Pep Stock Boosted by PepsiCo Beverage Surge Despite Frito-Lay Headwinds

As PepsiCo enters the third quarter of 2025, the company is buoyed by the robust performance of its PepsiCo Beverages North America division (PBNA), which has shown impressive high-single-digit growth in away-from-home channels. With notable gains in no-sugar colas and Gatorade sports drinks, PBNA’s emphasis on innovation and affordability, along with functional hydration offerings such as Propel, is clearly resonating with consumers. This has positioned PBNA as a critical driver of growth for PepsiCo in the latter half of 2025, signaling continued momentum.

Conversely, the Frito-Lay North America (FLNA) division is grappling with challenges in stabilizing volume across its core snack offerings. While there has been progress in subcategories such as Cheetos and Doritos, alongside a growing consumer interest in healthier options like SunChips, PopCorners, and Simply, the potato chip sector, especially the Lay’s brand, necessitates revitalization. PepsiCo’s strategic focus on relaunches highlighting natural ingredients and a “real food” ethos is part of efforts to invigorate the portfolio. Moreover, the division’s attempts to optimize its manufacturing capacity and drive productivity savings could potentially impact short-term performance.

The overarching question for PepsiCo in this third quarter is whether the thriving trajectory of PBNA can effectively counterbalance the hurdles faced by FLNA. Management remains optimistic that enhancements in the snack sector, bolstered by the strength in beverages and growth in international markets, will allow PepsiCo to meet the lower range of its long-term organic revenue growth forecasts. However, the company must navigate tougher year-over-year comparisons in the food segment and its dependence on productivity improvements, with the stabilization of Frito-Lay being pivotal to sustaining a balanced growth model.

Despite challenges in the snacks segment, PepsiCo’s capacity to maintain robust beverage growth sets it apart from certain peers. While Coca-Cola, with its strong emphasis on beverages, mirrors PepsiCo’s strategy through no-sugar innovations and functional category expansions, it lacks exposure to a snacks portfolio, making its growth strategy more straightforward but entirely reliant on beverages. Meanwhile, Mondelez International, although facing a similar sector with its snack brands, benefits from strong pricing power and resilient biscuit and chocolate category growth. However, the absence of a beverage division restricts its ability to leverage the dual growth engine strategy that PepsiCo employs.

PepsiCo’s strategic navigation through a dynamic landscape underscores its adaptability and resilience in ensuring sustained growth amidst sector-specific challenges.