Rising health consciousness and the growing popularity of non-carbonated drinks have resulted in a small decline in the US carbonated soft drink (CSD) market. Going forward, we expect this market to continue to decline slightly. Meanwhile, CSD manufacturers like Coca Cola (NYSE:KO), PepsiCo (NYSE:PEP), Dr Pepper Snapple (NYSE:DPS), and National Beverage (NASDAQ:FIZZ) are preparing for the demand changes with new versions of their leading soft drinks.
We currently have a Trefis price estimate of $60 for Coca Cola’s stock, about 4% above the current market price of $58. We estimate that the classic Coca-Cola soft drink constitutes around 27% of KO stock, compared to 17% for Diet Coke.
Declining Market
The US Carbonated Soft Drinks Market Size has decreased from 10 billion cases in 2005 to 9.4 billion cases in 2009. [1] Carbonated soft drinks are perceived to be responsible for the increasing obesity levels among people. This has resulted in negative publicity for CSD companies and less consumption of soft drinks. Alternative beverage categories like sports drinks, energy drinks, fruit juices, enhanced water and ready-to-drink coffee have witnessed significant demand growth as a result.
However, innovation in sweeteners will help beverage companies continue to sell carbonated soft drinks and can potentially lead to a rebound in the overall market.
The average of Trefis member forecasts for US Carbonated Soft Drinks Market Size indicate an increase from 9.8 billion in 2010 to 10.1 billion by 2016, compared to the baseline Trefis estimate of a decrease from 9.3 billion in 2010 to 9.2 billion by the end of the Trefis forecast period. The member estimates imply an upside of 1% to the Trefis price estimate for Coca Cola’s stock.
You can drag the forecast trend-line above to express your own view, and see the sensitivity of KO’s stock to US Carbonated Soft Drinks Market Size.
Our complete analysis for Coca Cola’s stock is here.
Notes:
1. Estimated based on publicly available US CSD market figures (volume) reported by Beverage Digest.
