Sodastream International Ltd (SODA), The Coca-Cola Company (KO), PepsiCo, Inc. (PEP): Are the Beverage Giants Worried About This Upstart?

Meanwhile, PepsiCo, Inc. (NYSE:PEP)’s beverage unit has suffered from similar negative trends in overall sales of its carbonated beverages, with volumes down 3% in FY2013. Like The Coca-Cola Company (NYSE:KO), PepsiCo, Inc. (NYSE:PEP) initiated wide-ranging restructuring plans over the past few years in order to better align its administrative and management structure to a low growth environment. In FY2013, cost savings from the plans continue to flow to the bottom line, with rising operating margins for both the company and its beverage unit. More importantly, operating cash flow has been strong as well, with $3 billion generated during the first six months of FY2013, which has allowed PepsiCo, Inc. (NYSE:PEP) to invest in new products and return excess funds to shareholders.

The bottom line

Sodastream International Ltd (NASDAQ:SODA) may be cutting in on the beverage giants’ turf, but there seems to be room for all players in the carbonated beverage segment. SodaStream’s do-it-yourself machines continue to win converts, with roughly 6 million active users, but it is unlikely to win broad market acceptance from constantly on-the-go consumers. The beverage giants’ growth problems stem more from weak global economic growth and an inability to further increase per capita unit consumption in its mature markets. Until the developing markets can pick up the slack in overall unit demand, The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP) may have a hard time generating meaningful top-line growth. As such, growth-oriented investors should put the beverage giants back on the shelf and stock up on SodaStream.

The article Are the Beverage Giants Worried About This Upstart? originally appeared on Fool.com and is written by Robert Hanley.

Robert Hanley has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, PepsiCo, and SodaStream. The Motley Fool owns shares of PepsiCo and SodaStream. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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