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Will Coca-Cola's Product Expansion Stimulate Growth in the Remainder of Fiscal 2019?

Christopher Vargas

Coca-Cola KO is set to report their third quarter results before the opening bell on Friday, October 18th. The beverage giant’s shares have risen just over 13% in 2019 thus far, slightly outperforming the broader soft drink market’s 12.6%.

Coca-Cola has been able to turn things around this year after posting five fiscal years of declining revenues thanks to a diverse product lineup. Will the company be able to continue this growth narrative in its upcoming Q3 and the remainder of fiscal 2019?

Product Lineup Expansion

The renowned soda company has made an effort to expand their product portfolio recently to better market their brand in the contemporary market landscape. Coca-Cola has recognized that the modern consumer is looking for more variety than just the original carbonated beverage it’s known for. This recognition led the company to expand its beverage portfolio to include teas, juices, sports drinks, and other products.

Earlier this year, Coca-Cola closed its $5.1 billion takeover of the British coffee chain Costa Coffee, which included the coffee company’s roastery, roughly 4000 retail outlets, coffee vending operations, and at-home coffee products. Additionally, the company launched Coca-Cola Coffee, which blends coke with coffee, in Japan, a major market for bottled coffee, and recently decided to launch the drink in over 25 new markets by the end of 2019.

The company also decided to launch its own energy drink called Coca-Cola Energy, despite its stake in Monster Energy drinks. Coca-Cola even decided to dabble in the alcohol industry by testing out its Lemon-Do product, an "alcopop" which was well-received during its test run across all of Japan in October. They are cheaper than canned beer, and popular with women and younger drinkers.

Companies like Constellation Brands STZ and Anheuser-Busch BUD have recently tried to cash in on the lucrative young alcohol consumer market by introducing their versions of flavored spiked drinks. If the Lemon-Do product continues its success in its Japanese trial run, then investors can expect Coca-Cola to introduce it in other markets.

Outlook

Our Q3 consensus estimates forecast Coca-Cola’s earnings to fall 3.88% to $0.56 per share, but sales are projected to climb 15.02% to $9.48 billion. Q4 consensus estimates predict earnings will leap 1.55% to $0.44 per share on the back of a 26.33% rally in revenue to $8.92 billion.

Full fiscal 2019 estimates project earnings to come in at $2.10 per share for a 1.15% spike while sales are expected to reach $36.8 billion, up 15.52%. The EMEA and Latin America segments are forecasted to make respective drops of 2.29% and 2.59%. The North America segment is anticipated to grow 1.17% while Asia Pacific pops 0.73%.

Coca-Cola is looking to carry over its storied legacy into the modern era with investments in a diverse product portfolio. The beverage company is right to branch out into different products since soda consumption has declined as the modern consumer has become more health conscious. However, time will tell how successful the company’s beverage ventures will be within the modern consumer landscape.

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