When Warren Buffett decided to take a sip of Coke
Investors can still guzzle bubbling returns in this sector, but they may need to look farther afield. Over the past 12 months, the four beverage companies with the highest stock appreciation have peddled their wares at overseas watering holes. Each of these stocks is up more than 50%.
The companies aren't household names. In fact, three of the four names are likely to be unpronounceable to most of you. But investors willing to quaff some international exposure have enjoyed brisk returns by seeking out companies that are growing beverage share in the developing world.
|
Company |
12-Month Return |
Market Cap (Billions) |
CAPS Rating (out of 5) |
|---|---|---|---|
|
Central European Distribution |
111% |
$2.12 |
***** |
|
Companhia de Bebidas das Americas |
75% |
$51.7 |
***** |
|
Coca-Cola HBC S.A. |
72% |
$16.1 |
**** |
|
Coca-Cola FEMSA, S.A.B. de C.V. |
56% |
$9.9 |
***** |
Polish vodka
One of my favorite quotes from The Motley Fool's CAPS community says it all about Central European Distribution: "They sell vodka in Eastern Europe and Russia. Can you say 'profit'?" From a humble beginning in 1990 as the exclusive importers of Fosters and Grolsch beer in Poland, Central European Distribution has pioneered retail sales and distribution networks throughout the country, acquiring 16 regional distributors and two production companies along the way.
Sales have grown 26% annually over the past two years, with operating income nearly doubling in each of those years. The company is extending its reach, buying a 49.9% voting stake in the Whitehall Group, a leading importer and distributor of premium wines and spirits in Russia, with the option to buy the remaining interest over the next five years. The last time I checked, alcoholic beverages were pretty popular in Russia.
A Brazilian brew
If you find the name "Companhia de Bebidas das Americas" to be a mouthful, just call it AmBev. Headquartered in Brazil, it is one of the largest producers and distributors of beer and soft drinks in Latin America. The company leverages enormous efficiencies of scale to deliver operating margins close to 30%, notably higher than the 20% that industry rivals produce.
The company announced a bitter quarter last summer thanks to soft comparisons with prior-year results (which had been boosted by the World Cup), but fourth-quarter results announced last week show a return to previous form.
A different play on Coke
The last two companies are overseas bottlers and distributors of Coke products. Coca-Cola HBC S.A. is headquartered in Athens, but has an enormous franchise that extends from Ireland to Russia to Nigeria. Despite the company's gigantic size, it nimbly delivered 15% revenue growth and 17% operating profit growth during 2007, largely resulting from market-share gains in developing markets such as Poland and Russia.
Its counterpart in Latin America, Coca-Cola FEMSA, S.A.B. de C.V., is headquartered in Santa Fe, Mexico. It is one of the three sub-holding companies that make up Mexican beverage giant Formento Economico Mexicano, better known as FEMSA. Domestic Coke bottler Coca-Cola Enterprises is staring at sluggish growth in the next few years, but this Latin American bottler has the advantage of rapid population expansion in Latin American markets.
A Foolish bottom line
Beverage companies are generally thought of as defensive plays for uncertain markets -- slow-growing but dependable. However, the picture looks more enticing when investors can combine these solid industry characteristics with the higher growth found in international markets, as the stock performance of these four companies last year demonstrates.
Picking international stocks can be tricky, what with different accounting standards, currency risk, and the difficulties of evaluating the competitive position of each company. But instead of making a bet on whether Wal-Mart
If you're considering indulging in some overseas stocks (beverage or otherwise), the Fool's international investing service, Motley Fool Global Gains, can help you navigate these tricky waters. A free 30-day trial is yours for the asking.
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