The market for non-alcoholic beverages is extremely crowded in developed markets. Moreover, the global footprint of many beverage products means that new frontiers are scarce and that sales growth will be tempered by competition. What's worse, investors seeking to find attractive investments among non-alcoholic beverages are hard-pressed to find companies trading at low price multiples in today's market.

As a result, investors have to be very picky when choosing beverage stocks.

Big Sodas Going Flat

PepsiCo (PEP) reported a 5% drop in net income year-over-year for the third quarter. PepsiCo's snacks business grew sales by 3%, outpacing its beverages business which grew by 1%. Despite a 3% increase in prices, PepsiCo's American beverage sales in the third quarter dropped by 5.3%. This is not a soft-drink growth story.

Somewhat better, Coca-Cola (KO) experienced modest growth during the same period. The third quarter saw the global sales volume of