Earnings Preview: Can Coca-Cola Keep Its Soda Popping?
Coke is America's largest beverage company and world's leader in marketing, manufacturing and distribution concentrates and syrups for nonalcoholic drinks. Its brands are iconic, with Coca-Cola, Diet Coke, Sprite, Dasani, Powerade and Minute Maid ranking as some of the most recognizable names worldwide.
Still, its management always keeps growth in mind. Recently, Coke paid $715 million to Dr Pepper Snapple Group for the rights to distribute some of its products in the U.S. This move should bring another substantial revenue stream, as the group's drinks are among America's most popular.
Low-Sugar, Noncarbonated Diversification
This is part of Coca-Cola's initiative to diversify its business. As consumers have gravitated more toward less-sugary drinks and a wider selection, the company has almost been forced to reduce its reliance on Coca- Cola. This effort has seen success, with Coke's noncarbonated beverages doing well in recent years.
In addition to expanding its lineup, the company has also worked to spread its reach abroad. Coke distributes to over 200 countries, and is experiencing speedy growth in emerging markets. Almost three-quarters of its revenues come from outside the U.S. China and India have been particularly effective platforms for the business in the last few years.
Coca-Cola is trying to revolutionize beverage industry technology as well. Its new machine, the Freestyle, is a futuristic, touchscreen fountain-drink dispenser. The Freestyle mixes the drink with the appropriate syrups and concentrates after the user picks a drink, so the beverage is concocted on the spot. Dr Pepper Snapple Group was willing to invest 135 million in the machine in exchange for rights to use it.
The Future of Coke
Coca-Cola's eponymous product won't be enough to sustain the company, but the business remains very successful. Despite being a latecomer to the market for nonsoda beverages, this segment has been profitable for Coke.
Coca-Cola will always have heavy exposure to the fluctuating price of critical inputs such as sugar, oranges and cocoa, and these commodities can experience unpredictable price moves. But that's a risk all of Coke's competitors face as well. If a major change does occur, Coke's scale and brand would give it an advantage in weathering the storm.
Arguably the world's most-recognized name, Coca-Cola will continue looking to reinforce its reputation as it expands its global footprint.