Coca Cola Company
) is the world's largest manufacturer, distributor, and marketer of
non-alcoholic beverage concentrates and syrups and competes with
) and Dr. Pepper Snapple Group (
). The company sells these syrups and concentrates to bottlers who,
in turn, sell the finished product.The Coke brand had market share
of about 17% in the US 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 we
estimate to account for nearly 27% of
our $60.54 price estimate for Coke's stock
. On the other hand, Pepsi relies more on its Frito Lays
and Gatorade brands, with the trademark Pepsi soft drink
accounting for around 7% of our $67.28 price estimate for
Looking for the Perfect Sweetner
Beverage companies are racing to find new sweetners to drive
growth in drinks other than their carbonated soft drinks (
) business, largely a consequence of increasing awareness on
health issues. For example, in the US, the top soft drink companies
have agreed to remove sweetened drinks like Coke, Pepsi and ice
teas from schools.
In order to make low calorie drinks taste better, soft drink
makers led by Coke, Pepsi and Dr Pepper Snapple
are experimenting with natural, low calorie sweetners and
flavor enhancers. Earlier this year, PepsiCo signed a
four-year deal with Senomyx Inc for the development of sweeteners,
with Coca-Cola signing similar deal with Chromocell Corp
earlier this week. Coke has kept its development plans
confidential, but many believe that it is very close to reaching a
break through like its competitors Pepsi and Dr Pepper Snapple.
We believe that a successful sweetner substitute would lift
Coke's division that we classify to include Coke Zero, Sprite Zero,
Barq & Other and accounts for 14% of our $60.54 price
estimate for Coke's stock. We estimate the revenues from this
division will increase at an annual rate of 4.4% from around
$4 billion in 2009 to $4.8 billion by 2013.
However, we expect that any major breakthroughs in sweeteners
and flavor enhancers may lead to new product
developments, which would drive revenues for this division. If
the revenues from this segment doubled to near 10% growth in the
coming years, this would add around 5% upside to our price
estimate for Coke's stock.
See our full analysis of Coke below
or by clicking here.
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