-
7/1/2015 Coca-Cola's 20 Billion Dollar Brands & Future
Growth
http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-growth/99999/
1/12
(http://stocktwits.com/valuewalk)
(https://twitter.com/valuewalk)(https://www.facebook.com/valuewalk)ValueWalk
(http://www.valuewalk.com) (http://www.valuewalk.com)
Posted By: Sure Dividend
(http://www.valuewalk.com/author/sure-dividend/)
Posted date: June 25, 2015 02:40:24 PM
In: Value Investing
(http://www.valuewalk.com/category/value-investing-2/)
No Comments
(http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-
growth/#comments)
Get The Full Warren Buffett Series in PDF
Get the entire 10-part series on Warren Buffett in PDF.
Save it to your desktop, read it on your tablet, or email
to your colleagues.
Email Address GET THE PDF
Coca-Colas 20 Billion Dollar Brands &Future Growth
Coca-Cola's 20 Billion Dollar Brands & Future Growth by Sure
Dividend
(http://www.suredividend.com/coca-colas-20-billion-dollar-brands-
future-growth/)
Coca-Cola (KO) has long been a favorite of The 8 Rules of
Dividend Investing
(http://www.suredividend.com/8rules/). Heres why.
The company has a 3%+ dividend yield, solid 7% to 9% constant
currency earnings-
per-share growth expectations, and a strong competitive
advantage.
When investors think of Coca-Cola, they often think only of the
companys ubiquitous
sodas. Today, Coca-Cola is so much more than a soda
business.
This article takes a look at the 20 beverage brands Coca-Cola
owns that generates $1
billion or more in sales each year. The impact of Coca-Colas
billion dollar brands, along
with emerging brands, will be analyzed to see Coca-Colas future
growth potential.
Minute Maid
Get our free daily newsletter!
View previous
campaigns.(http://us4.campaign-archive1.com/home/?u=c3eb7a1d092fc854772c834e0&id=299e40291b)
Subscribe
Email Address
(http://www.talkmarkets.com/content/news/market-
(http://www.resourceinvestor.com/2015/06/29/us-
(http://www.talkmarkets.com/content/us-
(http://www.futuresmag.com/2015/06/30/are-
CONTENT FROM OUR PARTNERS
Market Turmoil Due To "Grexit"And Puerto Rico Financial
(http://www.talkmarkets.com/content/news/market-turmoil-due-to-grexit-and-puerto-rico-financial-crisis?post=67993)
TalkMarkets
(http://www.talkmarkets.com/content/news/market-
turmoil-due-to-grexit-and-puerto-rico-financial-crisis?
post=67993)
U.S. oil glut an EIA invention?
(http://www.resourceinvestor.com/2015/06/29/us-oil-glut-eia-invention)
Hard Assets
(http://www.resourceinvestor.com/2015/06/29/us-oil-
glut-eia-invention)
ADP Employment Report: June2015 Preview
(http://www.talkmarkets.com/content/us-markets/adp-employment-report-june-2015-preview?post=67963)
TalkMarkets (http://www.talkmarkets.com/content/us-
markets/adp-employment-report-june-2015-preview?
post=67963)
July 2015 Economic Forecast:Partial Rebound From Last
(http://www.talkmarkets.com/content/us-markets/july-2015-economic-forecast-partial-rebound-from-last-months-decline?post=67992)
TalkMarkets (http://www.talkmarkets.com/content/us-
markets/july-2015-economic-forecast-partial-rebound-
from-last-months-decline?post=67992)
Are Greeks rushing to Bitcoin?
