Morningstar | Despite Near-Term Profit Headwinds, Coca-Cola Amatil's Narrow Moat Intact
Coca-Cola Amatil enjoys brand intangible assets and a cost advantage that affords it a narrow economic moat. But the firm is facing headwinds in its core Australian soft drink market from consumers’ shifting demand patterns, with an increasing focus on health and wellness driving down purchases of carbonated beverages--Amatil’s main product offering. While we’re encouraged by the firm’s cost control, plans to launch smaller package sizes at higher prices per litre, and an increasing line up of non-carbonated drinks, we expect volume declines in soft drinks and pricing pressure from both competitors and customers to limit top-line gains in the company’s home country. Nonetheless, we're encouraged by continued strong results in New Zealand and Australian alcohol distribution, which has offset continued macroeconomic headwinds in Indonesia, and plans to divest the struggling SPC food business.Coca-Cola Amatil manufactures, distributes and sells ready-to-drink beverages. Co.'s product range includes non-alcohol sparkling, beverages, spring water, sports and energy drinks, fruit juices, iced tea, flavoured milk, coffee, tea, beer, cider, spirits and packaged ready-to-eat fruit and vegetable snacks and products. Co.'s segments include: Non-Alcohol Beverages, which manufactures, distributes and markets sparkling drinks and other non-alcohol beverages; Alcohol & Coffee Beverages, which manufactures and distributes premium spirits, beer and coffee products; and Corporate, Food & Services, which is involved in the processing and marketing of fruit and other food products business.
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