Why Coca-Cola's Rally Makes PepsiCo Stock Look Even More Attractive

Reuben Gregg Brewer, The Motley Fool

Sun, Mar 9, 2025, 3:00 PM 5 min read

It is virtually impossible not to look at Coca-Cola (NYSE: KO) if you are considering buying PepsiCo (NASDAQ: PEP) and vice versa. The two companies are iconic and globally dominant beverage giants. The price charts of the two stocks, however, look very different today. If you are a long-term dividend investor, PepsiCo looks like it is the most attractive after Coca-Cola's recent rally. Here's why.

Coca-Cola makes a wide range of beverages. Basically, that's all it does. The company does this very well, with a massive global distribution network, research and development acumen, and marketing skills that place it in the pantheon of the consumer staples sector. It also has the scale to act as an industry consolidator, buying up companies with attractive products and growing them by simply plugging the new products into Coca-Cola's distribution system. It is a one-trick pony, but it is a very good trick.

PepsiCo makes a wide range of beverages. It also makes a wide range of snacks and packaged food products. It has a massive global distribution network, a strong research and development department, and a marketing team every bit as good as Coca-Cola's. As for scale, PepsiCo has a long history of buying smaller brands and expanding them, just like Coca-Cola. PepsiCo's most recent endeavor on this front is Mexican American food maker Siete, which offers both snacks and packaged food items.

PepsiCo may not be as dominant a beverage company as Coca-Cola; Pepsi-Cola has dropped to third in the cola wars. However, it is the No. 1 snack brand and a very solid No. 2 in the broader beverage space. In packaged food, it holds its own against larger peers. In other words, it is a well-run and diversified food company. Investors who like diversified businesses will probably prefer PepsiCo based on this fact alone.

That said, both Coca-Cola and PepsiCo are Dividend Kings, which speaks to the strength of their underlying businesses. Coca-Cola's dividend streak is a little longer, but a company simply can't increase its dividend for 50+ years without having a good business plan that gets executed well year in and year out. These two consumer staples companies stand toe-to-toe as businesses, with the exception of diversification.

That said, every company that exists for long enough will go through both good periods and bad periods. Right now, PepsiCo is facing some business weakness while Coca-Cola is executing better. Investors are aware of the dichotomy and buy and sell accordingly. If you look at the chart below, it almost seems like the two companies switched places. But short-term business gyrations aren't what long-term investors should be worried about. The bigger question is whether or not the company, be it Coca-Cola or PepsiCo, is still well run.