Coca Cola probably isn’t the first name that comes to mind when you’re thinking about investing in Artificial Intelligence (AI). But even without AI, this company has a lot going for it. Founded over 134 years ago, they’re Lindy, they can bounce back from setbacks (New Coke), and have the “mind share” of billions of people.
With products sold in over 200 countries, and nearly 2 billion servings a day, the complexity of local markets make Coca Cola an ideal candidate for adopting AI and Machine Learning.
HOW THEY USE AI
One place is Social Media. Coca Cola uses AI to understand how the product is being consumed and which products are popular in various markets. The company uses AI in their brand loyalty programs. To encourage engagement, they employ computer vision technology that allows purchases to be verified from a single smartphone snap. They’re using computer vision to identify when photos of their products are posted to Social Media platforms. Algorithms then target advertising. According to the company, this targeted advertising has a 4x greater chance of engagement than other targeting methods.
Another way Coca Cola is leveraging AI is through their networked self-serve fountain drink machines. (You may have seen one at your local Five Guys). These networked machines allow consumers to mix their own drinks on the spot. The company used data collected from the machines to launch the new Cherry Sprite in 2017.
BUYING OPPORTUNITY?
A bit of uncertainty surrounding their tax situation may open Coca Cola up to a buying opportunity. Last year the company ran foul of the IRS and got an adverse ruling that could mean coughing up $12 billion. Seems like a lot, but it’s only about a year’s worth of profit. They currently have only $438 million in reserve should they lose the appeal. Given the small reserve, I’m guessing they plan to win.
Keep in mind, Coca Cola has a base rate on annual returns of about 12% going back to 1975, with a standard deviation of 21%. Should they lose the appeal, back the truck up.
CONCLUSION
With a forward dividend yield of over 3%, a market share of 45%, and the mind share of 7 billion, Coca Cola is the real thing. The company is over 3 times larger by volume than their nearest competitors; and using AI-enabled systems, they have the benefit of speed at scale. This strategic implementation of AI and Machine Learning will keep Coca Cola light years ahead of competitors. Their advertising budget is unrivaled.
Pete Weishaupt owns shares of Coca Cola. The AI Investor has a disclosure policy.