To The Moon

Loser Stock That Lost the Cola War ?

$Pepsi(PEP)$ has not collapsed.

It has however, lost the central battle that once defined it - the cola war.

Despite generating more than twice $Coca-Cola(KO)$’s revenue, PEP is worth only about ½ as much in the stock market.

The reason is simple:

• KO owns the more profitable part of the beverage value chain.

• PEP in return, become a sprawling food & beverage conglomerate where soda is no longer the main priority.

Numbers tell the story

In FY 2025 :

• PEP generated roughly $93.9 billion in revenue, compared with about $47.9 billion for KO.

• Yet KO produced about $13.8 billion in operating profit, ahead of PEP’s $11.5 billion.

• KO’s operating margin was roughly 35%, more than double PEP’s 16.5%.

• Its market capitalization of about $375 billion was also nearly double PEP’s $189 billion.

The contrast reflects two very different business models:

KO :

• Is an asset-light beverage company.

• It sells high-margin syrup concentrate and manages brands.

• Independent bottlers handle much of the capital-intensive bottling, packaging and distribution work.

PEP:

• By contrast, owns roughly 80% of its bottling operations.

• It runs a large manufacturing & supply-chain system for both beverages and snacks.

• That structure requires heavy capital spending and holds down margins.

In short, PEP does more work; KO owns the more valuable part of the work.

PEP’s lost focus.

PEP did not lose because its products disappeared. It lost because it treated soda as one priority among many.

In the 1980s and 90s, PEP was neck-and-neck with KO.

Its “Pepsi Challenge” taste tests, Michael Jackson commercials and Cindy Crawford advertisements made the brand part of popular culture.

At that time, KO’s US market share was only 1% or 2% higher than PEP.

That contention has since disappeared.

In 2024, Pepsi fell to 3rd place behind Dr Pepper for the first time and remains there. Sales of Diet Coke and Coke Zero are also multiple times higher than PEP’s equivalents.

In 2025, PEP held just 8.1% of US carbonated soft-drink market by volume, way behind KO’s 18.5%.

PEP’s leadership spent years directing attention away from North American soda because the category was seen as structurally declining.

The company invested in “Better for You” products instead. eg. Quaker Oats and hummus.

Fact is from 2021, US soft-drinks industry stabilized, while consumers shifted toward healthier and functional drinks. PEP was left flat-footed.

PEP, Chief executive, Ramon Laguarta has acknowledged the problem openly:

• We do not feel good about the beverage business.

• We are putting all the urgency of the business and focus on improving our performance in soft drinks.

KFC loss is symbolic

The most visible sign of PEP’s weakened position came on 15 Oct 2026, when KFC said it would replace PEP products with KO across its 3,700 US restaurants from January 2027. (see below)

The partnership that lasted about 40 years, dating back to when PEP owned KFC before spinning off its restaurant businesses into Yum! Brands in 1997.

Althought KFC represents only a small share of PEP’s total sales, suffice to say, the loss matters because it shows declining brand power in a high-visibility channel.

Restaurant pouring contracts change hands infrequently, making the switch more damaging than its direct revenue impact alone.

KFC, US president, Catherine Tan-Gillespie said KO would give the chain “a platform to innovate, meet changing tastes and give customers more reasons to choose us.”

PEP did limit the damage by renewing its Taco Bell contract through 2036. (see below)

The deal preserves Pepsi, Pepsi Zero Sugar, Mountain Dew and Starry in Taco Bell locations, along with the exclusive Baja Blast and Baja Midnight flavours.

It also extends PEP’s beverage partnership with Taco Bell in Canada, the UK, Ireland and Thailand.

But the renewal is defensive rather than transformative.

It prevents a 2nd major Yum! Brands defection; it does not solve PepsiCo’s underlying beverage weakness.

Snacks subsidized soda

PEP’s scale comes largely from food.

About 58% of its nearly $94 billion in annual revenue comes from Frito-Lay and Quaker, including brands such as Lay’s, Doritos, Fritos and Quaker Oats.

Its beverage business generates the rest (42%), with 30% coming from North American beverages sector.

For years, Frito-Lay was the stronger growth engine.

Its North American operating margins have regularly been twice as large as those of the domestic beverage business.

That encouraged PEP to invest in snacks while leaving soda to run on autopilot. Unfortunately, that model is now under strain.

PEP’s North American snacks business is facing pressure as inflation-wary consumers resist higher prices:

• Some chip / crisp prices have risen as much as +50% since 2021.

• PEP has cut some snack prices in Spring 2026.

• The company holds a 38% share of the $80 billion US savoury-snacks industry, but sales are flat so far this year.

• That puts more pressure on the beverage unit to improve.

In the latest Q3 2026 earnings, PEP’s $28 billion North American beverage business shrank -2% by volume.

The division’s net revenue rose +5%, but mainly because of acquisitions. Organic revenue dipped slightly.

Coca-cola style model ?

