No more sugar? Pepsi to focus on lower-calorie sodas

Pepsi will expand its low- and no-sugar options following the UN health agency's recommendation that governments use tax policy to increase the price of sugary drinks. 

Sodas with 100 calories or less.

That’s the pledge Pepsi, the world’s second largest beverage and food business, has made, with its chair and chief executive saying Monday that, by 2025, at least two-thirds of its beverages will contain 100 calories or less per 12-ounce serving.

The initiative by Pepsi, which also includes sodium and climate change goals, comes as much of the world is losing its sweet tooth. In the United States, soda consumption has fallen off over the last three decades, in large part because of concerns about its contribution to obesity. Cities, states, and countries have also passed or are considering levying regulations against sugary sodas and other sweet drinks. The Pepsi initiative, then, is emblematic of a larger shift among soda companies to keep pace with societal and governmental trends.

“Over the last decade, we have made progress in reducing sugar,” Indra Nooyi, Pepsi’s chair and CEO, told CNBC on Monday. “Technology breakthroughs right now are resulting in better-tasting colas, almost as good as the full-sugar colas, but with lower calories. So we’re now faced with [an] interesting opportunity to step the consumer down to lower sweetness levels.”

To accomplish its sugar-soda goals, Pepsi will introduce more zero- and low-calorie drinks over the next 10 years. Contrary to the Pepsi name, its cola brand brings in just 12 percent of its $63 billion in annual revenue, with 25 percent coming from all carbonated drinks such as Mountain Dew. The rest comes from waters, juices, and other drinks that include the Tropicana and Gatorade brands. Pepsi is also the maker of unsweetened, ready-to-drink coffees and teas under the Starbucks and Pure Leaf brands, respectively.

The manufacturer has said the move to even more of these lower-calorie drinks is possible because of improving technology.

“The science has evolved,” Mehmood Khan, Pepsi’s chief scientific officer of research and development, told Reuters. For example, said Mr. Khan, new flavor ingredients require less sweetening. “It’s not just about sweeteners, it’s about understanding the flavor of the ingredients and having propriety knowledge and access to them.”

But Pepsi and its competitors, including Coca Cola and Dr. Pepper, are also facing increasing global pressure to scale back on sugary drinks because, advocates say, they contribute to obesity, diabetes, and tooth decay.

The World Health Organization recommended earlier this month that countries use tax policy to increase the price of sodas, sports drinks, and even 100-percent juices. In the United Nations health agency’s 36-page report, it said tax policies that lead to a 20-percent increase in the retail prices of sugary drinks would result in a proportional reduction in sugary-drink consumption.

France and Mexico have already introduced such taxes on these drinks to curb consumption, as has the city of Berkeley, Calif. In March, Britain also announced it will introduce a soda tax. Mexico’s soda tax coincided with a 12-percent decline in soda sales since it was implemented in 2014.

While these taxes have faced opposition in other parts of the United States, as well as from soda manufacturers, Americans are already generally losing their taste for soda pop. In 1998, the average American drank 56 gallons of carbonated soft drink annually. By 2014, it was 42 gallons, according to Beverage Digest. Soda sales have declined each of the last 11 years.

But soft drink consumption is up in other parts in the world. Chile and Mexico are now the top consumers of sugar-sweetened beverages, while China and sub-Saharan Africa have also seen rapid increases, as The Christian Science Monitor reported in April:

Soda's decline stems in large part from increased public awareness about obesity, in which experts contend sugary drinks have played a large part. In response, Coke and Pepsi have made concessions, such as introducing smaller beverage containers as an alternative to full-size soda bottles and no longer marketing soda directly to children. 

In America, this soft drink consumption decline has also coincided with more water bottle consumption, partly because of health concerns, and partly because of lead contamination problems highlighted by Flint, Mich.

"What we're seeing is that people are generally starting to make healthier choices more frequently when it comes to food and drink," Chris Hogan, the vice president of communications at the International Bottle Water Association, told the Monitor in August.  

This report contains material from Reuters.