3. Table of Contents
Introduction
History……………………………………………………………........................ 1
Top CorporateOfficers/Board of Directors……………………………………… 2
Board Analysis…………………………………………………………................ 5
Selection of Target Company……………………………………………………. 5
Selection of Bench Company……………………………………………………. 6
Trends in the Industry…………………………………………………………… 7
General Information……………………………………………………............... 8
Central Content
Property, Equity, and Value Management………………………………………. 9
Debt Management…………………………………………………...................... 22
Cash Management…………………………………………………..................... 28
Asset Management……………………………………………………………… 31
Organizational Citizenship……………………………………………………… 35
Strategic Positioning……………………………………………………………. 45
Summary.............................................................................................................. 49
Work Citied…………………………………………………………….............. 54
Appendix
PSC Charts………………………………………………………………............. 55
The Coca-ColaCompany Financial Statements………………………………… 81
PepsiCo Financial Statements…………………………………………………... 85
4. 1
Introduction
History
The Coca-Cola Company, one of the most well-known and valued brands, is the largest
beverage company in the world. They produce a variety of over 500 different still and sparkling
beverages. Coca-Cola Company’s portfolio has been growing for decades, producing other well-
known drinks such as PowerAde, Sprite, Coca-Cola Zero, Fanta, Minute Maid, Vitaminwater,
Simply, Georgia, and Del Valle.
The Coca-Cola Company all started with one man, Atlanta pharmacist John Pemberton.
In 1886 Dr. Pemberton decided to mix carbonated water with his homemade flavored syrup,
inventing the first Coca-Cola ever made. On May 8, 1886, Pemberton served the first Coca-Cola
to a customer at his pharmacy starting the greatest beverage industry of all time.
Only two years after the creation of the first carbonated soft drink, Dr. Pemberton passed
away, but the Coca-Cola Company did not die with him; before his passing, Pemberton sold
various portions of his company, with a majority of his business going to Atlanta businessman
Asa G. Chandler. Chandler was able to expand Coca-Cola’s reach beyond Atlanta, and
impressed by this expansion, Joseph Biedenharn became the first person to put Coca-Cola into
bottles by installing a bottling machine in the back of his Mississippi soda fountain. Just five
year later, large scale bottling was made possible by three enterprising businessmen. These three
men, Benjamin Thomas, Joseph Whitehead and John Lupton, developed what became the
Coca-Cola worldwide bottling system by purchasing the exclusive bottling rights from Chandler
for a mere one dollar.
5. 2
Top Corporate Officers
Chairman of the Board and Chief Executive Officer: Muhtar Kent
Chief Financial Officer: Kathy N. Waller
Chief Administrative Officer: Alexander B. Cummings
Senior VP and Global Chief Customer Officer: J. Alexander (Sandy) M. Douglas, Jr.
General Counsel: Bernhard Goepelt
Chief People Officer: Ceree Eberly
Chief Public Affairs and Communications Officer: Clyde C. Tuggle
Chief Information Officer: Ed Steinike
Chief Technical and Innovation Officer: Guy Wollaert
Chief Marketing and Commercial Officer: Joseph V. Tripodi
Board of Directors
Muhtar Kent: Age 61
Kent joined the Coca-Cola Company in 1978 holding numerous marketing and operation
leadership positions throughout his career. He has been the chairman of the board and Chief
Executice Officer since 2009, making him an inside director. Previous positions Kent has held
in the company include president and Chief Operating Officer.
Herbert A. Allen: Age 73
Allen has been a director of the Coca-Cola Company since 1982. He is the president and
CEO of Allen & Company Incorporated making him an outside director. From 2000-2010,
Allen served as a duality Director for Convera Corporation, a software as a service (SaaS)
vertical search service for publishers and other media companies.
Ronald W. Allen: Age 73
Allen has been a director of the Coca-Cola Company since 1991. Allen has been a
former Chairman of the Board, Chief Executive Officer, and President for both Aaron’s Inc. and
6. 3
Delta Air Lines, Inc. He is an outside director with duality, holding a directors position with
Aircastle Limited.
Ana Botin: Age 54
Botin was recently assigned to the board of directors for the Coca-Cola Company in July
of 2013. Ana is also the Chief Executive Officer of Banco Santander, S.A., making her an
outside director. She has also held a duality directors position for Banco Satander.
Howard G. Buffet: Age 60
Buffet has been a director of the Coca-Cola Company for the past four years. Buffet is
also the president for both Buffet Farms, and the Howard G. Buffet Foundation, making him an
outside director. Mr. Buffet also holds positions as the Chairman and Chief Executive Officer
for the Howard G. Buffet Foundation.
Richard M. Daley: Age 72
Former Mayor of Chicago from 1989 to 2011, Richard Daley, has been a director for the
Coca-Cola Company since 2011. Daley is an outside director, holding positions as the
Executive Chairman for Tur Partners LLC, and Of Counsel for Katten Muchin Rosenman LLP.
Duality is evident as he is also a director for Diamond Resorts International Inc.
Barry Diller: Age 72
Diller has been a member of the board of directors since 2002. His advising skills are
clear since he has help positions like Chairman of the Board and Senior Executive for
IAC/InterActiveCorp, as well as being their CEO, making him an outside director. His duality
skills are evident, seen through his position as a Special Advisor for Tripadvisor Inc, as well as
being the Senior Executive and Chairman of the Board for Expedia Inc.
Helene D. Gayle: Age 58
Gayle has been an outside director for the Coca-Cola Company since April of 2013. She
is a member with duality, holding a director’s position with both Colgate-Palmolive Company
and the CDC (center for disease control). She also has been the President and Chief Exectuive
Officer of CARE USA since 2006.
Evan G. Greenberg: Age 59
Greenberg has been an outside director since 2011. He has held numerous positions with
multiple companies, including Chief Executive Officer, President, and Chief Operating Officer.
Greenburg is another board member with duality, holding the position of Chairman of the Board
for ACE Limited.
7. 4
Alexis M. Herman: Age 67
Herman has been a director of the Coca-Cola Company since 2007. Herman is an outside
director, with her consulting skills evident with her positions as Chair and Chief Executive
officer of New Ventures, LLC. Like many others on the board, Herman is a member expressing
duality.
Robert A. Kotick: Age 51
Kotick has been a member of the board for two years. He is an outside director, holding
positions as President and Chief Executive officer for Activision Blizzard Inc. This makes him
another board member who expresses duality.
Maria Elena Lagomasino: Age 51
Lagomasino has been an outside director for the Coca-Cola Company for the past six
years. She has held numerous duality positions. Lagomasino is the current Chief Executive
Officer and Managing Partner for WE Family Offices, as well as previously holding the position
of Chairman and CEO of JP Morgan Private Bank from 2001-2005.
Sam Nunn: Age 76
Nunn has been an outside director since 1997. He expresses duality through his current
positions as the Co-Chairman and Chief Executive Officer for the Nuclear Threat Initiative. He
was formerly a member of the United States Senate, serving from 1972 through 1996.
James D. Robinson III: Age 80
James is the oldest director and has had the longest tenure of any other members of the
Coca-Cola Company board. He has served as an outside director since 1975. Robinson
expresses duality through his current positions of Co-Founder and General Partner for JD
Robinson Inc.
Peter V. Ueberroth: Age 77
Ueberroth has been an outside Director of the Coca-Cola Company for the past 28 years.
He duality is conveyed through the positions he holds elsewhere including Investor and
Chairman for Contrarian Group Inc., as well as being an nonexecutive Co-Chairman for Pebble
Beach Company.
8. 5
Board Analysis
There are a total of 15 board members for the Coca-Cola Company. The average age of
these members is 67 years old. This shows how the Coca-Cola Company elects board members
based on their experience and their wisdom in the business industry. All the board members
have duality in other companies or hold high positions in other companies like Chief Executive
Officer, Chief Financial Officer, Chief Operating Officer, President, or VP. Only one of the
board members has another role in the Coca-Cola Company, that being inside director Muhtar
Kent. Muhtar Kent is not only a board member, but he is also the chairman of the board and the
Chief Executive Officer.
Diversity isn’t very present in the board of directors. The majority of the board consists
of older men, with only four members being women. The youngest members of the board are
Robert A. Kotick and Maria Elena Lagomasino, who are both 51 years old.
The oldest member is James D. Robinson III, who is 80 years old. The shortest tenured member
of the board is Ana Botin, who was just recently added to the board in July of 2013.
Why I Selected Coca-Cola Company
There are so many reasons why I chose Coca-Cola Company as my target company. The
first and most prominent reason is their dominance in the beverage production and distribution
industry. There are no other beverage companies in the world that has been as successful as
Coca-Cola. They produce over 500 different types of still and sparkling beverages, and
distribute them worldwide. They are one of the most well known brands not only in the
9. 6
beverage industry or United States, but in the world. Whether you speak English or Spanish,
Chinese or Japanese, everyone knows what that signature script styled logo is.
Another main reason I chose Coca-Cola is its dominance over its competition. They not
only serve and distribute Coca-Cola, their portfolio explodes with other name brands that they
sell like Sprite, Minutemaid, Powerade, and much more. Coca-Cola is also the #1 provider of
sparkling beverages globally; not only that, they are the leading provider of ready-to-drink
coffees, juice, and juice drinks. Coca-Cola is not done growing though; their 17 billion dollar
brand is always looking to the future to expand and distribute even further than the 200 countries
they sell to worldwide.
