The growing concern about tariffs is catching the attention of a lot of companies. And beverage giant Coca-Cola (KO) is one of them, Considering that a planned tariff on aluminum is in the works, that will necessarily impact the cost of production for Coke, particularly in cans. That is why Coke has a plan going forward, and that foresight sent shares shooting up nearly 4% in Tuesday afternoon’s trading.
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Basically, noted Coke CEO James Quincey, if the prices of aluminum go up due to tariffs, then look for Coca-Cola to release more plastic bottles. Quincey noted that there was some room to work around increases in packaging costs, while still allowing it to “…compete in the affordability space.”
Quincey also offered some all-too-necessary perspective into the proceedings. He noted that Coke does buy some Canadian aluminum, which would go up in price under the tariffs. But he also pointed out that “…it’s not going to radically change a multibillion dollar U.S. business, and packaging is only a small component of the total cost structure.” Recent gains in aluminum recycling also help to blunt the losses.
The Unexpectedly Literal Part of Coca-Cola
A new report discovered that there was some shock in the soda enthusiast community that, when Coca-Cola calls itself Coca-Cola, it actually means that part literally. Coca-Cola originally derived its name from two sources: Coca, which is a direct link to the Coca leaf from which cocaine is derived, and Cola, which comes from the kola nut.
Indeed, reports noted, Coca-Cola actually still uses coca leaf extract in its product, obtaining it from the one company in the United States that is legally permitted to import coca leaf. Back in the 1890s, Coca-Cola actually contained nine milligrams of cocaine in every glass. The switch to a coca leaf extract, however, ensures that that ingredient is no longer part of the mix.
Is Coca-Cola Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on KO stock based on 12 Buys and one Holds assigned in the past three months, as indicated by the graphic below. After a 15.44% rally in its share price over the past year, the average KO price target of $71.46 per share implies 6.9% upside potential.
