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As summer draws near and temperatures rise, people will be looking for something to quench their thirst on a sunny day. For some it is the ubiquitous Coca-Cola, for others it is an ice cold beer. Still for others, and much to the chagrin of marketers and shareholders, it is simply tap water.

The Coca-Cola Company (NYSE: KO) and Pepsico, Inc. (NYSE: PEP) have had their long running Cola Wars as they battle it out for the next .1% of market share. However, for investors this is simply another industry to be examined in hopes of finding an undervalued stock or a surging brand. Many rising beverage companies often end up as acquisitions for the industry giants.

This survey article will identify several participants and provide brief financial snapshots of each company. It will also look for some general trends such as: Are the larger companies more profitable due to their scale or are the smaller companies more profitable by targeting niche markets?

As a data driven survey article, there are some stocks excluded due to lack of information. Furthermore, one could arguably exclude Pepsi since it is actually more a diversified food company than a beverage company. However, it is difficult, and perhaps irresponsible, to discuss Coca-Cola without mentioning Pepsi. I also decided to include Starbucks (NASDAQ: SBUX) to appease coffee drinkers, since it is not classified as a beverage company by Zacks.com. (Classifications were provided by Zacks.com. ) However, it is true that I know few people who slake coffee on a hot summer’s day, iced coffee maybe, but not coffee.

The list also includes some bottling companies. This list of companies is primarily focused on stocks traded on either the NYSE or the NASDAQ. It unfortunately excluded some companies like Kentucky-headquartered Brown-Forman (NYSE:BF.A) which is engaged in the manufacture, bottling, import, export, and marketing of alcoholic beverages. The following is the list of companies to be considered:

Beverage Companies
Ticker Name Closing Price May 20, 2011 Market Cap ($ Millions) Dividend Yield
KO Coca-Cola Company (The) 68.30 $156,757 2.8%
PEP Pepsico, Inc. 71.30 $114,112 2.7%
BUD Anheuser-Busch Inbev SA 60.44 $97,017 1.6%
ABV Companhia de Bebidas das Americas - AmBev 31.10 $96,410 2.4%
DEO Diageo plc 83.22 $51,100 2.4%
SBUX Starbucks Corporation 36.61 $27,311 1.4%
FMX Fomento Economico Mexicano S.A.B. de C.V. 61.80 $22,113 1.5%
KOF Coca Cola Femsa S.A.B. de C.V. 84.84 $15,666

2.4%

CCE Coca-Cola Enterprises, Inc. 29.47 $9,663 1.6%
DPS Dr Pepper Snapple Group, Inc 42.10 $9,318 2.4%
CCH Coca Cola Hellenic Bottling Co 24.48 $8,963 1.4%
TAP Molson Coors Brewing Company 46.50 $7,660 2.4%
HANS Hansen Natural Corporation 69.56 $6,191 0.0%
STZ Constellation Brands Inc 21.85 $4,655 0.0%
CCU Compania Cervecerias Unidas, S.A. 60.44 $3,850 1.2%
VCO Vina Concha Y Toro 49.96 $1,866 1.5%
CEDC Central European Distribution Corporation 11.78 $818 0.0%
COT Cott Corporation 8.54 $809 0.0%
SAM Boston Beer Company, Inc. (The) 81.16 $756 0.0%
FIZZ National Beverage Corp. 13.98 $646 0.0%
PEET Peet's Coffee & Tea, Inc. 48.55 $635 0.0%
HOOK Craft Brewers Alliance, Inc 9.27 $174 0.0%
OTCQB:JSDA Jones Soda Co. 1.20 $38 0.0%
JVA Coffee Holding Co., Inc. 6.59 $36 1.8%
REED Reeds, Inc. 2.14 $23 0.0%
WVVI Willamette Valley Vineyards, Inc. 3.14 $15 0.0%
LBIX Leading Brands Inc 3.11 $11 0.0%

Data is provided by Zacks.com services and downloaded on May 21, 2011. DEO figures are from Yahoo!Finance.

The beverage industry ranges from microcaps like Jones Soda to Coca-Cola and Anheuser-Busch Inbev. Beverage companies should show relatively high gross margins since sugar, yeast, hops, and water are relatively inexpensive.

