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Will PepsiCo's Focus on Premium Drinks Drive the Next Leg of Growth?
PepsiCoPepsiCo(US:PEP) ZACKSยท2025-07-31 18:31

Core Insights - PepsiCo is enhancing its competitive position in the beverage sector by focusing on premium and functional drinks to align with changing consumer preferences [1][2] - The company is shifting its beverage portfolio away from traditional colas towards health-conscious options, including no-sugar colas, functional hydration, and energy drinks [1][8] - Strategic partnerships, such as the alliance with Celsius, are being leveraged to support the premium drink strategy and enhance distribution [3] Company Strategy - PepsiCo's success with Gatorade and Propel indicates its capability to scale health-focused beverages, with premium hydration becoming a key growth area [2] - The introduction of liquid protein products is anticipated in late 2025 and early 2026, emphasizing taste and natural ingredients [2] - The company's focus on cleaner formulations and no artificial ingredients reflects a broader shift in its portfolio to meet evolving consumer expectations [2] Competitive Landscape - PepsiCo faces strong competition from Coca-Cola and Keurig Dr Pepper, both of which are investing heavily in premium and health-conscious beverages [4][5][6] - Coca-Cola is expanding its zero-sugar variants and functional beverages, while KDP is enhancing its premium beverage offerings through strategic partnerships and a balanced portfolio [5][6] Financial Performance - PepsiCo's shares have declined approximately 8.3% year to date, contrasting with the industry's growth of 4.6% [7] - The company trades at a forward price-to-earnings ratio of 17.33X, slightly below the industry average of 17.53X [9] - The Zacks Consensus Estimate indicates a projected decline of 1.9% in 2025 earnings, with a subsequent growth of 5.3% in 2026 [10]