PepsiCo Bets on Innovation: Is New Product Pipeline the Growth Catalyst?

PepsiCo, Inc. PEP is leaning heavily on innovation as a key lever to accelerate growth and reshape its portfolio to meet evolving consumer preferences. In the third quarter of 2025, the company emphasized a robust pipeline of new products spanning beverages and convenient foods, aimed at fueling its next phase of expansion. With consumers increasingly prioritizing health, functionality and value, PepsiCo’s strategy focuses on permissible and functional innovations — from zero-sugar beverages and protein-enriched drinks to snacks made with whole grains and natural ingredients. These efforts are designed not only to capture incremental demand but also to modernize legacy brands like Lay’s, Doritos and Pepsi with cleaner formulations and contemporary positioning.

In beverages, PepsiCo is pushing growth beyond traditional categories with a strong innovation pipeline. Pepsi Zero Sugar continues to post double-digit gains, while new functional launches like Propel Protein Water, Gatorade Lower Sugar and Pepsi Prebiotic target health-conscious consumers. The company’s acquisition of poppi, now generating about $525 million in retail sales, highlights its success in scaling modern, better-for-you brands and strengthening its position in functional beverages.

On the food side, PepsiCo is refreshing key snack brands with cleaner ingredients and added functionality. New offerings like Doritos and Cheetos “NKD,” snacks made with avocado or olive oils, and protein- and fiber-enriched options under Quaker, Sun Chips and PopCorners are fueling its $2 billion-plus permissible snack portfolio. With Sun Chips projected to exceed $700 million in annual sales, PepsiCo’s innovation strategy is emerging as a major growth catalyst, aligning health, taste and value to drive long-term momentum.

Innovation Strategies of KO & KDP

Both The Coca-Cola Company KO and Keurig Dr Pepper Inc. KDP are actively driving innovation to meet evolving consumer preferences and maintain a competitive edge in the beverage industry.

Coca-Cola has consistently prioritized innovation to stay ahead in the highly competitive beverage market. The company has expanded beyond traditional carbonated drinks into lower-sugar, zero-calorie and functional beverages, such as Coca-Cola Zero Sugar, flavored sparkling waters and plant-based drinks. Coca-Cola also leverages technology and data-driven insights to develop new products, personalize marketing and respond quickly to evolving consumer preferences. Limited-edition flavors, collaborations and culturally relevant campaigns further demonstrate its commitment to keeping the brand fresh and engaging for a younger, health-conscious demographic.

Keurig Dr Pepper focuses on innovation both in product offerings and beverage delivery systems. Through its Keurig single-serve coffee platform, the company has revolutionized home and office coffee consumption while continuously expanding pod flavors and sustainable packaging solutions. In its Dr Pepper beverage portfolio, KDP introduces new flavors, low-sugar options and functional drinks to capture shifting consumer preferences. Additionally, the company invests in technology-driven convenience, such as subscription models and direct-to-consumer channels, allowing it to adapt rapidly to market trends while enhancing consumer engagement and loyalty.

PEP’s Price Performance, Valuation & Estimates

Shares of PepsiCo have gained 1.5% in the past three months against the industry’s decline of 0.5%.

From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 16.83X, slightly below the industry’s average of 17.42X.

The Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 0.6%, 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.

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

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