The Coca-Cola Company (NYSE:KO) has a robust sales and distribution network, and will continue to exploit this fact as it acquires bolt-on acquisitions of new beverages. Coke can take a beverage selling just thousands of units per month, and utilize its sales force to increase this by orders of magnitude overnight. This is exactly what PepsiCo, Inc. (NYSE:PEP) did with Starbucks Corporation (NASDAQ:SBUX)’ ready serve beverage joint venture.
PepsiCo, Inc. (NYSE:PEP) took Starbucks’ ready-serve from concept to a billion-dollar brand by leveraging its worldwide customer base, and distribution network. PepsiCo is Coca-Cola’s primary competitor and sports a similar dividend at 2.5%. PepsiCo spends roughly 55% of its earnings to fund the dividend and has operating margins of 14%.
PepsiCo, Inc. (NYSE:PEP)’s bottled water unit is another area example of a company ready to utilize it’s global distribution network to push growth. As having pure water becomes more of a concern to countries like China and India, we will see PepsiCo there ready to capture this growing market and profit handsomely.
The main difference between PepsiCo and Coca-Cola is that the cola industry is largely an oligopoly or duopoly in most markets and has better margins than PepsiCo’s snack-food business. This makes comparing PepsiCo and Coca-Cola slightly more difficult to do an apples-to-apples basis.
Foolish bottom line
The Coca-Cola Company (NYSE:KO) will continue to see top-line and bottom-line growth as it implements more bolt-on acquisitions and decreases its share count. As more and more countries see an increase in their middle class populations, Coca-Cola will be there to quench their thirst. Adding shares of Coca-Cola can add stability and growth to anybody’s portfolio for the foreseeable future.
The article Coke’s Recipe for Success originally appeared on Fool.com and is written by Wes Patoka.
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