"Not surprisingly, Coca-Cola (NYSE: KO) has been placing particular emphasis on China, where there is plenty of untapped potential," says Paul Tracy in his StreetAuthority Market Advisor.
"Like most companies that have been around for well over a century, Coca-Cola operates in a relatively mature industry.
"Domestically, per-capita soft-drink consumption has plateaued and domestic volume growth is generally tough to come by.
"The story is quite different for many overseas markets, which now account for about 75% of the firm's sales. Coke isn't the world's most recognized brand for nothing -- consumers in 200 countries around the globe gulp down about 1.6 billion servings of its beverages every single day.
"The firm recently unveiled plans to invest over $2 billion to establish a larger footprint in the booming market in China's more remote locations. Now, it is following up on that commitment.
"Recently, Coke announced the grand opening of two new bottling facilities in the central and western provinces of Jiangxi and Xinjiang.
"These regions are far removed from the affluent and more developed cities on the eastern seaboard. But they are home to plenty of thirsty consumers -- Jiangxi alone has a population of 44 million.
"Coke already controls a dominant 54% of the Chinese soft drink market -- versus just 31% for rival PepsiCo. The company is moving aggressively to widen its lead by investing in marketing initiatives and key distribution infrastructure such as refrigerated coolers.
"To put the $2 billion expansion project in comparison, the firm has only invested $1.6 billion in China over the past three decades combined. It's easy to see the impetus behind this decision. The firm's sales volume jumped +19% in China, versus a -1% decline in North America last year.
"China's domestic consumption will only strengthen in 2009 thanks in part to recent stimulus measures. The country has already overtaken Brazil as Coke's third-largest market. The firm will generate more revenues in China than it does here in the U.S. within the next decade.
"Coca-Cola is making a big push for China's 1.3 billion consumers. But the company isn't neglecting other promising markets either. It now markets 80 different drinks to 900,000 retail outlets throughout the African continent.
"Meanwhile, all of this continues to translate into solid bottom-line improvement. The company just posted its ninth straight quarter of double-digit EPS growth.
"My staff and I feel China will be a powerful growth driver over the next few years, and think KO is a sound investment at prices below $56 per share."
Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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