Coke Wants to Double Revenues, Will Cumin-Flavored Soda Help?

Coca Cola (KO) Chief Muhtar Kent wants to double revenues in a decade. That's a tall order, so will cumin-flavored soda help?

As Bloomberg and others noted recently, the company's stepping up efforts in India. That includes bringing back cumin-flavored soda and old brands and expanding distribution networks. It plans to plow $5 billion into this through 2020.

Coke recently juiced its revenues (and increased its debt) when, in October 2010, it bought up the North American business of one of its major bottlers, figuring it will use that to streamline operations in its largest market.

KO Revenue TTM Chart

KO Revenue TTM data by YCharts

But North America appears to be home to a growing interest in public health, something that doesn't work in your favor if your business is selling sugar in liquid form. Most notably, New York City’s Mayor Bloomberg successfully pushed through a ban of super-large sugary drinks, despite industry ads that tried to brand him a nanny.

Last year, 44.2% of Coke’s revenues came from North America, 11.7% from Pacific counties, 10.3% from Europe, 9.4% from Latin America and 5.8% from Eurasia and Africa. (The balance is attributed to bottling investments and corporate.)

So that's a good reason to look beyond North America. Coke does business in more than 200 countries, and India is one of its largest untapped markets. It has lagged rival PepsiCo (PEP) there.

KO Revenue Growth Chart

KO Revenue Growth data by YCharts

The late Forbes reporter Paul Klebnikov documented some of Coke’s global expansion challenges in a story back in 2003, when he said that in the prior four years, Coke had taken more than $1 billion in charges related to overseas deals gone wrong. Much of that had to do with working in dangerous and corrupt countries, and India is mercifully tamer than Columbia, where a Coke executive was murdered the year of Klebnikov’s story. Success in India still relies on essentially building up the infrastructure to distribute and sell the stuff.

KO Capital Expenditures Chart

KO Capital Expenditures data by YCharts

As is, Coke has higher margins than Pepsi, whose margins are dampened by its sizable food business (if Ruffles and Doritos count as food).

KO Profit Margin Chart

KO Profit Margin data by YCharts

And it has historically run close in terms of return on invested capital.

KO Return on Invested Capital Chart

KO Return on Invested Capital data by YCharts

But it also costs a bit more than both its rival and McDonald’s (MCD), which could help pave the way there. The burger giant made headlines worldwide with its decision to open an all-vegetarian restaurant in India featuring items like McAloo Tikki potato burgers and McSpicy Paneer. Presumably Indians who may soon be introduced to McDonald’s fare will need something to wash down that fast food, something like a cold Coke.

KO PE Ratio Chart

KO PE Ratio data by YCharts

From the editors of YCharts.YCharts Pro Investor Service includes professional stock charts, stock ratings and portfolio strategies.

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