We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Pricing Power vs. Volume Pressure: What's Driving PepsiCo Now?
Read MoreHide Full Article
Key Takeaways
{\"0\":\"PEP posted Q2 EPS of $2.12 on $22.73B revenues, driven by pricing despite weaker volume trends.\",\"1\":\"Pricing actions, AI-driven productivity and plant closures are helping protect margins and fund innovation.\",\"2\":\"PEP is relaunching core brands and expanding value packs to reignite volume growth and consumer demand.\"}
PepsiCo, Inc.’s (PEP - Free Report) second-quarter 2025 performance reveals a company at the crossroads of leveraging pricing power while wrestling with volume pressures, particularly in North America. The beverage and snack giant beat expectations with earnings per share (EPS) of $2.12 and revenues of $22.73 billion in the quarter under discussion, while volume softness across several segments remained a concern.
To counter declining volumes, PepsiCo has leaned heavily into strategic pricing and value-creation efforts. The company is focusing on granular investments in affordability entry points, everyday low pricing and value packs to retain consumers amid a moderating demand environment. This pricing discipline has enabled top-line growth despite softer underlying consumption trends.
A key driver of resilience is PepsiCo's multi-layered productivity strategy, leveraging AI, ERP upgrades and North America integration to drive cost savings. The company expects a 70% increase in productivity in the second half of 2025, largely from Frito-Lay. Plant closures and fixed-cost reductions have supported margins and freed up funds for investment in innovation and value offerings. However, despite stable margins, sluggish volume growth raises concerns about long-term brand strength and category leadership.
PepsiCo remains confident that its pricing-led strategy will not only sustain profitability but also position it for a rebound in volumes. Relaunching core brands such as Lay’s and Tostitos with cleaner labels, expanding the permissible snacking portfolio and increasing focus on away-from-home consumption are expected to reignite consumer engagement. With consistent international growth and improving U.S. market competitiveness, the company is betting that its balanced approach, pricing precision, operational discipline and brand innovation will help it return to its long-term growth in the coming quarters.
PEP’s Competitors: KO & KDP’s Smart Moves
In the fiercely competitive beverage industry, PepsiCo faces strong challenges from two major players like The Coca-Cola Company (KO - Free Report) and Keurig Dr Pepper (KDP - Free Report) , each leveraging distinct strengths to capture market share and drive growth.
Coca-Cola continues to focus on brand strength and global reach to maintain its leadership in the non-alcoholic beverage sector. Despite facing similar volume pressures, Coca-Cola's pricing power and brand loyalty have allowed it to deliver strong margin performance. Its global dominance in sparkling beverages, particularly with Coca-Cola Zero Sugar, and its diversified presence across more than 200 markets reinforce its position as a formidable competitor to PepsiCo.
Keurig Dr Pepper operates with a unique edge through its hybrid portfolio of hot and cold beverages, anchored by its leadership in single-serve coffee systems and popular soft drink brands like Dr Pepper and Canada Dry. Keurig Dr Pepper benefits from a strong foothold in at-home consumption trends, particularly with its Keurig brewers. Its recent moves toward premiumization, strategic partnerships and focus on functional beverages demonstrate a nimble approach to consumer preferences.
PEP’s Price Performance, Valuation & Estimates
Shares of PepsiCo have lost around 8.3% year to date against the industry’s growth of 3.7%.
Image Source: Zacks Investment Research
From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 16.88X, slightly below the industry’s average of 17.39X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 1.8%, whereas its 2026 earnings estimate indicates year-over-year growth of 5.2%. The company’s EPS estimates for 2025 and 2026 have moved northward in the past 30 days.
Image: Bigstock
Pricing Power vs. Volume Pressure: What's Driving PepsiCo Now?
Key Takeaways
PepsiCo, Inc.’s (PEP - Free Report) second-quarter 2025 performance reveals a company at the crossroads of leveraging pricing power while wrestling with volume pressures, particularly in North America. The beverage and snack giant beat expectations with earnings per share (EPS) of $2.12 and revenues of $22.73 billion in the quarter under discussion, while volume softness across several segments remained a concern.
To counter declining volumes, PepsiCo has leaned heavily into strategic pricing and value-creation efforts. The company is focusing on granular investments in affordability entry points, everyday low pricing and value packs to retain consumers amid a moderating demand environment. This pricing discipline has enabled top-line growth despite softer underlying consumption trends.
A key driver of resilience is PepsiCo's multi-layered productivity strategy, leveraging AI, ERP upgrades and North America integration to drive cost savings. The company expects a 70% increase in productivity in the second half of 2025, largely from Frito-Lay. Plant closures and fixed-cost reductions have supported margins and freed up funds for investment in innovation and value offerings. However, despite stable margins, sluggish volume growth raises concerns about long-term brand strength and category leadership.
PepsiCo remains confident that its pricing-led strategy will not only sustain profitability but also position it for a rebound in volumes. Relaunching core brands such as Lay’s and Tostitos with cleaner labels, expanding the permissible snacking portfolio and increasing focus on away-from-home consumption are expected to reignite consumer engagement. With consistent international growth and improving U.S. market competitiveness, the company is betting that its balanced approach, pricing precision, operational discipline and brand innovation will help it return to its long-term growth in the coming quarters.
PEP’s Competitors: KO & KDP’s Smart Moves
In the fiercely competitive beverage industry, PepsiCo faces strong challenges from two major players like The Coca-Cola Company (KO - Free Report) and Keurig Dr Pepper (KDP - Free Report) , each leveraging distinct strengths to capture market share and drive growth.
Coca-Cola continues to focus on brand strength and global reach to maintain its leadership in the non-alcoholic beverage sector. Despite facing similar volume pressures, Coca-Cola's pricing power and brand loyalty have allowed it to deliver strong margin performance. Its global dominance in sparkling beverages, particularly with Coca-Cola Zero Sugar, and its diversified presence across more than 200 markets reinforce its position as a formidable competitor to PepsiCo.
Keurig Dr Pepper operates with a unique edge through its hybrid portfolio of hot and cold beverages, anchored by its leadership in single-serve coffee systems and popular soft drink brands like Dr Pepper and Canada Dry. Keurig Dr Pepper benefits from a strong foothold in at-home consumption trends, particularly with its Keurig brewers. Its recent moves toward premiumization, strategic partnerships and focus on functional beverages demonstrate a nimble approach to consumer preferences.
PEP’s Price Performance, Valuation & Estimates
Shares of PepsiCo have lost around 8.3% year to date against the industry’s growth of 3.7%.
Image Source: Zacks Investment Research
From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 16.88X, slightly below the industry’s average of 17.39X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 1.8%, whereas its 2026 earnings estimate indicates year-over-year growth of 5.2%. The company’s EPS estimates for 2025 and 2026 have moved northward in the past 30 days.
Image Source: Zacks Investment Research
PEP stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.