Is Coca-Cola's Productivity Play the Secret to Margin Expansion?

The Coca-Cola Company KO is driving productivity gains by leveraging technology for data analytics, streamlining supply-chain operations and improving employee engagement. This has led to increased efficiency, reduced costs and enhanced customer satisfaction. This has been aiding KO’s margins for a while now. 

In third-quarter 2025, the operating income soared 59% year over year while comparable operating income rose 8%. Comparable currency-neutral operating income advanced 15% on strong organic revenue growth across most segments, effective cost management and the timing of marketing investments. The comparable currency-neutral operating margin also expanded 270 basis points (bps) in the same quarter, backed by ongoing productivity efforts.

KO is achieving greater productivity in the marketing area through advanced analytics, improved media efficiency and disciplined spending. Alongside making growth investments, the company continues to advance productivity initiatives focused on enhancing supply-chain efficiencies, optimizing advertising spending and exercising prudence in cost management. Such factors have bolstered earnings per share, which increased 6% year over year despite 6% currency headwinds, increased net interest expenses and a higher effective tax rate.

Coca-Cola is evolving into a total beverage company with a resilient, all-weather strategy that integrates marketing, innovation and revenue-growth management. Its productivity initiatives extend beyond cost-containment efforts and revenue-management tactics, focusing on operational excellence and sustainable value creation. The company embodies an efficient operating model and a holistic approach to serving customers.

KO’s Competition in the Productivity Space

PepsiCo, Inc. PEP and Monster Beverage Corporation MNST are the key beverage companies competing with Coca-Cola in the productivity power.

PepsiCo, a beverage behemoth and Coca-Cola’s key competitor, is advancing its multi-year productivity initiatives to drive cost savings across the entire value chain. These efforts include expanding automation in manufacturing, warehousing and distribution to enhance PEP’s operational efficiency and minimize manual dependencies. PepsiCo’s productivity mechanism remains a cornerstone of its key strategic actions to enhance efficiency, fund innovation and boost margin expansion.

Monster Beverage places a strong emphasis on boosting productivity. It focuses on productivity through strategic investments in research and development, operational excellence and cost management. MNST continues to innovate with new flavors and health-oriented products while optimizing its supply chain and implementing strategic pricing actions to enhance gross profit margins. In second-quarter 2025, the gross margin expanded 210 bps, reflecting improved cost efficiencies. MNST’s productivity efforts, bolstered by product innovations and launches, offer a competitive edge and boost growth in the energy drinks market.

KO’s Price Performance, Valuation and Estimates

Shares of Coca-Cola have gained 11.1% year to date compared with the industry’s growth of 6.7%.

From a valuation standpoint, KO trades at a forward price-to-earnings ratio of 21.35X compared with the industry’s average of 20.36X.

The Zacks Consensus Estimate for KO’s 2025 and 2026 earnings per share (EPS) implies year-over-year growth of 3.5% and 8%, respectively. The estimates for 2025 and 2026 have increased a penny in the past seven days.

Coca-Cola 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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