Pepsi counts on "Next" to lure back lost drinkers

CHICAGO, March 13 Tue Mar 13, 2012 6:30am EDT

CHICAGO, March 13 (Reuters) - PepsiCo Inc is rolling out the "Next" version of its flagship cola brand in the United States later this month in an effort to court drinkers who have given up on cola, as it seeks to win back lost share in a shrinking market.

Pepsi Next, which has 60 percent less sugar and fewer calories than Pepsi-Cola, will launch nationwide on March 26 and will target people who do not want all the sugar of full-calorie sodas, but are "resistant" to diet sodas.

"Somewhere in between that landscape is a big, wide-open space looking for something better than the diets that exist today but less sugar than regular," said Angelique Krembs, vice president of marketing for Pepsi.

Every year, the cola category loses about 90 million cases of sales volume, as people opt for other mid-calorie drinks, such as coffee and tea, Krembs said, since they're unsatisfied with current cola options.

The stakes are high for PepsiCo, whose North American drinks business has suffered in recent years from an admitted under-investment in its brands. Chief Executive Indra Nooyi has come under fire by many on Wall Street for a stagnant stock price, lowered earnings forecasts, and market share losses.

"If we even get a fraction of that business captured by Pepsi Next, that's a very viable business," she said.

The drink will be sweetened with a mixture of high-fructose corn syrup and artificial sweeteners.

Nooyi has been criticized as having taken her eye off the company's core soda business, as she expanded into healthier areas like drinkable oatmeal and whole-grain chips.

Last month she laid out a plan to turn around the North American business that includes ramping up advertising and marketing by $500 million to $600 million this year. The marketing will be centered on 12 brands including Pepsi, Mountain Dew, Gatorade, Tropicana, Quaker and Doritos.

Krembs declined to say how much Pepsi was spending on the launch. In addition to traditional advertising, Pepsi will host an "internet taste test" and tastings at major retailers including more than 800 Wal-Mart stores.

The company used advertising agency TBWA/Chiat/Day, which handles all of its Pepsi ads.

This is not Pepsi's first foray into so-called mid-calorie drinks. It launched Pepsi XL in the 1990s and Pepsi Edge in 2004. Both were later discontinued. Coca-Cola also once launched the mid-calorie Coca-Cola C2, which was also discontinued.

More recently, Coca-Cola has seen huge success with its Coke Zero, a low-calorie cola with a flavor closer to Coca-Cola than Diet Coke, while Dr Pepper Snapple Group Inc launched the 10-calorie Dr Pepper Ten, with a cheeky, uber-macho ad campaign based on the premise that men don't like diet soda. The drink's tagline proclaims "it's not for women".

In testing over the summer, Pepsi Next met or exceeded the company's internal benchmarks regarding consumers' initial and repeat purchases for the product and how much it added to sales of existing Pepsi colas, Krembs said.

As a result, the company is optimistic Pepsi Next will increase overall sales rather than cannibalize them, she said.

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