Feb 26 2008

Pepsi RAW – will consumers pay more for a healthier soft drink?

Published by at 9:44 pm under Competition,Oligopoly,Product markets

Pepsi Tests ‘Naturally Sourced’ Beverage – Advertising Age – News

Pepsi is just about to launch its first new beverage since 1992.  The drink, called “RAW” will present consumers with a healthier alternative to the artificially flavored soft drinks that dominate the oligopolistic market.

Apple extract, sparkling water, grapes, coffee leaf, raw cane sugar. The list of ingredients sounds like it belongs to a health drink, but those are the components of Pepsi’s newest variant.

Pepsi Raw, being launched in U.K. test markets, is meant to be a more healthful alternative to the traditional cola. A type of Pepsi made from only “naturally sourced” ingredients, it taps into demand for premium, less-processed products.

Sounds great, right? But would you be willing to pay more for a “natural” Pepsi than for the good old fashioned artificially flavored Pepsi and Cokes you grew up with? Pepsi is betting the drink will appeal to young hipsters, and is launching it primarily at clubs and bars in six UK cities to test out the market.

So when can Americans expect to  enjoy the natural goodness of Pepsi RAW? Unfortunately, Pepsi seems to think Americans are a bunch of fat tightwads:

 “It makes sense to launch first in the U.K. because health concerns are a bigger issue there,” Ms. Dornblaser said, adding, “It might not fly as well in the U.S. because of the price.”

Oh, and if you’re too young to remember what Pepsi’s last attempted new product launch was, allow me to jog your memory:

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Hey, I LOVED Crystal Pepsi! So, would you be willing to pay more for a healthier Pepsi?


About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

36 responses so far

36 Responses to “Pepsi RAW – will consumers pay more for a healthier soft drink?”

  1. TimChuon 26 Feb 2008 at 11:24 pm

    oh yeah! first post!

    anyways, for some reason, i thought that the whole "low-fat" phase of marketing already ended…but i guess it's about time pepsi caught on and started making new drinks. Like for Coke, you have cherry(gross), vanilla (awesome), diet, lemon, enough-caffine-to-give-you-a-seizure, but it always seems like the classic coke sells the most. I think that it's more of the marketing that helps sales with Coke, and that if Pepsi wanted to boost sales, creating a new "hip" drink for smelly UK people is a stupid idea. Money would be spent a lot better if there werent hippie drinks being produced.

  2. TimChuon 26 Feb 2008 at 11:48 pm

    oh and i just realized something. Crystal Pepsi is racist! Why the hell is white pepsi better than black pepsi? subliminal message anyone? either way, Mountain Dew is better than both.

  3. Chris Seahon 27 Feb 2008 at 12:09 am

    Oh yeah! Second post! I think. Well, third. I think I would enjoy this product because I would be able to discern what the heck is actually in it. That said, since I am a young hipster, I am inclined to believe that this product would actually be a success.

    Previous market failures have…failed (new coke, anyone?) because they were offering an almost identical product to what was already on the market, the only variations being color or the use of corn versus fructose sweeteners. This product is something new entirely and fits nicely into the trend towards organic foods and better health. For such consumers (myself included), price shouldn't be an obstacle at all.

    Tim, mountain dew looks like fluorescent urine. grape fanta 4life. maybe that's why i like the inclusion of grapes in this new drink.

  4. Christina Huon 27 Feb 2008 at 12:30 am

    Haha, I think the drink would sell well, as long as it tastes good. And looks cool. Basically everyone [outside of the States at least] knows of the HUGE amount of calories, sugar, and caffeine in regular pepsi and coke. They know how unhealthy it is, and would probably go for something that still tastes like the good old fashioned thing but does not put them at risk for diabetes or, as Tim mentioned, a seizure.

  5. Tarynon 27 Feb 2008 at 2:13 pm

    Wow. A healthy soda; it sounds like an oxymoron. But nevertheless, I think it will do well. Personally, as an American, "healthiness" and "losing weight" are becoming more and more of a trend which, if we pretend that this is on a supply and demand graph, means that the demand for healthy products goes up. So, in the end I think Americans would be more willing to pay a higher price for a good tasting healthy soft drink; Americans could also buy this product too. Personally, speaking as a healthy American, I would rather drink water. I hardly ever drink pepsi or any other pop, and so if regular pepsi tastes better, I would rather have a regular pepsi than the healthy one just because I rarely drink pop. But I cannot speak for the general American population.

  6. Mondon 27 Feb 2008 at 9:46 pm

    I believe the drink would be a "great success," simply because people would choose the healthier alternative to make themselves feel better when consuming a soda. It makes people feel less guilty when consuming unhealthy goods like soda. At first glance, it does seem a lot more healthier than regular coke, but somehow I doubt there is such a thing as a healthy soda. Water, green tea, and mango juice for the win!

