Consumer staples manufacturers are under pressure, making some of the industry’s most iconic brands attractively priced.
Despite the headwinds facing the industry, Coca-Cola is performing well and remains reasonably priced.
PepsiCo isn’t going all-in right now, but its prices appear attractive.
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Two important trends are emerging in the consumer staples industry. First, consumers are worried about rising costs, and many are reining in spending. Second, consumers are increasingly choosing healthier foods. Both could be bad news for food-focused consumer staples companies, with investors reacting by moving away from food companies.
If you are a contrarian investor, this is an opportunity. As so often happens on Wall Street, the baby was thrown out with the bathwater. So even a historically well-run company like this Coca Cola(NYSE:KO) and Pepsi(NASDAQ:PEP) Seems to be for sale. Here’s why buying these stocks now is a no-brainer.
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Coca-Cola is the world’s most famous non-alcoholic beverage company. Its brand portfolio is industry-leading and many of its products have highly loyal customer bases. Its marketing and distribution capabilities are on par with any of its peers. And the company is large enough that it can quickly refresh its brand and products through acquisitions if they don’t fit with consumer tastes.
PepsiCo competes with Coca-Cola in the beverage market, but is more accurately a diversified food manufacturer. In addition to being a major player in beverages, PepsiCo is the world’s largest salty snack company (Frito-Lay) and a major force in packaged foods (Quaker Oats). Its business capabilities are comparable to those of Coca-Cola.
In fact, both Coca-Cola and PepsiCo are among the top ten consumer staples companies in the world. Coca-Cola ranked fourth and Pepsi-Cola ranked seventh. They also share another elite membership, as both companies are Dividend Kings. It takes a strong business plan that executes well in good times and bad to grow its dividend every year for more than 50 years.
At their core, Coca-Cola and PepsiCo are both very good companies. However, as mentioned above, investors are pessimistic about the consumer staples sector. For investors who think in terms of decades rather than days, these two stocks should appear attractive.
Coca-Cola may be more attractive to conservative investors. This is mainly because the business is performing quite well despite the difficult operating environment. To put some numbers into perspective, the company’s organic sales grew 6% in the third quarter of 2025. That’s up from 5% in the second quarter and much higher than PepsiCo’s 1.3% in the third quarter.
However, relatively strong results mean Coca-Cola’s current valuation is slightly less attractive than PepsiCo’s. Still, Coca-Cola seems reasonably priced, even a little cheap. Its price-to-sales ratio is roughly in line with its five-year average, while its dividend yield of 2.9% is middling from a historical perspective. However, Coca-Cola’s price-to-earnings and price-to-book ratios are both below their five-year averages.
Overall, these valuation tools suggest a reasonable entry point for more conservative investors.
As mentioned above, PepsiCo lags behind Coca-Cola in terms of business performance. However, things got worse. The company’s organic sales growth of 1.3% in the third quarter was down from 2.1% in the second quarter of 2025. So things seem to be getting worse for PepsiCo right now, not better. However, given the company’s long and successful history, it’s likely that it will eventually find a way to get back on track.
Still, investors are concerned and the stock price has been very weak. The dividend yield of about 4% is near the highest level in the company’s history. Its price-to-earnings and price-to-book ratios are both below their five-year averages. The P/E ratio is above the five-year average, but earnings vary widely from year to year and are currently weak, so that’s not a shock. Taken together, these indicators suggest PepsiCo is selling.
You need a strong appetite to buy a Pepsi these days, but if history is any guide, this is only a temporary situation. Notably, it has been acquiring new brands to better align its product portfolio with consumer trends. Another activist investor is urging the company to follow Coca-Cola’s lead and outsource its beverage bottling operations, which could boost profit margins. While there are many moving parts, a positive outcome appears likely for long-term investors.
When an entire industry is put in the Wall Street doghouse, contrarian investors should take note. Now is the time to dig deeper and it could also be an opportunity to buy some of the best players in the industry at attractive prices. That’s what Coca-Cola and PepsiCo offer today. Coca-Cola’s relatively strong business performance makes it a better choice for more conservative investors, while PepsiCo may appeal to those willing to take greater risks for greater returns. Or maybe the right risk-reward balance for you is to buy a little of each.
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Reuben Gregg Brewer works for PepsiCo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Two no-brainer dividend stocks to buy now originally published by The Motley Fool
