Both companies have a long history and have been fierce competitors in the carbonated soft drink market for decades. Lastly, let's take a look at some key value metrics for these two beverage giants, including their price-to-free cash flow (P/FCF), price-to-earnings (P/E), and price-to-earnings-to-growth (PEG) ratios. Pipeline setbacks are a concern.Nevertheless, strong demand for new drugs, namely Hemlibra (hemophilia), Ocrevus (multiple sclerosis), Evrysdi (spinal muscular atrophy), Phesgo (cancer) and Tecentriq (cancer), maintained momentum. Meanwhile, Coke was continuing with its use of notable personalities including Santa Clause in its various ad campaigns. The great Cola Wars of the 1980s were a battle between Coca-Cola and Pepsi for dominance. Coke has a long history of partnerships with major fast food chains, such as McDonald's and Burger King, while Pepsi has focused more on partnerships with entertainment companies, such as music festivals and sporting events. PepsiCo owns brands including Gatorade, Frito-Lay, Quaker Oats, and Rockstar Energy. But Pepsi has outdone itself with the organic drinks. Meanwhile, Pepsi had expanded its footprint in the country to 24 franchises by 1910. For these reasons, I'd argue that Pepsi has the edge in terms of competitive positioning. They were jubilant about the win and conducted television campaigns showing people choosing Pepsi over Coca-Cola. All told, with its broader product diversification, greater dividend coverage, and more attractively priced stock, Pepsi is the better buy today. And with each company's stock currently yielding about 3.5%, they remain popular options for income-focused investors. Dividend Aristocrats (>25 yrs S&P500 stocks), Dividend Achievers (>10 yr NASDAQ stocks), Monthly payments from quarterly dividends, Dividend Aristocrats (>25 yrs S&P500 stocks), Dividend Achievers (>10 yr NASDAQ stocks), Critical Facts You Need to Know About Preferred Stocks, Earn More With Dividend Stocks Than With Annuities for Your Retirement, Coca Cola Vs. Pepsi: Comparing Sales, Earnings & More. Both companies are posting unusually strong operating results in this rocky selling environment. They were driven, hungry, and willing to go that extra mile. Pepsi is the larger business in terms of revenue, with nearly twice as much as Coca-Cola. Since 2009, Coca-Colas net income has grown by an average of 9%, while its revenue has grown by an average of 1%. Coca-Cola (K.O.) One of the most famous ones was the 1975 Pepsi Challenge. Free cash flow is essentially what is left over after a company pays all of its bills and reinvests back into its business. Both conglomerates are head-to-head. Sales & Distribution. The main reason for PepsiCos recent revenue decline was due to the low pricing environment in North American markets; however, solid international growth helped push net sales higher year over year. Coca-Cola also has the most extensive distribution network of any beverage company, with nearly 300 facilities with solidsupply chain management of coca-colaworldwide dedicated to distributing their products. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. PepsiCo has a much more limited product line and brand base when compared to Coca-Cola; this places them in a weaker position in the industry because they are reliant on their same products earning revenue. Barbie Doll Rhetorical Analysis 1144 Words 5 Pages Advertisements: Exposed When viewing advertisements, commercials, and marketing techniques in the sense of a rhetorical perspective, rhetorical strategies such as logos, pathos, and ethos heavily influence the way society decides what products they want to purchase. Still, it is interesting to see how these two cola giants stack up next to each other regarding accurate statistics. This ad went viral on Facebook and Twitter, obviously as Pepsi wanted it to. The company used this newly formed partnership to give cola lovers a perfect companion for their Pepsi Doritos! The writer did not exaggerate advertising. For more than a century and traveling different paths, both these companies have created a niche for themselves. Diversify across sectors or allocate more towards a bullish sector thesis. This gives Coca-Cola another advantage over PepsiCo (and other beverage companies) because it can save on transportation costs. Invest better with The Motley Fool. The declining soda sales trend affects the core of both KO and PEP, but they are developing and growing a lot of new products to help replace that lost revenue. Required fields are marked *. Coke also stands a bit taller when it comes to cash generation. Nam lacinia pulvinar tortor nec facilisis. Coca-Cola has a centralized focus on the beverage industry, though they've emerged in numerous different beverage categories. Lower costs than PepsiCo is another good indicator of Coca-Colas management capabilities. Sales gained from revenue growth across its operating segments, aided by an improved price/mix and an increase in concentrate sales.Coca-Cola benefited from underlying share gains in both at-home and away-from-home channels. Instead of focusingspecifically on the beverage market, PepsiCo has specifically and intentionallyexpanded into other consumable markets: Though historically associated as a beverage/soda company, more than 50% of PepsiCo's business revenue is generated through its snack product. The greatest responsibility of our Delivery & Merchandising UNITED associates is maintaining and enhancing Wall Street can't seem to get enough soda and snacks right now. Get the latest insights directly to your inbox! Year-to-date, Coca-Cola shares have been much stronger, increasing nearly 12% in value and easily outpacing PepsiCos share return of 0.6%. Coca-Cola (KO 0.36%) and Pepsi (PEP-0.31%) have delivered steadily rising cash payouts and solid total returns to investors for decades. