Coca Cola (NYSE: KO) and PepsiCo (NYSE: PEP) better look out. Red Bull GmbH, the Austrian company behind bestselling energy drink and household name Red Bull, wants to try its hand at selling cola. The new drink, shown at right, will launch in seven countries over the next several months, with the US launch slated for June, according [subscription required] to the Wall Street Journal. According to BrandWeek, "Unlike Coca-Cola and Pepsi, Red Bull Cola will be 100% natural and command a premium price. Its formula will consist of kola nut and coca leaf."
The all-natural formula could be a big advantage for Red Bull,wcreating the perception of a more healthy beverage in the same way that vitaminwater became a big hit among people looking to drink healthier, in spite of being pretty high in calories.
Will Red Bull have success? That's hard to say without knowing what it tastes like, but with a strong brand and rapid growth, Red Bull could present the most serious challenge to the cola leadership of Coke and Pepsi in a long time -- possibly ever.
With Coke and Pepsi both experiencing significant declines in sales last year, this could be the perfect time to kick them while they're down.
Coca Cola's (NYSE: KO) strategy of acquiring premium non-carbonated beverage brands like Glacéau Vitamin Water appears poised to continue, with the company reportedly in advanced talks to acquire Honest Tea.
The eight year-old Bethesda, Maryland company has about $13.5 million in annual sales, and Coke is hoping that that number can grow as more healthful beverages take market share away from soda.
CNN Money quotes Beverage Digest editor John Sicher as saying that, "Honest is a very small brand, but has attracted attention due to its organic positioning. Linking up would be a positive for Coke."
Coke's strategy of using acquisitions to fight the decline in soft drink sales appears to be working, with sales expected to increase in the high single digits due to changes in the company's product mix. Look for Coke to continue making acquisitions like this one as it seeks to build stronger competitors for PepsiCo's (NYSE: PEP) Propel Fitness Water and Sobe brands.
TheStreet.com's Jim Cramer says that now, teetering financials and homebuilders will topple and safety plays will rule. Ouch.
Couple of tough days ahead. We were overbought going into this Fed decision; now we will have to pay for it, and pay for it big. We have to lose a lot that we gained, expecting that the Fed would work hand-in-hand with the Treasury Department to get us out of this jam.
But that's not going to happen now. You can see what will happen. They will kill the banks again. The fundraising that was going on will be halted. We will get some failures. The homebuilder credit lines? Some will not be extended.
Today's news that Southwest Airlines (NYSE: LUV) will slow its planned growth in 2008 marks the second time this year that the low-cost carrier has reined in expansion as it struggles with high fuel costs. "We are concerned about growing evidence of slowing economic growth that would inevitably affect passenger demand, coupled with a surge in energy prices," Chief Executive Gary C. Kelly said in a statement.
Clearly the airline industry is challenged by high fuel costs and the prospect for slower domestic growth that would make it harder for no-frills carriers to fill their planes. As Douglas McIntyre pointed out, the saving grace for Southwest is that it has a long-term hedge on fuel prices and is buying fuel at a crude oil cost of about $51 a barrel.
What can airlines do to get profitable during this expensive fuel, slower-growth period? Well, charging customers a bit more so they can have a soda on the plane is probably not the right answer -- all it really does is make the airlines look incredibly cheap. The price airlines charge makes a drink at Yankee Stadium look cheap. How many of us have been on a plane and everyone is snickering and making comments to the person seated next to them about how they can't believe they need to pay for a Coke (NYSE: KO).
I think that airlines, like any business, need to show consumers that they are valued. Charging for a drink has the opposite effect. For an interesting take on airline improvements, read this post by Steve Towers.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/04/07.
"Stock prices continue to behave bearishly," caution David Nassar and Larry McMillan, options experts and editors of the industry-leading The MarketWatch Options Trader.
Here, they offer a bearish market overview along with a bullish look at beverage stocks -- along with an options play on PepsiCo (NYSE: PEP).
