Coca Cola (NYSE: KO) shares are outperforming those of rival
Pepsi Inc. (NYSE: PEP).
Chart Courtesy of StockCharts.com
O.K. few people remember the Pepsi Challenge, where blindfolded "taste
testers" on camera picked Pepsi over Coke in, of course,
Pepsi commercials. That the "taste tests" were probaly staged,
and that if they weren't the commercials never showed those "tasters" who
preferred Coke, is not the issue. The ad campaign worked,
and Pepsi gained market share.
But those were the days when sugary, fizzy drinks were the rage. Today the drink
market is all about diet drinks, electrolytes, organic teas, smoothies, and extravagant
coffee. Starbucks (Nasdaq: SBUX) made a dent in the soft drink market. But Coke
and Pepsi fought back, by expanding and diversifying their offerings. Coke now
has Vitamin Water, which sells well, and owns 40% of Honest Tea, an organic tea
line that is selling well. Coke also has Powerade, and the increasingly popular
Powerade Zero, a fairly good tasting low-cal sports drink line which is competing
with Pepsi's Gatorade. Powerade sells roughly about 1/3 as many bottles as Gatorade,
but is steadily improving. And Coke Zero is also improving its foothold in the
market, recently contributing to rising revenues at Coke.
So, the question is whether Coke is poised to make a bigger dent in the alternative
drinks market, even as bottled water sales are stable, but not exactly growing.
And the answer, if you look at the stock's chart seems to be that investors are
betting on Coke instead of Pepsi these days. Coke shares are near a break out,
in a nasty market, which shows relative strength. Pepsi, although it is outperforming
the S & P 500 over the last few weeks, is stuck in the middle of its recent
trading range.
The intangible is that Coke is a pure drink story, while Pepsi is a food company,
since it owns Frito Lay and Quaker Oats, which contribute signficantly to its
sales.
The bottom line is that both stocks seem to be acting well in a tough market.
Pepsi is more diversified than Coke. But Coke seems to be getting the nod for
now.
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