As someone highly interested in the consumer goods market, I am always investigating new products and attempt to trace them back to the source. The latest thing to flash on my radar is called "Thums Up," the most popular cola in India. Not surprising at all, the brand was bought out by the mighty The Coca-Cola Company (NYSE:KO) . The brand was introduced in 1977 following the expulsion of The Coca-Cola Company (NYSE:KO) from India, only to be taken over in 1993 as another victim of the cola war with PepsiCo, Inc. (NYSE:PEP) . Although down from the 85% market share it enjoyed twenty years ago, Coca-Cola still enjoys a 42% market share of cola in India with the Thums Up brand.
Due to its storied history and aggressive advertising, one may think it doesn't get more American than Coca-Cola. While still an American company, 70% of revenue and 80% of operating profits are generated outside our borders. Instead of taking a risk with new companies in emerging markets, take a look at the soda giant for international exposure.
Coca-Cola owns over fifty operations involved in bottling, canning, and distributing their products. There are over 500 brands in 200 countries. Within an industry, Coca-Cola is about as dominant as it gets.
|Market Cap||Net Income||Median Operating Margin (%)|
|Coca-Cola||$167.4 B||$8,798 M||25.1|
|PepsiC||$110.6 B||$5,932 M||16.1|
|Dr Pepper Snapple Group Inc. (NYSE:DPS)||$9.4 B||$625 M||17.5|
To some it is obvious that Coca-Cola is in charge, but others need a pinch to wake up when they think they see more Pepsi around than Coke. Margins set this leader ahead of the pack. Coca-Cola primarily produces bases and syrups of their products and lets other companies do the rest. I work in a similar type of company, but unlike any other, Coca-Cola owns the majority of their distributors. This allows Coca-Cola to keep costs down because they own operations around the world and have the capital to buy out smaller competitors when deemed necessary. Their competitors are excellent companies and have potential for growth, but they sit in the shadows of Coca-Cola, particularly abroad.
A brief examination of current news will further highlight Coca-Cola's influence on the world market. Its main Latin American distributor, Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), is fueling the beverage giant's growth through rapidly-developing markets in Brazil, Mexico, Venezuela, and other countries in Central and South America. Again, KO owns the brands and the product, so it collects heavily through this subsidiary. Last month, KOF extended their reach by acquiring a majority stake in Coca-Cola Bottlers Philippines, Inc. As part of the deal, not only can KOF take over this entire company over the next seven years, it can also sell its stake to KO during the sixth year following the completion of the transaction. Coca-Cola has the potential to collect huge profits in the Pacific and have another path to tap into Eastern markets.