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TheStreet Open House

Coca-Cola Needs Less Fizz in Its Products to Get More in Its Stock

Stocks in this article: KO PEP BRK.B

NEW YORK ( TheStreet) -- You can tell when an iconic brand name like Coca-Cola (KO - Get Report) is running out of great sales ideas. If one of the top headlines for the company that invented the word "Coke" reads Slumping Diet Coke Goes Slurpee, even Warren Buffett might start squirming.

As a shareholder I'm glad Coca-Cola is looking for ways to extend the brand, such as selling a Diet Cherry Coke frozen beverage exclusively at 7-Eleven stores under the Slurpee brand as of Wednesday. It might add some fizz to the stock, which is down over 8% for the year to date as of the Wednesday close of $37.87.

KO is down over 13% from its 52-week high partly because of the ominous guidance on its operating profit in 2014 when it released with fourth-quarter earnings last week. It also disappointed when it reported that its beverage volume rose only 1% for the quarter and 2% for the year. CEO Muhtar Kent squarely placed responsibility for the bad news on, you guessed it, the weather as well as the challenging economic conditions in the many areas of the world where it sells its beverages.


Investors aren't buying it -- as in the shares. After the earnings the stock fell nearly 4% and on Feb. 20 it hit a 52-week low of $36.89. Part of the reason that the stock is languishing -- the Atlanta company isn't PepisCo (PEP).

Pepsico has grown its product mix to the point that its snack food division outperforms its beverage segment. Recently I  wrote that as a result, shares of PEP have soared while activist investors push for a shareholder-friendly spinoff of its snack food dynasty.

Diversity-poor Coca-Cola still gets the vast majority of sales and earnings from selling beverages, especially the bubbly kind. In fact about 75% of its global sales volume derives from selling soda pop. That's part of the reason the company had to admit that its fourth-quarter 2013 revenue fell 3.6% to $11.04 billion.

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