As the broader consumer staples industry grapples through hard times, one team of analysts on the Street sees bright spot in the beverage sector, which has seen its multiples hold up better than most. Within the beverage space, however, investors may benefit from getting more picky about their choices, according to Goldman Sachs analyst Judy Hong. (See also: Coca-Cola to Sell Alcoholic Beverages in Japan.)

In a note to clients late Monday, the analyst warned on potential downside in the space as a part of an overall weak consumer staples industry, indicating that valuations could slide another 8% to 12% if 10-year Treasuries see yields rise between 3.25% and 3.5%. That said, Hong upgraded Coca Cola European Partners PLC (CCE) to buy from neutral, expecting shares to gain on the company's deleveraging and capital allocation story. The Goldman analyst highlighted upside in Monster Beverage Corp. (MNST), which see sees outperforming its peers as it continues to expand its global reach in the high-growth energy-drink category. 

Preferring Coke to Pepsi

As for the dilemma of Coca Cola Co. (KO) versus PepsiCo Inc. (PEP), Hong prefers the former, upgrading shares of the long-time American favorite to neutral and downgrading Pepsi. "With KO (Coca-Cola) organic growth profile improving (4+% organic sales growth in 2018) and PEP (Pepsi) comparably soft (2-2.5%) we now view PEP shares as likely to underperform KO," wrote Hong, who swapped her view on the global beverage giants. She is pessimistic regarding any upside from Pepsi's Frito-Lay North American division and expects the company to fall short of Coke and its other peers as the industry scrambles to meet changing consumer preferences and combat a rapid decline in demand for sugary sodas. 

Hong expects KO to gain about 3% to reach $46 over 12 months, while her price target on shares of PEP, at $64, reflects a 41% downside over the year. 

As for alcoholic beverages, the Goldman analyst downgraded Molson Coors Brewing Co. (TAP) to neutral and reduced her price target from $104 to $83, which still implies a 13% gain from its price Wednesday morning. She expects the adult beverage maker to suffer on continued reductions to consensus estimates, driven by ongoing volume weakness.  (See also: What Keurig-Dr Pepper Merger Means for Industry.)