Bottling Profits: The Producers of Coca-Cola
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Investing in The Coca-Cola Company (NYSE: KO) has been a great investment during almost any period of time. At only a few dollars off its all-time high set in 1998, The Coca-Cola Company has been a terrific investment for nearly every person who has invested in the company for the long-term. In just its relative modern history, shares of The Coca-Cola Company are up almost 700% since 1990 (and that’s not including 22-years’ worth of dividend checks).
What has also been a great investment is Coca-Cola’s worldwide network of independent bottlers. Not only have these bottlers been a great investment, but in many cases they have performed better than The Coca-Cola Company itself. Over the past 10-years, shares of Coca-Cola’s major bottlers have outperformed shares of The Coca-Cola Company. One of Coca-Cola’s bottlers gained nearly 450% during that 10-year period, compared to The Coca-Cola Company’s almost 40% gain (neither of which includes dividends returned to shareholders).
What makes these independent bottlers such a good investment is the manner in which The Coca-Cola Company conducts its worldwide business operations. Unlike PepsiCo (NYSE: PEP), who acquired its two largest bottlers some years ago, The Coca-Cola Company’s business is structured similar to that of a fast-food franchisor-franchisee relationship. This business structure is referred to as the ‘Anchor Bottler’ system.
In this system, The Coca-Cola Company itself doesn’t actually produce the final product found on store shelves. The only product The Coca-Cola Company actually sells is syrup concentrate. And The Coca-Cola Company’s only direct customers are its network of independent bottlers.
These independent bottlers hold exclusivity contracts for the regions they serve. And it is these independent bottlers who are responsible for producing the final product, as well as selling and distributing the product to stores, restaurants and vending machines.
There are advantages and disadvantages to investing in the bottlers over The Coca-Cola Company itself. The Coca-Cola Company, as the large globally diversified company it is, is the safer investment. That global diversification protects the company from risk associated with any region-specific issues. That global diversification, however, also comes with its downsides.
North America, for example, is mostly flat (pun intended) when it comes to soda consumption. The real growth for Coca-Cola products is outside of the United States. Being able to invest in the individual bottlers allows investors to focus on a specific region of the world. Investors that want exposure to Latin America can get that exposure from one of Coca-Cola’s Latin American bottlers. Investors that want exposure to Russia can get that exposure from Coca-Cola’s Eastern European bottler. Investing in the bottlers gives investors something that investing in The Coca-Cola Company cannot give them. That something is laser-guided precision, targeting a specific area of interest for investors.
Who are these bottlers? There are many of them all over the world. Some based in the United States, many based internationally. Some are easily accessible to American investors, some not. For the purpose of this article, I will only briefly discuss the bottlers publicly traded on either the New York Stock Exchange or the NASDAQ Stock Market.
The first two bottlers are the ones based in the United States. Coca-Cola Enterprises (NYSE: CCE) is the primary bottler of most of Western Europe, including Great Britain and France. The second US-based bottler is Coca-Cola Bottling Co. Consolidated (NASDAQ: COKE). Consolidated is the secondary bottler of the United States (the primary US bottling operations of Coca-Cola Enterprises was purchased by The Coca-Cola Company in 2010). Consolidated produces Coca-Cola products for 11 US states, mostly in the Southwest.
The next two are based in Latin America. Coca-Cola FEMSA (NYSE: KOF) is the largest of the two Latin American bottlers, operating in 11 countries. Its primary countries of operation are Mexico, Colombia, Argentina, Peru and Venezuela. Embotelladora Andina (NYSE: AKO-A) (NYSE: AKO-B) is the second and smaller bottler. This bottler operates in Chile, Argentina and Brazil.
Coca-Cola Hellenic (NYSE: OCCH) is the final company on my list. Based in Greece, it is likely the bottler that will give readers the most pause. Despite being based in Greece, only a tiny fraction of its revenue is actually derived from that country. Coca-Cola Hellenic is the independent bottler for the majority of non-Western Europe; including Italy, Switzerland, the Czech Republic, Poland and the Ukraine, as well as the Western European countries of the Republic of Ireland and Northern Ireland. Coca-Cola Hellenic is also the bottler of Russia and Nigeria.
These are just five of the many independent bottlers of Coca-Cola products. There are others that are less accessible to American investors that might also interest you. I would like to encourage current investors of The Coca-Cola Company or investors considering a beverage company to also look at the many bottlers of Coca-Cola as a possible investment.
WhichStocksWork owns shares of Coca-Cola Hellenic. The Motley Fool owns shares of The Coca-Cola Company and PepsiCo. Motley Fool newsletter services recommend Andina Bottling, Coca-Cola Hellenic, PepsiCo, and The Coca-Cola Company. 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.