Coke to sell drinks with stevia; Pepsi holds off

Coca-Cola Co. will begin selling products made with a new zero-calorie sweetener despite no official nod from the government, but rival PepsiCo Inc. said Monday it won't follow suit.

The Food and Drug Administration is expected to determine that sweetener made from the herb stevia is "generally regarded as safe," but the agency's sign-off has taken longer than expected.

Purchase, N.Y.-based PepsiCo has two drinks made with stevia ready for market: a version of SoBe LifeWater and Trop 50, an orange juice product. But Chief Executive Indra Nooyi said PepsiCo won't begin selling the drinks until the FDA makes its official decision.

Meanwhile, Atlanta-based Coca-Cola is expected this week to begin selling three flavors of an Odwalla juice drink sweetened with stevia, The Wall Street Journal reports. A spokesman for Coca-Cola declined to comment.

Nooyi said sweeteners like those made with stevia are key in reversing the sales decline of carbonated soft drinks, or CSDs. Morgan Stanley analyst Bill Pecoriello has estimated soda sales will fall 6 percent in 2009.

"If we got back to flat on CSDs, oh my God, it's heaven," Nooyi told reporters at a Beverage Digest conference. She added that it would be possible if drinkmakers could find the right sweetener to meet consumer standards for taste and health.

Two versions of a stevia-based beverage sweetener have been developed by Coke and Pepsi. Both Pepsi's PureVia and Coke's Truvia, marketed by Cargill, are made from rebiana, a stevia-based extract.

"I think with PureVia, other Reb-A (rebiana) products, I think there's hope," Nooyi said. "If it continues like this, I think there's hope the category will get new life." Nooyi declined to say what other sweeteners PepsiCo researchers were pursuing.

As recently as August 2007, the FDA had questioned the safety of stevia.

"In fact, literature reports have raised safety concerns about the use of stevia, including concerns about control of blood sugar, and effects on the reproductive, cardiovascular and renal systems," the FDA wrote in a letter to Hain Celestial about its Zingers To Go Tangerine Orange Wave Herb Tea. The tea's ingredients included stevia.

But manufacturers have become more confident that the FDA won't oppose their use of stevia sweeteners, with trade publication Beverage Digest having even predicted that the sweetener would be approved last month.

A recent Morgan Stanley survey of consumers showed that 22 percent of 18- to 65-year-olds were extremely interested in stevia and 36 percent were somewhat interested. The fact that stevia is currently mostly available through health food stores may increase its positive perception among consumers who turn down drinks made with aspartame, saccharine or sucralose.

Also speaking at the Beverage Digest conference Monday, Morgan Stanley's Pecoriello asked if stevia is "the holy grail" in soft drink makers' quest for a natural sweetener that could replace high-fructose corn syrup, which has gotten the cold shoulder from health-conscious consumers and child nutrition advocates.

"A no-calorie, all-natural sweetener is a huge opportunity for the beverage industry," Pecoriello said.

But he doesn't know if current stevia-based sweeteners will hit a homerun with consumers' tastebuds.

"Taste is key and we believe rebiana still has too strong a flavor to be used across soft drink categories," he Pecoriello said, asserting that rebiana sweeteners in their current forms are better for flavored water and juice but too sweet for soda. "At this point, we do not believe that the rebiana products are going to drive meaningful industry growth," he added.

Meanwhile, Dr Pepper Snapple Group Inc. Chief Executive Larry Young said his company is looking at stevia very closely.

"We're looking at what brands it would make the most sense in," he said.

In afternoon trading, Coke shares edged up 31 cents to $44.88, while PepsiCo shares rose 17 cents to $52.20. Hain Celestial shares dipped 55 cents, or 3.2 percent, to $16.73, and Dr Pepper Snapple climbed 25 cents to $15.80. All of the companies' shares are trading well off their 52-week highs, battered by recent market turmoil and a tough consumer spending environment.