You didn't need to be psychic to see this one coming: PepsiCo (NYSE:PEP) is no longer interested in the sort-of-diet-soda market. The company intends to cease production of low-carb Pepsi Edge by January 2006.
Pepsi Edge has half the carbohydrates of regular Pepsi, just enough to ensure that it doesn't taste like a diet soda. But apparently, half a cola won't put the fizz in the sales machine. That was the gist of Fool Chris Mallon's argument back in April 2004. Unfortunately for Coca-Cola (NYSE:KO) shareholders like me, he was also obliged to include Coke's C2 product in his criticism of low-carb beverages. C2 is essentially the same idea as Pepsi's experiment -- take out some sugar, and voila, you've got a new drink.
The problem? The drinks don't taste very good. Fool Nathan Parmelee gave C2 a thumbs-down, predicting a dire fate for the brand extension. Rich Duprey even compared C2 to the infamous "New Coke" -- probably the last thing any Coca-Cola executive wants to hear.
PepsiCo is smart not to fight the marketplace. Trying to create demand where none exists would waste shareholders' money. Investors must remember that companies should always try new products, even if they do seem a bit silly. PepsiCo and Coca-Cola were trying to surf the Atkins-diet wave in creating these sodas, but both companies overestimated the country's fondness for that fad.
I may be late to the soothsaying game on this one, but I predict Coca-Cola will soon abandon C2. Let's hope the logic of responding to the lackluster market for low-carb drinks is as clear to Coca-Cola as it was to Pepsi.
Recent dispatches from the front lines of the Soda Wars:
- Pepsi Gives U.S. the Finger
- Should Coke Join Your Team?
- PepsiCo and Microsoft in the Game
- Coke Shakes Up Sodas
Post your thoughts at the Coca-Cola and PepsiCo discussion boards.
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Fool contributor Steven Mallas owns shares of Coca-Cola. The Motley Fool has a disclosure policy.
