Coca-Cola to Tap Into New Potential

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

It was announced recently that Coca-Cola (NYSE: KO) will enter into a partnership with HSN to tap into a whole new customer base. The collaboration will result in multi-year marketing for both the brands. As a result of this partnership, the Coca-Cola brand will be intertwined with all the HSN’s programming events throughout the year. HSN (NASDAQ: HSNI) intends to launch new campaigns that will merge both the brands at various events.

This collaboration may also be interpreted as Coca-Cola’s attempt to ramp up its marketing strategies in order to face its direct competitors, Pepsico and Dr Pepper Snapple Group (NYSE: DPS), in a more effective manner. Pepsi has been giving Coca-Cola a hard time in all the major markets. However, Pepsi does not have as many extensive plans for international growth as Coca-Cola. Dr Pepper recently crossed above 3% yield territory and had a profit and operating margin of 10.47% and 17.93%, respectively, in the last twelve months, which is close to Coca-Cola’s operating margin of 22.93%. Therefore, it may also represent a threat toward Coca-Cola’s already dwindling market share. The partnership with HSN will allow Coca-Cola to create a more interactive marketing model that will build a stable link between the company and consumers.

Collaboration with HSN

Bill Brand, EVP of Programming, Marketing, and Business Development at HSN, said, “We are very excited about this robust partnership between HSN and The Coca-Cola Company in 2013. True collaborative partnerships inspire our organization, our partners and most importantly our customers.” He further added, “HSN is dedicated to offering our customers fun, engaging retail opportunities and we look forward to introducing the HSN experience to a new audience and evoking that iconic moment of happiness that embodies the Coca-Cola brand.”

The Coca-Cola branded merchandise at the online store by HSN will include some of the most popular items, along with some exclusive products. The extensive collection of Coca-Cola merchandise will include items from various categories such as home décor, sporting goods, kitchen appliances, etc. This store will be the largest online Coca-Cola store in the world.

The association of both the brands will be extended to all the aspects of HSN, including the philanthropic project known as ‘HSN Cares.’ Under this project, HSN will launch a campaign called The Heart Truth® in collaboration with Diet Coke. This campaign will be for awareness about heart disease in women. HSN will also create merchandise that will be exclusive to this campaign, and the proceeds from the sales of that merchandise will be diverted towards programs that support women’s heart health.

Stuart Kronauge, vice president of Coca-Cola Trademark Brands, said, “Partnering with HSN gives us the opportunity to leverage their innovative digital platforms and engaged customer base to introduce the world of Coca-Cola to a whole new audience.” He further added, “Fans of our brand will be able to experience it like never before, and we look forward to working with HSN to elevate our brand in new and exciting ways.”

Investment in Milk-Based Beverages

Coca-Cola announced recently that it will acquire stakes in the Core Power maker, in collaboration with Select Milk Producers Inc. The company will be known as Fair Oaks Farms Brands LLC, and it will produce high protein milk-based beverages. According to Coca-Cola officials, the company intends to establish “an innovative portfolio of brands and products that feature the value-added nutrition of dairy.”

The scope of investment has not been disclosed, but it has been indicated by Coca-Cola that the investment in this project will increase over time. The market price of the shares of Coca-Cola did not show any significant difference after the announcement by the company. Currently, the shares of the company are being traded within the range of $37.39 and $37.74.

Coca-Cola’s International Growth

Although Coca-Cola has comprehensive plans for international investment, the analysts at JP Morgan believe that the company’s international growth will be slow. It is because of this belief that the firm lowered the earnings estimates for Coca-Cola for the next fiscal period. According to J.P.Morgan analysts, buying Coca-Cola’s stock at this point may not be a good idea; therefore the firm has given a neutral rating to Coca-Cola.

In my opinion, investors should ‘hold’ the shares of the company, as there is uncertainty regarding the prospective market performance. Buying the shares may be a risky decision, while selling the shares may cause a loss of a possible opportunity for short term gains. Considering the active endeavors by Coca-Cola in maintaining a stable market position, it can be said that there is a possibility for positive financial performance by the company in the prospective periods.


muhammadbazil 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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