  7. Laurenon 27 Feb 2008 at 10:54 pm

    I think the name would appeal more to people than the actual ingredients. It's all about how you advertise it. If it was called "Health Pep" or something, no one would buy it, because a lot of people (Americans at least) don't like to admit they're eating healthily. I think if it's advertised well, it'll appeal to more people and the demand for it will increase. I do agree with Taryn, though, about health being a trend in America right now.

  8. calvinluon 27 Feb 2008 at 11:10 pm

    A healthy Pepsi, sounds like a good idea. But before it can be anywhere close to success, it needs to taste like a Pepsi. The reason why Pepsi is so popular is because of its unique taste, this is where all the brand loyalty comes from. I don't think people will be willing to trade off taste for health,. I remember i was watching History Channel when it was talking about the history of Pepsi and Coke. Coke tried to suppress Pepsi's growth by launching a "improved" version of coke. It turned out to be a disaster, as a lot of loyal customer turned away and started drinking Pepsi instead. Therefore, Coke had no choice but to revive the original coke and renamed it as Coke Classic.

  9. Sharon Lion 28 Feb 2008 at 1:09 am

    "Healthy eating" is definitely a rising trend in America, so this could probably sell well, given good advertising and if it tastes good, then cool. the ingredients sound like a gross cocktail though. This would maybe sell even better than diet pepsi which has a bad rap for 'causing cancer'.

  10. Charlie.Gaoon 28 Feb 2008 at 11:10 am

    Nasty. Quite honestly, I don't think soft drinks can be "health". Period. No matter how healthy soft drinks can appear in advertisements, it's still loaded with chemicals and sugars that enhance its tastes. I don't know. Maybe i'm just biased since I don't drink soda.

  11. richardtuon 28 Feb 2008 at 11:43 am

    Pepsi are launching the new "Pepsi RAW" serving as an alternative and healthier soft drink product. According to Pepsi, the UK region are more concerned with health compare to the Americans, therefore, they are launching the product in the UK first. Since, the UK people are more concerned with their health, they have a higher willingness to pay for a higher price the drink. On the other hand, Americans are less concerned about their health, since their lives are originally associated with the original pepsi, they have a lower incentive to pay for a new product at a higher cost. Therefore, predictively, they will yield a greater success in the UK than in the US region.

  12. kevinchiuon 28 Feb 2008 at 12:43 pm

    Source 1: http://www.timesonline.co.uk/tol/life_and_style/f

    I think the success of Raw Pepsi will really depend on its price; like others have already stated, in order for Raw Pepsi to tap into a new "healthy soda" market, it will have to taste somewhat like the original. If Raw Pepsi is nothing like the original, or doesn't taste as good, then the idea of it being a healthy soda will be completely obscured, as the are plenty of healthy drinks out there. And, based on the 1-minute google research I conducted.. Pepsi Raw tastes "more like apple juice,” source 1). Also, according to source 1, the calorie amount from the regular Pepsi to Raw Pepsi has only been reduced from 126-117 calories. Thus, in my opinion, Raw Pepsi won't enjoy too much success beyond the initial release phase in the UK.

  13. Jeff Yeon 28 Feb 2008 at 6:39 pm

    I think this new product might actually be interesting. I can't wait to actually see what a genuinely "healthy" soft drink tastes like. Although coke has produced a lot more new products than pepsi, many of them haven't done so well. Pepsi might be hoping that since they haven't produced anything new in a while, consumers would think that now that they HAVE come out with something new, it'll be good. I for one, enjoy pepsi more than coke, so i'm excited about trying out this new drink.

  14. Chan Min Parkon 28 Feb 2008 at 8:23 pm

    As everyone has already stated, I think the success of this product will depend on its price and taste. If it tastes very bad, then people might as well go eat something else that tastes bad but is actually proven to be healthy (like vegetables…just kidding) I think when it comes out, i will probably try it once but if it doesn't taste good then i won't drink it anymore. As from my point of view, the 'healthy' soda drink does not really get my attention.

  15. Nicole Wongon 28 Feb 2008 at 8:29 pm

    Though taste and price are certainly important factors, I also think the original soda will be hard to replace. People are already familiar with the ordinary coke and pepsi and as we've seen, the newer pepsi "lines" (e.g. Pepsi Max) don't seem to be doing as well as the original drink. It's just that the original drink is widely known and easily obtainable anywhere that people may not bother with the new drinks if they find the original one perfectly fine, despite minor benefits.

