Will Diet Pepsi's Switch From Aspartame To Sucralose Boost Pepsi's Stock?

According to a new report by Jefferies, PepsiCo, Inc. (NYSE: PEP) could see a big boost in sales from its upcoming shift in artificial sweeteners.

In the report, analysts run down what Pepsi shareholders can expect when Diet Pepsi makes the transition from aspartame to sucralose in August.

Aspartame’s Bad Reputation

A consumer survey conducted by Jefferies indicates that aspartame has the worst perception among all sweeteners included in the survey. Of those surveyed, 55 percent indicated that they try to avoid foods and beverages sweetened with aspartame.

This number compares to 53 percent for high fructose corn syrup, 30 percent for sugar and 21 percent for stevia.

Most importantly for Pepsi, only 37 percent of respondents indicated that they try to avoid sucralose.

Related Link: Be Happy Pepsi Investors, Morgan Stanley Just Made A Bullish Move

Cautiously Optimistic

While analysts believe that eliminating aspartame could be a positive catalyst for Pepsi, they point out that expectations for the new Diet Pepsi formula should remain low. Changing the taste profile of strong brands can be a big risk, as the Coca-Cola Company (NYSE: KO)'s disastrous 1980s launch of “New Coke” demonstrated.

Despite aspartame’s horrible public perception, neither Coca-Cola nor Dr Pepper Snapple Group Inc (NYSE: DPS) are planning on changing the formulas of their aspartame-sweetened diet drinks in the near future.

Projections

Jefferies projects that the rollout of the new Diet Pepsi could produce up to a 10 percent initial boost to the brand’s U.S. volume.

Analysts are bullish on Pepsi’s stock based on its appealing valuation relative to peers Coca-Cola and Mondelez International Inc (NASDAQ: MDLZ) and its potential to beat low Wall Street consensus earnings estimates throughout the remainder of the year.

Jefferies has a Buy rating on Pepsi.