Why I Selected PepsiCo. as the Benchmark
The main reason I chose Pepsi Co. as the benchmark company was because they are one
of Coca-Cola Company’s biggest rivals. Pepsi Co. has been a rival of Coca-Cola since it was
invented back in 1898. Just like Coca-Cola, a pharmacist named Caleb Davis Bradham invented
the first ever Pepsi-Cola. Originally naming it “Brad’s Drink,” Bradham sensibly bought the
brand name “Pepsi-Cola” from a competitor for $100. Since then business has been booming.
Pepsi Co. began in 1965 with the merger of Pepsi-Cola and Frito-Lay, which in turn
created Pepsi Co. Pepsi Co. is one of the largest food and beverage producers and distributors in
the world. They offer their products to over 200 countries. Some of their iconic beverages
include Pepsi, Diet Pepsi, Pepsi Max, Gatorade, Lipton, Tropicana, Aquafina, Mountain Dew,
and many others. Some of their major brand foods include Lays chips, Doritos, Cheetos, Fritos,
Tostitos, and Ruffles. Unlike Coca-Cola Company, Pepsi Co. has expanded its production to
food rather than solely beverages. Pepsi Co. had over $66 billion in net revenue in 2013, proving
10. 7
how their diverse portfolio and treasured brands make Pepsi Co. one of Coca-Cola Company’s
biggest rivals in the world.
Trends in the Beverage Industry
One of the most up and coming themes I have seen in the beverage industry the past few
years is an emphasis on low or zero calorie drinks. These days, people are becoming more
conscious about their health and body image. Customers are asking for more healthy drink options,
but they don’t want to have to settle for plain water. This has created a frenzy between all the
competing beverage companies in the industry to try and come out with the best tasting drinks that
are still good for your health.
One of the main concerns when creating “diet drinks” is that the ingredients used in it may
have zero calories, but can still be harmful to your health in both the short-term and long-term run.
Scientists have performed many research studies to determine whether this is true. Many of them
have agreed, concluding that these artificial sweeteners or artificial ingredients are not digested
normally, and in fact may be harder to digest than ordinary, natural ingredients. Your body is not
used to taking in these artificial ingredients so your body may in fact take a longer time to digest
them, leaving them in your body longer which in turn would negatively effect your body weight.
Because of these recent findings, beverage companies have tried to use alternative ways of
sweetening their drinks.
Coca-Cola recently came out with a new Coca-Cola Life soda which is now available all
throughout the United States. Coca-Cola Life a new brand soda they created that is sweetened
with alternative sweeteners, but are still natural and better for you than ordinary sugar. Coca-Cola
11. 8
Life is made with real cane sugar and stevia leaf extract to give a more real, natural, and healthier
form to the original Coca-Cola.
General Information
General Information: NasdaqGS: KO – Headquarters: 1 Coca Cola Plz NW, Atlanta, GA.
– Company Founded: 1892 – Activities: The World’s largest beverage company, Coca-Cola
Company produces and distributes over 500 brands of still and sparkling beverages worldwide,
through the world’s largest distribution system, Coca-Cola Company provides over 200 countries
with their amazing tasting soft drinks, ready to made coffees, juices, and juice drinks. Stock
Performance: Over the past five years the Coca-Cola Company’s stock has grown from $28.23 to
$42.32, which is an incredible growth.
Then and Now
At the beginning of Coca-Cola’s history, there was an average of nine servings of cola
sold per day. Today, daily servings of Coca-Cola are estimated at an astonishing 1.9 billion
globally. Coca-Cola was the one and only product sold in a single state in America when the
company was first established. Now, the company sells over 500 different non-alcoholic
beverages worldwide.
12. 9
Central Content
Property, Equity, and Share Management
1.01 Net Income to Revenue (Net Margin)
The net margin is the amount of net earnings per each dollar of revenue. The net margin
can be found be dividing a company’s net income by their revenue. Companies are always
looking to increase their net margin because this shows the increase of net income per dollar
revenue they make.
I am scoring the Coca-Cola Company with a 1.5. Their net margin decreased by 2.7%
from 2012 to 2013. This is not a good sign for the Coca-Cola Company especially because their
biggest competitor, PepsiCo, increased their net margin by almost 7.4% from 2012 to 2013. It
never looks respectable when your company’s net margin is decreasing while your biggest
competition is increasing by almost three times the percentage you decreased by.
To keep up with competition, the Coca-Cola Company is going to need to increase their
sales, and may have to change some of their ordinary business practices since they are clearly not
getting the job done. Although the company has great brand loyalty, they will need to try and
differ customers from buying PepsiCo products and draw them to choose Coca-Cola products
over their competitors’.
1.02 Gross Profit to Revenue (Gross Margin)
The gross margin of a company measures a company’s earnings to total revenue. Finding
the gross margin allows you to figure out the amount of total sales revenue a company makes
after incurring the costs of manufacturing their products.
13. 10
Scoring the Coca-Cola Company with a 3.5 was based off of three main reasons. First,
the Coca-Cola Company increased their gross margin by only .66%, less than 1% increase from
2012 to 2013. Secondly, their competitor PepsiCo increased their gross margin by 1.5% over
that same year’s span. This looks bad for Coca-Cola because not only did they barely increase
their gross margin, but their competitor PepsiCo increased their gross margin by over two times
larger than Coca-Cola. With that being said, Coca-Cola still has a higher ratio at almost 60%,
versus PepsiCo who has a ratio of 53%.
In order for the Coca-Cola Company to increase their gross margin, they will need to find
a way to produce their products more efficiently so as to spend less on the production of each of
their products. Hopefully by doing this they will increase the gap between themselves and their
competitor.
1.03 Operating Efficiency
This measure of efficiency allows us to see the relationship between the expenses of
administering a company to the revenues a company is able to generate. A company
desires to decrease this number each year, which shows they are becoming less costly and
more effective at generating revenue.
Once again, the Coca-Cola Company loses to PepsiCo in this segment. Although
PepsiCo did not increase nor decrease their operating efficiency from 2012 to 2013, the Coca-
Cola Company decreased their efficiency. Coca-Cola increased their number by 2.6%, which
shows that they became less efficient at generating revenue than the previous year.
I scored Coca-Cola with a 2.5 for this analysis segment. For the Coca-Cola Company to
become more efficient, they will need to cut down production costs. Also, they should try and
14. 11
eliminate any unnecessary expenses they may have to try generate their revenue without having
to spend as much in order to do so.
1.04 Income/Pretax Earnings
This measurement determines the amount of taxes a company pays, and whether or not
they pay a fair amount. There will always be people who debate that a company pays too little or
too much income tax. A company has a responsibility to their shareholders as well as the
community to pay a fair amount of taxes, which can be seen as a measure of corporate
citizenship.
I believe the Coca-Cola Company did not meet their responsibility to shareholders and
the community of paying a fair amount of income taxes. They ended up increasing the amount
of taxes paid by over 7% from 2012 to 2013. Their competitor PepsiCo ended up decreasing
their taxes from 2012 by over 6%. That is a 13% difference in the amount of taxes paid by
Coca-Cola versus PepsiCo. This does not look good for Coca-Cola because they look like they
are not meeting the responsibility to shareholders and the community to pay as little taxes as
possible.
Although the company decreased their income tax expense from 2011 to 2012, they
ended up increasing their income tax expense the next year (2013), exceeding the amount they
paid in 2011. Considering this negative change, I will score Coca-Cola for this segment of my
analysis with a 1.5. The Coca-Cola Company needs to decrease their income taxes in order to
sustain their competitive advantage over the other companies in the industry.
15. 12
1.05 Return on Equity
A company’s return on equity is the rate of earnings for each dollar invested. A
company wants to increase this number each year in order to make more money back on their
invested dollars.
The Coca-Cola Company failed to increase their return on equity, decreasing their return
by 6.2% from 2012 to 2013. On the other hand, PepsiCo increased their return on equity by 2%.
This does not look good to investors because Coca-Cola is losing the amount they make back on
their owner’s investments.
I will grade Coca-Cola’s return on equity with a 2.0. In order for the Coca-Cola
Company to increase their ROE they can do a majority of things. Some changes they may need
to make in 2014 are to increase prices, increase profit margins, or increase their asset turnover
rate.
1.06 Capital Paid-In/Total Capital
When you divide paid-in by total capital you measure how much a capital a company’s
shareholders invest. Companies will try to decrease this number in order to have more earned
capital versus paid-in capital from investors.
Compared to PepsiCo who’s ratio did not change from 2012 to 2013, Coca-Cola’s paid-
in/total capital ratio increased by 6% in 2013, which is not what you want to see from such a big-
time company. Furthermore, their paid-in to total capital percentage is much larger than
PepsiCo. Coca-Cola is at 42% while PepsiCo is at an astounding .03%. This is why Coca-Cola
received a score of 1.0.