  16. jacqueszhangon 28 Feb 2008 at 8:50 pm

    A nice attempt, though it's hard to tell whether it'll succeed or not. The main thing here is that it's NEW. In the past, we've had diet coke, diet pepsi, coke zero and all kinds of random junk that pepsi and coke have been making that are supposedly 0 fat or 0 calories or 0 gas or 0 polar bears or whatever. I think actually changing the ingredients to make it more healthy might have more success. We'll probably have to see.

  17. jacqueszhangon 28 Feb 2008 at 8:51 pm

    By the way, Van Halen is AWESOME. And so is that advertisement.

  18. Michael Dailyon 28 Feb 2008 at 9:01 pm

    Well, I think it will get a lot of attention at first, but the hype around will die after a while. I mean in theory it sounds good: a healthy soft drink, but if somebody wanted to drink something healthy they'd go with something like orange juice. I mean Diet Pepsi is considered "healthy" by most Americans and that doesn't taste all that bad, but all natural ingredients sounds like a recipe for disaster. If it doesn't taste good, then it does not have a chance, and I don't think it sounds too appealing. To me it sounds like another one of those drinks like Sprite fire and Sprite ice, that sound cool but as soon as it touches your tongue you regret buying it. Also the success or lack thereof of Crystal Pepsi should tell you how this is going to turn out. Maybe it's not as big a thing for me because I don't care about Pepsi's healthiness but Pepsi Raw just sounds nasty.

  19. MichaelChowon 28 Feb 2008 at 9:20 pm

    This new product that Pepsi has created is both unique and health conscious to the society. From what I read in the previous posts, I agree with how without a doubt that the successes of this drink will rely on mainly the price level set, since it will be significantly more than that of a regular soft drink. Although there is some benefits to this drink I agree with Michael Daily in the sense that to me this drink will not be preferred over a regular soft drink.

  20. Conrad Liuon 29 Feb 2008 at 1:09 am

    It's only because health concerns have skyrocketed nowadays that Pepsi decided to launch a new product, one apparetly promoting healthy consumption. Of course, Pepsi is a firm, and again, this RAW pepsi is being sold primarily for profit, so in the end, whether or not this prodcut becomes a success lies in the accepted price level consumers are willing to buy.

  21. James Tsaoon 29 Feb 2008 at 1:33 am

    Awesome! Healthy pepsi.. nice! If the company manages to make the taste almost identical to the original one, I guarantee that the product will be a huge success. Of course, the place where they market it will be a concern. For example, definitely not in China or relatively poorer places, but countries like the UK or Japan. If I was in charge of the company, my major campaign would be towards children though because to parents (generally have more money and can afford pepsi), they value health as a main concern for their children. Of course, young hipsters would also be a good idea but might not want to test it on them because it has a higher chance of being called 'lame'

  22. Howard Linon 29 Feb 2008 at 11:12 am

    This new product makes a soda "healthier", however, isn't all sodas unhealthy? Sugar free or light Pepsi are the same price as classic ones. I don't see a reason why people would pay more just to drink a "more healthy" soda when you can drink a normal one just for the same effect.

  23. Rebecca Sungon 01 Mar 2008 at 12:48 pm

    "Apple extract, sparkling water, grapes, coffee leaf, raw cane sugar."

    This combination of ingredients seems weird to me…but the health-craze is in the states, so it might sell well at the beginning. Pepsi Raw can just become a fad that passes quickly. Besides, if a person was actually trying to be healthy, I highly doubt that he/she would be drinking soda.

  24. Kristie Chungon 01 Mar 2008 at 1:16 pm

    I think that this product could potentially sell pretty well given the right advertising, and if it tastes like the original pepsi. It could ride on the health-craze wave in the U.S.

  25. Jo Loon 01 Mar 2008 at 3:39 pm

    Introducing this product first in the UK is a smart move. The Brits are more health conscious and if they end up liking it, chances are most Americans will want to try it to. The problem for Pepsi is that if Raw does become successful and tastes the same as regular Pepsi, the sales of the regular will go down. But, this probably will be compensated by the increasing sales of Raw. I think more and more people would want to drink it, especially young adults who are obsessed with looks and by drinking Raw, they wouldn't feel as guilty as if they were drinking regular Pepsi, which is high in calories.

  26. Alex Goldmanon 01 Mar 2008 at 4:38 pm

    Although there seems to be a growing trend towards healthy diets, it seems to me that the Pepsi product has become synonymous with the brand name. Even if the drink is made with healthy ingredients, I will never be able to associate the company with anything other than the soda(which ironically is the goal of advertising. If the drink does prove to be healthy, and of high quality, I think that Pepsi can change their image to some extent and the drink will be successful.

  27. kevinhuangon 01 Mar 2008 at 9:02 pm

    I think people will probably be willing to pay more for a more healthy, more environmentally safe drink. Especially in Europe. People in Europe, compared to the rest of the world are definitely more health-conscious. As long as the drink tastes good, I expect it to be quite popular among the UK residents.

