Coca-Cola vs PepsiCo Stock

Coca-Cola vs Pepsi Stock Analysis

Coca-Cola vs. Pepsi stock has been a competitor since the end of the 19th century. Since their creation, both brands have greatly impacted consumer habits in many geographical areas. Although both companies are known for battling which soda is better, Coca-Cola and Pepsi’s business is much more diverse. Both companies operate in various business segments with different pricing and growth strategies.

Investors who are looking for growth stocks will be disappointed. Both Coca-Cola and Pepsi are in the Dividend Aristocrats club. These stocks are for long-term investors looking for safe stocks and regular dividends. In this article, we will look at both businesses and attempt to determine which one is a better investment.

Fun fact: According to a 2021 study, 67% of consumers prefer Coca-Cola over Pepsi. 

Chart by TradingView

Let’s begin with Coca-Cola vs. Pepsi stock. This American company originated in Atlanta and has been around since 1886. Since its creation, Coca-Cola developed and acquired more than 200 different brands and drinks. Every day, it’s estimated that 1.9B Coca-Cola products are consumed worldwide. The company operates four segments: North America (the best-performing segment), Europe, the Middle East and Africa, Latin America, and Asia Pacific.

Its focus is mainly on the beverage segment. Below are some of the company’s product lines:

Soda: Coca-Cola, Sprite, Fanta, Fresca, Schweppes and Barqs Root Beer

Water: Dasani, Powerade, Glaceau SmartWater, and Vitaminwater

Tea: FUZE, Gold Pink Tea, and Honest Tea

Juices: Minute Maid and Hubert’s Lemonade

Other: Body Armor, Monster Energy Drink, and Dunkin’ Donuts

Coca-Cola’s products are mainly beverages but well-diversified across all segments. There is also an alcoholic category, but it involves partnerships with other brands such as the famous Rhum and Coke cocktail Jack Daniel’s and Coca-Cola. There are also alcoholic mixes with Fresca—enough about Coca-Cola’s products. Let’s talk more about the business.

Coca-Cola Analysis (KO)

One of the main differences between Coca-Cola vs Pepsi stock is pricing. Coca-Cola prices its products based on its competitors. They don’t want prices to differ too much from competing products.

Instead of establishing a premium brand, Coca-Cola wants consumers to buy their products because they are better for the same price. Over the years, they have diversified its products to adapt to the everchanging demand. In the last decade, health concerns have decreased soda sales. Coca-Cola responded by investing in different and healthier beverage products.

Despite decreasing soda sales, the company is seeing consistent growth year after year. Lastly, Coca-Cola’s bottling division is also growing and taking more importance in its operations.

Coca-Cola’s stock has always been very attractive to value investors. The company is a member of the Dividend Aristocrats. They have been increasing their dividend yield for the last 60 years. Today, it is at 2.82%. The stock might be trailing its peers in the S&P index, but it has been consistent with its returns and quarterly distributions. Coke’s growth may be ahead of Pepsi’s, but the latter has a lot of momentum. Let’s take a look.

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PepsiCo (NYSE: PEP)

We will continue our Coca-Cola vs. Pepsi stock with PepsiCo. The company originated around the same time as Coca-Cola but in North Carolina. Both companies share a similar success story. PepsiCo has seven global divisions. North America’s products are 60% of the company’s revenue. The company is much more diversified than Coca-Cola: 

Frito-Lay North America: food and snacks in Canada and the US

Quaker Foods North America: cereal, pasta, and rice in Canada and the US

Pepsico Beverages North America: drinks in Canada and the US

Latin America

Europe

Africa, Middle East, and South Asia

Asia Pacific, Australia, New Zealand, and China

In 2020, PepsiCo had 23 brands with over $1B yearly sales. The company executives decided to expand their reach and add new markets to their brand:

Soda: Pepsi, 7up. Sierra Mist and Mountain Dew

Alternative Drinks: Tropicana, Gatorade, Sodastream, Rockstar Energy Drinks, and Aquafina 

Snacks: Ruffles, Tostitos, Lays, Doritos, Fritos, and Cheetos (more than 50% of Pepsico’s revenue)

Other: Starbucks products and Quaker

Since the pandemic, PepsiCo suffered some issues due to supply chain disruptions. More diversification can sometimes also lead to more issues. Despite this, the company is still growing, and its stock is well-positioned to grow in the coming quarters. 

Pricing

As we mentioned earlier, one of the key differences between Coca-Cola and Pepsico stock is pricing. PepsiCo is a price maker. The company isn’t looking at other brands and adjusting their prices accordingly. Instead, they set the prices, and others have to follow.

PepsiCo is well-positioned to afford this strategy, especially in the snack market. Let’s be real; they are responsible for some of the most popular (and tasty) snacks in stores. Even if the price might be higher, many consumers will still choose PepsiCo’s products.

Similar to Coca-Cola, PepsiCo has expanded its presence in healthier alternatives. However, the latter is lacking a presence in the alcoholic beverage department. They are attempting to mix their Mountain Dew products with alcohol but with little success. As for a Pepsi-rum cocktail, very few consumers want that. Coca-Cola is the way to go.

Which One to Invest In?

PepsiCo is also part of the Dividend Aristocrat club, thanks to its 50th consecutive year with an annual dividend hike. This year, it is at 2.65%, lower than Coca-Cola’s.

PepsiCo has grown more in the last decade than Coca-Cola, thanks to its diverse market presence. Coca-Cola has seen more success in the short term, but PepsiCo’s development is much stronger if we zoom out.

PepsiCo 2021 net revenue: $79.47B

Coca-Cola 2021 net revenue: $38.7B

If I had to pick one of the companies to put all my money in, I’d have a hard time. They are both excellent options. One of the key points to their future success is diversification.

Sodas are falling out of fashion. Healthier alternatives are on the rise. The company that can create or acquire and develop such a brand will have a lot of success. Otherwise, value investors should have their fingers in both these stocks.

Final Thoughts: Coca-Cola vs. Pepsi Stock

The battle between Coca-Cola and Pepsi stock is far from over. Both companies are expanding their presence on the shelves with new, healthier, and more diverse products. They are making life difficult for smaller companies to find some shelf space and profitable margins. Both stocks are also very attractive for long-term investors. Growth across many segments and quarterly dividend income are almost guaranteed. Both companies are Dividend Aristocrats and don’t intend to leave this club soon.

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