Strategic Management Case StudyCoca-Cola Co.

Presented by: Carter Vaillancourt, Megan Land, and Emily

Michaud

UMFK, 2013

Overview

1. Company Overview

.A brief history about Coca Cola

.Existing Mission and Vision Statement

.Existing Objectives and Strategies

.New Mission and Vision Statement

2. External Audit

.Industry Analysis

.Current Opportunities and Threats

.CPM Matrix

.EFE Matrix

3. Internal Assessment

.Organizational Structure

.Strengths and Weaknesses

.Financial Condition

.IFE Matrix

4. Strategy Formation

SWOT matrix

Space Matrix

BCG Matrix

Grand Strategy Matrix

Matrix Analysis

QSPM Matrix

5. Strategic Plan for the Future

Strategies

6. Implementation

EPS/EBIT

Projected Financials

7. Evaluation

Balanced Score Card

8. Coca-Cola Update

The Coca-Cola Bottle from the Beginning, to Present

1886-1892

1893-1904

1905-1918

1919-1940

1941-1959

1960-1981

1982-1890

1990-1999

In 1886 is when Atlanta pharmacist

created the first Coca-Cola mixture out

various ingredients,

where he

then put it

up for sale

for 5 cents

a glass

1984 is when Joseph Biedenharn was

hired to be

the first to

put the

Coca Cola

in bottles

Due to beverage companies

copying Coca-Cola they

began to manufacture the

contour bottle in 1916

In the 1928 Olympics located in Amsterdam,

Coca-Cola traveled

with the

team and

began

global

expansion

In 1943, during WWII General Eisenhower

requested 10

bottle plants

to be shipped

to them

overseas,

which then

created an

overseas business.

After 70 years, Coca-Cola added new

flavors:Fanta®, originally developed in the

1940s and

introduced in

the 1950s;

Sprite® followedin 1961, with

TAB® in 1963

andFresca® in 1966

In 1985, was the release of a

new taste for Coca-Cola, the

first change in formulation in 99

years. It wasn’t long until they

changed to their original

New beverages joined the

Company's line-up, including

Powerade®  

sports drink,

Qoo®

children's

fruit drink

andDasani® bottled

water

Revenue and Cash Flow Growth 2005-2010

Existing Vision Statement

Our vision serves as a 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 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 shareholders while being mindful of our overall responsibilities.

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

Existing Mission Statement

Our Roadmap starts with out 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…

• To inspire moments of optimism and happiness…

• To create value and make a difference.

Existing Growth Strategy

• Driving global beverage leadership

• Accelerate innovation

• Leverage our balanced geographic portfolio

Proposed Vision Statement

Coca-Cola’s vision is to inspire moments of

happiness while refreshing the world.

Proposed Mission Statement

With six main operating segments in North America, Latin America, Europe, Eurasia,

Africa, the Pacific,(3) and bottling investments, Coca-Cola is dedicated to being a

highly effective refreshments and fast-moving organization. (5) Our mission is to

bring consumers quality refreshments that anticipate and satisfy their desires and

needs. (1)(2). As a company we strive to be responsible citizens by helping to rebuild

and support sustainable communities (8), while maximizing long-term return to

shareowners (6). Through modern technology (4) and inspiring employees to be the

best they can be (9) we know we can continue to provide the best products on the

market.

1. Customers

2. Products or Services

3. Markets

4. Technology

5. Concern for Survival

6. Philosophy

7. Self-Concept

8. Concern for Public Image

9. Concern for Employees

External Audit

Industry Market Analysis

Coca Cola Pepsi Cola Nestle Dr. Pepper Snapple0

10

20

30

40

50

60

70

Stock Price 2010

Stock Price 2010

1)Spurring demand for energy drinks, especially in the US where estimates show

about 2 billion.

2)Approximately 85% of the company’s unit case volume is delivered in recyclable

bottles and cans, and the company targets to recover at least 50% of the equivalent

bottles and cans sold worldwide.

3)Bottled water drinking has increased 11%.

4)European and China market show large potential to grow by an estimated amount

of 7%.

5)Has the option, but no obligation, to assist bottlers with promotional and

marketing activities ($5 billion in 2010).

6)55 billion beverage servings are consumed worldwide each day

7)Global beverage industry is expected to grow from a valued $1.4 trillion in 2008,

to $1.6 trillion by 2013.

8)India currently only consumes 11 8oz servings of Coca Cola per person per year.

9)The non-alcoholic ready to drink(NARTD) beverage industry is expected to grow

by 50 billion unit cases by 2020.

Opportunities

Threats

1) Increasing preference for non carbonated healthy drinks. The Coca Cola soda saw a 5% volume declines respectively in the carbonated soda brands category.

