Yet today, Bernstein Research analyst Steve Powers reiterated his Outperform ratings on both Coke and Pepsi (and a Market Weight rating on Coca-Cola Enterprises (CCE)) on data from trends in Western Europe.
However, with $75 and $71 price targets on Coke and Pepsi, respectively, he sees the later with nearly 7% upside from current levels, compared to less than 5% for Coke. This bears out some of the results of the Western Europe survey, as Powers sees Coke losing market share to Pepsi and private label competitors.
Read highlights from his report below:
Beverages & Snacks sales grew +3.4% in Western Europe this past quadweek ending February 26, 2012ÂAcross our measured Beverages & Snacks categories, sales grew +3.4% in Western Europe this past quadweek ending February 26, 2012, with aggregate volumes up +0.9%. Specifically, Beverages in Western Europe grew +3.0%, with volumes up +1.2%, while Snacks categories grew +4.4%, with volumes up +0.2%. All major categories saw growth. Sports & Energy Drinks was the fastest growing category in Western Europe in the quadweek (up +6.5%), followed by Savory Biscuits (+4.7%), Salty Snacks (+4.3%), Carbonated Flavored Drinks (+3.7%), Non-Carbonated Flavored Drinks (+2.9%), and Mineral Water (+1.3%).
Private Label sales grew +6.7% (+56 bps of market share gain)ÂAcross these same categories, Private Label sales grew +6.7% in the most recent quadweek (+5.9% for Beverages, +8.6% for Snacks), with volumes up +2.0% (+1.9% for Beverages, +2.2% for Snacks). As a result, Private Label’s overall value share rose +56 bps year-over-year to 18.1%. Noncarbonated Flavored Drinks represented the category most heavily penetrated by Private Label (36.8%), followed by Savory Biscuits (24.2%), Salty Snacks (17.8%), Mineral Water (17.6%), Carbonated Flavored Drinks (10.3%), and Sports/Energy Drinks (8.3%). In terms of Private Label share gains and losses, the largest gain this past quadweek could be seen in Mineral Water (+96 bps), Savory Biscuits (+88 bps), Carbonated Flavored Drinks (+76 bps), and Salty Snacks (+69 bps); Private Label lost share in Sports/Energy Drinks (-3 bps) and Non-Carbonated Flavored Drinks (-31 bps).
In Western Europe, Coca-Cola’s brands saw sales grow +0.8%, below its participating categories’ growth of +3.0%, losing -61 bps of shareÂSales of KO brands grew +0.8% (volumes down -2.8%, implying positive price/mix), below the growth rate of their participating categories (+3.0%), leading to -61 bps of market share losses versus the prior year period. KO continued to maintain above ~60% value share in its strongest category, Carbonated Flavored Drinks (61.5% market share this quadweek). KO lost share in Sports/Energy Drinks (-160 bps) and Carbonated Flavored Drinks (-160 bps), while share remained flat in Non-Carbonated Flavored Drinks and Mineral Water. The company’s strongest growth was in NCFDs (+2.9%), followed by Mineral Water (+2.0%) and CFDs (+1.0%). KO’s sales declined in Sports/Energy Drinks (-8.6%).
Meanwhile, PepsiCo’s saw sales grow +5.9% in the most recent quadweek, while gaining +23 bps of share in its categoriesÂPepsiCo’s sales rose +5.9% this past quadweek (with volumes falling -4.3%), as growth in Snacks offset declines in Beverages. This was above the growth of its participating categories (+4.0%); as a result, the company gained +23 bps of aggregate market share (the company’s all-in market share is 13.5%). Specifically, PepsiCo’s Beverage brands saw sales grow +6.5% (with volumes up +6.7%, implying negative price/mix), while Snack brands grew sales +5.3% (with volumes up +1.7%). The company gained share in CFDs (+89 bps) and Salty Snacks (+39 bps), while losing share in NCFDs (-83 bps), Sports/Energy (-30 bps), and Savory Biscuits (-18 bps). PepsiCo saw growth in CFDs (+13.1%) and Salty Snacks (+5.7%), while seeing declines in Sports & Energy (-19.0%), NCFDs (-4.9%), and Savory Biscuits (-2.0%).
In CCE’s primary geographies, sales of Coca-Cola’s brands declined both in the UK (-2.0%) and in France (-1.1%)ÂCoca-Cola’s brand sales in the UK fell -2.0% this past quadweek, as volumes declined -7.3%. The company’s brands in the UK lost -172 bps of market share year-on-year to 27.2%. In France, Coca-Cola’s brand sales declined -1.1%, as volumes fell -5.4%. The company’s brands in France reached a market share of 31.2% in the quadweek, a year-on-year change of -107 bps. In addition, Hansen Natural’s Monster energy drink brandÂwhich is distributed by CCE in the U.K. and FranceÂsaw sales growth of +27.6% in the U.K. on the back of +31.4% volume growth, gaining +88 bps of share in the Sports & Energy category. In France, Monster sales rose +19.2% on the back of +25.0% volume growth, resulting in +137 bps of share gain. In Germany, a potential future market for CCE, sales of Coca-Cola’s brands grew +8.4%, with volumes up +5.3%, and the company saw aggregate year-over-year share gains of +81 bps.
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