KDP Keurig Dr Pepper Inc

By Mike Esterl 

PepsiCo Inc. may be on the verge of another big move to bail out Diet Pepsi.

Last August, the snack and soft drink giant introduced aspartame-free Diet Pepsi, removing one artificial sweetener and substituting another, sucralose, in an attempt to stanch sliding sales.

PepsiCo could announce more changes as early as this week. Executives notified some bottlers in recent days that they plan to discuss with them on Thursday an action plan to stabilize diet cola, according to a person familiar with the matter.

PepsiCo didn't immediately comment Wednesday.

Since PepsiCo tried to fix the brand last August, Diet Pepsi's plight has gotten worse. U.S. sales fell 12% in the 12 weeks ended May 21, compared with 6.7% for all diet sodas, according to estimates by Wells Fargo Securities, based on Nielsen store-scanner data.

In the year before the debut of aspartame-free Diet Pepsi, sales had fallen 8.5%, according to the estimates. In the past 52 weeks, they've fallen 9.3%.

Diet soda sales industrywide declined a more modest 5.4% in the most recent 52-week period, as rival Coca-Cola Co. and Dr Pepper Snapple Group Inc. brands won market share. Diet Pepsi is still the No. 2-selling diet soda after Diet Coke.

At the time, PepsiCo said it changed Diet Pepsi's recipe because consumer surveys showed aspartame -- long the soda industry's primary zero-calorie sweetener -- was the No. 1 reason Americans were dropping diet cola. Although the U.S. Food and Drug Administration vouches for aspartame's safety, some studies have flagged health concerns and internet reports tie the controversial sweetener to everything from cancer to autism.

But many Diet Pepsi loyalists don't like how the new, sucralose-sweetened version tastes. And new Diet Pepsi drinkers haven't materialized because Americans increasingly are rejecting all artificial sweeteners, not just aspartame, over health concerns.

PepsiCo defended its new recipe for Diet Pepsi, which also includes another zero-calorie sweetener, acesulfame potassium, commonly known as Ace K.

"Diet cola consumers in the U.S. asked for a great-tasting cola without aspartame, and we delivered," the company told The Wall Street Journal in a written statement last week, responding to a request for comment.

At the same time, the company reiterated last week that it was exploring ways to make the aspartame version available to consumers. Chief Executive Indra Nooyi suggested last year that the old version would be sold online.

Dean Crutchfield, an independent brand consultant, said PepsiCo should make a mea culpa and bring back the old Diet Pepsi -- much like Coke did in 1985 when it rolled out New Coke but quickly reversed itself after longtime fans rebelled.

"The last thing you want to do is alienate your existing customers because they're your ambassadors," said Mr. Crutchfield, who has advised PepsiCo and Coke in the past.

Chase Thomas, a 42-year-old nurse practitioner, used to treat himself to a Diet Pepsi every afternoon but stopped because the new version tastes "awful" and "flat." He also doesn't like Diet Coke or Coca-Cola Zero, instead keeping an unopened bottle of aspartame-sweetened Diet Pepsi in his fridge as a keepsake.

"It's my Holy Grail," said Mr. Thomas, who lives in Anniston, Ala.

Veteran beverage-industry consultant Tom Pirko said PepsiCo would have to take more dramatic steps, including possibly changing the brand name, to reverse plunging sales as consumers also are turning their backs on all carbonated beverages labeled "diet."

Diet Pepsi's "now aspartame free" label hasn't attracted enough new drinkers. While 42% of Americans avoided aspartame in a March survey by the International Food Information Council Foundation, 35% avoided sucralose, up from 25% last year. Those who avoided Ace K jumped to 28% from 13%.

Not helping matters, the consumer group Center for Science in the Public Interest cut its sucralose rating to "avoid" from "caution" in February after an Italian study linked the additive to leukemia in mice. That followed a 2014 study by different researchers suggesting the zero-calorie sweeteners saccharin, sucralose and aspartame raised blood glucose levels, a risk factor for diabetes.

Coke is far more exposed to soda than PepsiCo, which derives more of its sales from noncarbonated drinks and snacks. Still, Diet Coke's U.S. sales fell just 4.7% in the 52 weeks ended May 21, half as much as Diet Pepsi, according to Wells Fargo.

Negative tweets about Diet Pepsi outnumbered positive ones by a two-to-one ratio between October and May, according to social media tracker Sysomos. Tweets mentioning Diet Coke were slightly positive over the same period.

Write to Mike Esterl at mike.esterl@wsj.com

(END) Dow Jones Newswires

June 08, 2016 17:25 ET (21:25 GMT)

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