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Why Coca-Cola Is an 'Unbeatable Business'

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The soft-drink giant is well-positioned for continued growth despite weaker-than-expected third-quarter sales numbers.

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Few companies dominate their market in quite the same way that Coca-Cola (KO) (NYSE:KO) rules the soft-drink business.

According to Beverage Digest, Coke's brands collectively controlled 41.9% of the US carbonated soft drink market in 2010, well ahead of PepsiCo (NYSE:PEP), with 29.9%. Even in a head-to-head competition between the flagship brands-Pepsi versus Coke-Coke emerges the winner, with 17% of the market compared to Pepsi's 9.9%.

The company also has a huge asset in the Coca-Cola banner, which was just named the world's top brand for the 13th time on brand-consulting firm Interbrand's annual list.

In addition to Coke, the company's brands include over 3,500 beverages, which it sells around the world, including diet and sparkling colas, fruit juices, water, sports drinks tea and coffee.

Coca-Cola shares, too, are renowned for long-term, consistent growth. The stock has risen over 31% in the past five years, compared to a 6.8% decline for the S&P 500 Index (INDEXSP:.INX). And it has made the climb with remarkable consistency. The stock carries a beta rating of just 0.51, which means it's almost exactly half as volatile as the overall market. Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) is the company's largest shareholder, with an 8.9% stake, and Coca-Cola is Berkshire's largest holding.

"Every investor's goal should be to find companies with sustainable competitive advantages like Coke," writes Jim Fink in The Life and Leadership of Coca-Cola's Roberto Goizueta. "Coke's cola has always tasted the best and cannot be cloned despite endless efforts by competitors to do so. Coke's worldwide exclusive distribution network is virtually impossible to replicate. When you combine the best product with the best distribution network, you have an unbeatable business."

Global Slowdown Is Just Another Bump in the Road for Coca-Cola

Coca-Cola reported third-quarter profits that were in line with the consensus forecast last week, though sales were lower than expected.

During the quarter, the company's revenue gained 1% from a year earlier, to $12.34 billion. That missed the consensus estimate of $12.41 billion. On a constant-currency basis, revenue rose 6%.

Revenue rose 4% in the Eurasia and Africa region (which supplies 6% of Coke's total revenue), while North American revenue (46% of the total) gained 5%. These gains offset an 8% decline in Europe (10% of revenue) and a 4% drop in the Pacific region (13%), partly because the company sold more lower-priced drinks due to slower economic growth in those two areas. Latin American sales (10%) were flat.
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