Coca-Cola's Zero Sugar Momentum Confirms Bull Case, but Core Growth Challenges Persist

What happened

A recent Zacks article highlights Coca-Cola's Zero Sugar portfolio driving share gains and volume momentum as health-conscious demand reshapes growth. The DeepValue master report confirms Coca-Cola Zero Sugar grew +14% in FY2025 and +13% in Q4 across all segments, aligning with the bull scenario where it sustains low-to-mid teens volume growth. However, the report underscores that KO's overall growth is mix-led, not volume-led, with price/mix slowing to +1% in Q4 2025 and North America unit case volume declining 1% through September 2025. The company faces high valuation at 26.2x P/E, system constraints from bottlers, and uncertainty around the March 31, 2026 CEO transition for innovation execution. Therefore, while Zero Sugar is a bright spot, investors must await operational confirmation of price/mix re-acceleration and innovation metrics to justify the current 'WAIT' rating.

Implication

Coca-Cola's Zero Sugar lineup is driving volume gains, which supports the bull case but does not eliminate risks from slowing price/mix and system constraints that could compress margins. The company's high valuation at 26.2x P/E prices in sustained 4-5% organic revenue growth, making near-term execution critical, especially with input costs and marketing expenses rising. Key watchpoints include Q1/Q2 2026 data showing price/mix re-acceleration from Q4's +1%, innovation output post-CEO transition, and Mexico's potential excise tax impact on volume. Without confirmation of these factors, downside risks persist, particularly in the bear scenario where price/mix stays low and volume declines worsen. Thus, maintaining a 'WAIT' rating is prudent, with an attractive entry at $72, until clearer operational signals emerge in the next 6-9 months.

Thesis delta

The new article on Zero Sugar portfolio growth reinforces the bull scenario in the DeepValue report, where sustained volume growth for Coca-Cola Zero Sugar is a key upside driver. However, it does not alter the fundamental 'WAIT' thesis, as the investment case still hinges on price/mix recovery from Q4's slowdown and successful innovation execution under new leadership, with no immediate shift warranted based on this news alone.