2) With rising obesity rates of 35.7% for adults and 17% for youth in the U.S. alone, health concerns may cause reduced consumption of sugar sweetened beverages, impacting profitability.

3) Water is the main and most significant ingredient in beverages, quality and abundance of water is scarce worldwide, where 70% is used for agriculture and irrigation.

4) With $24.5 billion in net operating revenue generated from international markets, and operating in over 200 countries, unstable economic conditions in foreign countries can dramatically

decrease revenues.

5) The primary beverage of Coca Cola is sparkling beverages, the most popular drinks consumed worldwide, in their respective order, are water, tea, and beer.

6) Changes in currency rates. Coca-cola uses 74 functional currencies in 2010.

7) In 2010 had approximately 18,600 associates represented by labor unions.

8) PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67 Billion respectively. They are strong competitors in the market

9) PepsiCo dominated North America with sales of US $22billion,while Coca-Cola only had about US $7billion.

KO NSRGY PEP

Critical Success factors Weights Rating Weighted Score Rating Weighted Score Rating Weighted Score

  0.0 to 1.0 1 to 4   1 to 4   1 to 4  

Advertising 0.08 4 0.32 3 0.24 4 0.32

Product Quality 0.12 4 0.48 3 0.36 3 0.36

Price Competitiveness 0.10 4 0.4 3 0.3 4 0.4

Finanical Position 0.10 3 0.30 4 0.40 3 0.30

Customer Loyalty 0.14 4 0.56 3 0.42 4 0.56

Global Expansion 0.11 4 0.44 3 0.33 3 0.33

Market Share 0.07 3 0.21 4 0.28 3 0.21

Organization Structure 0.06 4 0.24 3 0.18 3 0.18

Customer Service 0.08 4 0.32 3 0.24 3 0.24

Production Capacity 0.10 4 0.40 3 0.30 4 0.40

Employee Dedication 0.04 3 0.12 4 0.16 3 0.12

Totals 1.00  

3.79   3.21   3.42

CPM

Key External Factors Weights Rating Weighted Score

  0.0 to 1.0 1 to 4  

Opportunities      

This is spurring demand for energy drinks, especially in the US which according to the latest industry estimates is about 2 billion 0.06 4 0.24

Approximately 85% of the company’s unit case volume is delivered in recyclable bottles and cans, and the company targets to recover at least 50%

of the equivalent bottles and cans sold worldwide

0.04 3 0.12

Bottled water drinking has increased 11%. 0.04 2 0.08

European and China market show large potential to grow, growing into these divisions more will help the revenue sales 0.04 2 0.08

Has the option, but no obligation, to assist bottlers with promotional and marketing activities ($5 billion in 2010). 0.05 2 0.1

55 billion beverage servings are consumed worldwide each day 0.06 3 0.18

Global beverage industry is expected to grow from a valued $1.4 trillion in 2008, to $1.6 trillion by 2013 0.05 3 0.15

India currently only consumes 11 8oz servings of KO per person per year 0.04 2 0.08

The non-alcoholic ready to drink(NARTD) beverage industry is expected to grow by 50 billion unit cases by 2020 0.05 3 0.15

Threats     0

Increasing preference for non carbonated healthy drinks. The Coca Cola soda saw a 5% volume declines respectively in the carbonated soda

brands category

0.06 3 0.18

With rising obesity rates of 35.7% for adults and 17% for youth in the U.S. alone, health concerns may cause reduced consumption of sugar

sweetened beverages, impacting profitability.

0.06 2 0.12

Water is the main and most significant ingredient in beverages, quality and abundance of water is scarce worldwide, where 70% is used for

agriculture and irrigation

0.09 2 0.18

With $24.5 billion in net operating revenue generated from international markets, and operating in over 200 countries, unstable economic

conditions in foreign countries can dramatically decrease revenues

0.07 3 0.21

The primary beverage of Coca Cola is sparkling beverages, the most popular drinks consumed worldwide, in their respective order, are water, tea,

and beer

0.07 4 0.28

Changes in currency rates. Coca-cola uses 74 functional currencies in 2010 0.04 2 0.08

In 2010 had approximately 18,600 associates represented by labor unions 0.05 2 0.1

PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67 Billion respectively. They are strong competitors in the market 0.05 4 0.2

PepsiCo dominated North America with sales of US $22billion,while Coca-Cola only had about US $7billion 0.08 4 0.32

Totals 1  2.85

EFE

Internal Audit

Financial InformationIncome Statement

Financial InformationBalance Sheet (1)

Financial InformationBalance Sheet (2)

Coca-Cola Worth Analysis for 2010 (in millions) 

