Pepsi's Cutting Edge?

By Alyce Lomax

March 9, 2004

http://www.fool.com/news/mft/2004/mft04030917.htm

PepsiCo's (NYSE: PEP) been showing a lot of get-up-and-go lately, quickly moving to revamp its products as consumer appetites evolve. According to the company today, it plans to launch a mid-calorie, mid-carbohydrate soda, called Pepsi Edge, this summer.

Although this new product flies in the face of recent low- or no-carb trends, it certainly addresses what may have long been an ignored market -- that is, the market for a soft drink that isn't as sugary or calorie heavy, but still tastes good. It's not such an uncommon complaint that full-strength sodas are too sweet, but preferable to the chemical aftertaste of diet drinks sweetened with Nutrasweet. (I myself prefer that refreshing chemical flavor.)

In addition, Pepsi says it's targeting what are known as "dual users," those who drink both diet and regular sodas. The company said that that kind of soda-pop consumer has increased by 75% over the last two years. An interesting tidbit that should attract both anti-Nutrasweet crusaders and low-carb dieters: Pepsi is apparently using the darling of the Atkins diet, Splenda sweetener, to lend the new beverage its middling sweet flavor.

Not surprisingly, it's said that cola rivals Coca-Cola (NYSE: KO) and Cadbury Schweppes' (NYSE: CSG) Dr. Pepper have also been working on similar soft-drink concepts. One could argue, however, that Pepsi's moved a little faster in grabbing hip ideas and making them happen. For example, Pepsi beat Coke to the punch with the first Diet Pepsi Slurpee at 7-Eleven (NYSE: SE) last September.

Other recent cutting-edge moves by Pepsi include, of course, its marketing campaign linked with Apple's (Nasdaq: AAPL) popular iTunes service (making me wonder if Pepsi's lining up a whole new generation of young die-hards). And, of course, addressing health-minded consumers by lowering carbs and removing trans fats from some snacks available through its Frito-Lay division.

Is this Pepsi's latest fresh idea? We'll have to wait till the summer to find out if the new drink will attract carb-conscious consumers and those looking for a middle ground, or if the drink is a tasteless flop snubbed for healthier alternatives. It should also be interesting to see what Coke's answer might be.