Food & Beverage

Pepsi sees 'opportunity to innovate' with new challenge to Coca-Cola

Eric Mandel
Pepsico Bubly sparkling water drinks.
Source: Pepsico

The Coca-Cola Co.'s biggest rival is shaking up the competition in the sparkling water wars.

PepsiCo Inc. (NASDAQ: PEP) has launched "bubly," a new flavored sparkling water that the company said has an "upbeat and playful sense of humor to shake up the sparkling water category" while not including artificial flavors, sweeteners or calories.

The new drink became available this month, with eight flavors: limebubly, grapefruitbubly, strawberrybubly, lemonbubly, orangebubly, applebubly, mangobubly and cherrybubly. Packaging for each flavor comes with its own greeting on the tab, such as: "Hey u," "hiii," and "yo," plus "personal messages" on the can" "I feel like I can be open around u," "hold cans with me," and "love at first phssst." Pepsi said the brand will make its official TV debut with two ads airing during the 90th Oscars broadcast on March 4.

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The introduction of bubly comes one year after PepsiCo launched it premium bottled water LIFEWTR, and furthers the company's commitment to its water portfolio. It also continues Pepsi's aims that at least two-thirds of the global beverage portfolio volume will have 100 calories or fewer from added sugars per 12-ounce serving by 2025. The New York Times reports that bubbly is "the most direct attack yet" on popular flavored sparkling water brand LaCroix.

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Todd Kaplan, vice president of PepsiCo North America Beverages' Water Portfolio, said in a news release that the company saw "an opportunity to innovate" in the sparkling water category by building a new brand and product.

This ground-up technique is slightly different than that of The Coca-Cola Co. (NYSE: KO), which has leaned heavily on its Venturing & Emerging Brands unit to acquire companies that can reach the ever-important millennial demographic. No acquisition was bigger than its $220 million acquisition in October of Topo Chico, one of Mexico's most popular sparkling waters. Mixed with its roll out of Dasani and SmartWater Sparking waters, the company's sparkling water sales increased by 42 percent in the past five years, according to the Motley Fool.

Coca-Cola is also dabbling in favor variations, adding Georgia Peach and California Raspberry to its full-sugar core soda line and launching a "brand rejuvenation" of Diet Coke that includes four new flavors: Diet Coke Ginger Lime, Diet Coke Twisted Mango, Diet Coke Zesty Blood Orange and Diet Coke Feisty Cherry.

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