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Learn from industry thought leaders and expert market participants. Both have expanded into the energy drink market which has continued to grow. In 2013, The Coca-Cola Company generated over $35 billion in revenue from nearly 500 sparkling beverage products. Therefore, companies have to respond to these needs in all aspects. The Difference in Cola Branding I believe that where Coca Cola have succeeded and Pepsi have failed, is with their For over 100 years, Coca Cola have used the same logo. (You can read the full research report on UnitedHealth Group here >>>)Shares of Coca-Cola held up a lot better than many others in last year's tough market; the stock was effectively flat in 2022, modestly better than rival Pepsi's -0.3% decline, but significantly better than the Zacks Consumer Staple sector's -5.1% decline (the market overall was down -15.7%). "PepsiCo Reports Fourth Quarter and Full-Year 2021 Results; Provides 2022 Financial Outlook; Announces Annual Dividend Increase and New Share Repurchase Program. Coca-Cola Company. Stocks recently featured in the blog include: UnitedHealth Group Inc. UNH, The Coca-Cola Co. KO, Roche Holding AG RHHBY, Lam Research Corp. LRCX and Valero Energy Corp. VLO. Thus, Pepsi's stock is the better bargain. Certain financial information included in Dividend.com is proprietary to Mergent, Inc. ("Mergent") Copyright 2014. While many of these snack foods aren't exactly healthy, an increasing amount of Pepsi's products do fit the "better for you" description. "Global Ventures (GV). PBG followed that price increase shortly after. Customized to investor preferences for risk tolerance and income vs returns mix. Also, history had shown that explosions in demand for alternative drinks were regularly followed by slow or negative growth. Save my name, email, and website in this browser for the next time I comment. However, increasing prices have not solved the problem completely. Invest better with The Motley Fool. A normal portion of this carbonated beverage contains 15mg of sodium, 37. By the 1920s Coca-Cola was establishing a presence in Europe and within a decade expanded its presence to Australia and South Africa. Zacks Investment Research. Your billing info has been updated. Their product lines include: Coca-Cola measures operations by dividing its products between sparking beverages (carbonated beverages) and still beverages (non-carbonated products). Now people were again talking about Coca-Cola New Coke vs. Coke Classic. "Bottling Investment Group (BIG). Pepsi's stock is nearly 20% less expensive than Coca-Cola's in terms of price to free cash flow. The two giants of the soft drinks industry share a long history of global competition and dominate this highly competitive business. (You can read the full research report on Coca-Cola here >>>)Shares of Roche Holding have underperformed the Zacks Large Cap Pharmaceuticals industry over the past year (-21.6% vs. +14.6%). Since then, the rivalry between the two drinks has never stopped. Pepsi has traditionally positioned itself as a young and hip brand, with a focus on younger consumers. Coca-Cola (KO -2.63%) and Pepsi (PEP -2.02%) have delivered steadily rising cash payouts and solid total returns to investors for decades. At times, Coca-Cola has been able to take advantage of its strong brand image, such as during the Share a Coke campaign in Australia (a program that allows people to put their name on Coca-Cola cans). John Pemberton developed a cola syrup. From 2004 to 2005, they had an increase of 2% in their current assets. Coca-Cola and Pepsi have diversified their beverage product lineups in response to these trends. He teaches accounting, helping promote financial education and awareness. Variety reports that The deal also included Delta's five SkyTeam Alliance partners: Aeromexico, Air France, Alitalia, CSA Czech Airlines, and Korean Air. KO is currently one of the ten highest-yielding Dow stocks, and both companies have doubled their annual dividend per share since 2007. The Coca-Cola Company and PepsiCo are two of the largest and most recognizable food and beverage brands in history, each with hundreds of products sold in markets worldwide. Why Did Warren Buffett Invest Heavily in Coca-Cola in the Late 1980s? Both companies expanded their product range in the 1960s. Executives credited a "mix between affordability and premiumization" for helping drive sales higher. Coke is valued at about twice PepsiCo's price-to-sales ratio of 3, in fact. Coca-Cola is the largest beverage company in the world, while PepsiCo is a close second. A sturdy balance sheet enables investments.However, softness in commercial business due to COVID-induced volatilities persists. Do you need a reliable supplier for ISO and CE-approved canning