A Kombucha-led recovery for Coca-Cola Amatil Ltd

Credit: Coca Cola

Poor old Coca-Cola Amatil Ltd (ASX:CCL). It can’t take a trick, with lower margins in supermarkets (thanks Woolworths Limited (ASX:WOW) and Wesfarmers Ltd (ASX:WES)) and changing consumer tastes in the servos making life tough. Then there’s the company’s struggling SPC Ardmona canning business. (I should know — I own shares.)

I can’t decide whether it’s a great or terrible thing that the company is now looking at new-age beverage (I can’t think of a better way to describe it): Kombucha.

Wikipedia describes kombucha as: “…a variety of fermented, lightly effervescent sweetened black or green tea drinks”.

I’m not lining up for mine… but apparently kids these days love it.

Even if I don’t love that particular product, I am a fan of the strategy. Coke is synonymous with its eponymous red can, but what most people don’t understand about the company is its unbeatable distribution system. It has a fridge (or access to one) in just about every cafe, servo, corner store and vending machine in the country. And while consumer tastes might be changing, Coke just has to make sure it maximises sales per square metre in those locations.

I think it’s got the goods, but it’s not the only game in town. There’s another company our resident dividend guru likes more

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Based on the last 12-months of dividends, its shares are currently offering a fully-franked 4.8% yield, which grosses up to almost 7% when those franking credits are included. And in stark contrast to the likes of Commonwealth Bank and Telstra, this company just increased its dividend by over 13%, and guided for 2017 profits to grow by 20%!

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Motley Fool contributor Scott Phillips (TMFGilla) owns shares of Coca-Cola Amatil Ltd. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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