When you think of the best beverage companies, then one name that certainly comes to mind is Coca Cola. Within the non-alcoholic beverage segment, it is among the leading companies in the world. Coca Cola is ubiquitous. You can go to pretty much any country in the world and spot Coca Cola products being sold there. The company has built a very strong brand over the decades to become a multinational giant. Coca Cola has traditionally relied on the carbonated soft drink market for its business success. However, changing eating habits and greater awareness of nutrition and healthy lifestyles is pushing the company to adapt itself and explore opportunities in areas like energy drinks and premium water.
Coca Cola’s Structural Advantages
Coca Cola is a dominant player in the carbonated drinks market that is in a structural decline. However, the company has experience in marketing reformulated variants of its popular products. It also has a strong enough brand equity to market these new products that allow the company to move away from the carbonated soft drink market and reposition itself to align with the changing consumer preferences.
Another critical requirement to succeed in the relatively crowded beverage market is scale advantages. Coca Cola has a network of 100 bottlers and does business in 200 countries. It has the ability to place itself in a favorable position of the beverage supply chain where it has significant cost advantages. Coca Cola also has a business model where it only focuses on producing the concentrate for its drinks. It does not do packaging and distribution. That is done by bottlers and other entities. So, Coca Cola’s business is capital-light.
If you are looking to invest in food and beverage stocks, then Coca Cola and PepsiCo are two stocks that you would want to look at. Coca Cola’s stock closed at $53.74 on 18th December 2020, up 2% for the past month. The stock has risen from around $42 in 2015 to $53 currently. In contrast, PepsiCo’s stock closed at $146.93 on 18th December 2020, up 2.7% for the past month. PepsiCo’s stock is up from $100 in 2015 to its current level of $146.