(http://www.futuresmag.com/2015/06/30/are-greeks-rushing-bitcoin)
Futures Magazine
(http://www.futuresmag.com/2015/06/30/are-greeks-
ISM Manufacturing Index: June 2015
Preview(http://www.talkmarkets.com/content/us-markets/ism-manufacturing-index-june-2015-
(http://www.valuewalk.com/2015/07/hedge-funds-inflows-increased-in-may-aum-at-3-171-trillion/)
Generating Employment In Poor And Fragile States
(http://www.valuewalk.com/2015/07/generating-employment-in-poor-and-fragile-states/)BREAKING
Home (http://www.valuewalk.com/) News
About
Books
VALUE INVESTING (http://www.valuewalk.com/sign-email/) Stock
Screeners
Value Investors
Videos (http://www.valuewalk.com/category/videos/) Links
(http://www.valuewalk.com/links/) Timeless Reading
Register (http://www.valuewalk.com/register)
-
7/1/2015 Coca-Cola's 20 Billion Dollar Brands & Future
Growth
http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-growth/99999/
2/12
Minute Maid
(http://www.minutemaid.com/content/minutemaid/en/home/) was
Coca-Colas first non-carbonated beverage Coca-Cola acquired
Minute Maid in 1960.
Coca-Cola has been in the juice business for 55 years.
Minute Maid was founded in 1945. The company got its start by
winning a
government contract for providing powdered orange juice to the
United States Army.
Fortunately for the world, but unfortunately for Minute Maid,
the war ended that year
and the contract was cancelled.
Minute Maid did not fold. The company pioneered the frozen
orange juice concentrate
approach and grew quickly. Minute Maid released its first
bottled (as opposed to
frozen) juice in 1973 to compete with Tropicana (now owned by
PepsiCo).
Since then, the Minute Maid brand has continued to grow. By
1997, Minute Maid was
generating over $2 billion a year in sales. The last estimate of
the companys sales was
in 1997, but the brand has continued to grow globally since that
time. The brand now
likely generates revenues of between $4 billion and $8 billion
every year for Coca-Cola.
Minute Maid Pulpy
Minute Maid Pulpy was launched in China in 2005. The company
reached billion dollar
brand status in 2010,after just 5 years.
Minute Maid Pulpy is the first brand Coca-Cola launched
exclusively in an emerging
market to reach annual revenues of $1 billion or more per year.
Like American
consumers, Chinese consumers are slowly trending toward
healthier alternatives.
The Minute Maid Pulpy brand appeals to a more health conscious
consumer. Juices
simply do not have the same stigma as soda does. This trend will
very likely result in
future growth for the Minute Maid Pulpy brand in China,
Singapore, Thailand, and
other Asian countries.
Simply
(http://www.valuewalk.com/wp-content/uploads/2015/06/Coca-Cola-1.png)
The Simply (http://www.coca-colacompany.com/brands/simply) brand
of juices is
sold in the United States and Canada. The brand was releases in
2001 and reached
billion dollar status by 2009. Simplys best-selling juice is
orange juice. The companys
orange juice is 100% juice and not-from-concentrate.
Despite the Simply name, the process of manufacturing Simply
orange juice is far
from squeezing orange juice into a bottle.
rushing-bitcoin)preview?post=67985)
TalkMarkets (http://www.talkmarkets.com/content/us-
markets/ism-manufacturing-index-june-2015-preview?
post=67985)BlackBerry: Short A Has-Been?
(http://www.talkmarkets.com/content/stocks--equities/blackberry-short-a-has-been?post=67984)
TalkMarkets
(http://www.talkmarkets.com/content/stocks--
equities/blackberry-short-a-has-been?post=67984)
(https://welcome.pubexchange.com/promo/pub/valuewalk)
-
7/1/2015 Coca-Cola's 20 Billion Dollar Brands & Future
Growth
http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-growth/99999/
3/12
First, different types of oranges are grown, harvested, and
juiced. The orange juice is
flash-pasteurized and the oxygen is removed from the juice to
prevent spoiling. The
juice is then categorized and separated by over 600 flavor
variables. The juice is
recombined in a precise formula, and natural concentrated orange
flavor is added.