16. 13
For Coca-Cola to decrease their ratio, they will need to increase their earned capital,
which is the money that comes from company profits. They will need to maintain a fair amount
of issued dividends. Coca-Cola will be able to increase their retained earnings by not giving all
their profits to dividends.
1.07 Capital Earned/Total
This ratio is the opposite of the ratio previously discussed in “1.06.” Companies look to
increase this number because it shows how much percentage of a company’s earned capital is
relative to their total capital. Earned capital is a company’s net income, which will be retained if
the company does not issue all their profits as dividends back to investors.
The Coca-Cola Company’s competitor PepsiCo did not increase their ratio for this
segment, but are still far ahead of Coca-Cola with a percentage rate at 99%, while Coca-Cola is
at a mere 58%. Also, Coca-Cola’s ratio decreased from 2012 to 2013 by 4.1%. For these
reasons, I scored Coca-Cola with a 1.0.
For the Coca-Cola Company to increase their earned capital in 2014, they can follow the
recommendations mentioned in the previous segment “1.06.” These recommendations include
keeping their issued dividends at a level in which allows the company to retain a good
percentage of their earnings.
1.08 Capital % of Change
This ratio determines how a company’s total stockholder’s equity changed compared to
the previous year. If this percentage increased, a company could have had a profit increase or
issued more stocks. If it decreases, there could have been a loss in the company’s profit, they
could have paid a liquidating dividend or purchased a large amount of treasury stock.
17. 14
I had trouble grading this analysis segment because although PepsiCo had a larger
increase in stockholder’s equity than Coca-Cola (7.2% versus .8%), they still have a smaller total
stockholder’s equity amount. Coca-Cola’s Stockholder’s equity amounts to $33,440,000 while
PepsiCo’s equity amounts to only $25,482,000. This is why I scored my target company with a
score of 3.0.
In order for the Coca-Cola Company to increase their total stockholder’s equity, they will
need to make sure their asset turnover is as high as possible, to hopefully raise profits. Although
they may have a 6% smaller percentage increase than PepsiCo, their overall stockholder’s equity
is still much higher.
1.09 Basic Earnings Per Share
A successful company will always have high earnings per share. This statistic provides
you with the annual earnings of a company in relation to the number of shares. The EPS of a
company can determine the stock price of that company. In other words, changes in the EPS can
have a direct effect on the market value of the stock.
I graded the Coca-Cola Company’s EPS with the lowest score possible, 1.0. I graded it
that low for a couple of reasons. The first in being that Coca-Cola EPS dropped by six cents
from 2012 to 2013, while PepsiCo increased by 41 cents. The second is that Coca-Cola’s total
EPS is much lower than PepsiCo’s. Coca-Cola has an EPS in 2013 of only $1.94 while PepsiCo
has over double that earnings, amounted at $4.37 in 2013.
Cola-Cola needs to straighten themselves out in 2014, and increase their EPS by a lot to
keep up with its competitor PepsiCo. Ways for them to increase their earnings can be to cut
unnecessary expense costs, or they may even want to explore the option of creating a new
18. 15
product line. I believe Coca-Cola would benefit greatly from selling food products along with
their beverage products since PepsiCo does just that.
1.10 Diluted Earnings Per Share
A diluted earnings per share is a more complex version of basic EPS. The diluted EPS
considers all the outstanding shares that people have with conversion privileges that could have
converted their options into additional shares. In addition, the closer the diluted EPS is to basic
EPS, the better.
I gave Coca-Cola’s diluted EPS a grade of 4.0. This grade dis-regards the earning level
compared to PepsiCo since I based the last analysis segment (1.09) on price level. I awarded
Coca-Cola with a 4.0 because their diluted EPS is much closer to their basic EPS than PepsiCo’s.
Coca-Cola’s difference is a mere seven cents while PepsiCo’s EPS difference is over four times
higher, amounting at 40 cents.
Being able to hold their diluted and basic EPS close together is something Coca-Cola can
be proud of. Common share holders would be more content with Coca-Cola’s difference in EPS
than PepsiCo’s; therefore the only thing Coca-Cola needs to do is raise their overall earnings per
share as I mentioned in the previous basic EPS analysis.
1.11 Share Price (Market Price)
The share price of a company is what that particular company sells a single share for on
the stock market to investors. The higher the share price, the more interested investors are in the
company.
I scored the Coca-Cola Company’s share price analysis with a 4.0. I did not score it
higher for two reasons. The first reason being that Coca-Cola’s share price did increase by 14%
19. 16
(which is good), but PepsiCo increased their share price by a whopping 21%. This 7% larger
increase in price along with the fact that PepsiCo had a higher share price than Coca-Cola by
over $14 is the second reason I did not score Coca-Cola a 5.0.
It’s a great sign that Coca-Cola increased their share price by a solid 14%. Hopefully in
2014 they will be able to increase that share price even further. If Coca-Cola explores the option
of creating new food product lines, it would increase the variety of products for consumers to
buy. Investors would in turn be even more interested in investing in the company, which would
raise the share price even further.
1.12 Price/EarningsRatio
The price/earnings ratio is a very debatable topic in terms of what number is a good
number. A higher number may suggest investors’ confidence in the company or it may be an
overpriced stock, while a lower number may show investors’ low confidence in the company,
although it leaves plenty of room for potential stock price growth.
Since the price/earnings ratio is so controversial, I awarded Coca-Cola with a score of
3.0. Both Coca-Cola and Pepsi increased their ratio by about 2-3%. They also have very similar
ratios in 2013; Coca-Cola had a ratio of 21.3 while PepsiCo had a ratio of 19.
Both companies price/earnings ratio are quite similar. For Coca-Cola to continue to
validate their ratio, they will need to continue their earnings and stock price growth. This will
show investors why their ratio is at just the right number, and that their stock is not overpriced.
20. 17
1.13 Diluted EPS/Basic EPS
As mentioned in earlier in the professional summary, a diluted EPS takes a step further
than basic EPS in complexity. In addition, the closer a company’s EPS prices are, they more
confident investors will be in that company.
Both the Coca-Cola Company and PepsiCo’s Diluted/Basic EPS ratio decreased by less
than 1%, which is an insignificant amount. They both have very high diluted/basic EPS ratios as
well; Coca-Cola’s ratio is just about 98%, while PepsiCo’s is 98.5%. This shows that both
companies have a good difference between their diluted/basic EPS prices. Therefor, I award
Coca-Cola with a 5.0 score.
As long as Coca-Cola continues their operating activities as is, and their directors find
ways to further grow the company in terms of stock price and earnings, they should be in great
shape for the future.
1.14 Book Value Per Share
The book value per share of a company can be calculated by dividing stockholder’s
equity by common shares outstanding. These price ratios can be interpreted in a variety of ways,
but in general the higher the book value, the less risky investing into that company will be.
Coca-Cola’s BV increased by less than 20 cents, while PepsiCo increased their BV by
over one dollar. Although both companies’ increased BV was relatively low, PepsiCo had Coca-
Cola beat in 2013 at a price of $16.67, while Coca-Cola’s BV was only $7.54. For these reason,
I scored Coca-Cola’s BV with a 2.0.
In order for the Coca-Cola Company to increase their book value per share they’ll need to
grow their stockholder’s equity by increasing their profits from the products they sell. Hopefully
21. 18
with all the new low-calorie and zero calorie beverages they have come out in the past year like
Coca Cola Life, they will draw in a more diverse market and drive their sales up even further.
1.15 Book Value Per Share/Market Value
In general, the larger the ratio of book value per share/market value is for a company, the
more favorable it is. This is because a larger number suggests that there is a lower investment
risk for that particular company.
The Coca-Cola Company’s BV/MV ratio decreased by about 2%, going from 20.31% in
2012 to 18.26% in 2013. PepsiCo’s ratio decreased by about 2% as well, going from 22.29% to
20.09% in 2013. This decrease in ratio, and the fact that Coca-Cola’s ratio was lower than
PepsiCo, is what lead me to score this section of the professional summary with a 2.5.
In order for Coca-Cola to increase their BV/MV ratio, they must continue to increase
their book value per share. As I stated earlier (1.14), Coca-Cola’s new healthier product lines
will hopefully draw in more health conscious customers and drive their book value per share
higher in 2014.
1.16 Dividends Per Common Share
Dividends per common share are the total amount of dividends paid out per issued share
throughout the entire year. Larger dividends will give investors a larger return on their
investments.
The Coca-Cola’s dividends per common share increased from $1.02 per share in 2012, to
$1.12 per share in 2013. PepsiCo’s dividends per share increased by $1.11, to $2.24 in 2013.
Although they did increase their dividends per share by about 10%, PepsiCo increased theirs by
over 50%. This is why I scored Coca-Cola for this section with an average 3.5.
22. 19
By increasing their company’s equity, Coca-Cola will be able to increase the amount of
dividends they give out, in turn increasing their dividends per share. If they are able to make this
change, they will hopefully have a lot closer dividend per share to their competitor PepsiCo’s.
1.17 Dividend Payout Ratio
The dividend payout ratio represents the portion of current profits that have been paid to
stockholders. A higher number is more desirable for this segment.