  28. serenatuon 02 Mar 2008 at 9:04 pm

    No matter how Pepsi is trying to make the soft drink more healthy, it's still not healthy. We will never know what other weird chemicals and stuff they add into the drink to make it "healthy". So I don't see why would someone spend more money on the Pepsi RAW when it is just like all the other soft drinks.

  29. julie.linon 02 Mar 2008 at 9:55 pm

    i dont drink soft drinks a lot because i dont like it, so i probably would not spend more money on it. but for people who love to drink softdrinks like pepsi, i think the new RAW should be a good alternative for their regular, high sugar, unhealthy soft drinks. i support the idea of RAW and i think it will make it into the softdrink market smoothly.

  30. Kai Lin Fuon 02 Mar 2008 at 10:29 pm

    Ok,according to wikipedia the definition for soft drink is a carbonated chemical compound that contains sodium, artificial sweeteners and it doesn't contain any vitamins, minerals, fiber, protein, or other essential nutrients. Does that sound healthy to you? Soft drink manufacturers can use the word "natural" all they want but all man made products are simply NOT natural. Other than that I think RAW will sell very well with today's health conscious generation.

  31. Hansenon 03 Mar 2008 at 1:12 am

    I don't drink Coke a lot, but I still do. For me, I cannot escape the fact that on a hot day, popping the cap off a bottle of Coke is refreshing. Indeed the whole deal with soft drinks is that it isn't healthy. But with all the attention going around about health these days, this RAW is merely another business ploy aimed at the general demand. We want Coke, but we want healthy. So what does Pepsi give us? Marketed, "healthy" cola. I'd buy it.

  32. calebon 03 Mar 2008 at 10:19 am

    I wouldn't buy it because I don't drink soft drinks often but I can see why people people that do drink soft drinks would find this very appealing. Whenever business say that their company saves blah blah blah amount of resources, although the consumption of their product doesn't mean that resources are being wasted, it just means not as many are. Its all about appealing to the consumer's conscious. If you can make him or her feel that their doing something good for themselves or the environment, even if the effect of their action doesn't change anything dramatically from their current status, they'll buy the product. People are stupid hypocrites .

  33. Erinon 05 Mar 2008 at 1:30 pm

    I think a lot of Americans would pay the extra money for this "healthy" drink. It seems like right now, we pay any amount of money for whatever new item claims to be "healthy" or 100 calories or less. So many popular snack foods have been turned into 100 calorie snack packs, claiming to be healtheir for you. But really, are they that much better? all of these things still gigantic lists of additives and preservatives on the back, and very little nutritional value. sure, it's only one calories, but you're still placing all of the un-needed chemicals in your body, which is quite unhealthy. Yet the amount of people consuming these products continues to grow exponentially. Why? People respond to incentives…which they will do with this new pepsi product. They will see the "healthy" label on it and feel they are doing their bodies good by consuming it..causing them to feel like they can spend their daily calories or junk food intake elsewhere=overconsumption of junk food. No matter what any company does, pop will not be healthy.

  34. Shanaon 06 Mar 2008 at 9:33 am

    I agree with what seems to be the general consensus that a large amount of people will find this product attractive beacause it claims it's healthy, and will therefore be willing to pay more for it.

    Personally though, I like the "artificially flavored soft drinks" such as Mr. Pibb/Pibb x-tra(a Coca Cola product), so I wouldn't go spend a bunch of money on this Pepsi product which sounds kind of…weird. Leave this to the vitamin water and other weird flavored-brand name drinks out there. And yes, I do know that the Coca Cola company technically owns "Vitamin Water" but it doesn't say Coca Cola Vitaman drink or Coca Cola 'raw'. Pepsi Raw just sounds funny.

  35. yunqimokon 08 Mar 2008 at 1:14 pm

    I think that Pepsi Raw is a great idea. People all over the world, including the US, are starting to become more health conscious. Or, if not health conscious, beauty and body image conscious. If people can now enjoy similar tasting things but which may not make one as fat, then why not? If money can buy something that tastes good and is good for you, then I am sure that many would be willing to pay it. After all, organic foods are many times more expensive than ordinary foods, but they are a hit in the market. Consumers who are wealthieir will definitely be willing to pay for the Pepsi Raw…provided that it tastes good of course.

  36. Jonathan Lauon 20 Mar 2008 at 8:48 pm

    Wow, I don't know about you, but I would definitely want to see what this stuff tastes like. If it tastes the same and the price isn't that much more than a regular coke, then I would definitely convert to Pepsi Raw. I'm sure there will still be chemicals in it, but at least this new product is more than just sugar and carbonated water.