Since being founded in 1886, Coca-Cola has always been known for one thing: its brand of soft drinks. For more than 130 years, John Pemberton’s famous beverage has evolved, first making use of coca leaves and kola nuts as part of its ingredients list. While its exact ingredients will not be revealed today (a decision made by Coke itself), the ingredients have nonetheless been modernized.
For those who want less sugar in their soft drinks, Coke manufactures make lighter versions of its beverages, including Coca-Cola Zero, Caffeine-Free Coca-Cola, Diet Coke Caffeine-Free, and Diet Coke. Other beverage choices as part of the Coke umbrella are Coca-Cola Life, Coca-Cola Citra, and Coca-Cola Cherry.
Now, banking institution Wells Fargo and one of its analysts is purporting that a surprising new drink may be added to the Coke roster: alcohol.
Bonnie Herzog is the analyst of note who is predicting the big change. She says that the change may be announced as early as this week, just in time for the investor day event Coke is hosting.
Coke is already having a banner year in terms of stocks. Part of this has to do with the growing market for Coke in countries across the world. The brand isn’t resting on its laurels, though, and is instead seeking ways to continue evolving.
Making the move to alcohol may be just the solution.
“We expect management will highlight a lot of this innovation,” says Herzog, adding that she will “expand on CEO James Quincey’s recent commentary to: grow and incubate high-growth brands in the U.S. through its Venturing & Emerging Brands unit (VEB); build and nurture small brands internationally, similar to what it has achieved with success in the U.S. with VEB and through local partnerships; expand into other premium segments such as adult craft beverages.”
Coke is keeping tight-lipped about the change for now, and insists on waiting for investor’s day to make an official statement on the matter.
Wells Fargo reports that earlier in November, the soda company had a nine percent increase in price targets, which now puts that price target at $51.
That said, there are a lot more questions than answers right now, and Herzog only added to the growing list of questions. “To what extent does KO intend to expand into adult craft beverages, and will that include alcohol beverages (or just mixers?)”
Upon some examination of the empire that is Coca-Cola, it does make sense for the company to enter into the realm of producing its own alcohol, be that whole beverages or just mixers. They’ve already delved into practically every other type of drink there is.
This all started in 2007, when Coke took the plunge and purchased Vitamin Water and Fuze, a non-carbonated fruit drink and tea brand. They continued their tea brand ownership a few years later in 2011, when they snatched up Honest Tea.
Then, by 2014, Coke had changed tact and moved on to energy drinks. They focused on Monster Beverage, of which they own a 16.7 percent stake. Also in 2014, the soda brand acquired Keurig Green Mountain.
In less than a decade, Coke acquired a vitamin water brand, several tea brands, a coffee brand, and an energy drink brand.
For a while, they didn’t buy up any other types of beverage companies, although now that may be changing with this new direction.
That said, if Coke does indeed start producing alcoholic beverages, could this tarnish its family-friendly reputation? The company has a $199.6 billion market value, making it the top producer of soft drinks. Would it be able to stand out in a cramped alcohol market?
At least to the point of its reputation, Herzog thinks few if any changes would occur.
“We continue to believe Coca-Cola’s best-in-class distribution and strong brand portfolio will allow it to retain its premium valuation and believe that investments in productivity and marketing today will pay off in years to come…We think Coca-Cola can support roughly 5 to 6 percent organic revenue growth over the next several years, ahead of current consensus estimates.”
Herzog went on: “With a new reinvigorated management team, and renewed focus on accelerating top-line growth while maintaining discipline around costs, we believe Coca-Cola’s next chapter of growth is around the corner.”
Until investor’s day comes and we know for sure what Coke’s plans are, we’ll have to take all this at face value. Like Herzog hinted, though, some exciting changes seem to be in store.
Regards,
Ethan Warrick
Editor
Wealth Authority