Why does Coca-Cola go through this intense process? To provide a
standardized
experience for consumers. In this way, Simply orange juice will
always taste the same
despite variances in weather which would otherwise change orange
juice tastes.
The advanced process Coca-Cola uses gives it an advantage in
juice. The company
realized 7% volume growth in the Simply brand in fiscal 2014,
far outpacing volume
growth in total still (non-carbonated) beverages of 4% for the
company.
Del Valle
Coca-Cola acquired (http://www.bloomberg.com/apps/news?
pid=newsarchive&sid=aJGqJwkCu_Ss) Del Valle in 2007 for a
total of $470 million
($380 million in cash and $90 million in assumed debt). At the
time of acquisition, Del
Valle had annual sales of around just under $500 million a year.
By 2010, Coca-Cola
grew Del Valle to reach $1 billion a year in annual sales.
The Del Valle brand is sold in the United States and Latin
America. The two largest
markets for the brand are Mexico and Brazil. Del Valle sells a
variety of fruit juices.
Coca-Cola has been able to quickly grow revenue in the Del Valle
brand by
standardizing packaging and unifying the brand. The companys
standardized
packaging helps consumers to quickly identify the Del Valle
brand, despite several
different flavors of juice. In addition, Coca-Colas bottling
partners, strong distribution,
and expertise in advertising have all played important parts in
Del Valles success since
the 2007 acquisition.
Powerade
Powerade was released in 1988 to compete with PepsiCos Gatorade
brand. Since that
time, the company has captured around 20% of the sports drink
market. Gatorade still
has a commanding market share of around 70%.
Powerade has grown through sponsorships of various sporting
events. Powerade
currently sponsors or has sponsored the following sports events:
Australian Rugby
League, Rugby Union Teams in Australia, Ireland, and New
Zealand, NASCAR, the
PGA Tour, the NCAA, several FIFA soccer league teams, and the
U.S. Olympic team
(excluding basketball and soccer), among other sporting events
and teams.
The Powerade brand is currently managed by Coca-Colas Glaceau
Vitamin Water
team. Powerade is a global brand sold around the world.
Glaceau Vitamin Water
-
7/1/2015 Coca-Cola's 20 Billion Dollar Brands & Future
Growth
http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-growth/99999/
4/12
(http://www.valuewalk.com/wp-content/uploads/2015/06/Coca-Cola-2.png)
Glaceau
(http://www.coca-colacompany.com/brands/glaceau-vitaminwater)
Vitamin
Water was acquired by Coca-Cola in 2007 for $4.1 billion
(http://www.washingtonpost.com/wp-
dyn/content/article/2007/05/25/AR2007052500405.html). Along with
Vitamin
Water, Glaceau also sells Smart Water and Fruit Water. The deal
was Coca-Colas
largest acquisition at the time.
At the time of acquisition, Glaceau had annual sales of $350
million. Coca-Cola
acquired the company for a price-to-sales ratio of 11.7, more
than 10 times the price-
to-sales ratio the company paid to acquire Del Valle in the same
year.
Coca-Cola quickly grew Vitamin Water into a billion dollar brand
after acquiring it.
Still, the company paid such a loft valuation multiple for the
company that the deal
likely should not have been made. Coca-Cola would have been much
better off simply
repurchasing its own shares than paying $4.1 billion for a brand
with $350 million in
annual sales; not profits.
Aquarius
Aquarius is the leading sports drink in Japan. Coca-Cola also
sells water under the
Aquarius brand in various countries. Coca-Cola release Aquarius
in 1983.
The brands growth model is similar to that of Powerade.
Coca-Cola sponsors
international sporting events to promote the Aquarius brand. The
brand is most
popular in Asia, especially Japan.
Ayataka
(http://www.valuewalk.com/wp-content/uploads/2015/06/Coca-Cola-3.png)
Ayataka
(http://www.coca-cola.com.sg/beverage_benefits/ayataka.asp) is a
calorie
free green tea brand sold in Japan and Singapore. The Ayataka
brand imitates the
experience of drinking traditionally brewed Japanese green
tea.
