These 3 companies own the U.S. soft drink market

Nothing beats the occasional can of your favourite soft drink on a scorching hot afternoon. If you are spoilt for choice between Coca-Cola, Pepsi, Dr Pepper, Mountain Dew, Sprite, Fanta, Sunkist, and 7-Up, think again. The reality is that these soft drinks are all owned by just three companies, namely the Coca-Cola Company, PepsiCo, Inc., and Keurig Dr Pepper, Inc.

Source: The Guardian 

It is the illusion of choice. The industry is an oligopoly that is controlled by these three players. According to The Guardian, they collectively owned a whopping 92.9% market share of the U.S. soft drink market in 2021. Here are the top 10 most popular soft drinks in the U.S.

No.Top 10 Carbonated Soft Drinks in the U.S.Brand Ownership in the U.S.
1Coca-ColaThe Coca-Cola Company
2Diet CokeThe Coca-Cola Company
3PepsiPepsiCo, Inc.
4Dr PepperKeurig Dr Pepper Inc.
5Mountain DewPepsiCo, Inc.
6SpriteThe Coca-Cola Company
7FantaThe Coca-Cola Company
8=Sierra MistPepsiCo, Inc.
8=SunkistKeurig Dr Pepper Inc.
107UPKeurig Dr Pepper Inc.
Source: Newsweek

I will now go through an overview of each of these three companies, their business model, and financial performance. From there, you can decide if any of them are worth a consideration for your stock portfolio after further research.

The Coca-Cola Company

Founded in 1892 and listed on the New York Stock Exchange, the Coca-Cola Company produces and sells beverage concentrates and syrups as well as a wide array of beverages ranging from carbonated soft drinks and juice to sports drinks and coffee. The first Coca-Cola was developed by pharmacist John Stith Pemberton in 1886 that once contained cocaine from coca leaves and caffeine from kola nuts. To this day, the company’s secret recipe is locked in a vault in the Coca-Cola museum in Atlanta.

The Coca-Cola Company is the largest non-alcoholic beverage company in the world by market capitalisation and worth over US$270 billion as of December 2022. It serves approximately 6.1 billion consumers globally and owns approximately 200 brands including Coca-Cola, Sprite, Fanta, Minute Maid, Dasani, and the recently acquired Costa Coffee in 2019.

The company in general adopts a franchised distribution model. It sells concentrates and syrups to more than 200 independent bottling partners globally. Its bottling partners combine the concentrates and syrups with still carbonation, water, and/or sweeteners before the finished products are sold to wholesalers and retailers and ultimately, to consumers around the world.

In addition, the company produces and sells finished products directly to distributors and wholesalers (mainly in the Bottling Investments segment) who in turn sell to retailers and consumers. It owns the bottling and distribution operations in this segment. The Global Ventures segment consists of revenue from Costa Coffee retail stores.

Revenue and net profit peaked in 2012 and 2010 respectively as the consumption of soft drinks continues to slow down especially in the U.S. as consumers are becoming more health- conscious. (Net profit in 2017 was down primarily because of an one-time tax charge related to repatriation of its foreign earnings.)

The beverage company is in the transition of refranchising its capital-intensive and lower-margin bottling operations (despite higher net operating revenues) and wants to focus on the more profitable concentrate business instead. The management wants to improve the company’s overall margin and profit in the long term. Sales volume grew at a compound annual growth rate of 1.9% from 25.5 billion units 2010 to 31.3 billion in 2021 as the demand for non-soft drinks remained more stable. The Coca-Cola Company is a dividend aristocrat and has increased its dividend per share for 60 consecutive years.

PepsiCo, Inc.

Established in 1965 through the merger of the Pepsi-Cola Company and Frito-Lay, Inc., PepsiCo, Inc. makes and sells soft drinks and savoury snacks. The company is listed on the NASDAQ and boasts a market capitalisation of over US$250 billion as of December 2022. Its carbonated soft drinks and snacks portfolio includes the signature Pepsi-Cola soft drink, Mountain Dew soft drink, Gatorade sports drink, Lays potato chips, Doritos tortilla chips, Cheetos cheese-flavoured snacks, and Quaker cereal, rice, and pasta. (Notably, brands like KFC, Pizza Hut, and Taco Bell were previously owned by PepsiCo before they were spun off and later became part of Yum! Brands, Inc.)

The food and beverage giant has a global footprint but North America remains its largest market, contributing to 60.0% of its revenue in 2021. It derived 55.0% of its revenue from snack foods and convenient foods like cereal, rice, and pasta in the same year.

PepsiCo is a dominant player in the potato chips market with a 60% market share in the U.S. alone. The potato chips business is more profitable in terms of operating profit margin. In addition, the company almost monopolised the dip market (with its Fritos bean dip, Lay’s smooth ranch dip, Tostitos nacho cheese dip, and the list goes on) by owning a whopping 87.5% share in the U.S.