Shareholder's equity - Goodwill - Intangibles 4,094

Net Income * 5 59,045

(Stock Price/EPS) * NI 71,177

# of Shares Out * Stock Price 71,225

Four Method Average 51,385

Ratio Analysis

Ratio (2010) Coca-Cola Pepsi Nestle

Liquidity Ratios

Current 1.17 1.11 1.29

Quick 1.02 0.89 1.03

Leverage Ratios

Debt to total assets 0.57 0.68 0.44

Debt to equity 1.35 2.19 0.78

Long-term debt to equity 0.45 0.94 0.12

Times-interest-earned ratio 20.43 9.23 41.25

Activity Ratios

Fixed Assets Turnover 2.38 3.03 5.12

Total Assets Turnover 0.48 0.85 0.98

Inventory Turnover 13.25 17.15 13.84

Profitability Ratios

Gross Profit Margin % 63.86 54.05 58.21

EBT Margin % 40.56 14.23 34.69

Net Profit Margin % 33.63 10.93 31.2

Return on total assets % 19.42 11.7 27.56

Return on Stockholder's equity % 38.09 33.27 49.17

Price-earnings ratio 6.03 15.35 5.43

Growth Ratios

Sales Growth (5-years) 8.74% 12.18% 3.80%

Net Income Growth (5-years Average) 19.37% 9.16% 32.08%

Earnings per share Growth (5-year Average) 19.92% 10.35% 37.77%

Strengths

1)With revenues of $35,119,000 million, Coca-

Cola is one of the largest beverage

manufacturers globally.

2)Coca-Cola owns four of the world’s top five

nonalcoholic sparkling beverage brands

including Coca-Cola, Diet Coke, Sprite

andFanta.

3)Sold 25.5 billion cases of products in 2010

4)Accounted for 51% of U.S. unit case volume,

and 50% of non-U.S. case volume for 2010

5)Has ownership interest in its

bottling/distributing partners; 23% in Coca-

Cola Hellenic, 32% in Coca-Cola FEMSA, and

30% in Coca-Cola Amatil.

6)Acquired Coca-Cola Enterprises, Inc., one of

the major bottlers for Coca-Cola in North

America which had $3.6 billion in revenues

7)In Eurasia and Africa, unit case volume

increased 12% in 2010

8)Coca-Cola has more than 500 brands and

3,500 beverages and products.

9)Coca-Cola sells 1.7 Billion servings of

beverages per day in over 200 countries.

10)Coca-Cola generated 9.5 billion in cash

from operations in 2010, up 16% over 2009.

Weaknesses

1)Weak performance in Europe achieving a 0% growth in 2010

2)Does not hold number 1 spot for either the water brand or the

leading sports drink

3)Currently does not hold a snacks segment, where Pepsi Co. has a

food division which creates for 60% of their total revenue.

4)Does not perform best in North America, only accounting for

31.7% in total revenue in 2010

5)Has a high number of current liabilities accounting for 18,508

million

6)Acquiring Coca-Cola Enterprises (CCE) resulted in assuming

additional $7.9 billion in debt

7)Operating income for Europe operations decreased by $50 million

in 2010

8)Interest expense increased $378 million mainly due to premiums

paid on repurchasing long term debt

9)Common Stock Market Prices decreased between the first and

second quarter in 2010 from $52.23 and $49.47

10)Other operating expenses grew to $5,959 million in 2010 from

$5,699 million in 2009

Key Internal Factors Weights Rating Weighted Score

  0.0 to 1.0 1, 2, 3 or 4  

Internal Strengths   3 or 4  

With revenues of $35,119,000 million, Coca-Cola is one of the largest beverage manufacturers globally 0.07 4 0.28

Coca-Cola owns four of the world’s top five nonalcoholic sparkling beverage brands including Coca-Cola, Diet Coke, Sprite and Fanta 0.08 4 0.32

Sold 25.5 billion cases of products in 2010 0.07 3 0.21

Accounted for 51% of U.S. unit case volume, and 50% of non-U.S. case volume for 2010 0.06 3 0.18

Has ownership interest in its bottling/distributing partners; 23% in Coca-Cola Hellenic, 32% in Coca-Cola FEMSA, and 30% in Coca-Cola Amatil 0.05 3 0.15

Acquired Coca-Cola Enterprises, Inc., one of the major bottlers for Coca-Cola in North America which had $3.6 billion in revenues 0.09 4 0.36

 In Eurasia and Africa, unit case volume increased 12% in 2010 0.04 3 0.12

Coca-Cola has more than 500 brands and 3,500 beverages and products 0.06 4 0.24

Coca-Cola sells 1.7 Billion servings of beverages per day in over 200 countries 0.05 3 0.15

Coca-Cola generated 8.5 billion in cash from operations in 2010, up 16% over 2009 0.06 3 0.18

Internal Weaknesses   1 or 2  

Weak performance in Europe achieving a 0% growth in 2010 0.02 1 0.02

Does not hold number 1 spot for either the water brand or the leading sports drink 0.06 2 0.12

