Americans Are Out of Their Houses and Buying These Drinks
The U.S. economy is as close to normal as it's been in over a year...
Nearly half of Americans are fully vaccinated against COVID-19, including nearly 60% of adults. As more folks get vaccinated and government restrictions ease, many industries will start to get back on their feet.
Earlier this year, we highlighted spice-maker McCormick (MKC) and entertainment giant Disney (DIS).
Both of these companies had business segments that thrived during the pandemic, while their other segments suffered under lockdowns. But now that things are reopening, the strength in their pandemic segments is still there... at the same time that the struggling businesses are roaring back.
Today, we're highlighting another great company that fits into this trend...
As the world's largest nonalcoholic-beverage company, Coca-Cola (NYSE: KO) needs little introduction. The company's best-known brands include the Coca-Cola, Sprite, and Diet Coke soft-drink lines. But it also owns popular juices like Minute Maid and Simply, as well as sports drinks Powerade and Vitaminwater. With these strong brands, Coca-Cola has a leading position in almost any market it enters.
But this is just the tip of the iceberg for Coca-Cola's beverage portfolio... The company estimates it has more than 20 brands worth more than $1 billion each. Not only are these brands well-known, but they have incredible loyalty.
That means that they keep people coming back again and again – providing steady sales for Coca-Cola.
Coca-Cola doesn't do all the work itself, though. Instead, it found a capital-efficient way to operate its business. You see, it doesn't build bottling plants and do all the work itself...
Instead, Coca-Cola sells beverage concentrates and syrups to its network of bottling partners (more than 200 worldwide), which then handle production, distribution to wholesalers and retailers, and local marketing.
That means that Coca-Cola doesn't need to invest all that money in plants and other manufacturing sites. And this helps keep more cash in Coca-Cola's coffers and makes it one of the best businesses in the world.
During much of the pandemic, Coca-Cola couldn't sell much to restaurants, movie theaters, stadiums, and other "away from home" markets. Before the pandemic, these had accounted for about half of the company's sales.
But the same folks who'd have bought Diet Coke at a movie theater still bought some to drink at home while streaming a movie on the couch.
Coca-Cola didn't break out the numbers in its quarterly releases, but it said its at-home business was the standout segment throughout the pandemic.
Still, case volumes declined about 35% at their low, and fell 6% for the full year. But this trend is starting to turn...
Folks have returned to restaurants in full force. Events like sports games, movie-theater showings, and concerts are back.
In fact, concert-venue owner and promoter Live Nation Entertainment (LYV) recently said that its concerts business was "fully open" in the U.S. CEO Michael Rapino said that Live Nation is hosting 30 nationwide tours this summer and will put on the Rolling Loud Music Festival, which is expected to bring in 200,000 people.
That's a great sign for the economic return to normal. And it's a huge boost for Coca-Cola. These events are a huge part of Coca-Cola's away-from-home business. Now that these events are back, people are flocking to them.
That means that Coca-Cola can begin to recover its lost sales. And this area should recover quickly...
Think about when you went to a restaurant or sporting event before COVID-19. There was a good chance that the establishment served Coca-Cola products instead of its competitor PepsiCo (PEP). As people return to these establishments, Coca-Cola will be feeling most of the benefit, thanks to its leading market share.
That should serve as a tailwind for Coca-Cola shares in the months to come.
Sometimes investing is simple.