Our analysis in this dashboard shows the potential upside available to Coca-Cola's (NYSE: KO) revenues, margins and stock price if it cuts down on its advertising and marketing expenditure over the next two years. We have compared KO's metrics with those of PepsiCo (NYSE: PEP).Currently KO's ad expense is almost double that of PEP, whereas its revenue is half of PEP.Sales for a beverage giant are likely to be driven by higher demand for healthy snacks and non-carbonated beverages, as people are moving towards healthier options.
If KO focuses on digital marketing and advertising of its healthy products mainly, it would likely lead to a steady uptick in revenue, margins and earnings in 2019 and 2020, as it can reach a wider audience at a lower cost.This is in contrast to a sharp decline in PEP's margins and earnings in 2019, mainly due to strong base effect (margins were unusually high in 2018 due to huge tax benefit received during the year).If KO is able to close its existing advertising expenditure gap with PEP, KO's stock could see an upside of about 10.4%
, as against 3.3%
in the case of PEP's stock.
In some of the below charts, we have shown KO's and PEP's metrics together for comparison purposes.
You may use the following key to identify the metrics for these companies.
1) Dotted line (........................) indicates a metric for PepsiCo
2) Straight Gray Line indicates a metric for Coca-Cola
[Please note: The above key is applicable only when the "gray straight line" and the "dotted line" appear together in the same chart for comparison purpose]