Coca Cola Sharpens Focus on Green Initiatives, $75 Fair Value

The Coca Cola Company (NYSE:KO), the maker of popular drinks such as Coca Cola, Fanta and Sprite, is pushing a greener strategy in order to implement sustainable initiatives and eventually reduce costs. ^[1] The company has also called for a responsibility deal within the soft drink industry to promote recyclability of bottles and cans. Coca Cola currently competes with companies like Pepsi (NYSE:PEP) and Dr. Pepper Snapple Group (NYSE:DPS).

We estimate a $75 price for Coca Cola, which is about 15% higher than the market price.

See our full analysis for  Coca Cola

Reducing Weight of Cans

Coca Cola Singapore is making efforts to reduce the weight of soda cans so that it uses less raw materials. Currently, all of its bottles and cans are recyclable. The company also said it had increased water efficiency by 13% since 2004 and intends to increase that number even further. ^[1] Such initiatives usually involve a fair deal of investment in the beginning but help reduce costs in the long run. Similarly, it has reduced the energy consumption in its manufacturing processes by a staggering 41%. One distinct advantage for Coca Cola is that its bottling plants are common for all its major brands, so the savings will be felt across its portfolio. Coca Cola currently enjoys healthy gross profit margins but we could see a slight increase if such measures are successful and are implemented holistically.

The move will also provide Coca Cola leverage at a time when governments around the world are getting strict about environmental issues. The move could also prop up sales as consumers want to buy products of companies they view as ethical and environmental friendly.

Recycle Please: London 2012 Olympics Sponsorship

As one of the official sponsors of the Olympics 2012, Coca Cola has placed more than 260 recycling bins across the city to encourage people to recycle the 11,000 tonne waste produced by the city each day. ^[2] The company has already established 44 recycling zones within the city and intends to double the number before the Games commence next year. Packaged products by Coca Cola that would be sold at the Olympics next year would all be made of recyclable materials. These are part of the company’s global initiatives to recover 50% of cans and bottles by the year 2015.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Coca-Cola’s “green” strategy working for its business, Channelnewsasia.com, 24 November, 2011 [↩] [↩]
2. Coca-Cola unveils biggest plastic recycling initiative for London 2012, Green Wise Business, November 9, 2011 [↩]