One of the bigger debates that rages on within the Consumer Staples sector is whether Coca-Cola (KO: 44.00, 0.00 (0.00%)) or PepsiCo (PEP: 54.59, 0.00 (0.00%)) is a better investment. The two carbonated and non-carbonated soft drink manufacturing behemoths take up over 70% of the world wide beverage sales and have been solid equity holdings since well before I was born. Raising dividends and consistent earnings might as well be each company’s middle name, but the debate of which one is better still rages on. While both are solid investment ideas, they are still fundamentally different in many ways. Let’s take a look.

Beverage Trends

One of the most important things to consider when looking at Pepsi & Coke are the beverage trends in the various markets that they serve. A common measure is volume growth, and It is the volume growth in the regions in which they operate that will drive future growth for both firms. If either firm misses an opportunity in an area, it is likely that the other will pounce on the misstep and take advantage.

First, lets take a look at the domestic operating environment. It has been no secret that beverage trends, especially for carbonated soft drinks, have taken a turn for the worse over the past two and a half years as Americans battle with health problems such as diabetes and obesity, of which Pepsi and Coke have shouldered part of the blame due to their unhealthy carbonated drinks. Volume growth in North America for Pepsi has gone from 5% volume growth in 2006 to an estimated -2% growth for 2008. Coke has had similar dismal numbers domestically, going from 0% growth in 2006 to an estimated -1% growth for 2008.