Both Coca Cola (NYSE:KO) and Pepsi (NASDAQ:PEP) announced their earnings results this month and, unsurprisingly, the companies topped estimates. For a long time in their history, the companies have been bitter rivals in the soda market. But the rivalry is spilling over into a new sector; the energy drinks market.

Dwindling demand for soda

Coca Cola and Pepsi built their respective brands making soda. However, most of the people across the world are growing conscious of the fact that soda is a huge agent of health problems. Therefore, it has become imperative for the conglomerates to diversify.

According to a Global Functional Beverage Market report, the functional beverage sector is expanding fast. Notably, the market is expected to hit $208.13 billion by 2024. To be sure, the market is set to expand at 8.66% CAGR between 2019 and 2024. As per the report, the key driver for the growth is an increasing tendency of people ditching alcoholic drinks, carbonated drinks and even fruit juices.

Having recognized the dwindling fortunes in the soda market and the potential in the functional beverages market, Coca Cola launched Coca-Cola Energy early this year. This became the first energy drink brand under the brand which is one of the most recognizable across the globe. Coca-Cola Energy debuted in Spain and Hungary. In Spain, the brand has already snapped up a 2% market share and is still growing.

Pepsi is building on earlier Mountain Dew platforms

On the other hand, Pepsi already has a number of flavors which tend towards energy drinks. Particularly, Ramon Laguarta, CEO of PepsiCo, recently said that the company will continue to push its Mountain Dew brand into the energy drink market step by step. The company already has Mountain Dew Amp Game Fuel exclusively targeted at video gamers.

Before Amp Game Fuel, PepsiCo had already experimented with Kickstart and Amp Energy. Although the brands nosedived a little after launch, they are slowly picking up.

It is interesting to see that these huge global brands are working tirelessly towards diversifying their product portfolios. According to James Quincey, CEO of Coca Cola, the company is working as per a transformation rationale where it is cutting down on sugary beverages while ramping up production of sugar-free, and functional beverages.