machine soft drinks or carbonated beverage filling machine? Coca-Cola North Americas top brands Both drinks were created in a pharmacy. Learn More. However, there is no clear demarcation about who is better. World War I and the resultant sugar crises almost forced Pepsi to go bankrupt in 1923. But when it comes to regular old cola, Coke is still king. I am sure the ad puts a big smile on Pepsis and Coca-Colas fans' faces worldwide. The beverage titan has generated $8 billion of operating cash flow so far this year, while Pepsi has produced $6.3 Coca-Cola and PepsiCo are both multinational beverage companies. KO has averaged an 8.5% annual increase over the past decade, while PEP has posted an average raise of nearly 10% over the same time frame. It is also true that The Coca-Cola Company tried, on several occasions and by all available means it in fact came very close , to completely eradicate its closest competitor from the market. Price as of January 18, 2023, 2:34 p.m. From water treatment to beverage filling, we offer solutions for small and large companies alike. On the other hand, a PepsiCo investment delivers more diversity, thanks to the company's large snack food business. In terms of financial performance, both Pepsi and Coca-Cola are highly successful and profitable companies. Which type of investor describes you best? Ultimately, the choice between Pepsi and Coca-Cola comes down to personal preference and individual taste. Success! Soda sales declined for the 12th consecutive year as investors have been turning to bottled water and other healthier beverages, a trend that could affect KO more than PEP. Theres no denying that Pepsi and Coke are two of the most well-known and widely used sodas in the world. If you are addicted to these, now is the high time to give up. News, reports, and commentary about active ETFs. Coca-Cola has a centralized focus on the beverage industry, though they've emerged in Advertisers know that we have a greater chance of buying a product if we can picture ourselves how we would like to be portrayed of course with the help of their product. During the 1980s, the company was exposed to innovations. Over 1.9 billion servings of Coca-Cola Company's beverages are consumed every day. The company was able to sell millions of their cans because people wanted to be part of an event. "Coca-Cola Reports Fourth Quarter and Full-Year 2021 Results. I work as the Sales Director for iBottling.com. Despite these complicated and evolving arrangements, higher retail prices for alternative beverages meant that margins for the franchiser, bottler, and distributor were consistently higher than on CSDs. Two companies that have played a pivotal role in shaping the contours of modern advertising. After a few initial blunders like issuing press releases and questioning the results of the Pepsi campaign, Coca-Cola came up with a devious plan. The Diagnostics division also remained stable in terms of the growth of its routine business. However, it is good to know that even though the differences are few; there are. The main goal of the case is to analyze the health of both companies in relation to EVA. PepsiCo has a diversified product portfolio encompassing the food, snack, and beverage industries. Coca-Cola International Wells Fargo Business Financial Services 500 stock market index fund accounted for 35% of the companys total shareholder return, while all other B.U.s combined only accounted for 15%. In contrast, its competitor, along with having a higher sales growth rate, indicates an improvement in management and execution. In contrast, Pepsi has a more limited international presence, with a strong focus on the North American market. Pressed Steel Pepsi with 2 soda crates /Coca-Cola Delivery no crates 2 -8" trucks + 5" forklift Pre owned as-is played with Condition combine shipping 3 Tonka's. In a 2021 worldwide study, about two-thirds of consumers think that Coca-Cola is better than Pepsi. The resulting ad that came out in 1984 featured the King of Pop singing "You're the Pepsi generation. The term was coined in the early 1980s to describe the competitive advertising, marketing, and sales tactics of Coke and Pepsi to Coca-Cola had earnings losses versus the previous year of 13.64% and losses versus the previous quarter of 25.49%. Coca-Cola boasts $44,292 million of net revenue in 2015 and According to MSNBC , Diet Coke sold 927 million cases in 2010, compared to Pepsi's 892 million. The ad featured a Pepsi can in a red cape, which had Cokes brand colors. You've successfully signed in. Another key difference between Pepsi and Coca-Cola is their marketing strategies. Coca-Cola's 2021 net revenue grew to $38.7 billion, while PepsiCo's 2021 net revenue grew to $79.47 billion. It has a similar international reach as PepsiCo, though it operates with different market segment groupings. Both companies have a long and rich history, with Pepsi being founded in 1898 and Coca-Cola being founded in 1886. Today, you can download 7 Best Stocks for the Next 30 Days. Since 2011, Coca-Cola has reduced its outstanding share count by more than 10% annually through a combination of stock buybacks and cash dividends. This difference shows up in operating profit margin. Both Coca-Cola and PepsiCo continue to see tremendous market demand. It also approaches pricing its good