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Coca-Cola’s and PepsiCo’s Revenues: Fizz or Flat in 2017?

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Tepid growth rates

The revenue growth rate of major nonalcoholic beverage companies Coca-Cola (KO) and PepsiCo (PEP) has been unimpressive in recent years. Unfavorable movements in foreign currency, weak soda volumes, and changes in consumer tastes have adversely impacted the performance of these beverage giants.

In fiscal 2016, the revenues of Coca-Cola and PepsiCo fell 5.5% and 0.4%, respectively. For Coca-Cola, this decline was worse than its 3.7% revenue fall in fiscal 2015. However, PepsiCo improved its performance in fiscal 2016, as compared to a 5.4% revenue decline in fiscal 2015.

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Organic revenue growth

The significant international exposure that Coca-Cola and PepsiCo have subjects them to adverse currency fluctuations. In fiscal 2016, international revenues accounted for 52.5% and 42.0% of Coca-Cola and PepsiCo’s overall revenues, respectively.

Excluding the impact of currency headwinds, acquisitions and divestitures, and structural items, the organic revenue of Coca-Cola and PepsiCo rose 3.0% and 3.7%, respectively, in fiscal 2016. Coca-Cola’s organic revenue growth in fiscal 2016 was driven by driven by improved price and mix. PepsiCo’s organic revenue growth was a result of higher volumes in both its snacks and beverage businesses.

Dr Pepper Snapple

Dr Pepper Snapple (DPS), the third-largest soda maker, delivered sales growth rate of 2.5% in fiscal 2016. The company’s sales growth in fiscal 2016 was a result of favorable product and package mix, higher shipments, and increased pricing.

However, adverse currency movements dragged down fiscal 2016 sales growth by 1.0%. Dr Pepper Snapple has less exposure to international operations than the above two biggest beverage giants. In fiscal 2016, Dr Pepper Snapple’s international operations accounted for 10.4% of the company’s net sales.

Series overview

In this series, we’ll discuss the performance of nonalcoholic beverage companies and the strategies that they are following to improve their soda and non-soda volumes. We’ll also discuss the measures that nonalcoholic beverage companies are taking to improve their margins, and in the final two parts of the series, we’ll check in with the analyst recommendations for Coca-Cola, PepsiCo, and Dr Pepper Snapple and examine their current valuations.

Let’s start with a discussion of what’s happening in the soda business.

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