Currently does not hold a snacks segment, where Pepsi Co. has a food division which creates for 60% of their total revenue 0.07 1 0.07

Does not perform best in North America, only accounting for 31.7% in total revenue in 2010 0.03 1 0.03

Has a high number of current liabilities accounting for 18,508 million 0.02 2 0.04

Acquiring Coca-Cola Enterprises (CCE) resulted in assuming additional $7.9 billion in debt 0.07 1 0.07

Operating income for Europe operations decreased by $50 million in 2010 0.03 1 0.03

Interest expense increased $378 million mainly due to premiums paid on repurchasing long term debt 0.03 2 0.06

Common Stock Market Prices decreased between the first and second quarter in 2010 from $52.23 and $49.47 0.02 2 0.04

Other operating expenses grew to $5,959 million in 2010 from $ 5,699 million in 2009 0.02 2 0.04

Totals 1   2.71

IFE

Strategy Formation

SWOT Matrix

Strengths

Weaknesses

Opportunities

Threats

1. Diversify beverage line by offering alcoholic beverages. (S1, S8, S9,

T5)

2. Increase R&D spending to research production methods to ensure that

we are utilizing resources in the most efficient manner. (S1, S10, T3)

1.Create a lower calorie sports drink line to promote healthydrinkinghabits while still

providing the essential electrolyte balance. (W2, W4, T1, T2)

2. Diversify products by entering the healthy snack/snack food market. (W3, T2)

1. Create a line of energy drinks to meet a growing demand of those products. (S8,

S9, S10, O1, O9)

2. Increase marketing in Latin America. (S8, S9, S10, O6, O7, O9)

1.Increase sports drink product sales through sponsorship of

collegiate sports. (W2, W4, O1, O6, O9)

2.Increase marketing in Europe. (W1, O4, O6)

3. Take advantage of the increasing demand for bottled water by

creating flavored water drops. (W2, O3, O6, O9)

ST

ST

WO

WT

Space Matrix

Financial

Strength

  Ratings

1 Cash Flow 5.0

2 Price

Earnings

Ratio

3.0

3 Earnings

per Share

5.0

4 Working

Capital

7.0

5 Liquidity 6.0

6 Net

Income

6.0

7 Return on

Assets

4.0

Financial

Strength

Average

5.14

Industry

Strength

    Rating

1 Profit

Potential

6.0

2 Financial

Stability

7.0

3 Resource

Utilizatio

n

4.0

4 Producti

vity,

Capacity

utilizatio

n

4.0

5 Market

Entry

6.0

6 Growth

Potential

3.0

7 Extent

Leverage

d

2.0

Industry

Strength

Average

  4.6

Envir

onm

ental

Stabi

lity

    Ratin

g

1 Rate of Inflation -5.0

2 Barriers to Enter

the Market

-4.0

3 Competitive

pressure

-2.0

4 Price Elasticity -4.0

5 Demand

Variability

-4.0

6 Price Range of

Competing

Products

-4.0

7 Ease of Exit from

Market

-6.0

Envir

onme

ntal

Stabil

ityAv

erage

    -4.14

Comp

etitiv

e

Adva

ntage

  Ratin

g

1 Market Share -1.0

2 Product Quality -3.0

3 Customer Loyalty -2.0

4 Capacity

Utilization

-2.0

5 Technologically

Advanced

-3.0

6 Global Expansion -1.0

7 Product Life Cycle -3.0

Comp

etitiv

e

Adva

ntage

Avera

ge

  -2.14

FS

CS

ES

IS-1-2-3-4-5-6 654321

ConservativeAggressive

CompetitiveDefensive

1

2

3

4

5

6

-6

-5

-4

-3

-2

-1

X Coordinate 2.43

Y Coordinate 1.00

BCG Matrix

Segments Revenue %rev profit %pft Relative Market Share Industry Growth

Rate (%)

North America $11,205.00 39.45% $1,520.00 15.31% 1.00 4.40%

Pacific $5,271.00 18.56% $2,048.00 20.63% 1.00 5.60%

Europe $5,249.00 18.48% $2,976.00 29.97% 1.00 5.30%

Latin America $4,121.00 14.51% $2,405.00 24.22% 1.00 6.00%

Eurasia & Africa $2,556.00 9.00% $980.00 9.87% 1.00 6.50%

Total $28,402.00 100.00% $9,929.00 100.00%

BCG Continued

Grand Strategy Matrix

Rapid Market

Growth

     

 

 

 

 

 

 

 

 

 

 

 

Weak Competitve

Position

  Strong

Competitive

Position

 

                         

     

 

 

 

 

 

 

 

 

 

 

 

 

 

