Investing in soft drink companies with ETFs


Nov. 20 2020, Updated 12:00 p.m. ET

Packaged investing

Exchange-traded funds (or ETFs) are capital market instruments that are designed to track an index, a commodity, or a basket of assets. Soft drink companies come under the consumer staples sector. There are many consumer staples sector ETFs that help investors access stocks in the soft drink industry.

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Consumer staple ETFs

Consumer staple ETFs provide exposure to companies that produce essentials, including food, beverages, tobacco, and household items. The above chart shows the exposure of some of the consumer staples ETFs to beverage companies, both alcoholic and non-alcoholic.

The Consumer Staples Select Sector SPDR Fund (XLP) tracks the S&P Consumer Staples Select Sector Index. The Vanguard Consumer Staples ETF (VDC) tracks the MSCI US Investable Market Consumer Staples 25/50 Index. Assets under management of the XLP and the VDC are $9.64 billion and $2.35 billion, respectively, as of November 17, 2014. The expense ratios for the XLP and the VDC are 0.16% and 0.14%, respectively.

Both the XLP and the VDC have The Coca-Cola Company (KO) and PepsiCo, Inc. (PEP) in their top ten holdings. Coca-Cola and PepsiCo are the dominant companies in the soft drink industry and together, hold 70% of the US carbonated soft drink market share.

The First Trust Consumer Staples AlphaDEX Fund (FXG), using the StrataQuant Consumer Staples Index as its benchmark, selects stocks from the Russell 1000 Index. The FXG has $2.11 billion in assets under management and has an expense ratio of 0.70%. Monster Beverage Corporation (MNST), a leading energy drinks maker, features in the top ten holdings of the FXG.

Dr Pepper Snapple Group, Inc. (DPS), the third-largest soft drink company in the US, is also a part of the XLP, the VDC, and the FXG ETFs.

ETFs are an efficient way to gain diversified exposure to various sectors and broad markets. To learn more, you can read Market Realists Macro ETF analysis page.


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