A sweet Asian fruit tempts the troubled soft drink industry

Sun Dec 22, 2013 1:15am EST
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By Marina Lopes

NEW YORK (Reuters) - An obscure melon once cultivated by Buddhist monks in China to sweeten tea could give the $8 billion U.S. diet soda industry a shot at winning back consumers concerned about artificial ingredients.

You won't find monk fruit in any of the soft drinks at your local convenience store. So far, shaky supplies and limited demand have kept the expensive melon on the sidelines of the sweetener industry.

But some experts think the fuzzy green fruit, which ripens to the size of an apple, could be the ingredient soda makers have sought for decades: a natural product with great taste and no calories.

When "someone figures this out and gets a taste that is low-calorie and natural, it could really be a silver bullet that catapults that company ahead," said Ali Dibadj, an analyst at Bernstein who follows the soft drink industry.

Soft drink makers are increasingly desperate for just such a miracle ingredient. Once a booming sector, diet soda has become a laggard. In the United States, consumption fell about 7 percent this year and could shrink by 20 percent through 2020, according to Nielsen data.

Consumers, increasingly wary of the health risks of artificial sweeteners, are ditching diet sodas for juices, teas and naturally sweetened lemonades, according to a recent Wells Fargo analysis.

"We believe we are seeing a fundamental shift in consumption behavior as diet drinkers leave the category altogether," said Bonnie Herzog, an analyst at Wells Fargo Securities.

FLAVOR TESTS   Continued...

Cans of Zevia soda are seen in a supermarket in Los Angeles, California, December 18, 2013. REUTERS/Lucy Nicholson