-
7/1/2015 Coca-Cola's 20 Billion Dollar Brands & Future
Growth
http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-growth/99999/
5/12
Coca-Cola introduced Ayataka in 2007. By 2012, the brand reached
$1 billion per year
in annual sales. The Ayataka brands success comes from its
unique formulation and
marketing.
When consumers swirl a bottle of Ayataka, they can see
cloudiness and particles inside
the beverage. This is a similar experience to authentically
brewed green tea in Japan.
The Ayataka brand is an on-the-go solution for Japanese green
tea drinkers.
Coca-Cola
The Coca-Cola brand is the most popular ready-to-drink beverage
in history. Coca-
Cola was created in Atlanta, Georgia in1886 by John
Pemberton.
The Coca-Cola brand is sold in over 200 countries in the world.
Coca-Cola is an iconic
brand. It is instantly recognizable around the world.
The Coca-Cola brand needs little explanation. The amazing
success of the Coca-Cola
brand has resulted in Coca-Cola companys tremendous growth over
the last 100+
years.
Fanta
Fanta is Coca-Colas second oldest company owned brand. Fanta was
created in 1940.
Due to a trade embargo, Coca-Cola could not import its products
to Nazi Germany.
The head of Coca-Cola Germany at the time decided to create a
new soda with only
ingredients available in Germany. The result was Fanta.
After World War II, Coca-Cola shut down Fanta and began
producing Coca-Cola again
in its German facilities. The company re-launched Fanta in 1955
after PepsiCo
launched several new products. Fanta is heavily marketed in
Europe, Asia, Africa, and
South America.
The 75 anniversary of Fanta was celebrated in Germany this year.
Coca-Cola once
again had a marketing failure. The company issued a less sweet
version of Fanta that
was similar to the original war-time formula of Fanta. Coca-Cola
said it wanted to get
back the feeling of the Good Old Times. The early 1940s in
Germany were not good
old times, and many misinterpreted Coca-Colas message. Coca-Cola
quickly replaced
its advertisement.
Sprite
Sprite is one of the most popular soft drinks in the world. The
lemon-lime soda was
introduced by Coca-Cola in 1961. Sprite is now sold in over 200
countries.
Sprite was originally developed in Germany in 1959 as clear
lemon Fanta. Coca-Cola
decided to rebrand the soda and call it Sprite for the United
States market. Coca-Cola
introduced Sprite to compete with 7-Up. Sprites sales surpassed
7-Ups decades ago.
Diet Coke
Diet Coke was introduced to the market in 1982. Since that time,
the Diet Coke brand
has become one of the most successful soda brands in the world.
Today, Diet Coke is
sold in over 185 countries.
th
rd
-
7/1/2015 Coca-Cola's 20 Billion Dollar Brands & Future
Growth
http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-growth/99999/
6/12
Diet Coke is the 3 most popular
(http://www.suredividend.com/pepsi-overtakes-
diet-coke-as-2-soda-in-u-s-which-is-best-investment/) soda in
the United States,
behind only Pepsi and Coca-Cola. The market share in the United
States for the top 5
most popular sodas is shown below:
Coca-Cola: 17.6% market share
Pepsi: 8.8% market share
Diet Coke: 8.5% market share
Mountain Dew: 6.9% market share
Pepper: 6.8% market share
Diet Coke is nearly as popular as Pepsi is in the United States.
Coca-Colas soda brands
are significantly stronger than Pepsis based on market
share.
Coca-Cola Zero
Coca-Cola Zero is Coca-Colas latest soda brand to reach $1
billion in annual sales. The
Coca-Cola Zero brand was launched in 2005. By 2007, it reached
billion dollar brand
status.
Coca-Cola Zeros success is a result of the massive brand equity
in the Coca-Cola
brand. The Coca-Cola Zero brand is targeted specifically at
males. Diet Coke is more
popular with women while men tend to avoid the soda due to the
word diet. Coca-
Cola Zero is Coca-Colas answer to a low calorie soda for
men.
