Tag Archives: NutraSweet

Diet Pepsi drops aspartame: Gilding the Lily?

PepsiCo just announced that it will be taking the artificial sweetener aspartame out of Diet Pepsi and replacing with another artificial sweetener, sucralose (known more commonly as Splenda®), combined with another sweetener named acesulfame-K (‘Ace-K’), which is a lower cost ’sweetener helper’.

apm-free D Pepsi

The stated reason is to respond to consumer objection to aspartame, as stated by a Pepsi Sr. VP: “Aspartame is the number one reason consumers are dropping diet soda.”

The more likely reason is that Diet Pepsi volume is down over 5% in the last year, part of a long-term slide, and nothing so far has worked to reverse the trend.

But this change is unlikely to make a material difference, for a few key reasons.

First, let me risk public embarrassment to try to establish my bona fides.  I marketed aspartame (Equal® Sweetener) for 6 years, and sucralose (Splenda) for another 5.  Did a lot of consumer research during those years.

DavesSweetenerBonaFides

Left: failing the dorky marketer test. Right: at a trade show, excitedly pitching sweeteners

Here’s why I don’t think this will make a difference:

1) Consumers generally don’t know what’s in their diet soda to begin with.  When asked open-endedly about ingredients in diet sodas, they have a vague notion that they contain artificial sweeteners, but the sweetener is not often mentioned by name.  When prompted, they will recognize aspartame.  But while consumers may theatrically claim that they avoid aspartame when they’re in a focus group, in reality very few actually check labels.

2) Consumers are generally full of it when it comes to stated preferences.  They will tell you all day long that they want less fat, less sugar, less salt, etc – – but in reality they will rarely change ingrained habits if there’s even the slightest risk of compromise (such as taste or cost).

3) Non-users or lapsed users have a handy reason for why they don’t use the product.  Aspartame has enough negative PR that it is an easy, politically correct and inarguable reason as to why surveyed consumers aren’t using the product.  But the true answer is a more complicated mix of dynamics including macro consumption trends, emergence of new alternatives, and changing demographics (‘modern’ diet sodas were first introduced, and gained loyal followings, in the early 1980s).

4) Changing out one artificial sweetener for another just reminds consumers that diet sodas generally contain artificial sweeteners.  Not a great plan to bring in new users. 

5) Changing ingredients to meet claimed consumer preferences is no guarantee of success.  3 years ago ConAgra changed its Hunt’s ketchup back to High Fructose Corn Sugar after a 2-year switch to sugar, ostensibly to answer consumer objections to HFCS.  Sales volumes showed that consumers didn’t really care.

Hunts No HFCS

6) Most importantly, consumers like their products the way they are.  ANY CHANGE in a loyal user’s product formulation will arouse suspicion.  A product as iconic as Diet Pepsi owes its unique taste to the specific combination of sweeteners in its formula.  It is impossible to improve the taste of Diet Pepsi, because its ideal is defined by its current taste.  So any change will alienate current users, who are currently drinking it even knowing in the back of their minds that it contains an artificial sweetener.

Ironically, this is the same category where New Coke infamously demonstrated what happens when you change the formulation of a well-loved product.  It will be interesting to see whether this ‘New Diet Pepsi’ fares any better.

Below is an introductory spot for New Coke in 1985.  In retrospect, a product and spokesperson that ultimately followed similar paths, albeit on different timing.

Product Life Cycle Management: What do a cyclist, a horsewoman and NutraSweet have in common?

No, this is not a joke.  So what do they have in common?   Answer: a strategy that focused on optimizing profits in the moment.  At least one had a thought-out exit strategy.  Can you guess which one?

There is a lesson here about understanding your product’s practical lifespan.

Let’s examine the players.

The Cyclist — Lance Armstrong

By now we’re all very familiar with Lance’s story – – cancer survivor, fundraiser extraordinaire (almost $500 million), of course winner of 7 Tour de France titles, since vacated due to his now-confessed use of PEDs.  Ironically, prior to his cycling fame, Armstrong was a world-class teenage triathloner, and if he had remained clean it’s likely he would still have been world class in triathlon or cycling.  Of course, now we’ll never know.

Young Lance

The relevance?  Post-cancer (and by some accounts before), Armstrong decided that he would pursue world cycling dominance at all costs.  Success required use of PEDs, intimidation of colleagues, and repeated lying.  But during that time, it paid off handsomely — Armstrong was estimated to have earned $20-30 million annually during the roughly 10 years that he dominated, so perhaps $300 million, not counting the fame and celebrity.  His worth is currently estimated at $125 million.

