The Coca-Cola Company
The Coca-Cola Company has the highest share in Warren’s Portfolio with a ~20% holding. With lots of ups and downs, the company’s stock has given a return of just ~4% in 2012. This was majorly due to a tough macro environment because of the rising health issues for the beverages companies. Coca-Cola generates ~45% of its sales from North America; therefore it is more likely to get affected by the disappointing volume trends of this region. As per the recent data about the US CSDs (carbonated soft drinks), the overall sales decreased by ~1.1% for the quad week ending 22 Dec ’12. And, Coca-Cola brands witnessed a volume decline of ~2.9% for the same period which offsets the benefit of the price increase of ~1.6%. This led to an overall decline of 50 bps in the company’s market share. I feel the main reason behind this decline is the increasing health and wellness awareness among the customers. This remains a major headwind for such companies which are facing intensified pressure from various health groups thus affecting their sales volumes.
Considering this difficult environment in North America, Coca-Cola is venturing into other markets aiming at boosting its market presence. The company has announced its decision to invest ~$1.3 billion till 2016 to enhance its share in the South American region. As part of this initiative, Coca-Cola has joined hands with its regional bottler Coca-Cola Andina and has invested ~$200 million in a bottling plant in Renca. I feel this to be a good move by the company as Chile has the highest per capita consumption of CSD in South America. And, with this focus, I expect its market share to further enhance pushing out its competitors. This would also benefit the company during the major events such as FIFA world cups and Olympics in this region scheduled in the next four years.
To sum it up, I feel both the companies Glaxo and Gannett offer a good investing opportunity considering their history in dividend and also the future growth fundamentals. On the other hand, Coca-Cola is adapting itself towards a tough macro environment and slower demand in the US, which I feel is likely to continue in the future. However, its improved focus on the emerging nations could benefit the company in the long run.
The article Part 2: Three Dividend Stocks You Must Buy originally appeared on Fool.com and is written by Madhu Dube.
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