Is PepsiCo's Gatorade Strategy Enough to Fend Off Its Rivals?

PepsiCo, Inc.’s PEP Gatorade brand remains the crown jewel of its sports hydration portfolio. The company is doubling down on strategies to defend and expand its lead in the face of mounting competition. On its latest earnings call, management emphasized that Gatorade has already begun to regain share in the sports drink category this year, a positive sign after facing pressures from both established rivals and newer entrants. Beyond core Gatorade, PepsiCo is also leaning into Propel, which has seen strong momentum as consumers seek functional hydration with added health benefits.

This two-pronged approach, fortifying Gatorade’s dominance while broadening into adjacent functional hydration spaces, shows PepsiCo is not relying on legacy strength alone. The company is investing in innovation, distribution and away-from-home channels to keep its beverages at the forefront of mind in gyms, restaurants and sporting venues. By combining Gatorade’s scale with Propel’s appeal to health-conscious consumers, PepsiCo aims to cover a broader spectrum of demand, from athletes to everyday wellness seekers.

However, the question remains whether this strategy is enough to fend off rivals like BodyArmor (owned by Coca-Cola) and upstart hydration brands that are growing quickly with younger audiences. PepsiCo’s advantage lies in its scale, brand recognition and ability to continuously innovate while leveraging global distribution. If the company can keep Gatorade fresh through product extensions and marketing while accelerating Propel’s rise, it will be well-positioned to maintain its leadership. But execution will be critical, because in the fast-changing beverage space, consumer loyalty can shift as quickly as new trends emerge.

PEP’s Competitors: KO & KDP’s Smart Moves

As the functional hydration market heats up, both The Coca-Cola Company KO and Keurig Dr Pepper KDP are sharpening their strategies to capture consumers seeking healthier, performance-driven beverages.

Coca-Cola has leaned heavily on functional hydration as part of its strategy to diversify beyond traditional sodas, with BodyArmor and Powerade serving as the core of its sports drink portfolio. BodyArmor, in particular, has helped Coca-Cola compete directly with PepsiCo’s Gatorade by emphasizing natural ingredients, coconut water and added electrolytes, appealing to younger, health-conscious consumers. Innovation has centered on flavor expansion, zero-sugar options and packaging formats that align with on-the-go lifestyles, while Coke leverages its global distribution to quickly scale new product launches.

Keurig Dr Pepper has approached functional hydration through a mix of acquisitions and brand innovation, most notably with Bai and Core Hydration. These products highlight antioxidants, natural sweeteners and “better-for-you” positioning that resonates with consumers seeking alternatives to traditional sports drinks. KDP continues to experiment with flavors, functional claims and premium positioning, while using its strong distribution partnerships, particularly in convenience and grocery, to carve out share in the fast-growing hydration category. Innovation at KDP has been about marrying wellness trends with accessible formats, ensuring its portfolio stays relevant amid shifting consumer preferences.

PEP’s Price Performance, Valuation & Estimates

Shares of PepsiCo have lost around 5.6% year to date against the industry’s growth of 2%.

From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 17.18X, slightly above the industry’s average of 17.55X.

The Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 1.6%, whereas its 2026 earnings estimate suggests year-over-year growth of 5.8%. The company’s EPS estimates for 2025 and 2026 have moved northward in the past 30 days

PEP stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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