Source: Wall Street Nation
$Coca-Cola Company (KO.US) $跟$PepsiCo Inc (PEP.US) $They are two familiar American companies, and their star product Coke is known as "Fat House Happy Water", which shows how popular they are among consumers. Both companies have a history of more than a hundred years, and their advertising campaigns to get consumers' attention are impressive.
They bring a lot of happiness to consumers and onlookers, but leave shareholders with bouts of sadness (Buffett lies in tears). So far this year, both giants have outperformed the S & P 500.The boss, Coca-Cola Company, is more than 30% behind!
At present, the market value difference between PepsiCo Inc and Coca-Cola Company is only 10%, which means that the gap between them is already very small, and we are very likely to be witnessing the replacement of the leaders of the two century-old enterprises!
The performance of Coca-Cola Company, PepsiCo Inc and S & P 500s in the past year
The beverage business is the main culprit of the depressed stock price.
During the epidemic, the closure of the restaurant had a significant negative impact on beverage sales. The Q2 revenue of Coca-Cola Company and PepsiCo Inc respectively.Down 28.48% and 3.06%.
You may be surprised why the performance of Coca-Cola Company, which is also a Coke maker and is more well-known to the public, is declining faster, while PepsiCo Inc seems to be unharmed. Did everyone abandon Coca-Cola Company and drink PepsiCo Inc crazily during the epidemic?
The answer is actually hidden in the product matrix of the two companies.。
Coca-Cola Company generates all its revenue from the beverage business, while PepsiCo Inc derives 54% of its revenue from oats and snacks and 46% from beverages.
This is a simple math problem:Coca-Cola Company ≈ 100% beverage; PepsiCo Inc ≈ 50% beverage + 50% food。
In terms of the performance during the epidemic, food > beverage, it is concluded that the share price of PepsiCo Inc is higher than that of Coca-Cola Company.
Source: PepsiCo Inc's official website
In this special period, it highlights the corresponding consequences of the different strategies of the two companies:
Coca-Cola Company's strategy is to focus on the beverage business, including the development and promotion of carbonated and carbonated beverage products, but has always developed in the field of beverages.
PepsiCo Inc appears to be "unprofessional" in comparison. In addition to the beverage business, it has also moved into snacks, oats and other food industries. It bought Wilson Sporting goods in 1970, KFC, Pizza Hut Italian pizza and Taco Bell Mexican restaurants seven years later. But later, because PepsiCo Inc did not want the competition in the catering business to hinder the expansion of his beverage business, he finally spun off the catering business in 1997.。
PepsiCo Inc has tasted the benefits of business diversification. When the beverage business was hit, the strength of the snack business well hedged the impact of the epidemic.
Can Coca-Cola Company regain his glory after the recovery of the epidemic?
I believe we all agree that Coca-Cola Company's reputation in the world is undeniable.
However, even before the epidemic, Coca-Cola Company was already a loser compared with rival PepsiCo Inc or the broader S & P 500 index, and this epidemic seems to have only widened the gap.
Review Buffett's investment in Coca-Cola Company:
Buffett has always been a loyal consumer and fan of PepsiCo Inc.He believes that Coca-Cola Company's brand occupies an irreplaceable position in people's hearts, which will be continuously strengthened and constitute a lasting competitive advantage.
He began buying large amounts of Coca-Cola Company's shares in 1988 and 1989 at a price-to-earnings ratio of about 15 times earnings.
By the end of 1998, Buffett's shareholding in Coca-Cola Company had a market value of 13.4 billion, an increase of about 11 times in 10 years, with an average annual compound return of about 27%.
1998-2012: the market value of Buffett's holdings has increased by only about 10% in 14 years, from $13.4 billion in 1998 to $14.5 billion, and the total dividend received during the period is about $3 billion.
A securities research institute has calculated the price of Coca-Cola Company's products.There was little growth in the nearly 30 years from 1990 to 2019.The annualized compound growth rate is only0.42%! And sales have not risen because prices have not risen: sales have not grown by more than 5% over the past decade.
Consumer preference for sugary drinks has continued to decline in recent years, analysts say.
Over the past decade, the decline in Coca-Cola Company's gross profit margin has been offset by revenue growth, so that profits are not in a growth channel, and it is not surprising that the stock price is mediocre.
Summary
I don't know how do you feel after reading this story? The editor's impression is: investment should not be small and big, and should not copy homework blindly!
Coca-Cola Company was once what everyone called a Buffett-style successful investment case, and until today, Coca-Cola Company's market share and gross profit are still beyond PepsiCo Inc's reach.But looking back on the past three, five or even ten years, Coca-Cola Company's return on investment is not ideal.。
Finally, I would like to remind you:
Both companies will release Q3 results in October: PepsiCo Inc is expected to release before the 1st market; Coca-Cola Company is expected to release it on the 16th.Among them, Wall Street's expectations for the performance of PepsiCo Inc's Q3 are as follows:
Source: Bloomberg Terminal
After the report card of Q3 comes out, will the market value of PepsiCo Inc surpass that of Coca-Cola Company?
Us Stock Intelligence Agent | Tommy