Why PepsiCo (NYSE: PEP) Stock Is the Real No. 1

Pepsi or Coke?

How many times have we been offered that choice at a restaurant? But deciding on a beverage with a meal is merely a matter of taste.

When viewing PepsiCo Inc. (NYSE: PEP) and Coca-Cola (NYSE: KO) as investments, we must take far more into consideration. And the winner of this "Pepsi Challenge" may surprise you.

After all, Coca-Cola is one of the 30 stocks in the Dow Jones Industrial Average. Certainly it's the better stock, no?

Actually, the answer really is no.

In terms of recent performance, the PEP stock price rose over 22%, while Coca-Cola stock has only risen 12%.

There's a good reason for that. PepsiCo has several competitive advantages over Coca-Cola.

The fact is, Pepsi stock is a quality investment, period.

PepsiCo (NYSE: PEP): The Beverage Business

The more astute of you know that PepsiCo is both a beverage company and a snack food company by virtue of its ownership of Frito-Lay.

That already upsets the comparison to Coca-Cola, which has no such division.

Pepsi is literally in a class by itself because it stands alone as a worldwide provider of both snacks and beverages.

And because the beverage business is the more challenging of the two, PepsiCo has a big advantage over Coca-Cola.

PepsiCo management says the soda business is slowing, and they're right. Ten years ago, carbonated beverages accounted for 50% of the North American beverage industry. Today that number sits at 40%. More and more people are quenching their thirst with either noncarbonated healthier drinks or energy drinks.

Sales have declined for the flagship drink, Pepsi Cola, which also brings in the most revenue for the company.

Overall, volumes have declined by 4%. But while people may be drinking less Pepsi, Mountain Dew, and other carbonated drinks, the PepsiCo still has strong noncarbonated brands such as Gatorade, Tropicana, Dole, Lipton, AMP, and Naked Juice.

To turn this trend back in its favor, Pepsi is increasing its noncarbonated brands marketing efforts and is looking to the laboratory for some fresh ideas…