Should You Invest In Coca-Cola?

The world’s largest beverage company has seen a big slump in sales, but it just announced plans to restructure which may be good for investors.

Sept. 12, 2020

The well-known beverage is serving up a change for its workforce, revealing plans in late August that it will restructure its workforce. This isn’t great news for Coca-Cola’s (NYSE: KO) staff, with the cut down expected to cost the company between $350 and $550 million. However, this is the new look for the business post-pandemic and should help it survive. 

The bull case for Coca Cola

People all around the globe know what a can of “Coke” is, but this recent news will see the beverage company move its focus to its most promising endeavors. These include drinks like sparkling beverages, performance drinks, juices, plant-based drinks, and even coffee!

The changes in the business will mean nine new interconnected operating areas, aimed at increasing the scaling of new products and less duplication. Coca-Cola will also be spending money on social media advertising campaigns and will aim to have more popular brands within its portfolio. The company spent an average of $4 billion a year on advertising over the last 5 years. 

Coca-Cola continues to produce a solid cash-flow and, despite the testing economic climate, it had $2.8 billion following its second-quarter earnings. 

The bear case for Coca-Cola

Coke usually makes around 50% of its revenue from sales outside of the home. Considering the COVID-19 virus forced most countries into lockdown, no one was out purchasing Coke products at bars, restaurants, or stadiums. 

This new way of life impacted the beverage giant, sending its second-quarter revenue for 2020 down 28% to $7.2 billion compared to a year prior. Another concern is that its main competitor, Pepsi (NASDAQ: PEP) did slightly better, with its revenue only down around 7% compared to the year before.

So, should I buy Coca-Cola stock? 

It has been a really challenging year for all types of businesses and the fact that Coca-Cola predominantly relies on people eating out, it was expected to take a hit to its sales. It’s a huge plus that Coca-Cola is a household name and it is going in the right direction as it makes changes to its structure and hones in on its most promising products. 

It’s likely that the beverage giant will start to experience a slight increase in sales as bars and restaurants reopen across the globe. On the flip slide, many consumers are cautious about spending their money as unemployment hits an historic high in the U.S. 

Overall, Coca-Cola is a well-known brand that will come out the other end of the pandemic in a good position. The stock is a buy from me, it might just taste a little different for the next 12 months!

Quickfire round: 

Who owns most of the shares in Coca-Cola?

Berkshire Hathaway, with a 9.31% stake. 

Does Coke own Pepsi?

No, both companies are owned by different entities. 

Does Coca-Cola stock pay dividends?

Yes, the company announced its 58th consecutive annual dividend increase.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.