WHO’s Aspartame Decision: Potential Impact on Diet Soda Sales and Drink Formulas.
Despite the WHO’s recent reaffirmation of its recommended intake of aspartame, the agency’s classification of the artificial sweetener as a potential carcinogen has the potential to deter diet soda consumers and spur the development of alternative beverage formulations.
Over the past 20 years, there has been a decline in soda consumption as individuals have increasingly opted for water or beverages with lower sugar content.
Nonetheless, diet sodas have managed to maintain a favourable position within the market, offering a sugar-free alternative to traditional soda. However, the WHO’s classification of aspartame as a potential carcinogen may instil fear among consumers and lead them to seek alternative drink options.
As a result, beverage manufacturers might be prompted to explore new formulations that meet consumer demands for healthier, low-sugar alternatives to diet sodas.
Diet sodas have emerged as a significant segment within the soda industry, representing over a quarter of total sales, despite full-calorie options maintaining dominance.
Coca-Cola and PepsiCo have successfully capitalized on this trend by introducing zero-sugar versions of their flagship soda brands. Popular diet soda options such as Diet Coke, Coke Zero, Pepsi Zero Sugar, and Diet Mountain Dew all contain aspartame, an artificial sweetener.
However, on Thursday, the International Agency for Research on Cancer (IARC), a subsidiary of the WHO, identified a potential link between aspartame and hepatocellular carcinoma, a type of liver cancer WHO officials have emphasized the need for further research to establish a conclusive connection between aspartame and cancer.
In contrast, the U.S. Food and Drug Administration (FDA) released a statement disagreeing with the IARC’s conclusion, asserting that their scientists have no safety concerns regarding aspartame. The FDA had previously reviewed the scientific information relied upon by the IARC and identified significant shortcomings in the studies.
Another body associated with the WHO and the United Nations’ Food and Agriculture Organization, the Joint Expert Committee on Food Additives, released its report reaffirming prior recommendations and stating that the acceptable daily intake of aspartame should be under 40 milligrams per kilogram of body weight. This means consuming less than nine to 14 cans of diet soda daily for most adults.
While the findings on the potential link between aspartame and cancer may not deter consumers who consume smaller amounts of diet soda, the announcement could negatively impact sales temporarily. According to TD Cowen data, diet sodas are at least 50% more prevalent among higher-income consumers than lower-income individuals.
TD Cowen analyst Vivien Azer noted that consumers in this demographic could be concerned by the WHO’s report.
The extent of attention garnered by the WHO’s announcement poses a significant risk for soda manufacturers. CFRA analyst Garrett Nelson suggested that if enough consumers come across the headlines, the sales volumes of low-calorie sodas could be affected.
Similarly, Wedbush analyst Gerald Pascarelli believes the report could temporarily impact sales in the category. However, he anticipates that soda companies will quickly adapt to mitigate adverse effects and maintain brand momentum.
Dr Francesco Branca, the head of the WHO’s nutrition and food safety division, advised manufacturers using aspartame to consider producing their products without the sweetener.
However, PepsiCo’s Chief Financial Officer Hugh Johnston stated that the company has no plans to change its use of aspartame and mentioned that it is not extensively used in its portfolio.
Notably, aspartame was previously used in Diet Pepsi until 2015, but after a customer backlash, the formula was adjusted, only to reintroduce aspartame a year later. However, in 2020, PepsiCo removed aspartame from Diet Pepsi, but it continues to be used in Pepsi Zero Sugar.
Coca-Cola faces more risk in terms of potential sales loss due to concerns surrounding aspartame, according to CFRA’s Nelson. While the beverage giant currently uses aspartame in Diet Coke and Coke Zero, it may consider replacing it with alternative sweeteners like stevia.
Despite the potential concerns, analyst Brittany Quatrochi from Edward Jones does not anticipate a significant impact on diet soda sales.
She suggests that consumers may switch to different sugar-free offerings and notes that this is not the first time a food or beverage product has been labelled a potential carcinogen. For instance, the IARC classified red meat as a probable carcinogen in 2018.
Manufacturers of diet sodas are not currently overly concerned about lost sales. The American Beverage Association (ABA), which advocates for Coke, PepsiCo, and Keurig Dr Pepper, views the WHO’s announcement as further confirmation of the safety of aspartame.
ABA interim CEO Kevin Keane stated that with over 40 years of scientific research supporting aspartame’s safety, consumers can confidently choose aspartame as a safe option, especially when aiming to reduce sugar and calorie intake.
In addition to diet sodas, aspartame is widely used as a sugar substitute in various food products, including breakfast cereals, chewing gum, and ice cream. Its high sweetness intensity, 200 times sweeter than sugar, allows it to be used in much lower concentrations, making it a desirable choice for food and beverage manufacturers seeking to reduce sugar content.
