Pepsi's SodaStream Buy Sensible, Shares Attractive

Wide-moat

While Pepsi's beverage business has posted tepid organic volumes as of late (down 2% in North America and flat globally in the first half of 2018), we've attributed this to the firm underallocating resources to its core beverage brands, including trademark Pepsi and Gatorade, relative to smaller brands rather than a deterioration in the underlying equity of these brands. As evidence, organic volumes in the North American beverage declined 2% in the second quarter, an improvement from the roughly 3% declines over the trailing 12 months, on a 1% improvement in price/mix. We continue to expect improving performance in the back half of the year, as the firm's new product innovations and reinforced brand investments take hold.

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