CITI: These 19 Companies Are Going To Make A Fortune From Global Growth

Industry: Beverage, non-alcoholic

Region: U. S.

Ticker: NYSE: KO

Revenue (annual report): US$ 46.854 billion (2013)

The Coca-Cola Company has a significant exposure in emerging markets; approximately 75% of their profits in 2013 came from overseas. Coca-Cola's breadth of product offering — including bottled water, tea, coffee, and juice — partially contributes to its major international success.

Citi analyst Wendy Nicholson also notes that because the Coca-Cola Company entered the Latin American market earlier and in a bigger way than PepsiCo did, it now "commands very strong market shares and in turn, very high profit margins".

Source: Citi

Industry: Beverage, non-alcoholic

Region: Latin America

Ticker: BMV: AC

Revenue (annual report): PS 60.359 million (US$ 4.66 million) (2013)

Arca-Contal derives almost 40% of its consolidated EBITDA from northern Mexico, which has the highest per-capita soft drink levels in the country. Additionally, despite a "challenging operating environment", Arca operates in the rapidly growing and highly profitable Ecuadorean franchise and in Argentina — which are seeing double digit EBITDA growth.

Citi analyst Alexander Robarts adds that Arca-Contal's recent acquistion of processed dairy assets in Ecuador, Toni, is an additional area of attractive non-organic growth. Now, Arca-Contal is the 5th largest company in the country.

Source: Citi

Industry: Beverage, non-alcoholic

Region: China

Ticker: SEHK: 2319

Revenue (annual report): US$ 2.04 billion (2013)

Citi's pick for Chinese non-alcoholic beverages is Mengniu Dairy. They add that concern on import UHT milk is "overdone", and that Mengniu has a chance to "invest in Arla branding for market share".

Citi analysts believe that China raw milk prices will probably "decline to a level where cycle average prices are cost plus farm's normal profit". If this happens, Jasmine Bai writes that "Mengniu's volume growth may accelerate, with cost delcine as well as ASP decline/promotion increasing". Consequently, they believe margin will benefit.

Source: Citi

Industry: Beverage, non-alcoholic

Region: Japan

Ticker: TYO: 2587

Revenue (annual report): ¥ 1.121 trillion (US$ 11 billion) (2013)

Among specialty soft drink companies in Japan, Citi writes that Suntory Beverage and Food has gone "the farthest in terms of overseas operations". They have focused on Southeast Asia, which is seeing particularly strong growth.

Nobuyoshi Miura, Citi analyst, adds that sales of SBF have been growing faster than the market average in Japan. In the last year, SBF has launched "high value-added and high-priced products authorized by the Consumer Affairs Agency in Japan as being beneficial to health" which has resulted in sales mix improvement.

Source: Citi

Industry: Beverage, alcoholic

Region: U.S.

Ticker: NYSE: BF.B

Revenue (annual report): US$ 3.784 billion (2013)

International sales of Brown-Forman have grown up to approximately 60% of the company sales, which has been largely driven by the Jack Daniel's family. The brand is doing well in both developed and emerging markets.

Citi analyst Wendy Nicolson writes that, Brown-Forman should continue "to capitalize on the heightened international interest in brown spirits".

Source: Citi

Industry: Beverage, alcoholic

Region: Europe

Ticker: DGE.L

Revenue (annual report): £ 15.487 billion (US$ 26.58 billion) (2013)

Andrea Pistacchi, Citi analyst, writes that Diageo is placed "to capture the lion's share of EM growth in spirits because it has the strongest route-to-market and broadest portfolio in most EM regions, except China and Eastern Europe".

Pistacchi adds that they see four long-run opportunities for Diageo including international spirits in Africa, route-to-market enchancements in Latin America, portfolio premiumisation in India, and sales and margin expansion in South East Asia.

