Carbonated Drink Is Not a Healthy Investment: The Coca-Cola Company (KO), PepsiCo, Inc. (PEP)

Dr. Pepper’s Current Scenario

Dr. Pepper primarily operates in North America with more than 90% of its revenue generated from US and Canada. Dr. Pepper reported a collective revenue and EBITDA of $6 billion and $1.3 billion, respectively, in 2012. The current stock price is trading at $ 42.76, 92% of its 52 week high. The company has a market cap of $8.9 billion. Going forward we do expect Dr. Pepper to invest in innovation as it will need to increase its product portfolio to compete with the likes Coca-Cola and PepsiCo. The revenue must grow from non-carbonated drinks in order to make up for the industry wide slump in the sales of carbonated drinks. The increasing awareness of health related problems in North America is resulting in declining sales. People now understand the consequences of excessive consumption of carbonated and are now resorting to non-carbonated options, such as juices and energy drinks. The overall industry sales for carbonated drinks have been witnessing constant declines for the past five or six years and the trend is only expected to continue. However, one silver lining for Dr. Pepper is the potential to increase sales by adding the Latin American markets. Coca-Cola reported robust sales from the other emerging nations and that seems to be driving its revenues. Going forward Dr. Pepper has to plan an aggressive expansion plan into the emerging markets as the soft drink industry now seems to relying on these markets for survival.

The article Carbonated Drink Is Not a Healthy Investment originally appeared on Fool.com and is written by Sujata Dutta.

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