WHO decision on aspartame could hurt diet soda sales or lead to new drink formulas

World Health Organization has classified aspartame, a sweetener in diet sodas, as a potential carcinogen. This could affect sales.

Coca-Cola and PepsiCo may decide to switch out aspartame with another sweetener.

Diet Pepsi will no longer contain aspartame in 2020.

The World Health Organization Thursday reaffirmed the recommended intake of Aspartame, but classified the sweetener by the agency as an a

Possible carcinogen

Diet sodas could still be a deterrent to drinkers, and new formulas for beverages may emerge.

Over the last two decades, soda consumption has declined as consumers have switched from drinking more soda to choosing beverages that are lower in sugar. Diet sodas, however, have been the bright spot in recent years for this category.

Diet sodas are now more popular than full-calorie sodas, even though they still account for the majority of sales.

Coca-Cola's

You can also find out more about the following:

PepsiCo's

Both companies have seen their bets on zero sugar versions of their name-brand sodas pay off. Aspartame is found in Diet Coke Zero Sugar, Pepsi Zero Sugar, and Diet Mountain Dew.

The International Agency for Research on Cancer (a WHO agency) identified on Thursday a possible connection between aspartame, a type liver cancer known as hepatocellular carcinoma. WHO officials have said that more research is needed to determine the possible connection.

In its report, the Joint Expert Committee on Food Additives reaffirmed previous recommendations by stating that the daily acceptable intake of sweetener was under 40 milligrams of sugar per kilogram of weight. This means that for most adults they should drink less than 9 to 14 cans per day.

The announcement that diet soda may cause cancer could temporarily affect sales. While consumers who drink less of it will not be affected, those who consume more might.

According to TD data, diet sodas are more popular among consumers with higher incomes than those with lower incomes. TD Cowen analyst VivienAzer wrote last week that the WHO report could cause concern for these consumers.

How much attention this announcement gets is the biggest risk to soda makers. CFRA analyst Garrett Nelson stated in a note dated June 29, that the announcement could negatively impact sales of low-calorie beverages if consumers read the headlines.

Gerald Pascarelli, Wedbush's analyst, told CNBC that he believes the report will affect sales. The dip in sales might not last for long.

He said that "these companies are quick at pivoting and doing what is necessary to maintain momentum in their brands. We suspect they will do the same."

Dr. Francesco Branca of the WHO division for nutrition and food safety said that manufacturers who use aspartame to sweeten their foods and beverages should consider removing the sweetener from their products.

Hugh Johnston, PepsiCo's Chief financial officer, told

Reuters

He said that the company does not plan to stop using aspartame. He also said that aspartame is not a part of the company's portfolio.

Diet Pepsi used aspartame until 2015. The company then tweaked its formula. PepsiCo reintroduced it a year after the backlash of customers. The change was short-lived. In 2020, the beverage giant eliminated aspartame from Diet Pepsi. Pepsi Zero Sugar still contains it.

Nelson, CFRA, says that Coke is at greater risk of losing sales due to aspartame. Diet Coke, Coke Zero and other products use aspartame. However, the beverage giant could switch to another sweetener, like stevia.

Brittany Quatrochi, an Edward Jones analyst, said that she doesn't expect a significant drop in diet soda sales.

She said that consumers may switch to a different product, but it is not the first food or beverage labeled as a carcinogen.

In 2018, the IARC, for example, classified red meats as probable carcinogens.

Diet soda makers are not worried about lost sales. The American Beverage Association is a lobbying group for Coke, PepsiCo, and

Keurig Dr Pepper

The WHO announcement was taken as a further confirmation of sweetener safety.

Kevin Keane, interim CEO of the ABA, said that "with more than 40 years' worth of science, and this definitive conclusion by the WHO, consumers are able to move forward in confidence, knowing aspartame will be a safe option, especially for those who want to reduce their sugar intake and calories."

Aspartame is also found in many other foods such as breakfast cereals and chewing gum. Aspartame is widely used to replace sugar because it's 200 times sweeter. This allows it to be used at much lower concentrations.