In these uncertain times for the stock market, it's a wise course to invest in companies with rock-solid brand names and long-term dominance of their industries. It's hard to think of a company that fits that description better than Coca-Cola (NYSE: KO).
According to Beverage Digest, Coke's brands collectively controlled 40.5% of the U.S. carbonated soft drink market in 2013, well ahead of its leading rival PepsiCo (NYSE: PEP). Even in a head-to-head competition between the flagship brands---Pepsi versus Coke---Coke emerges the winner, with 17% of the market compared to Pepsi's 9.7%.
The company also has a huge asset in the Coca-Cola banner, which was named the world's top brand for the 13thtime on brand-consulting firm Interbrand's annual list.
In addition to Coke, the company's brands include over 3,500 beverages, which it sells around the world, including diet and sparkling colas, fruit juices, water, sports drinks tea and coffee.
Coca-Cola shares, too, are renowned for long-term, consistent growth. The stock has risen over 60% in the past five years. And it has made the climb with remarkable consistency. The stock carries a beta rating of just 0.51, which means it's almost exactly half as volatile as the overall market. Warren Buffett's Berkshire Hathaway (NYSE: BRK.A, BRK.B) is the company's largest shareholder, with an 8.9% stake.
"Every investor's goal should be to find companies with sustainable competitive advantages like Coke,"writes Investing Daily's Jim Fink. "Coke's cola has always tasted the best and cannot be cloned despite endless efforts by competitors to do so. Coke's worldwide exclusive distribution network is virtually impossible to replicate. When you combine the best product with the best distribution network, you have an unbeatable business."
Not to be overlooked is the company's long history of returning capital to shareholders, both through reliable dividends and share repurchases. Coca-Cola is also one of America's most reliable dividend-paying stocks. The company has paid dividends for 84 consecutive years---since 1920---and has raised its payout every year for the past 50 years. The current annual rate of $1.02 a share yields 2.69% on a yearly basis.
The company's ongoing share repurchase plan is another often-overlooked benefit. Coke has spent $2.5 billion on buybacks through the first three quarters of the year.
The company's latest earnings report had a lot of positives. Global unit case volume grew 3% in the quarter and 2% year to date.Coca-Cola International volume grew 3% in the quarter while North America volume was even. Sparkling volume and brand Coca-Cola volume accelerated in North America, Eurasia and Africa, Europe and Asia Pacific in the quarter. Global price/mix increased 2% in both the quarter and year to date.
Reported net revenues declined 1% in the second quarter and 3% year to date. Excluding the impact of structural changes, comparable currency neutral net revenues grew 3% in both the quarter and year to date. Reported operating income declined 2% in both the quarter and year to date. Excluding the impact of structural changes, comparable currency neutral operating income grew 5% in the quarter and 6% year to date, resulting in improved operating margins while it continued to invest for growth in our brands with its global system partners.
Second quarter reported EPS was $0.58, down 1%, and comparable EPS was $0.64, up 1%. Comparable currency neutral EPS increased 6%. Year-to-date cash from operations was $4.5 billion.
Coke also said that unfavorable exchange rates held back its operating income by 7% in the quarter. The company's gross margin rose to 60.7% from 60.2% a year ago.
Despite the sales miss, the company saw higher sales volumes across all its divisions, led by Eurasia and Africa, where volumes rose 11%.
India continues to be a growth area for Coca-Cola. The company saw overall volumes rise 15% in the country in the latest quarter, with its main Coca-Cola brand posting a 34% increase. Sprite gained 15%. The company said its Indian growth is balanced across all of its package sizes. It also sold more juices and juice drinks, such as Minute Maid Pulpy and Maaza.
The company's Indian unit now controls 25% of the country's soft drink market, ahead of PepsiCo's 20% share. Domestic soft-drink maker Parle Bisleri also has a 25% stake.
Coke now plans to invest $5 billion in the country by 2020. The company will to use this cash to expand its distribution networks, introduce new products and increase its manufacturing capacity. That will help it better attract consumers as India's middle class keeps growing.
So Coca-Cola retains its dominant position in the world's most enviable market -- the United States -- and has ever-stronger growth prospects abroad. Sounds like the next five years will be just as sweet as the last five years have been.
Tom Scarlett is an investment analyst at Personal Finance.
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