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Beverage industry stays on growth path as cola giants tweak product line

A recent survey showed that the value of the American soft drink industry is set to cross $350 billion by 2025, despite the growing concerns about the health hazards of carbonated drinks. The high-growth beverage industry has been dominated by soda-based drinks over the past several years, thanks to the growing youth population.

The positive quarterly results of market leaders Coca-Cola (KO) and PepsiCo (PEP) indicate that so far the soft drink market is largely unaffected by the changing customer taste. At the same time, the companies are buckling up to face the potential threats to their core business in the future, and stay relevant.

Striking a balance between carbonated drinks and their healthier alternatives, PepsiCo is currently bringing innovation to its business. More than a month after acquiring organic foods company Health Warrior, PepsiCo Wednesday closed its previously announced acquisition of Israel-based carbonation products maker SodaStream.

Striking a balance between carbonated drinks and their healthier alternatives, PepsiCo is currently bringing innovation to its business

While the buyout of Health Warrior was the first deal under the company’s Hive initiative, launched exclusively for tracking the emerging trends in the food industry, SodaStream stands out for the customization option it offers to customers while being environmentally friendly.

The leading Wall Street analysts have assigned hold- buy ratings on the company’s stock, with some of the brokerages recently upgrading their ratings. The consensus rating is hold, on an average price target of $118.

Last month, Coca-Cola expanded its non-carbonated drinks portfolio further by announcing two energy drinks, including a no-sugar version. The highlight of the new products is that their basic ingredient will be natural caffeine. While the focus is on offering beverages that are relatively healthier, the company has more such initiatives in the pipeline that deviate from the conventional path.

Pepsi turns to nutrition as soda-based drinks lose their fizz

In September, Coca-Cola revealed plans to roll out wellness drinks made from cannabis, in partnership with Canada-based Aurora Cannabis. The company seems to be trying to cash in on the growing popularity of medical marijuana and the recent relaxation of regulatory norms on cannabis-based products.

The announcement followed the acquisition of UK-based coffee shop chain Costa and purchase of a minority stake in sports drink maker BodyArmor. Coca-Cola witnessed several rating upgrades recently, with the majority of the brokerages recommending buy, followed by hold.

Soon after the reports about PepsiCo closing the buyout of SodaStream, the company’s shares dropped about 1% Wednesday, continuing the withdrawal that started last month after reaching the peak. Coca-Cola’s stock slipped slightly in early trading Wednesday, after gaining about 7% since the beginning of the year.

 

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