Winning With Zero

Analysts give new Coca-Cola product the edge in battle of the diets

NEW YORK -- With a summer-long battle of diet colas planned by the two big soft-drink manufacturers, analysts are giving Coca-Cola Zero the early edge. Based on detailed modelingwe forecast Coke Zero should be able to achieve a 1.5% share of the carbonated-soft-drink category, states a beverage industry report from Bill Pecoriello of Morgan Stanley, New York.

Pecoriello, who made his predictions following a proprietary survey of 1,730 U.S. consumers ages 18 to 65, also said Diet Coke Sweetened with Splenda should attain a 0.4% share, and the relaunched, [image-nocss] reformulated Pepsi One should be able to achieve a 0.3% share of the category.

Analyst Bonnie Herzog of Smith Barney, New York, also has cautiously tipped her hand in the direction of Coke Zero, noting, We continue to be impressed with Coca-Cola's ambitious plans to improve its marketing, innovation and approach to the market; however, we have heard too many promises from other Coke management teams to accept that change is imminent at the company without seeing proof.

Some other findings drawn from the Morgan Stanley survey:

The regular carbonated-soft-drink (CSD) category will remain under significant negative pressure as consumers are becoming more health-conscious and the image of regular CSDs is deteriorating rapidly. While diet CSDs will continue to perform better than regular, the negative image of the current generation of products (taste, artificial sweeteners) is likely to limit their ability to offset the cases lost by the regular CSD category until new sweetener solutions can be developed. Bottled water should continue to capture the majority of cases lost by the CSD category thanks to its strong image and broad appeal. Consumer interest in the new diet/zero-calorie colas is good, although a high level of cross-interest may dilute consumer attention and make execution more difficult; however, none of the new colas have the ability to source significant volume from non-carbonated beverages, and all are heavily cannibalistic of the parent trademarks.

Coca-Cola Zero and the new Pepsi One roll out this month. Diet Coke Sweetened with Splenda was introduced earlier this spring.