Long considered one of Warren Buffett's favorite companies and top holdings, Coca-Cola
Let's take a closer look at why Warren loves this company and why you should consider Coca-Cola for your portfolio.
Blockbuster brand power
Coca-Cola has been labeled Interbrand's "Best Global Brand" for 12 consecutive years. Founded in 1886, the world's largest beverage company boasts 15 billion-dollar brands including Diet Coke, Coca-Cola Zero, and Sprite. The company sold 26.7 billion unit cases worldwide in 2011 equaling 1.8 billion servings per day of its 500 brands. In the past several decades, Coke has transformed itself from a carbonated-beverage company to one that includes juices such as Minute Maid and Odwalla, ready-to-drink teas such as Honest Tea and Fuze Tea, and sports drinks and waters such as PowerAde, vitaminwater, and Dasani.
Overseas opportunities abound
Coca-Cola's recent quarterly earnings showed continued growth in emerging-market nations, with Q2 2012 unit case volume growth for China, Brazil, India, and Russia at 7%, 6%, 20%, and 9%, respectively. While case volume outside the U.S. already stands at roughly 80% of Coke's worldwide volume, the company is aggressively pursuing growth in thirsty, relatively untapped emerging markets.
Percent of Coca-Cola's Overall Unit Case Volume
Per Capita Consumption
|United States||20.6%||314 million||403|
Source: Coca-Coca 2011 Annual Report. Per capita consumption based on an 8-ounce serving.
It's easy to see why Coke -- with one-tenth of the market penetration, nearly four times the population, and only 3% the per capita consumption of the U.S. -- recently upped its multibillion-dollar investment in India. The company is waging a fierce war with PepsiCo
Mighty balance sheet
Coke's solid cash position, increasing sales and margins, strong free cash flow, and 2.6% dividend yield have contributed to the company's success. During the past 12 months, Coke has fared well versus its competitors and the overall stock market, providing a total return of nearly 19% since this time last year. Dr Pepper Snapple
What to watch for
To supply many of Coke's beverages with the 10 teaspoons of sugar needed for each 12-ounce can, the company literally buys mountains of sugar annually. Most of this sugar comes from corn -- a key ingredient of high-fructose corn syrup. Historically, Coca-Cola has successfully hedged its huge commodity cost exposure, but the most intense U.S. drought in half a century may present a challenge. Coke's input costs spiked up last quarter. And assuming companies such as Archer Daniels Midland
Coca-Cola is worth a look because of the company's timeless and ubiquitous brand, global dominance, emerging-market growth opportunities, and solid financials. But don't take my word for it -- do some research of your own.
If you're interested in finding more great stocks with emerging market exposure, check out our free report featuring three U.S.-based companies set to dominate global markets. The report profiles a company that enjoys 50% more revenue in China than it does in the U.S. yet holds huge potential in Russia and India, where it currently obtains less than 1% of its sales. This free report won't be around forever, so get your copy today.
Fool contributor Nicole Seghetti owns shares of PepsiCo. Follow Nicole on Twitter, @NicoleSeghetti. The Motley Fool owns shares of SodaStream International, Coca-Cola, and PepsiCo. Motley Fool newsletter services have recommended buying shares of Coca-Cola, SodaStream International, and PepsiCo and creating a diagonal call position in PepsiCo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.