Coca-Cola’s 20 Billion Dollar Brands & Future Growth

Coca-Cola Growth Potential

In 2007 Coca-Cola had 10 billion dollar brands. Just 8 years later, the company has 20 billion dollar brands. The company sells 1.9 billion beverage servings every day. Coca-Cola’s global position by ready-to-drink beverage category is shown in the image below.

Coca-Cola is the global leader in ready-to-drink beverages. Still, the company has tremendous room for growth. The average global household consumes 26 beverage servings a day. Only 1.4 of these servings come from Coca-Cola brands.

The global population continues to rise, as do consumer incomes. Both population growth and income growth will help drive further sales for Coca-Cola. The company is investing in and partnering with African bottlers to gain better access to the continent. Africa currently has a population of 1.1 billion. By 2100, the continent is expected to have a population of over 4 billion. Populations growth is expected to be slightly negative in Europe, barely positive in North America, and slow in Asia. Africa will be the global population growth driver over the next several decades. Coca-Cola’s foresight into the continent will likely help drive growth.

In the United States, there is a perception that sodas (also called sparkling beverages) are in decline due to health concerns. The demise of the soda is fiction. Sparkling beverage sales are growing globally, although not as quickly as non-carbonated (also called still) beverage sales. The image below shows this growth over the last several years.

Both carbonated and non-carbonated beverage sales are increasing. Coca-Cola’s goal is to realize growth above the industry average. The company is certainly positioned to do so. Coca-Cola’s distribution system and marketing budget give it strong competitive advantages in the beverage industry. Coca-Cola can quickly grow billion dollar brands, as evidenced by Fuze Tea, Coca-Cola Zero, Ayataka, and Minute Maid Pulpy. All 4 of these brands reached billion dollar status in 5 years or less. Fuze Tea and Coca-Cola Zero reached $1 billion in annual sales in just 2 years.

In total, Coca-Cola shareholders can expect earnings-per-share growth of 7% to 9% a year going forward. This growth combined with the company’s 3.3% dividend yield gives investors expected total returns of between 10% and 12% a year going forward.