Brad Schwer

The Coca-Cola Company

(KO)

An Overview of Swot Analysis on

Coca-Cola Company• Prepared By:• Kazi Mashfiq Uddin Ahmed• ID: 100306003• Department of Business Administration• Green University Of Bangladesh

Objective Of The Assignment• This Assignment has been prepared with a specific purpose in mind. It outlines the

history and current scenario of the Coca-Cola Company globally and locally. The first part of the study takes us through the present state of affairs of the beverage industry and Coca-Cola Company globally.

• The report contains a brief introduction of Coca Cola Company and Coca-Cola India and a detailed view of the tasks, which have been undertaken to analyze the market of Coca-Cola i.e. we have performed Competitive, PESTLE and SWOT analysis of Coca-Cola Company and PESTLE and SWOT analysis of Coca-Cola India in order to identify areas of potential growth for Coca-Cola. We have also given a brief description of Trends and Forces that are affecting Coca-Cola Company globally.

• The main objective of this project report is to analyze and study in efficient way the current position of Coca- Cola Company. The study also aims to perform Market Analysis of Coca-Cola Company & find out different factors effecting the growth of Coca-Cola. Another objective of the study was to perform Competitive analysis between Coca-Cola and its competitors. Apart from these objectives this study is also conducted to understand the Customer preferences towards various Coca-Cola products.

INTRODUCTION TO COCA-COLA

Coca-Cola, the product that has given the world its best-known taste was born in Atlanta, Georgia, on May 8, 1886. Coca-Cola Company is the world’s leading manufacturer, marketer and distributor of non-alcoholic beverage concentrates and syrups, used to produce nearly 400 beverage brands. It sells beverage concentrates and syrups to bottling and canning operators, distributors, fountain retailers and fountain wholesalers. The Company’s beverage products comprises of bottled and canned soft drinks as well as concentrates, syrups and not-ready-to-drink powder products. In addition to this, it also produces and markets sports drinks, tea and coffee. The Coca- Cola Company began building its global network in the 1920s. Now operating in more than 200 countries and producing nearly 400 brands, the Coca-Cola system has successfully applied a simple formula on a global scale: “Provide a moment of refreshment for a small amount of money- a billion times a day.”

The Coca-Cola Company and its network of bottlers comprise the most sophisticated and pervasive production and distribution system in the world. More than anything, that system is dedicated to people working long and hard to sell the products manufactured by the Company. This unique worldwide system has made The Coca-Cola Company the world’s premier soft-drink enterprise. From Boston to Beijing, from Montreal to Moscow, Coca-Cola, more than any other consumer product, has brought pleasure to thirsty consumers around the globe. For more than 115 years, Coca-Cola has created a special moment of pleasure for hundreds of millions of people every day.

The Company aims at increasing shareowner value over time. It accomplishes this by working with its business partners to deliver satisfaction and value to consumers through a worldwide system of superior brands and services, thus increasing brand equity on a global basis. They aim at managing their business well with people who are strongly committed to the Company values and culture and providing an appropriately controlled environment, to meet business goals and objectives. The associates of this Company jointly take responsibility to ensure compliance with the framework of policies and protect the Company’s assets and resources whilst limiting business risks.

Company’s Short Profile

• Sector: Consumer StaplesIndustry: Soft Drinks

• Fiscal year ends 12/31• Non-alcoholic • Carbonated and non-carbonated beverages• Headquarters in Atlanta, GA• Focus is on the syrup for beverages

– Sold to bottlers, distributors, and fountain retailers

Established: 1886 Ranking: We own 4 of the world's top 5 nonalcoholic sparkling beverage brands Associates: 90,500 worldwide Operational Reach: 200+ countries Consumer Servings (per day): 1.5 billion Beverage Variety: more than 2,800 products

Coca-Cola

Source: Edward Jones

Sales and EPS GrowthDEC DEC DEC DEC DEC DEC2011 2010 2009 2008 2007 2006

Revenue (in billions)

31.0 31.9 28.9 24.0 23.1 22.0

% Change -3.0% 10.7% 19.8% 4.3% 5.2%Baseline EPS

3.05 3.15 2.70 2.37 2.18 2.07

% Change -3.2% 16.7% 13.9% 8.7% 5.3%

• 5-year compound growth rate in sales: 7.0%• 5-year compound growth rate in EPS: 8.0%

MISSION:• Our Roadmap starts with our mission, which is enduring. It declares

our purpose as a company and serves as the standard against which

we weigh our actions and decisions.

