Coca-Cola to Minimize Plastics Use - Analyst Blog

In an effort to minimize the usage of plastics, The Coca-Cola Company ( KO ) has joined with the three biotechnology companies to commercially build up 100% plant-based plastic bottles made from renewable sources.

The new bio-based plastic bottles will be a breakthrough in the first-generation PlantBottle packaging, which was initiated in 2009 and which was the only fully recyclable PET bottle made with up to 30% plant-based material called MEG (mono-ethylene glycol). The remaining 70% was made from PTA (purified terephthalic acid).

At that time, Coca-Cola had distributed more than 10 billion plastic bottles in 20 countries all over the world. Now, with the support of the three industry leaders of Virent, Gevo and Avantium, the remaining 70% will also be substituted with plant-based materials.

Though the financial terms of the deal were not disclosed, Coca-Cola expects to open its first full-scale commercial plant by early 2015.

Coca-Cola had carried out a deep two-year analysis of technologies and had discussed with its technical advisory board before signing the deal with these three companies. Coca-Cola now believes that the companies have the required technologies to develop the plant-based alternatives on a global commercial scale within the next few years.

Further, the three companies will develop the bio-based PET bottles using the materials provided by Coca-Cola, and will follow the requirements in accordance with the industry recycling. Virent, Gevo and Avantium have also extended their support towards Coca-Cola by sourcing and packaging supply over the long-term.

The new plant-made PET will possess the same features, as it was in the first-generation PlantBottle packaging, but will also have the advantage of being made from a wide range of renewable materials. This new technology will well-position the company in the industry and will drive change in the global packaging supply chain.

Coca-Cola, being a leader in sustainable packaging, keeps looking for new opportunities across the industry. Earlier in 2011, the company partnered with H.J. Heinz Company ( HNZ ) that allows Heinz to produce its ketchup bottles using PlantBottle technology.

In October, Coca-Cola reported strong operating earnings of $1.03 per share in third-quarter 2011 that came ahead of the Zacks Consensus Estimate by a penny, and rose 12% from the year-ago quarter. The results were encouraged by strong growth outside the U.S. and in emerging markets.

Further, we believe that Coca-Cola has the capacity to overcome the recession effects and sustain market share in the future. The Coca-Cola brand had market share of about 17% in the U.S. in 2010, much higher than its primary competitor PepsiCo Inc. ( PEP ), which had less than 11% market share.

Coca-Cola currently holds a Zacks #3 Rank, which translates into a short-term Hold rating. On a long-term basis, we maintain a Neutral rating on the stock.

HEINZ (HJ) CO ( HNZ ): Free Stock Analysis Report

COCA COLA CO ( KO ): Free Stock Analysis Report

PEPSICO INC ( PEP ): Free Stock Analysis Report

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

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

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