Assessing Revenue Trends for Nonalcoholic Beverage Companies



Slowdown in revenue growth

Over the past ten years, nonalcoholic beverage companies’ revenue has been influenced by several factors—including slowing soda volumes, tough macro conditions, expansion into emerging economies, and the addition of new product categories. In fiscal 2015, revenues for beverage giants Coca-Cola (KO) and PepsiCo (PEP) were significantly impacted by currency headwinds due to their significant exposure to international operations.

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Soda volumes impacting performance

Beverage giants Coca-Cola and PepsiCo have an extensive presence in over 200 countries. These mature companies’ revenue growth has slowed over the past few years. Coca-Cola has huge exposure to carbonated soft drinks, which have been impacted by the slowdown in category volumes in developed markets like the United States. Coca-Cola and its peers are increasingly focusing on still beverages as consumer demand shifts to healthier beverage choices. Coca-Cola’s sparkling beverages accounted for 73% of its worldwide unit case volume in fiscal 2015, down from 80% in fiscal 2007.

PepsiCo’s diversified business model includes both beverages and a strong snack food business. This approach has helped the company offset weakness in soda volumes to an extent. In fiscal 2015, PepsiCo’s snacks food business accounted for 53% of its revenue while its beverage business accounted for the remaining 47%. PepsiCo’s performance in fiscal 2015 was significantly impacted by currency headwinds. We’ll discuss fiscal 2015 performance in Part 15 of this report.

Dr Pepper Snapple (DPS) is a much smaller player than beverage giants Coca-Cola and PepsiCo. The company’s growth in recent years has been driven by its strong portfolio of flavored colas, solid brands like Penafiel, and third-party brands like Bai 5 and Fiji.

The rise of Monster

Leading energy drink maker Monster Beverage has been posting higher sales growth than the beverage giants! This growth has been driven by strong demand for energy drinks in contrast to carbonated soft drinks. However, the company’s sales growth has slowed over the years. Monster Beverage reported a net sales growth of 30.6% in fiscal 2011, but in fiscal 2015, the company’s net sales grew only 10.5%. Monster Beverage (MNST) accounts for 2.5% of the First Trust Consumer Staples AlphaDEX Fund (FXG).

In general, major nonalcoholic beverage companies are trying to offset the impact of weak soda volumes by focusing on productivity initiatives to improve margins.


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