PEP’s largest criticism from significant shareholders is the company’s heavy, capital-intensive structure that suppresses margins and prevents it from focusing fully on brands and not that it lacks scale.

In 2010s, activist investor Nelson Peltz spent 2 years trying (unsuccessfully), to convince PEP to separate its food and beverage businesses into 2 companies.

His argument was that a split could better “unlock” the value of each business.

Recently, Elliott Management called PEP a “dramatic” underperformer and urged it to consider re-franchising its company-owned bottlers.

That recommendation effectively asks PEP to move closer to KO’s asset-light model to (a) reduce ownership of bottling &distribution, (b) free up capital, and (c) concentrate more on brand-building, innovation and higher-margin concentrate sales.

KO is the ultimate tried & tested successful case-study :

• After acquiring bottlers in 2010, Coke quickly reversed course and re-franchised much of its bottling business.

• That reduced capital intensity and allowed KO to invest more in brands & innovation - strengths that helped persuade KFC to switch to KO.

PEP, Chief executive Ramon Laguarta has said re-franchising could lead to better execution and potentially better margins.

Analysts caution that it is not a quick fix:

• According to Barclays, MD, Lauren Lieberman warned that speeding up the company's plan to sell its bottling plants to independent owners would cause major problems.

• Analysts estimate a full transition could take a decade or more, similar to the time KO’s re-franchising took to pay off.

The preferred model.

KO’s advantage is not that it sells more cola - it’s that it built a more efficient, higher-margin business.

KO shed most of its capital-intensive bottling operations and focused on (1) concentrate, intellectual property and (2) brand-building.

It also expanded into faster-growing categories, including (a) dairy-centric and (b) protein-based drinks.

Currently, the company has 32 billion-dollar brands, with growth in sugar-free variants and Fairlife dairy products.

PEP, meanwhile, remains vertically integrated & diversified.

That is scale, but it also creates complexity, capital intensity and lower margins.

Pressure from Peltz & Elliott reflects a broader investor view; that is PEP’s conglomerate structure may be worth less than the sum of its parts.

The Buy ?

The other question to address is whether PEP is still a buy, especially now ?

For that I defer to PEP’s technical indicators of (1) Simple Moving Average of 20-day, 50-day & 200-day, (2) MACD and (3) RSI.

Simple Moving Average (SMA).

On 26 Oct 2026, PEP ended the day at $135.46 per share.

This is higher than its SMAs of 20-day ($129.59) and 50-day ($134.01) but lower than its 200-day ($146.15) - clearly indicating that price is recovering, but the trend remains mixed.

With the 20-day SMA below the 50-day SMA, and 50-day below the 200-day, PEP remains a bearish ordering, despite recent price rebound.

Death-cross formed on 19 Jun 2026 has not been reversed.

PEP’s indicators suggest a short-term recovery, but not yet a confirmed reversal of its longer-term downtrend.

MACD.

The MACD line (+0.98) trend above the Zero line, while the Signal line (-0.38) below.

This creates a split signal, marking a critical bullish transition phase.

With MACD line has successfully broken into positive territory, immediate momentum has officially shifted from bearish to bullish.

Underlying price action is actively strengthening, pulling the lagging Signal line upward from negative territory toward a full recovery.

The Divergence sits at a strong positive 1.36, with its tall green histogram bar above the zero baseline, indicating that current upward move is not just a weak relief rally, but a move backed by accelerating velocity.

RSI.

The 14-day RSI comes in at 58.70, above the neutral “50” midpoint and still below the conventional overbought threshold of 70, supporting a recovery in momentum without overbought reading.

My viewpoints (mine only)

Is PEP a loser stock ?

As a cola brand, PEP has clearly lost ground to KO.

It has fallen behind KO and Dr Pepper in the US carbonated soft-drink market, lost the KFC fountain contract, and allowed KO to dominate the high-margin beverage model.

As a company, PEP is not a simple loser:

• It built a massive food-&-beverage empire through Frito-Lay, Quaker and its global distribution network.

• Its problem is not lack of revenue but a lack of (1) focus, (2) margin and (3) beverage momentum.

However, market’s verdict is clear:

• Owning the most profitable section of the value chain is more valuable than doing the most work.

• KO sells the syrup and owns the brand.

• PEP makes, bottles, ships and sells a much wider range of products but earns far less profit per dollar of sales.

Yes, PEP lost the cola war in its purest form.

Whether PEP can still win as a company depends on its ability to :

• Restore urgency in soft drinks.

• Improve its North American beverage volumes.

• Decide whether its sprawling food-&-beverage structure still creates value.

What PEP needs now is a strong CEO to steer the company and claw back its rightful share in the cola-market. At the same time, further solidify its position in the food empire.

Then it will become a double-winner company. Agree ?

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• Do you think KO is a “better” bet than PEP ?

• Do you think PEP will transform its cola business model to be like KO’s or continue to operate in-house from manufacturing to distributing ?

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