PepsiCo and Coca-Cola take battle to still beverages

By: Azhar Azam

FY2016 (US$ Billion Except Per Share Data & Employees)	The Coca-Cola Company	PepsiCo
Net Revenues	41.86	62.80
Net Income	6.53	6.33
Net Assets	87.27	74.13
Long-Term Debt	29.68	30.05
Stock Price per Share (18-August-2017)	45.86	118.39
Employees	100,300	264,000
Cash Dividend per Common Share	2.96	1.40
Market Cap (18-August-2017/Bloomberg)	195.61	168.77
Brand Value (Interbrand)	73.10	20.27

The feud to dominate the nonalcoholic beverage market between the two US companies, Coca-Cola Company (NYSE: KO) and PepsiCo (NYSE: PEP), is ancient – more than 100-years. Although Coke has mostly prevailed in this global rivalry, but PepsiCo has outperformed The Coca-Cola Company on the Wall Street – thanks to strong sales in junk food.

All the same, the net revenues of both the largest carbonated drinks conglomerates have been stroked by health imperils, structural reforms, and currency headwinds; yet the fierce competition between the two is irrepressible as the two take the soda-war to the still beverage market – waters, flavored waters, and enhanced waters, juices, juice drinks, ready-to-drink teas, juices, and energy drinks.

The Coca-Cola Company is the world’s largest nonalcoholic beverage company that owns and licenses more than 500 sparkling and still beverage brands and nearly 3,900 beverage choices. It has the largest beverage distribution system that makes its products available to consumers in 200-countries of the world. So it would take more than 10-years to try all Coca-Cola products.

The company owns four of world’s top-5 sparkling beverage brands; Coca-Cola, Diet Coke, Fanta, and Sprite. It also accounts for 1.9 billion beverage servings in 200-countries out of nearly 56 billion servings each day in the world. Dasani, vitaminwater, Powerade, Minute Maid, Simple, Del Valle, Georgia, and Gold Peak are the brands, features in its 21 billion-dollar brands.

According to ‘The Coca-Cola Company Investors Overview April 2017’, the industry retail value of nonalcoholic beverage (NAB) industry is expected to cross $110 billion @ CAGR of 4% by 2016. Sparkling soft drinks (SSD), water, value-added dairy, energy, juice & juice drinks, other NARTD (Non-alcoholic ready-to-drink), RTD (ready-to-drink) tea, sports drinks, and RTD coffee are the main NAB industry segments estimated to grow in the years to come.

The company estimates that the KO value share in sparkling soft drinks exceeds 50%; focusing to shift ‘to a Category Cluster Model to drive growth across total portfolio (consumer-centric)’. Ranked #1 by Euromonitor 2016 in SSD, Water, Enhanced Water/Sports, and RTD Coffee/RTD Tea, it is also ranked #2 in Juice/Dairy/Plant-Based and #4 in Energy for 2016-unit case volume.

It has Beverage Partners Worldwide (BPW) joint venture with Nestle which markets and distributes Nestea products in Europe and Canada under agreements with its bottlers. The Nestea trademark is owned by Société des Produits Nestlé S.A.

The Coca-Cola system sold 29.3 billion, 29.2 billion, and 28.6 billion unit cases of its products in 2016, 2015, and 2014. Sparkling beverages represented 72%, 73%, and 73% of its worldwide unit case volume for 2016, 2015, and 2014. Trademark Coca-Cola accounted for 45%, 46%, and 46% of its worldwide unit case volume for 2016, 2015, and 2014.

The company’s net operating revenues have been declining continuously; 4% in 2015 and 5% in 2016 as well as long term debt has also been doubled in the past five years. Its employee strength has also been curtailed to 100,300 in 2016 from 123,200 in 2015.

PepsiCo is also a leading global food and beverage company with a complementary portfolio of enjoyable brands such as Frito-Lay, Gatorade, Pepsi-Cola, Quaker, and Tropicana. Through its operations, authorized bottlers, contract manufacturers, and other third parties, PepsiCo makes, markets, distributes, and sells a variety of conventional beverages and foods and snacks in over 200-countries and territories.

Its products are sold across the world through six global divisions. Some of the company’s other famous brands are: Mountain Dew, Naked Juice, Lipton Tea (Pepsi-Lipton Partnership), Lay’s, Wavy and Ruffles chips, Doritos tortilla chips, Aquafina, Cheetos snacks, Fritos corn chips, Diet Mountain Dew, Diet Pepsi, Diet 7up, Kurkure, and many more.

In 2016, Pepsi Co (24%) had a larger market share than The Coca-Cola Company (20%) of the United States liquid refreshment beverage category; however the latter has significant carbonated soft drinks (CSD) market share advantage in many markets outside the US.

The company’s net revenues have also been erratic over the years; -5% in 2015 and flat in 2016 whereas long term debt has grown by nearly 28% since 2012. Its total staff strength is 264,000 as of 2016; including 113,000 employed in the United States.