Lance A Foundation

The exit strategy?  Whether Armstrong expected this ride to end well is unknown; increasingly it seems that he didn’t actually give much thought to his exit strategy and in fact just put his head down and worked to get the next title that he was seeking.  What is clear is that the gravy train has now developed into a bad case of road rash.  Including his volunteered restitutions and lost future endorsements, it’s estimated that he has lost $200 million of future earnings, and it is not clear what the nature of his future will be.  But he is still young, 41, and while he may have difficulty along the way, it’s possible he can re-establish public support.

So – he went all-in for success, and achieved it at the cost of longer-term viability.  A medium-length life cycle with a sharp drop-off.  Worth it?

The Horsewoman – Rita Crundwell

If you live in Illinois you know the story – – the long-time comptroller of little Dixon, IL (pop 15,000) was found to have embezzled over $53 million from the town over 22 years (!).  Crundwell continued this deception for years and stopped only when she was caught.  The ill-gotten gains were used to support a lavish equestrian lifestyle, including among other things an 88-acre estate and ranch, 3 additional homes, over 300 champion horses and a $2 million RV.   After her arrest, Crundwell faced certain loss of all of her possessions as well as as up to life in prison.  An excellent account is here.

Crundwell 1

The exit strategy?  In November 2012, rather than drag the state through a long and expensive trial, Crundwell pled guilty to embezzlement and wire fraud and faces up to 20 years in prison.  Sentencing is in February.  In this case, realizing that she successfully made hay while the sun shone, Crundwell has taken as close to the high road as is possible, and has gained some measure of respect for it.  But she’s still going to jail for a long time.  Worth it?

Crundwell 3

NutraSweet

NutraSweet, the brand name for the sweetener aspartame, was a much better tasting product than its predecessor saccharin, and supplied the missing link that enabled diet sodas to finally go mainstream, a huge profit machine for the soda makers.  Its introduction strategy was as innovative as its taste, and set the bar for future branded ingredient launches (such as Intel Inside).

At launch, NutraSweet was priced at a high multiple of saccharin, and required that customers put the then-unknown NutraSweet swirl logo on the front panel of their famous products.  In exchange, NutraSweet spent as much as $50 million annually to promote the brand, driving awareness and consumer demand for its customers’ products.  Customers, which included Coca-Cola and PepsiCo, had no choice but to agree to NutraSweet’s terms, but did so grudgingly.  In fact, NutraSweet purposely pursued a strategy that ensured at best a cool relationship with each of its major customers.  An excellent NY Times account can be found here.

diet pepsi

Why the unconventional take-no-prisoners approach, counter to the typical goal of generating customer loyalty for the long term?  Well, NutraSweet knew exactly what its sell-by date was:  December 1992, at which point the patent on the aspartame molecule would expire and lower-cost producers would enter the market.  (and in fact, this has happened – – at its peak NutraSweet sold for $150/lb; it is currently around $5/lb.).  There was no long term.  NutraSweet management, with essentially a one-product portfolio, decided that the aggressive pricing strategy maximized overall profits.  This seems to have been the right move – – NutraSweet was remarkably profitable during its lifespan, and the market has demonstrated that trying to retain customers post-patent at premium pricing would have been difficult at best.

The lesson?

Managing a product’s life cycle is about maximizing net present value of future profits.  This in part means understanding the expected premium that a product can command over its lifecycle, based on advantages vs competitive offerings, and managing pricing, promotion and product improvements to realize this premium. When a product can no longer produce an acceptable profit, it is time to sunset or adjust the strategy (reducing investment, etc).

Lance Armstrong certainly had an extremely powerful brand for a good number of years, and maximized profits over that time period.  However, he didn’t seem to envision any consequences of his maximization strategy and therefore has shortened his own marketability life cycle.  Said another way, he killed his own golden goose.

Rita Crundwell also maximized profits over a significant time period, and clearly did nothing to change things.  It is likely that she fully realized that when her marketability life cycle ended it would be irretrievably over, which led to her pleading guilty.

NutraSweet assessed its profitability life cycle very early, as part of its pricing/marketing strategy, and stuck to its strategy successfully.  And while the logo has essentially been retired, it stands as one of the more innovative, and profitable, chapters in marketing history.

Net, managers need to carefully assess how a product’s pricing power may shift during its lifecycle, and plan pricing and support appropriately to maximize profits.