The Coca Cola Company (KO) has registered a strong financial performance, and the company's strategic foresight makes it an attractive stock for long-term investors. It has been able to increase its EPS and dividends over the years. Currently, it offers an attractive dividend yield of 2.6%. It operates in the mature non-cyclical beverage industry, with limited growth opportunities. In line with its 2020 vision, the company has been working upon growth opportunities and improving its organizational structure.
Offering more than 500 brands, KO is the world's largest beverage company. The company is the top-ranked provider of sparkling beverages, juices, ready-to-drink coffees, and juice drinks. It also has the world's largest beverage distribution channels, with consumers in more than 200 countries. It serves approximately 1.8 billion beverages a day to consumers around the world.
In recent years, the company has modified its business model to increase its operational efficiency, and effectively address the changing global marketplace demands. To maintain its momentum in the business, KO has been taking necessary steps to overcome various issues. The Coca Cola Company acquired Coca Cola Enterprises (CCE) operations, one of its largest bottlers in North America, to improve its supply chain in North America and enjoy cost savings. To grow in the Middle East, Coke purchased Aujan Industries. In the first six months of 2012, its total acquisition and investment activities stood around $756 million. Also, the company revealed a four-year reinvestment and productivity program, which will help the company save $550-$650 million by the end of 2015.
The Coca Cola Company announced its new operating structure, which will divide its global business segment into three units. The new structure will split global operations evenly among America and the rest of the world.
The plan was associated with the company's journey towards its 2020 vision. KO has more than 700,000 employees around the world, together with its bottling partners. The company plans to reorganize three operating businesses; Coca Cola America, which will consist of operations in Latin America and North America, Coca Cola International, which will consist of the company's Pacific, Europe, and Eurasia & Africa operations, and the Bottling Investment Group, which oversees operations outside North America related to the company-owned bottling operations. The plan will be effective from Jan 1, 2013. Furthermore, the company disclosed that other organizational changes will be announced with the passage of time. Until that time, all current reporting and organizational structures will be the same as before. The company aims to create synergies, and in the process, seeks to target its geographical market more effectively by aggregating its global operations into three divisions. By doing so, the company will be able to target the existing geographical market more coherently, which is hoped to be achieved by the resulting synergies and focus.
KO has appointed leaders for its operating businesses who have relevant experience and have proven their potential. Steve Cahillane will be appointed as the President of Coca Cola America. He has extensive experience (20 years) in beverages, sales and distribution, and he is currently the President and Chief Executive officer of Coca Cola Refreshment (CCR). Ahmet Bozer will be appointed as the President of Coca Cola International; currently he is the President of the Eurasia & Africa Group. Bozer has been working for the company for more than 22 years. Irial Finanwill, who has more than 30 years of experience with the company, will continue working as the President of Bottling Investment Group. All three leaders named for the operating businesses under the reorganizing plan will continue reporting to Muhtur Kent, who is the Chairman and Chief Executive Officer.
Possible currency headwinds could impact KO's earnings which present a downside risk for the stock. For example the previous quarter saw the shaving of 4% of revenues because of unfavorable currency movements. Also, a potential long term headwind could come about as a result of consumers opting for more health conscious products and move away from sweet carbonated drinks. Commodity price fluctuations could also increase its cost which would translate into lower earnings.