Business Policy and Strategy - Final Project Report Coca-Cola

Business Policy and Strategy- Section 2

Final Project Report

April 27, 2015

Coca-Cola

About the Company

Coca-Cola’s history dates back to the late 1800s. The company is best known for it’s flagship product, Coca-Cola, which was created by pharmacist Dr. John Pemberton.  In 1888, Dr. Pemberton sold portions of his business to various parties, with the majority interest of his business to Atlanta businessman, Asa G. Candler.  With Mr. Candler’s help, the beverage’s popularity grew rapidly and sales significantly increased.  This is because he increased consumer awareness of the brand by plastering the logo on calendars, posters, bookmarks, and notebooks.  This was the first step in making Coca-Cola one of the most recognizable brands in the world. Since 1919, Coca-Cola became a publicly traded company which further boosted their sales.

In 2006, company-owned bottling operations were brought together to form the Bottling Investments operating group, now the second-largest bottling partner in the Coca-Cola system. Fast forward 8 years and Coca-Cola is the best selling beverage in most countries; in 2014 the Coca-Cola Company had a 42% share of the soft drink market. Following behind is their competitor, PepsiCo, with 27% of the market (Appendix A).  Other Coca-Cola brands included were Diet Coke, Sprite, Fanta, Minute Maid, Vitamin Water, and Coke Zero. Furthermore, “Coca-Cola produces more than 3,500 beverage products…The company also manufactures finished beverages. Coca-Cola owns or licenses more than 500 brands, including sparkling beverages, waters, juices and juice drinks, teas, coffees, and energy and sports drinks” ("Carbonated Soft Drinks in Europe").  With such a large portfolio it is no surprise Coca-Cola products are sold in more than 200 countries, and consumers drink 1.9 billion servings per day. The Coca-Cola Company is headquartered in Atlanta, Georgia and employs 130,600 people.  

 Financial Situation

Financially, the company is doing well. Coca-Cola carries $21.68 billion in cash and short-term investments on its balance sheet in 2014, and has a debt to equity ratio of just 0.58 when adjusted for the huge amount of treasury stock that the company carries (Coca-Cola Co.). In December 2014, the company reported annual revenue of $45,998 million, a decrease of 2.04% compared to 2013 (Beverage-Digest). However, Coca-Cola has reported strong revenues because they have large market share in the soft drink industry (Beverage-Digest).  As shown on Appendix B, Coke’s market share alone is the size of the combination of Pepsi-Cola and Mountain Dew.

After analyzing the balance sheet and cash flows, Coca-Cola is shown to have $19.06 billion in long-term debt. While this number is large, it is not bad considering that the company generated $8.21 billion in free cash flow last year (Coca-Cola Co.). It should also be mentioned that during 2014, the company's interest income of $594 million more than offset the interest expenses of $483 million that the company had, so the company has a positive consolidated net income (Coca-Cola Co. (KO) | Income Statement). This shows that the company is not in any current trouble with regard to its debt, and should continue to have the financial flexibility to support its current operations.