Will Russian Sanctions Affect US Consumer Stocks?

Russia has put economic sanctions in place that will ban U.S. and European agricultural and dairy imports, and opened discussions to take the bans further

Adam Fleck, CFA 11 August, 2014 | 5:05PM
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Russia has enacted economic sanctions that will ban U.S. and European agricultural and dairy imports, with additional discussion around enacting a sugary-drink tax or limiting production of soft drinks in the country in an effort to punish U.S. companies such as Coca-Cola and PepsiCo.

The region's geopolitical situation has already negatively impacted beverage volume – Coke bottling partner Coca-Cola Hellenic reduced its near-term volume outlook on August 7 primarily because of Russia, for instance, but we don't plan to make any changes to our fair value estimates for the manufacturers at this point. We also don't anticipate that these challenges will harm the companies' long-term brand- driven and distribution-driven competitive advantages or our wide moat ratings.

While the situation remains uncertain, several factors beyond the headlines mitigate the overall negative impact to Coke and Pepsi, in our opinion. For Coca-Cola, we believe the magnitude to the overall company is small – we estimate Russia represents only about 1%-2% of the firm's global case volume.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Coca-Cola Co57.26 USD0.35Rating

About Author

Adam Fleck, CFA  Adam Fleck is an associate director of research with Morningstar.

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