differently. See the following Information Box for a discussion. To make the world smarter, happier, and richer. We also reference original research from other reputable publishers where appropriate. In 2020, PepsiCo had 23 different brands with over $1 billion of annual sales. He observed that brain activity changed. The operating profit of PepsiCo Beverages North America increased 26% from 2020 to 2021, reflecting the resurgence of the post-pandemic environment. As a result, their operating profits are more similar than you might otherwise expect. PepsiCo has created a diverse product line of complementary goods across the food and beverage industries. Hi, Im John Lau, the funder of iBottling.com, Ive been working in a factory in China that makes beverage equipment for 16 years now, and the purpose of this article is to share with you the knowledge related to beverage equipment from a Chinese suppliers perspective. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Here, we would like to share with you for TOTAL FREE! Your account is fully activated, you now have access to all content. Marketing Strategies Comparison They have been in competition since their inception. Another key difference between the two brands is their product offerings. "PepsiCo Brands: All 23 Billion Dollar Brands Explained.". The company has become a powerful force in the snack foods business, with popular brands such as Lays, Doritos, Tostitos, Cheetos, and Quaker Oats,among others. Coca-Cola's operational structure divides operational markets into the four following divisions: Coca-Cola also created a Global Ventures segment to help new brands scale and identify ways to maximize the scale of select products around the world. It reaches only 31% of the worldwide market share for nonalcoholic beverages with a goodbottled water profit margin. Browse our guide to find the best dividend stocks. Congratulations on personalizing your experience. All stock quotes on this website should be considered as having a 24-hour delay. As Americans become more concerned with sugar, chemicals, and the sustainability of packaging, the operations, product lines, and pricing of both companies will be impacted. Pepsi has a good shot at boosting its profitability into the 20% range, as well, with moves into energy drinks and similarly attractive growth areas. KO Operating Margin (TTM) data by YCharts. Applause goes to the Pepsi creative team! Making the world smarter, happier, and richer. This is perhaps the most important valuation metric for dividend investors, since the amount of cash these companies have left over after paying their operating expenses and capital expenditures ultimately will determine what they can pay to investors via dividends. But there's a large valuation gap. However, Pepsi has a wider range of products, including snacks, juices, and energy drinks. And with each company's stock PepsiCo also has solid international B.U.s, but it has fewer international B.U.s than Coca-Cola. Coca-Cola had been holding the number one position in the market for decades. PepsiCo. Both companies have healthy balance sheets and generate lots of cash, but a lack of growth is cause for concern. In fact, Pepsi did launch Diet Pepsi. PepsiCo sells beverages, snacks, and food all around the world through its seven global divisions. One area where Coca-Cola has a clear advantage over Pepsi is in international expansion. The investments Coca-Cola made to improve its productivity have allowed them to be more efficient than PepsiCo when serving its customers and has also helped them lower costs. PepsiCo typically prices its goods based on consumer demand and demographics. What brands does The Coca-Cola Company offer? Investopedia does not include all offers available in the marketplace. ", Beverage Industry. Coca-Cola Company. Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. Pepsi Interpret the results of your EVA calculation. The Motley Fool has a disclosure policy. Practice management news, reports, video and more. However, Coca-Cola has consistently outperformed Pepsi in terms of revenue and profitability, with a higher market capitalization and a stronger brand value. Both Coca-Cola and PepsiCo are global leaders in the beverage industry, offering consumers hundreds of beverage brands. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Even though PepsiCos net income has been higher, Coca-Colas revenue growth is a positive sign that the company is improving in this area. PepsiCo Beverages North America (beverages in the United States and Canada). KO currently ranks #26 on the list of largest companies traded on U.S. stock exchanges, while PEP comes in at #37. It also takes a more direct pricing strategy by analyzing consumer demand and setting prices accordingly. Coca-Colas success in international markets is primarily attributed to its strong IBU. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. His finding was that the subjects responded strongly to Pepsi in the reward center of the brain. The company utilizes this strategy more often than Coke. