Hot or Not? Coca-Cola
|
C2 may revive sales for awhile, but will it be enough for investors to forget its other problems?
June 17, 2004
By Andrew Stein, CNN/Money staff writer
|
NEW YORK (CNN/Money) - It may be top dog in the cola wars, but Coca-Cola has been playing catch up on Wall Street for some time.
Shares of Coke have trailed the rest of the market for the past few years as the Dow component struggles to overcome a slew of hurdles. Most recently, a management shakeup, SEC probe into its accounting practices and falling sales of its flagship product have taken the fizz out of this once venerable stock.
But with its low-carb C2 cola marking the company's largest product introduction since its successful launch of Diet Coke in the early 1980's, we figured it was a good time to ask whether Coca-Cola is Hot or Not?
Just for the taste of it
Market share of Coke Classic and Pepsi-Cola have both withered over the past several years, with Coke losing about 9 percent and Pepsi shedding about 12 percent since 2000, according to Beverage Digest.
However, Coca-Cola does have a strong heavyweight in its portfolio: Diet Coke. In fact, it is the only one of the top six selling soft-drinks to gain market share over the past four years.
Still, now that Coke has latched onto the low-carb craze, investors have to be wondering if Coke is messing with a good thing. Will the new C2 eat into Diet Coke sales?
Things go better with Pepsi?
In the soft-drink market, the Atlanta-based company has held the top spot for years, with Pepsi second, as Coke flexed its marketing muscle and spread its iconic brand around the world.
The two companies have been engaged in their cola wars for decades, often launching similar products within months of each other.
But the similarity ends there. Coke shares have remained flat this year while Pepsi's stock has climbed 15 percent year-to-date on the continued strength of its Frito-Lay snack food business.
Coke isn't it on Wall Street
With the various obstacles hanging over it, one might think Coca-Cola shares would be trading at a discount to its peers. But the stock sports a price-to-earnings ratio of about 24 times 2004 estimates, in line with Pepsi's and above the average of 22 for the rest of the beverage industry.
C2 may give Coke sales a boost as low-carb fans pick up a bottle, but with an already popular, growing diet drink on the market, the initial pop may not be enough to outweigh its other problems.
|
--*Disclaimer
|
|
|
|
|
 |
|
