January 24, 2011 1 Comment
Since re-launching last September 2010 as Sierra Mist Natural, Pepsi’s lemon-lime soda has been gaining traction and experiencing double digit sales growth in the latest quarter. Jennifer Cirillo from Beverage World has more details on the beverage’s resurgence (link here). Sierra Mist Natural replaced high fructose corn syrup with natural sugar and four other ingredients, as well as featuring updated packaging. As the runner-up to Sprite in the lemon-lime soda category, Sierra Mist Natural had lost 14% volume in the two years before updating their package and formula (according to Beverage Marketing Corporation Data).
Sierra Mist Natural’s senior brand manager, Carlos Saavedra, says that the the refreshed formula boosted sales as consumers were leaving the category due to the unhealthy perceptions. The belief that soft drinks contain artificial flavoring and high amounts of sugar and calories has turned people off, and with a natural offering Sierra Mist Natural has regained lost consumers and attracted new ones. Saavedra says, “We realized that we really had a great opportunity here to take a great-tasting product, make it natural and use that to give consumers a really strong reason to pick [Sierra Mist] off the shelf.” Sierra Mist Natural has 100 calories and 25 grams of sugar per eight-ounce serving and is offered at the same price point as Sierra Mist.
I’m not certain that this growth generates any additional profit for Sierra Mist Natural. If sales had declined 14% in prior years, double digit growth would only be returning it to expected levels for 2009 volume. Factoring in the amount of money that was spent to re-brand and update the formula for Sierra Mist Natural, PepsiCo has to consider the cost that went into the beverage and how long it will take to pay back or recoup their investment.
BevWire is not convinced that this growth will last or continue at a double digit growth pace. Normally a repackaging option, price decrease, or formula adjustment lifts volume sales for a short time period only. Once consumers experience the change effect, they will likely go back to their regular purchase patterns. An advertised price decrease or formula adjustment calls attention to consumers to try the product, but that may not build a lot of longevity. And while feedback for natural flavored products is increasingly positive, there is still desire for the beverage to be produced in its original formula. Case in point: Pepsi’s Throwback beverage series for their trademark Pepsi Cola and Mountain Dew. Why would you need to return to your roots if the product itself is popular and successful? If it were to attract consumers that grew up with the original product, but left the product when it changed the packaging or formula, would they come back for a retro product that is only available for a limited time? Furthermore, what would happen after the retro beverage is no longer produced again?
Overall, this is a long term investment for the Sierra Mist Natural. Though double-digit growth for two quarters is step in the right direction, other factors would definitely need to be considered. If all else fails, Sierra Mist Natural could always release a retro edition of their beverage to stimulate sales.