Coke pins hopes on ‘super milk’

The dwindling returns from soft drinks have seen Coca-Cola develop a new super milk to diversify its product range.

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Source: Bloomberg

Before the US markets open on Tuesday 10 February Coca-Cola is due to post its fourth-quarter figures. The adjusted earnings per share are set to drop from $0.53 down to $0.422. Sales are also expected to fall from $11.981 billion to $10.762 billion. Subsequently, pre-tax profits are called lower at $2.392 billion from $2.66 billion. However, the year-on-year pre-tax profit is expected to increase by just over 7%.

Institutional analysts have maintained a positive outlook on the company, with 15 giving Coca-Cola a buy rating, 14 a hold and four a sell. The average twelve-month price target for the company is $44.35, still 6.25% above the current share price.

The dwindling popularity of soft drinks has been well known for some time and Coca-Cola has spent some considerable time and money producing products with healthier ingredients. In 1999 it began offering bottled water, which was broadly successful; however, the 2004 launch in the UK was an unmitigated disaster. The press learned that it was treated tap water from Sidcup and the product was soon pulled from UK shelves. The publicity was so bad that it cancelled launches in France and Germany.

This time round it will be launching premium milk under the Fairlife name, and there is little doubt that after a decade it will have learned from its painful previous lessons. This product will be launched as a premium offering at twice the price of normal milk. Coca-Cola’s milk will have 50% less sugar, 50% more protein & 30% more calcium than ordinary milk.

Year on year this should be a good set of figures for the US drinks company, and with the diverging revenue streams coming online optimism for the future should see shares retest the $44 year highs.

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