Investors can't go wrong with either choice, but one stands out as the better long-term option.
When it comes to non-alcoholic beverage companies, there's Coca-Cola (KO 0.49%) and PepsiCo (PEP 0.32%) -- and then there's everyone else. In the U.S., the two account for around 71% of the carbonated soft drink market. The dominance of that duopoly makes them attractive investment opportunities.
For investors looking to invest in one of these companies, there's no "wrong" option to go with here. However, each company has its own unique strengths and focus areas. Let's see which offers a more compelling case for investors looking to choose one to add to their portfolio.
Coca-Cola's financials seem to be stronger
Coca-Cola is the market leader in non-alcoholic beverages, but one thing that may surprise people is just how much more revenue PepsiCo brings in. In Q2 2023, Coca-Cola made around $12 billion in revenue, more than $10 billion less than PepsiCo made.
Despite the gap in revenue, both companies are similar in net incomes, which is a testament to Coca-Cola's profit margins.
PEP Revenue (Quarterly) data by YCharts.
Higher profit margins are important because they give companies more financial flexibility. Higher margins generally come with more cash flow, which companies use for things like research and development, acquisitions, and paying dividends.
Coca-Cola can operate at higher margins largely because of its focus on beverages, operational efficiency, and the pricing power it has thanks to its strong brands. PepsiCo's margins aren't shabby by any means, but its broader business means it has more complexities to deal with, which can lower efficiency.
There's a difference in portfolio diversification
PepsiCo's revenue gap over Coca-Cola can be attributed to its larger portfolio that includes beverages, snacks, and nutrition products. Coca-Cola's portfolio only consists of beverages. Both have iconic brands, including, but not limited to, the following:
- Coca-Cola: Coca-Cola, Sprite, Powerade, Dasani, and Minute Maid.
- PepsiCo: Pepsi, Gatorade, Lay's, Doritos, and Aquafina.
PepsiCo's vast portfolio can help provide a cushion during times when beverage sales may lag or consumer preferences shift. Coca-Cola dominates the beverage segment, but PepsiCo's diverse portfolio allows it to take advantage of consumer trends across multiple categories.
A good example would be PepsiCo's introduction of products tailored to health-conscious consumers, among them Naked Juice for vegetable and fruit-based smoothies, whole grain breakfast options, and sugar-free, zero-calorie alternatives to traditional sodas.
Both companies have admirable dividends
Regarding dividends, Coca-Cola leads PepsiCo slightly. At their current share prices, Coca-Cola has a 3.2% yield compared to PepsiCo's 2.8%.
Coca-Cola has increased its dividend annually for 61 straight years while PepsiCo has a 50-year streak, so both are Dividend Kings. However, PepsiCo has been increasing its dividend by larger percentages in recent years. PepsiCo has boosted its payouts by 36% in the past five years compared to Coca-Cola's 18%.
PEP Dividend data by YCharts.
Dividend yields fluctuate with stock price, so you don't want yield to be a determining factor in your investment thesis, but it's important nonetheless. Maybe more important, though, is the sustainability of the dividend.
Neither Coca-Cola nor PepsiCo is in danger of needing to cut their dividends, but it's worth noting how much lower Coca-Cola's 56% dividend payout ratio is than PepsiCo's 81%. Coca-Cola's lower payout ratio gives it more flexibility to reinvest in the business or potentially accelerate its dividend increases.
Which should investors go with?
For long-term investors, the better choice now seems to be Coca-Cola. The stock is more expensive, with a price-to-sales ratio of 5.6 compared to PepsiCo's 2.7, but it has the foundation to be a stable and high-yielding stock for the long haul.
Between its top-tier brand equity, impressive margins, and lucrative dividend, Coca-Cola seems to be the more appealing choice for investors looking for reliability and a shareholder-friendly company. It also passes the Warren Buffett test as it is one of his top holdings.
Stefon Walters has no position in any of the stocks mentioned. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.
FAQs
The yield for Coca-Cola is over 3%, whereas the yield for Pepsi is just below that. But as the chart below shows, the yield for both companies is more than double the average for the S&P 500.
Which is better, Pepsi or Coca-Cola? ›
co*ke has fewer calories: 90 calories vs. 100 calories in Pepsi. Pepsi has less sodium: 20 mg vs. 30 mg in co*ke.