Source: Citi

Industry: Beverage, alcoholic

Region: Europe

Ticker: LSE: SAB

Revenue (annual report): US$ 23.213 billion (2013)

SABMiller is in a great position to play the emerging markets growth gap.

Citi Analyst Pistacchi writes that SABMiller "has the best geographic footprint in global beer" with significant exposure to emerging markets with low per capital consumption, including Africa and Latin America.

Source: Citi

Industry: Beverage, alcoholic

Region: Japan

Ticker: TYO: 2502

Revenue (annual report): ¥ 1.714 trillion (US$ 16.8 billion) (2013)

Starting in early 2014, beer consumption is beginning to bounce bank in Japan because of higher wages and the stock market upturn. Consequently, Citi sees "potential for rapid growth" in the Asahi Group Holdings, whose domestic alcohol beverages account for 61% of its profit.

Additionally, the Japanese government "intends to make changes in the tax treatment" for beer, which Citi analyst Nobuyoshi Miura believes Asahi Group Holdings might "benefit most" from the "revisions to alcoholic beverage taxes".

Source: Citi

Industry: Food

Region: U.S.

Ticker: NYSE: MJN

Revenue (annual report): US$ 4.2 billion (2013)

Citi writes that they favor packaged food groups with the "most significant emerging market exposure" because it provides for "better long term growth potential given rising incomes and a shift in consumer preferences towards packaged food items amongst much of the developing world".

Over 70% of sales for Mead Johnson — infant formula producer — are in emerging markets, including China (which accounts for 31% of the total company sales). Most importantly, although China is the biggest market, Citi analyst David Driscoll writes that they "estimate that less than 20% of Chinese infants are on formula, with the majority of the infants in the country still breastfeed[ing]". As a result, there is significant room for further growth, especially because of the rising middle class.

Source: Citi

Industry: Food

Region: Europe

Ticker: LSE: ULVR

Revenue (annual report): € 49.8 billion (US$ 68.0 billion) (2013)

Unilever has the most emerging market exposure out of the major European food companies. Despite recent deceleration in its emerging market business, Citi writes that Unilever is "well positioned to capitalize" because the long-run structural drivers of emerging market growth, including population growth, further urbanization, and real wage growth, "remain intact".

Source: Citi

Industry: Food

Region: Latin America

Ticker: NYSE: BRFS

Revenue (annual report): R$ 30.521 billion (US$ 13.78 billion) (2013)

Citi analyst Alexander Robarts writes that they have "recently adopted a more constructive view for the Brazilian protein processors" because they are "entering an attractive stage of development characterized by four key factors: 1) new senior management [...], 2) incremental productivity gains and/or synergies; 3) focus on financial deleveraging and working capital managment [...], and 4) dollar operating leverage of depreciating".

Additionally, he writes that Citi recently increased its target price on Brasil Foods and reiterated the Buy rating, "reflecting a higher export margin expected for this year".

Source: Citi

Industry: Food

Region: China

Ticker: SEHK: 0322

Revenue (Yahoo finance): US$ 11.07 billion (2013)

Citi analyst Jasmine Bai writes that they "believe margins will increase over three-to-five years for the China instant noodle companies". Additionally, although the China instant noodle category is a duopoly, they believe that "the price competition depends on Tingyi's decisions".

Additionally, Citi analysts like Tingyi's intiatives of innovation and non-fired noodle launch. A change like that reflects an effort for new products innovation to drive sector demand and gain pricing power, rather than just "taking existing products' market share".

Source: Citi

Industry: Food

Region: Japan

Ticker: TYO: 2802

Revenue (annual report): ¥1.172 trillion (US$ 11.5 billion) (2013)

Citi's number one pick for Japanese food is Ajinomoto for three reasons. First, there has been an upturn for two and a half years in the global price for lysine for animal feed, and because Ajinomoto is third globally in lysine production it will benefit. Secondly, there is "substantial growth potential" in high value-added lysine for dairy cattle, and Ajinomoto is planning a 10x boost to production capacity by 2016. And third, there is continued rapid growth in the overseas food business. According to Citi, not only is Ajinomoto venturing into the U.S., but it has also "obtained patents in major countries" and see looking to developing markets in Europe and Oceania.

