A new study investigates the harmful effects of natural sugars in fruit juice. What will this mean for Coke and Pepsi?
In a palm-to-the-forehead moment for the likes of Coca-Cola (KO) and Pepsi Co. (PEP), many of the healthier brands the two companies sell have been deemed by a new study to be, well, not very healthful. The study by nutritionists at the University of North Carolina warns that "naturally occurring sugars" are really no different from corn syrup or other kinds of sugar regarding health risks, and have no health benefits whatsoever. While a smoothie, blended from real fruits right before your very eyes seems like a vast improvement from a can of Coke, researchers argue they simply allow you to consume more sugar without feeling full.
Looks like the millions of juice drinkers who thought they were making a healthy choice, really just fell for dubious advertisements. Some companies are already starting to feel the heat as consumers begin to internalize the new revelation. The juice company Naked, owned by Pepsi, had to shell out $9 million in a class-action lawsuit on the grounds that its claims of being "all-natural" were misleading to consumers. Anyone who purchased one of 38 flavors in the last six years is eligible to receive up to $75 if they file a grievance by December 17.
That's a pretty alarming precedent for major beverage companies, who along with stocks like Starbucks (SBUX) and McDonalds (MCD), are scrambling to keep up with consumers demands for more nutritious products. Pepsi has been particularly aggressive with this strategy, acquiring Tropicana and Quaker Oats, in addition to Naked. Coca-Cola has followed suit to a certain extent, but has also invested heavily in improving its lines of artificial sweeteners. They even partnered with Cargill Inc. and the Swiss company Evolva to develop a product called Truvia, a fermentation-based sweetener to be used in a new line of low-calorie products.
Evolva's stock jumped over 15% on Swiss exchanges after the announcement that Truvia would be on grocery shelves sooner than planned. Clearly the market's enthusiasm for artificial sweeteners is growing. While Coca-Cola is probably too large a company to see much change in its stock as a result of the one venture alone, Truvia accounts for 60% of the Stevia sweetener market. Artificial sweeteners also don't work as well in "natural" fruit products whose flavorings are often too mild to compete with the sometimes chemical after taste - but they've been used in diet soft drinks for years.
However, these new findings suggest an important turning point for the beverage industry, as it re-thinks a strategy that has worked well since the whistle was blown on high-fructose in the late nineties. Even as emerging economies clamor for more access to American delicacies like Seven-Up and Big Macs - it is only a matter of time before they, too clamp down on advertisers efforts to paint heavily sweetened items as "good for you." The EU already bans many artificial sweeteners, including Stevia. If other countries follow suit, especially our own, a number of beverage and fruit juice companies could feel increased pressure to innovate or provide less tasty products.
Until then, we'll stick to carrot juice.
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Which fruit and juice sellers will keep up with the science? Use the list below to begin your own analysis.
1.Jamba, Inc. (JMBA, Earnings, Analysts, Financials):Through its subsidiary, Jamba Juice Company, owns and franchises Jamba Juice stores. Market cap at $215.45M, most recent closing price at $12.83.
2.Dole Food Company Inc. (DOLE, Earnings, Analysts, Financials):Engages in sourcing, growing, processing, marketing, and distributing fresh fruits and vegetables, and food products to wholesale, retail, and institutional customers worldwide. Market cap at $1.21B, most recent closing price at $13.55.
3.Pepsico, Inc. (PEP, Earnings, Analysts, Financials):Engages in the manufacture, marketing, and sale of foods, snacks, and carbonated and non-carbonated beverages worldwide. Market cap at $122.69B, most recent closing price at $79.26.
4.The Coca-Cola Company (KO, Earnings, Analysts, Financials):Distributes, and markets nonalcoholic beverages worldwide. Market cap at $170.5B, most recent closing price at $38.35.
5.Starbucks Corporation (SBUX, Earnings, Analysts, Financials):Operates approximately 16,858 stores, including 8,833 company-operated stores and 8,025 licensed stores. Market cap at $53.66B, most recent closing price at $71.57.
6.Fresh Del Monte Produce Inc. (FDP, Earnings, Analysts, Financials):Produces, transports, sources, markets, and distributes fresh and fresh-cut fruit and vegetables worldwide. Market cap at $1.65B, most recent closing price at $29.41.
7.McDonald's Corp. (MCD, Earnings, Analysts, Financials):Operates as a foodservice retailer worldwide. Market cap at $96.39B, most recent closing price at $96.26.
(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research, all other data sourced from Finviz)
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Dig Deeper: Access Company Snapshots, Charts, FilingsJamba, Inc.(JMBA, Chart, Download SEC Filings) Dole Food Company Inc.(DOLE, Chart, Download SEC Filings) Pepsico, Inc.(PEP, Chart, Download SEC Filings) The Coca-Cola Company(KO, Chart, Download SEC Filings) Starbucks Corporation(SBUX, Chart, Download SEC Filings) Fresh Del Monte Produce Inc.(FDP, Chart, Download SEC Filings) McDonald's Corp.(MCD, Chart, Download SEC Filings)
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