Coca-Cola Enterprises Inc. (CCE) operates in the soft drink beverage industry and is the world’s largest bottler of Coca-Cola beverages. The company serves more than 400 million customers across North America and Europe.

The two key factors that drive growth at Coca-Cola Enterprises are a strategic agreement with The Coca-Cola Company, which allows the continual rollout of innovative products that stimulate incremental revenues, and the company’s delivery capability, which includes a strong go-to-market model.

In an environment of declining carbonated soft drink [CSD] growth, and given the company’s heavy dependence on carbonated beverages, management has decided to focus on building a strong market position in every beverage category, especially non-carbonated beverages and low calorie sodas.

Therefore, Coca Cola Enterprises acquired the FUZE beverage brand (energy drink) and expanded its product portfolio by entering into a distribution agreement with Campbell Soup Company.

In North America the company has increased its customer-centric focus, which emphasizes improved customer service and an enhanced supply chain and order fulfillment structure. In Europe the company has improved its full-service vending operations and created new supply efficiencies.

The company is augmenting bottling operations with incremental distribution agreements. The agreements are primarily focused on the health and wellness category drinks, such as energy drinks, vitaminwater, vitaminenergy, juices and water.

Further, Coca Cola Enterprises reported its second consecutive quarter of strong results. Earnings of $0.67 per share were $0.24 above the Zacks Consensus Estimate of $0.43, driven by the benefits of price and packaging initiatives in North America, volume and pricing growth in Europe and efficient cost control mechanisms.

Given the company’s price and package initiatives, efficient cost control mechanisms and spread of its bottling operations in the health and wellness category, we believe Coca Cola Enterprises will benefit immensely from the increasing demand for energy drinks, juices and water. Further, the CSD category is also improving. We, therefore, upgrade the stock to Outperform from Neutral.

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