What did Warren Buffett invent

Coca-Cola - the never-ending success story

American stock market legend Warren Buffett once said that Coca-Cola stock was one of his favorite stocks. No wonder! The world's number one beverage manufacturer not only brings joy to the consumers of its soft drinks, but also to its shareholders for many decades.

For many years, Coca-Cola has held a top position in the ranking of the world's most valuable brands, which is compiled by the US consultancy Interbrand. The current value of the brand is $ 77.84 billion (and we're only talking about the brand's value, not the value of the operating business). In addition, the company does not have to fear any competition at the moment. Coca-Cola is the market leader.

A typical Buffett share - an ideal long-term investment

Back in 1988, Warren Buffett acquired the first block of shares worth $ 1 billion in Coca-Cola. The next package of shares followed in 1994, valued at $ 300 million. Berkshire Hathaway currently holds around 8.9 percent of the beverage manufacturer with 400 million shares.

The stake in Coca-Cola is currently the largest position in the stock portfolio of Buffett's private equity firm Berkshire Hathaway. With a value of around US $ 15 billion, the Coca-Cola position has a deposit weight of 20% in Berkshire's stock portfolio, which is valued at around US $ 75 billion.

The decision to invest in Coca-Cola was an easy one for Buffett, as the company fulfilled the most important characteristics that the star investor would like to see in an investment. For one, the business principle is very easy to understand. The company has offered a basically unchanged product for more than 100 years.

Even today, Coca-Cola can score points in the emerging markets with the often young population with brilliant growth prospects. In addition, the group still has a dominant market position that its big competitor PepsiCo cannot endanger for the time being.

Like clockwork

In the past few years, Coca-Cola has contributed to the good performance of Berkshire Hathaway in several ways. Without having to buy more shares, the stake in the soft drink manufacturer was increased from 8.1 percent in 2000 to 8.9 percent.

The reason: The Coca-Cola company has regularly bought back and destroyed its own shares in recent years. Each individual share therefore now represents a larger proportion of the company. In addition, profits and dividends will have to be distributed across fewer shares in the future.

The company doesn't just reward its shareholders with share buybacks. Coca-Cola is a dividend king too! Coca-Cola has always paid a dividend for the past 50 years and has raised it regularly. In the past ten years, the group has even been able to increase its dividend by an average of almost 10 percent annually.

Due to the strong position in the market, the worldwide awareness of the Coca-Cola brand and the adaptation of drinking habits in the emerging countries to the industrialized countries, the beverage manufacturer should be able to continue to please its shareholders with a steadily growing dividend.

The beginnings of Coca Cola

Coca-Cola was invented by John Stith Pemberton. The war veteran and pharmacist from Atlanta used wine, cola nuts, damiana and an extract from the leaves of the coca plant to brew a syrup that he called "Pemberton's French Wine Coca" as a remedy for tiredness, headaches and depression.

Mixed with soda water, the syrup was first sold as a drink in Jacob’s Pharmacy in Atlanta on May 8, 1886 for 5 cents a glass. It was advertised not as a soft drink, but as a medicine. On August 30, 1888 - shortly after the inventor's death - the pharmacy wholesaler Asa Griggs Candler secured the rights to the brand for a total of US $ 2,300 after several errors and presumably also frauds.

Since prohibition was in effect in more and more states in the USA, it was not difficult for Coca-Cola to establish itself as a "substitute drug" with its selling price of one nickel (5 cents). In 1899, after the introduction of crown caps, business really took off. Assuming that Coca-Cola was primarily intended for soda bars, Candler gave the bottling rights to Franklin Thomas and Joseph Brown Whitehead for virtually free.

They founded the "Coca-Cola Bottling Co." and soon supplied the entire United States. Coca-Cola was soon no longer only drunk by the urban upper class in soda bars, but above all by the rural population.

From the 20th century until today

In January 1916, Asa Candler handed over the running of the business to his son Howard, and by Christmas of that year he bequeathed his relatives 90% of the voting shares, except for seven. However, as early as 1919, Howard Candler sold the Coca-Cola Company behind his father's back to a consortium led by Ernest Woodruff and Eugene Stetson for 25 million dollars.

In 1923 Robert W. Woodruff, the son of Ernest Woodruff, took up his post as the new President of the Coca-Cola Company. Under his leadership, the company and Coca-Cola became what journalist William Allen White later referred to as the "sublimated nature of America."

His goal was that Coca-Cola should never be more than "an arm's length from lust" and to spread it worldwide, for which he founded the "Foreign Sales Department" - later "The Coca-Cola Export Corporation" - in 1926. As a result, Coca-Cola continued its triumphant advance and continued to expand worldwide. Today, Coca-Cola is the second best-known word in the world, just behind Okay.

Coca-Cola or PepsiCo, who's the better? This question has preoccupied investors for decades. For me, PepsiCo is currently in the lead thanks to its good product portfolio. > read more


© Verlag für die Deutsche Wirtschaft AG, all rights reserved