Coca-Cola Co. (KO) and rivals hoped zero-calorie recipes would lift the $75 billion U.S. soda industry after Americans began scaling back on full-calorie carbonated soft drinks in the late 1990s amid obesity concerns. For a while they helped: Diet soda's share of consumption rose from 26% to 31% between 1990 and 2010, according to Beverage Marketing Corp., even as many consumers complained about the taste.
Now diet soda is the industry's weightiest problem. Store sales of zero- and low-calorie soda plunged 6.8% in dollar terms in the 52 weeks through Nov. 23, while sales of regular sodas dropped 2.2%, according to Wells Fargo, citing Nielsen scanner data. As a category, diet soda has contracted more than regular soda for three straight years.
"We are seeing a fundamental shift in consumer habits and behaviors," PepsiCo Inc. (PEP) Chairman Indra Nooyi said recently.
PepsiCo gets about a quarter of its U.S. revenue from soda. Coke and Dr Pepper Snapple Group Inc. (DPS) both derive more than half their U.S. sales from soda.
Soda isn't the staple it once was. In a March survey by Mintel, 34% of those aged 18 to 36 considered it a "treat,'' a higher proportion than among older drinkers. Meanwhile, about 20% of Americans say they are on a diet, down from more than 25% a decade ago, according to NPD Group.
But the biggest drag is health fears about artificial sweeteners found in diet soda—mainly aspartame, but also sucralose and acesulfame potassium.
The American Beverage Association says such sweeteners are among "the most studied and reviewed ingredients'' over four decades, and are safe weight-loss tools, positions echoed by the American Diabetes Association and the Academy of Nutrition and Dietetics.
The Food and Drug Administration and other government agencies around the world also vouch for their safety.
The Internet has amplified fears. Among the top 10 Google search results for "diet soda'' on a recent day: "10 Reasons to Give Up Diet Soda,'' "No, seriously: Diet sodas are terrible for you, too'' and "7 side effects of drinking diet soda.''