Coke Must Fizz up to the Competition, Say Analysts

Jan 17, 2002
George Anderson

Although Coke sales have picked up since 1999, PepsiCo has continued to gain over its larger rival. Coke has been slow to react to the growth in non-carbonated drinks sector, which is currently twice as fast as that of the carbonated market, says Datamonitor.

Recent ventures aimed at improving the brand’s image among young consumers will not be enough to reverse Coke’s recent poor fortunes, according to Datamonitor. It still has much to do to avoid another year of losing ground to PepsiCo, which has bolstered its position with marketing involving pop stars such as Britney Spears.

Moderator Comment: Analysts need to get real on Coke.

It isn’t that Datamonitor has gotten it wrong, it just seems that the case of Coca-Cola’s demise is being overstated. Consider that:

  1. Coke’s long term earnings growth expectations are in the 11% – 12% range – pretty solid by most people’s standards. Thomson Financial/First Call has the consensus estimate on Coke (KO ? NYSE) pegged at $1.77 a share in 2002 up from $1.56.

  2. Pepsi’s connection with younger consumers is nothing new. The same theme has been repeated since I was a kid — a very long time ago. It is important to remember this situation is North American in nature. Coke’s distribution in Europe and elsewhere around the world is far superior to Pepsi’s.

  3. Coke may lose some ground in the take-home and immediate consumption bottled cola segments but it still owns the more profitable fountain business.

  4. Pepsi is doing a better job than Coke in areas outside of carbonated beverages — the Gatorade deal was a plus — but the folks in Atlanta aren’t sitting idly by. Most of Coke’s volume growth has been from non-cola businesses. Dasani continues to achieve spectacular results and Powerade is in it for the long term.

Seems to me that investors would have a hard time going wrong whether they picked Coke or Pepsi.

What do you think the prospects are for Coke, Pepsi and the liquid refreshment business in general? [George Anderson – Moderator]

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