Georgia Coffee
The Georgia Coffee brand includes more than 100 ready-to-drink
coffee beverages.
The Georgia Coffee brand was first introduced in Japan in 1975.
Since that time, the
brand has expanded to China, South Korea, Singapore, and
India.
The Georgia Coffee brand is especially successful in Japan.
Georgia Coffee is the
leading ready-to-drink coffee brand in Japan. The Georgia brand
sells more than twice
as much volume as the Coca-Cola brand does in Japan.
The ready-to-drink coffee market makes up 21% of the entire
ready-to-drink
beverage market in Japan
(http://www.probat.com/fileadmin/user_upload/Files/Connecting_Markets_Coffee/01_Japanese_RTD_Coffee_Market.pdf).
Teas account for 22% of the market, with carbonated beverages
coming in at 15% and
bottled water at 13%. Canned/bottled coffee is much more popular
in Japan than it is
in the United States. The Georgia brands leading market share in
the Japanese ready-
to-drink coffee market is a substantial earnings generator for
Coca-Cola.
Schweppes
Coca-Cola owns the Schweppes brand outside of the following
countries: The United
States, Canada, Mexico, and most of the European Union. Dr.
Pepper/Snapple (DPS)
owns the Schweppes brands in the previously mentioned
countires.
The process of carbonating beverages was invented in 1770 by
Joseph Priestley.
Jacob Schweppe refined and patented his own process of creating
mineral water in
1783, creating the Schweppes brand. The Schweppes brand is
Coca-Colas oldest
owned brand much older than the Coca-Cola brand itself which was
created in 1892.
I LOHAS
rd
-
7/1/2015 Coca-Cola's 20 Billion Dollar Brands & Future
Growth
http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-growth/99999/
7/12
I LOHAS became a billion dollar brand this year. I LOHAS was
launched in Japan in
2009. Since that time, it has quickly become the leading mineral
water brand in Japan.
The I LOHAS brand is marketed to be an earth friendly product.
After drinking an I
LOHAS beverage, consumers can simply twist the bottle to compact
it, reducing the
size its size for more efficient disposal. The image below
(https://triplelights.com/uploads/2014-12/i-lohas-water-features-ea-post-274-
600x375-20141226-1.jpg) show the twisting idea of the
bottle.
(http://www.valuewalk.com/wp-content/uploads/2015/06/Coca-Cola-4.png)
The disposal of garbage has long been a more discussed issue in
Japan than in the
United States. Japans large population and small country size
make garbage space
come at a premium. The more efficient landfill space of the I
LOHAS bottle is
particularly appealing in Japan.
Dasani
Dasani was released by Coca-Cola in 1999. Coca-Cola created
Dasani to compete with
PepsiCos (PEP) popular Aquafina water brand. Since that time,
Dasani has become
the market leader in the highly fragmented bottled water
industry in the United
States with a 7.4% market share.
Coca-Cola attempted to launch Dasani Twist in 2012. Dasani Twist
uses the same
twisting packaging that has propelled I LOHAS to success in
Japan. Dasani Twist did
not drive sales in the United States like it did in Japan.
Dasani is most popular in the United States and Canada.
Coca-Cola botched the
products release in the United Kingdom in 2004. Coca-Colas
advertising department
used the phrase bottled spunk to describe Dasani. Coca-Cola
clearly didnt do their
research; spunk is slang for semen in the United Kingdom. If
that werent bad
enough, bromate a known carcinogen was found in Dasani in the
United Kingdom.
Coca-Cola pulled Dasani from the United Kingdom market and has
not introduced
Dasani to continental Europe.
Bon Aqua
Dasani has not been a hit internationally. Coca-Colas Bon Aqua
brand is its
international answer to bottled water.
