From a nineteenth-century-born beverage available in a soda fountain to becoming one of the most iconic refreshments across the globe and the most quintessential brand in the beverage industry, Coca-Cola (KO) is more than just a soft drink. With a market presence in more than 200 countries and consumption amounting to 1.9 billion servings a day, it is reported that the name itself is the second-most widely understood term in the world after ’OK’.
And the celebrated drink’s parent company has proven to be enduringly successful, joining Forbes’ list of the world’s most valuable brands in 2018, while it has gotten its share of celebrity endorsements by the likes of Warren Buffett and others. Adding several other brands to its portfolio including healthier alternatives to the sugar-packed soft drinks, the beverage titan has held true to its origins of fun, happiness and enjoying the simple pleasures in life. The Coca-Cola and Diet Coke brand have a combined value of $84 billion as at 2020.
A brief history of Coca-Cola
In 1886, a pharmacist by the name of John S. Pemberton came up with the original Coca-Cola drink, which was then advertised as a beverage helping in relieving headaches and served at Jacobs’ Pharmacy in Georgia, USA. At $0.05 per glass, around nine drinks per day were sold during its first year. Meanwhile, company accountant Frank Robinson, came up with the beverage’s moniker – Coca-Cola - mainly due to the drink’s two main ingredients, coca leaves and kola nuts, while he also penned the well-known Spencerian script logo.
By 1895, the beverage was being sold in every state in the union. Soda fountain urns and clocks were used for advertising purposes, while music hall performer Hilda Clark was one of the first celebrities to market the drink in a variety of formats including posters, trays and bookmarks. By 1901, the brand’s advertising budget surpassed $100,000 which helped sales explode, hitting the $1 million-gallon mark in 1904.
The company’s ownership traded hands a number of times during its early days until it was eventually sold to Ernest Woodruff’s Trust Company of Georgia. From then onward the beverage maker quickly flourished, boosting its marketing budget and separating its syrup and bottling operations - a business model that remains intact till this day. The move saw it expand its global footprint, selling its syrup to bottlers all across the globe in places such as Bermuda, China, Colombia, Mexico, Australia, South Africa, as well as in Belgium, Germany, Italy, Norway and other places. By the late 1950s, Coca-Cola was sold in over 100 countries with international sales making up roughly one-third of the its gross revenues. In the 1980s it launched Diet Coke, quickly becoming America’s top sugar-free beverage, boosting Coca-Cola’s retail sales by 7%.
And whereas the company may be well-known for its iconic caramel-coloured soft drink, it has also rolled out several other popular brands. During World War II, it introduced Fanta, following a trade embargo on cola syrup against Germany, which made it impossible to sell the drink in the country. The then head of the its German office decided to create a new product exclusively made with ingredients found in the country. Then, in 1961, it introduced Sprite which went on to become another of the company’s bestsellers. During the 1990s and 2000s, it shifted its focus to healthier beverages by introducing a number of non-carbonated brands like Minute Maid Juices to Go, Powerade, Fruitopia fruit drinks and Dasani water, amongst others.
Coca-Cola has also made several acquisitions over the years. Some of the most notable ones include that of Minute Main and the movie studio Columbia Pictures in a $692 million deal. Although eventually sold to Sony, under its ownership Columbia released a number of popular films amongst which include The Karate Kid and Ghostbusters. On August of 2018, the company agreed to acquire Costa Coffee from Whitbread for £3.9 billion.
Known for its prolific marketing, Coca-Cola has had a major impact on popular culture, after being host to some of the most memorable ad campaigns. Without a doubt, its great marketing efforts coupled with its universally appealing flavour have made Coca-Cola one of the greatest beverage companies of all time.
A predecessor bank of SunTrust received $100,000 for underwriting Coca-Cola's 1919 public offering. When the bank eventually sold the stock in 2012, it was worth close to $2 billion!
When did Coca-Cola go public?
