The beverage industry is experiencing exciting growth, particularly in the realms of energy drinks, bottled water, and sugar-free soft drinks. As environmental factors and consumer preferences shift, many beverage companies are successfully navigating challenges while innovating to meet demand.
BNN Bloomberg recently caught up with Nik Modi, co-head of global consumer and retail research at RBC Capital Markets, to discuss emerging trends in the beverage sector, the sustained popularity of energy drinks and water, and the broader economic pressures affecting consumer brands.
Key Takeaways
- Energy drinks continue to show significant double-digit growth as they become an integral part of daily consumption.
- Packaged water has consistently captured market share over the past twenty years and is expected to see continued expansion.
- Low-calorie and zero-sugar beverages are key areas of growth for beverage companies worldwide.
- Rising fuel prices, inflation, and changes in U.S. food assistance programs are presenting challenges for beverage brands.
- Beverage companies are utilizing long-term contracts and pricing strategies to manage commodity cost fluctuations.
Read the full transcript below:
LINDSAY: It’s time for Hot Picks, and today we are zeroing in on three plays in the beverage sector. For more, let’s welcome Nik Modi, co-head of global consumer and retail research at RBC Capital Markets. Good morning. Thanks for joining us.
NIK: You bet. Thanks for having me.
LINDSAY: The beverage sector is pretty expansive. I’m wondering, is there growth in it right now? Are certain areas within the sector doing better than others before we actually get to your picks?
NIK: Yes, on a broader scale, the beverage market is experiencing growth. It’s important to examine the specifics: non-alcoholic beverages are on a growth trajectory faster than those that contain alcohol, with energy drinks notably experiencing double-digit increases. It’s remarkable to see the momentum that this category has gained over the past year, and we believe it’s still just the beginning of this trend.
LINDSAY: That’s interesting. What factors are driving the growth of energy drinks? And regarding alcoholic beverages, while they may not be growing as quickly, is there still some growth?
NIK: The growth in alcoholic beverages is relatively limited. Major segments like beer, wine, and spirits are seeing declines. The exception lies within ready-to-drink cocktails and prepackaged alcoholic drinks, which are seeing a bit of growth — that’s the bright spot in the market.
LINDSAY: Let’s dive into it then. Your first pick is Monster Beverage Corporation. What makes this opportunity appealing?
NIK: There is significant potential here. We’ve maintained a buy rating on Monster for over 15 years, believing it to be on the verge of becoming a mega global brand. Given its expansive global reach, particularly with Coca-Cola as its main distributor—which boasts the world’s largest distribution network—the opportunity is immense. Despite currently holding only 10% of the U.S. carbonated soft drink market, energy drinks are growing increasingly acceptable to pair with food, marking a significant shift in consumer behavior.
LINDSAY: Interesting perspective. Now, what about Primo Brands Corporation? Why is this company on your radar?
NIK: Primo Brands is a major player in the U.S. bottled water market and leads the home and office water delivery segment. With packaged water steadily expanding its market share for two decades, we predict this trend will persist. The stock appears undervalued with potential for margin growth, especially as the company successfully navigates a turnaround under new leadership.
LINDSAY: Lastly, what about The Coca-Cola Company? Is there growth potential on the sugar-free side?
NIK: Yes, there are positive developments. Diet Coke has resumed its growth trajectory, and Coke Zero is performing exceptionally well. Even traditional full-sugar Coke is witnessing growth. Coca-Cola is also capitalizing on market share gains and has exciting promotional events upcoming, such as FIFA and the World Cup, which may drive additional consumer engagement and growth momentum.
LINDSAY: What challenges do these companies face in this diverse sector?
NIK: The greatest challenge stems from macroeconomic conditions. Rising gas prices negatively impact consumption levels, affecting the entire industry. Additionally, changes in SNAP funding in some states may hinder beverage accessibility, and while there are discussions surrounding GLP-1 drugs, I believe their impact is overstated compared to broader economic concerns.
LINDSAY: Are these companies also feeling the pinch from rising prices and costs?
NIK: Yes, they are impacted, but many have hedged contracts in place that extend into the latter part of this year, which might delay the effect of current market pressures until 2027. The expectation is that a normalization of the economy will provide these companies with the capacity to adjust pricing strategies effectively during that period.
LINDSAY: Regarding water as a beverage, how does it fit into the current landscape?
NIK: Water is trending positively. With concerns surrounding GLP-1 drugs, investing in water companies seems prudent. For over two decades, packaged water has steadily captured a larger share of the beverage market, and this trend is likely to continue, especially with the growing awareness of chronic dehydration issues globally. While some may see it as a commoditized category, the fastest-growing segments are actually the more premium bottled waters.
LINDSAY: Very interesting insights. Thank you for sharing, Nik Modi, co-head of global consumer and retail research at RBC Capital Markets. We appreciate your time.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| MNST NASDAQ | N | N | N |
| PRMB NYSE | N | N | N |
| KO NYSE | N | N | N |
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This BNN Bloomberg summary and transcript of the May 22, 2026 interview with Nik Modi are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
FAQ
What are the key growth areas in the beverage industry?
Key growth areas include energy drinks, packaged water, and zero-sugar beverages.
How are macroeconomic factors affecting beverage companies?
Macroeconomic factors, such as rising fuel prices and inflation, are presenting challenges for beverage companies regarding consumption and profitability.
What is the market position of energy drinks?
Energy drinks currently account for about 10% of the U.S. carbonated soft drink market but are showing strong growth potential.
Why is bottled water expected to continue growing?
Bottled water has been steadily gaining market share due to increased awareness of hydration’s importance and an overall preference for healthier options.
How are companies addressing rising costs?
Many companies are leveraging long-term supply contracts and pricing flexibility to manage rising commodity costs.
