You can pass a function to .replaceWith [docs]:

$('code').replaceWith(function(){
    return $("<pre />", {html: $(this).html()});
});

Inside the function, this refers to the currently processed code element.

DEMO

Update: There is no big performance difference, but in case the code elements have other HTML children, appending the children instead of serializing them feels to be more correct:

$('code').replaceWith(function(){
    return $("<pre />").append($(this).contents());
});