The beverage aisle used to revolve around soda, water, juice, and coffee. Now consumers can choose drinks promising energy, hydration, zero sugar, protein, gut health, or some combination of them.
PepsiCo reports Thursday morning, giving you a fresh look at how quickly those newer categories are reshaping the industry.
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Theme: Energy Drinks, Hydration, Zero Sugar, Functional Soda, Distribution, and Changing Consumer Tastes
Consumers Want More From a Drink
The beverage business is fragmenting.
A consumer reaching into a cooler may want caffeine before a workout, electrolytes after one, a zero-sugar soda at lunch, a prebiotic drink with dinner, or enhanced water during the day.
That shift creates both a threat and an opportunity for the industry's biggest companies. Traditional soda still sells in enormous volumes, but future growth increasingly depends on serving more occasions and more specific needs.
Distribution could be just as important as the brand itself. PepsiCo and Coca-Cola already have enormous systems capable of putting new products into convenience stores, restaurants, supermarkets, and vending machines almost immediately. Celsius and Monster show what happens when a new category becomes large enough to build businesses around it.
What’s Driving It
PepsiCo Is Thursday’s Main Catalyst
PepsiCo releases Q3 results Thursday at approximately 6:00 a.m. ET, followed by its analyst Q&A at 8:15 a.m.
Its beverage business enters the quarter in transition. Q2 PepsiCo Beverages North America revenue increased 7%, helped heavily by acquisitions, while organic revenue grew 1%. Organic beverage volume declined 2%.
That gap tells us why the portfolio strategy matters.
PepsiCo has added poppi and deepened its partnership with Celsius Holdings, giving its distribution network exposure to Celsius, Alani Nu, and Rockstar. At the same time, it is expanding Gatorade and Propel beyond traditional sports drinks while pushing zero-sugar and functional varieties across its established brands.
Management has explicitly highlighted hydration, protein, fiber, energy, and zero sugar as areas where consumer demand is reshaping the portfolio.
Thursday should tell us whether those newer products are helping offset pressure in traditional beverages.
The Chain Reaction
Consumers demand more functionality → emerging categories gain shelf space → new brands grow rapidly → beverage giants acquire or distribute them → national distribution accelerates adoption → category boundaries blur → the strongest portfolios win more drinking occasions
What’s Working
Zero Sugar and Energy Keep Taking Share
Coca-Cola Zero Sugar volume increased 16% last quarter, while sports-drink volume rose 5%. Monster Energy Drinks segment sales jumped more than 21%, and Alani Nu retail sales increased nearly 56%.
Consumers are not necessarily abandoning traditional brands. They are moving toward different versions and different occasions.
That favors companies capable of offering a portfolio rather than betting everything on one type of drink.
What to Watch
For PepsiCo, watch North American beverage volume, Gatorade, zero sugar, poppi, distribution of Celsius and Alani Nu, pricing, margins, and management’s outlook for the category.
The strongest result would show better underlying volume, not simply revenue growth created by acquisitions or pricing. That would suggest PepsiCo’s expanding beverage portfolio is genuinely bringing more consumers and occasions into the system.
PepsiCo (PEP)
What it does:
PepsiCo combines one of the world's largest beverage systems with its Frito-Lay and other food businesses. Its drink portfolio includes Pepsi, Mountain Dew, Gatorade, Propel, bubly, SodaStream, poppi, and numerous partnerships.
Why it fits:
PepsiCo is Thursday’s direct catalyst and one of the companies best positioned to turn changing beverage trends into scale.
Its advantage is not that every emerging drink needs to carry the Pepsi name. PepsiCo can own a brand, build an internal product, or use its distribution system to help another company grow.
The Celsius relationship demonstrates that flexibility. PepsiCo distributes Celsius, Alani Nu, and Rockstar in the U.S., giving it exposure to fast-growing energy brands without needing to create every winner internally.
What stands out:
Q2 PepsiCo Beverages North America reported revenue increased 7%, although acquisitions contributed six percentage points and organic revenue grew only 1%. Organic volume declined 2%, making underlying demand the key issue Thursday.
The portfolio itself is changing quickly. PepsiCo has added poppi in functional soda while expanding Gatorade, Propel, zero-sugar products, protein drinks, and other functional offerings.
What to watch:
Organic beverage volume, Gatorade, poppi, zero sugar, energy distribution, pricing, operating margin, and product innovation.
The Takeaway: Buy this if you want the diversified beverage platform capable of participating in new categories without abandoning its massive traditional brands. PepsiCo’s distribution network gives successful new products a path to national scale.
The risk is that portfolio expansion masks continued weakness in its core North American beverage volumes.
Coca-Cola (KO)
What it does:
Coca-Cola owns or licenses hundreds of beverage brands across sparkling drinks, water, sports drinks, juice, dairy, coffee, tea, and energy.
Why it fits:
Coca-Cola may have the broadest beverage distribution system in the world, allowing it to respond to changing consumer tastes without depending solely on its namesake cola.
The company’s challenge is not replacing Coca-Cola. It is making sure that when a consumer wants something other than traditional soda, another Coca-Cola product is still within reach.
That is why categories such as zero sugar, sports drinks, water, dairy, and tea matter increasingly.
What stands out:
Q2 global unit case volume increased 5%, showing strong overall demand. Coca-Cola Zero Sugar volume jumped 16%, while water increased 6% and sports drinks grew 5%.
Even traditional sparkling drinks remained healthy, growing 4%, including 5% growth for Trademark Coca-Cola.
That combination is important. Coca-Cola does not need legacy soda to collapse for functional drinks to become a growth engine. The company can expand both simultaneously.