Sales and Margins

Ticker

Sales

Gross Margin

Operating Margin

ABV

$ 15,159

68.2%

31.8%

KO

$ 35,119

63.9%

21.7%

TAP

$ 4,703

61.5%

15.5%

DPS

$ 5,636

60.2%

10.4%

SBUX

$ 10,707

58.4%

9.9%

BUD

$ 36,297

55.5%

13.0%

SAM

$ 464

55.3%

10.1%

CCU

$ 1,791

54.2%

13.6%

PEP

$ 57,838

54.1%

11.0%

PEET

$ 334

53.6%

5.9%

HANS

$ 1,304

52.2%

16.5%

KOF

$ 8,588

48.9%

9.5%

LBIX

$ 20

48.5%

0.0%

CEDC

$ 712

46.1%

NA

WVVI

$ 17

44.3%

3.6%

FMX

$ 13,921

44.0%

10.1%

DEO

$ 16,060

43.8%

19.8%

CCH

$ 9,255

41.9%

6.2%

CCE

$ 6,714

36.9%

7.3%

STZ

$ 3,332

35.7%

12.2%

VCO

$ 748

35.4%

11.2%

FIZZ

$ 593

33.2%

NA

JSDA

$ 18

26.0%

NA

HOOK

$ 132

25.6%

1.5%

REED

$ 20

21.3%

NA

COT

$ 1,803

14.8%

3.0%

JVA

$ 83

12.6%

3.3%

Data is provided by Zacks.com services. NA means a negative net income. Due to data source timing of margins might not be current. DEO figures are from the most recent 20-F for margins and Yahoo!Finance for revenue.

Gross margins appear to be correlated to sales and overall size to a greater extent than operating margins.

Company Snapshots
Recent prices are from May 20, 2011.

Coca-Cola Company (The) (NYSE: KO) - Beverages - KO has a market capitalization of $156.8 billion. KO closed recently at $68.30 per share with a dividend yield of 2.75%. KO shows a trailing P/E ratio of 19.2x which decreases compared to its forward P/E which is 17.7x. This suggests mild earnings per share growth. KO's $68.3 per share price is 36.5% above its 52-week low of $50.03 and 0.2% below its 52-week high of $68.46 per share. KO has a high price to sales ratio at 4.1x. On an operating cash flow basis, KO appears to have little upside improvement.

Pepsico, Inc. (NYSE: PEP) - Beverages - PEP has a market capitalization of $114.1 billion. PEP closed recently at $71.30 per share with a dividend yield of 2.69%. PEP shows a trailing P/E ratio of 17.4x which decreases compared to its forward P/E which is 15.9x. This suggests mild earnings per share growth. PEP's $71.3 per share price is 17.3% above its 52-week low of $60.77 and 0.7% below its 52-week high of $71.78 per share. PEP has a low price to sales ratio at 1.9x. On an operating cash flow basis, PEP appears to have little upside improvement.

Anheuser-Busch Inbev SA (NYSE: BUD) - Alcoholic beverages - BUD has a market capitalization of $97 billion. BUD closed recently at $60.44 per share with a dividend yield of 1.61%. BUD shows a trailing P/E ratio of 18.3x which decreases compared to its forward P/E which is 15.9x. This suggests some earnings per share growth. BUD's $60.44 per share price is 30.8% above its 52-week low of $46.2 and 5.8% below its 52-week high of $63.97 per share. BUD has a low price to sales ratio at 2.6x. On an operating cash flow basis, BUD appears to have little upside improvement.

Companhia de Bebidas das Americas - AmBev (NYSE: ABV) - Alcoholic beverages - ABV has a market capitalization of $96.4 billion. ABV closed recently at $31.1 per share with a dividend yield of 2.37%. ABV shows a trailing P/E ratio of 20.1x which decreases compared to its forward P/E which is 18.4x. This suggests mild earnings per share growth. ABV's $31.1 per share price is 69% above its 52-week low of $18.4 and 5.7% below its 52-week high of $32.88 per share. ABV has a high price to sales ratio at 6.3x. On an operating cash flow basis, ABV appears to be highly valued.

Starbucks Corporation (NASDAQ: SBUX) - Consumer - SBUX has a market capitalization of $27.3 billion. SBUX closed recently at $36.61 per share with a dividend yield of 1.42%. This suggests mild earnings per share growth. SBUX's $36.61 per share price is 60.4% above its 52-week low of $22.82 and 3.7% below its 52-week high of $37.97 per share. SBUX has a medium price to sales ratio at 2.4x. On an operating cash flow basis, SBUX appears to be highly valued.

