Case facts

71,000 employees worldwide, in over 200 companies

Worlds largest beverage company
Products
o Coca-Cola, Diet Coke, Sprite, and Fanta, etc.
o Water, juice and juice drinks, sports drinks, energy drinks, teas, and
coffees
Distribution
o Restaurants, grocery markets, street vendors, others
o Consumers consume over 1.4 billion servings daily
o NOTE: Coke is concerned that the trend toward more healthy eating
and drinking will hurt sales of their traditional sugar and sugar
substitute based drinks
2006 Revenues of 24 billion (increase of 4.2% from 2005).
2006 Net income of 5.08 billion, up 4.2% from 2005.
2007 acquisition coke acquired Energy brands INC. produces Glaceau
vitamin water (ranked 2nd to pepsis Propel in the fitness market. Spent 4.1
billion)
THIRD QUARTER OF 2007
o Third quarter 2007 revenues in line with estimates. Price increases
due to rising aluminum and sweetener costs.
o Costs rose 6 percent. Price per case rose 4%.
o FOR LARGEST BOTTLER: net income rose 25.8% for largest bottler.
But earnings in operations fell as shipment volume weakened in
North America and Europe
o 2007 third quarter income of 268 million or 55 cents/share. 2006
third quarter 213 million or 44 cents/share. UP BY 25.82%
o Shipped 2.5% fewer cases during the quarter, compared to the year
earlier.

DIVISIONS (7 divisions)

Africa
East and South East Asia and the Pacific Rim
European Union
Latin America
North America
North Asia, Eurasia, and Middle East
Bottling Investments

Africa
Largest private sector 55,00 employees (77% of Coke employees
Favorite drink in South Africa. Johansberg South Africa. Large office in Cairo
Egypt.
Operating revenues dropped from 4.8% to 4.6%.
East and South Asia and Pacific Rim

Declining Coke sales in India and the Philippines. (in 2006)

o In the Phils. Lack of affordability and availability. To address this
Coke acquired Cocal Cola Bottlers Phils. INc.
Benefited from 2006 launch of Coca Cola Zero in Australia and Thailand
EUROPE
Successful Fifa campaign 6% volume growth in 2006 compared to 2005.
(note: remember decline in European volune in 3 rd quarter of 2007)
Success factors: new products, innovative packaging, and collaborating
with customers. Ex: Aquarius, Nestea, and Powerade
Acquired mineral water company Apollinarius and Traficante to add to its
existing five water brand line-up of Ciel, Valser, Toppur, Kropla Besikdu,
and Dasain which is available in four flavors.
Collaboration with Itunes. Coke is involved in a digital program that
focuses on youth.
Gained the respect of the European Commision by not advertising to
target audiences under the age of 12.
Latin America
Top three markets:The US, Mexico, and Brazil
Beverage portfolio gained 7% points in 2006. Company is looking to
expand its product lines.
Focus in Latin America: adding more water, juice, and juice sports drinks.
Recently acquired Jugos del Valle S.A.B. de CV to strengthen their presence
in this region with more juice beverages.
Focused on more nutritional offerings: Minute Maid Forte, flavored water in
Colombia, 100% Cepita Juice in Argentina.
Relying on its digital marketing platform in Latin America to build and
strengthen its relationship with consumers. (Has more than 5 million
visitors in Mexico and Brazil.)
North America

Successful implementation of My Coke Rewards. Involved about 3.5

million participating subjects. Greater than 1.5 million rewards were
claimed.
o Program was bilingual and internet based
o Coke expanded the program in 2007
Coke products comprise 70% percent of sodas drunk in Mexico
Coke is test marketing coffee/tea dispensing technology via the Far East
Coast Brand (concept store that first opened in Canada)
Launched a calorie burning beverage called Enviga and nationally
launched Vault in 2006, which is an energy soda.
Strong leadership team headed by CEO Isadell (Check Exhibit 5)

