Nowadays, more and more consumers are avoiding sugary drinks due to increasing health concerns. In the past five years, growth for carbonated soft drinks has taken a sharp downturn. As a matter of fact, total sales of carbonated soft drinks plunged for the 11th consecutive year in the United States. Not only this, yearly per capita consumption of carbonated soft drinks declined to approximately 650 eight-ounce servings in the previous year, which accounts for the lowest point since 1985.
Consumer concerns over sugar content, artificial ingredients and calories are forcing soda consumers away from the beverage and in the direction of products perceived as healthier or natural. However, nonalcoholic drink manufacturer PepsiCo (PEP, Financial) has performed very well over the last few years because of its diversity.
In the most recent quarter, the company reported earnings per share of $1.40, eight cents better than analyst estimates. On the other hand, the company’s revenue came in at $16.03 billion, surpassing the consensus by $200 million. Although that figure represents a 1.8% drop, it is significantly better than the 7% drop reported by foremost competitor Coca-Cola (KO, Financial).
PepsiCo is mainly known for its namesake cola, but is also manufactures Gatorade sports drinks, Lipton Tea, Tropicana juices and more. Apart from this, the company is also the maker of Frito-Lay brand snacks like Doritos and Lay’s potato chips.
Furthermore, the company is taking various steps to change its reputation as a producer of junk food. In previous quarter, the company noted that 45% of its overall topline came from guilt-free products, which are drinks with less than 70 calories per 12-ounce serving, as well as snacks with less sodium and saturated fat.
This clearly suggests the company is successfully changing its products to meet consumer concerns, which should make the business more sustainable in the imminent years.
Moving onward, from a dividend point of view, the company presently flaunts a dividend yield of 2.96%. That yield considerably exceeds the stock market average, however, the most significant thing to notice is the company has increased its quarterly payout successively for 44 years.
Summing up
Despite the decline in demand for carbonated drinks, PepsiCo has managed to deliver strong results on the back of its diverse line of snack, food and beverage products. The company’s ability to sustain itself in various environments makes it a better investment compared to its rivals. Although the stock has been uniform this year, it still represents a great opportunity for long-term investors. As an outcome, adding Pepsi to the portfolio would be advantageous for investors going forward.
Disclosure: No position in any of the stocks.
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