The Zacks Beverages – Soft Drinks industry is facing mounting pressures as rising input costs and tariff uncertainty strain margins and complicate production planning. Volatile prices for sugar, packaging materials and transportation are forcing companies to reassess pricing and supply-chain strategies, all while navigating unpredictable tariffs on key ingredients and machinery. These challenges risk weakening competitiveness, especially in price-sensitive markets. Even as cost pressures intensify, major opportunities are emerging.

Shifting consumer preferences toward healthier, natural and functional beverages are fueling innovation across plant-based drinks, botanical blends and wellness-focused formulations. At the same time, rapid digital growth, powered by AI-driven insights, expanding e-commerce channels and connected supply chains, is enabling brands to engage consumers more effectively and operate more efficiently. Companies that harness these positive trends through innovation, partnerships and digital transformation are well-positioned to offset cost headwinds and capture growth in a changing marketplace. Leading players, such as The Coca-Cola Company (KO Quick QuoteKO - Free Report) , PepsiCo Inc. (PEP Quick QuotePEP - Free Report) , Monster Beverage Corporation (MNST Quick QuoteMNST - Free Report) , Keurig Dr Pepper Inc. (KDP Quick QuoteKDP - Free Report) and Vita Coco (COCO Quick QuoteCOCO - Free Report) , are well-positioned amid industry challenges.

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?

Rising Costs & Tariff Uncertainty: Rising costs and tariff uncertainty are squeezing 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 risk 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.

Shifting Consumer Preferences: The U.S. soft drinks industry is undergoing a rapid transformation as consumers increasingly prioritize health and wellness. Demand is rising for beverages made with natural ingredients, reduced sugar and functional benefits, along with bold, diverse flavors. Plant-based and botanical-infused drinks are gaining popularity, while functional beverages that support hydration, energy and mood are carving out meaningful market share. Companies are expanding into adjacent categories, such as the fast-growing RTD alcoholic beverage segment, through innovation and strategic partnerships. Brands that embrace healthier, functional and sustainable offerings are best positioned to stay competitive, while slower movers risk declining sales and losing relevance to nimble emerging players.

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 new revenue opportunities in an increasingly tech-driven marketplace.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Beverages - Soft Drinks industry is housed within the broader Consumer Staples sector. It currently carries a Zacks Industry Rank #147, which places it in the bottom 39% 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 dull 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 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries results from a negative aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing 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 and underperformed the S&P 500 Index in the past year.

The stocks in the industry have collectively gained 3.1% against the sector’s decline of 5.7% in the past year. Meanwhile, the S&P 500 has rallied 12.3%.

One-Year Price Performance

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 18.07X compared with the S&P 500’s 22.8X and the sector’s 16.44X.

Over the last five years, the industry traded as high as 23.76X and as low as 17.2X, with a median of 20.95X, as the chart below shows.

Price-to-Earnings Ratio (Past 5 Years)

5 Soft Drink Stocks to Watch

Two stocks in the Zacks Beverages – Soft Drinks industry currently sport a Zacks Rank #1 (Strong Buy), whereas none of the stocks have a Zacks Rank #2 (Buy). We have also highlighted three 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.

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 the unending 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 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 #1 company have rallied 33.3% in the past year. The Zacks Consensus Estimate for MNST’s 2025 sales and earnings indicates year-over-year increases of 9.6% and 22.2%, respectively. The consensus mark for earnings has moved up 3.7% in the past 30 days.

Price & Consensus: MNST

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 growth 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 42.4% in the past year. The Zacks Consensus Estimate for COCO’s 2025 sales and earnings indicates year-over-year increases of 18.3% and 15%, respectively. The consensus mark for earnings has moved up 5.1% in the past 30 days. The company currently carries a Zacks Rank #1.

Price and Consensus: COCO

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 2025 sales and earnings suggests year-over-year growth of 2.7% and 3.5%, respectively. The consensus mark for earnings has been unchanged in the past 30 days. The Zacks Rank #3 company’s shares have risen 12.4% in the past year.

Price & Consensus: KO

PepsiCo: Resilience and strength in the global beverage and convenience food businesses have been aiding the company’s performance. It expects to benefit from delivering convenience, variety and value proposition to customers through its brands. PEP is poised to benefit from investments in brands, go-to-market systems, supply chain, manufacturing capacity and digital capabilities to build competitive advantages. Its cost-management and revenue-management initiatives bode well amid the ongoing inflationary pressures.

For the beverage business, PEP expects strong growth and market share gains from the liquid refreshment beverage category, with share gains in the carbonated soft drinks, RTD Tea and water categories. Shares of this Purchase, NY-based leading soft-drink company have lost 10.3% in the past year. The Zacks Consensus Estimate for PEP’s 2025 earnings suggests a year-over-year decline of 0.7%. The consensus estimate for this Zacks Rank #3 company’s 2025 earnings per share has been unchanged in the past 30 days.

Price & Consensus: PEP

Keurig Dr Pepper: The beverage and coffee company in the United States and Canada is poised to gain from continued momentum in the Refreshment Beverages segment and solid market share growth. KDP's consumer-centric innovation model, portfolio expansion into high-growth categories and solid route-to-market capabilities appear encouraging. These endeavors are supported by the constant focus on cost efficiency and capital discipline. The company’s International segment is also performing well.

The Zacks Consensus Estimate for KDP’s 2025 sales and earnings suggests growth of 7.4% and 6.8%, respectively. The consensus mark for earnings has moved up 0.5% in the past 30 days. The company’s shares have plunged 16.2% in the past year. It currently has a Zacks Rank #3.

Price & Consensus: KDP