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Here's Why Investors Should Hold Coca-Cola for the Long Run

July 23, 2014 | About:
rusticnomad

rusticnomad

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Coca-Cola (KO) is a standout amongst the most well-known brands on the planet. The stock is a dividend aristocrat as it has paid continuous dividends for more than 25 years. In any case, it would seem that Coca-Cola is stagnating. In the last two years, the stock has acknowledged less than 12%, grossly underperforming the S&PPP 500's addition of around 47%. So, has Coca-Cola lost its appeal, and should investors proceed onward for greener pastures? Let’s take a look at the strategies and underlying business.

Increasing advertising spend to overcome weaknesses

Coca-Cola's performance is determined by the strength of its brand, value, pack, and channel building design across its whole portfolio. The organization has been increasing its advertising investments quickly, and is focused on decreasing different costs.

However, the organization is confronting weaknesses. Its volume in its developed markets was down 1% in the first quarter. As a result, Coca-Cola is investing in promoting with replenished force. Recently, the organization needed to boost its advertising plan because of declining volumes in developed markets.

Focus on productivity

Coca-Cola is focused on certain strategic priorities. First, quicken development in sparkling beverages. Second, strategically stretch its portfolio. Third, increase brand investments by augmenting gainfulness. Fourth, lead points-of-sale.

Coca-Cola has established a comprehensive set of strategies to quicken sparkling beverage development. It is focusing on investments and is conveying strong showcasing to support the sparkling brand. It is working with its packaging partners to increase the sparkling brand penetration, as well as frosty drink accessibility. What's more, its cautiously choosing disciplined occasion, brand, value, pressed channel strategies, coupled with revenue development administration capabilities to drive sustained quality development.

Administration is also taking a look at development, coupled with strong engagement with partners and stakeholders, to elevate trust and to address class misperception. The organization believes that there's tremendous development potential in the sparkling class, and with the assistance of Coca-Cola's system partners, its investing in an extensive variety of sparkling advancement to satisfy the interest of its consumers.

A key arrangement

Also, Coca-Cola is looking to increase its presence with diverse products. Recently, the organization got a stake in Keurig Green Mountain (GMCR) to enter households through an alternate channel. Thus, Coca-Cola is making the right move by collaborating with Green Mountain. Furthermore, Coca-Cola as of late increased its stake in Green Mountain to 16%. So, the organization is sure in regards to the prospects of this move.

Positive trends

The organization is also undertaking efforts such as the Share a Coke program, with individualized personalized Coca-Cola bottles and cans, continuous support and advancement on Sprite and Fanta, and diversified new bundle introductions across its whole sparkling portfolio. These moves are required to produce energy and engagement among customers, prompting the growth of its sparkling brands all around the globe.

The non-alcohol mixed beverage major is distinctly focused on meeting expectations with its worldwide bottling partners to assemble strong, profitable, and intensely advantageous brands in a fast developing regardless profitable beverage classification. Case in point, Coca-Cola's efforts on its squeeze drinks portfolio have reaped benefits as volumes were up 3% in the first quarter. This was a result of brands such as Simply, which jumped in the twofold digits in North America, and Minute Maid Pulpy, which grew 8% in China.

The worldwide tea arrangement of Coca-Cola also increased 4%, owing to twofold digit growth across Honest and Gold Peak brands in North America, as well as Ayataka and Sokenbicha in China and Japan.

For North America, Coca-Cola remains focused on building strong brands, making customer happy, and improving its capabilities. It is streamlining its operations and distinguishing ways to operate all the more viably and effectively. Besides, Coca-Cola is very optimistic about its future in Europe, energized by strong and coordinated programs that it has created together with its partners.

Conclusion

So, Coca-Cola is making various impressive moves. Also, the organization's valuation is also very appealing. The stock trades at 22 times last year's earnings, lower than the industry normal of 46. Additionally, on a forward P/E basis, the stock trades at a P/E of just under 19, signifying earnings growth going ahead. In the next five years, Coca-Cola's earnings are expecte to grow at a CAGR of 6.70%, which is superior to the groth of 6.05% seen in the last five years. So, Coca-Cola looks like a solid stock from several angles, and improvements in the business can bring about a noticeable improvement going ahead.


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