Watch Out Below For Coca-Cola

Coca-Cola (KO) has been under pressure for a few years.

KO is up roughly 33% since 2012. The S&P 500 is up roughly 88% over the same time frame.

They have sought to streamline their business and have divested a lot of assets. But the clouds are still dark for Coke.

KO has three major problems:

Aggressive competitor: Pepsi (PEP) is very aggressive. And very diversified: in addition to drinks they offer snack foods (Frito-Lays), granola bars & cereals. KO does just beverages

Soft drink tax: Cities have begun to tax soft drinks, with the inevitable result that sales are falling. By a lot. Two months after enacting the tax, Philadelphia saw soda sales drop 30%+. Canada Dry is laying off 20% of its workers. It’s a few million in losses, but it’s spreading to other cities.

End of Food Stamps Benefits: At the height of the recession, US States waived the requirement that food stamp (SNAP) recipients had to (1) have a job, (2) be in training, or (3) provide some community work. Food stamp recipients shot up from 27M to 47M. 8 years into the recovery, there are still 41M individuals getting food subsidies.

Most don’t realize, but food stamps are big business: about $71 billion (B) in annual support.

Food stamp subsidies have more than doubled since 2007 (at $30B.)

If you really want to get pissed off at program wastage… administrative costs have also doubled – from $2.4B annually to $4.8B.)

In past economic cycles, Food Stamp participation drops back to pre-recession levels within 2-3 years of the recession.

That stopped with the 2001 recession. Why? Because big business stepped in.

A cool $50B per year of government money is being funneled to a handful of companies. These companies spend millions themselves in lobbying to keep the largess going.

Almost half of food stamp money is spent on candy and – wait for it – soft drinks.