Coca-Cola (NYSE:KO) plans to invest $2 billion in India over the next five years. It plans to channel this money towards developing infrastructure, partnerships and brand building. According to Ahmet C Bozer, President of Coca Cola Eurasia and Africa, this is the company’s single largest investment in a country apart from the U.S. and China. Coke expects India to be one of its top five markets by 2020. [1] The firm’s arch rival Pepsi (NYSE: PEP) is also pumping huge amounts of money in emerging economies like India and China to boost growth. (See our previous post: Pepsi Updates: Investing Billions in China and India for Growth) Coca-Cola competes with companies like Pepsi (NYSE:PEP) and Dr. Pepper Snapple Group (NYSE:DPS).
Our price estimate for Coca-Cola is $75, implying roughly a 10% upside to the current market price.
Coca-Cola India Statistics
- India has been a key growth driver for Coca-Cola, it has witnessed strong volume growth in India for the past 21 quarters, 15 of which have seen double-digit growth. [2] See our note Coca-Cola Fair Value $75: Pushing Further into Rural India
- Coca-Cola enjoys a dominant position in India’s beverage market. Its two sparkling brands, Thums Up and Sprite, are India’s top selling soft drink brands.
- To date, the company has invested over $2 billion in India and currently employs more than 25,000 people.
We believe investments in key emerging markets would enable Coca-Cola to increase its beverage market share globally. Growth has been sluggish in developed countries, therefore, channelizing resources towards building a brand and infrastructure in emerging economies would pave the way for future growth opportunities. India’s burgeoning middle class and under penetrated tier 3 cities and rural areas offer significant growth opportunities. See related note Transactions Over Volume in India, Coke’s Growth Mantra.
Understand How a Company’s Products Impact its Stock Price at Trefis
- Coke plans $2bn India investment in bid to boost growth, BBC News, 15 November, 2011 [↩]
- Coca-Cola System Investing $2 Billion in Long-Term, Sustainable Growth in India, Company Website, November 14, 2011 [↩]
