Coke Surges Ahead in Health Trend as Pepsi Struggles

Coca-Cola (KO) is outperforming PepsiCo (PEP) in the health trend, driven by its successful zero-sugar lineup. Coca-Cola Zero Sugar grew 16% globally across every geographic segment, while Diet Coke and Coca-Cola Light added another 7%, led by North America and Asia.

This success can be attributed to Coca-Cola's earlier investment in sugar-free and functional drinks. The company is launching new products such as Coca-Cola Zero Zero, a drink with zero sugar, zero calories, and zero caffeine, across Asia and Latin America. It also introduced Bodyarmor Fit, a zero-sugar sparkling sports drink with electrolytes.

PepsiCo's quarter told the opposite story, with its North American beverage volume falling 4% and its North American food business seeing organic revenue slip 2%. Core operating margin contracted to 16.8%, and overall organic revenue grew just 2.4%, well behind Coke's 6%.

Coca-Cola trades at a premium to PepsiCo, which may mute future upside even if the business keeps humming. However, Pepsi is considered a cheaper, higher-yielding stock with a higher risk bet on a potential recovery that hasn't yet shown up in the numbers.