Slow Market

Growth

Quadrant II

1. Market development

2. Market penetration

3. Product development

4.Horizontal integration

5. Divestiture

6. Liquidation

Quadrant III

1. Retrenchment

2. Related diversification

3. Unrelated diversification

4. Divestiture

5. Liquidation

Quadrant IV

1. Related diversification

2.Unrelated diversification

3. Joint ventures

Quadrant I

1. Market development

2. Market penetration

3. Product development

4.Forward integration

5. Backward integration

6. Horizontal integration

7.Related diversification

Matrix Analysis

Alternative Strategies IE SPACE GRAND BCG COUNT

Forward Integration x x X 3

Backward Integration x x X 3

Horizontal Integration x x X 3

Market Penetration x x X 3

Market Development x x X 3

Product Development x x X 3

Related Diversification x x 2

Unrelated Diversification x 1

Retrenchment

Divestiture

Liquidation

Strategy Evaluation

Integration Strategies

•We have integrated into many

suppliers prior to 2010

•We recently purchased CCE which

helps integrate our bottling and

marketing

Product and Market Development

•We are highly established worldwide

prior to 2010

Market Penetration

•We are currently in 200

differentcountries priorto2010

Unrelated or Related Diversification

•We don’t offer a food segment

(Unrelated)

•None of our main competitors offer an

alcoholic beverage (Related)

Quantit

ative

Strateg

ic

Planni

ng

Matrix-

QSPM

Create a

lower

calorie

sports

drink

line/

while

still

providin

g

essential

electroly

te

balance.

Diversif

y

product

s by

enterin

g the

healthy

snack/s

nack

food

market.

Diversify beverage line by offering alcoholic beverages.

                

Key

factors

    Weight AS TAS AS TAS AS TAS

External         1 to

4

  1 to 4   1 to 4  

Opport

unities

               

1. 

There is

spurring

demand

for

energy

drinks,

especiall

y in the

US

which

accordin

g to the

latest

industry

estimate

s is

about 2

billion 

0.06 4 0.24        

2.  

Approxi

mately

85% of

the

company

’s unit

case

volume

is

delivere

d in

recyclabl

e bottles

and

cans,

and the

company

targets

to

recover

at least

50% of

the

equivale

nt

bottles

and cans

sold

worldwi

de.

0.04            

3.

Bottled

water

drinking

has

increase

d 11%.

0.04            

4.  

Europea

n and

China

market

show

large

potential

to grow,

growing

into

these

divisions

more

will help

the

revenue

sales.

0.04     3 0.12    

5.   Has

the

option,

but no

obligatio

n, to

assist

bottlers

with

promotio

nal and

marketin

g

activities

($5

billion

in

2010).

0.05 2 0.1     3 0.15

6.   55

billion

beverage

servings

are

consume

d

worldwi

de each

day

0.06 4 0.24     4 0.24

7. 

Global

beverage

industry

is

expected

to grow

from a

valued

$1.4

trillion

in 2008,

to $1.6

trillion

by 2013.

0.05 4 0.2     4 0.2

8.   India

currently

only

consume

s 11 8oz

servings

of KO

per

person

per year.

0.04 2 0.08 3 0.12 2 0.08

9.   The

non-

alcoholi

c ready

to

drink(N

ARTD)

beverage

industry

is

expected

to grow

by 50

billion

unit

cases by

2020.

0.05         4 0.2

Threats             

1.   Incre

asing

preferen

ce for

non

carbonat

ed

healthy

drinks.

The

Coca

Cola

soda

saw a

5%

volume

declines

respectiv

ely in

the

carbonat

ed soda

brands

category.

0.06 2 0.12        

2.   With

rising

obesity

rates of

35.7%

for

adults

and 17%

for

youth in

the U.S.

alone,

health

concerns

may

cause

reduced

consump

tion of

sugar

sweeten

ed

beverage

s,

impactin

g

profitabi

lity.

0.06 2 0.12 4 0.24    

3.  

Water is

the main

and

most

significa

nt

ingredie

nt in

beverage

s,

quality

and

abundan

ce of

water is

scarce

worldwi

de,

where

70% is

used for

agricultu

re and

irrigatio

n.

0.09 1 0.09 4 0.36 1 0.09

4.   With

$24.5

billion

in net

operatin

g

revenue

generate

d from

internati

onal

markets,

and

operatin

g in over

200

countrie

s,

unstable

economi

c

conditio

ns in

foreign

countrie

s can

dramatic

ally

decrease

revenues

.

0.07            

5.   The

primary

beverage

of Coca

Cola is

sparklin

g

beverage

s, the

most

popular

drinks

consume

d

worldwi

de, in

their

respectiv

e order,

are

water,

tea, and

beer.

0.07         4 0.28

6.   Cha

nges in

currency

rates.

Coca-

cola

uses 74

function

al

currenci

es in

2010.