The Coca-Cola Company’s dividend payout ratio increased from 51% in 2012 to 57.7%
in 2013, which is a 13% increase. PepsiCo decreased their ratio by about 4.8%, falling to 51.3%
in 2013. Considering these factors, I awarded Coca-Cola with a 5.0 score for both their
increased and higher ratio than PepsiCo.
To continue the increased dividend payout ratio for Coca-Cola in 2014, they will need to
continue their profit growths so that they can pay out more money to stockholders. They can do
this by cutting expenses, increasing their product’s prices, or finding new technological ways to
produce their products in order to lay off a number of employees.
1.18 Dividend Yield Ratio
The dividend yield ratio tells us the dividend as a percentage of the current market value
of a stock. The larger the ratio, the more cash immediately returned back to investors.
The Coca-Cola Company had a 3.7% dip in their dividend yield ratio from 2012 to 2013.
On the other hand, PepsiCo had a much larger decrease in dividend yield, falling by 14% in that
same years’ span. Furthermore, in 2013 both Coca-Cola and PepsiCo had the same ratio at .027.
Considering these facts, I graded Coca-Cola with a 3.5 for this segment.
23. 20
Coca-Cola will look to improve this ratio in 2014. The board of directors should attempt
to issue more dividends to match the increased share value of the company. The increased
dividends would stimulate interest in the company’s stock, and would provide more immediate
cash returns to investors.
1.19 Investment Productivity
The investment productivity of a company is a theoretical measurement of the return on
investments to shareholders in the most recent year being reported. You can calculate this ratio
by adding the increased market price of common shares and dividends paid during the year.
Coca-Cola had a relatively low investment productivity ratio in 2013 at .170. Their
competitor PepsiCo had a 44% higher productivity ratio at .245 in that same year. For these
reasons I scored Coca-Cola with a 2.5 score.
Since PepsiCo had a significantly higher investment productivity ratio in 2013, Coca-
Cola will definitely be looking to increase their ratio in 2014. The solution to this would be to
increase the share price of the company, which would simply come with an overall more
successful year.
1.20 Projected Time to Invested Payback
This risk measurement is a theoretical estimate of the length of time that it will take for a
firm to achieve the amount invested for one share of stock. You can compute this ratio by taking
the current selling price of a stocks’ divided by the EPS plus dividends. In general, a firm wants
to have a lower or decreasing number for this payback ratio.
The Coca-Cola Company increased this payback ratio by 12.5% in 2013, which does not
look good for the company or to its’ investors. PepsiCo had a similar increase (11.6%) from
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2012 to 2013. They both ended up having very similar ratios; Coca-Cola had a ratio of 13.5
while PepsiCo had a ratio of 12.5.
I scored Coca-Cola with a 1.5 for this analysis segment since they had both a higher ratio
than their competitor and a higher increase. That increase is not a desirable change firms want to
have. As stated in previous sections of this professional summary, Coca-Cola will need to
increase their stock price to make them more appealing to investors. This will hopefully provide
the company with a better payback ratio in the upcoming year.
1.21 Price Potential
The price potential of a firm represents the possible estimation of that particular firm’s
stock price in the forthcoming fiscal period. From an investor’s perspective, the higher the price
potential, the more likely they will be interested in investing in the company in the next trading
period.
I scored Coca-Cola with a 1.0 for this analysis segment for various reasons. The first
being there was a negative 3% difference between their price potential and their actual stock
price in 2013. In addition, PepsiCo’s price potential is over double that of Coca-Cola, amounting
to $92.
For Coca-Cola to generate interest from investors to want to buy stock in the company,
they will have to increase their price potential significantly in 2014. Since their price potential is
lower than their actual stock price in 2013, not many people would want to invest in the
company since the predicted outcome would be a decrease in stock price in the following year.
For Coca-Cola to increase this price potential they will need to continue to cut costs, lower
manufacturing expenses, and continue to expand their brand line in order to draw in more
25. 22
consumers. By drawing in more consumers, the stock price will naturally increase since more
people will be buying their products.
1.22 Beta
The beta of a company is the systematic risk of a company in regards to the changing
market they are in. A number closer to one means that a company will be able to adapt to the
changing market and be able have stable company security.
The Coca Cola Company has a beta of .66, significantly closer to one than PepsiCo.
Their beta rating is at a discouraging .37, almost half of their biggest competitor. These numbers
show that the Coca-Cola Company is more likely to have better security in the changing market
than their more risky competitor PepsiCo.
Since Coca-Cola is much less of a security risk than PepsiCo, I scored them with a 4.0 for
this section of my analysis. Coca-Cola will want to continue their successful risk management.
This can be done by continuing to innovate within the company, and expanding the company by
buying subsidiary companies that sell food products just as PepsiCo has done.
Debt Management
2.23 Current Debt to Total Debt
A company’s debt strategy is very important to their success. Companies need to make
sure they have implemented a smart strategy in order to ensure they don’t have too much current
debt to pay off. You can calculate this ratio by dividing the company’s current debt by its total
debt.
26. 23
It is desirable for a company to decrease their current to total debt year after year. The
Coca-Cola Company was successful in doing this from 2012 to 2013 by decreasing their ratio by
7%, from 52.5% to 49.1%. Their competitor PepsiCo actually increased their debt ratio by 2% in
2013, which does not look good for the company. Considering these statistics, I scored Coca-
Cola with a 4.5.
Coca-Cola will look to continue their successful debt management by continuing to lower
their ratio of current debt to total debt. Their top management team will be responsible for
making sure they continue to improve their debt strategy in order to prevent the accumulation of
too much debt.
2.24 Non-Current Debt to Total Debt
This ratio is similar to the previously discussed one in paragraph 2.23. The non-current
to total debt ratio will also allow us to analyze the management team’s debt strategy. Unlike the
previous ratio though, firms want to continuously increase their non-current to total debt
percentages.
Just as Coca-Cola beat PepsiCo in the previous ratio, they continue their success when it
comes to non-current to total debt. The Coca-Cola Company was able to increase this ratio by
7% in 2013, while their competitor PepsiCo did the opposite, decreasing their ratio by 1% from
2012-2013. For these reasons I awarded Coca-Cola with a matching score of 4.5 as given in the
previous segment.
As I mentioned in the previous segment, Coca-Cola’s management team is doing a great
job at managing their debt. As long as they continue to be consistent with the way they run their
operations they will remain on the right path.
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2.25 Total Debt to Total Assets
Simply put, the total debt to total assets calculates the amount of debt a company has
relative to the assets of that company. Companies look to decrease this ratio in order to lower
their financial risk and increase wealth.
Coca-Cola received a 3.0 for this section of my professional summary because they only
increased this ratio by 2%, which is a pretty insignificant change. On the other hand, PepsiCo
decreased their ratio by only 1%, which is also pretty insignificant.
Both companies had very subtle changed in their total debt to total asset ratios, this being
the sole reason I gave Coca-Cola a score of 3.0. If Coca-Cola wants to decrease this ratio, I
would recommend they start becoming less reliant on debt to be a successful company, and more
reliable on the assets they have and the products they sell. The hopes are they can continue to
grow as a company with the innovation of new products in 2014.
2.26 Current Assets to Total Assets
A firm’s current assets to total assets ratio is a measurement of their distribution of asset
investments. You can consider cash and anything that will turn into cash in the next year as a
form of current assets. Firms will usually look to increase this ratio.
Coca-Cola received a score of 2.5 because they were not able to increase their ratio;
instead, they decreased by about 1%. PepsiCo was able to increase their ratio by an impressive
14% in 2013. Although PepsiCo’s increased ratio is respectable in itself, Coca-Cola still has a
higher overall ratio, 34.8% to PepsiCo’s 28.7%.
Coca-Cola will be looking to increase this ratio in 2014. They can do this by increasing
their currents ratios, or decreasing their non-current ratios. I recommend they get rid of any
28. 25
unnecessary manufacturing equipment or stop producing non-profitable products; this will help
to decrease their non-current assets.
2.27 Non-Current Assets to Total Assets
Non-current assets are what help companies to perform their daily operating activities. If
this ratio is decreasing, it may be a sign that there will be structural operating problems in the
future.
Like the previous segment, Coca-Cola didn’t have much of a change in ratio from 2012-
2013, decreasing by less than 1%. Their competitor PepsiCo was able to decrease their ratio by
5%, which is a positive thing. Although Coca-Cola did not decrease their ratio, their overall
2013 ratio was still 6% lower than PepsiCo. Considering these factors, I graded Coca-Cola with
a 2.5.
Although this ratio is the exact opposite of the previous one, the solution to decrease this
ratio would be to follow the same recommendations as mentioned in the previous analysis
segment.
2.28 Times Interest Earned
This ratio measures the ability of a firm to cover their cost of capital. It represents the
number of times a company’s earnings exceed its financial costs. In increasing number in this
case is desirable.
The Coca-Cola Company did not perform well from 2012 to 2013, decreasing their times
interest earned ratio by 19%. On the other hand, PepsiCo was able to increase their ratio by 6%.
Although PepsiCo did what Coca-Cola could not in that they increased their ratio, Coca-Cola’s
29. 26
ratio in 2013 was still over double the size of PepsiCo’s, amounted at 25.8 compared to 10.8.
For these reasons, I scored Coca-Cola with a 2.0.
