Editor's Note: Jon D. Markman writes a weekly column for CNBC on MSN Money that is republished here on TheStreet.com.


Coca-Cola ( KO), one of the great symbols of American ingenuity and pride, is on the ropes.

Crushed between the triple threat of a slowdown in carbonated-soda sales at home, the deteriorating image of U.S. interests overseas and a rise in health concerns everywhere, its revenue is flagging, and Coke's stock price, though up a bit recently, is down 45% from 1998.

Yet Coke has been around a long time, and it is a fighter. And it just so happens that, in recent months, its long-dithering executives appear to have recognized their peril in a more fundamental way and are prepared to emerge from their corner, swinging.

Yes, the cola king is preparing a comeback. And this time it just might work. On Wednesday, Coca-Cola reported a drop in its fourth-quarter net income due to impairment charges at its largest bottler. But revenue rose and results surpassed Wall Street's expectations.

Coke's fourth-quarter net income fell 22% to $678 million, or 29 cents a share, from $864 million, or 36 cents a share, a year ago. The company said it experienced 3% growth in its sparkling beverages, or carbonated drinks, a business that includes trademark products such as Coke and Fanta.

The secret recipe, strangely enough, has nothing to do with the red can for which it is so famous. The path back to glory is mostly green, with a big, new-age helping of tangerine and pink grapefruit, and perhaps a dash of java.

Long Odds, Big Payoff

The new corporate Coca-Cola, you see, is not really that into soda at all. While sugar water will always be at the core of the company's mission, the way forward is all about high-concept juices in groovy bottles, as well as vitamin water, energy potions and chilled coffee.

Consider Coca-Cola's most recent $250 million purchase, a small "alternative" beverage pioneer called Fuze. If you've never heard of it, you're probably not a 28-year-old woman. In years past, this was exactly the kind of concept drink the soda giant shunned. Now it's considered a potential lifesaver.

Fuze was invented four years ago in the New Jersey basement of industry veteran Lance Collins. It's an awesome story of stubborn entrepreneurship. Collins knew the odds were around 97-1 against success, but he thought he saw a niche for low-calorie, high-taste, upscale juices for beautiful people, and he gave it a shot.

His design team created a gorgeous, colorful glass bottle for his "banana colada" and "peach mango" concoctions, gave them such coy names as Slenderize, Refresh and Vitalize, called them "infuzions" instead of juices, and listed "transformative" ingredients such as chromium, carnitine and Citrimax.

This doesn't sound like Coca-Cola's cup of tea, but check out the demographic. Collins started small by focusing on urban women in their 20s and 30s, then elbowed his way past the big boys of the game via an aggressive distribution strategy into one chain store after another. He sold 24 million bottles in 2003, double that in 2004 and double again last year.

Success for a new beverage is all about persuading a distributor to make room for your stuff on its truck, and by all accounts, Collins' salespeople pulled every trick in the book to fight their way into the awesome sales routes of Coke, Budweiser and Miller beer. You can now choose from an entire shelf of Fuze at the tiny Korean deli in Seattle where I get my lunch every day, which is astonishing for an independent brand. Or you can buy cases of it at Wal-Mart Stores ( WMT) and in many supermarkets, not only in the U.S. but also in Asia, South America and Europe.

Cute little Fuze is the future of Coca-Cola because, well, everyone's doing it. Archrival PepsiCo ( PEP) started its own youth movement by buying the stunningly successful SoBe line of oddball tea and energy drinks for $370 million in 2000 and added the quirky independent Izze line of light juices, which my kids love, late last year. Coca-Cola bought natural-juice maker Odwalla in 2001 and picked up Fuze earlier this month.

Do you notice a pattern? Neither cola maker is buying any soda-pop companies, just these little wunderkinds, because that's where the growth in the industry is coming from. While carbonated soda's share of the market is shrinking, alternative beverage sales are jumping as much as 50% a year. And energy drink sales are advancing even faster.

Fuze has a line of energy drinks, called NOS, that is aimed at car-racing fanatics. It has reportedly been muscling up well against Red Bull, Monster and No Fear in Nascar towns, and now Coca-Cola will throttle up sales by pumping NOS -- which is short for nitrous oxide, an ingredient of racing fuel -- through its worldwide network. Zoom!

International Juice

At the end of the day, all the successful grapefruit infusions in the world won't help a company like Coca-Cola much if the rest of the company is in the tank. They're a drop of sucralose in a giant bucket of syrup. Fortunately, revenue and earnings are improving elsewhere, particularly in international divisions.

On Tuesday, we learned that sales volumes in Japan were up 5% in January, vs. a gain of 1% in January last year. That's important because while Japan amounts to only about 5% of Coca-Cola's total sales volume, pricing there is so outrageous that the country totals a whopping 20% of the company's total annual profit, according to a Merrill Lynch estimate.

Down in Mexico, Coca-Cola announced in December that it would join its largest bottler in that country to buy the second-largest Mexican juice company, Jugos Del Valle. That's another big attempt to bring noncarbonated sodas more powerfully into the mix. The company made similar deals last year in the Philippines and India, two more key regions.

When you put it all together, you can see that Coca-Cola's earnings are being helped by the plain fact that its product balance is improving, with noncarbonated beverages such as Fuze and Odwalla now amounting to 20% of its total sales, and regular old Coke and Diet Coke fading a bit into the back of the corporate fridge. It takes a while for investors to recognize this, but rising revenue serves to punctuate the new message.

I estimate that Coca-Cola will earn $2.60 a share this year and $2.87 next year. When you put a price-earnings multiple of 21 on the 2008 figure, you get a price target of $60. That's 25% higher than the current quote, which makes the stock a good buy right now. If it doesn't work out, you can always mellow out with a chilled ginseng-and-guarana Fuze tea.
At the time of publication, Jon Markman owned shares of Coca-Cola.

Jon D. Markman is editor of the independent investment newsletter The Daily Advantage. While Markman cannot provide personalized investment advice or recommendations, he appreciates your feedback; click here to send him an email.