Friday, December 10, 2010

Yacktman on Pepsi & Coca-Cola

From a recent interview with Donald Yacktman, Stephen Yacktman, and Jason Subotky of Yacktman Asset Management.

During the interview, Stephen Yacktman had the following to say about Pepsi and Coca-Cola:

While Pepsi is partially a beverage company, you've also got Frito-Lay and Quaker foods. Additionally, you have Gatorade, which is extraordinarily dominant in the sports drink category.

On the Frito-Lay business, all I could say is if you walk down the chip aisle of a grocery store, it is hard to find a bag that's not a Pepsi brand. There are niche players, but Frito-Lay has some of the highest market share of any major product in the grocery store. It's a fabulous business. We like to say that if you can buy it from a vending machine, we want to own it. Chewing gum, chips, candy, beverages, sodas — those categories have the wind at their backs compared to other packaged food categories.

Coca-Cola is a diversified company, and prior to the bottling acquisition, 80% of its earnings came from outside the United States. Coke has high market share in many of the top emerging markets, which we think will allow the company to grow volume at an attractive rate for decades to come.

Both are high quality businesses but Pepsi clearly has not been executing on the same level as Coca-Cola recently.

We'll see if that persists.


Long positions in Pepsi and Coca-Cola

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