Starbucks and Monster Look Better After Coca-Cola's Report

Eric is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Coca-Cola (NYSE: KO) started off 2013 with decent results. Even though the beverage seller's revenue dipped, the report impressed the market, which looks positive for companies that sell refreshments in general. Coca-Cola reported especially strong results in its tea, juice, and energy drinks businesses. Rising demand for these products could help Starbucks (NASDAQ: SBUX) and Monster, (NASDAQ: MNST) although these companies do have to consider the competition from Coca-Cola.

Overall results

Coca-Cola's report shows that volume gains exceeded revenue gains this quarter. Coca-Cola's overall sales dipped 1% for 1Q 2013, and the beverage giant reported 4% volume growth. Unfavorable currency impacts also affected the company's sales. Exchange rates could work in Coca-Cola's favor in the future, so volume statistics do help put the quarter's results into better perspective. Coca-Cola closed the day up 5.7% after releasing the report.

Energy drinks

A stronger performance by Coca-Cola in the energy drink market could suggest tougher competition for Monster. Nevertheless, Coca-Cola's announcement that it sold 9% more energy drinks, by volume, isn't a reason for Monster investors to worry. Monster achieved 15% revenue growth last quarter, and Monster's growing from a large base. Energy Fiend states that in 2012, Monster had 37% market share, while Red Bull had 42% of the market. Traditional soft drink companies still haven't caught up to the two big names in this business.

A slowdown in the energy drink market overall would pose more of a risk to Monster, as the energy drink seller's held up relatively well against direct competition. Monster's 10-K explains that consumer concerns about energy drinks, or caffeinated beverages in general, could hurt the company. Rising energy drink sales at Coca-Cola make this risk look less significant. Coca-Cola's energy drink results could also suggest better prospects for Starbucks' Refreshers as well.

Tea drinks

Coca-Cola also sold more tea in 1Q 2013, as the beverage giant reported an overall gain in the double digits. One item in the report specifically stands out for Starbucks. Coca-Cola explained that its Ayataka green tea brand achieved 13% growth in Japan, and the beverage giant also noted that Ayataka became a billion dollar brand recently. The news that a company that's best known for its cola drinks successfully grew a major tea brand in an Asian market makes coffee giant Starbucks' tea sales prospects look a lot better. With Tazo and Teavana, Starbucks already has two strong tea brands of its own.

Juice drinks

Juice also stood out as a growth area for Coca-Cola this quarter, with juice sales rising by 9%, and this category provides diversification for the beverage giant as well. Rising juice sales could also be good news for Starbucks' Evolution Fresh line. In February, Starbucks announced that Evolution Fresh juice was available at coffee shops in Boston and New York City. As for Monster, rising juice demand might mean a few more Hansen beverage sales, but at this point energy drinks provide almost all of Monster's revenue, which explains why the beverage company changed its name to Monster last year.

Takeaway

Coca-Cola's results highlight areas in the international refreshment market that currently have growth potential. This quarter, the beverage giant's efforts to expand outside of soft drinks look like they worked. Coca-Cola's juice, tea, and energy drink operations all exceeded its overall performance. These results indicate global drink trends that should work in favor of Monster and Starbucks as well.


Eric Novinson has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, Monster Beverage, and Starbucks. The Motley Fool owns shares of Monster Beverage and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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