According to Coca-cola's vision 2020, they will double their servings to 3 billion per day which is huge! This is only for its gold standard coca-cola brand and 2020 is not far away my friends. However they also own other revenue generating brands. Coca-cola is undergoing a transformation in this decade, they realise that a bigger portion of their revenue will derive from healthier drinks. The hard truth is people are increasingly health conscious, and the common Asian trend leans towards non-carbonated "healthier" sugar free drinks. Even in America, soft drink business has been declining.
Their earnings grew by 15% last year with revenue growth slightly below expectations at $11.04 Billion. Thats why estimates for 2013 has been moved lower too (same case for many companies). Recently, it seems more people are switching to bottled water, teas and other non-alcoholic beverages recently. Throughout the 1990s soft drinks grew continuously but sales have been declining since 2005. Sales have dropped 1.2% for 3 years in a row (See Stats here) While soft drinks sales have been declining, healthy alternatives have been growing steadily. Coca-cola owns DASANI water, which saw an increase by 11% in 2012. Even in Singapore, i can safely say that quite alot of people prefer to drink water, ready to drink teas (ice Lemon/Green tea), coffee or sports drinks. Coke recognizes the potential for healthier beverages, thats why they are working on marketing several of their brands such as 'simply orange', 'Honest Tea', and 'Powerade'. In the midst of epidemic obesity due to sugary drinks, the global beverage giant is taking steps to increase its line of non-sugary drinks. (not because its the right thing to do but because it makes more economic sense, catering for public's change in preference)
Technically Speaking
The
stock has done well since its split last year. It is presently trading at 40.65 - a return of about
14 5% if you were able to pick it up at $35.50 back in mid-Nov. Since its last big dip in mid March, the stock has been using the
middle Bollinger bands as support and this shows how strong the move
has been. Recently, RSI and MACD indicators have peaked signalling overbought status. Usually these are signs that the stock needs to consolidate before moving up again or we might see some kind of reversal pattern. What happens now may be influenced by market sentiments and not the company by itself. I have spoken about market cycles in previous posts, consumer non-cyclicals are better to hold during late bull to early bear markets. Analysts do predict that consumer spending is slowing down and that could affect the sale of beverages for Coke. However i have firm belief that Coke will continue to stay innovative, expanding their brands in emerging markets around the globe. If the trend continues, soft drinks will slowly decline in market share and unless Coke spends more money on offering non-sugary drinks, there will be other competitors to take its place, which i am sure they know. I expect the company to continue its focus on offering alternatives to soft drink market and we should see its revenue pick up over the years.
Disclaimer: I hold long position on Coca-cola (KO) and have no plans to execute any order within the next 72hrs. Would advise anyone to perform their own due diligence before investing.
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