Coca-Cola (KO) Diversifies with Unilever's AdeS Acquisition
The Coca-Cola Co. KO is making significant efforts to invest in newer revenue platforms to boost long-term sales and profits. On Mar 28, the beverage giant and its largest Latin American bottler Coca-Cola Femsa SAB KOF finally closed the proposed acquisition of AdeS soy-based beverage business from consumer products giant Unilever Plc UL.
However, terms of the transaction were not disclosed.
AdeS, a mix of fruit juice and soy, is a leading soy-based beverage brand in Latin America. The company has a presence in Brazil, Mexico, Argentina, Uruguay, Paraguay, Bolivia, Chile and Colombia. With this addition, Coca-Cola will make its debut in the soy-based beverage category.
Diversification to Combat Weak Sales Trajectory
Sales of Coca-Cola’s carbonated beverages are suffering due to increasing health consciousness among consumers.,The cola segment has been particularly facing challenges, as consumers are opting for alternatives. Also, potential new taxes on sugar-sweetened beverages and growing regulatory pressures are affecting CSD sales.
The challenges in the CSD category have been felt by all major soft drink makers – Coca-Cola, PepsiCo Inc. PEP and Dr Pepper Snapple Group Inc. DPS – leading to lower volumes and weak sales.
Although Coca-Cola has increased marketing investments and is driving package and product innovation to boost its carbonated beverage business, the efforts are yet to result in any meaningful improvement. Sparkling beverage unit case volume declined 2% in the fourth quarter and was even for 2016.
The AdeS takeover will boost Coca-Cola’s beverage portfolio in Latin America enabling it to increase the number of nutritious and delicious products offered to its consumers.
Earlier this month, two Brazilian newspapers had stated that PepsiCo had bid to take over Brazil-based dairy company Fábrica de Produtos Alimentícios Vigor SA or “Vigor”. However, PepsiCo spokesperson reportedly refused to comment, as it “does not comment on rumors or speculation”. On the other hand, representatives of J&F, Lactalis and Lala did not immediately respond to requests for comment.
Again, Coca-Cola’s Brazilian partner, Leão Alimentos e Bebidas, reached an agreement to acquire dairy company Verde Campo back in Dec 2015.
We believe, the company’s effort toward offering more diversified products to reap benefits from a shifting consumer preference toward good-for-you and health and wellness products will bode well in the years to come.
Zacks Rank & Stock Performance
Coca-Cola carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coca-Cola’s shares have gained 2.3% so far this year, comparing unfavorably with the Zacks categorized Beverages/Soft Drink industry’s growth of 6.5%. Meanwhile, estimates are trending upward for the current as well as for the next year over the last 30 days.
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Coca-Cola Company (The) (KO): Free Stock Analysis Report
Dr Pepper Snapple Group, Inc (DPS): Free Stock Analysis Report
Pepsico, Inc. (PEP): Free Stock Analysis Report
Coca Cola Femsa S.A.B. de C.V. (KOF): Free Stock Analysis Report
Unilever PLC (UL): Free Stock Analysis Report
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