Fomento Economico Mexicano S.A.B. de C.V. (NYSE: FMX) - Beverages - FMX has a market capitalization of $22.1 billion. FMX closed recently at $61.8 per share with a dividend yield of 1.46%. FMX's $61.8 per share price is 51.7% above its 52-week low of $40.73 and 3.2% below its 52-week high of $63.8 per share. FMX has a low price to sales ratio at 1.6x.

Coca Cola Femsa S.A.B. de C.V. (NYSE: KOF) - Beverages - KOF has a market capitalization of $15.7 billion. KOF closed recently at $84.84 per share with a dividend yield of 2.4%. KOF shows a trailing P/E ratio of 19.4x which decreases compared to its forward P/E which is 17.1x. This suggests some earnings per share growth. KOF's $84.84 per share price is 35.5% above its 52-week low of $62.59 and 0.4% below its 52-week high of $85.17 per share. KOF has a low price to sales ratio at 1.8x. On an operating cash flow basis, KOF appears to have little upside improvement.

Coca-Cola Enterprises, Inc. (NYSE: CCE) - Beverages - CCE has a market capitalization of $9.7 billion. CCE closed recently at $29.47 per share with a dividend yield of 1.63%. CCE shows a trailing P/E ratio of 14.7x which decreases compared to its forward P/E which is 13.7x. This suggests mild earnings per share growth. CCE's $29.47 per share price is 33.9% above its 52-week low of $22.01 and 7.9% below its 52-week high of $31.8 per share. CCE has a very low price to sales ratio at 0.9x. On an operating cash flow basis, CCE appears to be a good value with upside.

Dr Pepper Snapple Group, Inc (NYSE: DPS) - Beverages - DPS has a market capitalization of $9.3 billion. DPS closed recently at $42.1 per share with a dividend yield of 2.38%. This suggests mild earnings per share growth. DPS's $42.1 per share price is 24.8% above its 52-week low of $33.73 and 0.4% below its 52-week high of $42.28 per share. DPS has a low price to sales ratio at 1.6x. On an operating cash flow basis, DPS appears to have little upside improvement.

Coca Cola Hellenic Bottling Co. (NYSE: CCH) - Beverages - CCH has a market capitalization of $9 billion. CCH closed recently at $24.48 per share with a dividend yield of 1.36%. CCH shows a trailing P/E ratio of 15.8x which decreases compared to its forward P/E which is 13.5x. This suggests some earnings per share growth. CCH's $24.48 per share price is 23.6% above its 52-week low of $19.8 and 24.5% below its 52-week high of $30.47 per share. CCH has a low price to sales ratio at 1x. On an operating cash flow basis, CCH appears to be a good value with upside.

Molson Coors Brewing Company (NYSE: TAP) - Alcoholic beverages - TAP has a market capitalization of $7.7 billion. TAP closed recently at $46.5 per share with a dividend yield of 2.41%. TAP shows a trailing P/E ratio of 12.9x which decreases compared to its forward P/E which is 12.6x. This suggests mild earnings per share growth. TAP's $46.5 per share price is 15.8% above its 52-week low of $40.15 and 9.5% below its 52-week high of $50.93 per share. TAP has a low price to sales ratio at 1.8x. On an operating cash flow basis, TAP appears to be a good value with upside.

Hansen Natural Corporation (NASDAQ: HANS) - Beverages - HANS has a market capitalization of $6.2 billion. HANS closed recently at $69.56 per share. HANS shows a trailing P/E ratio of 27.5x which decreases compared to its forward P/E which is 24.5x. This suggests some earnings per share growth. HANS's $69.56 per share price is 85.3% above its 52-week low of $37.53 and 0% below its 52-week high of $69.56 per share. HANS has a high price to sales ratio at 4.4x. On an operating cash flow basis, HANS appears to be possibly overpriced.

Constellation Brands Inc (NYSE: STZ) - Alcoholic beverages - STZ has a market capitalization of $4.7 billion. STZ closed recently at $21.85 per share. STZ shows a trailing P/E ratio of 11.5x which decreases compared to its forward P/E which is 11.1x. This suggests mild earnings per share growth. STZ's $21.85 per share price is 42% above its 52-week low of $15.39 and 5.1% below its 52-week high of $22.97 per share. STZ has a low price to sales ratio at 1.4x. On an operating cash flow basis, STZ appears to be a good value with upside.