-
7/1/2015 Coca-Cola's 20 Billion Dollar Brands & Future
Growth
http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-growth/99999/
8/12
Bon Aqua became a billion dollar brand in 2013. The Bon Aqua
brands most popular
markets are Russia, Hong Kong, South Africa, and Germany.
Gold Peak
(http://www.valuewalk.com/wp-content/uploads/2015/06/Coca-Cola-5.png)
Gold Peak tea (http://www.goldpeakbeverages.com/tea/) was
released in the United
States in 2006. It reached billion dollar brand status by 2014.
Gold Peak tea is made
with real sugar, tea leaves, and water. The brand has no
preservatives.
Gold Peak tea has realized rapid growth since its release. The
ready-to-drink tea
industry is growing quickly as consumers look for caffeinated
beverages that are
healthier than sodas. Coca-Cola has a long growth runway ahead
in tea. The company
currently has just a 6.8% global market share
(http://www.statista.com/statistics/387413/market-share-of-leading-ready-to-
drink-tea-companies-worldwide/) in the ready-to-drink tea
category.
Fuze Tea
Fuze Tea is Coca-Colas first global tea brand. Coca-Cola
released Fuze Tea in 14
countries in 2012. Just 2 years later, Fuze Tea became a billion
dollar brand. Going
from 0 sales to $1,000,000,000 a year in 2 years is nothing
short of phenomenal.
Since its release, Fuze Tea has been quickly expanded to nearly
40 countries. The
global success of Fuze Tea is a result of Coca-Colas excellent
global distribution
platform. Fuze Tea will likely continue growing along with the
ready-to-drink tea
category.
Emerging Brands
Coca-Colas 20 billion dollar brands give it an unrivaled
portfolio of high quality
beverages to drive profits. The company must continuously create
or acquire new
brands to drive further growth and stay ahead of industry
trends. Coca-Colas
Venturing & Emerging Brands division (http://www.coca-
colacompany.com/innovation/the-next-big-thing-how-cokes-venturing-emerging-
brands-team-stays-a-step-ahead-of-tomorrows-thirsts) is
responsible for finding the
next big thing. To use a baseball analogy, the Venturing &
Emerging Brands division is
Coca-Colas farm system. Once a brand graduates, it hits the big
leagues and gets to
utilize Coca-Colas unrivaled distribution system.
The Venturing & Emerging Brands division looks for new niche
or upcoming beverage
brands with at least $10 million or more in sales. It invests in
these brands and works
with them to reach at least $75 million in annual sales. Once
that number is reached,
the brand is eligible for moving into the corporate Coca-Cola
business.
-
7/1/2015 Coca-Cola's 20 Billion Dollar Brands & Future
Growth
http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-growth/99999/
9/12
The Venturing & Emerging Brands division was created in
response to the Glaceau
acquisition. Coca-Cola acquired Glaceau for $4.1 billion a steep
price for a business
with less than $400 million in annual revenues. The Venturing
& Emerging Brands
division can save Coca-Cola billions by indentifying promising
brands and acquiring
them before they reach the size of Glaceau.
The Fuze, NOS, and Honset Tea brands are the biggest success
stories so far at the
Venturing & Emerging Brands division. Fuze in particular has
done exceptionally well
and reached billion dollar brand status in 2014. Coca-Cola
acquired Fuze beverages
(http://www.wsj.com/articles/SB117034638924495048) in 2007 for
around $250
million.
Coca-Cola bought 40% of Honest Tea
(http://www.reuters.com/article/2011/03/01/us-cocacola-honesttea-
idUSTRE72055U20110301) in 2008 for $43 million. The company
purchased the
remainder of the company in 2011. Since Coca-Cola was exercising
an option to
purchase the entire company made in a deal in 2008, Coca-Cola
likely paid under $150
million for the entire business, but the exact details are not
disclosed. Honest Tea
generated an estimated
(http://www.washingtonpost.com/business/economy/even-
after-sale-to-coca-cola-bethesda-based-honest-tea-work-in-
progress/2014/06/28/83d67924-fb22-11e3-932c-0a55b81f48ce_story.html)
$130
million in sales in fiscal 2014. Coca-Cola is quickly expanding
the Honest Tea brand.
