4 Reasons Why Coca-Cola Could Reach Its 2020 Vision

Coca-Cola recently laid out its growth plan for the next 7 years in its "2020 Vision" where it was put forth that the company plans to double its system revenue, raise system margins, and increase the total number of servings to 3 billion per day. If it can reach these goals, Coca-Cola would definitely be worth further investigation by Foolish investors. It could be difficult, but there are four main reasons why Coca-Cola could realize its 2020 Vision.

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A rising middle class supports a growing beverage industry
The long-term macroeconomics support the potential growth of the beverage industry, including a rising middle class, greater urbanization, and growing personal-consumption expenditures, pushing global demand for the company's beverages. At the end of this decade, there will be around 800 million new middle class consumers, with significant growth of 70% in personal expenditure per consumer.

Thus, Coca-Cola is quite excited about a young demographic, with as many as 3.5 billion consumers who will be the targeted members of Coca-Cola's brands. Its 2020 Vision will be well supported, with estimated volume growth at 3%-4% and value growth of 5%-6% through 2020.

Huge moat with significant economies of scale
Coca-Cola owns one of the strongest brands in the nonalcoholic beverage industry. Coca-Cola, the company's core brand, is considered a billion-dollar brand in 19 countries. It also owns 16 other billion-dollar brands and 20 more sparkling and still brands, which each produce around $500 million-$1 billion in revenue annually. The company has the leadership position in the American soda industry, with a 41% market share. PepsiCo ranks second, accounting for 31% of the soda market.

Furthermore, Coca-Cola has a strong global distribution system in 200 countries, possessing more vehicles than both UPS and FedEx combined. Thus, Coca-Cola has a huge moat with great economies of scale that no competitors could easily copy or beat. That provides an extremely strong foundation for the business' future growth.

Committed to investing heavily with five strategic priorities
In order to restore the business momentum to reach its 2020 Vision, the company has laid out five strategic priorities, including accelerating the growth of its sparkling business, expanding the still portfolio, increasing investments in the brands, winning at the point of sale, and investing in the next leaders. With those five strategic priorities, Coca-Cola is committed to investing heavily in marketing to grow the sparkling business, led by the Coca-Cola brand.

By 2016, the spending for media and brand-building initiatives could increase up to $1 billion to further strengthen the brands and improve the company's global marketing network.

Expanding into at-home, single-serve cold-beverage business
While Coca-Cola is facing a slowdown in soda sales in the U.S., the company decided to reverse the trend by its partnership and investment in Green Mountain Coffee Roasters . The deal will expand its footprint in the single-serve cold-beverage industry. It poured $1.2 billion into acquiring a 10% stake in Green Mountain to leverage Green Mountain's Keurig technology and to create the new platform for consumers to enjoy soda at home.

Coca-Cola's CEO Muhtar Kent commented that people would spend more time at home and more beverages would be consumed at home. The investment into Green Mountain could let Coca-Cola benefit from that trend significantly. On the other hand, Green Mountain's Keurig could leverage Coca-Cola's strong brands, distribution channel, and the company's marketing muscle.

Foolish takeaway
For these reasons, I strongly believe that Coca-Cola could deliver on its 2020 Vision. Valued at 16.5 times forward earnings, Coca-Cola is just a bit more expensive than PepsiCo, which has a forward earnings multiple of 16. However, with a juicy 3.3% dividend yield and unique growth prospects, Coca-Cola should be a solid stock to hold in the long run.

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The article 4 Reasons Why Coca-Cola Could Reach Its 2020 Vision originally appeared on Fool.com.

Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, Green Mountain Coffee Roasters, and PepsiCo. The Motley Fool owns shares of Coca-Cola and PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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