For Coca-Cola to increase their TIE ratio they will need to increase their earnings while
decreasing their financing costs. To decrease their costs, they will need to analyze all the money
they have been borrowing and assess what they can cease to borrow for, and what projects are
important enough to continue to borrow for.
2.29 Current Cash Coverage Ratio
A company needs to generate enough cash in their daily operations in order to cover their
current debts. For example, a negative number would mean that a company does not make
enough cash in order to cover that current debt.
Coca-Cola Company remained at a positive .38 ratio from 2012 to 2013. PepsiCo was
able to increase their ratio by 8% in that year. PepsiCo also had an overall larger ratio at .54 in
2013. Considering these statistics, PepsiCo clearly has a much better CCC ratio, leading me to
score Coca-Cola with a 1.0.
The two main solutions for Coca-Cola to be able to increase their CCC ratio in 2014
would be to increase their cash, and to decrease their current debt. Like I mentioned in the
previous analysis section (2.28), Coca-Cola will need to assess what level of debt will put them
in a position to be successful for the future, and allow them to hold onto more cash, and not
waste it by paying off excess debt.
2.30 Accounts Payable Turnover
This turnover statistic assesses how quickly a company pays off its short-term
obligations, along with paying off the suppliers of its products. Being able to pay-off obligations
30. 27
in a quick and efficient manner will increase the positive relationship that company has with its
suppliers. Therefor, companies are always trying to increase this turnover ratio.
Coca-Cola failed to increase their APT ratio, and actually decreased it by 10%. PepsiCo
also decreased their ratio, falling by 4% from 2012 to 2013. This shows that both companies
were not able to improve their relationships’ with their suppliers over the year. Considering
these facts, I graded Coca-Cola with a 1.5.
Efficiency in business operations will need to be improved in order for Coca-Cola to have
a better APT ratio in 2014. To be able to accomplish this, they will need to make minor changes
in the way they pay off their obligations. Maybe a centralization of their manufacturers would
help to improve efficiency in paying those obligations.
2.31 Average Payment Period (Days)
The average payment period is the amount of time it takes to pay off current bills that
have arisen from day to day operations. Obviously, a lower amount of days would mean a
company is better at paying bills faster, which is what companies are always striving to do.
In 2013, Coca-Cola increased the amount of days it takes to pay off bills by 22, which is
a 12.6% increase from the prior year. PepsiCo also increased the amount of days it takes them
by 6.5%. Furthermore, Coca-Cola took 49 days longer than PepsiCo in 2013 to pay off these
bills, which does not look good at all considering PepsiCo is their biggest rival. After this
analysis, I scored Coca-Cola with a score of 1.0.
Coca-Cola will look to decrease their payment period in order to better relations with
their suppliers. As I mentioned in section 2.30, they should explore centralizing their
manufacturing plants throughout the world in order to make paying their bills more efficiently,
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which would also indirectly better their relations with suppliers and everyone else they have an
obligation to pay.
2.32 Total Debt to Equity
This ratio tells us the potential control creditors have over a company’s decision-making
and strategies, along with measuring the financial leverage of that company. An increase in this
ratio shows that company relies too heavily on their creditors.
Coca-Cola unfortunately increased this ratio by 6% in 2013, while PepsiCo was able to
decrease their ratio by 5%. I scored Coca-Cola with a 2.0 for this section since they could not
decrease their ratio, while their biggest competitor was able to do what Coca-Cola can only hope
to do in the following year.
Debt is an important thing for a company to have, because it helps them to grow. Too
much debt however is not a good thing, so Coca-Cola needs to figure out what debt they can take
on, what debt they should try to eliminate from their budget. As long as Coca-Cola can increase
their equity while maintaining a low level of debt, they should be in good shape to decrease their
total debt to equity ratio in 2014.
Cash Management
3.33 Working Capital
Working capital is the leftover money after a company has paid off all their liabilities.
This can be calculated by subtracting a company’s current assets by their current liabilities. A
company needs to have enough leftover assets in order to be able to pay off short-term debt.
32. 29
The Coca-Cola Company was able to successfully increase their working capital by over
39% from 2012 to 2013. This rightfully awarded Coca-Cola with a score of 4.5. The only
reason I did not give it a 5.0 is because their competitor PepsiCo was able to increase their
working capital by a whopping 167%.
For Coca-Cola to continue to increase their working capital they simply need to continue
their daily business operations. Their financial team will need continue all their successful cash
management strategies, along with finding new ways to increase their working capital even
further for the 2014 year.
3.34 Working Capital/Total Revenue
The working capital relative to total revenue is a company’s net liquid assets available to
the management team as a percentage of revenue. Companies are always triyng to increase this
ratio in order to have more liquid assets available for use.
There was a 49% increase for Coca-Cola’s working capital/total revenue ratio in 2013,
which is quite an impressive improvement. PepsiCo was also able to increase their ratio by an
astounding 167%. Coca-Cola received a score of 5.0 for this segment because they also had
almost a 16% higher ratio in 2013 compared to PepsiCo.
As long as Coca-Cola continues to lower their liabilities, it will leave the management
team with more current assets to use.
3.35 Current Ratio
A company’s current ratio measures their ability to pay short-term obligations. A ratio
that is less than one is strongly undesirable for a company to have.
33. 30
Coca-Cola’s current ratio remained at 1.1 from 2012 to 2013. PepsiCo was able to
increase their ratio from 1.1 to 1.2 in 2013. Since there was no change for Coca-Cola, and there
is a very small difference between the two companies’ 2013 ratio, I graded Coca-Cola with a 3.5.
Coca-Cola will be looking to increase their current ratio in 2014. They can do this by
decreasing the current liabilities they have like supplier payments, production costs, and
employee wages. If they can increase their current ratio, they will be on the path to success.
3.36 Quick Ratio
Also referred to as the acid test ratio, the quick ratio is similar to the current ratio except
that it is a tighter measure of liquidity. It is measured with the exclusion of inventory and several
other types of current assets from the computation.
Coca-Cola successfully increased their quick ratio by 14%, while PepsiCo increased their
quick ratio by 22%. PepsiCo also had a higher overall ratio of 1.1, compared to Coca-Colas ratio
of 0.8. Considering these facts, I graded Coca-Cola with a score of 2.5.
Being able to decrease the amount of liabilities, as mentioned in the previous segment,
will help Coca-Cola to continue to increase their quick ratio in 2014.
3.37 Cash Flow From Operating Activities to Revenue
This measurement is the relationship between a company’s revenue compared to the cash
it generates from its daily business operations. An increasing percentage would obviously be a
desirable characteristic for this particular entity in a company’s business.
The Coca-Cola Company was not able to increase this ratio in 2013, remaining at 22%.
PepsiCo was able to increase their ratio by 15%, raising their percentage from 13%-15%. Since
Coca-Cola has a higher ratio in 2013 than their competitor, I scored them with a 3.5.
34. 31
Since Coca-Cola failed to increase their CF from OA to revenue ratio in 2013, they will
definitely be looking to increase it in 2014. Ways to do this would be to increase revenue, and to
cut unnecessary costs that are taking away from their revenue. You can look to see an increase
in this ratio for Coca-Cola if they can successfully implement this plan into their business
practices.
3.38 Cash Emphasis
Cash emphasis is measured importance that the top management team places on cash. It
is the percentage of total assets that the TMT commits to cash assets.
Coca-Cola received a grade of 4.0 because of their increased cash emphasis ratio. It went
up from 9.8% to 11.6% from 2012 to 2013. PepsiCo also increased their cash emphasis by an
impressive 44%. I did not give Coca-Cola a 5.0 because their 2013 ratio was still lower than
PepsiCo’s by 4%.
There are many smart decisions the top management team will need to make in 2014 in
order to continue to increase Coca-Cola’s cash. These decisions include operating, financing,
and investing decisions. All three greatly affect the amount of cash a company will have.
Asset Management
4.39 Revenue/Total Assets
When you divide a company’s revenue by their total assets, you are calculating their asset
turnover. This measures the amount of revenue generated per every dollar. An increased ratio
will indicate increased productivity.
35. 32
Both the Coca-Cola Company and PepsiCo each decreased their ratios by 7%, and 2%
respectively. Also, PepsiCo’s ratio in 2013 was much bigger (.857) than that of Coca-Cola’s
(.520). With these numbers in mind, I scored Coca-Cola’s revenue/total asset ratio with a 2.0.
Coca-Cola will want to increase this ratio in 2014 in order to keep up with their
competition. They could do this by increasing their revenue. This is hard to do because if Coca-
Cola were to raise their prices most customers would just switch over to buying PepsiCo’s
products, so that option might not be the best. As I’ve recommended earlier in this analysis,
Coca-Cola would greatly benefit from expanding their product line to sell food as well. This
would increase the variety of consumers they serve, thus increasing their revenue exponentially.
Having a wide range of customers would not only increase this ratio, but would help to increase
others as well.
4.40 Net Income to Total Assets (ROA)
The return on assets of a company, also known as the net income to total assets, measures
how much profits are produced for every dollar of assets invested in the business. It can be seen
as a measure of asset productivity or asset utilization.
