However, potential investors should also weigh the industry's headwinds, including persistent raw material inflation, supply-chain disruptions and rising operational costs linked to eco-friendly practices. Elevated packaging costs, freight inefficiencies and commodity price volatility pose risks to profitability. Leading companies like Coca-Cola KO, PepsiCo PEP, Monster Beverage MNST, Keurig Dr Pepper KDP and Vita Coco COCO are poised to successfully navigate these challenges through innovation, digital optimization and operational efficiency, standing out as compelling investment options in this evolving and competitive industry.
About the Industry
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.
What's Shaping the Future of the Beverages - Soft Drinks Industry?
Evolving Trends: The U.S. soft drinks industry is witnessing a growing demand for healthier beverage options as consumers prioritize wellness. This shift includes preferences for drinks made with natural ingredients, reduced sugar and functional benefits, alongside diverse flavors and improved taste experiences. Plant-based beverages, such as those featuring botanical extracts and non-dairy milk alternatives, are gaining popularity among health-conscious consumers seeking environmentally friendly choices. Functional beverages offering targeted health benefits, such as enhanced hydration, energy boosts and mood support, are carving out a niche in the market. Additionally, companies are capitalizing on these trends by expanding into new and adjacent categories, including the rapidly growing ready-to-drink (RTD) alcoholic beverage segment, often through collaborations.
Digital Growth & Innovation: The U.S. soft drinks industry is leveraging digital transformation to fuel growth and enhance consumer engagement. As preferences increasingly shift toward online shopping, brands are heavily investing in direct-to-consumer platforms and third-party marketplaces to meet rising demand. Companies are prioritizing robust digital capabilities, exploring innovative fulfillment options and expanding their digital offerings to stay ahead. Subscription-based models are also being introduced to boost customer loyalty and secure recurring revenues. In addition to digital initiatives, the industry continues to benefit from product innovation. Companies are optimizing portfolios by focusing on core brands, launching products and expanding into untapped markets to capture greater market share. These strategies, combined with technology-driven advancements, are transforming the sector and enabling brands to remain competitive in an increasingly digital and dynamic marketplace.
Raw Material Cost Inflation & Supply Constraints: The beverage industry is grappling with rising production costs due to raw material shortages, higher commodity prices and logistical challenges. Increased costs for key inputs like steel and aluminum have raised packaging expenses, while ongoing supply constraints in the aluminum-can industry add strain. Freight inefficiencies and surging domestic and international transportation costs have compounded these challenges, leading to higher operating expenses that impact gross and operating margins. To offset these pressures, many companies have implemented price increases, which contributed to recent sales growth. However, with commodity inflation and elevated transportation costs expected to persist in the near term, the industry continues to face headwinds. Additionally, a growing emphasis on eco-friendly packaging and sustainable sourcing is driving operational changes, influencing cost structures.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Beverages - Soft Drinks industry is housed within the broader Consumer Staples sector. It currently carries a Zacks Industry Rank #141, which places it in the bottom 43% 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 dull 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 bottom 50% of the Zacks-ranked industries results from a negative aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing 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.
Industry vs. Broader Market
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 3.4% compared with the sector’s decline of 0.8% in the past year. Meanwhile, the S&P 500 has rallied 26.7%.
One-Year Price Performance
Industry's Current Valuation
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 19.33X compared with the S&P 500’s 22.91X and the sector’s 17.13X.
Over the last five years, the industry traded as high as 23.98X and as low as 19.33X, with a median of 21.89X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 Soft Drink Stocks to Watch
None of the stocks in the Zacks Beverages – Soft Drinks industry currently sports a Zacks Rank #1 (Strong Buy), whereas one stock has a Zacks Rank #2 (Buy). We have also highlighted four stocks with a Zacks Rank #3 (Hold) from the same industry.
Let us take a look.
Vita Coco: This is a pioneer in the functional beverage category. This New York-based company has been benefiting from its focus and investment to expand consumption occasions of coconut water. This has been contributing to strong volume growth for the category and its flagship Vita Coco Coconut Water brand. The company’s focus on growing the coconut water category resulted in its overall sales growth, witnessing a 15% CAGR for the last four years. The company looks well-poised for growth, driven by its ability to drive brand volume growth via strong retail execution and creative marketing programs. Additionally, COCO’s strategies position it to improve profitability and cash generation in the long term.
Vita Coco’s shares have rallied 40.6% in the past year. The Zacks Consensus Estimate for COCO’s 2025 sales and earnings indicates year-over-year increases of 11.3% and 20.8%, respectively. The consensus mark for earnings has been unchanged in the past 30 days. The company currently carries a Zacks Rank #2.
Vita Coco Company, Inc. Price and Consensus
Vita Coco Company, Inc. price-consensus-chart | Vita Coco Company, Inc. Quote
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 3.9% and 3.6%, respectively. The consensus mark for earnings has been unchanged in the past 30 days. The Zacks Rank #3 company’s shares have gained 3.6% in the past year.
CocaCola Company (The) Price and Consensus
CocaCola Company (The) price-consensus-chart | CocaCola Company (The) Quote
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.
In the beverage business, PepsiCo 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 12.4% in the past year. The Zacks Consensus Estimate for PEP’s 2025 sales and earnings suggests year-over-year growth of 2.9% and 5.4%, respectively. The consensus estimate for this Zacks Rank #3 company’s 2025 earnings per share has moved down 0.6% in the past 30 days.
PepsiCo, Inc. Price and Consensus
PepsiCo, Inc. price-consensus-chart | PepsiCo, Inc. Quote
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 9.3% in the past year. The Zacks Consensus Estimate for MNST’s 2025 sales and earnings indicates year-over-year increases of 6.9% and 13.9%, respectively. The consensus mark for earnings has been unchanged in the past 30 days.
Monster Beverage Corporation Price and Consensus
Monster Beverage Corporation price-consensus-chart | Monster Beverage Corporation Quote
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 6.2% and 6.5%, respectively. The consensus mark for earnings has been unchanged in the past 30 days. The company’s shares have declined 1.9% in the past year. It currently has a Zacks Rank #3.
Keurig Dr Pepper, Inc Price and Consensus
Keurig Dr Pepper, Inc price-consensus-chart | Keurig Dr Pepper, Inc Quote
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Free: See Our Top Stock And 4 Runners UpCocaCola Company (The) (KO) : Free Stock Analysis Report
Vita Coco Company, Inc. (COCO) : 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
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
