As Americans sip more selectively, soft drink makers are bubbling up profits not from selling more — but from functionality.
That’s according to Bank of America Securities analyst Bryan D. Spillane’s latest U.S. Soft Drink Primer, which shows flat beverage volumes in 2024, but rising dollar signs. The reason stems from premium products touting functional benefits like zero sugar, caffeine, and probiotics.
Consider the numbers: In 2024, U.S. liquid refreshment beverage (LRB) sales rose 4.5% in value, with volume growth remaining mostly flat. Total beverage volume, including LRBs and alcoholic drinks, was also flat year-over-year and has grown at a modest 0.7% CAGR over the past five years.
However, consumer interest in functional benefits—like caffeine, creatine/protein, probiotics, and zero sugar—continues to drive value. The industry’s shift toward revenue growth over volume has expanded its profit pool by 7% annually over the last decade.
Spillane breaks down which beverage stocks are best positioned to tap this trend.
Coca-Cola Company
Coca-Cola Company KO: The analyst reiterated the Buy rating on the stock, with a price forecast of $77.
Spillane outlines key risks to their price objective. Upside risks include stronger growth in both developed and emerging markets, a weaker U.S. dollar relative to other currencies, and better free cash flow conversion. On the downside, potential risks include market volatility across regions, earnings pressure from a stronger dollar, and rising consumer concerns around sugar and calorie content.
There’s also Coca-Cola Europacific Partners plc CCEP, which Spillane reiterated a Buy rating with a price forecast of $96.
The recent addition of the Philippines territory offers access to a fast-growing market with structurally lower margins that present potential for improvement and medium-term upside, Spillane says. The target multiple reflects only a slight premium to the S&P 500 Beverage Index, which is justified by Coca-Cola Europacific’s delivery track record and growth potential.
The analyst also expresses confidence in Coca-Cola Europacific’s ability to continue reducing leverage, supported by strong cash conversion and a solid profit trajectory.
Keurig Dr Pepper
Keurig Dr Pepper Inc. KDP: Spillane reiterated the Buy rating, with a price forecast of $41.
Spillane writes that the price objective reflects a prolonged recovery in the U.S. Coffee segment, while still recognizing Keurig Dr Pepper’s strong and diversified portfolio.
The firm sees the company as well-positioned to grow both sales and earnings, especially with recent brand additions like C4 energy drink and Electrolit hydration, which enhance its overall growth potential.
BellRing Brands
BellRing Brands, Inc. BRBR: The analyst reiterated the Buy rating on the stock, with a price forecast of $90.
Spillane writes that the outlook for BellRing is justified, as the company is positioned for future growth.
This view is backed by strong consumer interest reflected in positive scanner data, which is further supported by ongoing volume gains from increased production capacity, promotional efforts, and a planned boost in marketing investment.
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