Missed the The Coca-Cola Company (KO) Dip? There’s Still Time to Buy

Peltz’s intricate argument is spelled out in a 59 page manifesto where the main headline remains ‘pull out of the beverage business, Coca-Cola has won.’ Although Peltz has a lot to gain if PepsiCo, Inc. (NYSE:PEP) buys Mondelez International Inc (NASDAQ:MDLZ) (he owns significant shares in both companies), his argument is in some ways compelling. PepsiCo’s snack business represents close to 2/3 of its entire business. As it is, its beverage business, which has for the most part been all about catching up with Coca-Cola, doesn’t have that much of a solid future. And the fact that PepsiCo is siphoning capital from its beverage business to sustain the snack business only muddies the waters.

Mondelez International Inc (NASDAQ:MDLZ) presents a robust global distribution network and will be instrumental in offsetting any of PepsiCo’s risks or losses in the U.S. In 2012, Mondelez sales were well distributed in key markets across the globe; 39% in Europe, 20% in North America and 15% in the Asia Pacific and Latin America region. This is exactly what PepsiCo needs.

PepsiCo has however ignored the recommendation, maintaining that it’s not interested in Mondelez, which has languished after splitting off from Kraft Foods Group Inc (NASDAQ:KRFT). This move has only opened up speculation that The Coca-Cola Company (NYSE:KO) will move in for Mondelez.

If Coca-Cola moves in for Mondelez, the upside could be breathtaking – at the least. And if PepsiCo goes back on its decision and considers an acquisition, competition for Coca-Cola in the beverage industry will wane. Whichever way you look at it, it’s a win-win.

Conclusion

The Coca-Cola Company (NYSE:KO) remains one of those stocks that you can keep adding to your portfolio year in year out. Not only is its business easy to understand, but its wide moat means low risks and detailed predictability. Its ability to offer a great dividend even in the face of a harsh economic climate (slowing growth in China, Brazil’s credit crunch), is also a great bonus. It is a great long-term investment.

The article Missed the Coca-Cola Dip? There’s Still Time to Buy originally appeared on Fool.com and is written by Lennox Yieke.

Lennox Yieke has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of PepsiCo. Lennox is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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