• To refresh the world: In body, mind, and spirit.

• To inspire moments of optimism and happiness:

Through our brands and our actions.

• To create value and make a difference: Everywhere we

engage.

VISION:

• Our vision serves as the framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth.

• People: Be a great place to work where people are inspired to be the best they can be.

• Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs.

• Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value.

• Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities.

• Profit: Maximize long-term return to shareowners while being mindful of our overall responsibilities.

• Productivity: Be a highly effective, lean and fast-moving organization.

Bringing Vision to Life• Our vision to become truly sustainable and achieve long-term growth is changing the

way we think and operate.

• You’ll see evidence of our progress every day as we work closely with our bottling partners in achieving our goals:

• We will be in the top three for total return to shareowners among a set of comparable global companies, while ensuring the long-term health of our system.

• We will be the employer of choice, where people create extraordinary results every day, in every country where we operate.

• We will double the value of our most recognized brand, Coca-Cola®, and grow the rest of our portfolio so it is comparable in size.

We will be the world's most respected, preferred and trusted global partner, as measured by superior satisfaction scores and innovations that ignite the categories in which we choose to compete.

We will be the recognized global leader in corporate social responsibility. It’s in our very nature to innovate, create and excel. The more we grow, the greater the opportunity for you to grow with us.

VALUES• Guided by shared Values that we will live

by as a company and as individuals:

• Leadership: “The courage to shape a better future”

• Passion: “Committed in heart and mind” • Integrity: “Be real”• Accountability: “If it is to be, it's up to me”• Collaboration: “Leverage collective genius”• Innovation: “Seek, imagine, create, delight”• Quality: “What we do, we do well”

THE GOALS ARE SIMPLE::• We Will Reinvigorate Growth Of Our Company ,

And We Will Inspire Our People

• BE THE BRAND: Inspire creativity, passion, optimism and fun.

SWOT Analysis

Fig 2.1 SWOT ANALYSIS OF COCA-COLA

STRENGTHES:• WORLD’S LEADING BRAND

• Coca-Cola has strong brand recognition across the globe. The company has a leading brand value and a strong brand portfolio. Business-Week and Inter-brand, a branding consultancy, recognize. Coca-Cola as one of the leading brands in their top 100 global brands ranking in 2006.

• The Business Week-Inter-brand valued Coca-Cola at $67,000 million in 2006. Coca-Cola ranks well ahead of its close competitor Pepsi which has a ranking of 22 having a brand value of $12,690 million Furthermore; Coca-Cola owns a large portfolio of product brands. The company owns four of the top five soft drink brands in the world: Coca-Cola, Diet Coke, Sprite and Fanta.

• Strong brands allow the company to introduce brand extensions such as Vanilla Coke, Cherry Coke and Coke with Lemon. Over the years, the company has made large investments in brand promotions. Consequently, Coca-cola is one of the best recognized global brands. The company’s strong brand value facilitates customer recall and allows Coca-Cola to penetrate new markets and consolidate existing ones.

LARGE SCALE OF OPERATIONS:

With revenues in excess of $24 billion Coca-Cola has a large scale of operation. Coca-Cola is the largest manufacturer, distributor and marketer of non-alcoholic beverage concentrates and syrups in the world. Coco-Cola is selling trademarked beverage products since the year 1886 in the US. The company currently sells its products in more than 200 countries. Of the approximately 52 billion beverage servings of all types consumed worldwide every day, beverages bearing trademarks owned by or licensed to Coca-Cola account for more than 1.4 billion. The company’s operations are supported by a strong infrastructure across the world. Coca-Cola owns and operates 32 principal beverage concentrates and/or syrup manufacturing plants located throughout the world. In addition, it owns or has interest in 37 operations with 95 principal beverage bottling and canning plants located outside the US. The company also owns bottled water production and still beverage facilities as well as a facility that manufactures juice concentrates. The company’s large scale of operation allows it to feed upcoming markets with relative ease and enhances its revenue generation capacity.

ROBUST REVENUE GROWTH IN 3 SEGMENTS:

Coca-Cola’s revenues recorded a double digit growth, in three operating segments. These three segments are Latin America, ‘East, South Asia, and Pacific Rim’ and Bottling investments. Revenues from Latin America grew by 20.4% during fiscal 2006, over 2005. During the same period, revenues from ‘East, South Asia, and Pacific Rim’ grew by 10.6% while revenues from the bottling investments segment by 19.9%.