What to watch:
Zero Sugar, sports drinks, water, pricing, emerging-market volumes, energy partnerships, and whether category diversification continues without hurting margins.
The Takeaway: Buy this if you want the global distribution leader with enough brand breadth to follow consumers wherever beverage preferences move. Coca-Cola can use its enormous system to scale both classic products and newer categories.
The risk is that smaller emerging brands continue taking attention and shelf space faster than Coca-Cola can develop or acquire alternatives.
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Keurig Dr Pepper (KDP)
What it does:
Keurig Dr Pepper combines Dr Pepper and other soft drinks with energy, hydration, coffee, and a growing portfolio of partner brands.
Why it fits:
KDP may be the most interesting distribution story in the group.
Its U.S. refreshment system increasingly includes not only Dr Pepper but brands such as Ghost Energy and Electrolit. That gives KDP access to fast-growing categories while its established soda business provides scale and retailer relationships.
The company is also preparing to separate its coffee and refreshment businesses, which could eventually give the beverage operation a clearer identity and capital-allocation strategy.
What stands out:
Q2 U.S. Refreshment Beverages sales increased 10% to $2.9 billion, driven by 6.5% volume and mix growth plus 3.5% pricing.
Management highlighted strong demand for Dr Pepper Zero Sugar, Ghost energy drinks, and Electrolit hydration.
Adjusted operating income in the segment increased nearly 12% and reached 29.9% of revenue, showing that growth is translating into strong profitability.
What to watch:
Ghost, Electrolit, Dr Pepper Zero Sugar, refreshment volumes, margins, distribution wins, debt reduction, and preparations for the planned corporate separation.
The Takeaway: Buy this if you want the beverage distributor quietly building exposure to multiple fast-growing categories. KDP does not need every emerging brand to be internally developed because its distribution network can become the growth engine.
The risk is complexity. The JDE Peet’s acquisition, high leverage, and planned separation create substantial execution demands.
Celsius Holdings (CELH)
What it does:
Celsius now owns a three-brand energy portfolio consisting of Celsius, Alani Nu, and Rockstar in the U.S. and Canada.
Why it fits:
Celsius is the clearest pure-play on energy drinks evolving from a niche category into a much broader consumer platform.
The company is no longer dependent on one brand. Alani Nu targets a different customer demographic, Rockstar adds another large established name, and PepsiCo provides distribution scale.
That gives Celsius an opportunity to cover more price points, consumer groups, and occasions within energy.
What stands out:
Q2 revenue reached a record $818 million, up 11%. Alani Nu generated $364 million of quarterly sales, and its retail sales surged 55.7% year over year, reaching approximately 8.7% of the U.S. ready-to-drink energy category.
The overall portfolio contributed roughly 30% of the growth in the U.S. zero-sugar energy category during the quarter.
There is a complication, however. The core Celsius brand’s revenue fell nearly 12% amid inventory rebalancing, promotions, club-channel softness, and SKU optimization.
That makes the investment case much more nuanced than simply “energy drinks are growing.”
What to watch:
Core Celsius brand trends, Alani Nu growth, Rockstar stabilization, PepsiCo distribution, gross margin, international expansion, and promotional spending.
The Takeaway: Buy this if you want the aggressive growth play on modern energy drinks. Alani Nu is gaining share quickly, while the broader portfolio gives Celsius several different ways to attack the category.
The risk is that growth at Alani Nu masks continued weakness in the original Celsius brand while integration and promotional spending pressure margins.
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Monster Beverage (MNST)
What it does:
Monster is one of the world's largest energy-drink companies, with Monster Energy, Reign, Bang, Predator, Fury, and other brands sold internationally.
Why it fits:
Monster is the benchmark for whether energy drinks remain a durable growth category rather than a temporary consumer trend.
Unlike diversified beverage giants, the company has built its business almost entirely around energy. That concentration creates more risk, but it also gives shareholders direct exposure if the category keeps taking share from traditional beverages.
Its international runway is particularly important because energy-drink penetration remains lower in many overseas markets than in the U.S.
What stands out:
Q2 net sales increased 20.2% to $2.54 billion, while Monster Energy Drinks segment revenue jumped 21.6%.
Sales outside the United States surged 34.6% to $1.16 billion and represented approximately 46% of total company revenue. Operating income increased 17%, and net income rose nearly 20%.
Management says the category continues attracting new consumers, expanding usage occasions, and increasing household penetration.
That is exactly the thesis behind this entire edition.
What to watch:
Global Monster growth, international penetration, Reign and Bang, zero-sugar products, gross margin, aluminum and freight costs, and regulatory developments.
The Takeaway: Buy this if you want the established pure-play on energy drinks becoming a larger global beverage category. Monster combines strong brand recognition with significant international room to expand.
The risk is concentration. If consumers move away from high-caffeine energy products or regulators become more restrictive, Monster has fewer unrelated businesses to absorb the hit.
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The Cooler Is Getting Crowded
Consumers are not simply choosing between Coke and Pepsi anymore. They are deciding whether they want caffeine, electrolytes, zero sugar, prebiotics, protein, enhanced water, or a traditional soda.
PepsiCo and Coca-Cola have the distribution to follow those preferences. KDP is building a broader partner portfolio. Celsius is assembling a modern-energy platform, while Monster keeps proving that energy itself still has plenty of room to grow.
Thursday’s PepsiCo report should tell us whether the biggest beverage companies are keeping pace with that shift.
For you, the next beverage winner may be the company that owns the most drinking occasions, not the company that sells the most cola.
Best Regards,
— Adam Garcia
Elite Trade Club
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