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Is The Coca-Cola Company (KO)’s Growth Story Over?

The Coca-Cola Company (NYSE:KO) has more than 100 products in nearly every country in the world. When a company reaches the size of Coca-Cola, one can’t help but wonder if the company’s growth story is nearing the end. After all, unless aliens come down to earth to buy Coca-Cola products, there will be very few people that don’t already have exposure to these products. Where does the company go from here?

The Coca-Cola Company (NYSE:KO)First, let’s review The Coca-Cola Company (NYSE:KO)’s last quarter. The company reported an increase of 13% even though the amount of products sold increased by only 3%. It looks like the company still suffers greatly from the economic slowdown in Europe and elsewhere. It looks like the company’s non-carbonated products will take the driver’s seat and carry the company’s growth from now as Coca Cola’s flagship drink Coke isn’t showing as much growth as it once did. As knowledge becomes easier to access, people become more health conscious and they learn to avoid certain products that are perceived to be unhealthy. As a result of this movement, the carbonated drink consumption has been on the decline in North America and much of Europe. In the last quarter, Coca Cola’s soda sales in the US fell by 2% which barely got compensated by a small growth in the company’s teas and sports drinks.

Coca Cola is doing a great job in diversifying its portfolio of products in order to appeal to the new tastes of the world population. Because the company offers a large variety of products, it can always sell in large numbers when the global taste trends change over time. While healthier beverages are selling better lately, there are also some nice growth opportunities in energy drinks. From here, most of Coca Cola’s growth will come from emerging economies, particularly India, China, Southeast Asia and the continent of Africa. In addition, when Europe’s economy recovers, Coca Cola might be able to regain some market share in the continent. In the last quarter, Coca Cola’s revenue in Europe fell by 6% which is a sharp decline. It will be interesting to see how the company will recover in the continent.

Coca Cola continues to meet or beat its own guidance almost every quarter; however, the analysts have higher expectations compared to the management of the company. Coca Cola’s growth is happening in a conservative manner whereas analysts want it to grow more aggressively. Of course, growing aggressively is a difficult task to achieve for a company that is as large as Coca Cola. The company still has a lot of products to launch in a lot of markets; but it can’t be done all at once. Currently Coca Cola focuses on launching products that are unique to cultures of different countries to ensure that its new products will be well-received by the target populations.

Currently Coca Cola enjoys healthy margins. While the company’s gross margin is down from 60.1% to 59.6% in the last quarter, this is still a number many companies would love to have. Over the years, the margins should stay pretty stable for the company. The company also has healthy amount of cash at $18 billion. This cash can easily support future growth. Coca Cola’s operating income grows faster than its revenue, which suggests that the company’s cost cutting measures have been working.

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