Stevia, a sweet-tasting herb grown largely in South America,
could prove to be the next big thing in the cola
industry. Rebania-A, a sweetener obtained after processing the
plant, is around 300 times sweeter than traditional sugar and is
low enough on the calorific index to allow cola companies to brand
their drinks 'calorie-free'.
Stevia could, theoretically, substitute most artificial
sweetening agents that the cola players currently use in their
zero-calorie variants. Growing consumer distrust surrounding the
health effects of compounds such as aspartame is certainly
providing a big push for companies such as Coca-Cola Co (
) and PepsiCo (
) into adopting stevia as the sweetener of choice. Whichever
company is able to successfully incorporate this new
sweetener into its drinks stands to make market share gains in the
low calorie soda market.
See our full analysis for
The Trouble With Stevia
However, there are significant hurdles before stevia can be
turned into a viable sweetening agent for carbonated soft drinks
(CSDs). Like its chemical counterparts, stevia is known to leave a
strong aftertaste, often compared to licorice. Considering
that a bitter aftertaste is exactly why many people seem to be
averse to the taste of diet sodas (which contain aspartame), cola
companies are holding their cards before a suitable solution is
found. Coca-Cola, which has introduced stevia in drinks such as
Sprite to drive down their caloric values, is taking a cautious
approach in this direction. The company is combining stevia with
traditional sugars and corn syrup in order to improve its
taste. More importantly, stevia is much more expensive than
other natural and artificial sweeteners currently in vogue. The
cost factor certainly makes its widespread use a risky proposition,
market share gains notwithstanding.
Regulators Encourage Change, Coca-Cola Obliges
Despite such obstacles, the adoption of stevia in
CSDs received a major boost in 2008, when the FDA in the
US gave it 'GRAS' (Generally Regarded As Safe) status. This implies
that companies using stevia in their products do not need to
mention it explicitly - effectively giving the sweetener a vote of
confidence. Coca-Cola seized this opportunity in a big way,
introducing stevia-flavored variants in as many as 30 product
lines. PepsiCo was more conservative in its attempt, choosing to
limit its stevia experiment to its 'SoBe' line of enhanced water
beverages and Trop50, a low-calorie variant of its 'Tropicana' line
of fruit juices. (("
FDA okays Stevia as GRAS sweetener
", December 2008, Foodconsumer.org))
Europe, however, took longer to adopt stevia - it was only in
the latter part of 2011 that the floodgates opened with the
EU clearing Rebania-A for commercial use. Again, Coca-Cola has
become one of the first companies to make use of this opportunity
in Europe. This month it announced that it will be reintroducing
its line of 'Vitaminwater' in the UK with enhanced packaging
and stevia-based flavoring.
There are some concerns in Europe about the nature of stevia.
Regulators in the region are currently reluctant about allowing
beverage companies to use the 'natural' tag when it comes to
stevia-flavored drinks. This might actually undermine the basic
intention of cola companies - to remove the consumer's suspicions
about the negative health effects of artificial sweeteners.
Assuming the issue is sorted out in due time, players who have been
quick to adopt stevia stand to gain a significant share of the
low-calorie soda market. Coca-Cola looks to be on course here while
PepsiCo will need to pick up its game in the coming years. Until
then, we believe that Coca-Cola should be able to make a
significant gain in market share across the US and Europe.
We estimate a $39 price for Coca-Cola, which is in-line with the
current market price.
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