Is Coca-Cola's Pricing Power Keeping Up With Global Inflation?

The Coca-Cola Company KO has effectively utilized its pricing power to navigate inflationary headwinds over the past several quarters, helping the beverage giant offset rising input costs and currency headwinds. Consumers have largely accepted higher prices across sparkling and still beverages, helping the company protect margins despite rising input and logistics costs. This resilience reflects Coca-Cola’s powerful brand equity and global distribution strength.

In first-quarter 2025, the company reported strong organic revenue growth of 6%, driven by price/mix rather than volume, a testament to its brand strength and ability to pass on costs to consumers without major pushback.

While higher prices have supported top-line growth, the elasticity of demand is becoming more evident, particularly in developed markets. In North America, volumes have plateaued as consumers became increasingly price-sensitive, especially in lower-income segments. With inflation easing and consumer budgets tightening, further price hikes can risk eroding demand. Coca-Cola has responded by introducing more affordable pack sizes and tailoring offerings to match regional affordability trends, balancing premiumization with value offerings to retain market share.

Internationally, Coca-Cola continues to benefit from favorable pricing in high-growth markets, such as Latin America and the Asia Pacific, where brand loyalty remains strong. However, the long-term sustainability of pricing-led growth is in question, especially if macroeconomic conditions remain volatile.

As inflation normalizes and competition intensifies, Coca-Cola may need to rely less on price and more on volume, innovation and operational efficiency to sustain its momentum. The true test of its pricing power may lie just ahead.

KO Leads With Pricing Power: Are Competitors Closing In?

While Coca-Cola maintains a firm lead in pricing power, rivals like PepsiCo Inc. PEP and Keurig Dr Pepper Inc. KDP are stepping up their game. Is the competitive gap starting to narrow?

PepsiCo puts a strong emphasis on pricing to fuel growth, mirroring Coca-Cola’s strategy amid persistent cost inflation and shifting consumer demand. PepsiCo has recently driven strong revenue growth through price hikes, especially in beverages and snacks, using its brand strength to pass on costs with limited volume impact. PEP is focusing on premium offerings, mix improvements and localized pricing to balance margin growth with affordability. As PepsiCo expands its higher-margin product lineup, it is steadily closing the pricing power gap with Coca-Cola.

Keurig Dr Pepper has also leveraged pricing to drive top-line growth, particularly in its packaged beverages and coffee systems. KDP has implemented strategic price increases and mix enhancements to offset inflationary pressures, while maintaining relatively stable volumes. Keurig Dr Pepper’s focus on strong brands, new products and varied packaging mirrors Coca-Cola’s strategy, especially for at-home and on-the-go use. Its push into premium and functional drinks also aligns with KO, showing growing similarities in how both approach pricing and consumer trends.

The Zacks Rundown for Coca-Cola

KO shares have rallied 13.7% year to date compared with the industry’s growth of 5.9%.

From a valuation standpoint, Coca-Cola trades at a forward price-to-earnings ratio of 22.92X, significantly higher than the industry’s 18.32X.

The Zacks Consensus Estimate for KO’s 2025 and 2026 earnings implies year-over-year growth of 3.1% and 8.2%, respectively. Earnings estimates for 2025 have been northbound in the past 30 days, whereas the same for 2026 has been unchanged in the same period.

Coca-Cola 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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