Juicing for Growth
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Today, while looking at a few cold hard numbers, I'm also taking a more contemplative look at what some major companies are doing to drive growth. More specifically, I'm looking at how Starbucks Corporation (NASDAQ: SBUX), PepsiCo, Inc. (NYSE: PEP), The Coca-Cola Company (NYSE: KO), and even the Campbell Soup Company (NYSE: CPB) are juicing for growth.
Starbucks Corporation acquired the Evolution Fresh juice brand in 2011. The Company is seeking growth via juice outlets that focus on healthy beverage drinks. As Julie Jargon reported in a Wall Street Journal article (November 11, 2011), " The coffee chain is buying a small, upscale juice maker Evolution Fresh Inc. for $30 million—a deal that pushes Starbucks well beyond its coffee roots and shows how serious the company is about transforming itself into a consumer products player with a large presence outside its own stores."
Why is this important to potential Starbuck's investors? Aside from being a new revenue stream, this acquisition highlights Starbucks commitment to tailoring their growth to trends. Health foods and drinks are more "in'' than ever. Companies such as Starbucks must drive growth through offering "on trend" products in addition to their core products. While there's still room for innovation and growth in the coffee and tea category, there's probably greater room in the health drinks category.
Consider that Starbucks reported in January 2013 their financial results for their fiscal first quarter (ended December 30, 2012) and their focus going forward. They believe they will have sustainable profitable growth due to two major factors. These are the quality and diversity of their growth drivers in tandem with their ongoing concentration on operational excellence. Evolution Fresh is one of those quality and diverse growth drivers.
The Company started out small with their Evolution Fresh initiatives. However, by the end of 2013, their goal is to have this line of bottled cold-pressed juices in roughly 8,000 locations. Starbuck will open a juice processing facility this year in Southern California. Investors should note that this will quadruple their production and distribution capacity.
Investors should also note that Starbucks has a history of successful initiatives (their ready-to-serve coffee powder (instant coffee) although they refrain from using that term, elaborate in-store coffee concoctions, and Verismo® machines).
Consider that for 1Q 2013 their Total Net Revenues grew by 11% to $3.8 billion, which is a record for the Company. Their global comparable store sales increased by 6%. The Company has a history of growing sales and no doubt has plans to market their healthy juice offerings aggressively.
PepsiCo, Inc. has plans for their breakfast beverage under their Mountain Dew brand. This is the Company's "Kickstart" product offering. This 16 ounce product (80 calories) is a caffeinated sparkling juice drink.
Mr. Greg Lyons , VP of Marketing for Mountain Dew, said, "Our consumers told us they are looking for an alternative to traditional morning beverages…"
Here's another major beverage player catering to the desires of their customers. They're being innovative as per the demands of the marketplace. Who would have thought of PepsiCo as a morning beverage purveyor? Investors should research companies who are not afraid to be creative as concerns additions to their storied product families.
PepsiCo's Organic Revenue (sales streams, which are a direct result of an entity's existing operations) increased 5 percent in the fourth quarter and full year 2012. PepsiCo Americas Beverages market share movement in the United States advanced chronologically in the fourth quarter. The Company stated that this was because of "disciplined execution and significant investments in advertising and marketing."
Of importance to potential investors is that the Company is targeting mid-single-digit organic revenue growth and 7 percent core constant currency Earnings Per Share (EPS) growth for 2013. For income loving investors, PepsiCo Company announced a quarterly dividend increase of 5.6%, which will begin this coming June.
The Coca-Cola Company's "Simply Orange Juice Co." brand is also pursuing growth. This brand of juice blends has three new flavor additions to their family. Again, here's a traditional beverage company constantly innovating based on consumer desires.
Allison Higbie, Group Director of Marketing for Simply Beverages, stated recently, "To meet the demand for new flavors, we are offering refreshing new twists on classic favorites."
Coca-Cola, for the 2012 fourth quarter and full year increased worldwide volume and value share in nonalcoholic ready-to-drink (NARTD) beverages. This category includes their Simply Orange and Minute Maid Juices To Go. Overall, the Company experienced volume and value share growth across almost every beverage category. Coca Cola reported global volume growth of 4% for the full year (3% for 4Q).
In addition, it's not all "soups" for The Campbell Soup Company; they've juiced up their product portfolio with their Bolthouse Farms offering. This is a newly acquired business for Campbell's. Bolthouse Farms product line-up consists of beverages, carrot products and dressings. Juices include carrot, pomegranate, acai, mango coconut and others.
Denise Morrison, President & CEO of The Campbell Soup Company stated earlier this year that, "Our newly acquired Bolthouse Farms business delivered solid results in the fresh carrots, beverages, and salad dressings category, driven by innovation and increased distribution. The Bolthouse Farms integration is also progressing well."
This is an important step forward for Campbell's. For the second quarter of fiscal 2013, their sales grew 10 percent to $2.333 billion. The acquisition of Bolthouse Farms added 9 percent to this sales increase.
What can investors' takeaway from all of this? Certainly, it's a juicy time in the marketplace for these major players on the stock market. They recognize the value in offering healthier drink options to consumers focusing on healthier lifestyles. As an investor, research solid companies in sync with what the marketplace is demanding of them in terms of new products that address health concerns.
Michael Ugulini has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, PepsiCo, and Starbucks. The Motley Fool owns shares of PepsiCo 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!