Coca-Cola vs. PepsiCo in the functional beverage race: Who’s winning the wellness war?

Functional Beverages Redefine the Cola Wars in 2025

The beverage industry’s most consequential rivalry has moved far beyond the cola aisle. In 2025, PepsiCo and The Coca-Cola Company are entrenched in a new battle—one defined by gut health, low sugar, hydration optimization, and TikTok virality. The functional beverage segment, now projected to exceed $200 billion globally by 2027, has become the core battleground where consumer packaged goods titans are racing to win share of stomach and mind.

PepsiCo’s recent $1.95 billion acquisition of prebiotic soda brand poppi underscored its aggressive transformation strategy. Meanwhile, Coca-Cola has doubled down on sports hydration and premium water, expanding brands like Bodyarmor and Smartwater+. As each pursues distinct verticals within functional wellness, institutional analysts and investors are recalibrating their expectations for legacy soda companies in a future increasingly defined by health-centric, purpose-driven consumption.

Why Did PepsiCo Acquire Poppi in 2025?

PepsiCo’s acquisition of poppi is more than a portfolio addition—it represents a pivot into culturally relevant wellness marketing and rapid digital consumer engagement. Closed in May 2025, the $1.95 billion transaction includes $300 million in anticipated tax benefits, bringing the net outlay to $1.65 billion. The deal also features a performance-based earnout model, a structure increasingly common in CPG M&A to de-risk fast-growing startups with limited profitability but significant brand velocity.

Poppi, a Gen Z favorite for its fruit-forward prebiotic sodas, built its brand through TikTok virality and influencer-powered storytelling. With sugar levels under five grams and ingredients like apple cider vinegar, poppi has become a standout in the functional soda space—blending indulgence with perceived gut health benefits.

PepsiCo Beverages North America CEO Ram Krishnan described poppi as a “compelling strategic fit” and a central piece in the company’s Positive Choices transformation strategy. The brand complements prior acquisitions like Kevita, Health Warrior, and Siete Foods, forming a modular but cohesive wellness ecosystem.

How Is Coca-Cola Responding? Spotlight on Bodyarmor and Smartwater+

Coca-Cola’s functional beverage strategy hinges on hydration, performance, and clean-label credibility. Its $5.6 billion acquisition of Bodyarmor in 2021 brought a new tier to its sports drinks business, giving it a premium alternative to Powerade. Bodyarmor, backed by athletes and built around coconut water, has performed well in retail and fitness environments, holding steady against PepsiCo’s Gatorade.

Smartwater+, Coca-Cola’s enhanced premium water line, adds botanical infusions, electrolytes, and mood-related positioning. It aligns with high-income wellness consumers in both grocery and airport retail footprints.

Internally, Coca-Cola has also launched and scaled AHA—a flavored sparkling water designed to compete with LaCroix and Bubly, featuring caffeine-enhanced and adaptogenic variants. However, compared to poppi, these efforts haven’t matched the cultural virality or digital engagement seen in PepsiCo’s portfolio.

James Quincey, CEO of The Coca-Cola Company, has repeatedly stated the firm’s preference for “measured, margin-accretive innovation,” focusing more on line extensions and selective M&A than early-stage brand acquisitions.

Who’s Winning in Gut Health and Functional Soda?

In terms of category penetration, PepsiCo is clearly leading in gut health. The acquisition of poppi gives it a brand with unmatched social resonance, product innovation, and DTC loyalty in the prebiotic soda market. Analysts from Barclays and Bernstein noted that PepsiCo’s strength lies in scaling digital-first brands without eroding authenticity—a capability it had already demonstrated with Kevita and LIFEWTR.

By contrast, Coca-Cola lacks a direct entry into the gut health soda or prebiotic beverage segment. Its kombucha experimentation via pilot brands and local incubators remains fragmented. The company has instead concentrated on hydration science and high-performance formats—areas where it leads in operational efficiency and brand strength, but not necessarily innovation.

Market and Institutional Sentiment

The institutional response to the poppi acquisition has been cautiously optimistic. Buy-side firms note the transaction’s high multiple but see it as a “necessary forward bet” on generational shifts in beverage consumption. PepsiCo’s wellness transformation is increasingly viewed as integral to defending its North American beverage margins, especially as traditional soda volumes flatten.

Coca-Cola’s defensive stance—grounded in operational leverage and channel control—has stabilized its margins but drawn criticism for under-indexing on emerging health trends. Sell-side analysts expect the company to enter the digestive health space via acquisition or deeper partnerships before 2026.

In Q1 2025 earnings calls, both companies highlighted functional beverages as top-line growth drivers, with wellness SKUs contributing double-digit volume increases across the board.

Which Strategy Is More Scalable in 2025?

PepsiCo’s integration infrastructure offers it a distribution and scaling advantage. Its DSD (direct-store-delivery) system allows rapid national rollouts, while its venture integration playbook ensures that acquired brands retain their identity while benefiting from retail muscle.

Coca-Cola’s strength, by contrast, is in consistency and global reach. Bodyarmor and Smartwater+ have seen successful international expansion, and the Coca-Cola system continues to dominate in shelf presence across grocery and foodservice.

The question is whether scale alone is enough in a market increasingly driven by micro-influencers, algorithmic virality, and health narratives. Here, PepsiCo’s digital agility and brand cultural cachet give it the edge—at least in U.S. urban markets and among younger demographics.

What Comes Next? M&A and Product Innovation Outlook

Analysts expect further activity in functional categories where consumer science is driving demand. PepsiCo is expected to pursue deeper innovation in energy-plus-functional formats, possibly integrating poppi into broader lifestyle campaigns or hybrid snack pairings. Coca-Cola may respond with a strategic acquisition in gut health or a reboot of its internal kombucha and digestion-focused brands.

Emerging areas of interest include mood and adaptogen beverages that feature ingredients like ashwagandha and reishi, immunity-boosting drinks based on vitamin C and elderberry, and cognition-focused beverages formulated with magnesium, L-theanine, and nootropics. Gut and metabolic health categories continue to attract investor capital and brand innovation, making them prime battlegrounds for future portfolio expansion.

Functional Beverage Leadership in 2025

PepsiCo has established a first-mover lead in the functional soda space and broader wellness beverage strategy. Its acquisitions of poppi, Kevita, and LIFEWTR are synergistic, culturally fluent, and scalable. Coca-Cola, while still dominant in hydration and performance, appears more cautious and less agile in consumer-driven innovation.

However, with vast global infrastructure and proven scaling experience, Coca-Cola remains a formidable competitor poised to make calculated moves. In this next chapter of the cola wars, the winner may not be the one with the best taste—but the one who best aligns with the microbiomes, moods, and TikTok feeds of the next billion beverage buyers.