For Immediate Release
Chicago, IL – February 20, 2026 – Today, Zacks Equity Research discusses the competitive landscape of The Coca-Cola Co. KO, PepsiCo Inc. PEP, Monster Beverage Corp. MNST, Keurig Dr Pepper Inc. KDP, and Vita Coco COCO.
Industry: Soft Drinks
Link: https://www.zacks.com/commentary/2871824/5-soft-drinks-stocks-set-to-gain-as-innovation-offsets-cost-pressures
The Zacks Beverages – Soft Drinks industry is experiencing significant momentum, fueled by innovation oriented toward health and digital advancements. Consumer interest is shifting toward natural, low-sugar, and functional beverages, as well as the expanding reach of ready-to-drink (RTD) alcoholic drinks. Companies harnessing AI insights, expanding e-commerce, and optimizing supply chains are enhancing consumer interaction and operational efficiency, positioning themselves for sustainable competitiveness.
Nevertheless, the industry faces considerable challenges with rising input costs and tariff uncertainties pressuring profit margins. Fluctuations in sugar, packaging, and shipping costs are necessitating pricing adjustments and supply chain reorganizations, while evolving trade policies introduce further unpredictability regarding essential ingredients and equipment. These challenges particularly impact competitiveness in sensitive pricing markets. Yet, viable growth opportunities continue to present themselves amid this challenging economic backdrop.
Industry frontrunners such as The Coca-Cola Co., PepsiCo Inc. , Monster Beverage Corp., Keurig Dr Pepper Inc. and Vita Coco are strategically positioned to excel by driving innovation and digital enhancements in spite of ongoing cost and tariff challenges.
About the Industry
The Zacks Beverages – Soft Drinks industry encompasses businesses involved in the manufacture, sourcing, development, marketing, and sale of non-alcoholic beverages. This includes sparkling drinks, natural juices, enhanced water, sports and energy drinks, dairy products, and ready-to-drink (RTD) tea and coffee. Some players, like PepsiCo, also produce convenient foods and flavored snacks, enhancing their beverage offerings.
These companies market their products through a vast network of wholesalers and retailers, including supermarkets, department stores, mass merchandisers, and club stores. Some also distribute through company-owned or partner bottling operations.
What’s Shaping the Future of the Beverages – Soft Drinks Industry?
Shifting Consumer Preferences:The U.S. soft drinks sector is rapidly evolving as consumers increasingly demand healthier options. There is a growing interest in drinks made with natural ingredients, lower sugar content, and functional benefits alongside vibrant, diverse flavors. Plant-based and botanical-infused beverages are gaining traction, while functional drinks that promote hydration, energy, and well-being are securing significant market presence.
Companies are diversifying into related categories, particularly in the rapidly expanding RTD alcoholic beverage market, bolstered by innovative tactics and strategic collaborations. Brands prioritizing healthier, functional, and sustainable offerings are best positioned to remain competitive, while those slower to adapt may see dwindling sales and relevance.
Digital Growth & Innovation: Advancements in digital technology are redefining the soft drinks industry as companies leverage these tools for enhanced consumer engagement and operational efficiency. Utilizing advanced data analytics and AI can help brands better understand changing preferences, tailor marketing approaches, and fine-tune product development. E-commerce is booming, with direct-to-consumer channels, subscription models, and fast-delivery partnerships expanding market access.
Digital avenues also facilitate immersive brand experiences through interactive marketing campaigns, loyalty programs, and social commerce. Automation, smart manufacturing, and integrated supply chains are helping to improve productivity and lower costs. As competition escalates, soft drink companies that embrace digital transformation across research and development, marketing, distribution, and customer experience will be better positioned to drive growth and capitalize on revenue opportunities in a tech-centric market.
Rising Costs & Tariff Uncertainty: Escalating costs and tariff unpredictability are exerting pressure on the soft drinks industry, creating a challenging environment for both global and regional firms. Elevated input prices—spanning sugar, aluminum cans, packaging materials, and logistics—are diminishing profit margins and prompting companies to revisit their pricing and supply chain strategies.
Simultaneously, ongoing tariff fluctuations on essential ingredients and imported machinery complicate production planning and cost estimation. Brands must strategically manage selective price increases to avoid dampening consumer demand, especially in price-sensitive sectors. To maintain a competitive edge, soft drink manufacturers are focusing on procurement efficiency, local sourcing, and innovative measures aimed at cost-reduction. These economic pressures may narrow margins and complicate pricing strategies throughout the industry.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Beverages – Soft Drinks industry is part of the broader Consumer Staples sector and currently holds a Zacks Industry Rank #84, positioning it within the top 35% of more than 250 Zacks industries.
This ranking reflects a promising near-term outlook, as research indicates that the top 50% of Zacks-ranked industries significantly outperform their lower-ranked counterparts. Analyst outlook for the industry remains positive, with estimates showing growing confidence in earnings growth potential among member companies.
Before examining specific stocks to consider for your portfolio, let’s delve into the industry’s recent performance on the stock market and its current valuation status.
Industry vs. Broader Market
The Zacks Beverages – Soft Drinks industry has surpassed both the Consumer Staples sector and the S&P 500 Index over the past year.
Collectively, the stocks in this industry have appreciated by 15.3%, compared to the sector’s growth of 8.3% and the S&P 500’s return of 14.3% during the same period.
