A look around
According to Beverage Digest, The Coca-Cola Company (NYSE:KO) clearly leads the soft drink market with a 34% share, while PepsiCo, Inc. (NYSE:PEP) owns 26.3% of the market share and Dr Pepper Snapple Group Inc. (NYSE:DPS) has 11%. Pepsi is clearly the closet competitor and has the strongest global reach that can affect Coca-Cola. Further, Pepsi’s food division accounts for half of its revenue and has a strong 40% market share of the packed salted snack market, which gives it a leverage for a more diversified product range. Coca-Cola also scores above Pepsi, as its reach is far more extensive in restaurant chains and food outlets like McDonald’s Corporation (NYSE:MCD), Subway, and Nando’s, while KFC and Taco Bell only sell Pepsi soft drinks.
Dr Pepper Snapple Group Inc. (NYSE:DPS) is a comparatively small player compared to the two giants. It has a very concentrated area of operation, as almost all profits come from the U.S. and Canada. Further, the company depends on The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP) for two-thirds of their distributions. Dr Pepper is introducing its “TEN” low-calorie drinks, which include 7UP TEN, A&W TEN, Sunkist TEN, RC TEN, and Canada Dry TEN, which have only 10 calories per 12 fluid ounces. This seems like a smart move to attract health-conscious customers.
Dr Pepper Snapple Group Inc. (NYSE:DPS), since its inception, has been making the right moves, which have clearly been seen in the company’s stock price performance. The company’s revenue and profits have been improving consistently, but as the company mainly has a concentrated exposure without much penetration into emerging markets, its future growth prospects look dim. With a dividend yield of 3.2%, it can definitely attract income investors, but it definitely does not offer as much value as its peers.
Final words
The Coca-Cola Company (NYSE:KO) is, without a doubt, a strong value addition for any portfolio with a long-term view. Its strategic investment in health drinks, plus investments in emerging markets, confirms a strong potential to grow further in the future. PepsiCo, Inc. (NYSE:PEP), too, is a well-run company and a good value for an investor’s money. Both of these giants offer stability to their investors.
The article This Company Means Value originally appeared on Fool.com and is written by tarun bachhawat.
tarun bachhawat has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of PepsiCo. tarun is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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