Coke Named Most Powerful Brand, But Is Another Soda Stock Stronger?
Much has been made recently of Americans' slowing soda habit. Sales of sugary drinks have been declining for the last decade at a rapidly increasing pace. In 2015, soda sales fell by 1.2%, compared with 0.9% in 2014.
That's why it may be surprising for some to find out that Coca-Cola (KO) - Get Report has been named the No. 1 Most Powerful Brand for the fifth consecutive year by Tenet Partners in a study released yesterday.
In ranking companies, Tenet runs about 1,000 brands through its complicated system of metrics. Basically, Tenet measures the familiarity of a brand with its fundamentals, such as its market cap. The result has Coca-Cola in the top spot, followed by Hershey (HSY) - Get Report . Apple (AAPL) - Get Report comes in at No. 5.
Without a doubt, Coca-Cola's products are iconic. And its stock remains a favorite blue-chip pick for buy-and-hold investors. But take a look at a chart of Coca-Cola's recent stock performance and you may be reaching for the Dramamine.
Instead, the better profits for investors this year might come from Coke's old rival PepsiCo (PEP) - Get Report .
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Although Coca-Cola is the more beloved brand among consumers, investors have been better pleased with Pepsi stock. Last year, Coke shares returned 1.95%, while Pepsi pulled in full-year gains of 5.8%.
And, aided by its healthily diversified portfolio of products, Pepsi has fared better as American soda sales decline. Among other snack brands, PepsiCo is the owner of Frito-Lay, maker of Doritos. Apparently, although Americans are passing on sugary soda, they still get the munchies: Frito-Lay sales ticked up by 3% during the first quarter of 2016. PepsiCo controls a 40% chunk of the global snack food market share.
In addition, Pepsi also owns popular noncarbonated beverage brands such as Gatorade and Tropicana juices, which have sill fared well sales-wise while carbonated soda sales have faltered.
These holdings have keep Pepsi's bottom line somewhat insulated against soda sale headwinds.
With a healthy dividend paid out for 44 consecutive years and a return on equity (ROE) reaching a 15-year high in 2015 with an expected rise of 8% by 2017, PepsiCo continues to be an excellent choice for investors.
Shares of PepsiCo are slightly down in price today, giving us a great opportunity to grab shares. Whereas Coca-Cola may have a more powerful brand, PepsiCo is currently the better stock for investors. Expect this company to keep churning out profits, even as sales of sodas continue to slow.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.