PepsiCo generates more than twice the revenue of Coca-Cola, yet its market valuation is only about half the size of its rival’s, highlighting the changing fortunes of the two biggest names in the soft drinks industry.
The contrast has been underlined by KFC’s decision to replace PepsiCo drinks with Coca-Cola products at its 3,700 US restaurants from January. The fried chicken chain’s relationship with PepsiCo stretches back four decades, after PepsiCo acquired KFC before spinning it off in 1997.
The move is a symbolic setback for PepsiCo, which once made its cola brand the centrepiece of an aggressive challenge to Coca-Cola. During the 1980s and 1990s, the company used the Pepsi Challenge and high-profile television adverts featuring Michael Jackson and Cindy Crawford to compete for consumers.
Pepsi falls behind Coca-Cola in the US
Pepsi-Cola held 8.1% of the US carbonated soft drinks market by volume last year, compared with 18.5% for Coca-Cola. Pepsi was also overtaken by Dr Pepper to become the third most popular drink.
Coca-Cola has reshaped its business around brand building and product innovation. PepsiCo, by contrast, has remained a broad portfolio company in which soft drinks are one priority among many.
That difference in focus has helped create a striking gap between the companies’ financial performance and stock market valuations. PepsiCo’s larger revenues have not translated into a comparable market value, with investors valuing Coca-Cola at roughly twice as much.
The loss of KFC’s drinks business adds to the pressure on PepsiCo as it seeks to maintain the position of its flagship cola brand in a market where Coca-Cola has established a clear lead.
