Zacks Industry Outlook The Coca-Cola, Monster, Fomento, Primo and The Vita Coco

Industry: Soft Drinks

Link: https://www.zacks.com/commentary/2969816/5-soft-drink-stocks-poised-for-growth-amid-health-focused-innovation

The Zacks Beverages – Soft Drinks industry is benefiting from strong consumer demand for healthier beverages and rapid digital transformation, creating favorable long-term growth opportunities. Rising preference for zero-sugar, low-calorie, functional and clean-label drinks is driving product innovation, premiumization and portfolio diversification.

At the same time, investments in artificial intelligence, data analytics, e-commerce and smart manufacturing are enhancing consumer engagement, operational efficiency and market reach. These trends are enabling companies to strengthen brand loyalty and capture new revenue streams.

Industry leaders like The Coca-Cola Co., Monster Beverage Corp., Fomento Económico Mexicano, S.A.B. de C.V., Primo Brands Corp. and The Vita Coco Company, Inc. are well-poised to benefit from these trends. 

However, the industry continues to face headwinds from rising raw material, packaging and transportation costs, as well as tariff-related uncertainty, which could pressure margins, complicate pricing decisions and weigh on overall profitability.

About the Industry

The Zacks Beverages - Soft Drinks industry comprises companies that manufacture, source, develop, market and sell non-alcoholic beverages. Soft drinks mainly include sparkling drinks, natural juices, enhanced water, sports and energy drinks, dairy, and ready-to-drink (RTD) tea and coffee beverages. Some industry players like PepsiCo produce and sell handy food with flavored snacks, complementing their beverage portfolio. The companies sell products through a network of wholesalers and retailers, including supermarkets, department stores, mass merchandisers, club stores and other retail outlets. Some also offer products via company-owned or controlled bottling, independent bottling partners and partner brand owners.

What's Shaping the Future of the Beverages - Soft Drinks Industry?

Growing Demand for Healthier Beverages: Growing demand for healthier beverages is creating significant opportunities across the U.S. soft drinks industry. Consumers are increasingly choosing zero-sugar, low-calorie, naturally sweetened and clean-label products that support broader wellness goals. This shift is accelerating growth in diet sodas, flavored sparkling water, functional beverages and drinks enriched with electrolytes, vitamins, botanicals and other beneficial ingredients. 

In response, manufacturers are reformulating established brands, launching innovative flavors and expanding into adjacent categories to reach new audiences. These developments are helping companies attract health-conscious consumers, particularly younger buyers, while strengthening brand loyalty and supporting premium pricing. As interest in nutrition, hydration and functional benefits continues to rise, healthier beverage offerings should remain a major source of innovation, differentiation and sustainable industry growth ahead. 

Digital Growth & Innovation:Digital growth and innovation are reshaping the soft drinks industry as brands leverage technology to strengthen consumer engagement and streamline operations. Advanced data analytics and AI-driven insights are helping companies understand evolving preferences, personalize marketing and optimize product development. E-commerce continues to surge, with direct-to-consumer channels, subscription models and rapid-delivery partnerships expanding market reach. 

Digital platforms also enable immersive brand experiences through interactive campaigns, loyalty programs and social commerce. Meanwhile, automation, smart manufacturing and connected supply chains are improving efficiency and reducing costs. As competition intensifies, soft drink companies that embrace digital transformation, spanning R&D, marketing, distribution and customer experience, are better equipped to drive growth, enhance agility and capture revenue opportunities in an increasingly tech-driven marketplace.

Rising Costs & Tariff Uncertainty:Rising costs and tariff uncertainty are affecting the soft drinks industry, creating a challenging operating landscape for global and regional players alike. Higher input prices, spanning sugar, aluminum cans, packaging materials and transportation, are eroding margins, forcing companies to rethink pricing and supply-chain strategies. 

At the same time, ongoing tariff volatility, particularly on key ingredients and imported machinery, is complicating production planning and cost forecasting. Brands must balance selective price hikes with the risks of dampening consumer demand, especially in price-sensitive markets. To stay competitive, soft drink makers are doubling down on procurement optimization, local sourcing and efficiency-focused innovation. These cost burdens may squeeze margins, complicate pricing strategies and impact overall industry competitiveness.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Beverages - Soft Drinks industry is housed within the broader Consumer Staples sector. It currently carries a Zacks Industry Rank #90, which places it in the top 37% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s positioning in the top 50% of the Zacks-ranked industries results from a positive aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential.

Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and valuation picture.

Industry vs. Broader Market

The Zacks Beverages – Soft Drinks industry has outperformed the Consumer Staples sector but underperformed the S&P 500 Index in the past year.

The stocks in the industry have collectively gained 16.9% compared with the sector’s growth of 2.6% and the S&P 500’s growth of 25.1% in the past year.

Industry's Current Valuation

On the basis of the forward 12-month price-to-earnings (P/E) ratio, commonly used for valuing soft drink stocks, the industry is currently trading at 19.51X compared with the S&P 500’s 20.93X and the sector’s 17.22X.

Over the last five years, the industry traded as high as 23.76X and as low as 17.2X, with a median of 19.51X.

