Morningstar has released a research report on Coca-Cola Amatil asking: ''Has Coca-Cola lost its fizz?''
The company had experienced a challenging 18 months, characterised by falling volumes, a resurgent Pepsi and volatility in Indonesia.
Mr Mueller said Amatil's narrow competitive advantage afforded it pricing power, which was significant given half of its volumes were sold to the Australian supermarket duopoly.
''Health is the new `black'. It is possible today's parents are convincing their kids soft drinks are bad for you,''Baby Boomers to Generation Y were brought up on Coke but that was in the past, he said.
A recent Roy Morgan report indicated soft drink consumption in Australia had fallen in the five years to December 2013.
Morningstar believed historic 1% to 3% category growth in CSDs (carbonated soft drinks) was a thing of the past.
''In our view, volume growth will be flat to slightly down. It remains to be seen whether growth in other categories, particularly water, can offset this.''
Unlike CSDs, water was highly competitive and Amatil appeared to have no competitive advantages, with minimal brand equity in its water range, Mr Mueller said.
Consumers appeared to be unwilling to pay for brands, with private-label water growing 80% during the last two years.
Amatil was at a competitive disadvantage in terms of cost competitiveness in water because of its decentralised production mode. Its Mount Franklin brand cost more to produce per litre than the selling price of private-label brands on supermarket shelves.
''We believe Amatil will address its cost position in water over the long term and will centralise manufacturing and bottling to gain production efficiencies. However, the category is ripe for price deflation.''
Despite growing promotional activity in private-label water, Australian prices were considerably higher than in some other developed countries, he said.
Coke: At a glance
• Challenging 18 months
• Falling volumes
• A resurgent Pepsi
• Health-conscious society
