The Coca Cola Company (KO) has acquired Nidan, the fourth largest juice manufacturing company in Russia. The acquisition is a part of the company’s strategic plan to expand its presence in the fast growing emerging markets through strategic acquisitions. Nidan’s products include Moya Semya, Da! and Caprice; and the company has its facilities in Moscow and Novosibirsk.
Coca Cola already has a presence in the Russian juice market and commands a 22% market share through Multon. Now, with the acquisition of Nidan, which has a 14% market share, the company is expected to become the market leader in the Russian juice market. In 2008, the company’s rival, PepsiCo (PEP) had acquired Lebedyansky, a major juice company in Russia, through which it currently controls a 32% market share.
The acquisition also compliments management’s plans to expand in the water and juices categories, due to the growing awareness of healthy living among consumers of carbonated beverages. Over the last two decades, the company has already invested about $2 billion and plans to spend about another $1 billion over the next three to five years.
Further, in the most recent quarterly earnings, the company witnessed high volume growth in the Eurasia & Africa division with markets such as India, Turkey and Russia posting volume growth of 22%, 10% and 6%, respectively.
Coca Cola currently has a Zacks Rank of #3, implying a short-term Hold recommendation. We are also maintaining our Neutral rating on the stock, due to the sluggish volume trends in North America and Europe, intense competition and exposure to adverse fluctuations in commodity prices and foreign currency.
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