Is PepsiCo's Protein and Prebiotic Push a New Functional Edge?

PepsiCo, Inc. PEP is sharpening its competitive edge by leaning into one of the fastest-growing areas of food and beverages: functionality. As consumers increasingly seek products that deliver benefits beyond taste, such as protein for satiety or prebiotics for gut health, the company is expanding its portfolio to meet these evolving needs. In 2025, PepsiCo has made functional nutrition a core pillar of its innovation strategy, positioning protein and prebiotic-enriched products as key growth drivers across both beverages and convenient foods. This shift reflects a broader effort to move toward higher-value, permissible categories that can support both volume growth and margin resilience.

On the beverage side, PepsiCo is rolling out a wave of functional innovations aimed at everyday consumption occasions. New launches such as Pepsi Prebiotic, Propel Protein Water and protein-enhanced Muscle Milk formulations are designed to blend familiar flavors with tangible health benefits. The company is also extending functionality into trusted platforms like Gatorade, pairing hydration with lower sugar and added nutritional benefits. These offerings allow PepsiCo to compete more directly with emerging functional beverage brands, while leveraging its unmatched scale, distribution and brand recognition to accelerate adoption.

Functionality is also gaining traction in PepsiCo’s food portfolio, with protein-rich and fiber-boosted snacks under brands like Doritos, Quaker, Sun Chips and PopCorners. These updates modernize iconic brands while appealing to health-focused consumers. If well executed, PEP’s protein and prebiotic push could become a key differentiator, driving new occasions and strengthening long-term loyalty.

How KO & KDP Are Building a Functional Edge in Beverages

Both The Coca-Cola Company KO and Keurig Dr Pepper KDP are strengthening their portfolios with functional and better-for-you beverage innovations to meet evolving consumer wellness demands.

Coca-Cola is steadily strengthening its functional edge by expanding into beverages that offer health benefits beyond refreshment. The company has leaned into zero-sugar, hydration and functional platforms, such as enhanced waters, sports drinks and emerging functional beverages that support energy, wellness and balance. While Coca-Cola’s focus is less on protein-heavy offerings, its investments in low- and no-sugar formulations, functional hydration and wellness-oriented innovations position it well to capture consumers seeking better-for-you choices.

Keurig Dr Pepper is also building a functional advantage, particularly across coffee, cold beverages and emerging wellness drinks. The company is tapping into consumer demand for functional energy, hydration and better-for-you refreshment, while selectively expanding into health-forward formulations. KDP’s strong position in coffee allows it to innovate around protein-enhanced and functional coffee occasions, while its cold beverage portfolio supports extensions into low-sugar and wellness-focused products. Combined with productivity-driven reinvestment, KDP’s functional push is helping it differentiate its offerings and sustain growth in a competitive beverage market.

PEP’s Price Performance, Valuation & Estimates

Shares of PepsiCo have gained 4.4% in the past three months compared with the industry’s growth of 6.4%.

From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 17.37X, slightly below the industry’s average of 18.22X.

The Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 0.6%, whereas the same for 2026 earnings indicates growth of 5.4%. The company’s EPS estimates for 2025 and 2026 have remained stable in the past seven 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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