It's tough to invest when the stock market appears
hellbent on rising, even as the consumers on whom our
economy depends continue to tread water. Nurturing a large
cash position may make sense, but you
don't want to miss out on additional
gains, either. If you're parched by this drought of good
investments, Fools, grab a frosted glass. The non-alcoholic
beverages industry may strike the perfect balance between
portfolio offense and defense.
Pop, fizz, and fizzle, too?
Does
Coca-Cola (NYSE: KO) beat
PepsiCo (NYSE: PEP)? Is
Dr Pepper Snapple (NYSE: DPS) the new real
thing? We'll get to that, but first, let's
start with a few gulps of big-picture perspective.
First, recognize that soda, bottled water, and energy
drinks -- as popular as they may be -- are not consumer
staples in the same way food is. When's the last time you
heard of someone heading for the soup kitchen because they
couldn't get their hands on a Red Bull or
Gatorade?
Second, U.S. carbonated soft drink consumption has been
declining for years since peaking in 2004. U.S. consumers'
concern for their flabby midsections plays a role in that
phenomenon, but the recession has also probably sapped
demand, especially in terms of pricey vending machine sales.
Non-carbonated drinks haven't fared much better, as the
recession weighs heavily on
U.S. bottled water salesas well. By contrast, the world's
developing regions saw the bottled water business grow
briskly in 2008, while volumes across ready-to-drink
categories effervesced well into the double digits, in
certain cases.
In short, a company's geographic exposure is crucial in
determining just how much risk a particular beverage stock
involves. Furthermore, a U.S. economic recovery offers plenty
of potential upside to industry results, which in turn could
lift share prices.
On that note, let's take a peek at the geographic mix for
the three biggest industry names, and then dive into company
details.
Company
Market Cap
Dividend Yield
Profit Margin (TTM)
% North America Sales*
% Ex-North America Sales*
Coca-Cola
$119.4 B
3.2%
20.3%
34.2%**
65.8%**
PepsiCo
$91.6 B
3.1%
11.9%
>45.8%***
54.2%***
Dr Pepper Snapple
$6.9 B Continued... |