Many of PepsiCo's (PEP -0.62%) sugar-free products contain the artificial sweetener aspartame. But not all health officials are convinced of its safety. And this month, an agency that's part of the World Health Organization (WHO) labeled it a "possible carcinogen." PepsiCo, however, isn't planning to make any changes to its products.
What does this mean for the stock, and does this make PepsiCo a more risky investment to hold?
The WHO and FDA disagree on aspartame risk
The International Agency for Research on Cancer (IARC), which is part of the WHO, recently classified aspartame as "possibly carcinogenic to humans." Although that doesn't mean that the IARC believes it does cause cancer, the possibility of a link between aspartame and cancer could lead to more studies on the chemical.
The U.S. Food and Drug Administration (FDA), however, disagrees with the WHO's stance. It has stated that aspartame "is one of the most studied food additives in the human food supply," noting that regulators in Canada and Europe have also deemed it safe to consume.
Also worth noting: The Joint FAO/WHO Expert Committee on Food Additives (JECFA), an international committee of scientific experts administered by the Food and Agriculture Organization of the United Nations (FAO) and the WHO, saw nothing in the new research to convince it to change its previously established acceptable daily intake level for aspartame of 40 milligrams per 1 kilogram body weight.
Based on that, an adult weighing 70 kilograms (154 pounds) would need to consume more than nine to 14 cans of diet soda a day to exceed the acceptable daily intake level.
Staying the course with its current formulas
Despite the IARC now including aspartame on its list of possible carcinogens, PepsiCo is not planning to make any changes to its products. Chief Financial Officer Hugh Johnston stated that "by far the weight of the scientific evidence suggests that aspartame is safe as an ingredient."
Rival Coca-Cola, which also uses aspartame in its sugar-free products, took a similar stance, stating that it has no plans to change its recipes and reaffirming its belief that aspartame is safe for people to consume.
This doesn't mean that the companies might not end up changing their product formulas in the future, but for now, they aren't making any moves in reaction to the IARC's decision.
The upsides of standing pat
Not changing its formula looks like a smart move for PepsiCo because while the IARC classifying aspartame as a "potential carcinogen" may sound scary, the sweetener was not upgraded into one of the agency's more serious categories, which are reserved for agents and substances for which there is more definitive evidence of hazard.
The IARC also classifies some agents as probable carcinogens or known carcinogens. Aspartame is only possibly cancer-causing. So far, insufficient evidence has been found to make a more definitive link. There's nothing new at this point that strongly supports the idea that aspartame is more hazardous to health at normal consumption levels than it was previously believed to be.
Changing recipes can be a costly, time-consuming process for a food company to undertake. PepsiCo's decision to maintain its status quo in the wake of the IARC's reclassification of aspartame looks like a good move for shareholders in that light. And although some consumers may potentially turn away from Pepsi's sugar-free products, given that rival Coca-Cola isn't planning to drop aspartame either, the companies will be in the same boat.
Is PepsiCo stock still a good buy?
Sales of PepsiCo's products have proven resilient amid inflation and challenging economic conditions. The company reported 14% organic growth through the first half of the year. With the FDA still viewing aspartame as safe for use at current levels, I suspect consumers' opinions on the sweetener will largely remain unchanged.
Unless there's a significant drop in demand for its sugar-free products as a result of this reclassification of aspartame that pushes the company to take another look at its products, PepsiCo's stock should be relatively unaffected by this. The worst-case scenario is that a drop in demand dictates that the company needs to adjust its formula. For long-term investors, PepsiCo can still be a good growth stock to hang on to now.
