- World Cup drove strong volume growth for sponsors in beverage categories
- FY26 guidance was largely reaffirmed, with spirits companies remaining the key growth laggard amid US and China industry headwinds
- India listings remain a key value-unlock catalyst for select beverage players
Related Insights
2Q26 earnings were mixed across beverage players, with companies better able to leverage World Cup activations outperforming. Notably, Coca-Cola and AB InBev both delivered revenue and earnings beats. As the official beverage and beer sponsors of the World Cup respectively, both companies executed consumer activations effectively, driving strong volume growth. Coca-Cola reported 5% volume growth for its trademark Coca-Cola, its strongest performance in 17 years excluding Covid recovery periods. Similarly, AB InBev estimated that the World Cup remains on track to contribute approximately 25 bps of full year volume uplift. In contrast, while PepsiCo’s Frito-Lay was the official World Cup snack food sponsor, it delivered flattish volume growth, which management attributed to a challenging consumer environment due to high gasoline prices and delays in pricing investments.
Execution remains key, with most beverage companies under our coverage largely reaffirming their FY26 revenue and earnings guidance. Coca-Cola was the notable exception, raising its outlook on the back of strong volume momentum, which we attribute to successful World Cup activations and its ability to stay closely connected with local consumers through effective product innovation. In contrast, while PepsiCo’s affordability pivot is a step in the right direction, its products appear to be resonating less effectively with consumers, as reflected in continued weakness in North America sales volumes. Although PepsiCo maintained its guidance, management cautioned that earnings could land at the lower end of the range as it increases marketing investments in North America to support volume growth. Pernod Ricard also stood out, guiding for a 3% to 4% decline in organic sales for FY26, broadly in line with its peer Diageo’s 2% reported decline, highlighting the ongoing challenges facing the premium spirits category, particularly in the US and China.
Looking to unlock value through the listing of Indian subsidiaries. Indian consumer staples companies trade at forward P/E multiples that are 2.5x to 5.5x higher than those of their parent companies or global brand owners. Beyond earnings delivery, several beverage players, including Coca-Cola, Carlsberg, and Pernod Ricard, are exploring listings of their Indian operations to capitalise on these attractive valuations. In addition to raising funds to strengthen their capital structure, an India listing could help streamline operations. For Coca-Cola, this would allow the company to sharpen its focus on its higher-margin brands and concentrate on its core business.
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