Chicago, IL – March 14, 2025 – Today, Zacks Equity Research discusses The Coca-Cola Co. KO, PepsiCo Inc. PEP, Monster Beverage Corp. MNST, Keurig Dr Pepper Inc. KDP and Primo Brands Corp. PRMB.
Link: https://www.zacks.com/commentary/2429711/5-soft-drinks-stocks-showing-resilience-amid-cost-tariff-woes
The Zacks Beverages – Soft Drinks industry offers a dynamic investment landscape shaped by promising growth opportunities and persistent cost pressures. On the growth front, evolving consumer preferences for healthier, functional and sustainable beverages present companies with opportunities to expand market share. Additionally, the industry is embracing digital transformation, with brands leveraging direct-to-consumer platforms, subscription models, and data-driven personalization to enhance consumer engagement and drive new revenue streams.
However, potential investors should weigh the industry's headwinds, including rising input costs, supply-chain disruptions and tariff-related uncertainties, which have been the key hurdles. Escalating packaging expenses, freight inefficiencies and commodity price volatility could impact profitability. Leading players like The Coca-Cola Co., PepsiCo Inc., Monster Beverage Corp., Keurig Dr Pepper Inc. and Primo Brands Corp. are well-positioned to overcome these hurdles. These companies stand out as strong investment contenders in an increasingly competitive and evolving market through innovation, digital transformation and operational efficiency.
The Zacks Beverages - Soft Drinks industry comprises companies that manufacture, source, develop, market and sell non-alcoholic beverages. Soft drinks mainly include sparkling drinks, natural juices, enhanced water, sports and energy drinks, dairy, and RTD tea and coffee beverages. Some industry players like PepsiCo produce and sell handy food with flavored snacks, complementing their beverage portfolio.
The companies sell products through a network of wholesalers and retailers, including supermarkets, department stores, mass merchandisers, club stores and other retail outlets. Some also offer products via company-owned or controlled bottling, independent bottling partners and partner brand owners.
Shifting Consumer Preferences: The U.S. soft drinks industry is experiencing a surge in demand for healthier beverage options as consumers increasingly prioritize wellness. This shift has fueled interest in drinks made with natural ingredients, reduced sugar and functional benefits while driving demand for diverse flavors and enhanced taste experiences. Plant-based beverages, including botanical-infused drinks and non-dairy alternatives, are gaining traction among health-conscious consumers seeking sustainable choices.
Meanwhile, functional beverages that promote hydration, energy and mood support are carving out a strong market presence. To capitalize on these trends, companies are expanding into new and adjacent categories, such as the booming ready-to-drink (RTD) alcoholic beverage sector, often through partnerships and innovation.
Digital Growth & Innovation:The U.S. soft drinks industry is leveraging digital transformation to fuel growth and enhance consumer engagement. With rising demand for online shopping, brands are investing in direct-to-consumer platforms and third-party marketplaces to strengthen their digital presence. Companies are also optimizing fulfillment strategies, expanding digital offerings, and introducing subscription-based models to boost customer loyalty and secure recurring revenue.
Beyond digital advancements, product innovation remains a key growth driver. Brands are refining portfolios, launching products and entering untapped markets to expand their reach. By leveraging technology and innovation, the industry is evolving to stay competitive in an increasingly digital and dynamic landscape.
Rising Costs & Tariff Uncertainty: The beverage industry is facing mounting cost pressures due to raw material shortages, soaring commodity prices and logistical disruptions. Rising expenses for key inputs like steel and aluminum have significantly increased packaging costs, while supply-chain bottlenecks and freight inefficiencies add strain.
Newly imposed U.S. tariffs are creating uncertainty and additional financial pressure. The government's 25% tariffs on imports from Canada and Mexico may trigger retaliatory measures, escalating trade tensions and potentially disrupting supply chains. These cost burdens could squeeze margins, complicate pricing strategies and impact overall industry competitiveness.
The Zacks Beverages - Soft Drinks industry is housed within the broader Consumer Staples sector. It currently carries a Zacks Industry Rank #73, which places it in the top 29% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry's positioning in the top 50% of the Zacks-ranked industries results from a positive aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group's earnings growth potential.
Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry's recent stock-market performance and valuation picture.
The Zacks Beverages – Soft Drinks industry has underperformed the Consumer Staples sector and the S&P 500 Index in a year.
The stocks in the industry have collectively lost 0.1% against the sector's rise of 2.5% in the past year. Meanwhile, the S&P 500 has rallied 8.8%.
On the basis of the forward 12-month price-to-earnings (P/E) ratio, commonly used for valuing soft drink stocks, the industry is currently trading at 19.03X compared with the S&P 500's 20.48X and the sector's 17.68X.
Over the last five years, the industry traded as high as 24.01X and as low as 17.34X, with a median of 21.81X.
