Coca-Cola Amatil Ltd [ASX:CCL] has made good gains recently, with its share price up 2.72%, emerging from a rather wobbly ASX this morning.
Coca-Cola Amatil is one of the largest bottlers in the Asia-Pacific region and one of the world’s five major Coca-Cola bottlers with a market cap of $7.11 billion. The bottling giant has today posted one of its highest share prices for the year, trading at $9.81 at time of writing.
What caused Coca-Cola Amatil share price to rise?
Enviro-conscious investors would be pleased to hear that after the federal government’s announcement, they’ve set national targets to tackle Australia’s waste crisis and provide greater certainty for business over the next 12 years. CCL has responded pledging to make its packaging 100% recyclable within the next decade.
The announcement was made yesterday as news came of new national targets requiring 70% of plastic packaging to be recycled or compostable, and 30% of packaging to be made of recyclables.
More news out of Citi Group this morning tells us that CCL plans to acquire the Lion Dairy and Drinks business. Analysts from Citi highlighted the need for CCL to expand its non-carbonated drinks range into juice and dairy products, two of the highest priced non-carbonates.
This comes after analysis pointing to apparent gaps in CCL’s drinks portfolio and high Australian prices for carbonated soft drinks.
Estimates give juice and dairy markets $2 billion in wholesale turnover in Australia, with CCL only owning a 4% share.
What’s next for Coca-Cola Amatil?
Coca-Cola Amatil has delivered a return on equity (ROE) of 25.2% over the past 12 months. An impressive accomplishment considering the industry average is only 10.3%. This tells us that the company has made significant profits from relatively little equity capital. Which has, perhaps, given investors confidence in CCLs long run performance.
In today’s increasingly conscious and enlightened society, there is no doubt that CCL has capitalised on recent trends to ensure brand integrity remains unscathed. Amatil has announced it will follow suit of the big supermarket chains and will begin to phase out single-use packaging by improving design or using recycled materials.
Nevertheless, Amatil’s commitment to eliminating the waste its business produces can only bode well for the company as waste management becomes a hotter issue over the coming decade.
CCL has also continued to expand its alcohol bottling operations, with Fiji-based business Paradise Beverages having inked a partnership agreement to distribute its range of rums in the US state of California.
Right now, CCL seems to be ticking all the boxes. Its expansion into the juice and dairy market is worth watching as a list of potential bidders for Lion Dairy & Drinks grows, CCL may bid in a consortium with another party.
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