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Health-centric beverages like Tropicana, niche cross-market products like Lipton, and heavily saturated products like Pepsi are all priced differently based on the underlying customer group. Thanks to stagnating or declining net incomes, the valuations of the two beverage giants is starting to push into overvalued territory. And it's 11% cheaper on a price-to-earnings-to-growth basis, which takes into account Pepsi's slightly higher expected EPS growth. Those dividends appear well supported with billions in free cash flow generated annually. Their superior distribution system, effective marketing, and incredible brand loyalty created a legion of happy customers. If you have anything interesting to share on our site, reach out to us at. Guidance for beverage companies in the current economic climate. Revenue growth outpaced volume growth, with a 9. Coca-Cola and Pepsi dominate the $200 billion global soft drink and bottled water manufacturing industry. What was the Challenge Over the past five years, KO has significantly trailed the performance of both PEP and the S&P 500. It's not hard to see why investors are so excited about these businesses. The term was coined in the early 1980s to describe the competitive advertising, marketing, and sales tactics of Coke and Pepsi to develop and maintain market share. Soda: Pepsi, Diet Pepsi, Pepsi Max, 7Up, Sierra Mist, Mountain Dew, Alternative Drinks: Tropicana, Sodastream, Aquafina, Gatorade, Snacks: Ruffles, Tostitos, Lays, Doritos, Fritos, Cheetos, Other: Ready-to-drink Starbucks products, Quaker. The strength of the business model is hidden in producing products that can be consumed on the go. What is the value of your investable assets? An investor might happily pay that premium if they were seeking a more focused beverage portfolio with higher profitability. Pellentesque dapibus efficitur laoreet. Given these impressive growth and financial metrics, it makes sense that Coke and Pepsi stocks would both be beating the market in 2022. Coca-Cola (K.O.) Pepsi and Coca-Cola are two of the most popular and widely recognized beverage brands in the world. Both Coca-Cola and Pepsi have internationally recognizable brands, though each attempt to market to different product lines. KO and PEP are both strong cash flow generators, and have been for years. Great! Get a free quote now by contacting us! Ethos is the credibility of an author or the distinguishing character, sentiment, moral nature, or guiding beliefs of a person, group, or institution. A business savvy executive at the company designed a bold and revolutionary strategy and called it The Pepsi Challenge'. When thinking of legendary rivals, PepsiCo PEP and The Coca-Cola Company KO undoubtedly come to the forefront of many minds. A relationship and a rivalry ingrained in the culture that predates the 20th century. Coke and Pepsi are two of the most well-known and widely recognized brands in the world. Douglas Daft assumed leadership in April 2000; one of his first moves was to lay off 5,200 employees, or 20% of worldwide staff. The price, taste, and perceived quality vary from consumer to consumer. Overall, Pepsi and Coca-Cola are two of the most iconic and well-known beverage brands in the world. These are not the returns of actual portfolios of stocks. ETFs and funds that prioritize investments based on environmental, social and governance responsibility. However, on an overall basis, both companies have been experiencing negative sales growth. Pepsi's marketing strategy utilizes celebrity endorsements and company sponsorships to promote its product. Frito-Lay North America (branded food and snack business in the United States and Canada). ", Coca-Cola Company. Rising operating costs are hurting margins. Pepsi's shares are also 6% cheaper on a forward price-to-earnings basis, which is a measure of what investors are paying for each dollar of earnings these businesses are projected to generate in the next year. Coca-Cola Co. (KO) and PepsiCo, Inc. (PEP) are very similar businesses in terms of industry, ideal consumers, and flagship products. Her expertise is in personal finance and investing, and real estate. The second factor was its international business which grew by approximately 4% for fiscal 2014, while its U.S. business declined by 1%. 125 years of happiness:The history of Coca-Cola, Creating Thirst in all the Right Places :International Development of Coca-Cola, For drinkers, 8 drinking habits deeply altered by COVID-19. It was initially sold as a patent medicine for five cents per glass at soda fountains, which were popular at the time due to its use of natural ingredients and low cost (compared to alcohol). *Average returns of all recommendations since inception. ", PepsiCo. Today you can access their live picks without cost or obligation. In terms of acquisitions, Coke has made a number of strategic acquisitions, including the purchase of Minute Maid and Dasani, while Pepsi has focused more on acquiring snack brands, such as Fritos and Lay's. Reproduction of such information in any form is prohibited. 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( `` Mergent '' ) Copyright 2014 all offers in..., their operating profits are more similar than you might otherwise expect juices, and been! Coke are two of the post-pandemic environment 3, in fact the resurgence of the environment... Were regularly followed by slow or negative growth transaction costs market which has continued to grow focus!, portfolio guidance, and food all around the world drinks has never stopped valuations of case...