Coke is it

People love it, it is ones of the worlds most enduring and loved brands. Warren Buffett loves it and has a massive shareholding in the American icon.

In this day and age of dwindling fortunes and sagging sales this brand is a stalwart and Lion Nathan [LNN.NZX], the Australasian brewer, wants a piece of the Australian company that makes the black sticky concoction in this part of the world, Coca-Cola Amatil [CCL.ASX]

Lion Nathan previously owned the loss-making Pepsi franchise in Australasia so clearly see a non-alcoholic soda drinks company as integral to its alcohol brands.

Buffett calls companies like Coca-Cola Amatil "economic moats". That is, a company that has a strong brand and a product that is unique, enduring, easy to understand and sells, even during hard times.

Lion Nathan execs must have been reading some of Warrens screeds of pronouncements on his investing principles because they have their target right. The only problem being they haven't offered CCL Amital stockholders enough for their sweet black goldmine.

Lion have offered only AU$ 7.7 billion for Coca-Cola Amatil . The cash and stock bid, made at a 25 per cent premium to cokes share price, has been roundly criticised by CCA management as "unattractive" and "complicated". The offer from Lion gives Coke shareholders stock in Lion Nathan which is majority controlled by Kirin, the Japanese brewer.

The parent company and approx 30% shareholder in CCA will not comment on the matter but its CFO said last month to analysts:

"if the purchaser had the financial and the management resources to really grow that market for the long term, and that when selling we would sell if at fair value."

The stock and cash offer, even at a 25% premium is still below "fair value" and its is unclear as to whether Lion's management would grow the Coke brand and its other products long-term but of course the answer to that would be why wouldn't they?

The CCL Amital parent company, The Coca-Cola Company [NYSE: KO], wouldn't necessarily go for a higher price for their 30% shareholding but a company that would provide a higher return for their providing the syrup for finished product, which they get whoever owns CCL Amital.

Coke is a strong brand with a massive market share in this part of the world and that and its other strong brands; Fanta, Sprite, Lift, Lift Plus, Powerade, L&P and Schweppes make Lions initial bid too low by far.

Hang on CCL stockholders, don't sell yet.

Related Links

Buffett and Coke

CCA Shareholder centre

Complete 2007 annual report PDF format (802kb) Complete 2007 Shareholder Review PDF format (2.6mb) Notice of Meeting PDF format (235kb) From Amazon For God, Country, and Coca-Cola: The Definitive History of the Great American Soft Drink and the Company That Makes It by Mark Pendergrast Buy new: $15.61 / Used from: $5.73 Usually ships in 24 hours The Real Thing: Truth and Power at the Coca-Cola Company by Constance L. Hays Buy new: $10.85 / Used from: $4.60 Usually ships in 24 hours Petretti's Coca-Cola Collectibles Price Guide by Allan Petretti Buy new: $31.65 / Used from: $9.00 Usually ships in 24 hours Coca-Cola: The Collector's Guide to New and Vintage Coca-Cola Memorabilia by Randy Schaeffer Buy used from: $4.85 Other Coca Cola books from Amazon c Share Investor 2008

Marketing vs Content

During the last 7 months or so since contributing in a serious way to this blog, I have learnt a number of things.

1. Its bloody hard work
2. Don't ever underestimate how intense competition can get
3. Loyal readers are why I continue
4. Marketing can be more important than content (even though I hope I have
improved my content over the last 7 months)



Marketing such as this, helps push products that
have little real benefit for the consumer but sell
more because of the appeal of its advertised image.


While the first point maybe obvious to those seasoned writers who have been doing this for years, and business leaders should know instinctively the second point. Point number three is more of a personal nature but it is the importance of marketing that I wish to principally discuss here.

When one thinks of the triumph of marketing over content, ones interest naturally leans to the granddaddy of all when it comes to marketing, Coca Cola.

The advertising of the sugar, water, caffeine and CO2 concoction has been filled with much mystique and hype since the product began and hasn't ceased in this way in the product's 100 plus years of existence.

The origins of Coke's marketing success comes from those traveling charlatans who used to go from town to town in the USA, boasting of the properties of the latest elixir that would "cure all".

In the case of Coke it started as one of these types of elixirs but it at least had a bit of a pick me up quality to it, from the sugar and caffeine, and other substances in its earlier guise.

The early backers seized on this traveling salesman mystique and it has been used and refined over the years to the point where Coke is the most recognised brand in the world, and has been for many years.

A huge amount of marketing dollars were used to push the fizzy water over the last 100 years and the ploys used to keep the drinks mystery and image have been many and varied.

During the company's boom years of the 1940s, American soldiers were supplied with the sweet brown stuff by Coca Cola wherever the war took them and the image that Coke was the epitome of fighting for the "American dream" was then cemented in the minds of not just Americans, but many other countries that fought side by side them.

Clever marketing on Coke's part.

The fact that this product, if consumed in large quantities, can, make you tubby, rot your teeth and has no benefit to the body in a nutritional way is largely forgotten because the consumer is constantly bombarded with images of attractive, athletic, young people enjoying the "Coke lifestyle".

A whole host of dangerous and worthless products from Cigarettes to most home cleaning products, are successful because of great and or constant marketing.

It is a masterstroke of marketing an image for a product that has no real benefit to its consumers.

I know, they say consumers these days can see past the hype and can tell quality but the coke test proves that millions just cant or chose to ignore the realities.



The world's most successful brand, Coca Cola, achieved
its longevity not through its magnificent product but
from expert marketing and branding.


While I'm clearly not comparing my writing to Coke's success, I do wonder sometimes about lesser quality product succeeding over the hyped up marketing of the likes of my mate from the Tarawera empire, Phillip MacCallister, who's marketing budget must surely be bigger than my mortgage payments, which are quite considerable!

The Share Investor Blog isn't being advertised on Google, but I probably should. I don't spend any money on marketing but I do spend time trying to get it out there for free so people can read it.

I think it is relatively interesting, and its content of a sufficiently good quality. It is getting a steady increase in readership as the months go by, but I still think it deserves better numbers when I compare it to other websites of a similar nature with larger audiences.

My ignorance of the importance of marketing before I started the Share Investor Blog is clearly apparent to me now. Here was I thinking, in my best Kevin Costner impression, "if I write it they will come".

How hopelessly wrong I was.

The importance of marketing cannot be underestimated, especially when it comes to a new business venture. While it is fine to have a wonderful product, that is not always enough. People actually have to know you have a great product.

Those people at Sony had a superior product in the Betamax Video player in the 1980s but the competition had more marketing muscle but an inferior product.

We all know what happened to Betamax.

My lesson learned!


**Footnote: Look for an exciting new permanent addition to the blog over the next 2 months. Legal reasons prevent me from telling you more.


Related Share Investor reading

Marketing Burger Fuel's Future
Pumpkin Patch vs Burger Fuel

c Share Investor 2008