PepsiCo has no plans to change portfolio after WHO aspartame warning

The World Health Organization reaffirmed its recommended intake of aspartame Thursday, but the agency’s classification of the sweetener as a possible carcinogen could still scare away diet soda drinkers and lead to new beverage formulas.

Soda consumption has fallen over the past two decades as consumers have switched to drinking more water or picking beverages with less sugar. However, diet sodas have been a bright spot for the category in recent years.

Although full-calorie options still dominate the soda segment, diet sodas now represent more than a quarter of sales. Coca Cola’s and Pepsi Co’s bets on zero-sugar versions of their namesake sodas have been paying off for both companies. Diet Coke, Coke Zero, Pepsi Zero Sugar and Diet Mountain Dew all contain aspartame.

On Thursday, the International Agency for Research on Cancer, a WHO agency, identified a possible link between aspartame and a type of liver cancer called hepatocellular carcinoma. WHO officials said more research on the potential connection is needed.

A separate body, the Joint Expert Committee on Food Additives, said in its own report that the acceptable daily intake of the sweetener is under 40 milligrams per kilogram of body weight, reaffirming prior recommendations. For most adults, that means drinking less than nine to 14 cans of diet soda every day.

While the findings on possible links to cancer may not deter consumers who drink smaller amounts of diet soda, the announcement could at least temporarily hurt sales.

Diet sodas are at least 50% more popular with higher-income consumers than with lower-income people, according to TD Cowen data. Those consumers could be concerned by the WHO’s report, TD Cowen analyst Vivien Azer wrote in a research note last week.

The biggest risk for soda makers is how much attention the announcement garners. CFRA analyst Garrett Nelson wrote in a June 29 note that the news could hurt sales volumes of low-calorie sodas if enough consumers see the headlines.

Likewise, Wedbush analyst Gerald Pascarelli told CNBC he thinks the report could hit sales in the category. But the dip might not last long.

“These companies are quick to pivot and to do what’s necessary to maintain momentum for their brands, and we suspect they’ll do the same thing,” he said.

Dr. Francesco Branca, head of the WHO’s nutrition and food safety division, said manufacturers who use aspartame in their food and drinks should consider making their products without the sweetener.