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Pepsi Versus Coke: The Cola Wars Are Back

IAM Newswire
·4 min read

Just like its rivals Coca-Cola Co (NYSE: KO) and Keurig Dr Pepper Inc (NASDAQ: KDP), the snack and beverage giant has taken a hit during the pandemic due to restaurant closures and other pandemic-related disruptions. But, PepsiCo, Inc. (NASDAQ: PEP) had a joker in its deck of cards. Namely, its diversified food and beverage portfolio allowed the company to benefit from more people working and learning from home. It was clear this was Pepsi's notable asset even during the prior quarter as, unlike its rivals, Pepsi's Q2 total core gross margin rate grew 6 basis points to 55.6%. Its supremacy became even more obvious during its latest third quarter as sales snapped back from the pandemic.

Q3 Earnings Report

Pepsi topped analysts' estimates both for its earnings and revenue. Net sales of $18.09 billion expanded by 5.3% in its latest quarter as demand for Tostitos and pancake mixes grew. It exceeded the $17.23 billion expected by Refinitif.

Despite the COVID-19 related costs of $147 million, Pepsi managed to deliver a net income of $2.29 billion, exceeding both estimates and the $2.1 billion it made in the same quarter last year.

Performance Of Growth Drivers

Despite eased lockdown measures, both its Frito-Lay and Quaker Foods businesses reported organic revenue growth of 6%. So, even though people started feeling more at ease and leaving their homes, Frito-Lay saw an increased demand for Tostitos, Cheetos and Doritos. Moreover, Quaker Foods' pasta and macaroni and cheese dishes even reported double-digit sales growth.

Forecasts

Pepsi provided an update to its fiscal 2020 outlook after pulling its forecasts in late April like the majority of companies. For the remainder of the fiscal year, Pepsi is now expecting organic revenue growth of 4% which is in line with its prior outlook. But as for earnings per share of $5.50, they are 38 cents less than its original forecast.

New Markets On The Horizon

Sales of functional beverages amounted to approximately $31.7 billion last year which is 6.9% from 2018, according to Euromonitor International data. PepsiCo is launching a drink to get a piece of its subsegment, the $1 billion sleep aid industry. In September, Pepsi unveiled Driftwell that contains L-theanine, an amino acid that promotes relaxation and calmness. Pepsi plans to launch its counter-stress drink online later this year and in stores early next year.

PepsiCo has been on the quest to fortify its position in the health and wellness sector for several years now. In 2016, it acquired kombucha beverage maker KeVita and the plant-based energy bar company Health Warrior two years later. It already expanded the range of its sports drink megabrand Gatorade with the launch of nighttime protein powders. It is also considering a move into alcoholic drinks. PepsiCo is looking at the bigger picture. It used to keep people hyped but now it will also have products to calm them down.

Going Green

PepsiCo committed to shift to 100% renewable energy by 2040. Coca-Cola has set 2030 as its deadline, but it only committed to reducing greenhouse gas emissions by ¼ with its base year being 2015. However, PepsiCo plans to source 100% renewable electricity across all company-owned and controlled operations globally also by 2030, but its franchises and third-party operators will join the green train by 2040. 

Outlook

Pepsi succeeded to plant more optimism about the sustainability of its growth drivers. It delivered a strong profit as snacks and sodas thrived both during the lockdown and with eased social distancing measures. The bottom line is that the soda giant is doing good, it is going green and it is bravely stepping out into new markets. It is also forecasting a full-year profit that is above market expectations. By the looks of it, Cola wars are back and in more ways than one.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure . IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you're interested in becoming an IAM journalist contact: contributors@iamnewswire.com

The post Cola Wars Are Back appeared first on IAM Newswire.

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