The Coca-Cola Company (KO), PepsiCo, Inc. (PEP): Is There a Winner of the Soda Wars?

The cost (and reward) of a different direction

It’s true that Coca-Cola has exhibited higher growth rates than Pepsi over the last few years.  That’s largely because of the evolving strategic direction Pepsi CEO Indra Nooyi has taken the company.  Diversifying Pepsi’s portfolio of brands required investment, and therefore resulted in restrained profit growth.  However, it’s likely that the company’s moves will pay off in the long run, as Pepsi is not as vulnerable to always-changing consumer preferences.  For better or worse, Coca-Cola is chained to its namesake sparkling beverages.  Pepsi, meanwhile, is diversified across food and beverage products.

Both Coke and Pepsi are outstanding businesses that reward shareholders with cash flows and dividends. The companies may seem to be on the same trajectory, but the future for each clearly takes a different path.  As a result, I think investors would be wise to prefer Pepsi.

The article Is There a Winner of the Soda Wars? originally appeared on Fool.com and is written by Robert Ciura.

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