0.04            

7.   In

2010

had

approxi

mately

18,600

associate

s

represen

ted by

labor

unions

0.05            

8.   PEP

operatin

g

income

and

revenues

both

exceede

d KO's

by .85

Billion

and 7.67

Billion

respectiv

ely. They

are

strong

competit

ors in

the

market

0.05 1 0.05 4 0.2 2 0.1

9.

PepsiCo

dominat

ed North

America

with

sales of

US

$22billi

on,while

Coca-

Cola

only had

about

US

$7billio

n.

0.08 1 0.08 4 0.32 2 0.16

  total should

be 1.0

1            

QSPM

Strengt

hs

                   

1.  With

revenue

s of

$35,119

,000

million,

Coca-

Cola is

one of

the

largest

beverag

e

manufac

turers

globally.

0.07 1 0.07 4 0.2

8

2 0.14

2.  Coca

-Cola

owns

four of

the

world’s

top five

nonalco

holic

sparklin

g

beverag

e brands

includin

g Coca-

Cola,

Diet

Coke,

Sprite

and

Fanta. 

0.08         2 0.16

3.  Sold

25.5

billion

cases of

product

s in

2010

0.07 2 0.14     3 0.21

4. 

Account

ed for

51% of

U.S.

unit

case

volume,

and

50% of

non-

U.S.

case

volume

for

2010

0.06 2 0.12     3 0.18

5.  Has

ownersh

ip

interest

in its

bottling/

distribut

ing

partners

; 23%

in Coca-

Cola

Hellenic

, 32% in

Coca-

Cola

FEMSA

, and

30% in

Coca-

Cola

Amatil.

0.05            

6.  Acq

uired

Coca-

Cola

Enterpri

ses,

Inc.,

one of

the

major

bottlers

for

Coca-

Cola in

North

America

which

had

$3.6

billion

in

revenue

s

0.09            

7.  In

Eurasia

and

Africa,

unit

case

volume

increase

d 12%

in 2010 

0.04            

8.  Coca

-Cola

has

more

than

500

brands

and

3,500

beverag

es and

product

s.

0.06 3 0.18     4 0.24

9. Coca-

Cola

sells 1.7

Billion

servings

of

beverag

es per

day in

over

200

countrie

s.

0.05 3 0.15     3 0.15

10.

Coca-

Cola

generag

ed 8.5

billion

in cash

from

operatio

ns in

2010,

up 16%

over

2009.

0.06 2 0.12 4 0.2

4

2 0.12

Weakn

esses

               

1.  Wea

k

perform

ance in

Europe

achievin

g a 0%

growth

in 2010.

0.02         3 0.06

2.  Does

not hold

number

1 spot

for

either

the

water

brand or

the

leading

sports

drink.

0.06 3 0.18        

3.  Curr

ently

does not

hold a

snacks

segment

, where

Pepsi

Co. has

a food

division

which

creates

for 60%

of their

total

revenue.

0.07     4 0.2

8

   

4.  Does

not

perform

best in

North

America

, only

accounti

ng for

31.7%

in total

revenue

in 2010.

0.03     3 0.0

9

2 0.06

5.  Has

a high

number

of

current

liabilitie

s

accounti

ng for

18,508

million

0.02            

6.  Acq

uiring

Coca-

Cola

Enterpri

ses

(CCE)

resulted

in

assumin

g

addition

al $7.9

billion

in debt 

0.07            

7.  Oper

ating

income

for

Europe

operatio

ns

decrease

d by

$50

million

in 2010

0.03            

8.  Inter

est

expense

increase

d $378

million

mainly

due to

premiu

ms paid

on

repurch

asing

long

term

debt

0.03            

9.

Commo

n Stock

Market

Prices

decrease

d

between

the first

and

second

quarter

in 2010

from

$52.23

and

$49.47.

0.02            

10.

Other

operatin

g

expense

s grew

to

$5,959

million

in 2010

from $

5,699

million

in 2009.

0.02            

    total

should

be 1.0

  1            

           

2.28   2.2

5

  2.8

2

Create a

lower calorie

sports drink

line/ while

still providing

essential

electrolyte

balance.

Diversify

products by

entering the

healthy

snack/snack

food market.

Diversify

beverage

line by

offering

alcoholic

beverages.

