The Coca-Cola Company: Strengths, Weaknesses, Opportunities, and Threats
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A SWOT analysis is a look at a company’s strengths, weaknesses, opportunities, and threats, and is a tremendous way to gain a detailed and thorough perspective on a company and its future. Fresh off their third quarter financial results, I would like to focus on the owner of the most globally recognized brand in the world, The Coca-Cola Company (NYSE: KO).
- The company has been in business for 125 years, is valued at $166.31 billion, and operates in nearly every country in the world, and is as stable and established as it gets
- Coca-Cola operates in some of the fastest growing markets in the world, and with a growing middle class in these regions, more people will have the funds to purchase Coca-Cola’s products (Case Volume Growth- Latin America: 6% Eurasia & Africa: 6% Pacific: 5%)
- The company pays out quarterly dividends of $0.255, which annualized puts the dividend as yielding 2.75%
- The company has paid out dividends since 1987, and has consistently paid out and raised its dividends since implementing their dividend
- The company’s stock is relatively un-volatile, with a Beta of 0.51
- The company is exposed to fast-growth markets and slow-growth markets alike (Case Volume Growth- Europe: 2% North America: 1%), and these markets weigh on the company’s overall growth as 37% of the company’s business is split between these two markets
- The company is relatively established in the markets it operates in, as not a lot of people are unaware of the Coca-Cola brand
- The company produces products that are not considered “healthy”, the large portion of their beverages are high in sugar content, and as the world’s waistline keeps growing, people are going to eventually look towards healthier alternatives
- The company owns or licenses more than 500 brands of beverages, and there are not a huge amount of sub-industries in the beverage market that Coca-Cola does not operate in
- The company recently acquired its 15th billion dollar brand, Del Valle, and other acquisitions are always an opportunity for the company
- The company’s revolutionary twist on the fountain dispenser, the Freestyle, has drawn customers across state lines just to get in line to fill their cup with their favorite beverage, and this machine should prove to be a valuable investment into the future
- Their extensive and effective distribution network allows the company to take any product and have it in nearly every store around the world in days
- The energy-drink market has for years been labeled as a fast-growing market, and an acquisition of Monster or another company is not probable at the time, due to the recent allegations against Monster, however is possible
- PepsiCo has for decades been battling with Coca-Cola for the money of the consumer, and this threat will not disappear anytime in the near future
- Recently some select states have imposed taxes on the sale of soft drinks, and have banned the sale of drinks larger than a certain size, trying to battle obesity
- A rise in ingredient prices could squeeze the margins of the company, as the historic drought of this year has already caused food prices to rise considerably
- Coca-Cola sells products in countries all around the world, so they face the threat of weak currency conversion rates that could hurt margins
Major publically-traded competitors of Coca-Cola include PepsiCo (NYSE: PEP) and Dr. Pepper Snapple Group (NYSE: DPS). PepsiCo has been competing with Coca-Cola since their birth, and offer similar to near identical products. These two companies will continue to battle each other into the future. Dr. Pepper Snapple, while significantly smaller than Pepsi and Coca-Cola, poses a significant threat to Coca-Cola because of the wide popularity of their products and difference between the different brands. Their main brand, Dr. Pepper is relatively unlike anything Coca-Cola offers.
Coca-Cola possesses many strengths, weaknesses, opportunities, and threats; however in the end appears to be an established giant with a firm grasp on the beverage market. Emerging markets should fuel growth into the future, while recovering established markets should rebound. For any long-term investor, Coca-Cola is a tremendous buy on any pullback.
makinmoney2424 has no positions in the stocks mentioned above. The Motley Fool owns shares of PepsiCo. Motley Fool newsletter services recommend The Coca-Cola Company and PepsiCo. 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.If you have questions about this post or the Fool’s blog network, click here for information.