What has made Coca Cola become the great success that it is? This article details one key success factor which has made the company’s sales skyrocket and its notoriety unparalleled.
Today, let’s talk about a company that has:
The most widely recognized brand name in the world.
A 10% share of the entire global market for non-alcoholic beverages.
A monopoly on the very definition of a multinational corporation.
If you guessed The Coca-Cola Company (NYSE: KO), then you’d be right.
Coca-Cola Pours Into Emerging Markets
If you live in America where Coca-Cola ads run everywhere from movie theatres’ opening credits to New York City store fronts, you probably wouldn’t know that it derives over 80% of sales, 75% of income and 95% of operating profits from abroad.
That makes sense though when you figure that its distribution network now covers more than 200 countries and has a 50% share of the global market for carbonated drinks.
Naturally, this opens up a very profitable blue-chip play for investors interested in capitalizing on economic growth overseas, and more specifically in emerging markets.
Because of flat sales in North America and even Europe, Coke has coped in the past through acquisitions of competitors like Nestea, Dasani and Vitaminwater over the last several years. Those purchases probably haven’t hurt, but they haven’t really helped either, since total case sales in North America dropped by 2% so far in 2009.
Yet growth in emerging markets continues rising at a brisk pace. In the second quarter of this year, Coca-Cola enjoyed 33% sales growth in India and 14% sales growth in China. And they remain untapped gushers if you look at both countries through the company’s measuring scale of bottles consumer per capita,
The average American drinks 412 bottles of Coke products a year. In China, that figure drops to 28 bottles and Indians consume only 7.
For example, India has a high birthrate and 1 billion people with an average age of 25… and trending lower. Since young people are particularly susceptible to the lure of carbonated, sugary drinks, that creates a particularly attractive Coke, especially as family incomes in India continue to rise.
Investors should step back a moment and think about those facts and figures … and the opportunities they raise. Because you can bet that Coca-Cola has.