Sparkling Soda Decline Continues for Coca-Cola, PepsiCo, and Dr Pepper Snapple Group

Still beverages beat sodas. What does this mean for Coca-Cola, PepsiCo, and Dr Pepper Snapple Group?

Apr 30, 2014 at 5:30PM

Consumers' increasing dislike for sodas along with their increasing preferences for healthy still beverages and snacks all represented themes in last week's news surrounding beverage giant Coca-Cola (NYSE:KO), snack/beverage conglomerate PepsiCo (NYSE:PEP), and their little brother Dr Pepper Snapple Group (NYSE:DPS)Coca-Cola reported further weaknesses in its carbonated soda segment with sparkling volume declining 1% in its most recent quarterly report.  Carbonated sodas serve as an increasing drag on Coca-Cola's overall volume reports Beverage Daily. According to the newsletter, Coca-Cola's global volume growth has shown a steady decline annually with volume growing 6% in 2010, 5% in 2011, 4% in 2012, and a mere 2% in 2013.  PepsiCo also saw a 1% decrease in its North American carbonated soda business. In Latin America PepsiCo saw its overall beverage volume decline due to carbonated related soda taxes in Mexico in the most recent quarter. 


Source: Motley Fool Flickr

Simply Orange proves popular
In contrast to Coca-Cola's carbonated sodas, it's still beverage volume increased 8% in the most recent quarter.  Coca-Cola's still volume got a boost from brands such as Simply Orange which saw a double digit expansion in North America. Simply Orange goes against the overall decline in orange juice volume stemming from concerns of health care professionals and consumers regarding the sugar and calorie contents of orange juice in general, according to Beverage Daily. The all natural perception of Simply Orange serves as a draw for consumers. However, doubts exist as to the legitimacy of Simply Orange's "pure" and "natural" status. Until claims prove otherwise, consumers will likely continue snapping up the product. 

Dr Pepper minus Ten


Source: Motley Fool Flickr by Karin Hernandez

Beverage Daily cites a study performed by a Wall Street firm indicating that Dr Pepper Snapple Group's Ten diet line of sodas are losing placement in convenience stores. According to the survey, the product line only resides in 72% of convenience stores surveyed versus 82% about a year ago. Convenience stores complain about Ten's lack of repeat business.  Overall diet soda volume suffered relatively worse in 2013 according to Beverage-Digest.  Consumer health concerns about diet soda ingredients such as aspartame serve as a driver for this accelerated decline.

Frito-Lay Co?


Source: Motley Fool Flickr by Chris Mali

Maybe PepsiCo should change its name to Frito-Lay Co. Here's why. Snacks carried PepsiCo in its most recent quarter.  Its reported global snack volume increased 2% versus flat volume for beverages. PepsiCo's CEO Indra Nooyi believes its business will lean more toward snacks in the future, according to the newsletter Bakery and Snacks. PepsiCo's snacks also retained top positions in a number of its markets.  Frito-Lay North America and Quaker Foods North America both reported strong gains in volume when factoring out currency fluctuations, mergers, and divestitures.  Frito-Lay's biggest brands -- Ruffles, Cheetos, Doritos, Tostitos, and Lay's -- all served as catalysts for revenue growth according to Bakery and Snacks

What should investors do?
Coca-Cola shareholders shouldn't run for the hills just yet. Coca-Cola still possesses the largest non-alcoholic beverage infrastructure on the planet.  The future for this company will likely come from still beverages. PepsiCo shareholders should enjoy a bright future brought on by its strong snack portfolio. Potential investors in Dr Pepper Snapple Group should probably take their investment dollars elsewhere while product innovations such as the Ten diet line and even some of its healthy beverages fail to perform. Dr Pepper Snapple Group's lack the scale and dependence on the distribution networks of Coca-Cola and PepsiCo also give them the upper hand.

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William Bias owns shares of Coca-Cola. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of Coca-Cola and PepsiCo and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

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Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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