QSPM (2)

Strategic Fit

Competitive Risks

• Pepsi Co. and Nestle currently have market share in the Food Industry

Funding Aggressive Growth

• Market Capitalization of 190 billion

• Current Assets exceed current liabilities by over 3 billion

Strong Brand Utilization

• Moving into the food industry and having very strong customer loyalty,

customers will be drawn to new products

Kellogg Company

• Currently located in 180 different countries

• Sales totaled 12.4 billion in 2010

• Includes brands such as: Special K, Cheez-It, Pringles, Keebler, Austin,

Famous Amos, and Townhouse Crackers

• Food Consumer Products Industry Kellogg's is ranked number 2, behind

Pepsi Co. and ahead of General Mills

3-Year Goals

In 3 Years

-Acquire ownership of Kellogg Company by the end of 2013

- Expand Healthy Food choices through acquisition

Year 1: Begin Acquisition Process with Kellogg Company

Year 2: Attain Ownership of Kellogg Company

Year 3: Begin Marketing and Sales with Kellogg Company

Strategic Implementation

Kelloggs Worth Analysis for 2010 (in millions)  

Shareholder's equity - Goodwill - Intangibles (2,930)

Net Income * 5 6,235

(Stock Price/EPS) * NI 17,849

# of Shares Out * Stock Price 17,868

Four Method Average 9,755

Kellogg Company Net Worth Analysis

EPS/EBIT

Capital Needed 6,000,000,000

EBIT Range $7 bil. - $15 bil.

Interest Rate 4%

Tax Rate 16%

Stock Price (Dec. 31, 2010-year end) 30.86

Current Shares Outstanding (Basic) 2,308,000,000

CS Shares needed 194,426,442

Assumptions

Common Stock

Financing

   

  Recession Normal Boom

EBIT 7,000,000,000 10,000,000,000 15,000,000,000

Interest - - -

EBT 7,000,000,000 10,000,000,000 15,000,000,000

Taxes 2,030,000,000 2,900,000,000 4,350,000,000

EAT 4,970,000,000 7,100,000,000 10,650,000,000

# of Shares 2,502,426,442 2,502,426,442 2,502,426,442

EPS 1.99 2.84 4.26

Debt Financing    

  Recession Normal Boom

EBIT 7,000,000,000 10,000,000,000 15,000,000,000

Interest 240,000,000 240,000,000 240,000,000

EBT 6,760,000,000 9,760,000,000 14,760,000,000

Taxes 1,960,400,000 2,830,400,000 4,280,400,000

EAT 4,799,600,000 6,929,600,000 10,479,600,000

# of Shares 2,308,000,000 2,308,000,000 2,308,000,000

EPS 2.08 3.00 4.54

Stock needed 5,400,000,000

Debt needed 600,000,000

Interest 24,000,000

CS shares needed 174,983,798

Assumptions

Stock needed 600,000,000

Debt needed 5,400,000,000

Interest 216,000,000

CS shares needed 19,442,644

90% Stock -

10% Debt

Financing

 

  Recession Normal Boom

EBIT 7,000,000,000 10,000,000,000 15,000,000,000

Interest 24,000,000 24,000,000 24,000,000

EBT 6,976,000,000 9,976,000,000 14,976,000,000

Taxes 2,023,040,000 2,893,040,000 4,343,040,000

EAT 4,952,960,000 7,082,960,000 10,632,960,000

# of Shares 2,482,983,798 2,482,983,798 2,482,983,798

EPS 1.99 2.85 4.28

10% Stock -

90% Debt

Financing

 

  Recession Normal Boom

EBIT 7,000,000,000 10,000,000,000 15,000,000,000

Interest 216,000,000 216,000,000 216,000,000

EBT 6,784,000,000 9,784,000,000 14,784,000,000

Taxes 1,967,360,000 2,837,360,000 4,287,360,000

EAT 4,816,640,000 6,946,640,000 10,496,640,000

# of Shares 2,327,442,644 2,327,442,644 2,327,442,644

EPS 2.07 2.98 4.51

EPS/EBIT Continued

Projected Financial Assumptions

Capital needed 10,000,000,000

Debt needed 6,000,000,000

Cash Used 4,000,000,000

Interest (estimate) 4%

Tax Rate 16%

Stock Price (Dec. 31, 2010 - year end) 30.86

Additional Interest 240,000,000

Dividends Paid $1.83 per share 4,223,640,000

Kellogg's pays off own liabilities

Kellogg's shareholders are paid off

Projected FinancialsIncome Statement

Projected Income Statement (in millions) 2009 2010 2011

Total Revenue 30,990 35,119 52,784 15% increase,

plus Kelloggs

12,397

Cost of Revenue 11,088 12,693 21,324 % of revenue,

plus Kelloggs

7,108

Gross Profit 19,902 22,426 31,460

Operating Expenses - - -

Research and Development - - -

Selling General & Administrative 11,671 13,977 17,276 Add Kelloggs

3,299

Nonrecurring - - -

Others - - -

Total Operating Expenses - - -

Operating Income or Loss 8,231 8,449 14,184

Income from Continuing Operations - - -

Total Other Income/Expense Net 289 5,502 6,052 10% increase

EBIT 9,301 14,976 20,236

Interest Expense 355 733 1,221 Add Kelloggs

248, add 240

from

financing

Income Before Tax 8,946 14,243 19,015

Income Tax Expense 2,040 2,384 3,042 16% tax rate

Consolidated Net Income 6,906 11,859 15,973

Less: Non-Controlling Interests 82 50 50 Same

Net Income 6,824 11,809 15,923

Basic EPS 2.95 5.12 6.90

Diluted EPS 2.93 5.06 6.82

Basic Average Shares Outstanding 2,314 2,308 2,308 Same

Diluted Average Shares Outstanding 2,329 2,333 2,333 Same

Dividends Per Share 1.64 1.76 1.83

Projected Financials Balance Sheet (1)

