Coke vs. Pepsi in one of Asia's largest untapped markets

It's in emerging markets that the battle between the two beverage giants still matters

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In the mature markets of the U.S. and Europe, the world of carbonated drinks is what it is: Coca-Cola (NYSE: KO) has its fans and its share of the market; PepsiCo (NYSE: PEP) has its fans and its share of the market. People's tastes and the current market shares likely won't change there. If they do, it will be by very little.

It's in emerging markets that the battle between the two beverage giants still matters, and now that old war has opened on a new front, in a country with more than 60 million untapped consumers: Myanmar.

The place
Myanmar is the country formerly known as Burma. It's one of Southeast Asia's largest countries, but one of the least-developed, due mainly to the fact that it was under control of a brutal military dictatorship from 1962 until 2011.

Many companies, even if they had the opportunity to do business there, didn't want to be associated with such a government and so stayed away. Democratic elections were finally held in 2010, however, and as a result long-standing sanctions are going away and the country is slowly starting to open up for business. This is good news for the people of Myanmar, as well as investors in the cola giants.

Someone to watch over me
Pepsi's deal is with a distributor called Diamond Star, which has been doing business in Myanmar for 50 years. As such, Diamond Star undoubtedly knows its way around the economy. This should give Pepsi some advantage as it competes there with Coke. And Pepsi is wasting no time getting started in Myanmar. Its beverages are being sold in certain areas, with distribution set to increase in the coming weeks.

Coke announced its intention to return to Myanmar this past June, and seems to be moving more slowly. Its first move was to make a grant of US$3 million to support women's economic empowerment there through job creation initiatives, a laudable way to kick things off. Its next move will be to import products into the country from Coca-Cola operations in neighbouring countries. Previously, Coke had not done business in Myanmar for 60 years.

Coke and Pepsi: toe to toe
For what it's worth, the Dr Pepper Snapple Group (NYSE: DPS) isn't operating in Myanmar, and appears to have no plans to. Monster Beverage (Nasdaq: MNST) has no chance of going head-to-head there with Coke and Pepsi, so the upcoming cola wars in Myanmar ought to be a straightforward battle between the soda kings.

But while Pepsi has Diamond Star to expertly guide it through what is undoubtedly a very different kind of economic environment, Coke is No. 1 for a reason. With gross margins of 60% and 52% and operating margins of 23.22% and 14.95% for Coke and Pepsi, respectively, Coke is a distribution and marketing machine, a streamlined, jet-powered bulldozer. And once it's done its due diligence in figuring out how to do business in Myanmar, count on it to power through the country.

Being diversified beyond beverages into snack foods, Pepsi can never operate as efficiently as Coke, which really has just one job to focus on: selling drinks. And while Pepsi has one of the strongest brands in the world, Coke is almost certainly the world's biggest and best-known.

Did someone mention world domination?
All of which is not to say that Pepsi can't do well enough in Myanmar to bring in some serious revenue and profit. CEO Indra Nooyi seems confident: "PepsiCo has a strong and growing business that spans more than 200 countries and territories around the world, and we are constantly looking for new growth opportunities that will put our food and beverage brands in the hands of more consumers. Myanmar is a market with great potential, and our agreement with Diamond Star [is an] important first step toward expanding our presence in the country."

If you're in the market for some high yielding ASX shares, look no further than our "Secure Your Future with 3 Rock-Solid Dividend Stocks" report. In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

 More reading

The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

A version of this article, written by John Grgurich, originally appeared on fool.com

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »