Coke Expands in Emerging Markets - Analyst Blog

The Coca Cola Company (KO), the largest global producer and marketer of still and sparkling beverages, announced its intention to invest about $121 million in a new plant in Karnataka, Southern State of India. The investment is in line with the company's strategy to expand its operations in developing and emerging markets.

Coca Cola has also been expanding its presence in emerging markets through the introduction of water and juices. Apart from making sparkling and still beverages the company intends to manufacture juices and juice drinks in the proposed facility.

Further, in the most recently reported quarterly earnings, the company witnessed high volume growth in the Eurasia & Africa division with markets such as India, Turkey and Russia posting volume growth of 22%, 10% and 6%, respectively.

Earlier this month, Coca Cola expanded its presence in Russia through the acquisition of Nidan, the fourth largest juice manufacturing company in Russia. Over the last two decades, the company has already invested about $2 billion and plans to spend about another $1 billion over the next three to five years.

Coca Cola's arch rival Pepsi Co. (PEP) has also been focusing on emerging markets for growth. Both companies are expanding market shares primarily in few major markets such as India, China and Russia.

Coca Cola currently has a Zacks #3 Rank, implying a short-term Hold recommendation. We are also maintaining our Neutral rating on the stock, due to the sluggish volume trends in North America and Europe, intense competition and exposure to adverse fluctuations in commodity prices and foreign currency.
 
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