One stock in the Zacks Beverages – Soft Drinks industry currently sports a Zacks Rank #1 (Strong Buy), whereas none of the stocks have a Zacks Rank #2 (Buy). We have also highlighted four stocks with a Zacks Rank #3 (Hold) from the same industry. You can see the complete list of today's Zacks #1 Rank stocks here.
Let us take a look.
Primo Brands: This is a top North American beverage company specializing in healthy hydration. It offers responsibly sourced, diverse products across various formats, channels and price points, catering to different consumer needs. With distribution in the United States and Canada, Primo Brands ensures broad accessibility and quality across its portfolio. The company's commitment to key priorities — brand leadership, organic growth, exceptional customer service, operational excellence and stakeholder trust — fuels its success and value creation.
PRMB's strong brands, market share expansion and superior service continue to drive sustained momentum and long-term growth. Primo Brands' shares have surged 79.5% in the past year. The Zacks Consensus Estimate for PRMB's 2025 sales and earnings indicates year-over-year increases of 147.2% and 54.5%, respectively. The consensus mark for earnings has moved up 26.8% in the past 30 days. The company currently flaunts a Zacks Rank #1.
Coca-Cola: The soft drink behemoth is poised to gain from strategic transformation and ongoing worldwide recovery. The streamlining of its portfolio and accelerating investments to expand the digital presence position the company for long-term growth. It has been witnessing a splurge in e-commerce, with the growth rate of the channel doubling in many countries. KO is strengthening consumer connections and piloting numerous digital-enabled initiatives through fulfillment methods to capture the online demand for at-home consumption.
Coca-Cola is diversifying its portfolio to tap into the rapidly growing RTD category. The company has been gaining from the elasticity in the marketplace, an improved price/mix, and concentrated sales and underlying share gains in at-home and away-from-home channels. The Zacks Consensus Estimate for KO's 2025 sales and earnings suggests year-over-year growth of 1.9% and 2.8%, respectively. The consensus mark for earnings has moved up 0.7% in the past 30 days. The Zacks Rank #3 company's shares have gained 15.6% in the past year.
PepsiCo: Resilience and strength in the global beverage and convenience food businesses have been aiding the company's performance. It expects to benefit from delivering convenience, variety and value proposition to customers through its brands. PEP is poised to benefit from investments in brands, go-to-market systems, supply chain, manufacturing capacity and digital capabilities to build competitive advantages. Its cost-management and revenue-management initiatives bode well amid the ongoing inflationary pressures.
For the beverage business, PEP expects strong growth and market share gains from the liquid refreshment beverage category, with share gains in the carbonated soft drinks, RTD Tea and water categories. The stock of this Purchase, NY-based leading soft-drink company has lost 10.1% in the past year. The Zacks Consensus Estimate for PEP's 2025 earnings suggests year-over-year growth of 1.7%. The consensus estimate for this Zacks Rank #3 company's 2025 earnings per share has moved down 0.5% in the past 30 days.
Monster Beverage: The Corona, CA-based company markets and distributes energy drinks and alternative beverages. MNST has been experiencing continued strength in its energy drinks category, which is driving its performance. The company offers a wide range of energy drink brands, such as Monster Energy, Java Monster, Cafe Monster, Espresso Monster, Monster Energy Mule, Juice Monster Pipeline Punch, Juice Monster Pacific Punch, Juice Monster Mango Loco, Monster Ultra Paradise and Monster Hydra Sport. Product innovation also plays a significant role in the company's success. Monster Beverage is implementing pricing actions to overcome the ongoing cost pressure.
Despite the unending supply-chain challenges, MNST continues to stand by its strategy to ensure product availability and solidify long-term growth of its brands. Management is optimistic about strength in the global energy drinks category. It has been poised to gain from growth in the Monster Energy family of brands, and strength in Strategic and Affordable energy brands.
Shares of this Zacks Rank #3 company have lost 9.8% in the past year. The Zacks Consensus Estimate for MNST's 2025 sales and earnings indicates year-over-year increases of 6.3% and 12.4%, respectively. The consensus mark for earnings has moved down by a penny in the past seven days.
Keurig Dr Pepper: The beverage and coffee company in the United States and Canada is poised to gain from continued momentum in the Refreshment Beverages segment and solid market share growth. KDP's consumer-centric innovation model, portfolio expansion into high-growth categories and solid route-to-market capabilities appear encouraging. These endeavors are supported by the constant focus on cost efficiency and capital discipline. The company's International segment is also performing well.
The Zacks Consensus Estimate for KDP's 2025 sales and earnings suggests growth of 5.3% and 5.7%, respectively. The consensus mark for earnings has moved down by a penny in the past 30 days. The company's shares have rallied 12.8% in the past year. It currently has a Zacks Rank #3.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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CocaCola Company (The) (KO) : Free Stock Analysis Report
PepsiCo, Inc. (PEP) : Free Stock Analysis Report
Monster Beverage Corporation (MNST) : Free Stock Analysis Report
Keurig Dr Pepper, Inc (KDP) : Free Stock Analysis Report
Primo Brands Corporation (PRMB) : Free Stock Analysis Report
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