The Coca-Cola Company
) recently announced a new investment plan over the next three
years to boost growth in Vietnam. The cola giant is strategically
shifting its focus to the fast growing emerging nations as
developed countries are nearing market saturation.
Coca-Cola plans to make a system investment of $300 million in
Vietnam over the next three years to build new infrastructure,
create jobs, develop strong partnerships and build its brands in
the country. With this additional investment, which will begin in
2013, Coca-Cola and its bottling partners' total investment in
Vietnam will shoot up to $500 million between 2010 and 2015.
In addition to Vietnam, Coca-Cola is showing keen interest in
other emerging markets like India, Russia and China, capitalizing
on the high-growth nature of these countries. Coca-Cola has
already invested over $2 billion in India and remains very
optimistic about its Indian operations. Coca-Cola has been
witnessing double-digit business growth in India aided by its top
brands like Thums Up, Sprite and Maaza. Further, Coca-Cola, along
with its bottling partners, will make an investment of $3 billion
over the next eight years to build consumer marketing,
infrastructure and brands in India.
Further, Coca-Cola has plans to invest $4 billion in China
over three years starting in 2012, thus raising Coca-Cola's total
investment in China between 2009 and 2014 to $7 billion. China is
also expected to serve as a double-digit growth market over the
long-term. Coca-Cola also plans to invest $3 billion in Russia
between 2012 and 2016 and $8 billion in Brazil through 2016.
Currently 43% of the company's business is being generated in
developed markets (U.S., Western Europe, Australia, and Japan),
37% in developing nations and 20% in emerging markets. Management
believes that due to the higher growth rates in emerging and
developing markets, each of these geographic segments will
contribute 33% of the company's business by the end of 2020.
We currently have a Neutral recommendation on The Coca-Cola
Company. The stock carries a Zacks #3 Rank (a short-term 'Hold'
We are encouraged by the company's global reach, strong brand
power, expanding presence outside the U.S. and its solid cash
position. Moreover, the company's acquisition of
) bottling business and its productivity initiatives are expected
to result in significant cost savings.
However, Coca-Cola needs to ramp up its advertising spending
to match arch competitor
) increased focus on North American beverages. Soft economic
conditions and tough currency environment also concern us.
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