Projected Balance Sheet (in millions)

ASSETS

Current Assets

Cash & Cash Equivalents 6,959 8,379 4,379 Decrease by

$4 billion for

funds

Short-term Investments 2,192 2,820 3,666 30% increase

Net Receivables 3,758 4,430 5,316 20% increase

Inventory 2,354 2,650 4,236 20% increase,

plusKelloggs

1,056

Other Current Assets 2,226 3,162 4,336 30% increase,

plusKelloggs

225

Total Current Assets 17,551 21,579 21,933

Long-term Investments 6,755 7,585 9,861 30% increase

Property Plant & Equipment 9,561 14,727 21,537 25% increase,

plusKelloggs

3,128

Goodwill 4,224 11,665 15,876 5%increase,

plusKelloggs

3,628

Intangible Assets 8,604 15,244 18,696 10% increase,

plusKelloggs

1,456

Accumulated Amortization - - -

Other Assets 1,976 2,121 2,989 7% increase

like previous

year, add

Kelloggs 720

Deferred Long-term Asset Charges - - -

Total Assets 48,671 72,921 90,892

Projected Financials Balance Sheet (2)

LIABILITIES

Current Liabilities

Accounts Payable 6,921 9,132 10,045 10%

increase

Short-term Debt 6,800 9,376 11,176 Add 30%

of $6

billion

from

financing

Other Current Liabilities - - -

Total Current Liabilities 13,721 18,508 21,221

Long-term Debt 5,059 14,041 18,241 Add 70%

of $6

billion

from

financing

Other Liabilities 2,965 4,794 5,033 5%

increase

Deferred Long-term 1,580 4,261 4,261 Same

Liability Charges - - -

Minority Interest 547 314 314 Same

Negative Goodwill - - -

Total Liabilities 23,872 41,918 49,070

STOCKHOLDERS' EQUITY

Misc. Stock Opt Warrants - - -

Redeemable Pref. Stock - - -

Preferred Stock - - -

Common Stock 880 880 880

Retained Earnings 41,537 49,278 60,977 Increases

from Net

Income,

Dividends

paid out

Treasury Stock (25,398) (27,762) (27,762) Same

Capital Surplus 8,537 10,057 10,057 Same

Other Stockholders' Equity (757) (1,450) (1,450) Same

Total Stockholders' Equity 24,799 31,003 41,822

Total Liabilities and Stockholders' Equity 48,671 72,921 90,892

Coca-Cola's Projected Ratios 2010 v. 2011 2010 2011

Current Ratio 1.17 0.97

Quick Ratio 1.02 0.83

Debt to Total Assets 0.57 0.54

Debt to Equity 1.35 1.17

Times Interest Earned 20.43 16.57

Fixed Asset Turnover 2.38 2.45

Total Asset Turnover 0.48 0.58

Inventory Turnover 13.25 12.46

Gross Profit Margin % 63.86 59.60

Return on Stockholders' Equity % 38.09 38.07

Projected Financial Ratios

Strategic Evaluation

Balanced Scorecard

Area of Objectives Measure or Target Time Expectation Primary Responsibility

Customers      

1 Brand Identity Industry reports/Market Cap. Yearly Marketing Officer

2 Satisfaction Customer Survey Yearly Marketing Officer

Employees      

1 Employee Moral Survey Yearly People Officer

2 Service Training # of seminars Yearly Administrative Officer

Operations      

1 Diversify product line Acquire Kelloggs Company Yearly Administrative Officer

Business Ethics      

1 Ethics Training # of ethics training sessions Yearly People Officer

2 Recycling Recycle 50% of total wastes    

Financial      

1 Revenues Increase by 50% each year Yearly Financial Officer

2 Ratio Analysis Better than competitors/industry Avg. Yearly Financial Officer

Update

Update

• Currently serving 3,500 products worldwide

• Global volume growth in the first quarter of 2013 was 4%

• On Earth Day Coca Cola donated more than 55,000 recycling bins to parks,

schools, colleges, and homes in a 115 communities across the US

• 63,290,877 likes on Facebook

• Coca Cola Rewards program is now offered

Stock Performance