Coca-Cola went public in 1919, debuting on the New York Stock Exchange (NYSE) under the ticker symbol KO at $40 per share. By the time the company went public, it had already built a reputation and strong fan base, while it was opening bottling plants all across the globe in places ranging from the Philippines to Europe.
The stock has split 11 times over the years. It has undergone seven 2-for-1 stock splits, two 3-for-1 stock splits and one 4-for-1 stock splits, as well as a 1-for-1 stock dividend. The first stock split took place in 1927, whereas the last in 2012. During stock splits the market capitalisation before and after the split takes place remains the same, however, the shareholder now owns more shares but each is valued at a lower price per share. By lowering its stock price on a per-share basis, Coca-Cola could attract a wider range of buyers.
How much would an investment in Coca-Cola in the 1990s be worth today?
Coca-Cola's stock market history is as remarkable as the beverage giant itself. Indeed, its stock would have returned 2,211% over a 30-year period. This means that an investment of $10,000 back in the beginning of the 1990s would have accumulated to $231,066.
What’s more, the stock has had 57 years of consecutive dividend increases, so much so that this legacy has helped crown the company dividend king. True to this tradition, in February 2020, Coca-Cola announced its 58th consecutive annual dividend increase, raising the quarterly payment 2.5% to $0.41 per share. The same occurred in February 2021, with a declared dividend of $0.42 .
Is Coca-Cola a buy?
From having to cut into revenue built on valuable partnerships with fast food chains and cinemas which were forced to shut their doors due to the COVID-19 pandemic to people avoiding the Coke machine with all its cans, buttons and change, 2020 has been a challenging year for the beverage maker. The company was also faced with a headwind from people moving away from its sugary drinks as they sought healthier alternatives.
Yet, Coca-Cola has been quenching consumers’ thirst for decades. Its long history, brand loyalty and sheer market size makes it a perfect example of a blue-chip stock. It remains the dominant company in the beverage industry, being in the lead from 2004 to 2019 and with a market share of 43.7% as of 2019.
Organic sales grew by 6% the same year, while net income per share rose 9% and whereas the pandemic has certainly slowed sales down in the near-term, its wide portfolio that includes water and other hydration products, juices, coffee and teas, dairy, plant-based drinks, as well as energy drinks, means that it has several different avenues of growth. What’s more, according to analysts, the global non-alcoholic beverage market is expected to grow from $378.38 billion in 2020 to $410 billion in 2021 at a CAGR of 8.4%.
In 2019, the Coca-Cola stock rallied, booking a 17% return in addition to a healthy 3% dividend yield, which makes for a total return of 20.61%. By February of 2020, it was around the $59 mark, then the pandemic had other plans which saw the price contracting to $37 level. But by September, the stock had already gained 37% since its March lows, maintaining its robust momentum thanks to its efforts to streamline its portfolio and boost its investments towards expanding its digital presence in line with a shift in consumer preference. Since the March lows, Coca-Cola rebounded significantly with a total return of 49.69% till the end of 2020.
What’s next for Coca-Cola?
Aiming to make gains through the trend towards eating healthier, as of 2019, around 45% of Coca-Cola’s portfolio is either low-sugar or no-sugar, while 18 of its 20 top brands offer variants of these options. In effect, even prior to the pandemic, its Coca-Cola Zero grew volume at a double-digit percentage rate in 2019, while Innocent, a juice and smoothie brand has also seen expanding sales. As consumer tastes change, the company has proven that it can respond, grow and maintain its market share. It also aims to enter the popular hard seltzer market with an alcoholic version of its Topo Chico, its sparkling mineral water brand, which is set to be introduced in the U.S. in 2021.
More recently, Coca-Cola has announced strategic steps to reorganise its business for future growth. Part of its plans is to establish new operating units, global beverage category leads and new platform services, all of which are expected to accelerate its growth in tandem with the fast-changing market place. This could potentially mean that it can keep growing its share price and provide dividend increases for many years to come.
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