Dr Pepper Snapple Group has announced a sweetener blend

Dr Pepper Snapple Group has announced a sweetener blend

When PepsiCo revealed last year that it was working on a sweetener innovation, CEO Indra Nooyi said it could “alter the trajectory of the cola business”.

Analysts, however, shared little of her enthusiasm. “We question whether this is truly the turning point,” one said at the time. Now Dr Pepper Snapple Group, which during full-year results yesterday announced its own upcoming lower-calorie sweetener blend, is facing the same collective shrug of the shoulders.

“While we believe sweetener innovation is important for CSD players stuck between consumers’ sugar and artificial sweetener concerns, we do not expect any new launch to significantly affect category growth this year,” says CLSA's Caroline Levy in a note today (13 February). Stifel's Mark Swartzberg, meanwhile, merely notes that DPSG had begun testing the secret stevia-and-sugar blend that will be used in 60-calorie versions of some of its brands.

Another analyst, far from welcoming the news, is worried that the low-calorie products threaten sales of another recent DPSG innovation, the Ten range. The Ten portfolio was launched in 2011 by Dr Pepper Ten, with DPSG claiming the ten-calorie beverage would attract consumers looking for healthier options but without the diet imagery.

The company has since added other brands to the range but, despite DPSG maintaining yesterday that Ten continues to bring consumers back to the CSD category, analysts have remained sceptical over its merits, especially as DPSG refuses to break down its performance.

Analysts have also questioned its extended roll-out period (28 months and counting), and now Bernstein's Ali Dibadj fears a competing low-calorie range could cut short any runway that Ten has left.

“Does it make strategic or financial sense for the company to continue investing heavily in Ten?” Dibadj asks. “Given the - very tangible, we think - risk of imminent cannibalisation from another innovation?”

Dibadj welcomes, however, DPSG's pricing and efficiency moves that have kept profits and sales at the US soft drinks maker stable throughout 2013. “We certainly hope the other US beverages companies see pricing and cost-cutting as the way forward as well,” the analyst says.

Dibadj would therefore surely have been happy when in a call with analysts yesterday, CFO Marty Ellen laid out what could be termed the company's current motto. “What we want to demonstrate is that even on lower volumes we can make more money,” Ellen said.

But, just how many more costs can be shaved? And, for how long can DPSG keep taking price before the market reacts?

Hard to impress, analysts may be. But DPSG will surely know that consumers are an even tougher challenge.