The advisors explain, "Rallies can't gain footholds, while declines are deeper and more long-lasting than seem possible. As a result, there is an oversold condition in this market -- one which can spur sharp, but short-lived rallies at any time -- but a true intermediate-term buy signal is not at hand, for none of our indicators have turned bullish.
"The Standard & Poor's 500 turned bearish when the index fell through what had been support at 1490. That was the last piece of the bearish puzzle. The market has been under extreme pressure ever since. Any rallies towards 1490 can be sold, as that level now represents resistance.
"Meanwhile, where is support? It was at 1430-1440, but that level gave way and it seems likely now that the averages will test 1410 (the August closing lows) and perhaps 1370 -- which is multiple support from both August and March.
"Should that give way, then a true bear market would be underway. Support levels are somewhat meaningless in a nasty decline like this anyway; it is more important to monitor oversold conditions.
TheStreet.com's Jim Cramer says that this is among the worst markets he remembers, and explains how to live through it.
We've just crossed into no man's land with this dramatic selloff of what has been working: agriculture, oil, minerals and defense -- although the latter held up well.
We are now square into 1990, where only a few stocks hold up and things go very awry. It is a time to be defensive and be glad you caught as much as you did, but recognize that we will not go up without emergency Fed relief because there simply is too much stress in the system.
Are we in a bear market? I have long ago recognized the worthlessness of those labels. You say "bear market" and maybe you miss the next six points in Coke (NYSE: KO) (Cramer's Take) that could be had or the next five in Merck (NYSE: MRK) (Cramer's Take). We may have a nice leg up in dividend-oriented stocks. We can catch bounces in commodity stocks, and we might just want to start buying some beat-up stocks with solid rest-of-world exposure.
Coca Cola (NYSE: KO) will pay New England Patriots heartthrob Tom Brady $3 million to $5 million to endorse Smartwater, Vitamin Water's sister brand that was acquired as part of the deal for Glaceau (which made 50 Cent a very rich man indeed...).
The Glaceau acquisition was part of Coke's strategy to pursue revenue growth as sales of carbonated beverage decline. According to the USA Today:
Brady, who dates a supermodel and makes gossip-column headlines as well as sports news, joins Jennifer Aniston in pitching the distilled water with added electrolytes. Replacement of electrolytes depleted in workouts can ease muscle fatigue. Smartwater is the top enhanced water with yoga enthusiasts, and Aniston has lent the brand a sexy, healthy lifestyle image. Brady adds some muscle to the healthy image.
You almost have to wonder about whether these products are a rip-off. If the company can pay Jennifer Aniston and Tom Brady millions of dollars to sell water, the mark-up has got to be pretty high.
But Tom Brady is as big as it gets right now, and this a pretty big coup for Glaceau.
Given today's choppy, consolidating markets, if your portfolio does not contain a consumer products defensive stock, consider adding PepsiCo (NYSE: PEP).
Pepsi has all the ingredients for a reasonably safe consumer play: a leading primary brand, product diversification, established market positions, a wide geographical footprint, marketing savvy, and cost discipline.
Pepsi has a large snack operation, but the major business model here is, of course, beverages, led by Pepsi Cola, which vies with Coke (NYSE: KO) for global cola supremacy. Operating in about 200 countries, look for PEP international market share to increase in 2007-2009. The company is also well-positioned in the juice and non-carbonated drink segments, which are also expected to perform well, moving forward. Rising commodity costs may pressure margins, but PEP does have modest pricing power as a response. Superior marketing adds to an impressive corporate operation: Pepsi frequently responds to rival Coke's new marketing efforts with something more trendy and cool, particularly as interpreted by teens and younger adults.
Technically, PEP's chart looks good. Aside from the August 2007 market sell-off, PEP's stock has danced with its 50-day moving average on three occasions in 2007, but the chart otherwise displays a healthy advance, minor correction pattern. PEP's chart has also cleared resistance at $70. Equally important, PEP has been above its 200-day moving average -- the toughest average to break -- for about three years. The P/E of 19 is not cheap, but it's reasonable given the company's growth prospects.