5 Soft Drink Stocks to Watch

One stock in the Zacks Beverages – Soft Drinks industry currently sports a Zacks Rank #1 (Strong Buy), whereas two stocks have a Zacks Rank #2 (Buy). We have also highlighted two stocks with a Zacks Rank #3 (Hold) from the same industry. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vita Coco:This is a pioneer in the functional beverage category. This New York-based company has been benefiting from its focus and investment to expand the consumption occasions of coconut water. This has been contributing to strong volume growth for the category and its flagship Vita Coco Coconut Water brand. 

The company’s focus on growing the coconut water category resulted in its overall sales growth, witnessing a 15% CAGR for the last four years. The company looks well-poised for growth, driven by its ability to drive brand volume increase via strong retail execution and creative marketing programs. Additionally, COCO’s strategies position it to improve profitability and cash generation in the long term.

Vita Coco’s shares have rallied 97.1% in the past year. The Zacks Consensus Estimate for COCO’s 2026 sales and earnings indicates year-over-year increases of 31.6% and 64.7%, respectively. The consensus mark for earnings has moved up 11.4% in the past 30 days. The company currently flaunts a Zacks Rank #1.

Coca-Cola: The soft drink behemoth is poised to gain from strategic transformation and ongoing worldwide recovery. The streamlining of its portfolio and accelerating investments to expand the digital presence position the company for long-term growth. It has been witnessing a splurge in e-commerce, with the growth rate of the channel doubling in many countries. KO is strengthening consumer connections and piloting numerous digital-enabled initiatives through fulfillment methods to capture the online demand for at-home consumption.

KO is diversifying its portfolio to tap into the rapidly growing RTD category. Coca-Cola has been gaining from the elasticity in the marketplace, an improved price/mix, and concentrated sales and underlying share gains in at-home and away-from-home channels. The Zacks Consensus Estimate for KO’s 2026 sales and earnings suggests year-over-year growth of 3.6% and 9.7%, respectively. The consensus mark for earnings has moved up 0.6% in the past 30 days. This Zacks Rank #2 company’s shares have risen 23.3% in the past year.

Primo Brands: The company is a leading North American branded beverage company focused on healthy hydration. Primo Brands operates in a category supported by health, wellness and hydration trends, while its broad portfolio gives it exposure to multiple price points and consumption occasions. The company’s growth is driven by healthier hydration demand, premium-water momentum and improving Direct Delivery execution. Management expects retail momentum to be supported by new distribution, additional displays, Amazon Grocery availability and brand activation.

Direct Delivery service metrics are recovering, with better customer trends and on-time performance, creating scope for modest growth and stronger route economics. Premium brands, expanding distribution, improving delivery execution and disciplined cash generation support a balanced long-term investment case for shareholders. Shares of the company have risen 5.6% in the past year. The Zacks Consensus Estimate for PRMB’s 2026 sales suggests year-over-year growth of 1.6%. The consensus estimate for this Zacks Rank #2 company’s 2026 earnings per share has moved up 0.6% in the past 30 days.

Monster Beverage: The Corona, CA-based company markets and distributes energy drinks and alternative beverages. MNST has been experiencing continued strength in its energy drinks category, which is driving its performance. The company offers a wide range of energy drink brands, such as Monster Energy, Java Monster, Cafe Monster, Espresso Monster, Monster Energy Mule, Juice Monster Pipeline Punch, Juice Monster Pacific Punch, Juice Monster Mango Loco, Monster Ultra Paradise and Monster Hydra Sport. Product innovation also plays a significant role in the company's success. Monster Beverage is implementing pricing actions to overcome the ongoing cost pressure.

Despite supply-chain challenges, MNST continues to stand by its strategy to ensure product availability and solidify long-term growth of its brands. Management is optimistic about the strength in the global energy drinks category. It has been poised to gain from growth in the Monster Energy family of brands, and strength in Strategic and Affordable energy brands. Shares of this Zacks Rank #3 company have rallied 55.3% in the past year. The Zacks Consensus Estimate for MNST’s 2026 sales and earnings indicates year-over-year increases of 14.8% and 12.1%, respectively. The consensus mark for earnings has moved up 0.4% in the past seven days.

Fomento Económico Mexicano, alias FEMSA, participates in the beverage industry through Coca-Cola FEMSA, which is the world’s largest franchise bottler for Coca-Cola products. FEMSA presents a compelling investment case, driven by its FEMSA Forward strategy, which is sharpening operational focus, simplifying the portfolio and enhancing shareholder returns. Strong execution at OXXO Mexico, improving margins and disciplined international retail expansion support sustainable growth. Meanwhile, Digital@FEMSA is strengthening customer engagement through the rapidly scaling Spin ecosystem.

Backed by resilient cash flows, cost optimization and an attractive capital-allocation framework, including dividends and share repurchases, FEMSA is well-positioned for long-term value creation and earnings expansion. The Zacks Consensus Estimate for FMX’s 2026 sales and earnings suggests growth of 17.3% and 127.2%, respectively. The consensus mark for earnings has moved down 1.6% in the past seven days. The company’s shares have surged 40.9% in the past year. It currently has a Zacks Rank #3.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance  for information about the performance numbers displayed in this press release.

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