Global Packaged Food & Non-alcoholic Beverages: Resilient Beverage Demand
Positive early volume recovery in 1Q26 may not necessarily be indicative of full‑year performance. While pricing remains the primary top‑line driver for most listed PFNAB companies, an improving q/q ...
Chief Investment Office - Hong Kong version4 Jun 2026
  • Early volume trend in 1Q26 is encouraging, but may not be indicative of full-year performance
  • Consumers likely to increasingly prioritise value with intensifying cost of living pressure
  • National brands to face pressure to narrow value gap relative to private labels
  • Favour pure play beverage players with limited private label competition
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Positive early volume recovery in 1Q26 may not necessarily be indicative of full‑year performance. While pricing remains the primary top‑line driver for most listed PFNAB companies, an improving q/q volume trend is beginning to emerge. Notably, Coca‑Cola recorded solid 3% y/y unit case volume growth in 1Q26, led by China, US, and India, improving from 1% in 4Q25. We also saw a meaningful improvement in volume trends at Kraft Heinz and Mondelez, with volume/mix declines narrowing to ‑1.2% and ‑0.5% respectively in 1Q26, compared with ‑4.7% and ‑4.8% in 4Q25. For Kraft Heinz, the improvement appears to reflect earlier brand and marketing investments gaining traction. In contrast, Mondelez’s volume stabilisation was driven by distribution expansion and its ability to respond more swiftly to evolving consumer preferences.

Value proposition remains critical in stemming volume declines. Both PepsiCo and Kraft Heinz have announced major initiatives to address ongoing volume weakness. PepsiCo introduced price cuts of up to 15% on selected brands while maintaining pack sizes. This strategy has shown early green shoots, with its North America Foods business returning to 2% volume growth in 1Q26 after several quarters of decline. Under its new CEO, Kraft Heinz has paused plans to split into two separate companies and instead announced a USD600mn investment to revitalise its brands, prioritising long-term recovery over near-term earnings. As a result, FY26 earnings are projected to decline by c.22%. Approximately half of this investment will be directed towards pricing, product quality, and packaging, with the remainder allocated to R&D, as well as incremental sales and marketing headcount and related investments.

Beverage category remains the safer play with limited private label headwind. With fuel prices surging and likely to remain elevated for a prolonged period due to the ongoing conflict in Iran, expect renewed cost-of-living pressures on US consumers. As such, the strategic shifts undertaken by PepsiCo and Kraft Heinz may translate into only limited volume uplift, particularly given significant private-label penetration of 10% in salty snacks and 47% in tomato products. By comparison, branded beverage players such as Coca‑Cola are likely to face lower private-label competition, supported by relatively low private-label penetration in beverages, especially in carbonated drinks, where penetration stands at just 4%.


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