Honest Tea now has an exclusive deal with Wendys (WEN) to sell
tea at the
hamburger retailer. In addition, Coca-Cola has introduced Honest
Fizz
(https://www.honesttea.com/blog/products/root-beer/) organic
zero calorie sodas to
capitalize on the Honest brand name.
Coca-Cola Growth Potential
In 2007 Coca-Cola had 10 billion dollar brands. Just 8 years
later, the company has 20
billion dollar brands. The company sells 1.9 billion beverage
servings every day. Coca-
Colas global position by ready-to-drink beverage category is
shown in the image
(http://phx.corporate-ir.net/External.File?
item=UGFyZW50SUQ9MjkwNDg1fENoaWxkSUQ9LTF8VHlwZT0z&t=1)
below.
(http://www.valuewalk.com/wp-content/uploads/2015/06/Coca-Cola-6.png)
-
7/1/2015 Coca-Cola's 20 Billion Dollar Brands & Future
Growth
http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-growth/99999/
10/12
Coca-Cola is the global leader in ready-to-drink beverages.
Still, the company has
tremendous room for growth. The average global household
consumes 26 beverage
servings a day. Only 1.4 of these servings come from Coca-Cola
brands.
The global population continues to rise, as do consumer incomes.
Both population
growth and income growth will help drive further sales for
Coca-Cola. The company is
investing in and partnering with African bottlers to gain better
access to the continent.
Africa currently has a population of 1.1 billion. By 2100, the
continent is expected to
have a population of over 4 billion. Populations growth is
expected to be slightly
negative in Europe, barely positive in North America, and slow
in Asia. Africa will be
the global population growth driver over the next several
decades. Coca-Colas
foresight into the continent will likely help drive growth.
In the United States, there is a perception that sodas (also
called sparkling beverages)
are in decline due to health concerns. The demise of the soda is
fiction. Sparkling
beverage sales are growing globally, although not as quickly as
non-carbonated (also
called still) beverage sales. The image
(http://phx.corporate-ir.net/External.File?
item=UGFyZW50SUQ9MjkwNDg1fENoaWxkSUQ9LTF8VHlwZT0z&t=1)
below
shows this growth over the last several years.
(http://www.valuewalk.com/wp-content/uploads/2015/06/Coca-Cola-7.png)
Both carbonated and non-carbonated beverage sales are
increasing. Coca-Colas goal is
to realize growth above the industry average. The company is
certainly positioned to
do so. Coca-Colas distribution system and marketing budget give
it strong competitive
advantages in the beverage industry. Coca-Cola can quickly grow
billion dollar brands,
as evidenced by Fuze Tea, Coca-Cola Zero, Ayataka, and Minute
Maid Pulpy. All 4 of
these brands reached billion dollar status in 5 years or less.
Fuze Tea and Coca-Cola
Zero reached $1 billion in annual sales in just 2 years.
In total, Coca-Cola shareholders can expect earnings-per-share
growth of 7% to 9% a
year going forward. This growth combined with the companys 3.3%
dividend yield
gives investors expected total returns of between 10% and 12% a
year going forward.
The Safety of Investing in Coca-Cola
Total returns of 10% to 12% a year should appeal to investors
looking to compound
their wealth over time. Coca-Cola shares have even greater
appeal due to their low-
risk nature. Coca-Cola is a Dividend King
(http://www.suredividend.com/the-
dividend-kings-dividend-stocks-with-50-years-of-rising-dividends/);
the company
has paid increasing dividends for over 50 consecutive years.
