Coca-Cola maintains cornerstone status as big tech leads global market
By Ralph Tathagata
The year 2023 is speeding on the final lap, and much of the global market’s gains have been driven by big tech. For instance, Alphabet, Microsoft, Nvidia and Tesla shares have risen 48%, 32%, 184%, and 100%, respectively with the rest of the market flocking to big tech.
However, while these big tech companies are playing leading and strategic roles in the S&P 500, Coca-Cola, though down 9% year to date on the global stock market, maintains a compelling status.
According to Statista, Coca-Cola has a global brand value of over 89 billion U.S. dollars and has invested over 4 billion U.S. dollars in advertising spending in recent years. This investment has continued to bolster its valuation appeal in all marketing ramifications.
What’s more, Coca-Cola, with dozens of billion-dollar brands on its stable and a global distribution network that reaches billions of customers daily, provides drinks for many of the world’s biggest Quick Service Restaurant (QSR) chains. Put simply, this established position as major business partner to restaurants, grocery stores, and convenience stores around the world means that Coca-Cola is a cornerstone to many businesses’ sales and profitability.
As a result, many businesses around the world depend on Coca-Cola to sell high volumes of high-margin beverages with the unrelenting consistency their customers demand. In fact, businesses need Coca-Cola virtually in every type of economy.
Also, Coca-Cola HBC, a strategic bottling partner of The Coca-Cola Company, bottles and sells beverages of the carbonated drinks giant exclusively in 29 markets. It also partners with other beverage businesses such as Monster Energy, Edrington, Brown-Forman and Campari to sell their products.
Coca-Cola HBC creates value for all its stakeholders by supporting the socio-economic development of the societies in which it operates, and believes that building a more positive environmental impact is integral to the future growth of the company.
At the global stock market, Coca-Cola’s stock is about half as volatile as the overall market. It has a low beta because the market simply has a higher degree of confidence in Coca-Cola’s durability compared to many other stocks. So, its stock has become a very attractive investment relative to the perceived underlying risk.
Despite the fact that investors might expect to pay a significant premium to buy into the Coca-Cola’s cornerstone business, its stock currently has a price-to-earnings multiple of 24, which is higher than the S&P 500’s P/E of 20.
It’s pertinent to state that The Coca-Cola Company has raised its dividend every year for 61 years straight, with the most recent increase amounting to approximately a 5% hike.
Coca-Cola’s scaled distribution and strong marketing mix, combined with its cornerstone status and low level of volatility compared to the S&P 500, make it an exceptionally compelling global brand.
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