New York, June 16 - Shares of soft-drink makers fell on Monday after serious flooding in the central U.S. corn-growing region raised concerns that costs for the corn syrup used as a sweetener would rise.
Coca-Cola, Coca-Cola Enterprises Inc, PepsiCo Inc, Pepsi Bottling Group Inc and Dr Pepper Snapple Group Inc all closed more than 2 percent lower, underperforming the Dow Jones Industrial Average, which only closed down 0.3 percent.
"Corn syrup prices are up because of the increase in the price of corn," said Todd Leone, head of listed trading at Cowen & Co. He added that rising corn syrup prices were hitting shares of beverage companies, which use them to sweeten drinks.
The flooding, the worst seen by the U.S. Midwest in 15 years, sent corn prices to a record high on fears of crop losses in the heart of the world's top grain exporter.
Aside from the high-fructose corn syrup used in its drinks, PepsiCo uses corn to make Frito-Lay snacks.
PepsiCo said that an Iowa factory that produces some of its Quaker foods was also impacted by the flooding and it expects disruptions to normal service over the next few weeks.
PepsiCo said it was largely covered on key commodities through 2008, but that its corn coverage extended into 2009.
A PepsiCo spokeswoman declined to specify the company's exact exposure to corn, beyond saying that it was one of PepsiCo's top 10 input costs and that no one input was greater than 10 percent of the company's total cost of goods sold.
A Coke spokesman declined to quantify the corn exposure and a Dr Pepper Snapple spokesman was not immediately available for comment.
Coke and PepsiCo shares both closed down 2.2 percent on the New York Stock Exchange, at $54.18 and $66.04, respectively. Dr Pepper Snapple, the third-largest soft-drink maker, closed down 3.9 percent at $23.71.
Shares of Pepsi Bottling, the largest bottler of PepsiCo Inc drinks, closed down 4.8 percent at $29.24 while Coke Enterprises, the biggest bottler of Coke drinks, closed down 4 percent at $18.56.
This is the latest blow to a sector whose shares fell on Friday after a profit warning from Greece's Coca-Cola Hellenic Bottling Company SA, the world's second-largest bottler of Coke drinks, stoked worries about international weakness.