Coca – Cola Overview
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The Coca-Cola Company is a leading manufacturer, distributor and marketer of soft drink concentrates and syrups, juice and juice-drink products. The company is a profitable company that trades on the New York Stock Exchange. The original product was formulated in 1886 by john Pemberton, a pharmacist in Atlanta Georgia, who sold it at a local drug store soda fountain as a “treatment for the mental and physical disorders. A few years later, Asa Candler acquired the formula, established a sales force and began advertising the brand of Coca-Cola. The Coca-Cola became incorporated in 1919 and is now the largest manufacturer, distributor and marketer of non- alcoholic beverages in the world.
Nature of the Business
Today Coca-Cola markets and connects with consumers using a portfolio of nearly 400 brands in over 200 different countries. Coca-Cola has five strategic business units: North America, Africa, Asia, Latin America, and Europe, Eurasia and the Middle East. The company adopted their strategies of success using the following strategic priorities: A. Accelerated carbonated soft-drink growth, led by Coca Cola B. selectively broaden the family of beverage brands to drive profitable growths C. grow system profitability and capability together with our bottling partners. D. Direct investments to highest -potential areas across markets. E. Drive efficiency and cost effectiveness everywhere. In 2003 Coca-Cola Company products comprised of about 10% of total worldwide sales of non-alcoholic beverage products. The companys primary competitor in many countries is PepsiCo. Other significant competitors include Nestle S.A., Cadbury Schweppes plc, Groupe Danone, and Kraft Foods Inc., among others. The remaining portion will evaluate the performance and give an investment outlook of the Coca-Cola Co using market and ratio analysis.
Market Position of Coca Cola in the US:
Coca Cola plays a major in its industry, not only in the U.S, but also all over the globe. Coke is single handedly the most popular soft drink anywhere, beating out its competition, Pepsi Co. Overseas, Coke has established its empire from South America to Africa to all of Asia and Europe. Coke is the worlds top soft-drink company. The Coca-Cola Company owns four of the top five soft-drink brands (Coca-Cola, Diet Coke, Fanta, and Sprite). Among its other brands are Barqs, Fruitopia, Minute Maid, PowerAde, and Dasani water. In the US it sells Group Danones spring water brands (Dannon and Sparkletts). Coca-Cola sells Crush, Dr Pepper, and Schweppes outside Australia, Europe, and North America. The firm, which does no bottling, sells about 400 drink brands, including coffees, juices, sports drinks, and teas, in some 200 nations. Cokes position is so powerful in the market that it is the second most recognized word anywhere in the world after “OK.” Even though many nations overseas feel the impact that Coke has, the individuals at Coke has assured that their presence is felt here in the US also. Coke has established itself into many facets in the US that makes this company stand out. For instance, Coke makes a continuous effort to introduce a new product, i.e. new Vanilla Coke. Coke also boosts its market positioning the states with the many youth partnerships, TV commercials, sports, music, and community service.
Major Moves by Coke:
Like many companies, Coke is far from perfect and like many other companies may sometimes go through their share of crisis and their fair share of big decisions. Recently, it was reported in the Boston Business Journal, that Coca Cola is going to sign an eight year extension with there long time team sponsor, world champion Boston Red Sox. This deal was brought because of the clubs big success and to commensurate the attendance and market size of Boston. Since Coke is the clubs most active sponsor, the deal solidifies Coke as a major player within major league baseball. This move is especially significant because Pepsi is Major League Baseballs official soft drink sponsor; however Coke is attempting to acquire this from its competition by getting pouring rights in all of the parks, which it already has in about half of the MLB ball parks.
Profitability ratios are reported to assist in the interpretation of the companies, in this case Cokes, operating efficiency. One profitability ratio is the return on assets (ROA) of a company, which measures the net income stated as a percentage of total assets. Currently, Coke has an ROA of 15.6%. This means that 15.6% of there net income is a total of there net assets. Compared to the industry, which has an ROA of 9.2%, Coke is has large amount there net income going into there total assets. This means that eventually, Coke will acquire greater income in the future. Another profitability ratio is the ROE, return on equity. Return on equity measures the net income stated as a percentage of stockholders equity. This means that whatever a companies ROE is it is the percentage of stockholders equity of that particular company. In Cokes case, there ROE is 30.6%, compared to the industry average which is only 25.1%. After analyzing this, I see that coke has a major part of its income going to stockholders, whereas most other companies do not have as much. With this said Coke gives more incentive to invest in its firm because if gives a higher return compared to other companies in the industry. This appears to not be a new trend for Coke because when you take a look at their 5-year average, they have totally been consistent in their actions. There 5 year ROA average is 14.5% compared to 5-year industry average of 7.9%. There 5 year ROE average is 30.2% compared to the 5-year industry average of 23.4%. Consistency is truly the key to success.
The most popular price ratios used are the Price/Earnings ratio and the Price-Cash flow Ratio. Both of the following ratios measure or try to measure the value of a companies stock.