While it is important to keep an eye on the financial press and reports on stocks you are watching and invested in, there are also other valuable sources of data that can help paint a much fuller investment picture.
These include industry journals and academic research, and for customer-facing stocks, you can do your own "on the ground" research simply by walking into the local shops. Some recently completed studies and consumer surveys shed some light on the reasons why the earnings of Coca-Cola Amatil Ltd (ASX: CCL) will remain under pressure for some time yet.
Declining overall popularity
It might be an obvious point to make, but one reason for the decline of the share price of Coca-Cola Amatil is the declining relevance of its product. But investors should not mistake that decline as a product-specific issue related to one brand like Coca-Cola or Diet Coke.
Rather, the problem is a structural one, where the consumption of all carbonated soft drinks is falling in Australia. One estimate by global research firm Euromonitor shows that overall consumption per capita has dropped by over 15% in the last decade.
That means that Coca-Cola Amatil's products might maintain or even grow market share against rivals, but it will be competing for a shrinking overall market, which has obvious knock on effects for profitability.
Declining relevance
Not so long ago, worrying about sugar content, kilojoules and nutritional value was not something that the 18-35-year-old demographic spent too much time on.
But Generation Y and millienials have grown up bombarded by health messages and have far more access to information than ever before. And while it would be a mistake to generalise and conclude that this means that they are healthier than previous generations, it does mean that they drink less carbonated beverages.
Research confirms this, with 40% of respondents to a survey in this age bracket saying that they did not consume soft drinks, or drank less than they did a year ago, compared with just 33% two years ago.
This is especially relevant for a soft drink bottler, as this age range has always been the key target market for carbonated drinks, as can be seen in the advertising strategies that those brands employ.
Exponentially increasing choice
If you talk to a supermarket employee about which aisle has the most product turnover, it's likely they will point you in the direction of the drinks aisle. New bottled drinks debut almost every week, while poorly performing ones are "deleted" as product lines.
Energy drinks, iced teas, coconut water, flavoured water, functional wellness drinks, sparkling water, fruit juice blends and green tea-based drinks now sit alongside the "traditional" soft drinks, cordials and sports drinks that once dominated the shelves.
Once again, in an environment where the overall market attributable to ready to drink beverage sales is shrinking, increased choice further lowers the sales and profitability of established players.
Coca-Cola Amatil has attempted to counter some of these trends by entering new categories, but it is often up against popular and entrenched brands. For example, its energy drink, Mother, must compete against the international brands and marketing machines of Red Bull, V and Monster.
In addition, execution when extending the product range has been a problem, as shown in the failed launch of the original Mother, as well as more recent problems with the Barista Brothers range of milk which led to widespread recalls and damage to the new brand just as it was trying to build a position in the market.
Coca-Cola Amatil was once a defensive portfolio staple built on Australia's love of soft drinks, but the negative trends affecting it do not appear to be temporary or cyclical, and as a result, it is difficult to make a case to buy it.
