Coca-Cola – Part 2

Strengths and weaknesses analysis / Fundamental analysis: 
Strengths: 

• Coca-Cola maintains one of the world’s best-known brand names,
• Its product is sold in key store locations,  
• Its business is well protected against new entrants. It is very expensive to establish and maintain a similar retail sales network worldwide,
• Carbonated products still have ample growth potential in EM,
• On the back of a strong and innovative product pipeline, volume growth is expected to accelerate in the coming quarters. 

 

Weaknesses:

• Due to poor short-term company performance, the stock has de-rated compared with the peer group. Further de-rating is to be expected as carbonated sales continue to decline,
• The key agricultural products the company requires e.g. sugar, cocoa, and oranges are cheap at present, but higher price volatility and shortages of these products would expose the company to new challenges,
• 80% of revenues are generated in non-USD countries. A stronger USD would imply weaker company results.
• Europe and China are important markets for the company. Further gripping of economic conditions in these areas can be expected; hence company results may be tempered for another number of quarters.   
• The introduction of a levy on carbonated products should dramatically change consumer practice.