Economic Condition, The Soft Drink Industry & Coca-Cola By: Jing Li Puttachad Nimnakorn Elizabeth Kulin

Main points The Background of Coca-Cola Co. Economic variables forecasted to change within next 6 months . Effect on the soft drink industry. Effect on coca-cola.

The Background of Coca-Cola Co.

Economic variables forecasted to change within next 6 months .

Effect on the soft drink industry.

Effect on coca-cola.

Coca-Cola Company The headquarters of Coca-Cola Co. Atlanta, Georgia The leading position of Coca-Cola in the soft drink industry. Coke’s main products Owns four of top five soft drink products Operating locations The financial situation Source: Coca-Cola Co. Website

The headquarters of Coca-Cola Co.

Atlanta, Georgia

The leading position of Coca-Cola in the soft drink industry.

Coke’s main products

Owns four of top five soft drink products

Operating locations

The financial situation

Unemployment General Economic Forecast Expected to rise up until the first quarter of 2010, peaking at 8.9% Affect on Soft Drink Industry Impact on wages consumer confidence------consumption expenditure Retail sales Affect on Coca-Cola Co. Demand decrease Positive effect: little wage pressure Source: IBISWorld Database

General Economic Forecast

Expected to rise up until the first quarter of 2010, peaking at 8.9%

Affect on Soft Drink Industry

Impact on wages

consumer confidence------consumption expenditure

Retail sales

Affect on Coca-Cola Co.

Demand decrease

Positive effect: little wage pressure

Supply and Demand General Economic Condition GNP: Consumer demand is low Business input costs remain low which helps some industries to survive Affect on Soft Drink Industry Price of raw materials : crude oil price GNP: Personal income Affect on Coca-Cola Co. Costs of production Sugar price Aluminum price Crude oil price: plastic price, retail gasoline price Source: Financial Forecast Center and IBISWorld database

General Economic Condition

GNP: Consumer demand is low

Business input costs remain low which helps some industries to survive

Affect on Soft Drink Industry

Price of raw materials : crude oil price

GNP: Personal income

Affect on Coca-Cola Co.

Costs of production

Sugar price

Aluminum price

Crude oil price: plastic price, retail gasoline price

. U.S. Real GNP Gross National Product Past Trend Present Value & Future Projection Billions Chained 2000 US Dollars. Annual Rate Seasonally Adjusted Source: Financial Forecast Center

Source: Global InfoMine

Money Supply General Economic Forecast Expected to decrease 2 points by August 2009 Affect on Soft Drink Industry Impact on consumer buying Less investments for new entries Affect on Coca-Cola Co. Freeze on new Competition Effect on shareholder volume & stock price

General Economic Forecast

Expected to decrease 2 points by August 2009

Affect on Soft Drink Industry

Impact on consumer buying

Less investments for new entries

Affect on Coca-Cola Co.

Freeze on new Competition

Effect on shareholder volume & stock price

Inflation & CPI General Economic Forecast expected to decrease from -.9 to –2.6 CPI decreased in early 2009 we will see slow increase in next 6 months Affect on Soft Drink Industry Pricing decisions Sales revenue drop VS stimulate Qoutput Surplus risk Cost of supplies - Gross profit and net income Affect on Coca-Cola Co. Pricing decisions Competitive industry VS strong brand Costs of supplies – Gross profit and net income

General Economic Forecast

expected to decrease from -.9 to –2.6

CPI decreased in early 2009

we will see slow increase in next 6 months

Affect on Soft Drink Industry

Pricing decisions

Sales revenue drop VS stimulate Qoutput

Surplus risk

Cost of supplies - Gross profit and net income

Affect on Coca-Cola Co.

Pricing decisions

Competitive industry VS strong brand

Costs of supplies – Gross profit and net income

International-Exchange Rates General Economic Forecast The US dollar is expected to decline in value against foreign currencies in 2009. Affect on Soft Drink Industry Focus on increasing domestic sales. Affect on Coca-Cola Co. 75% of Coca-Cola’s sales revenue comes from international sales. Loss at conversion (9% in 2008) Company worth and stock demand affected Fix: increase sales domestically

General Economic Forecast

The US dollar is expected to decline in value against foreign currencies in 2009.

Affect on Soft Drink Industry

Focus on increasing domestic sales.

Affect on Coca-Cola Co.

75% of Coca-Cola’s sales revenue comes from international sales.

Loss at conversion (9% in 2008)

Company worth and stock demand affected

Fix: increase sales domestically

General Economic Forecast Low interest rate : 3.2 % Loan , 3.5% for Long term T-Bill yield and .22% short term T-Bill High money demand but no loan provided Consumer credit - decrease by 44% in mid of 2009 Affect on Industry Decrease interest income Impact from global credit crisis Affect on Coca Cola Fixed interest rate - no effect on long-term debt affect from global credit crisis Less demand Interest Rate & Credit Market

General Economic Forecast

Low interest rate : 3.2 % Loan , 3.5% for Long term T-Bill yield and .22% short term T-Bill

High money demand but no loan provided

Consumer credit - decrease by 44% in mid of 2009

Affect on Industry

Decrease interest income

Impact from global credit crisis

Affect on Coca Cola

Fixed interest rate - no effect on long-term debt

affect from global credit crisis

Less demand

Business Cycle indicators General Economic Forecast Leading economy index (LEI) increased 0.1 % in Jan Predicted : from Feb-Aug 2009 will dropped by 1.6 % Manufacturers’ orders Increase money supply --> increase in retail sales growth Predicted : get less negative when compare to the beginning of 2009 (-6.4 ---> -2.0) Consumer confidence index (CCI) Increased in March 2009 2.7%---> expanding unemployment insurance Predicted : CCI might be slightly increased --> government boost

General Economic Forecast

Leading economy index (LEI)

increased 0.1 % in Jan

Predicted : from Feb-Aug 2009 will dropped by 1.6 %

Manufacturers’ orders

Increase money supply --> increase in retail sales growth

Predicted : get less negative when compare to the beginning of 2009 (-6.4 ---> -2.0)

Consumer confidence index (CCI)

Increased in March 2009 2.7%---> expanding unemployment insurance

Predicted : CCI might be slightly increased --> government boost

Business Cycle indicators Impact on industry Decrease in quantity of demand Decrease in retail’s sales growth Affect to demand and supply related industries Negative affect of the industry revenue growth Impact on Coca-Cola Affect related industrial partners : bottling partners Decrease in sales volume : Consumers’ behavior changing

Impact on industry

Decrease in quantity of demand

Decrease in retail’s sales growth

Affect to demand and supply related industries

Negative affect of the industry revenue growth

Impact on Coca-Cola

Affect related industrial partners : bottling partners

Decrease in sales volume : Consumers’ behavior changing

Coca-Cola: Going Forward “ Our goal is to use our company’s assets” Brand, finances, distribution system, global reach and management team to increase value for shareholders. 2008 10-k annual report

“ Our goal is to use our company’s assets”

Brand, finances, distribution system, global reach and management team to increase value for shareholders.

2008 10-k annual report