Coke and Pepsi May Be Losing Their Fizz
In an article last weekend in The Wall Street Journal titled "Is This the End of the Soft Drink Era?", author Mike Esterl made a timely observation:
As U.S. consumption
of soda beveragesslipped over the past eight years, the beverage giants typically were able to raise prices enough to keep soda revenue growing.
But soda sales at U.S. stores declined in the send half of last year -- including the holidays, when partygoers normally pay up to gulp more.
The baby-boom generation, still over 73 million in number, is becoming more concerned about the ramifications of ingesting too much sugar or artificial sweeteners.
"The question from here is if that is the new norm," Steve Powers, a beverage analyst at Sanford C. Bernstein, told the Journal after reviewing the latest store sales numbers. Last year the sale of carbonated, flavored sugary beverages (a.k.a. "soda") declined by 0.6% to $28.70 billion at American stores. In terms of volume the sales actually dropped by almost 2%.
The article quoted statistics by SymphonyIRI Group , a consulting company that claims to be "...a global leader in innovative solutions and services for the CPG, retail and health-care industries." Its clients are most of the members of the Fortune 100 CPG and retail companies.
In a news story on Tuesday, SymphonyIRI said its fourth-quarter 2012 MarketPulse survey "found that shopper sentiment dropped to its lowest point since Q3 2011. While consumers across all age groups feel the strain of ongoing economic strife, those aged 35-54 convey particularly gloomy attitudes, with 43% stating that their financial situation deteriorated in 2012."
This doesn't help the angst that management is feeling at both KO and PEP. The chart below clearly illustrates what's been unfolding when it comes to KO's share price and the trailing-twelve-month revenue-per-share direction.
There are two conclusions I draw from this chart. First, there appears to be good support at around the $36-a-share level. The second is that revenue per share, which had moved up buoyantly for most of 2012, apparently didn't fare as well in the fourth quarter, which KO reports on Feb. 12.
The analyst consensus estimate for sales revenue for the fourth quarter of 2012 is $11.54 billion, an increase of 4.6% over the year-ago same quarter. Earnings (EPS) are estimated to have risen 12.8% to 44 cents per share. KO will be under tense scrutiny to come close to or exceed these numbers.