5 Soft Drink Stocks to Watch as Health Trends Shake Up the Industry

The Zacks Beverages - Soft Drinks industry is facing headwinds from elevated input costs, supply-chain disruptions, and tariff uncertainties, pressuring margins despite a surge in demand for healthier beverage options and digital transformation efforts. The industry currently carries a Zacks Industry Rank in the top 26%, indicating bright near-term prospects, though it has underperformed the broader market in the past year; key players like Coca-Cola, Monster Beverage, Keurig Dr Pepper, Primo Brands and Zevia are adapting through innovation and digital strategies. While none of the stocks in the industry currently sport a Zacks Rank #1 (Strong Buy), two stocks have a Zacks Rank #2 (Buy).

Analysis

The U.S. Beverages - Soft Drinks industry confronts persistent headwinds, including elevated input costs for materials like steel and aluminum, ongoing supply-chain disruptions, and tariff-related uncertainties, all of which exert pressure on profit margins. Freight expenses and volatile commodity prices further challenge profitability. Despite these obstacles, the industry shows resilience, driven by shifting consumer preferences towards healthier options such as natural, low-sugar, and functional beverages, including plant-based and RTD alcoholic drinks. Companies are actively leveraging digital transformation, investing in direct-to-consumer platforms, optimizing fulfillment, and innovating product portfolios to engage consumers and secure recurring revenue. The Zacks Beverages - Soft Drinks industry, part of the Consumer Staples sector, holds a Zacks Industry Rank #63 (top 26% of over 250 industries), signaling bright near-term prospects based on a positive aggregate earnings outlook. However, the industry has underperformed in the past year, growing 0.4% compared to the Consumer Staples sector's 3.5% rise and the S&P 500's 11.9% rally. Valuation-wise, the industry trades at a forward 12-month P/E of 18.68X, below the S&P 500's 21.97X and its own 5-year median of 21.45X, but above the sector's 17.75X. Key players like Coca-Cola (KO), Zevia (ZVIA), Monster Beverage (MNST), Keurig Dr Pepper (KDP), and Primo Brands (PRMB) are navigating these complexities. KO (Zacks Rank #2) is benefiting from strategic transformation and digital expansion, with its shares up 12.2% and 2025 sales/earnings projected to grow 2.4%/2.8%. ZVIA (Zacks Rank #2) has seen its stock skyrocket 196.7%, focusing on zero-sugar, plant-based drinks, with 2025 sales/earnings growth projected at 3.4%/38.7%. MNST (Zacks Rank #3) continues to show strength in energy drinks, with shares up 24.3% and 2025 sales/earnings growth expected at 5.9%/14.8%. PRMB (Zacks Rank #3) shares jumped 37.9%, with remarkable 2025 sales/earnings growth forecasts of 145.6%/52.5%. KDP (Zacks Rank #3) saw a 4.1% share decline but expects 2025 sales/earnings growth of 5.6%/6.3%.

Key Decisions for Investors

• Given the mixed industry landscape of persistent cost pressures and evolving consumer demand, investors should prioritize companies demonstrating effective adaptation through product innovation, particularly in health-conscious segments, and robust digital strategies.
• Consider specific stocks like Zevia (ZVIA) and Primo Brands (PRMB) which have shown exceptional share price growth (196.7% and 37.9% respectively in the past year) and very strong forward earnings projections, alongside established leaders like Coca-Cola (KO) which is successfully executing strategic shifts.
• Closely monitor the impact of input cost inflation, supply chain stability, and tariff policies on company margins, as these remain significant headwinds for the sector's overall profitability.
• Evaluate the industry's current forward P/E ratio of 18.68X, which is below its historical median and the broader market, potentially offering attractive entry points for companies with strong fundamentals and clear growth catalysts despite the challenging environment.