While PepsiCo was able to increase their ROA by 6% in 2013, Coca-Cola was not able to
match them or even come close. Coca-Cola ended up falling from an ROA of 10.5% in 2012 to
9.6% in 2013; because of this, I once again scored the company with a 2.0.
What Coca-Cola needs to do in order to increase their ROA ratio is find expenses that
may need to be re-financed in order to increase profits. If the top management team can study
these financial expenses and find a way to minimize or eliminate a few of them, they will be able
to increase their ROA in the following year.
36. 33
4.41 Accounts Receivable Turnover
The accounts receivable turnover indicates the number of times a year a company
receives the total balance due from customers. Companies are always attempting to increase
their turnover year after year.
I scored Coca-Cola with a 2.5 for this analysis segment because they decreased their
turnover ratio by 5% from 2012 to 2013, while PepsiCo was able to increase their turnover ratio
by 3%. Both the Coca-Company and PepsiCo had equal ratios though in 2013.
For Coca-Cola to increase their ratio in the following year, they will need to make
transportation and the manufacturing of their products as efficient as possible. This will allow
them to get orders out to stores and other clients as quickly as possible.
4.42 Average Collection Period (Days)
The collection period of a company is how long it takes them to receive money from
customers once a sale has been made. This ratio is a very important component of a company’s
cash flow strategy. A decreasing number of days is desirable, showing that a company can
receive their payments in a timely fashion.
Coca-Cola unfortunately increased the amount of days it takes them to receive payments
from customers by two days in 2013, which was a 5% increase from the previous year. PepsiCo
was able to decrease their period by only one day. Neither company changed much, and they
had an equal pay period of 38 days in 2013, so I scored Coca-Cola with a 2.5.
To be able to receive payments quicker and more efficiently, Coca-Cola should look to
have a better collection policy in 2014. They can notify customers when they are late on
37. 34
payments, or maybe give some kind of small incentive to customers who make their payments
early.
4.43 Inventory Turnover
Companies are always trying to sell their inventory as quickly as possible. A firm’s
inventory turnover is a measure of how fresh their inventory is, and how efficient management is
at moving/selling products once they have been manufactured or purchased.
Firms desire this ratio to increase over the years, but unfortunately for Coca-Cola they
did the opposite. Coca-Cola’s inventory turnover fell by 3% in 2013, while PepsiCo was able to
increase their ratio by 5% in that same year. For these reasons I scored Coca-Cola with a 2.0.
If Coca-Cola desires to see an increase in their turnover ratio in 2014, they will need to
follow a variety of strategies. They can decrease the production of certain products that have a
low demand, or they can increase the marketing efforts on any new products they have made
recently in order to increase the demand for them. If they do this, they will be providing
customers with more of what they want while also decreasing the amount of manufactured
products that are not so popular.
4.44 Average Age of Inventory (Days)
The average age of inventory is similar to inventory turnover in that it is another way of
assessing inventory management. Companies look to continuously sell their products so they
can continue to manufacture and replace their inventory quickly and efficiently.
Coca-Cola increased their age of inventory by two days, or 3% in 2013, while PepsiCo
was able to decrease their age of inventory by 5%, or two days. Coca-Cola’s 2013 age of
38. 35
inventory was also 25 days more than that of PepsiCo’s. For this reason, I graded Coca-Cola
once again with a 2.0.
Coca-Cola will need to follow the recommendations mentioned in the previous analysis
segment (4.43) in order to decrease their age of inventory in 2014. Being able to quickly and
efficiently manufacture and sell products is essential for Coca-Cola or any company’s success.
Organizational Citizenship
5.29 Employees
What drives a company to be successful? One of the most important assets to a
company’s success are their employees. Employees are what drive companies. They are the
brains, the innovators, the workers, the directors, and the managers. Each employee needs to do
his or her job to the level in which helps the company achieve whatever goal they set out to
achieve.
I awarded Coca-Cola Company’s employee rating with a 5.0. I gave them this score
because Coca-Cola is always trying to better themselves and are always encouraging open
communication between employees from all around the world. They engages in frequent
dialogue with associates; this open dialogue allows for better communication through promoting
business strategies, sharing ideas and opportunities, increasing awareness, and soliciting
employee opinions.
Looking at the 2010 results from Coca-Cola’s global “Employee Insights Survey,” we
can conclude that their employee’s job satisfaction is exceptionally high. There was an 84%
associate engagement score, which was a 2 point increase from 2008. Additionally, Coca-Cola
39. 36
has compensation packages that are among the world’s best. They also offer developmental
opportunities for employees. They have created a “Coca-Cola University.” This university
offers learning programs for high performers.
Unless they drastically lay off employees or make severe pay cuts, I believe employee
satisfaction throughout Coca-Cola Company will remain very high.
5.30 Customers
Customer satisfaction is one of the key components of any company’s success. If your
customers are not happy, you are most likely doing something wrong. You always want your
customers to be satisfied so they can spread good word-of-mouth to others and allow your
customer base to continue to grow.
Coca-Cola’s customer base reaches all around the world. It is quite rare to find an office
or building without a Coca-Cola vending machine located somewhere inside it. Customers are
clearly extremely satisfied, with daily servings of Coke being served an estimated 1.9 billion
globally.
To ensure customer satisfaction, Coca-Cola has set up a FAQ page on their website
where customers can get answers to their general questions. If they doesn’t suffice, you can also
contact the company in numerous ways including email, calling their customer service hotline, or
through the mail. Coca-Cola is also always open to new ideas or innovations. Customers are
able to send their ideas to the company through an easy to fill out submission form. To ensure
the ongoing satisfaction of these customers, Coca-Cola has employed an independent external
organization called Gfk. They provides them with overall performance measurements from all
their different markets.
40. 37
When considering all the facets Coca-Cola has to offer to their customer base, and
considering the clear financial success they have had throughout all the years, I have graded
them with a 5.0 score. As long as Coca-Cola Company continues operations as they do today, I
don’t see why their customer base would feel anything but complete satisfaction.
5.31 Competitors
A lot of the times, a company’s success relies heavily on its competition’s success. If a
company wants to be at the top of the chain, you have to beat the competition, and stay one step
ahead at all times.
The Coca-Cola Company really is at the top of their industry. As stated earlier in the
introduction, the Coca-Cola Company is in fact the world’s largest beverage company in the
entire world. This claim does not come without great success and innovation. Coca-Cola offers
over 500 still and sparkling brands throughout the world. They are not only the leading soft
drink company in the world, they’re also are the number one producer and distributor of sparking
beverages, ready-to-drink coffees, juices, and juice drinks. What makes Coca-Cola so successful
compared to competitors is their innovation. Their company has grown so much throughout the
years. Coca-Cola has expanded both their product line and brand line. The large variety in their
products and brand lines is what makes them stand out the most compared to its competitors.
The new generation of calorie aware customers is growing rapidly. Coca-Cola has been on top
of their game in creating new low-calorie and zero calorie drinks to keep up with this fast,
emerging trend of the beverage industry.
Another reason the Coca-Cola Company is so successful compared to other companies in
their industry is their customer equity. They have gained and held on to billions of customers,
and are still growing their customer base to date. Considering all that Coca-Cola has
41. 38
accomplished compared to its competitors, and the fact that they have remained at the top of the
beverage industry since the beginning years of its creation, I have scored them with a 5.0.
5.32 Directors
Successful companies usually come with great directors. Directors have the prolific role
of overseeing all organizational operations and making sure that shareholders are satisfied.
There are a total of 15 board members for the Coca-Cola Company. The average age is
relatively high at 67 years old. This high age though is not something that goes to waste. This
just means that among the board there is a broad range of experts, and members who have years
of exceptional experience. Every board member has duality in other companies, so that
exceptional experience comes from a wide variety of different businesses and organizations.
This wide variety is a great asset for the company. By having so many board members who also
hold director positions or other high positions (CEO, CFO, COO, etc.) in other companies, it
solicits a large amount of diverse experience and ideas to be present.
The few not so great characteristics of the board would have to be its lack of
demographic diversity. Coca-Cola’s board of directors consists primarily of older men (11 out
of 15), with only 4 of them being women. Because of these characteristics, I will give a score of
4.0. The Coca-Cola Company and its board members have had clear success over the decades;
because of this success, I wouldn’t recommend changing anything. If however there is member
who leaves the board, I would recommend replacing that member with someone younger, with a
different ethnicity, or another women. The younger member would be able to bring fresh new
insight into the board, while a women or someone with a different ethnicity would help to
diversify the board even further.
42. 39
5.33 Government
Dealing with the government can sometimes be quite a hassle. The Coca-Cola Company
needs to make sure they consistently abide by any laws and regulations that the government has
put into place regarding Coca-Cola’s products and employees.
The government has recently cracked down on many food and beverage companies,
making sure they follow all regulations, and are clearly explaining what goes into each product
they provide. There have been numerous beverage companies that have gotten in trouble
because they didn’t say all the ingredients they used in producing their product. This goes
against government laws and regulations because every company needs to be honest to their
customers in what ingredients they use. Every customer should be able to find out exactly what
goes into the product they are purchasing for simple reasons like general knowledge, or more
important reasons like one’s concern for personal health.
