Is This the Best Beverage Buy?

Soft-drink retailers are a classic defensive play. They're cheap treats for cash-strapped consumers, and because their revenues are based on volume rather than high prices, they have the ability to raise their revenues significantly with minor price changes. What's not to like?

Getting into the numbers
Who are the major soft-drink retailers and how do they stack up to one another?

Company

Market Cap
(in millions)

Revenue, LTM
(in millions)

Free Cash Flow, LTM (in millions)

Dividend Yield

CAPS Rating (out of 5)

Coca-Cola
(NYSE: KO  )

$121,005

$31,346

 $ 6,720.0

3.4%

****

PepsiCo
(NYSE: PEP  )

$102,956

$44,337

 $ 5,199.0

3.1%

*****

Dr. Pepper Snapple
Group (NYSE: DPS  )

$9,059

$5,519

 $ 1,380.0

2.7%

***

Hansen Natural
(Nasdaq: HANS  )

$3,442

$1,137

 $   206.3

-

****

Cott (NYSE: COT  )

$609

$1,592

$108.3

-

*

SkyPeople Fruit Juice (NYSE: SPU  )

$113

$70

 $     0.5

-

*****

Jones Soda (Nasdaq: JSDA  )

$48

$23

 $    (5.5)

-

**

Data from CapIQ, a division of Standard & Poor's, and the Motley Fool CAPS database.

It's important to keep track of revenue, but free cash flow gives us a better sense of what the company is doing with that revenue -- and whether they'll have the funds to invest in the business later.

Coca-Cola is the 10-ton gorilla of the soft-drink industry. It's focused entirely on beverages, unlike PepsiCo, which has a thriving snacks business, and Warren Buffett famously reported that if you gave him $100 billion and asked him to take away Coke's soft-drink leadership, he'd give it back and say it couldn't be done.

Hansen Natural, on the other hand, has been a small-cap darling for its incredible outperformance over the last ten years.

Which soft-drink retailer do you like and why? Let us know in the comments.

Fool editor Julie Clarenbach doesn't own any of the companies mentioned here. Coca-Cola is a Motley Fool Inside Value choice. Hansen Natural is a Rule Breakers selection. Coca-Cola and PepsiCo are Income Investor picks. Motley Fool Options has recommended a diagonal call position on PepsiCo. The Fool owns shares of Coca-Cola. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 12, 2010, at 8:52 AM, Varchild2008 wrote:

    Dr. Pepper snapple has been under analyst attack ever since it debuted in 2008, may. Back then analysts were saying that $20 a share was far too expensive. One analyst said to wait for it to dip to $15. Eventually the stock fell to $11.93 or so at the bottom. Now the company is significantly improving sales in all categories except premium beverages.

    Some analysts don't want the stock to strike 40 yet. I say....who listens to analysts anyhow? Dps deal with coke was not just a cash deal like pepsi. Dps has gained fountain spots and can now ship some coke products. Coke will bring a better way to ship dps drinks as well, if you have been following their planned trials they have for the new shipping approach.

    In the end, I think dps cash flow is strong enough to push the stock much higher than analysts think. Dividend plus buyback plus snapple sales equal brighter future to come.

  • Report this Comment On June 12, 2010, at 5:24 PM, tabiad wrote:

    The new comer must dominate the market, and this can only be done through precise, aggressive marketing- Pepsi revealed this strategy with michael jackson but the entire fire mishap went wrong , had it went as planned, I believe it would've been full scale impact.

    Anyway. an everest of marketing would get your brand in the circuit.

    I believe Jones soda can be this player. they have showed signs of strong marketing but shy of a full a aggressive explosion.

    The Wallmart is a sign of good direction and co-operation on management's side; this is important to investors.

    I vote Jones Soda.

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