Stock Analysis: PEP is a low-risk stock. If you don't already own a consumer products stock as a defensive, consider adding PEP to your portfolio. Investors with an investment horizon longer than 1 year should be rewarded from PEP's shares. Sell / Stop Loss: $53.
As we noted in our earnings preview last week, analysts had been expecting to see the company report 68 cents a share for its recent quarter, but were surprised to see the company show actual earnings of 71 cents a share.
The quarter got a good boost from the company's overseas business. Overall, the company had a unit case volume increase of 6% during the quarter. Internationally, case volumes rose by a respectable 8%, with North American case volumes rising only 1%.
The stock hit a new 52-week high this morning, trading as high as $58.89 to start off the day. Shares are currently trading up 1.8% to $58.80, up $1.04.
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer
Net income at JPMorgan rose 2% to $3.37 billion, or 7 cents per share, compared with $3.30 billion, or 5 cents, a year earlier. Revenue rose 4% to $16.11 billion. The results included a $1.3 billion writedown and credit loss provisions of $18 billion. Analysts had expected profit of 90 cents on revenue of $16.6 billion. The results stunned Wall Street and highlighted Chief Executive Jamie Dimon's prowess as a cost-cutter.
The picture at Coke was also bright thanks to strong sales outside the U.S. Profit at the Atlanta-based company soared 13% to $1.65 billion, or 71 cents a share, from $1.46 billion, or 62 cents, a year earlier. Revenue rose 19% to $7.69 billion. Wall Street had expected profit of 68 cents.
Meanwhile, United Technologies continued to produce strong results. Net income at the parent of Pratt & Whitney aircraft engines and Otis elevators, surged 20% to $1.2 billion, or $1.21 per share, as revenue jumped 14% to $12.16 billion. The results surpassed the $1.16 average estimate of analysts polled by Thomson Financial.
Altria Group reported net income of $2.63 billion, or $1.24 per share, down from $2.88 billion, or $1.36 per share, because of the spinoff of Kraft Foods Inc. (NYSE: KFT), helped by higher prices and a weaker dollar, according to Reuters.
After seeing PepsiCo Inc. (NYSE: PEP) beat analyst estimates earlier this week for its third quarter, there are going to be some big expectations for its main rival, Coca Cola Co. (NYSE: KO) when it reports its third quarter numbers next Wednesday.
The stock has been impressing analysts at Citigroup lately. Just yesterday the broker lifted its price target on the stock to $67 a share (the stock is currently trading at $57.50), citing improved fundamentals in its Japanese businesses. The broker currently has a buy rating on the company.
Analysts are expecting the soft drink giant to come through with earnings of 68 cents per share for its most recent quarter, and based on the company's solid earnings history, I would not bet against it this time around. The company last reported earnings back on July 17, posting EPS of 85 cents and easily beating Q2 analysts' estimates by 3 cents. In fact, if you look back at the company's history you will find that it has beat estimates for each of its last seventeen quarters. That's a pretty nice run.
TheStreet.com's Jim Cramer explains why lousy results from a U.K.-based firm bode well for American companies this reporting season.
Tate & Lyle's loss is our gain. That's the only way to think about the big decline in that U.K.-based sugar producer's stock this morning on news that the currency translation from dollars to pounds will kill it.
The declining dollar is going to make some of these earnings in the next few weeks jump off the chart. They will be so much higher than people think they will be for the big exporters, particularly those to Europe (we don't have much to go to Japan) that you are going to be blown away.
The big litmus test this earnings reporting period will be the exposure to these foreign currencies. We fret every day about the dollar, but it is a little ridiculous at this point -- meaning the currency is way too low.