Another main concern when dealing with such a global company such as the Coca-Cola
Company is their oversees employees, suppliers, distributors and factory workers in regards to
their workplace and human rights. One initiative Coca-Cola has taken in order to ensure all
government regulations was in 2011 when they endorsed the “UN Guiding Principles on
Business and Human Rights.” These guiding principles are what the Coca-Cola Company has
used in recent years to ensure the safety of their employees, suppliers, distributors and
manufacturers, as well as upholding their workplace and human rights. For all these reasons, I
have awarded a score of 4.5 for the focus of government.
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5.34 Environnent
The new trend in today’s business world is the emerging dedication of organizations to
try and “go green,” and become more environmentally friendly. The Coca-Cola Company has
been making a valiant effort to try and move closer to being as green as possible.
Being a producer and distributor of beverages, Coca-Cola cannot avoid making plastic
and glass bottles which are obviously not too good for the environment. People litter and throw
their empty bottles on the ground all the time. This is not environmentally friendly for humans,
nor is it safe for the animals who live in our eco-system. To try and avoid damaging this world
as much as possible, Coca-Cola has taken numerous steps towards building a more eco-friendly
bottle. In 2010 the company made an innovative breakthrough in creating the first ever fully
recyclable PET bottle, partially made from plants. These bottles are still packaged and look the
same, but are now made with some plant materials instead of only using petroleum and other
fossil fuels.
Pollution is one of the biggest threats to the world’s freshwater, and nobody knows more
about this than Belgium. In an effort to conserve more water in the freshwater reserve located
near the Coca-Cola Enterprises (CCE) production plant in the Antwerp province, the Coca-Cola
Foundation has partnered with Belgian NGO Natuurpunt in creating a project aimed at
improving the water management system of the Stappersven nature reserve. Estimates of
99,000,000 liters of water are replenished through this system per year, which is an astounding
number. Coca-Cola sells about 915 million liters of beverages per year, which consists of 90%
water, which is why this project is so important to the company’s sustainability strategy.
Although Coca-Cola has been making a strong effort to do its part in the world’s new
environmental green movement, it can’t escape the fact that they still make millions of plastic
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bottles all around the world year after year. For that reason, I will score this environmental
analysis with a 3.5.
5.35 Community
Having a good relationship with the community is an essential factor in both a company’s
image and success.
One of the most complex communities to be in good terms with is the gay, lesbian, bi-
sexual, and transgender (LGBT) community. In one of numerous examples in the Coca-Cola
Company attempt to better relations with the LGBT community, they sent 100 volunteers to be
in Atlanta’s Pride Parade. They have also partnered with numerous other Pride celebrations
throughout America, including New York, Florida, and Los Angeles. I believe this is one of
many great efforts on Coca-Cola’s part in trying to better their relationship with the LGPA.
The 320 Community Water Partnerships in 86 countries that they have developed is
another example of Coca-Cola’s attempt at creating positive community relations. They were
even able to construct 9 community water tap stands in Angola, providing 41,200 people with
access to an enhanced water supply. Additionally, Coca-Cola has donated over $1,000,000 to
the “America is Your Park” campaign. This campaign helps repair damaged activity spaces and
build new parks for needy communities. Keeping all these factors in mind, I award Coca-Cola
with a 4.5 score.
5.35 Stockholders
Stockholder’s value plays a vital role to a company’s financial success. In order to keep
up or increase this value, two things must take place. First, a company’s stock price must
increase, or second, dividends must be issued.
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Coca-Cola’s stockholder’s value has been erratic for the past 13 years, which is why I
will be awarding it with a score of 2.5. From 2012 to 2013, the Coca-Cola Company’s stock
price increased by over 5$ ($36.25 to $41.31) which is good, although their stock price has been
as high as 69.97 back in 2011.
One of the main reasons I did not score their stockholder value higher is because they had
a falling out on annual dividends per share. Dividends are the money a company can pay out to
their shareholders usually as a distribution of profit. From 2001 to 2011, their dividends per
share increased incrementally from $.72 to $1.88. Then there was a drastic decrease in 2012,
falling to $1.02. Thankfully, they have increased that number to $1.12 in 2013. Hopefully, this
trend continues and their annual dividends per share will keep increasing each year after.
5.37 Communication
Communicating with the public is essential for organizations. Being able to openly
communicate with customers and not keeping information private will gain company customer
equity, and increase their market.
The Coca-Cola Company doesn’t exactly scream “healthy” when it comes to their
products. They don’t try and market themselves to be a healthy beverage company or claim to
be something they are not, which is good. They also keep everything they do open to the public.
They are always advertising to the public when a new product comes out or when the company is
taking part in a community event. Coca-Cola has really never gotten into trouble by holding
back what they use to produce their assortment of beverages. They are straightforward and
include an ingredients list on every product they produce, as required by law.
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I am going to score Coca-Cola’s communication with the public a 5.0 because there are
no reasons why I should do otherwise. As long as the Coca-Cola Company continues to keep
their operations public, they should be in good shape for the future.
5.38 Public Persona
One of the most important factors that play into a company’s success is their persona, or
brand image. Companies are constantly trying to uphold a good image in the public’s eye in
order to keep customers coming and wanting more.
I would give Coca-Cola’s overall public persona a score of 2.5. It’s hard to judge Coca-
Cola’s persona because of the industry it is in. They are in the beverage industry, so one of the
main concerns about their products is their nutritional value. To be honest, they don’t have much
of a nutritional value in their beverages. These beverages are loaded with sugar and other
ingredients that are far from healthy for you. People who are health conscious are sure to say
negative things about the Coca-Cola Company, even claiming that they play a role in America’s
obesity epidemic. With that being said, Coca-Cola’s image other than their products being un-
healthy is a pretty good one. In an attempt to quiet down the negative critiques regarding their
un-healthy products, Coca-Cola is making a large effort to produce lower calorie or zero calorie
beverages.
In order to keep their image as positive as possible, Coca-Cola is big in helping
communities and the public. They don’t keep anything private when it comes to their products
or operational activities, which looks good. In addition, the Coca-Cola Company and the Coca-
Cola Foundation continuously donate money to charities and community projects. This helps to
show that they want to be an active and helping hand in the community, which assists in creating
a more respectable image.
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Coca-Cola’s community relations are not what give them a controversial image, it’s the
products they sell. They are obviously an extremely successful company so they really don’t
need to worry about their image too much, but if they want to try and better that image they
should continue to create new products with all-natural ingredients, using as little artificial
ingredients as possible. If they can successfully create new and innovative “healthier” products,
I am sure you’ll start to see the negative criticisms of Coca-Cola’s products to start quieting
down.
5.39 Vendor Relations http://www.coca-colacompany.com/our-company/suppliers/suppliers
Having a good relationship with your vendors and suppliers is a vital component to a
company’s success. Since the Coca-Cola Company is so global, they have vendors and suppliers
all throughout the world.
To ensure a good relationship with company suppliers and vendors, Coca-Cola has
created the “Supplier’s Guiding Principles” (SGP’s) for them to abide by. These principles were
created to make sure all suppliers follow responsible workplace policies, along with abiding by
applicable, local labor laws. These policies communicate the values and expectations the Coca-
Cola Company has for its bottling partners and business partners.
All of Coca-Cola’s suppliers are trustworthy and hard working. They ensure the success
of the company by providing them with the highest of quality products. These vendors operate
to the highest standards of business conduct and labor rights. For all these reasons, I am scoring
Coca-Cola’s vendor relations with a 5.0.
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Strategic Positioning
6.40 Vision and Mission
The Vision and Mission statement of a company are key anchors in describing what a
company wants to be, and what a company does. They express the values of the company, and
explain what exactly the purpose of the company is. The goals of the mission statement should
be clear and realistic, and anyone wishing to find a company’s vision and mission statement
should not have an issue doing so.
The Coca-Cola company receives a 5.0 score for their vision and mission statement.
Their vision and mission is clearly present right on the company’s website. Their mission was
made to “declare our purpose as a company and serves as the standard against which we weigh
our actions and decisions.” Their three main missions are “to refresh the world, to inspire
moments of optimism and happiness, and to create value and make a difference.” Underneath
their mission is their vision statement. It reads “Our vision serves as the framework for our
Roadmap and guides every aspect of our business…”
As long as the Coca-Cola Company, their directors, and managers continue to implement
this inspiring vision and mission statement through their daily operations, they will continue to
be on top of the beverage industry to countless years to come.
6.41 Competitive Advantage
They competitive advantage of a company measures how well they stack up to other
organizations in the same industry. There are several ways of measuring the competitive
advantage of a company, one of them being their market share percentage of their specific
industry.
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As stated earlier in this analysis, Coca-Cola is the number one beverage company in the
world. They produce and sell more beverages than any other company in the industry. Coca-
Cola controls 42% of the carbonated drink market, compared with their biggest competitor Pepsi
who only controls 30%. Now although this is a big difference, one advantage PepsiCo has to
offer that Coca-Cola doesn’t is that they produce food as well. Coca-Cola may lead the industry
in carbonated drink sales, but PepsiCo has sales where Coca-Cola doesn’t in other food
industries.
