Economic worries, prompted by ongoing uncertainty about how tariff announcements will ultimately play out, are scaring investors. The benchmark S&P 500 index has lost 8% of its value in 2025 (as of April 14).
Not all businesses have fared as poorly. Look at Coca-Cola (KO +0.44%). The global beverage giant has seen its shares rise 17% this year thanks to steady financial performance that investors might appreciate more these days.
In times like now, it's reassuring to know that Coca-Cola can raise prices on its products. But will pricing power, a fantastic trait for any business to have, help the beverage stock soar? History provides the answer.
Coca-Cola dominates the industry
Legendary investor Warren Buffett likes to own companies that have an economic moat. Coca-Cola easily falls into this category. Credit goes to the soft drink enterprise's powerful brand presence, which is the most critical asset contributing to its success.
Coca-Cola has a huge product portfolio with various drinks to cater to numerous tastes and preferences. It has a long operating history spanning over 100 years. The company is a leader when it comes to marketing efforts. And perhaps most importantly, Coca-Cola has loyal customers who have developed an affinity toward the brand.
Buffett has even previously expressed his view that Coca-Cola essentially sells happiness. Think about how strongly the business and its products resonate with consumers all over the world. Coca-Cola faces almost no threat of obsolescence.
Being in an advantageous competitive position affords Coca-Cola the ability to increase prices. In 2024, the leadership team reported a 9% benefit from favorable pricing and mix, for example. In an inflationary environment, especially with the threat of tariffs, this somewhat insulates the business from cost pressures.
NYSE: KO
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What investors should expect
Coca-Cola's pricing power isn't a new discovery among the investment community. It's a well-known characteristic. While this is a high-quality business with a strong brand, exceptional profitability, and a low threat of disruption, pricing power likely won't propel the stock to outperform.
Over the past decade, shares of Coca-Cola are up 78% (excluding dividends). In comparison, the S&P 500 has climbed 160%. During that 10-year stretch, Coca-Cola flexed its pricing power on many different occasions. Nonetheless, the stock failed to outperform the broad benchmark.
This makes it hard to believe that Coca-Cola can achieve market-beating returns going forward. Yes, management can continuously ask consumers to pay a little more for its drinks, a strategy that has been employed in the past. However, that doesn't mask the company's muted growth potential.
Coca-Cola serves 1.9 billion servings of its products daily. It has a presence in a whopping 200 countries and territories. It's ubiquitous, with every market and distribution channel likely being fully penetrated.
Keep the long term in mind
Coca-Cola's growth going forward will probably mimic broader GDP trends. It's worth pointing out that in the last decade, Coca-Cola's revenue rose at a compound annual rate of just 0.2%.
This stock is having a wonderful year thus far. However, over the long term, which is the time frame every investor should focus on, Coca-Cola isn't going to soar. I'd bet that the stock keeps lagging the S&P 500 over the next 10 or 20 years.
This doesn't mean the company isn't a worthy investment candidate. Some investors love owning businesses that cut them a check every quarter. Coca-Cola can be a smart choice for dividend investors. It has raised its dividend in 63 straight years, and the current yield stands at a healthy 2.8%.
