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ATLANTA (

TheStreet

) --

Coca-Cola

(KO) - Get Coca-Cola Company Report

and

PepsiCo

(PEP) - Get PepsiCo, Inc. Report

will each report quarterly results this week, but the cola giants are battling more than each other for beverage dominance.

Coke is expected to report growth of 13.9% in second-quarter earnings to $2.7 billion, or $1.16 a share, up from year-earlier earnings of $2.37 billion, or $1.06 a share on an adjusted basis. Analysts expect revenue to surge 42.8% to $12.38 billion from $8.67 billion.

The maker of Coke, Sprite and Vitamin Water drinks, among many beverages, has been battling rising commodity costs, as have most companies in the food and beverage business. In its first quarter, Coke's cost of goods sold was up 55% year over year to $3.95 billion, or 37.5% of total revenue, up from $2.54 billion, or 33.7% of total revenue.

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Recently,

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Coke "rung the bell on a heavyweight battle against Goldman Sachs

"

(GS) - Get Goldman Sachs Group, Inc. Report

in a battle over its aluminum costs, noted

TheStreet

senior contributor Daniel Dicker.

"Coke has seen aluminum prices explode more than 13% since the start of the year, even though supplies have been running at deep surpluses inside the London Metals Exchange's network of storage warehouses," Dicker said.

The storage warehouse where Coke gets most of its aluminum is privately held by

Metro International Trade Services

, which is owned entirely by Goldman Sachs.

Pepsi, which boasts a wide roster of brands including Frito Lay, Tropicana and Quaker, is expected to grow second-quarter earnings by 20.6% to $1.93 billion, or $1.21 a share. Analysts expect revenue to increase by 10.9% to $16.41 billion from $14.8 billion.

As of earlier this year,

Pepsi had been able to better manage the risk of rising commodity costs than Coke

, and market watchers will pay close attention to the food and beverage maker's report this week to see if it has been able to maintain that trend. In its first quarter, Pepsi's cost of goods sold soared 22% to $5.45 billion, though the figure took up a smaller percentage of total revenue year over year. Pepsi turned to improved operational efficiencies and price increases to help offset those costs, but Chief Financial Officer Hugh Johnston conceded in April that pricing in the first half of the year "has not been what we would have liked or expected."

>> Consumer Dividend Stocks Increasing Payouts

Costs for plastic bottles and fuel to transport beverages has risen as oil prices heated up this year. Oil prices affect the price of polyethylene terephthalate, or PET, the plastic used by beverage companies to make soda bottles. Coke, Pepsi,

Dr Pepper Snapple

(DPS)

and other beverage makers cannot hedge the prices they pay for PET because the material is not traded like other commodities.

Both PepsiCo and Coca-Cola recently purchased their largest bottlers, hoping to streamline production and distribution costs. Coca-Cola bought out

Coca-Cola Enterprises

(CCE)

in October of last year in a $3.4 billion acquisition. Earlier, PepsiCo acquired two of its bottlers.

>> Don't Buy Dunkin' Donuts IPO: Value Analyst

That means the pair is even more acutely affected by bottling costs than they had been before integrating the bottlers' cost of operations into their own.

Standard & Poor's beverages analyst Esther Kwon had a strong buy rating on Coke shares ahead of its report. She trimmed her full-year EPS estimate by 6 cents to $3.88 a share, attributing the cut to higher costs and lower equity income, but lifted her price target on the stock by $2 to $77.

"We see growth accelerating in the second half of 2011 on cost savings and reversal of negative impact of marketing expenses related to bottler acquisition," Kwon noted. "We are positive about KO's broad international footprint and strong free cash flow generation."

Shares of Coke were 1.1% lower at $66.82 Monday afternoon ahead of Tuesday morning's earnings release, while Pepsi was 1.3% lower at $67.67. Pepsi's report is due out on Thursday.

--

Written by Miriam Marcus Reimer in New York.

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