Financial Analysis of The Coca-Cola Company
Nanyang Business School
M.Sc(Finance)
Wang Guannan
Table of Contents
1. Introduction of the Coca-Cola Company ............................................................................................ 3
1.1 The development of the Coca-Cola Company ...................................................................... 3
1.1.1 Atlanta Beginnings ........................................................................................................ 3 1.1.2 The Woodruff Legacy .................................................................................................... 3 1.1.3 The War and Its Legacy ................................................................................................. 4 1.1.4 A World of Customers ................................................................................................... 4 1.1.5 Coca-Cola Now .............................................................................................................. 4 1.2 The product of the Coca-Cola Company .............................................................................. 5
1.2.1 Coca-Cola ...................................................................................................................... 5 1.2.2 Fanta .............................................................................................................................. 5 1.2.3 Qoo ................................................................................................................................ 5 1.2.4 Sprite ............................................................................................................................. 5 1.3 Coca Cola’s Competitor—PepsiCo Company ........................................................................ 5 2 Industry overview ........................................................................................................................... 7
2.1 Industry analysis ................................................................................................................... 7
2.1.1 Porter’s Five Forces ....................................................................................................... 7 2.1.2 Competition from External Sources .............................................................................. 7 2.1.3 Internal Threats ............................................................................................................. 8 2.2 Business Strategy .................................................................................................................. 8
2.2.1 SWOT Analysis ............................................................................................................... 8 2.2.2 Application of SWOT Analysis ....................................................................................... 9
3 Account Analysis ........................................................................................................................... 13 4 Credit Analysis ............................................................................................................................... 14 5 Financial Analysis .......................................................................................................................... 15
5.1 Measuring Overall Profitability ........................................................................................... 15 5.2 Common-Sized Income Statement and Profitability Ratios ............................................... 15 5.3 Evaluating Investment Management ................................................................................. 16 5.4 Evaluating Financial Management ..................................................................................... 17 5.5 Assessing Sustainable Growth Rate .................................................................................... 19 5.6 Cash Flow Analysis .............................................................................................................. 19 6 Financial Statements Forecasting ................................................................................................. 21
6.1 Common Sized Financial Statement ................................................................................... 21
6.1.1 Common Sized Income Statement .............................................................................. 21 6.1.2 Common Size Balance Sheet ....................................................................................... 22 6.2 Forecasting ......................................................................................................................... 23
6.2.1 Forecasting Assumptions ............................................................................................ 23 6.2.2 Consequence of Forecasting ....................................................................................... 23 6.3 Sensitive Analysis ................................................................................................................ 25 7 Conclusions ................................................................................................................................... 28 References ............................................................................................................................................ 29 Appendix .............................................................................................................................................. 30
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1. Introduction of the Coca-Cola Company
According to an investigation in 20th century, the most popular three words are : God, She, Coca-Cola. None of the countries refuse Coca-Cola. It is absolutely that Coca-Cola is the most famous brand today and brings the world a brilliant legend.
The Coca-Cola Company is the world famous beverage retailer, manufacturer and marketer of non-alcoholic beverage concentrates and syrups. The Coca-Cola Company established in 1892 and the headquarters is located in Atlanta in USA. It take up a pretty high market share in its industry for about 48% and two of the first three most popular beverage all over the world (1st is Coca Cola,2nd is PepsiCo,3rd is low calories Coca Cola). It enjoys popularity all over the word mainly for its flagship product—Coca-Cola. Coca-Cola has been the first place in the sales volume of sodas in the world for consecutive 10 years. Coca-Cola currently offers more than 500 brands which include soda, sport drinks, milk and dairy-based beverage, fruit juice, tea and coffee and so on in over 200 countries or territories. It serves 1.6 billion servings each day. Therefore, it is absolutely that Coca-Cola is the bellwether in beverage industry.
1.1 The development of the Coca-Cola Company 1.1.1 Atlanta Beginnings
John Pemberton, an Atlanta pharmacist, was inspired by simple curiosity in 1886. He stirred up a fragrant, caramel-colored liquid and, when it was done, he carried it a few doors down to Jacobs' Pharmacy. Here, the mixture was combined with carbonated water and sampled by customers who all agreed -- this new drink was something special. Pemberton's bookkeeper, Frank Robinson, named the mixture Coca-Cola?, and wrote it out in his distinct script. A century later, The Coca-Cola Company has produced more than 10 billion gallons of syrup.
