Coca-Cola Growing Presence in Latin America


The Coca-Cola Company ( KO ) is the world's largest manufacturer, distributor, and marketer of non-alcoholic beverage concentrates/syrups and competes with companies like Pepsi ( PEP ) and Dr. Pepper Snapple Group ( DPS ). The company sells their syrups and concentrates to bottlers who, in turn, sell the finished product.

The Coke brand had roughly 17% market share in the U.S. in 2009, much higher than its primary competitor Pepsi, which had less than 11% market share.

Coke relies heavily on its trademark Coke soft drink, which accounts for nearly 27% of our $60.54 price estimate for Coke's stock. The company's Diet Coke brand accounts for an additional 17%. On the other hand, Pepsi relies more on its Frito Lay snack brand (42% of stock value), as its trademark Pepsi brand accounts for only 7% of our $67.28 price estimate for Pepsi's stock.

Coca-Cola Bottler Merger in Mexico

Last week, Mexico's 2 nd and 3 rd largest Coca-Cola producers announced a merger that would create the second largest bottler in Latin America and save the companies an estimated $80 million a year through cost synergies within three years. The resulting company would have a strong presence in Mexico, which is by far the world's largest per capita consumer of Coca-Cola products.

Some reports have speculated that there may be further consolidation among bottlers in Latin America. The reports have noted that there are around 40 Coke bottlers in Mexico, Brazil and Argentina, presenting an opportunity for consolidation.

See our full analysis and $60.54 price estimate for Coca-Cola

Carbonated Soft Drink Market Share Outlook

Coca-Cola's net operating revenues from Latin America increased at an annual growth rate of around 10% between 2007 and 2009, and now constitute around 12% of the company's net revenues. This has largely been driven by increasing market share (volume sales growth) in the region. Unit case  volume of soft drinks sold annually by Coca-Cola bottlers in Latin America increased by 8% in 2008 and 6% in 2009.

Growth in the Latin American market has helped Coca-Cola to achieve slight improvement in its international carbonated soft drinks market share. The market share increased from around 20.6% in 2005 to 21.4% in 2009. Going forward, we expect it to increase to around 22% by the end of our forecast period.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: DPS , KO , PEP



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