Pepsi Shares Pop, yet Remain Attractive
The wide-moat firm's enviable portfolio of beverage and food brands support its edge.
Wide-moat
We think performance in the firm's North American beverage business, which has averaged roughly 3% declines the last 12 months, seems to be trending in the right direction as the firm's investments behind its core beverage brands (such as increased media spending for trademark Pepsi) begin to take hold. As evidence, volumes in this business were down just 2%, versus a 3% decline in the first quarter, even though pricing within this segment remains solid (up 1% during the quarter). Further product innovation, including recently launched Gatorade Zero and the return of seasonal brand Mountain Dew Baja Blast, should help to sustain positive momentum across its largest beverage brands over the remainder of the year. Overall, we posit its enviable portfolio of beverage and food brands (with 22 brands that each generate $1 billion in annual sales) has helped it ingrain itself in retailers' supply chains and secure valuable shelf space, supporting its edge.
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