Yes, Coca-Cola leads the beverage industry better than any other leader of an industry,
but they have some tough competition right underneath them in PepsiCo and other beverage/food
producers. For these reasons, I will award them with a 4.0 for their competitive advantage. I
believe if Coca-Cola really wants to run away from the competition, they should start looking
into producing food items as well to diversify their market and extend their brand.
6.42 Environment: External
The environment that surrounds a company influences their operating activities, choices,
as well determines how they must prepare for any sudden changes in the business industry. A
company must adapt to their environment in order to keep up with any competing companies in
their industry.
I score the Coca-Cola Company a 5.0 for this segment of the analysis. I believe Coca-
Cola has done a great job in recent years with regards to adapting to their surrounding external
environment. The newest trend in the beverage industry is creating new, healthier alternatives to
the classic sodas or juices. Coca-Cola went ahead and started creating low-calorie and zero
calorie soft drinks to sell. Not only that, they also created a new soda called “Coca-Cola Life,”
which is made with stevia leaf extract, along with being sweetened by real cane sugar.
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Another way Coca-Cola has been able to keep up with the changing external environment
is by trying to go green, and becoming more eco-friendly. They have made various changes in
their company operations to make this green movement. These changes in operation include the
production of their product packaging. They created new bottles in order to use less plastic, and
have changed the way their cans are made so they can save a significant amount of aluminum
each year. Since starting their new can production, they have saved an estimated 16,500 tons of
aluminum per year.
6.43 Innovation
Being an innovative company is vital to the success of their business. A company must
be innovative in order to keep up with new inventions, trends, or any competing companies that
are coming out with new innovative products.
The Coca-Cola Company has been quite innovative throughout its career; after all, it was
the first company to ever mass-produce carbonated sodas. Their innovation is shown through the
numerous products they produce each day. They have expanded their brand line tremendously
be not only selling sodas, but also juices, juice drinks, and ready-to-drink coffees. As stated
earlier, they also have been innovative with the way they produce their packaging, trying to
become as eco-friendly as possible.
I will score Coca-Cola’s innovation with a 4.5. I did not give them a 5 because I do think
there is always room to improve when it comes to innovation. Technology is constantly
changing and so is the consumer market. I believe Coca-Cola can improve their innovation by
expanding their brand to start producing food products. Their rival, PepsiCo already produces
multiple types of food products. So in order to keep up with their competition, maybe expanding
their production further than beverages would be a great path for them to follow.
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6.44 Plans and Progress
The plans and progress of a company show how well that particular company has done
over time, whether they have grown or improved, and whether they have a bright future ahead of
them. Most successful companies are always planning ahead, and trying to get one step ahead of
their competitors.
The Coca-Cola Company rightfully earns a 4.5 in this section of my analysis. They lead
their industry by far in the production and sales of non-alcoholic beverages, and, have certainly
been one of the best companies to invest over the past two centuries. On day one they started at
a stock price of about $1.40, now they have increased that price to over $44.00. This increase
shows their gradual yet impressive progress they have had over the years.
With regards to the future, Coca-Cola is definitely on the right path. The company plans
on doubling their systems revenue to over 200 billion dollars by 2020. CEO Muhtar Kent says
he plans on cutting costs by $1 billion by the time 2016 rolls around. He wants to reduce supply
and data-management expenses as well as overhaul marketing programs to reduce costs even
further. The one thing I would recommend Coca-Cola does in the future (as stated earlier in the
innovation analysis section) is expand their brand to produce food products. This would allow
them to expand their market reach even further than it already does.
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Summary
Profit, Equity, and Share Value Management Grade: 2.66
This grade represents how well the Coca-Cola Company was able to handle their
transition from 2012 to 2013 with regards to their profit, equity, and share value management.
These segments are able to show whether or not a company has a competitive advantage, and
how well they have grown over that period of time.
Coca-Cola’s average grade for this section was a 2.57. There were great in some
categories, and tremendously lacked in others. This is why their overall grade for this portion of
the summary was not very high.
One of the most defining characteristics for a company is their stock price. As noted
earlier in this professional summary, Coca-Cola’s stock price increased by only 5$, while their
biggest competitor PepsiCo’s stock price rose by over 14$. Also, you must take into the account
the much larger stock price that PepsiCo has over Coca-Cola ($82.94 to $41.31). This does not
look good at all for Coca-Cola since PepsiCo is their biggest competitor.
Coca-Cola will need to improve their profits, and manage their equity a lot better to see
an improvement in next year’s performance. This will in turn naturally increase the share value
of the company, and make investors a lot more interested in the company.
Debt Management Grade: 2.45
A company must be efficient at managing their debt in order to be successful. A
company does not want to have too little or too much debt; they want to have just the right
amount that will serve their financial requirements.
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Coca-Cola’s overall grade of a 2.45 shows they did not do such a good job at managing
their debt from 2012 to 2013. This leaves the company with much room for improvement in the
upcoming years.
If the Coca-Cola Company will want to see an increase in debt management, they will
need to decrease their debt in order to have more money to spend on other operating activities.
As I mentioned in section 2.29 of this professional summary, Coca-Cola’s current cash coverage
ratio was quite low at .38, and did not increase at all from 2012 to 2013. Coca-Cola’s top
management team needs find a way to deal with their debt more efficiently in order to be able to
use their cash more wisely, and not have too waste it on paying off current and non-current debt.
Cash Management Grade: 3.83
Being able to manage their cash is essential for the continued growth and success of
Coca-Cola. Cash services the needs of an organization, but too much of it can lead to lost
opportunities, meaning that that extra cash could have been used to work towards gaining more
earnings.
This was Coca-Cola’s highest overall graded segment in the quantitative section of my
professional summary, with a score of 3.83. Although they were able to manage their cash fairly
well in recent years, there is still plenty of room for them to improve.
For Coca-Cola to continue to improve in the future, they will need to stop holding onto so
much cash and use it more towards gaining extra earnings throughout the year. This goes along
with debt management, in that Coca-Cola held onto a lot of extra cash recently in order to pay
off all their current and non-current debt. By reducing the debt they owe, Coca-Cola will be able
to better use their cash to increase profits.
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Asset Management Grade: 2.17
Coca-Cola’s asset management determines how well they handle all of their assets (not
including cash). The utilization of non-current productive assets is vital, and property, facilities
and equipment should always be managed at an optimum level.
The Coca-Cola Company received their lowest overall grade in this quantitative section,
having a score of 2.17.
Coca-Cola had almost double the amount of long-term assets than current assets, which
shows us solvency is an apparent problem throughout the company. Their top management team
will need to re-think their asset management plan and take on more current assets in order to
improve their asset management ratios in 2014.
Organizational Citizenship Grade: 4.23
The organizational citizenship of Coca-Cola shows you the relationships they have along
with their corporate behaviors.
Coca-Cola had a high overall score of 4.23 for their citizenship segment. This grade
shows they had a great relationship with vendors, customer, their employees, environment,
community, and the government.
Coca-Cola does a great job in making sure their customers, the government, and their
customers are satisfied with the way they go about their daily operations and selling of products.
Although they give plenty of time and effort into creating community relations, like creating
water taps in Angola, or donating money to the “America is your park campaign,” they can still
do even more to create better relations with the communities around them. They can easily
donate more money to a variety of charities in order to give themselves a more generous image.
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Strategic Positioning Grade: 4.60
The strategic positioning of Coca-Cola will tell us their core company values and
characteristics, as well as how well they are planning for the future.
Coca-Cola’s grade for this segment was significantly high at 4.60. This score proves that
the company has a great vision and mission, and shows us that they are innovative for the present
and for the future. Coca-Cola has been successfully attempting to adapt to the new industry
trend of selling more healthy products. They have come out with numerous new beverages that
are made with more natural ingredients, and have created healthier products than previous ones.
This shows they are trying to meet all the demands of their vast amount of customers.
One suggestion that I have touched on numerous times in this semester project is for
them to create new food products, or buy smaller companies to sell the food products they create.
This would further increase the variety of customers, and help them to improve their competitive
advantage.
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Overall Grade: 3.14
After much research and assessment, the Coca-Cola Company received an overall grade
of 3.14. This grade is not what you would want to see coming from such a big company like
Coca-Cola. The grade was impartially earned through all the ratios and statistical findings of the
corporation.
After the countless hours of research and analysis’s I performed for the company, I
believe that the Coca-Cola Company would not be the most sound investment at this present
time. I actually believe that its biggest competitor, PepsiCo, would be a better choice of
companies to invest in at this time. PepsiCo is on the rise, while Coca-Cola is starting to fall
behind. Evidence for this claim can be easily found by simply looking at the major difference in
stock price, along with the stock price potential for 2014. There is no doubting that Coca-Cola is
still the leading producer and distributor of beverages in the world, but they need to be a little
more innovative to be able to reach the high competitive advantage they once held in the past.
My biggest recommendation for the company like I have mentioned numerous times in
previous segments would be for Coca-Cola to enter a new industry, particularly the food
industry. Although they sell an exuberant amount of sodas, juices, and ready to drink coffees,
they need to find new ways to keep up with competition in order to stay in the race for top
companies in their industry. Being able to offer food products along with the vast amount of
beverage products they sell would be a great start for Coca-Cola, its directors, and its
shareholders to regain the throne as the greatest beverage company in the world.
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