Together, the three segments of “Latin America”, “East, South Asia” and “Pacific Rim” bottling investments, accounted for 34.8% of total revenues during fiscal 2006. Robust revenues growth rates in these segments contributed to top-line growth for Coca-Cola during 2006.

WEAKNESS:

• NEGATIVE PUBLICITY:

• The Coca-Cola Company has been involved in a number of controversies and lawsuits related to its relationship with human rights violations and other perceived unethical practices. There have been continuing criticisms regarding the Coca-Cola Company's relation to the Middle East and U.S. foreign policy. The company received negative publicity in India during September 2006.The company was accused by the Centre for Science and Environment (CSE) of selling products containing pesticide residues. Coca-Cola products sold in and around the Indian national capital region contained a hazardous pesticide residue.

• On 10 December 2008, the US Food and Drug Administration (FDA) wrote to Mr. Muhtar Kent, President and Chief Executive Officer, to warn him that the FDA had concluded that Coca-Cola's product Diet Coke Plus 20 FL OZ was is in violation of the Federal Food, Drug, and Cosmetic Act.

• In January 2009, the US consumer group the Centre for Science in the Public Interest filed a class-action lawsuit against Coca-Cola. The lawsuit was in regards to claims made, along with the company's flavours, of Vitamin Water. Claims say that the 33 grams of sugar are more harmful than the vitamins and other additives are helpful.

Value Line ProjectionsFiscal Year Mar 31 Jun 30 Sep 30 Dec 31 Full Year

EPS 2010 0.68 0.99 0.93 0.80 3.40

Fiscal Year Mar 31 Jun 30 Sep 30 Dec 31 Full Year

EPS 2010 0.74 1.05 0.91 0.73 3.43

11.5% Yr to Yr Gain

12% Yr to Yr Gain

Baseline Projections

Value Line ProjectionsFiscal Year Mar 31 Jun 30 Sep 30 Dec 31 Full Year

Revenue (in billions)

7.6 8.9 8.9 7.4 32.8

Fiscal Year Mar 31 Jun 30 Sep 30 Dec 31 Full Year

Revenue (in billions)

7.9 9.0 8.6 7.7 33.0

Baseline Projections

7% Yr to Yr Gain

7% Yr to Yr Gain

P/E ValuationCompany Ticker EPS

Growth (5 yr)

Rev Growth (5 yr)

Beta Forward P/E

Dividend

ROE

Coca-Cola KO 8% 9% .71 16.0 3.2% 30%

PepsiCo PEP 11% 9% .68 15.9 2.7% 41%

Dr. Pepper Snapple

DPS 10% 4% .89 14.5 1.8% 17%

National Beverage Corp.

FIZZ 6% 4% .80 14.6 None 21%

Average Forward P/E for S&P 500: 14.5

P/E Valuation

• 5-year average P/E: 18• Forward P/E: 16• Averaged P/E multiple: 17x• Estimated projection: 17*$3.43

$58.31 per share

DCF Input Data    Projection Period

2009 2010 2011 2012 2013 2014

Revenue$30,990.

0$33,469.

2$36,146.

7$39,038.

5$41,771.

2$44,695.

1Growth -3.0% 8.0% 8.0% 8.0% 7.0% 7.0%

EBITDA $9,467.0$10,208.

1$10,482.

5$11,711.

5$12,531.

3$13,408.

5% Margin 30.5% 30.5% 29.0% 30.0% 30.0% 30.0%Growth -2.1% 7.8% 2.7% 11.7% 7.0% 7.0%

Dep & Am $1,005.0 $1,085.4 $1,172.2 $1,266.0 $1,354.6 $1,449.5

EBIT $8,462.0$9,122.7$9,310.3$10,445.

5$11,176.

7$11,959.

1% Margin 27.3% 27.3% 25.8% 26.8% 26.8% 26.8%

Taxes $1,534.0 $1,656.7 $1,789.3 $1,932.4 $2,067.7 $2,212.4EBIAT $6,928.0$7,466.0$7,521.1$8,513.1$9,109.1$9,746.7Equity risk premium 8%

P/EBITDA multiple 13.0x

Valuation

• DCF intrinsic value: $59.31• P/E valuation: $58.31• Valuation range

$58.31-$59.31• Current stock price

$54.95 (Undervalued)

Pros Cons•Solid payout ratio•Increasing dividends•Cash position•Acquisitions•Stock buybacks

•Bottling acquisition’s North American focus•Lower margin acquisition•Regulations•Halting stock buybacks until CCE deal closes (4Q 2010)

Recommendation: BuyEstimated Value: $58.31-$59.31

Current Price: $54.95