Will Refranchising Deals Unlock Coca-Cola's Next Margin Boost?

The Coca-Cola Company KO has been aggressively refranchising bottling operations globally, moving from owning many bottlers to focusing on a brand-led, franchise system. The company continues to witness a margin growth trend, driven by strong underlying expansion and benefits from bottler refranchising. 

Coca-Cola demonstrated impressive margin expansion in third-quarter 2025, reinforcing its ability to manage costs and pricing effectively amid ongoing macroeconomic volatility. The company’s comparable operating margin expanded 115 basis points (bps), while the comparable currency-neutral operating margin expanded 270 bps. This margin growth reflects both underlying operational efficiency and the benefits of strategic initiatives such as bottler refranchising and disciplined revenue growth management.

Coca-Cola’s strategic selection of the right franchise partners for bottling operations has been driving superior results. Management noted that identifying the right bottling partners leads to greater investment, improved operational efficiency and robust performance, which collectively accelerate system-wide growth and boost overall profitability. In short, the combination of strong franchise partners and a franchised model delivers faster, more profitable growth for the Coca-Cola system.

At its core, Coca-Cola remains focused on adapting to consumer and channel shifts in collaboration with bottlers to sustain long-term strength. The refranchising deals are expected to enhance KO’s overall margin profile. Combined with the company’s focus on productivity, cost-control initiatives, product innovations and supply-chain optimization, these measures should further elevate margins and strengthen profitability.

KO’s Competition

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

PepsiCo is demonstrating a strong commitment to driving productivity and digital transformation as core pillars of its long-term growth strategy. PEP is modernizing operations across manufacturing, warehousing, and distribution through expanded automation, SKU optimization, network consolidation and waste reduction across the value chain, enhancing efficiency and operational resilience. Despite the inflationary pressures, PepsiCo has sustained volume share and strengthened value perception through disciplined pricing and other efforts. Such actions reinforce PepsiCo’s disciplined approach to expanding margins and strengthening operational agility.

Monster Beverage maintains its leadership in the global energy drinks market, driven by strong brand equity, strategic product innovation and disciplined pricing, ensuring continued growth and competitive advantage. The company’s balanced approach to product mix and promotional investments has helped it defend market share and deliver consistent growth. MNST continues to review opportunities for higher prices, domestically and internationally. Monster Beverage is experiencing strong margin growth, primarily driven by lower input costs, pricing actions and supply-chain optimization.

KO’s Price Performance, Valuation and Estimates

Shares of Coca-Cola have gained 12% in the past year compared with the industry’s growth of 6.7%.

From a valuation standpoint, KO is trading at a forward price-to-earnings ratio of 22.10X compared with the industry’s average of 18.42X.

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 been stable in the past 30 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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