1.1.2 The Woodruff Legacy
Perhaps no person had more impact on The Coca-Cola Company than Robert Woodruff. Woodruff was a marketing genius who saw opportunities for expansion everywhere. He led the expansion of Coca-Cola overseas and in 1928 introduced Coca-Cola to the Olympic Games the first time when Coca-Cola traveled with the U.S. team to the 1928 Amsterdam Olympics. Woodruff pushed development and distribution of the six-pack, the open top cooler, and many other innovations that made it easier for people to drink Coca-Cola at home or away. This new thinking made Coca-Cola not just a huge success, but a big part of people's lives.
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1.1.3 The War and Its Legacy
In 1941, America entered World War II. Thousands of men and women were sent overseas. The country, and Coca-Cola, rallied behind them. Woodruff ordered that \bottle of Coca-Cola for 5 cents, wherever he is, and whatever it costs the Company.\vision that Coca-Cola be placed within \reach of desire,\was coming true -- from the mid-1940s until 1960, the number of countries with bottling operations nearly doubled. Post-war America was alive with optimism and prosperity. Coca-Cola was part of a fun, carefree American lifestyle, and the imagery of its advertising.
1.1.4A World of Customers
The Company's presence worldwide was growing rapidly, and year after year, Coca-Cola found a home in more and more places: Cambodia, Montserrat, Paraguay, Macau, Turkey and more. he international appeal of Coca-Cola was embodied by a 1971 commercial, where a group of young people from all over the world gathered on a hilltop in Italy to sing \Like to Buy the World a Coke.\ In 1978, The Coca-Cola Company was selected as the only Company allowed selling packaged cold drinks in the People's Republic of China.
1.1.5 Coca-Cola Now
Coca-Cola is committed to local markets, paying attention to what people from different cultures and backgrounds like to drink, and where and how they want to drink it. The sales of Coca-Cola grow steadily these years. And even during the period from 2008 to 2009 when financial crisis happened, the sales did not decrease too much. Here is the bar chart to show us the sales of Coca-Cola these years. The development of Coca-Cola has been a legend in the world.
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1.2 The product of the Coca-ColaCompany 1.2.1 Coca-Cola
Coca-Cola is the most popular and biggest-selling soft drink in history, as well as the best-known product in the world. Coca-Cola might owe its origins to the United States, but its popularity has made it truly universal. Today, you can find Coca-Cola in virtually every part of the world.
1.2.2 Fanta
Available in Europe since the 1940s, Fanta was introduced in the United States in 1960. Consumers around the world, particularly teens, fondly associate Fanta with happiness and special times with friends and family. This positive imagery is driven by the brand's fun, playful personality, which goes hand in hand with its bright color, bold fruit taste and tingly carbonation.
Minute Maid Premium Orange Juice: Minute Maid has been making orange juice for over 50 years, and has a heritage of innovation, quality and nutrition. Minute Maid has the longest history of marketing orange juice with calcium, and was the first to nationally launch orange juice with calcium plus vitamin D, low acid orange juice, orange juice with vitamins C and E plus Zinc, and orange juice with naturally sourced plant sterols.
1.2.3Qoo
A light noncarbonated juice drink packed with vitamin C and calcium, Qoo is a popular beverage among children that has taken several countries in Asia and Europe by storm. The brand is brought to life with a hugely popular blue mascot \like a cat.
1.2.4 Sprite
Introduced in 1961, Sprite is the world's leading lemon-lime flavored soft drink. Sprite is sold in more than 190 countries and ranks as the No. 4 soft drink worldwide, with a strong appeal to young people. Millions of people enjoy Sprite because of its crisp, clean taste that really quenches your thirst. But Sprite also has an honest, straightforward attitude that sets it apart from other soft drinks. Sprite encourages you to be true to who you are and to obey your thirst.
1.3 Coca Cola’s Competitor—PepsiCo Company
PepsiCo (or “the company”) is one of the largest food and beverages companies in the world. Itmanufactures, markets, and sells a variety of salty, sweet and grain-based snacks, as well
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