Compania Cervecerias Unidas, S.A. (NYSE: CCU) - Alcoholic beverages - CCU has a market capitalization of $3.9 billion. CCU closed recently at $60.44 per share with a dividend yield of 1.17%. CCU shows a trailing P/E ratio of 20.0x which decreases compared to its forward P/E which is 15.2x. This suggests strong earnings per share growth. CCU's $60.44 per share price is 55.5% above its 52-week low of $38.87 and 1.6% below its 52-week high of $61.42 per share. CCU has a low price to sales ratio at 2.2x. On an operating cash flow basis, CCU appears to have little upside improvement.

Vina Concha Y Toro (NYSE: VCO) - Alcoholic beverages - VCO has a market capitalization of $1.9 billion. VCO closed recently at $49.96 per share with a dividend yield of 1.47%. VCO's recent closing price is 28.1% above its 52-week low of $39 and 3.4% below its 52-week high of $51.65 per share. VCO has a low price to sales ratio at 2.5x.

Central European Distribution Corporation (NASDAQ: CEDC) - Alcoholic beverages - CEDC has a market capitalization of $818.1 million. CEDC closed recently at $11.78 per share. CEDC's $11.78 per share price is 13.8% above its 52-week low of $10.35 and 133.6% below its 52-week high of $27.52 per share. CEDC has a very low price to sales ratio at 0.6x.

Cott Corporation (NYSE: COT) - Beverages - COT has a market capitalization of $809.2 million. COT closed recently at $8.54 per share. COT shows a trailing P/E ratio of 12.6x which decreases compared to its forward P/E which is 11.9x. This suggests mild earnings per share growth. COT's $8.54 per share price is 53.3% above its 52-week low of $5.57 and 5.5% below its 52-week high of $9.01 per share. COT has a very low price to sales ratio at 0.4x. On an operating cash flow basis, COT appears to be a good value with upside.

Boston Beer Company, Inc. (The) (NYSE: SAM) - Alcoholic beverages - SAM has a market capitalization of $756.2 million. SAM closed recently at $81.16 per share. SAM shows a trailing P/E ratio of 24.1x which decreases compared to its forward P/E which is 23x. This suggests mild earnings per share growth. SAM's $81.16 per share price is 40.5% above its 52-week low of $57.77 and 22.6% below its 52-week high of $99.53 per share. SAM has a low price to sales ratio at 1.6x. On an operating cash flow basis, SAM appears to have little upside improvement.

National Beverage Corp. (NASDAQ: FIZZ) - Beverages - FIZZ has a market capitalization of $646.3 million. FIZZ closed recently at $13.98 per share. FIZZ shows a trailing P/E ratio of 16.6x which decreases compared to its forward P/E which is 15x. This suggests mild earnings per share growth. FIZZ'a $13.98 per share price is 21.8% above its 52-week low of $11.48 and 8.7% below its 52-week high of $15.19 per share. FIZZ has a low price to sales ratio at 1.1x. On an operating cash flow basis, FIZZ appears to have little upside improvement.

Peet's Coffee & Tea, Inc. (NASDAQ: PEET) - Beverages - PEET has a market capitalization of $634.8 million. PEET shows a trailing P/E ratio of 32.8x which increases compared to its forward P/E which is 33.3x. This suggests an earnings decline. PEET just closed at $48.55 per share, which is 46.2% above its 52-week low of $33.2 and 0.9% below its 52-week high of $49.01 per share. PEET has a low price to sales ratio at 1.9x. On an operating cash flow basis, PEET appears to be highly valued.

Craft Brewers Alliance, Inc (NASDAQ: HOOK) - Alcoholic beverages - HOOK has a market capitalization of $174.5 million. HOOK just closed at $9.27 per share which is 175.9% above its 52-week low of $3.36 and 6.8% below its 52-week high of $9.9 per share. HOOK has a low price to sales ratio at 1.3x.

Jones Soda Co. (NASDAQ: JSDA) - Beverages - JSDA has a market capitalization of $38.4 million. JSDA closed recently at $1.20 per share, which is 84.6% above its 52-week low of $0.65 and 68.3% below its 52-week high of $2.02 per share. JSDA has a low price to sales ratio at 2.2x.

