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 Reports and Commentary from the Investment World

Reports and commentaries are posted here on a regular basis.


Coca Cola


Coca Cola (KO:NYSE) (CCA:LSE)

Coca-Cola is an American icon, yet it has been in danger of slipping into irrelevance. Consumers are flocking to a new breed of coffees, juices, and teas, all categories where Coke has historically been weak. For the longest time, Coke seemed in denial, more fixated on reversing the stagnation in soda than investing heavily into the alternative beverages that consumers were clamoring for. Archrival PepsiCo Inc has eclipsed it in many ways,including stock performance, earnings growth, talent development, and buzz.
The Atlanta-based Coca-Cola Company is the world's largest beverage company, producing nearly 400 beverage brands in over 200 countries around the world. As well as Coca-Cola, recognised as the world's best-known brand,  the company markets four of the world's top five soft drink brands, including Coke, diet Coke, Fanta and Sprite.
Its other brands include Cherry Coke, Banaqua, Kinley, Mezzo Mix, Kuli, Mer, Lilt, Powerade, Dasani, Fresca, Delaware Punch, Lift, Minute Maid, Mello Yello, Mr Pibb, Smart, Gold Spot, Limca, Maaza, Thums Up, mbasa and Calo .
The company also has ownership interests in a number of bottling and canning operations worldwide.

Coca-Cola still racks up more annual profit than Pepsi, but Pepsi now has a market value of $103 billion,
virtually equal to Coke's. Just 10 years ago, Coke was three times the size of Pepsi.
Now, Coke is at a turning point. On the one hand, it is still the most valuable brand in history. On the other
hand, the value of the Coke brand has declined 20% since 1999. The challenge of reversing this trend, of making Coke more exciting, innovative, and relevant, falls largely on Mary Minnick's shoulders. The marketing dynamo has helped bring a new sense of urgency to everything, from how the company advertises to how it develops new drinks.
Minnick's top priority has been jump-starting Coke's product development. Under her leadership, Coke has been unusually prolific, launching more than 1,000 new drinks or new variations of existing brands worldwide in the past 12 months. One of the new products is a male-oriented diet drink called Coca-Cola Zero. Another is a  brisk-selling coffee flavoured cola called Coca-Cola Blak. These seem destined to be big sellers for Coca Cola.
But,in the long run, new flavours and brand extensions won't be enough to make Coke a growth company again.
So with the solid backing of CEO E. Neville Isdel, Minnick is pushing to transform Coke from a soda-centric
organization to one on the cutting edge of consumer trends. At a private, May meeting of Coke's top 200 global marketers in Istanbul, Mary Minnick implored her troops to stop thinking in terms of existing drink categories and to start thinking broadly about why people consume beverages in the first place. The goal: to come to market with products that satisfy those needs before the competition.  
In the future, Minnick says, the winners will be the beverage companies that develop breakthrough products that, more often than not, cross over traditional beverage categories - just as Red Bull did when it single-handedly created the energy drink segment. 

Undoubtedly,some of what's currently emerging from Coke are catch-up products that finally give it an entree into some hot categories. The Atlanta behemoth just launched a new bottled tea called Gold Peak, and in coming months  it will unveil a premium coffee drink licensed from chocolatier Godiva to compete with bottled Frappuccinos sold by Pepsi. Coke is also using new packaging to help reinvent some of its older brands, including the flagship Coca-Cola Classic. Earlier this year, the company began rolling out sleek, aluminum designer Coke bottles with etched, glow-in-the-dark graphics, for sale initially in a few dozen nightclubs around the world. The hope is that the designs will improve the 120-year-old brand's image with trendsetters.

The signs are there that Coca Cola is finally turning the corner and making a real effort to win back business. Revenues increased 6.66% in the last quarter, beating analyst's expectations. Earnings per share have been steadily increasing since 2005.  You can buy Coca Cola today at a P/E below 10.

This is one of the World's greatest franchises, trading now at cheaper levels than Warren Buffet paid for it.

Buy Coca Cola (KO:NYSE) or (CCA:LSE). In time it may pour out some refreshing gains. Enjoy the 2.8% dividend in the meantime.



Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.