Source: Citi

Industry: Home and Personal Care

Region: U.S.

Ticker: NYSE: PG

Revenue (annual report): US$ 84.17 billion (2013)

Citi analyst Wendy Nicholson writes: "Proctor and Gamble's efforts in emerging markets make it a better 'play', owning in part to the fact that the big categories in HPC [Home and Personal Care] are growing at a faster clip in emerging markets vs. developed markets and [Proctor and Gamble] is expanding its business in them".

Proctor and Gamble's high profile efforts include launching toothpaste in India and local manufacturing of oral care in Brazil.

Source: Citi

Industry: Home and Personal Care

Region: Europe

Ticker: FWB: BEIG

Revenue (annual report): € 6.141 billion (US$ 8.38 billion) (2013)

Citi analyst Toby McCullagh writes that Beiersdorf "is the most reliant on" its emerging market operations to achieve "rich organic growth expecations" because the emerging markets are driving greater than 80% of the company's organic sales growth this year.

Furthermore, Beiersdorf is one of the only companies that Citi covers that has a "recovery story playing out" in its developed market arena. Because the emerging market growth seems to be slowing down "modestly", having a strong developed market sector will help out Beiersdorf.

Source: Citi

Industry: Home and Personal Care

Region: China

Ticker: SEHK: 1044

Revenue (Yahoo Finance): $US 21.19 billion (2013)

Hengan's sanitary napkin business "is still strong in sector consolidation, but tissue margins still need to decline and diapers may continue to lose market share", according to Citi analyst Jasmine Bai.

However, she writes that Citi believes that "Hengan has been able to gain young customers through its brands" and that they expect "Hengan sanitary napkin segment profit growth at c. 20% driven by sales in the next two years".

Source: Citi

Industry: Home and Personal Care

Region: India

Ticker: BSE: 531642

Revenue (annual report): US$ 710 million (2013)

Marico is changing its business profile as "dependence on coconut oils continues to reduce" as superior growth "and share gains across high margin segments emerge".

Additionally, Jamshed Dadabhoy writes: "The Paras acquisition is fairly small for now — only ~3% of consolidated revenues — but represents a high growth and high margin opportunity for Marico over the medium term. If Marico is successful in growing the brands / the business, it could result in further white spacse to leverage off the brand equity of its value added hair oil segment".

Source: Citi

Industry: Tobacco

Region: Europe

Ticker: LSE: BATS

Revenue (annual report): £ 15.260 billion (US$ 26.18 billion) (2013)

Citi has listed British American Tobacco as a Buy because they "believe it can continue to generate solid EPS growth, thanks to its pricing power" in emerging markets. Additionally, it has the highest exposure to the emerging markets, and the lowest exposure to the weak European market.

Analyst Adam Spielman writes that, "we believe BAT is growing strongly in a lot of small markets, for example, Bangladesh, Venezuela, Romania, Saudi/UAE, and East Africa".

Source: Citi

Industry: Tobacco

Region: Japan

Ticker: TYO: 2914

Revenue (annual report): ¥ 2.399 trillion (US$ 23.6 billion) (2013)

Japan Tobacco commands the top share of the Russian cigarette market (the second biggest cigarette consumer) and the Japanese market (the fifth biggest consumer). Analyst Nobuyoshi Miura writes that, "retail prices in both countries are so low on a global basis, and we see substantial scope for profit growth via price hikes".

Additionally, the Japanese government recently increased the consumption tax from 5% to 8%, after which the cigarette ASP (excluding tax) rose around 3%. In October of 2015, Japan is planning on raising the consumption tax to 10%, and Citi "sees a possibility of JT's ASP rising again".

Source: Citi