Pepsi Faces Bigger Tariff Blow Than Coca-Cola in Ongoing Soda Rivalry

As the White House’s sweeping tariffs begin to bite across industries, beverage giant PepsiCo appears to be taking a harder hit than its longtime rival Coca-Cola – adding a fresh twist to the decades-old soda war.

For more than half a century, PepsiCo has produced its concentrated syrup in Ireland, capitalizing on the country’s low corporate tax regime. However, with new trade tariffs in effect, particularly those targeting imported goods, Pepsi’s Ireland-based operations have become a potential liability. In contrast, Coca-Cola manufactures most of its secret syrup formula domestically in Atlanta, Georgia, and the U.S. territory of Puerto Rico, giving it an edge under the new trade landscape.

Adding to Pepsi’s challenges is a 25% tariff on aluminum – a key component of canned beverage packaging. Coca-Cola’s CEO James Quincey addressed the issue during a February earnings call, noting the company’s flexibility in packaging choices.

“If aluminum cans become more expensive, we can shift focus to PET bottles and other formats,” Quincey said, reinforcing the brand’s strategy to maintain affordability and meet consumer demand.

Meanwhile, PepsiCo has suffered a notable setback in market position. In 2024, it lost its No. 2 spot in the U.S. soda market to Dr. Pepper. Analysts credit Dr. Pepper’s rise to bold marketing and appeal to younger consumers seeking alternatives to traditional cola.

“Dr. Pepper has distinguished itself through effective marketing campaigns that emphasize its unique flavor and individuality,” said Andrew Dickow, managing director at Greenwich Capital Group, in an interview with the Food Institute.

PepsiCo does have facilities in Texas that produce concentrates for products like Pepsi and Mountain Dew, but those plants are primarily focused on bottling and regional distribution, making a full-scale production shift from Ireland a costly and complex undertaking.

With tariffs squeezing input costs and reshaping manufacturing logistics, the battle for soda dominance in the U.S. is entering a new and uncertain era. For Pepsi, staying competitive may require a quick and strategic pivot – or risk losing more ground in the fizzy fight.