Who makes more money, PepsiCo or Coca-Cola? ›
Key Highlights. Revenue Comparison: In 2022, Coca-Cola generated over $43 billion in revenue, while PepsiCo's revenue surpassed $86 billion. Primary Operations: PepsiCo's main operations are in the United States. Coca-Cola holds the title of the world's largest beverage company.
What sells best co*ke or Pepsi? ›
co*ke trademark brands (Coca-Cola, Diet co*ke, co*ke Zero Sugar and others) controlled 69% of the segment while Pepsi (Pepsi-Cola, Diet Pepsi and Pepsi Zero Sugar) captured 27%. Cola accounted for half of the $96 billion that U.S. consumers spent on all soft drinks in 2023, Beverage Digest figures show.
Do more people buy co*ke or Pepsi? ›
Currently, when it comes to soda sales, co*ke, Diet co*ke, Pepsi and Diet Pepsi are ranked first, second, third and seventh respectively (Hartlaub, 2014). It has been suggested that a strong brand image is the key to the dominance of co*ke over Pepsi (Gladwell, 2005).
Is co*ke a good stock to buy long term? ›
The long-term outlook is highly positive for co*ke's cash trends, and so investors can count on further steady dividend growth over the coming years (and decades).
Why do people choose co*ke over Pepsi? ›
According to Psychology Today, 'you taste its price and many other aspects of the drink that do not register on the tongue. ' This is one of the arguments put forward as to why Coca-Cola sells more than Pepsi, even though on blind taste tests, Pepsi usually seems to win.
Is Pepsi more unhealthy than co*ke? ›
Pepsi contains citric acid, while co*ke does not. Pepsi also has slightly more sugar, calories, and caffeine while co*ke has a tiny edge in sodium. With ingredients that match so closely, neither has an edge as being any healthier than the other. co*ke has had a slight edge over Pepsi from the beginning.
Who is number 1 co*ke or Pepsi? ›
Both companies have a large global presence, controlling several hundred brand names each. Since 2004, Coca-Cola Company has been the market leader, according to industry statistics. Pepsi ranks second, followed by Keurig Dr. Pepper.
Will Pepsi overtake co*ke? ›
PepsiCo is on course to take over as the biggest US beverage company by market value, supplanting rival Coca-Cola, which has held the spot largely uninterrupted for the better part of two decades.
Coca-Cola brands, which includes Fanta, Dr Pepper, Sprite, and many more, receive a score of 55 in our table. PepsiCo, which owns 7Up, Copella, Pepsi, and Tropicana, receives a score of 41. We recommend avoiding these brands if you are concerned about contributing to plastic pollution.
Who is richer Pepsi or co*ke? ›
Coca-Cola's market capitalization was approximately 241.77 billion U.S. dollars as of August 2021, while PepsiCo's market capitalization was about 216.25 billion U.S. dollars. This statistic is a testament to the success of Coca-Cola in the market, as it has a significantly higher market capitalization than PepsiCo.
Who is doing better Pepsi or co*ke? ›
Coca-Cola is the market leader in non-alcoholic beverages, but one thing that may surprise people is just how much more revenue PepsiCo brings in. In Q2 2023, Coca-Cola made around $12 billion in revenue, more than $10 billion less than PepsiCo made.
Who won co*ke vs Pepsi? ›
Coca-Cola, with a market value of about $246 billion, has been on top due to a strong brand and consistent sales growth. However, PepsiCo's diverse food business, with brands like Lay's and Doritos, has become a key difference.
Why does Pepsi taste different now? ›
We have reduced the amount of sugar and used a blend of sweeteners to maintain the Pepsi taste people expect.
Which company is more valuable co*ke or Pepsi? ›
At roughly $246 billion on Monday, Coca-Cola's market cap is more than $15 billion above PepsiCo's. Coca-Cola has long held the top spot in part due to its strong brand portfolio and record of sales growth.
Why is Coca-Cola stock so high? ›
A massive share repurchase plan
As far as growth goes, Coca-Cola Consolidated doesn't really have any. Its first-quarter volume was down less than 1% year over year. And with slightly higher prices, its net sales rose 1%. Regarding profitability, there was improvement in the company's first quarter.
Is Pepsi products cheaper than co*ke? ›
On a price-to-sales basis, Pepsi (2.5) is markedly cheaper than co*ke (5.6).
Is Coca-Cola buy Pepsi? ›
On three occasions between 1922 and 1933, the Coca-Cola Company was offered the opportunity to purchase the Pepsi-Cola Company, which it declined on each occasion.
