Coca-Cola CompanyKO

Morningstar Rating

Stock Research and Analysis

by Philip Gorham, CFA

The extensive direct distribution network that enables Coca-Cola to deliver its products to almost all corners of the globe is the source of the firm's wide moat, in our opinion. Declining consumption of carbonated beverages in the key North American Read more

Bulls Say

Coca-Cola's distribution network extends to more than 200 countries worldwide, an infrastructure that would be extremely difficult and costly for new entrants to replicate.

Interbrand has named Coca-Cola the most valuable brand in the world for several consecutive years, citing the firm's effective marketing and ability to adapt its product portfolio to shifting consumer tastes.

The company's products represent around 3% of the estimated 50 billion beverages that are served every day around the world, creating global familiarity with its brands.

Coke has emerged as the long-term winner in the cola war with PepsiCo, one of the most profitable beverage categories, and competition between the rivals on price is no longer as fierce.

Albeit late to the game, Coke has recently extended its product portfolio into growing noncarbonated beverage categories in response to changing consumer preferences. Read more

Bears Say

Coke's revenues are relatively undiversified in comparison with those of rival PepsiCo, whose snacks business has proven to be quite resilient during economic downturns.

With a footprint that already spans the globe, there may be little remaining opportunity for Coke to expand geographically.

Despite the popularity of its flagship brand, cola consumption is declining at a faster rate in the U.S. than the broader carbonated soft drinks market.

Coke could soon face a rejuvenated competitor, as PepsiCo is consolidating its anchor bottlers in an attempt to improve the performance of its beverages division. Read more

Strategy

In recent years, Coke has responded to the declining carbonated beverage sector by broadening its product portfolio through both acquisition and product innovation. In North America, the firm has adopted Read more

Management

Coke has gone through a leadership transition, with Muhtar Kent having taken the helm as CEO in July 2008 and as chairman in April 2009. Although we think Coke has an otherwise strong level of director independence, we would prefer to see the roles Read more

Profile

Coca-Cola is the world's largest manufacturer, distributor, and marketer of nonalcoholic beverage concentrates and syrups. The firm also sells a variety of noncarbonated Read more

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Week Ahead Market Report: 2/8/2010
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