PepsiCo shook off recession fears last week, reporting solid 2022 revenues and third-quarter earnings, beating analysts' estimates.

PepsiCo (PEP) delivered better returns to Wall Street than Coca-Cola. Over the last five years, PepsiCo's shares are up 50%, compared to 20% of Coca-Cola (KO).

"We are very pleased with our results for the third quarter as our global business momentum remains strong. Given our year-to-date performance, we now expect our full-year organic revenue to increase 12 percent (previously 10 percent) and core constant currency earnings per share to increase 10 percent (previously 8 percent)," Chairman and CEO Ramon Laguarta said in a press statement following the release of third-quarter financial results.

PepsiCo's better performance than Coca-Cola's may have surprised some portfolio managers.

Coca-Cola has a better-known brand than PepsiCo. It ranked No. 6 on Forbes' 2020 World's Most Valuable Brands, while PepsiCo ranks No. 36.

But it isn't a surprise to Eric Schoenstein of Portland-based Jensen Investment Management, which has owned shares of PepsiCo since 2003 and Coca-Cola from 1992 to 2018.

Schoenstein attributes PepsiCo's superior performance to economies of scope, selling several products through its distribution channels, like snacks and beverages.

"I would note that our thesis on Pepsi's advantages over Coke has long emphasized the broader product mix diversity that Pepsi has with snacks and food business – generally considered as Frito Lay and Quaker," he said in an email to International Business Times. "Those areas account for about half of total revenues and nearly two-thirds of profit, which provides a boost over Coke given it is beverages only."

His analysis of PepsiCo's advantages echoes a statement Laguarta made after the release of the company's third-quarter results: "Our strong results demonstrate that the investments we have made towards becoming an even Faster, even Stronger, and even better company with pep+ at the center of everything we do are working. We are encouraged by the progress we are making on our strategic agenda and remain committed to investing in our people, brands, supply chain, and go-to-market systems and winning in the marketplace."

As part of PepsiCo's strategic agenda is the expansion to new product categories that include both traditional beverages that contain sugar and new sugarless drinks.

The new product diversification addresses the preferences of a new generation of consumers concerned about the health consequences of sugar -- an area where Pepsi has been losing sales to upstart companies.

And they help the company capitalize on the scale effects of better utilization of its distribution network. "The product diversity also provides more opportunity for efficiencies within distribution and potential for cost savings through larger bulk buying of commodities and raw materials," said Schoenstein.

Moreover, branching into new products helps PepsiCo undergo a "creative destruction" by leveraging its traditional competitive advantages to address the shift in consumer preferences.

Pepsico