Coke, Pepsi Court Low Carbs

The low-carb craze enters a new era this year as Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP) prepare to introduce low-carb sodas. The companies will promote these not-quite-diet colas as a tasty, lower-sugar alternative to full-flavored sodas. Pardon me, but isn't that just a diet soda?

Low-carbohydrate diets have been good news for Americans trying to lose weight, but bad news for the big cola makers. While sales volume for Diet Coke and Diet Pepsi grew 5% and 6%, respectively, in 2003, the flagship colas, Coca-Cola Classic and Pepsi-Cola, both lost share to products like bottled water, sports drinks, or diet sodas. Enter the low-carb soft drinks in response. Pepsi's Pepsi Edge will be available this summer, while Coke's low-carb offering, code named C2, is still in the testing phases.

I'm skeptical about the possible success of low-carb sodas. People looking for a low-calorie soft drink have already adopted diet colas, and the companies might take a cue from Anheuser-Busch's (NYSE: BUD) and Miller's strategy of emphasizing the low-carb characteristics of their existing products. Both Coke and Pepsi have put loads of money into their billion-dollar diet cola brands, the fastest-growing industry segment, and now run the risk of damaging them by pushing the low-carbohydrate sodas based on taste. Without directly saying it, the companies are admitting diet sodas don't taste good.

Plus, soda companies have tried middle-of-the-road colas before, with fabulously underwhelming results. Remember Pepsi One, the low-calorie cola that was supposed to have a full-calorie taste? Me either.

And there's no guarantee that a viable market for a low-carb cola even exists. Research conducted by Cadbury Schweppes (NYSE: CSG) concluded that calorie-conscious soda drinkers will switch from regular to diet soda, with no desire for an in-between product. I tend to agree with this view, based on changing market share in the beverage industry. However, my opinion certainly won't stop soda makers from spending gobs of shareholder money promoting these wishy-washy colas. I just hope the advertising blitz for these carb-counter colas doesn't do permanent damage to diet-soda brands.

What do you think? Is Pepsi damaging its existing line of diet drinks by focusing on a low-carb alternative? Talk about it with other Fools on the PepsiCo discussion board.

Fool contributor Chris Mallon can tell the difference between Coke and Pepsi, but not their soft drinks, preferring to drink water when thirsty. He owns shares of Anheuser-Busch.