Did Domino’s Pizza Enterprises just hammer the first nail in Coca-Cola Amatil’s coffin?

Credit: Coca Cola

A recent menu change at Domino’s Pizza Enterprises Ltd. (ASX: DMP) shows that one of Coca-Cola Amatil Ltd’s (ASX: CCL) major advantages may be being further eroded as we speak.

Domino’s has introduced a range of ‘naturally sugar free’ beverages by Nexba, that go by the name ‘Next Gen’ and sport the tagline ‘nothing artificial, no nasties. Made in Australia!

I am not sure if the brand is likely to experience any success, even though it is obviously positioned to target changing consumer tastes. Yet to my mind it illustrates the degree to which Coca Cola Amatil’s primacy can be undermined in a wide range of ways – and not just by the advent of perceived healthier alternatives.

For those who don’t know, Coca-Cola Amatil is the local ANZ, Pacific Island, and Indonesian bottler of the Coca-Cola stable of drinks (among many other brands). Traditionally it’s had most restaurants and fast-food chains stitched up under distribution agreements that see Coke as the primary stocked beverage.

If you want to eat at Domino’s, McDonalds, or Red Rooster, for example, you can either have Coke, Coke, Coke, or…Coke Amatil-bottled water, Sprite, or juice.

However, if Domino’s is leading the way of restaurant chains offering wider range and variety to customers, I expect it could see Coca-Cola Amatil’s competitive advantage further undermined. Instead of making many sales at what are effectively monopoly locations, Amatil will be competing side-by-side with other beverages, and not just in the supermarkets.

This could place continued pressure on the company’s margins and sales, which are already virtually stagnant. While this is obviously negative, it does not mean that Amatil is facing the beginning of a long and inevitable decline.

The company has a wide range of brands besides Coke, and has growing ventures in alcohol and coffee. Indonesia is also shaping up as an increasingly important growth market, and customers there are opting for teas and flavoured waters more than conventional soft drinks.

Still, I would be wary of paying too much for Coca-Cola Amatil shares.

Instead, consider these 5 growing businesses:

Are you planning on a blue-chip retirement?

If term-deposit rates stay low your lifestyle expectancy could stay low with them.

But you must act now. This updated report is available for a limited time only, and your copy is 100% FREE. So don't miss out!

At The Motley Fool we know share markets can be volatile with President Trump and the great unknown of China front and centre. So we've handpicked 5 of our favorite term-deposit-crushing dividend shares to make your savings work for you.

Simply click here to receive your free copy of "Our top 5 ASX higher income shares for financial year 2018" right now.

Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.