The first thing that popped in my mind when I saw the name of the article was Coca Cola. And in fact, they mentioned them also, that they could have problems with getting an important ingredient. Article wrote that the eruption of conflict in Sudan has created a rush among international consumer goods manufacturers to secure supplies of gum Arabic, a key ingredient in a wide range of products including fizzy drinks, candy, and cosmetics. Around 70% of the world's supply of gum Arabic, which has few substitutes, is obtained from the acacia trees in the Sahel region of Sudan, the third-largest country in Africa, which is currently experiencing fighting between the army and a paramilitary force. Companies reliant on the ingredient, such as Coca Cola and PepsiCo, have long stockpiled supplies, but this latest conflict has affected the capital, disrupted basic communications, and paralysed the economy.
Now Coca Cola, or they competitor Pepsi, not getting this important ingredient, could be a hit for the whole world. Procurement manager Richard Finnegan estimated that current stockpiles of gum Arabic will run out in five to six months, while other industry sources have given estimates of three to six months. However, some companies such as Swedish confectioner Cloetta AB, which makes Lakerol lozenges that contain gum Arabic, have said they have ample stock of the ingredient. Trade in gum Arabic has ground to a halt, according to a dozen exporters, suppliers, and distributors, and sourcing additional supplies from rural Sudan is currently impossible due to the conflict and road blockages.
Despite the rather positive news from Sweden, if conflict in Sudan will not end in the following half year, companies could face big problems. Not to mention the casualties that war brings.
As for the technical analysis, in the past period, Coca Cola stocks had some ups and downs, however they remain on the 5-year high level.* The price is currently sitting at 63,68 USD per stock, which makes it an attractive and affordable choice. Despite the fact, that stock is currently also on the historical high, I decided to buy stocks of Coca Cola when the market opens. The reason for this is purely the long tradition and marketing/name they have managed to produce for themselves. To put this simple, in my own terms, since the crisis is coming and people will not have much money, Coca Cola is one of the products that people will buy even if they run short on their finances. It is one of the companies, that has also showed in the past, to keep good sales despite the financial situation the world was facing.[1]
Movement of Coca Cola stocks in the last five years. (Source: Investing) *
* Past performance is no guarantee of future results.
[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
