PepsiCo Eyes Long-Term Gains in Emerging Markets

Growth in India, Latin America and the Middle East accelerates – but is it sustainable? What investors need to know.

PepsiCo Expands Beyond North America

PepsiCo is shifting its growth strategy away from its mature North American markets and is focusing aggressively on international expansion. In the second quarter of 2025, the company reported strong double-digit or mid-single-digit growth in several key emerging markets – including India, Latin America and the Middle East.

These gains have been driven by increased consumer demand for snacks and beverages, along with PepsiCo's ability to tailor its products to local preferences. With growing popularity in no-sugar soft drinks, energy drinks and hydration brands like Gatorade, the company is successfully tapping into health-conscious trends in these regions.

Is This Growth Sustainable or Just a Temporary Boost?

Despite the recent surge, the company faces several challenges in maintaining this momentum. Concerns remain about the cyclical nature of demand in emerging markets, especially as regions like China show signs of economic slowdown.

Key risks include:

• Currency fluctuations and inflationary pressures
• Shifts in consumer confidence and affordability
• Ongoing volatility from geopolitical and macroeconomic factors

PepsiCo’s international segment, once considered a drag on profitability, is now one of its strongest divisions – but this success hinges on continued reinvestment, affordability strategies and market adaptation.

Strategic Shifts in Product Portfolio

To stay relevant in evolving markets, PepsiCo is innovating beyond traditional snacks and sugary beverages. It is expanding into:

• Permissible snacking – healthier options with strong consumer appeal
• Functional beverages – such as protein drinks and enhanced hydration products
• Away-from-home channels – including gyms, cinemas and convenience stores

This broad-based approach ensures PepsiCo is not overly dependent on any one trend or region.

Competition Heats Up: Coca-Cola and Keurig Dr Pepper Respond

PepsiCo is not the only company eyeing global expansion:

• Coca-Cola (KO) is seeing strong results from India, Africa and Southeast Asia, supported by localised product development and smaller pack sizes for affordability.
• Keurig Dr Pepper (KDP) is selectively entering high-growth markets, especially in Latin America and Asia, with a focus on partnerships, flavoured waters, and single-serve coffee.

Both competitors are increasing efficiency to combat inflation while maintaining relevance with health-conscious and younger demographics.

Outlook for Investors: What the Numbers Say

• Valuation: PepsiCo’s forward P/E ratio is 17.53X – slightly above the industry average of 17.49X.
• Earnings Forecast:
  • 2025: Expected EPS decline of 1.6%
  • 2026: Projected EPS growth of 5.8%
• Recent Momentum: EPS estimates have been revised upwards over the past 30 days.
• Zacks Rank: Currently holds a #2 rating (Buy)

Investor Takeaway: A Long-Term Play with Caution

PepsiCo's strategy in emerging markets appears sound, with a blend of innovation, local adaptation and growing profitability. However, investors should keep a close eye on macroeconomic developments, particularly in regions like China.

While the near-term may present headwinds, the long-term potential for sustained, profitable growth remains promising for those looking to diversify into consumer staples with global exposure.

Sources: (Investing.com, Reuters.com)