Focus on energy drinks
From the four-week data disclosed by Neilson C-store, the sales growth in the energy drinks was more than 6% in March year over year. Monster Beverage Corp (NASDAQ:MNST) outpaced the industry growth rate (6%) by posting around 8% growth. However, total sales were down in comparison to previous years as the company is facing strong competition from Red Bull which had around 7.5% growth in February 2013.
The company sees the shift from carbonated drinks to energy drinks as a huge opportunity and is adding ‘rehab’ drinks and flavors to its product portfolio. Energy drinks section shares 90% of the overall revenue. Though it witnessed weakening sales in the US, this was offset by robust international sales. Monster Beverage Corp (NASDAQ:MNST) posted more than 35% sales growth year over year in the fourth quarter by selling its products in more than 90 countries around the world, excluding the US. These profits were majorly driven by “Monster Energy” which is one of its top-selling products.
The company is continuously expanding in other countries with 29% rise in demographics in the fourth quarter of 2012. For the first quarter, it expects to reach Slovenia, Peru, Chile, Korea, Singapore, India, Romania, Albania, and Croatia with additional markets in Central/Eastern Europe by mid-2013. With this expansion, Monster Beverage Corp (NASDAQ:MNST) is expected to deliver earning growth of 20% year over year starting from 2013.
Moving ahead with health drinks and cost saving
PepsiCo, Inc. (NYSE:PEP) is facing setbacks in its beverage business from its key competitor, The Coca-Cola Company (NYSE:KO), in the US. Though the company outpaced sales in the first quarter of 2013 by 1% to $12.6 billion, analysts consider this upside insignificant.
As the macro trends shift from soda to healthier drinks, the company has turned towards emerging markets like its Asia & Middle East and Africa markets, where sales rose by 12% and 15% respectively in the first quarter. Moreover, PepsiCo, Inc. (NYSE:PEP) is working to increase its cola sales by adding Novel natural sweetener in cola drinks without sacrificing the taste. This cola drink is under FDA review process, and as soon as it gets approval, it will be launched in the market.
One significant growth driver for PepsiCo, Inc. (NYSE:PEP) is the improvement in profit margins through its cost savings program. At the time of its implementation in year 2012, this program was targeted at $500 million each year with total effect of $1.5 billion by 2014. But with the increase in profits in first quarter 2013, its target for this year has been increased to $900 million and $3 billion in total by 2014. This program will cover every aspect of business from production to distribution and marketing. Also, it includes the reduction of about 8700 employees across 30 countries, which is 3% of the workforce across the globe. This effort will provide the company cost-competitiveness and will be the main funding source for future brand innovation.
Simplifying sales & distribution
Dr Pepper Snapple Group Inc. (NYSE:DPS) Group
derives 90% of its revenue from North America and, 70% of it comes from carbonated drinks. It is facing stiff competition from its competitors in North America, and the only way out of this situation is international expansion. For many months, the company’s expansion plans were on hold, due to Sales and Distribution licensing agreement restrictions outside the US. However, this hurdle seems to be waning away and, it recently announced the repurchase of distribution rights in its South Asia and Pacific regions. With this, the company can now distribute its products in Australia, China, Japan, South Korea and Malaysia directly. This opportunity will help the company to revive its profits speedily.
The company is also planning to expand its four core products, 7UP, Sunkist, A&W, and Canada Dry into the international market. These products were launched in early 2013 in more international markets, and are receiving good response. Sales shot up by 70% year over year in January 2013 for 7/11 Stores.
Conclusion
PepsiCo, Inc. (NYSE:PEP) and Monster Beverage Corp (NASDAQ:MNST), with their long-term approach of expansion into international markets, and with the new line of products in their portfolios are all set to deliver their shareholders good returns.
Similarly, Dr Pepper Snapple Group Inc. (NYSE:DPS), with repurchase of its distribution rights in key international markets, will maintain positive momentum. Looking at the growth prospects of these companies in the long run, I recommend a buy for all three.
The article International Markets Will Sweeten These Beverage Companies originally appeared on Fool.com.
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