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Analyst Blog

Tropicana, a division of PepsiCo, Inc. (PEP - Free Report) , announced the launch of Tropicana Essentials Probiotics, a product with 100% juice and probiotics. The company is expected to roll out the juice in 2017 along with a limited release this October. Notably, probiotics are live microorganisms that are good for our health, especially the digestive system.

The company claimed that Tropicana Probiotics will provide one billion live and active cultures per serving, without any added sugar, preservatives or artificial flavors. The drink will be available in Strawberry Banana, Pineapple Mango and Peach Passion Fruit flavors.

Probiotics are usually found in supplements, kombucha and yogurt. Meanwhile, PepsiCo is quite optimistic about the launch as this juice is the first probiotic offering in the mainstream juice category.
 

Growing awareness among consumers about the use of artificial sweeteners, high sugar content and related obesity concerns is hurting the carbonated soft drinks (“CSD”) category. Notably, total CSD sales declined 3.3% year over year to $15.40 billion in the second quarter of 2016. Meanwhile, the introduction of Tropicana Probiotics is expected to boost the company’s overall sales through the non-carbonated beverages category.

Product innovation is usually one of the key instruments used by a company to accelerate growth. PepsiCo regularly comes up with new flavors of existing products alongside maintaining a robust pipeline of new products. Innovation has accounted for approximately 9% of the company’s revenues or over $5 billion in the second quarter. Along with Tropicana Essentials Probiotics, PepsiCo has introduced several products recently like Quaker Breakfast Flats, Mountain Dew Black Label, among others, which are expected to drive solid top line growth in the second half.

PepsiCo currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in this industry include Coca-Cola Amatil Limited (CCLAY - Free Report) , Dr Pepper Snapple Group, Inc. (DPS - Free Report) and Primo Water Corporation (PRMW - Free Report) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Full-year 2016 earnings are expected to increase 10.8% for Coca-Cola Amatil, 8.5% for Dr Pepper Snapple and 140% for Primo Water.

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