Coca-Cola's Premiumization Push: Growth Engine or Volume Risk?

The Coca-Cola Company KO is increasingly leveraging premiumization as a key growth strategy to drive revenues, expand margins and offset sluggish volumes. The company’s strategy centers on expanding consumer choice through brand innovation and a diverse pricing spectrum, ranging from affordable, local products to premium and functional beverages. This approach allows KO to capture greater value per serving while adapting to evolving consumer preferences for quality, variety and perceived added benefits.

The company’s health-oriented offerings, including Fairlife, Coca-Cola Zero Sugar and Diet Coke, appear encouraging, as it continues to steer consumers toward value-added and differentiated beverage options. KO’s premiumization strategy is reflected in its product innovations and marketing efforts. Despite solid innovations, Coca-Cola is witnessing soft volumes across its key markets, reflecting persistent consumer strain and softer category trends.

Nevertheless, Coca-Cola is focused on delivering balanced top-line growth, with volume being a key priority. By combining affordable options with aspirational offerings, and an emphasis on innovation and marketing, Coca-Cola is firmly maintaining its global leadership while redefining the next generation of beverage consumers. As Coca-Cola continues to evolve, its premiumization strategy positions it to effectively capture value in an increasingly dynamic and changing consumer landscape.

Management anticipates pricing to normalize as inflation eases, while continuing to leverage both affordability and premiumization based on market conditions and consumer demand. Premiumization, alongside the company’s focus on productivity, cost-control initiatives, ongoing innovation and supply-chain optimization, should support volume growth and enhance profitability. As a result, the effective execution of premiumization has the potential to be a key catalyst for long-term margin expansion and sustainable value creation.

KO’s Competition

PepsiCo, Inc. PEP and Keurig Dr Pepper Inc. KDP are the beverage companies competing with Coca-Cola.

PepsiCo has emphasized premiumization as a key pillar of its growth strategy, aiming to transform its portfolio to align with evolving consumer preferences for healthier, more functional and higher-value products. The company emphasized the success of premium offerings such as Gatorade Zero, Propel and hydration powders and tablets, which are gaining share in the functional beverage space. It is also expanding through strategic acquisitions like Poppi, a prebiotic soda brand, and sharpening its competitive edge in the beverage category by doubling down on premium and functional drinks.

Keurig’s premiumization strategy focuses on elevating its product portfolio and consumer experience to capture higher value and drive growth beyond basic coffee brewing. KDP is building a tier of premium and super-premium coffee offerings through brands like Lavazza, La Colombe and Kicking Horse, which resonate with higher-value consumers and drive positive mix. Hence, Keurig’s premiumization strategy combines product innovation, technology upgrades, brand partnerships and sustainability initiatives to drive higher revenues, reinforce brand loyalty and strengthen its position in the competitive at-home and coffee market.

KO’s Price Performance, Valuation and Estimates

Shares of Coca-Cola have gained 0.5% in the past six months compared with the industry’s growth of 3%.

From a valuation standpoint, KO is trading at a forward price-to-earnings ratio of 21.78X compared with the industry’s average of 18.19X.

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 #4 (Sell). 

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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