Its revenue is rather diversified and is perhaps a lower-risk investment compared to the Coca-Cola Company should health-conscious consumers ditch sugary drinks. PepsiCo focuses more on in-home consumption whereas the latter emphasises on its out-of-home consumption.

The company sells its products to distributors and retailers. At the same time, it sells beverage concentrates and finished goods to bottlers who subsequently sell to distributors and retailers. It also manufactures and distributes third-party brands in certain markets such as Crush, Dr Pepper, and Schweppes from Keurig Dr Pepper Inc.

PepsiCo’s revenue and net profit expanded at a CAGR of 2.9% and 1.7% respectively between 2010 and 2021. The company also marked its 50th consecutive increase in its dividend per share in 2021.

Net income in 2015 and 2017 was down due to a one-off impairment charge related to its Venezuela operations as well as a tax charge related to repatriation of its foreign earnings. Net income in 2018 surged as a result of tax benefits related to the reorganisation of its international operations.

Keurig Dr Pepper Inc.

Founded in 1981 and listed on NASDAQ, Keurig Dr Pepper Inc. was formed via the merger of Keurig Green Mountain and Dr Pepper Snapple Group in 2018. It is a beverage company and coffeemaker with business presence in the U.S., Canada, Mexico, and the Caribbean. It owns coffee brands like Keurig and beverage brands including Dr Pepper, Sunkist, 7UP (distributed by PepsiCo internationally) and Schweppes in the U.S. and Canada. As of December 2022, it had a market capitalisation of US$51.1 billion.

The company breaks down its revenue as presented in the following chart. In the Packaged Beverages segment, it produces and distributes own-brand and third-party finished products to retailers who in turn sell to consumers.

In the Coffee Systems segment, the company manufactures single-serve coffee brewers, coffee pods or capsules, and coffee for consumption at home, restaurants, hotels, offices, and so on. It also manufactures coffee pods on behalf of partners including Starbucks, Dunkin’, and Tim Hortons that subsequently sell to retailers.

In the Beverage Concentrates segment, the company sells semi-finished products to internal parties and third-party bottlers. The manufacturing and distribution business in Mexico represents approximately 90% of the revenue from its Latin America Beverages segment.

The company’s Keurig single-serve coffee brewers were used by approximately 36 million or 29% of the American households in 2021. This represents a source of recurring income for the company as some consumers stick to the same brewer and replenish their coffee pods regularly. This segment is a potential growth driver for the company as consumers opt for healthier beverage options like coffee and tea instead of sugary drinks. As this merged entity was formed rather recently, the prospect of the company remains to be seen.

The fifth perspective

The competition is stiff in the soft drinks market. These players are competing with companies that sell healthier drink options like bottled water and fruit juices. As a result, they’ve expanded into the healthier, higher-growth categories on their own and offer alternatives with less added sugar or sometimes low or no calories like Diet Coke.

Several risks are common for these soda players such as the strengthening U.S. dollar as they obtain a portion of their revenue outside of the U.S. Rising raw material prices is also a risk to them. Nevertheless, because of economies of scale, they can boost their operational efficiencies to absorb the cost increases. Alternatively, they can leverage on their leading positions in the market to pass on cost increases to consumers. A can of soft drink is rather cheap and minor adjustments to prices and packaging size will not be very noticeable. I reckon the soft drinks segment will continue to grow albeit at a slower pace compared to other beverages like energy drinks and coffee.

Overall, these three companies are not fast-growing stocks, and we can expect slower but stable growth over the years. In the case of Coca-Cola and PepsiCo, they have a long-term track record of paying an increasing dividend which make them suitable for income investors.

Shak Chee Hoi

Chee Hoi is an investor and research analyst at The Fifth Person. He was previously involved in wildlife conservation work with a non-governmental organisation as well as sustainability consultancy work. He personally believes in impacting society and the environment for the greater good.


  1. Dear CH
    An excellent and concise summary
    Fully agree with your conclusion. The USD weakening, China reopening and the warmer months ahead plus lower chances of a deep prolonged recession will all serve as tailwinds to support these
    I hold KO and have started nibbling at PEP. Both are weaker YTD. PEP has higher potential and the fact that we lose relatively less on dividend WHT as non US investors with PEP as compared to KO also needs to be borne in mind. Finally, at some stage, Dr KP might be a potential takeover candidate if they lose market share and drop in terms of market capitalization
    Most importantly, even in the context of the anticipated recession, these stocks are like portfolio buffers and might paradoxically even go higher with fast money rotating back into these from growth sectors
    Warm regards

    1. Hey ross,

      I am not familiar with Celsius, so I can’t say much about it. From a quick glance, this company is growing fast and taking away market share from competitors like Monster Energy. The current valuation may not be justified if their growth rate decelerates. Just my two cents!

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