Coffee Holding Co., Inc. (NASDAQ: JVA) - Beverages - JVA has a market capitalization of $36.2 million. JVA closed recently at $6.59 per share with a dividend yield of 1.82 percent. The closing price of $6.5899 per share is 77.6% above its 52-week low of $3.71 and 17.3% below its 52-week high of $7.73 per share. JVA has a very low price to sales ratio at 0.4x.

Reeds, Inc. (NASDAQ: REED) - Beverages - REED has a market capitalization of $23.1 million. REED closed recently at $2.14 per share, which is 27.8% above its 52-week low of $1.67 and 39.6% below its 52-week high of $2.98 per share. REED has a low price to sales ratio at 1.1x.

Willamette Valley Vineyards, Inc. (NASDAQ: WVVI) - Alcoholic beverages - WVVI has a market capitalization of $15.4 million. WVVI closed recently at $3.14 per share, which is 1.6% above its 52-week low of $3.09 and 21.1% below its 52-week high of $3.8 per share. WVVI has a very low price to sales ratio at 0.9x.

Leading Brands Inc (NASDAQ: LBIX) - Beverages - LBIX has a market capitalization of $11.3 million. LBIX closed recently at $3.11 per share, which is 62% above its 52-week low of $1.92 and 28.3% below its 52-week high of $3.99 per share. LBIX has a very low price to sales ratio at 0.6x.

Smaller Stocks show Greater Variation in Returns
The following chart shows the largely expected result that the smaller companies tended to have the highest and lowest YTD price changes. While price change is usually a strong indicator of return, some stocks that offer returns should have provided close to half their yearly yield at this point. For example, KO's price has increased just 3.9% since the start of the year; however, it also offers a 2.8% dividend yield.

Year to Date Returns
Ticker Market Cap ($ Billions) YTD Price Change to May 20, 2011
JVA 0.04 77.2%
HANS 6.19 33.1%
HOOK 0.17 25.4%
LBIX 0.01 24.4%
DPS 9.32 19.7%
CCE 9.66 17.7%
PEET 0.63 16.3%
SBUX 27.31 13.9%
DEO 51.1 12.6%
FMX 22.11 10.5%
PEP 114.11 9.1%
FIZZ 0.65 6.4%
REED 0.02 6.2%
BUD 97.02 5.9%
VCO 1.87 4.1%
KO 156.76 3.9%
KOF 15.67 2.9%
JSDA 0.04 0.8%
ABV 96.41 0.2%
CCU 3.85 0.2%
STZ 4.65 -1.4%
COT 0.81 -5.2%
TAP 7.66 -7.4%
WVVI 0.02 -10.6%
SAM 0.76 -14.6%
CEDC 0.82 -48.6%

Data is provided by Zacks.com services. Returns exclude impact of dividends.

Conclusion
As a survey article this is a starting point for those looking to due additional research in the beverage industry. However, here are some high level preliminary thoughts:

  1. Large cap, leading companies seem to offer good dividends with reasonable valuations. These include Pepsi and Coca-Cola.

  2. Molson offers a solid dividend yield at 2.4% with a relatively low P/E valuation and a 1.8x price to sale value.

  3. AmBev also offers a good dividend, but has a somewhat higher P/E ratio than the other large cap companies.

  4. Among small cap stocks, Vina Concha Y Toro offers a reasonable dividend yield at 1.5% and a good operating margin. However, it does not seem to be undervalued. It should be noted that the 1.5% dividend yield appears to be low relative to dividends posted by Yahoo!Finance. VCO pays irregular dividends and so further research in that would be critical. The summation of the last 12 months of dividends would suggest a yield around 1.9%. In terms of dividend growth, it is somewhat flat.

  5. Central European Distribution shows lower valuations, but has had a significant recent price decline, suggesting that it is not undervalued. The company is also struggling under a large debt load. This could be an interesting short opportunity, but would require more research.

  6. Peet's shows a relatively weak valuation and offers no dividend. Among the stocks with positive earnings, it has the highest P/E ratio. However, its 52-week return, around 33%, is confounding short sellers. According to Yahoo!Finance, about 30% of the shares are currently sold short at the end of April.

  7. The micro cap beverage stocks, like Reed's, Leading Brands, and Jones Soda, appear to offer limited to no upside and are very thinly traded. Even some of the smaller caps are thinly traded, for example, National Beverage with a $.6 billion market cap, trades around 35k shares per day.Coffee Holding might be worth a second look among the microcaps. However, it might have already captured all of its upside already given its recent strong performance.

Source: Quenching a Thirst for Beverage Stocks