Can Functional Snacks and Drinks Power PepsiCo's Next Leg Up?

PepsiCo, Inc. PEP is expanding its functional portfolio to capitalize on the growing consumer preference for health-focused products offering benefits like hydration, protein, digestive health and overall nutrition. The company’s strategy spans beverages and snacks, bolstering its presence in performance beverages and better-for-you snacks as part of its broader efforts to diversify beyond traditional carbonated soft drinks and salty snacks.

Functional snacks and beverages play a meaningful role in powering PepsiCo’s next growth phase, supported by rising consumer demand for healthier and better-for-you product offerings. The company is investing in categories such as zero-sugar beverages, prebiotic drinks, protein-based offerings and performance hydration products, while also strengthening its snack portfolio with healthier ingredients and enhanced functional nutrition.

This strategic shift toward a functional portfolio enables PepsiCo to tap into fast-growing categories that often command premium pricing and strong brand loyalty, supporting revenue growth and margin expansion. However, the functional food and beverage market is intensely competitive, with emerging wellness brands and established industry players actively competing for the same health-conscious consumers. Hence, maintaining product taste, ensuring the credibility of health claims and preserving brand authenticity will be necessary for sustained success. 

Functional snacks and beverages represent a promising long-term growth opportunity for PepsiCo. Such products must reach a meaningful scale to effectively offset slowing growth in the company’s traditional categories. PEP’s extensive global distribution network and robust brand portfolio provide a key competitive advantage, enabling it to scale functional offerings efficiently across diverse markets.

PEP’s Peers: How are They Doing?

The Coca-Cola Company KO operates a highly diversified global non-alcoholic beverage portfolio across carbonated soft drinks, hydration, energy, juices, dairy, coffee, tea and functional beverages. KO’s strategy centers on brand-led growth, premiumization, zero-sugar innovation and expansion in faster-growing categories. Coca-Cola is prioritizing strong innovations, focused on transformative product development, expanded portfolios and robust consumer engagement.

Monster Beverage Corporation MNST continues to benefit from constant growth in the global energy drink market, backed by strong demand across convenience stores and other key retail channels. In third-quarter 2025, the Monster Energy Drinks segment's sales grew 16% on a currency-adjusted basis. MNST continues to innovate with new flavors and health-oriented products while optimizing its supply chain and implementing strategic pricing actions. Building on the success of its $1 billion Ultra brand, Monster Beverage also introduced a new visual identity and merchandising strategy with dedicated Zero Sugar coolers, supported by a viral social media campaign around its flagship Zero Ultra drink.

PEP’s Price Performance, Valuation and Estimates

Shares of PepsiCo have gained 11.2% in the past six months compared with the industry’s growth of 17.4%.

From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 19.09X compared with the industry’s average of 20.32X.

The Zacks Consensus Estimate for PEP’s 2026 and 2027 earnings per share (EPS) implies a year-over-year rise of 5% and 6.5%, respectively. The estimates for 2026 and 2027 have moved south in the past 30 days.

PepsiCo 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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