Coke's Sour Note

You know that wedge of lime you ask for when your order a clear-bottled Mexican beer? I always thought its purpose was to mask the funky, skunky taste that comes when you guzzle degraded products in tourist destinations where inventory doesn't move so quickly. Ditto the lime that people order with their Diet Cokes -- if it's not there to cover up for that robotic, sugar-supplement aftertaste, why is it there at all?

I take my Coke straight up, thank you. But, apparently, Coca-Cola (NYSE: KO) thinks people just enjoy a little citrus with their cola, which is why the firm unveiled plans to introduce a lime-tinged regular (read, nondiet) Coke early this year. If the figures provided to the Associated Press regarding Diet Coke with lime's market penetration are any guide (a 0.7% share of the market in the U.S.), then a non-nonfat version is definitely not the fix for Coke's recent woes.

You might want to ask yourself what's become of the industry when generic maker Cott's (NYSE: COT) lowered guidance looks a lot like the situation at the biggest brand in the world. PepsiCo (NYSE: PEP) has been creaming Coke in the lucrative noncarbonated market, where its flagship Gatorade continually outperforms Powerade. (Largely because -- in my expert opinion as a runner, cyclist, and user of both products -- a post-race Powerade makes many of us want to heave.)

But in the end, I wonder whether product quality is really a factor at all. Marketing sizzle may be the only thing that matters. Let's face it: We're talking about tap water (literally) and its sugared cousins. And this is where I think Coke has lost its way. When I take a look at a chart like this one, I see a company whose best days may be behind it. The masses need caffeine? Increasing numbers of them make the trip to Starbucks (Nasdaq: SBUX) for a hot one or grab a chilly Frappucino at the 7-Eleven (NYSE: SE). International sales will save the day? Not a bet for me. When I witness the evident glee that Europeans take in Coke's failures, like the bogus U.K. rollout of Dasani, I wonder whether it can ever battle its simmering reputation as an ugly American.

Yes, Coke has looked cheap as heck ever since this fall's unpleasantness, with an enterprise value-to-free cash flow ratio in the high teens, but I stand by the assessment I made back then. There are plenty of smart folks who will disagree with me, but I'm not sure Coke is cheap enough. I'm pretty sure I can find better investment ideas.

For related Foolishness:

• I may not like Coke, but this guy's really got his undies in a bundle.
• Should you be crying in your Coke?
• Thinking about scoring some cheap coke?
• C2 has puzzled many of us.

Seth Jayson still buys plenty of Cokes, but at the time of publication, he had no positions in any  company mentioned. View his stock holdings and Fool profile here. Fool rules are here.