If you have to run ads defending your ingredients to stave off declining sales, maybe it's time to rethink your production.
Coca-Cola (NYSE:KO) launched its first ads today defending the use of the artificial sweetener aspartame, arguing that not only is it safe to consume, but it can be healthier for you, too. With sales of soft drinks losing their pop, the beverage giant wants you to know you don't have to fear drinking its soda.
Aspartame, known more commonly by the brand name NutraSweet, is a controversial ingredient that's witnessing a large and growing resistance to its presence in the food chain despite the FDA's having signed off on its safety. Monsanto (NYSE:MON) owned the brand at one time but sold it to J.W. Childs in 2000. Even so, the sweetener is made with genetically modified bacteria -- E. coli, to be exact -- from the chemicals giant, and today the sweetener is found in more than 5,000 consumer foods and beverages worldwide. Sucralose, another widely used artificial sweetener, goes by its brand name Splenda.
Whether the drop in sales is a result of the presence of aspartame remains cloudy, but Beverage Digest says diet-soda makers -- where the sweetener is prevalent -- are seeing sales in the U.S. fall at a faster clip than regular sodas. Even though classic Coke and Diet Coke remain the two top-selling sodas in the country, Coca-Cola witnessed a 4% drop in North American sales volumes for its fizzy drinks last quarter. Rival PepsiCo (NASDAQ:PEP) reported that beverage volumes in its Americas division fell 3.5% despite the contribution of a 3% price increase.
It's not just carbonated drinks weighing the toll aspartame exacts. The dairy industry is also soured by the prospect of having to label aspartame-flavored milk products such as labeling chocolate milk as "artificially sweetened" because of the negative connotations it has. With per-capita milk consumption down 23% since 1975 and whole milk sales off 58%, anything that might cause a more health-conscious consumer to avoid drinking their beverage is a cause for concern.
And it's pitting dairy producers against soda makers. The industry's biggest dairy company, Dean Foods (NYSE:DF), says that even though about half the sugar in flavored milk is from naturally occurring lactose, all the sugar in soda is added sugar.
Which is probably part of the reason Coke feels the need to defend aspartame from attacks. Not that it's not working behind the scenes to try natural flavors as well. A new stevia-flavored drink is being tested in Argentina to see if it performs well enough to expand into other markets, while SodaStream (NASDAQ:SODA) introduced a line of stevia-flavored drinks for its make-it-yourself soda machine last year.
Even in the face of a growing obesity problem, consumers are more health-conscious these days and are reading labels more frequently. Thus, spending money to defend your production process isn't such a sweet deal for Coke investors, and it represents money that could be better spent on developing natural flavorings that aren't lab-made and genetically modified.
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Fool contributor Rich Duprey owns shares of Dean Foods. The Motley Fool recommends and owns shares of Dean Foods, PepsiCo, SodaStream, and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.