While many on the Street have supported PepsiCo’s rapid transition to rely on “guilt-free” products as a major source of revenue, not all analysts are on board. RBC Capital’s Nik Modi says Pepsi’s aggressive investment in snacks and non-carbonated drinks has been to the detriment of sales.

“I think Pepsi is falling victim to media hype” said Modi, speaking of the Purchase, N.Y.-based company’s move beyond soft drinks. In April 2016, Pepsi announced that less than 25% of sales came from soda. “Soft drink sales are growing when you do the right thing … It’s about the relevancy of the brand,” wrote the analyst.

Has Coke Cracked the Code?

Due to fast-evolving consumer preferences for healthier food and increased government pressure in the form of sugar and soda taxes, major global packaged food and beverage leaders have shifted their focused away from traditional center-aisle products to double down on innovation. As soda sales in the United States declined for the 12th consecutive year in 2016, beverage leaders such as PepsiCo Inc. (PEP) and Coca-Cola Co. (KO) have been forced to reevaluate their direction and develop new offerings such as bottled and premium water, coffee and fiber-filled sodas. (See also: Pepsi, Coke Have Limited Upside, Dr. Pepper and Cott Undervalued: BMO.)

 

Both RBC and Goldman analysts applauded Coke’s strategy on growing value, or dollars, not volume. While soft drink sales by volume continue to slip, Coke’s sales have only decreased in one out of the past 29 years. In a panel on Monday, the analysts indicated that the Atlanta-based company’s soft drink strategy has trumped PepsiCo’s current plan, as the firm loses market share and “gives up” on the category. Trading flat on Tuesday at $44.94 per share, KO reflects a 3% gain over the recent 12-month period and an 8.4% return year-to-date (YTD). Down 0.1% at $116.12, PEP reflects a 15.9% increase over the 12-month period and an 11% incline YTD.

In April, Coke posted Q1 earnings of $0.43, which missed the consensus by a cent, while revenues down 11% to $9.12 billion beat forecasts. Pepsi reported Q1 results above expectations, with EPS of $0.94 on revenue of $12.05 billion. The firm said an organic sales boost of 2.1% year-over-year (YOY) was driven by demand for its guilt free products such as unsweetened tea and baked chips, which now make up over 45% of total revenue.(See also: Coke vs. Pepsi Earnings Recap.)

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