Nevertheless, a Procter & Gamble (NYSE: PG) (Cramer's Take) will kill the numbers, so will a Coca-Cola (NYSE: KO) (Cramer's Take). I know these are at 52-week highs, but we are now going to have to start looking at stocks that haven't gone up that much this year. Take PG; it's only up 9%. That gives it some room. Same with Colgate (NYSE: CL) (Cramer's Take). Those still worth betting on; they can still run.
Oh, and don't forget, for the purposes of next quarter, Goldman Sachs (NYSE: GS) (Cramer's Take) will have more than 50% in earnings overseas. The firm is not going to report for while, but that's still another reason to own it -- and another reason to expect that a foreign company will take a stake in Bear Stearns (NYSE: BSC) (Cramer's Take) before long despite the Buffett denial. If a stake is taken, I doubt it will be domestic.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Goldman Sachs.
A number of high-profile CEOs must not have provided enough information on their compensation packages. The SEC is sending them letters asking for a little more detail. The agency has already sent out about 300 letters.
Among the things that interest the SEC is how pay consultants make calculations for corporate boards. The Journal quotes the SEC's director of corporation finance, John White, saying, "We're seeing a lot of really vague disclosure" about individual performance goals and targets.
The issue can't really be that hard to resolve, especially at very big companies. They know full well how their CEO's pay is set, who is involved, who is consulted from outside the company, and what the final comp numbers are. It is not rocket science.
It is, however, another area of friction between the SEC and big companies.
PepsiCo Inc. (NYSE: PEP) has decided to change the label on its Aquafina bottled water. From now on it will say "Public Water Source," meaning, basically, tap water -- filtered tap water, but tap water nonetheless. I not only salute the label change but also the fact that Pepsi and The Coca Cola Co. (NYSE: KO) aren't bent on destroying natural springs. They are still, of course, selling us loads of bottles that will need to be discarded later.
I am not the first to speak out against bottled water as a prime example of an industry that has completely "invented" a public need and managed to push it successfully. The result? Depletion of natural springs, huge amounts of bottles added to the already massive quantities of garbage we produce, energy wasted on production and shipping, and increased corporate control over a basic resource -- water. Not to mention the morality of the issue: 2.6 billion cases of bottled water sold in 2006 while people in some parts of the world don't have access to clean water.
But a movement away from this has begun, and hopefully it will slowly make a difference. Only recently, San Francisco's mayor "signed an executive order banning the use of city funds for the purchase of single-serving water bottles." Many restaurants, including Mario Batalli's, will serve only filtered water, not bottled water, even though it is more lucrative. Reuters quotes the industry newsletter as saying that it's more about convenience than health or taste. Well, then, I guess John Sicher, the newsletter's publisher, never heard of empty bottles one can fill with ... tap water.
What to do now? Despite all my objections, this unnecessary industry that has sprung into a multi-billion dollar sector, now has many jobs on the line if it is threatened. I don't doubt that a change is needed, but it can be gradual. Telling people that they're drinking tap water may be the first, small as it is, step into changing consumer perception. As for Pepsi and Coke, I'm sure they'll manage.
Coca Cola (NYSE: KO) and PepsiCo (NYSE: PEP) better look out. Red Bull GmbH, the Austrian company behind bestselling energy drink and household name Red Bull, wants to try its hand at selling cola. The new drink, shown at right, will launch in seven countries over the next several months, with the US launch slated for June, according [subscription required] to the Wall Street Journal.
Hansen Natural
TheStreet.com's Jim Cramer says that now, teetering financials and homebuilders will topple and safety plays will rule. Ouch.
Today's 
Given today's choppy, consolidating markets, if your portfolio does not contain a consumer products defensive stock, consider adding 
Shares of soft drink giant 
After seeing 
A number of high-profile CEOs must not have provided enough information on their compensation packages. The SEC is sending them letters asking for a little more detail. The agency has already sent out about 300 letters.
Slow approach to raising bank capital loses the race against write-offs
Cramer on BloggingStocks: The SEC's waffling will be deadly
How Fannie and Freddie will fail