-
7/1/2015 Coca-Cola's 20 Billion Dollar Brands & Future
Growth
http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-growth/99999/
11/12
(http://stocktwits.com/widgets/share)
Coca-Cola sells branded beverages. This reduces the risk of
investing in the company.
It is virtually impossible to imagine a world where humans no
longer drink beverages.
This means there will always be demand for Coca-Colas products.
This is in stark
contrast to riskier technology companies. Eastman-Kodak was a
member of the nifty
fifty at one time and believed to be a high quality business
suitable for long-term
investment. Unfortunately, the companys competitive advantage
was built in an
industry that became obsolete. Eastman-Kodak filed for
bankruptcy in 2012. It is very
difficult to imagine a similar fate for Coca-Cola.
Warren Buffett (http://www.valuewalk.com/warren-buffett/) first
invested in Coca-
Cola in 1988. Since around the time of Warren Buffetts
investment, Coca-Cola has
total returns of around 2,500%
(http://www.suredividend.com/coca-cola-in-1989-
compared-to-todays-top-10-dividend-stocks/) since that time. Not
bad for a business
that just sells beverages. Coca-Cola is still one of Warren
Buffetts largest holdings.
Valuation
Its far better to buy a wonderful company at a fair price than a
fair company at a
wonderful price
Warren Buffett
Coca-Cola is currently trading for a price-to-earnings ratio of
19.7 (using adjusted
earnings). The companys price-to-earnings ratio is slightly
lower than the S&P 500s
current price-to-earnings ratio of 20.8. Coca-Cola is certainly
not a deep value stock.
The company is an exceptionally high quality business with a
long growth runway
ahead. Coca-Cola is likely trading around fair value at this
time.
Final Thoughts
Coca-Cola has compounded shareholder wealth for very long
periods of time. There is
nothing standing in the way of future growth for Coca-Cola. The
company will very
likely continue rewarding shareholders with rising dividends and
earnings-per-share
as a result of Coca-Colas strong brand portfolio.
Coca-Cola has slowly transitioned from a business built on the
Coca-Cola soda brand to
a diversified global beverage powerhouse. Coca-Colas competitive
advantage comes
from its large advertising expenditures and its excellent
distribution system. The
company can either acquire or create new promising brands and
quickly bring them
onto the global scale. Coca-Cola is the global leader in juice,
ready-to-drink coffee, and
carbonated beverages. Coca-Cola makes an excellent investment
for long-term
investors looking for rising dividend income.
Previous
(http://www.valuewalk.com/2015/06/china-
u-s-spying/)
China, US To Develop Codeof Conduct For Cyber
Spying(http://www.valuewalk.com/2015/06/china-u-s-spying/)
Next
(http://www.valuewalk.com/2015/06/samsung-
caught-disabling-windows-
updates/)
Samsung Caught DisablingWindows Updates
(http://www.valuewalk.com/2015/06/samsung-caught-disabling-windows-
updates/)
(http://www.valuewalk.com/2015/06/china-
u-s-spying/)
(http://www.valuewalk.com/2015/06/samsung-
caught-
disabling-
windows-
updates/)
-
7/1/2015 Coca-Cola's 20 Billion Dollar Brands & Future
Growth
http://www.valuewalk.com/2015/06/coca-colas-20-billion-dollar-brands-future-growth/99999/
12/12
Load Comments
Copyright 2015 ValueWalk - Privacy Policy
(http://www.valuewalk.com/legal-disclaimer-valuewalk/)
ABOUT THE AUTHOR
(http://SureDividend.com)
(http://www.valuewalk.com/author/sure-
Sure Dividend (http://www.valuewalk.com/author/sure-
dividend/)
Sure Dividend is designed specifically to simplify the process
of investing
in high quality businesses with shareholder friendly managements
for
individual investors. Sure Dividend takes a quantitative
approach to this
task, while providing qualitative analysis backed up by
fundamentals. The
Sure Dividend approach uses The 8 Rules of Dividend Investing to
simplify
the process of investing in high quality dividend growth
stocks.