Is Coca-Cola Expanding To Challenge PepsiCo?

Coca-Cola Co. (NYSE:KO) is the world’s most recognizable brand, but there is always room for improvement.  On Wednesday, Coca-Cola announced it is purchasing approximately half of Aujan Industries Co., a major competitor in the Middle East beverage sector, for $980 million.  The deal is the largest-ever investment by a multinational firm in the Middle East’s consumer goods sector.

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The deal will present Coca-Cola with an equity stake in one of the leading beverage businesses in the Middle East.  Aujan holds a top-three position in still beverages in every country in which it operates, and is one of the top 100 companies in Saudi Arabia with total annual revenues over $850 million.  It will also allow Coca-Cola to gain market share from PepsiCo (NYSE:PEP).

Although Coca-Cola (NYSE:KO) is the global leader in the beverage market, PepsiCo dominates the Middle East market.  PepsiCo controls 85 percent of the soda market in Saudi Arabia, compared to Coca-Cola’s 12 percent.  “The Middle East is a high-growth region with some of the highest rates of Non Alcoholic Ready To Drink per capita consumption. Today’s announcement is a demonstration of our commitment to consumers here that we are investing for the long term,” said Ahmet C. Bozer, President, Coca-Cola Eurasia and Africa Group. “In addition to their great brands, we are investing in Aujan because it is a well-run, successful business. This transaction creates a platform for further cooperation between The Coca-Cola Company, Aujan and existing bottling partners across the region.”

Coca-Cola plans to invest $5 billion in the Middle East and North Africa over the next decade, as emerging markets are seen as a way to expand growth and market share.  Shares of Coca-Cola are up 1 percent on the news, and have gained almost 2 percent year-to-date.  Other top beverage companies include: Dr Pepper Snapple Group, Inc. (NYSE:DPS), Hansen Natural Corp. (NASDAQ:HANS), Jones Soda Co. (NASDAQ:JSDA), Starbucks Corp. (NASDAQ:SBUX), Coca-Cola Enterprises Inc. (NYSE:CCE) and Heckmann Corp. (NYSE:HEK).

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