by Alyssa Oursler | September 7, 2012 9:15 am
Sure, Coca-Cola (NYSE:KO) is a household name and a blue-chip company to say the least. But while you’ve heard of the stock and definitely the soft drink, you may not have heard of these other ways to bet on the largest beverage company in the world.
Coke, a member of InvestorPlace‘s Real America Index (representing the state of Georgia), is responsible for 1.7 billion beverage servings every day, but it doesn’t make all those sips happen alone. Instead, the company owns, licenses and markets its 500 or so brands, then works with around 275 bottling partners to get those brands to customers.
And four of those bottling partners are actually publicly traded companies — and relatively large ones at that.
The Coca-Cola Co. that we’re all familiar with is obviously the mama bear to its many bottling cubs, with a whopping $169 billion market cap. And of course, it has plenty going for it. Warren Buffett, for one, owns 400 million shares — a 9% stake worth around $15 billion. And Buffett tends to know what he’s doing.
But still, things have slowed for the company recently — even after its two-for-one stock split. In fact, KO’s gains have actually been beaten by … well … every other publicly traded Coke play out there.
Thirsty to know more? Let’s take a look at five alternative ways to gulp down the sweet soft drink.
Your first option is Coca-Cola Bottling (NASDAQ:COKE), the largest independent Coca-Cola bottler in the U.S. but the smallest company of these four bottling options.
The main Coca-Cola Co. actually does a large portion of domestic bottling itself, since it bought Coca-Cola Enterprise’s (NYSE:CCE) North American operations in 2010 — which could be part of the reason that COKE’s operations make for a market cap of only $635 million. Still, CCE has operations in 11 states, mostly in the Southeast.
To be fair, the company really hasn’t been looking all that great lately. It’s enjoyed six consecutive quarters of revenue growth, but that’s only half of KO’s streak, and COKE’s earnings per share have fallen for the last five quarters, as the drought has squeezed its margins.
The stock’s movement, though, tells a whole different story. COKE has gained nearly 18% year-to-date — doubling KO’s 9% gains — and 26% in the last year,
There’s another caveat, though. COKE has an average trading volume of just 10,000 shares, and such a low-volume stock must be handled with care. Still, it’s an option for betting on the beverage market — and just one for Coke specifically.
After Coca-Cola Co. bought Coca-Cola Enterprises’ North American operations it left the bottler as a solely European distributor and dropped it to the third-largest in the world.
Still, that bronze medal for size comes with an $8.74 billion market cap and over 170 million customers throughout Belgium, France, the U.K., Luxembourg, Monaco, the Netherlands, Norway and Sweden. And while its revenue, of course, was slashed by more than half when KO snatched back the North American operations, CCE has still fared pretty well for the most part, with 14 consecutive quarters of earnings growth before a fall in the most recent quarter.
But that slip in earnings doesn’t look to be getting back on track for rest of the year, thanks to ongoing marketplace challenges, unfavorable weather and negative currency exchange, according to the company. And remember, betting on a bottler is essentially like betting on a region, and Europe is chock-full of uncertainty.
In the end, though, investments are about the returns, and CCE has also seen gains of around 18% since January. Plus, the company plans to repurchase at least $600 million of its shares by year-end. And it has the most substantial trading volume — an average of 2 million — of all the bottlers, which should give investors some comfort.
And now for the biggest and baddest of Coke bottlers: Coca-Cola FEMSA (NYSE:KOF). This one boasts the biggest market cap of $24.13 billion, the biggest year-to-date gains with a 28% climb and it reigns in a very appealing region.
KOF has 34 bottling facilities in Latin America, serving 1.6 million retailers in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela, Brazil and Argentina. And while the U.S. and Europe both face great uncertainty, Latin America has a relatively strong economy that’s expected to keep growing.
Plus, FEMSA has even more room to run, and has been taking advantage of it. The company made three acquisitions in Mexico in the last year alone and is also considering its first venture outside of Latin America with a purchase in the Phillipines.
Again, there’s fine print, as earnings were hit last quarter by weaker Mexican peso, rising labor costs and more expensive high-fructose corn syrup. But FEMSA still managed to grow its top line for the 13th consecutive year and says things are set to get back on track.
Plus, analysts still expect to see 15% growth per year, compared to around 10% for the S&P 500 — and that growth could be even stronger if FEMSA goes through with its possible expansion.
And for the last option, we’re back across the pond to the largest bottler in Europe: Coca-Cola HBC (NYSE:CCH). This company is the result of a merger between Athens-based Hellenic Bottling Co. and the London-based Coca-Cola Beverages. And, well, it may not be your best bet.
To start, the company is based in Greece — a bit of a red-flag from the get-go — and it produces, sells and distributes primarily Coca-Cola products in 27 countries in Europe and Nigeria. So far, it’s had the least impressive year-to-date share gains, at just over 11%, and is actually in the red for the past 12 months. But again, those 2012 numbers still beat KO’s performance.
It troubles should hardly come as a surprise, considering CCH relies almost completely an economy that’s been in crisis for some time now. The company has suffered from falling revenue and actually lost money is three quarters since 2011.
If you’re convinced that Europe is going to get back on track, though, CCH is a pretty direct bet on the region — and one that has a big-name consumer brand in its back pocket.
If you’re wary of bottlers because of low trading volume, or are hesitant to go all-out in one region, there are still other ways to cash in — albeit indirectly — on Coca-Cola. A few consumer-based ETFs, for example, have KO a as a top holding and let you bet on the soft drink, but hedge against some of the issues the company and its bottlers are facing.
The Select Sector Consumer Staples SPDR (NYSE:XLP), to start, has KO as its largest holding at 12.51% and has seen gains of almost 11% year-to-date. And the Vanguard Vanguard Consumer Staples ETF (NYSE:VDC) has the soda-maker as its second-largest holding at 9.7%, along with gains of more than 12% since January.
Plus, both these ETFs also give you exposure to rival cola-maker Pepsi (NYSE:PEP), along with trusty names like Procter & Gamble (NYSE:PG), Philip Morris (NYSE:PM) and Wal-Mart (NYSE:WMT).
In the end, betting on the success of the beverage king comes with many more options than simply snatching up some shares of KO — all of which have shown solid success so far this year and don’t look to be going flat any time soon.
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