6th Feb 2024 13:09
(Alliance News) - Jefferies believes that Coca-Cola HBC will emerge relatively unscathed from the spillover effect from the conflict in the Middle East, despite cautious commentary by McDonald's which pointed to some potential contagion on western brands.
The broker noted the US fast food restaurant chain on Monday reported weaker than expected sales in the International division - plus 0.7% compared to the consensus of 4.7% - with the Middle East conflict weighing heavily on positive same store sales in all other regions, with some Middle East-related brand impact.
It said McDonald's trends are often a good indicator for Coke's global volume growth.
Jefferies explained Egypt accounts for 10.5% of Coca-Cola Hellenic Brands group volumes and accounts for around 15% of its growth.
However, although the broker believes that there is likely to be some modest impact towards the end of the fourth quarter from the Middle East conflict, overall trends will likely be positive in Egypt as the company laps a weak comparative quarter.
It believes that Coke accounts for just under half of Egypt volumes and that non-Coke brands, such as Schweppes or Monster, are less likely to be impacted.
Jefferies thinks the Schweppes brand resonates strongly in Egypt, while there are opportunities to do more with Coke, Sprite and Fanta. It said the launch of Monster in the country has displayed positive initial momentum.
Market share has also lagged that of Pepsi, giving opportunities for a catch up here.
Shares in Coca-Cola HBC fell 1.5% to 2,289.30 pence in London on Tuesday.
By Jeremy Cutler, Alliance News reporter
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