The beverage industry is set for significant changes in coming years in the wake of changing consumer behavior, especially from the emerging markets. This is expected to enhance the growth prospects cutting across the segments of the beverage companies in the later part of this decade. The marketing too is set for a change in tune with the focused markets and consumer habits, particularly the younger brigade. The emerging markets alone are going to offer more prospects for growth and opportunities are up for grab.
The crisis in the developed markets is driving major beverage companies to search for growth prospects around the globe. This is quite evident from the way Coca-Coka (KO) and PepsiCo (PEP) have drawn their productivity program. While their current program might be based on the existing requirements and cutting down of costs and jobs, they are also working out plans to tap the markets that offer growth prospects.
Though these two US-based MNCs are already in emerging nations, what is going to offer them further prospects is in the area of packaged and processed foods due to a marked shift in consumer behavior. The two companies could also engage in M&A, not only to consolidate their presence, but to extend it. This is possibly to limit the local competition.
Only last week, the two dominant players in the food and beverage industry have announced their earnings results. There is a lot of similarities. Both have reported earnings and revenues that came in above street expectations.
While PepsiCo indicated earnings outlook for 2012, Coca-Cola avoided it conveniently. Both companies have initiated productivity programs with clear future ambitions. They are drawing their plans to meet the situations of 2020.
Interestingly, Ernst and Young findings of shift in consumer shopping habits provide ample opportunities for the beverage industry. If the beverage companies probe the available opportunities especially in the emerging markets, they will be well placed to take advantage of the situation in the coming years.
The growth that emerging markets alone offer is quite significant for any major company to ignore. Ernst & Young finds that 70 percent of the worldwide GDP will be from the emerging markets during the next decade. The GDP in the region is estimated to be 4 – 5 percent more than the developed markets.
When the world reaches the year 2020, it is estimated that one billion people will enter under the middle class segment. Of this, two-thirds are going to be from emerging markets. While 82 percent of the global population is living in the region, 92 percent of the world's births is reported from the emerging nations.
Significantly, both companies have initiated plans with an eye on future growth. At the same time, both companies do not want to lose their strongholds in the U.S. In fact, they might try to extend the gains. Still, opportunities available in the emerging markets are phenomenal for any MNCs to ignore. It is but natural that the two multinational companies cannot be on the sidelines and would naturally want to make a kill.
iStock Punch
The beverage companies stock might be performing side ways currently given the economic ambiguity. But if one looks at the growth prospects available in emerging nations, the two companies stocks look attractive for the long term. If there is going to be a dip, it can be used as buying opportunities.