North Asia, Eurasia, and the Middle East

11% unit case volume for Coke in 206

10,000 employees in Russia. one of the countrys Largest foreign based

firm. (14% of total)
Russian market performed strongly for Coke in 2006.
o Company acquired Multon juice to expand Russian beverage
portfolio.
o Coke is the top seller of nonalchoholic beverages in Russia with a
22% unit case volume growth in 2006.
China is a huge Coke customer yielding 15% unit case volume growth in
2006.
o Coke recently purchased Kerry Beverages Limited, one of the
largest bottlers in China
Turkish Market was also strong in 2006, more than doubled in unit case
volume over the last 10 years.
Coke sales in Japan did not meet company expectations

Bottling Investment

Coke is increasing investment in bottling investment, front-end capability,

equipment, and people/training
Segment has performed well for Coke in recent years
Coke recently became the No. 1 German bottler.
Coke has focused on route-to-market design and optimization of the
infrastructure in its bottling operations in India
Recently acquired Kerry Beverages Limited and Apollinaris GmbH
Long-term bottling strategy is to reduce ownership interests in bottlers
and/or sell the companys interest to investee bottlers
Prime investors where Coke has no controlling ownership at year-end
2006:
o Coca-Cola Enterprises Inc. (CCE)
35% of the company
Worlds largest bottler of Coke beverages
In 2006, sales of syrups, concentrates, and finished products
by the company to CCE were approximately 5.4 billion.
CCE produced approximately 60% of the unit case volume for
Coca Cola
o Coca Cola Hellenic Bottling Company S.A.
23% of the company
Bottles Coke products in Armenia, Austria, Bulgaria, Nigeria,
Poland, and others
2006. 44% of the business was conducted for Coca-Cola
company
o

Coca-Cola FEMSA
Approximately 32% of this company
62% of this business is conducted for Coke
Serves Colombia, Mexico, Argentina, and Brazil
Coca-Cola Amatil Limited
Coke owns 32%
50% of business is for Coke

 New Zealand, South Korea, and Australia

Other Interests include ready-to-drink tea and coffee businesses
with Nestle. Products in this division are not only sold in the US but
63 other countries too, except JAPAN.
As a result of the proposed break-off between Coke and
Nestle, Coke can now enter Jaoan and other countries with
the tea business.
Coke recently purchased Odwalla at a price considered as a bargain: 186
million dollars
Coke also purchased Fuze for 250 million, w/c supported their noncarbonated portfolio
INtl revenues are critical to the company as its North American revenues
amount to only 28% of total revenues. (NOTE exhibit 3)
o

Competitors

Two major rivals: PepsiCo (no. 2 softdrink producer) and Cadbury

Schweppes PLC (no. 3)
Note: PepsiCo has more than double to employees as Coca-Cola (Exhibit 6)
Group Danone competes with a lesser degree with Coke.
Cadbury is a diversified company that produces and markets beverages,
chocolate, and chewing gum. Cadbury plans to divest its beverage division
in 2007.

PEPSICO

Fierce competitor in the beverage industrys two fastest growing

categories: water and sports drinks
Contains the number one water brand: Aquafina and the leading sports
drink brand: Gatorade. PepsiCo doubled its Gatorade sales in the past 5
years.
Pepsi leads the bottled tea market with Brisk, co-marketed with Lipton.
Has its own coffee product: Frapuccino, marketed with a joint venture with
Starbucks.
Obtains 60% of its revenues from its snack division
o This division ahs succeeded in the these health conscious times
with a campaign called Smart Spot that emphasizes better for you
products
Products have met the FDA and Natl Academy of Sciences
nutritional criteria.
Tailored brands that have been very successful in different countries.
Home-grown managers
Margin markets, such as Mexico, China, Russia and Brazil are targeted by
the company to provide affordable snacks.
Ranked #19 among Americas most admired companies. Ranks as #10
worldwide
168,000 employees
2006 revenues of more than 35 billion