Industry’s Current Valuation
Based on the forward 12-month price-to-earnings (P/E) ratio, a common metric for valuing soft drink stocks, this industry is presently trading at 20.1X, in contrast to the S&P 500’s 22.48X and the sector’s 18.06X.
Over the past five years, the industry has experienced a high of 23.76X and a low of 17.2X, with a median of 20.21X.
5 Soft Drink Stocks to Watch
Currently, no stocks in the Zacks Beverages – Soft Drinks industry hold a Zacks Rank #1 (Strong Buy), although one stock is rated Zacks Rank #2 (Buy). Additionally, four stocks are designated Zacks Rank #3 (Hold) within the same sector.
Keurig Dr Pepper: This company, which focuses on beverage and coffee production in the U.S. and Canada, is set to benefit from ongoing momentum in the Refreshment Beverages segment and substantial growth in market share. KDP’s consumer-focused innovation strategy, expansion into high-growth sectors, and effective distribution capabilities are showing great promise. Continuous emphasis on efficiency and sound capital management supports these initiatives. Furthermore, the company’s international segment is performing robustly.
The Zacks Consensus Estimate for KDP’s 2026 sales and earnings indicates growth projections of 5.3% and 6.7%, respectively. The consensus estimate for earnings has seen a slight increase in the past week. However, KDP’s shares have declined by 12.1% over the past year and it holds a Zacks Rank #2.
Coca-Cola: The renowned soft drink leader is poised for growth due to its strategic transformation and ongoing global recovery. Streamlining its portfolio and enhancing digital investments are positioning the company for sustained growth. Coca-Cola is witnessing significant growth in e-commerce, with some regions seeing channel growth rates double. The company is building strong consumer connections and launching several digital initiatives to tap into rising online demand for at-home consumption.
KO is also innovating its portfolio to capitalize on the rapidly growing RTD category, experiencing benefits from market elasticity and pricing strategies, and gaining market share across both in-home and out-of-home channels. The Zacks Consensus Estimate suggests year-over-year growth of 5% and 7.7% for KO’s sales and earnings respectively for 2026. The earnings consensus estimate has increased slightly over the last month. KO is currently rated Zacks Rank #3 and its shares have appreciated by 13.5% in the past year.
PepsiCo: The company’s resilience in both global beverage and snack sectors is enhancing its performance. PepsiCo is capitalizing on convenience, variety, and value for its consumers through its broad brand portfolio. The company is investing in brand strength, go-to-market strategies, supply chain enhancements, production capacity, and digital capabilities to develop competitive advantages. Its focus on cost and revenue management is critical in the current inflationary context.
In terms of its beverage segment, PepsiCo anticipates strong growth and market share gains particularly in liquid refreshment beverages, including carbonated soft drinks, RTD tea, and various water categories. This Purchase, NY-based leader has seen its shares increase by 10.3% over the past year. The Zacks Consensus Estimate for PEP’s 2026 sales and earnings forecasts growth of 4.5% and 5.4%, respectively, with the earnings consensus estimate rising by 0.4% over the last month for this Zacks Rank #3 company.
Monster Beverage: This Corona, CA-headquartered company specializes in energy drinks and alternative beverages. MNST is enjoying robust growth in its energy drink category, which is a key driver of its overall performance. The brand portfolio includes various energy drinks like Monster Energy, Java Monster, and other innovative products. Continued product innovation is vital to the company’s success, and Monster Beverage is executing pricing strategies to navigate ongoing cost pressures.
Despite ongoing challenges in the supply chain, MNST remains committed to ensuring product availability and achieving the long-term growth goals for its brands. Management expresses optimism regarding the global strength in the energy drink sector. Over the past year, shares of this Zacks Rank #3 company have surged by 62.4%. The Zacks Consensus Estimate projects a 9.5% increase in MNST’s sales and a 15.2% increase in earnings for 2026, with a slight upward revision to the earnings forecast recently.
Vita Coco: This New York-based pioneer in the functional beverage sector is thriving due to strategic investments aimed at increasing coconut water consumption. Its initiatives are yielding strong growth for both coconut water as a category and its flagship product, Vita Coco Coconut Water.
The company’s growth strategy has led to a 15% compound annual growth rate (CAGR) over the past four years. Vita Coco is well-positioned for future success, benefiting from strong retail execution and creative marketing endeavors. Additionally, the company’s plans aim to enhance profitability and cash generation in the long run.
Key Takeaways
- The soft drink market is evolving with increased consumer focus on health and wellness.
- Digital innovation is becoming essential for engaging consumers and streamlining operations.
- Rising costs and tariff uncertainties are presenting challenges for industry players.
- Leading companies are focusing on innovation and digital transformation for competitive advantage.
- The Zacks Beverages – Soft Drinks industry shows strong performance indicators compared to broader markets.
FAQ
What are the trends influencing the soft drinks market?
Health awareness among consumers is pushing the demand for low-sugar, natural, and functional beverages.
How are companies adapting to rising costs?
Many soft drink companies are optimizing their supply chains and exploring local sourcing to manage costs effectively.
What role does digital transformation play in this industry?
Digital transformation is crucial for enhancing consumer engagement and optimizing production processes in the soft drinks sector.
Which companies are leading in the soft drinks industry?
Coca-Cola, PepsiCo, and Monster Beverage are among the key players implementing innovative strategies.
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