PepsiCo, Inc. PEP is broadening its functional product range to meet the increasing consumer demand for health-oriented options that offer benefits such as hydration, protein, digestive health, and overall nutrition. The company’s approach encompasses both beverages and snacks, reinforcing its position in performance drinks and healthier snack choices as part of its wider initiative to diversify away from conventional carbonated soft drinks and traditional salty snacks.
Functional snacks and beverages are pivotal in driving PepsiCo’s next phase of growth, fueled by the rising consumer interest in healthier alternatives. The company is focusing on sectors like zero-sugar beverages, prebiotic drinks, protein-enriched products, and performance hydration, while enhancing its snack offerings with better ingredients and improved nutritional benefits.
This strategic pivot towards a functional lineup allows PepsiCo to access rapidly growing sectors that typically enjoy premium pricing and strong consumer loyalty, thus fostering revenue growth and improving profit margins. However, the functional food and beverage arena is intensely competitive, with both emerging wellness brands and established players vying for the attention of health-conscious consumers. Therefore, maintaining appealing flavors, ensuring the accuracy of health claims, and preserving brand integrity are vital for ongoing success.
Functional snacks and beverages represent a promising opportunity for long-term growth for PepsiCo. To counteract the slowdown in its traditional product categories, these offerings need to reach significant scale. PEP’s extensive global distribution network and strong brand portfolio provide a competitive edge, enabling efficient scaling of functional products across various markets.
PEP’s Peers: How are They Doing?
The Coca-Cola Company KO boasts a diverse global non-alcoholic beverage portfolio that includes carbonated soft drinks, hydration solutions, energy drinks, juices, dairy, coffee, tea, and functional beverages. KO focuses on brand-driven growth, premiumization, zero-sugar innovations, and expansion into faster-growing sectors. Coca-Cola emphasizes strong innovations centered on transformative product development, expanded portfolios, and robust consumer engagement.
Monster Beverage Corporation MNST continues to thrive in the burgeoning global energy drink market, bolstered by strong sales in convenience stores and other key retail channels. In the third quarter of 2025, sales in the Monster Energy Drinks segment grew by 16% on a currency-adjusted basis. MNST is committed to innovation with new flavors and health-focused products while optimizing its supply chain and implementing strategic pricing strategies. Following the success of its $1 billion Ultra brand, Monster Beverage has also unveiled a new visual identity and merchandising approach with dedicated Zero Sugar coolers, backed by a viral social media campaign for its flagship Zero Ultra drink.
PEP’s Price Performance, Valuation and Estimates
Shares of PepsiCo have increased by 11.2% over the past six months, compared to the industry’s growth of 17.4%.
From a valuation perspective, PEP is currently trading at a forward price-to-earnings ratio of 19.09X, in contrast to the industry average of 20.32X.
The Zacks Consensus Estimate for PEP’s earnings per share (EPS) for 2026 and 2027 indicates a year-over-year increase of 5% and 6.5%, respectively. However, estimates for both years have been revised downward in the last 30 days.
PepsiCo’s stock presently holds a Zacks Rank of #3 (Hold).
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CocaCola Company (The) (KO): Free Stock Analysis Report
PepsiCo, Inc. (PEP): Free Stock Analysis Report
Monster Beverage Corporation (MNST): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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Key Takeaways
- PepsiCo is expanding its functional product offerings in response to growing health-conscious consumer demands.
- Investment focuses on zero-sugar beverages, prebiotic drinks, and performance hydration.
- The competitive landscape for functional foods is intensifying, necessitating a focus on taste and brand integrity.
- Functional snacks and beverages are viewed as a crucial growth opportunity for PepsiCo.
- PEP’s valuation is slightly below the industry average, though its stock has shown positive growth.
FAQ
What is PepsiCo’s strategy regarding functional products?
PepsiCo is diversifying its product portfolio by investing in functional snacks and beverages that cater to health-focused consumers.
How is PepsiCo’s stock performing compared to its industry?
PepsiCo’s shares have grown by 11.2% over the last six months, while the industry average growth stands at 17.4%.
What are functional snacks and beverages?
Functional snacks and beverages are products designed to offer specific health benefits, such as improved hydration, digestive health, and added protein.
What challenges does PepsiCo face in the functional food market?
PepsiCo must contend with intense competition from both emerging and established brands, requiring them to maintain taste, brand authenticity, and health claims.
What is the outlook for PepsiCo’s earnings?
The Zacks Consensus Estimate suggests a year-over-year increase in earnings per share of 5% for 2026 and 6.5% for 2027.