Comprised of : Frito-Lay North America, PepsiCo Beverages North America,

PepsiCo International, and Quaker Foods North America.
Brands are available in 200 markets, generate sales of 92 billion
Conducts business in North America, Latin America, Europe, Middle East,
Africa, and Asia Pacific.
Sales have declined for PepsiCo domestically, but overseas revenues have
been strong particularly in the Middle East, Argentina, Brazil, and China.
Frito-Lay is the largest profit source of late for the company
Intl market has served the snack division well.
o Operating proft: rise by 26% and snack volume: rise by 9% in 2006.
Mexico and Russia were two strong contributing markets for PepsiCo
Beverage volume increased by 7% in the Middle East, Argetina, China, and
Brazil in 2006.
Frito-Lay North American operation yielded an increase in 8% profit with
snack volume rising 3%
o Attributed to new products and improved Doritos brand sales

CADBURY SCHWEPPES PLC

Worlds largest confectionery company

Has a strong beverage presence in the Americas and Australia
Dates back 200 years with brands: Cadbury, Schweppes, Halls, Trident, Dr.
Pepper, Snapple, trebor, Dentyne, 7Up, Bubblicious, and Basset
Employing 60,000 associates
Won Britains most admired company in 2004

GROUP DANONE
In 2005, shared first place worldwide in bottled water
o selling nearly 20 billion liters
o 70% of its sales were in emerging markets
o Primary brand in bottled water is Evian
Sells flavored waters and focuses on health-conscious consumers
Levite, another brand is a big success in Mexico
Companies continues to add new drinks in different markets such Taillefine
Fiz in France, which is zero-calorie soda that has achieved a number two
ranking in the French low-calorie segment.
Soft Drink Industry
consists of PepsiCo, Coca Cola Company and Cadbury Schweppes PLC.
Federal regulations may prohibit PepsiCo and Coke from bidding for
Cadburys softdrink business.
o Analysts believe Snapple, Cadbury brand, would be good for Coke.
o PepsiCo would likely benefit most from acquiring Cadburys Mexican
assets with such strong brands as Squirt, Crush, and Canada Dry.
Since Coke and Nestle are parting ways on selling tea in US, this may open
doors for Pepsi
o Bottled tea is one of the fastest growing drinks in the industry

50-50 joint venture between Nestle and Coca-Cola was established

in 2001 known as Beverage Partners Worldwide, but is now
proposed to come at an end.
Cokes North America segment revenues have increased from 2004-2006
(Exhibit 7)
Rising cost of raw materials has hurt the beverage industry
o oranges (price of orange JUICE has increased by more than 60% in
2006 on the New York board of Trade due to hurricane damage in
Florida,
o corn (increased 57% from Dec. 2005-Dec 2006 : as a result of
growing demand for ethanol ad other pressures),
o fuel/electricity
Water is the main substance in manufacturing of soft drinks
o Limitation of water in some parts of the world causes systems to
purify water to be utilized, resulting to an increase in manufacturing
costs/unit
US is the leader among countries experiencing problems with obesity
o Many states now band the selling of some soft drink brands in
public schools due to obesity issues among the youth
Use of ingredients in Coke may be hazardous to ones health
o Regulations may soon require warning labels
Low value of the dollar is also problematic in a global environment
Coke derives 72% of its revenues from outside the US (Exhibit 8)
o

The Future

Pepsi and Coke are often used interchangeably by many consumers

expressing their interest in softdrinks
o Which company s level of consumer loyalty outweighs the other?
Marketing snacks and softdrinks is where Coke finds itself at a
disadvantage, considering the subsidiary divisions Pepsi owns
o Should coke strive to enter the snack business from which its rival
PepsiCo derives so much revenue ?

DEVELOP A THREE YEAR STRATEGIC PLAN TO ASSESS TWO

IDENTIFIED STRATEGIES FOR COO KENT TO CONSIDER
IMPLEMETING.