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PepsiCo Leans on Pricing Power: Is Volume Decline a Growing Risk?

By Zacks Equity Research | October 16, 2025, 11:31 AM

PepsiCo, Inc. PEP delivered nearly 3% reported net revenue growth in the third quarter of 2025, driven primarily by its pricing power and portfolio reshaping initiatives. While price increases and premium innovations have supported top-line resilience, the company continues to navigate a delicate balance between maintaining value perception and protecting volumes. North America, in particular, remains a challenging landscape as consumer budgets tighten and elasticity pressures mount. Despite this, PEP’s disciplined approach to pricing, cost optimization and brand investment has sustained revenue momentum across both beverages and convenient foods.

However, PepsiCo’s reliance on pricing to offset input and supply chain cost inflation raises concerns about the long-term impact on volume trends. In its beverages segment, growth was bolstered by strong performances from Pepsi Zero Sugar and functional hydration brands like Propel, but volumes were impacted by softness in certain packaged water categories and competitive dynamics in the carbonated drinks space. Similarly, in its foods segment, volume recovery remains gradual, reflecting subdued category demand and moderation in promotional intensity. While PepsiCo continues to refine its price-pack architecture to offer better everyday value, maintaining volume growth amid ongoing price sensitivity could remain a structural challenge.

Looking ahead, PepsiCo aims to mitigate volume pressure through a renewed focus on innovation, affordability and permissible product expansion. Management has outlined plans to simplify its SKU mix, expand automation and leverage AI-driven efficiencies to protect margins while funding growth initiatives. By investing in functional beverages, protein-rich snacks and zero-sugar offerings, the company seeks to drive incremental consumption and offset potential volume softness from pricing-led strategies.

PEP’s Competitors: KO & KDP’s Pricing Power vs. Volume Trade-Off

Amid a shifting beverage landscape marked by inflation and cautious consumer spending, both The Coca-Cola Company KO and Keurig Dr Pepper KDP are relying on strategic pricing to sustain growth while managing volume pressures.

Coca-Cola continues to leverage its strong global pricing power to drive revenue growth amid uneven volume trends. In recent quarters, the company has demonstrated disciplined pricing strategies across markets, focusing on balancing affordability with premiumization. While higher prices have supported double-digit revenue growth in key regions, underlying volume growth has remained modest, reflecting consumer sensitivity to elevated price points in developed markets.

Keurig Dr Pepper has also leaned on pricing actions to offset inflationary pressures and drive revenue expansion, though at the expense of flat to slightly declining volumes in several beverage categories. The company’s pricing initiatives across carbonated soft drinks, coffee and packaged beverages have strengthened top-line performance, particularly as it navigates cost pressures tied to raw materials and logistics. However, KDP faces a more elastic consumer base compared to larger peers, leading to some softness in household purchase frequency, especially in mainstream soda and coffee pods.

PEP’s Price Performance, Valuation & Estimates

Shares of PepsiCo have gained 3.9% in the past three months against the industry’s decline of 4%.

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From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 17.91X, slightly above the industry’s average of 17.76X.

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Image Source: Zacks Investment Research

The Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 0.7%, whereas its 2026 earnings estimate indicates year-over-year growth of 5.6%. The company’s EPS estimates for 2025 and 2026 have moved northward in the past 30 days.

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Image Source: Zacks Investment Research

PEP stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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CocaCola Company (The) (KO): Free Stock Analysis Report
 
PepsiCo, Inc. (PEP): Free Stock Analysis Report
 
Keurig Dr Pepper, Inc (KDP): Free Stock Analysis Report

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

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