Source: PaxForex Premium Analytics Portal, Fundamental Insight
Coca-Cola, a widely recognized and popular beverage, has a strong presence in the fast-food industry and is a household name. However, investors who perceive purchasing shares of the company as solely being connected to their favorite cola may overlook the fact that The Coca-Cola Company boasts a beverage portfolio comprising more than 200 brands. And contrary to any assumptions that these other brands are not particularly significant, it should be noted that they hold substantial value.
While Coca-Cola's eponymous brand is undoubtedly the most renowned, the company previously maintained a portfolio of 400 brands before the pandemic. However, in response to the challenges posed by the pandemic, the company underwent a restructuring process that reduced the total number of brands to 200. During this streamlining effort, management made the decision to eliminate smaller, local brands that were not significantly contributing to the overall business. These brands accounted for only 2% of volume and 1% of the top line.
The new brand portfolio is now more streamlined and efficient. By discontinuing underperforming brands, the company has freed up resources to focus on core brands while also investing in new products that have the potential to make a more substantial contribution to the company as a whole.
During the first-quarter conference call in 2023, CEO James Quincey revealed that The Coca-Cola Company now boasts an impressive lineup of 26 $1 billion brands. With nearly $44 billion in revenue over the trailing 12 months, these brands collectively contribute to more than half of the company's total revenue.
Each of these $1 billion brands holds significant value and could be considered as a valuable company in its own right. While Quincey did not specifically mention which brands achieve $1 billion in annual sales, some of the more well-known brands under Coca-Cola's ownership include Schweppes, Minute Maid, and Costa Coffee. Additionally, there are lesser-known brands that also perform exceptionally well, such as fairlife, which specializes in milk products, and Smartwater, both of which have reached the $1 billion mark.
It is important to acknowledge that Coca-Cola, as a beverage, plays a substantial role within the company. However, The Coca-Cola Company has strategically diversified its offerings across various drink categories, ensuring a well-rounded and diverse portfolio of beverages. This strategic approach allows the company to hedge its position and capitalize on opportunities presented by different types of drinks.
Despite the closure of 200 brands as part of its restructuring, The Coca-Cola Company remains committed to introducing new products and fostering brand innovation. Additionally, it has successfully completed several acquisitions, most notably BodyArmor.
One of Coca-Cola's key strengths lies in its unparalleled global distribution system, enabling seamless integration of acquired companies and their products. While many companies face challenges when integrating acquisitions, Coca-Cola has established a reliable system that ensures efficiency when incorporating new products. This allows the company to rapidly scale new brands, surpassing the pace they could achieve independently.
Innovation has played a significant role in Coca-Cola's growth, contributing to 25% of gross profit growth in 2023. As the company expands, it leverages procurement efficiencies, leading to substantial cost savings of $1.8 billion over the past five years.
Successful new brands create new opportunities for Coca-Cola. For example, Costa Coffee has expanded its presence to 40 markets, while Topo Chico Hard Seltzer is now available in 20 markets.
With a vast portfolio of brands and ongoing innovations within each brand, Coca-Cola has access to almost limitless expansion possibilities. The company envisions a $1.3 trillion opportunity, with 8% to 10% of that potential lying within emerging categories. Coca-Cola is uniquely positioned among beverage companies to capitalize on this expansive opportunity.
As long as the price is above 60.00, follow the recommendations below:
- Time frame: D1
- Recommendation:long position
- Entry point: 61.19
- Take Profit 1: 63.00
- Take Profit 2: 65.00
Alternative scenario:
If the level of 60.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 60.00
- Take Profit 1: 59.00
- Take Profit 2: 58.00
