Abstract This research considers The Coca-Cola Company from an ...

Abstract
Coca-Cola 1
This research considers The Coca-Cola Company from an investment perspective, including
evaluating key ratios of the company's financial performance and its recent stock performance to
consider which types of investors might find this an attractive opportunity. Coca-Cola is one of
the most famous brands in the world, with a familiar red and white color scheme that is well
recognized. Unlike some other powerful American brands such as Chrysler or IBM that have
looked to international mergers or sell-offs in order to survive, Coca-Cola has remained an
American company even as it has expanded around the globe.

The Coca-Cola Company
Coca-Cola 2
In one year, Coca-Cola will be celebrating its 125 th anniversary, and as a brand, there is a
lot to celebrate. Coca-Cola was invented in Atlanta, Ga. in 1886 as a combination of local
pharmacist Dr. John Stith Pemberton’s unique syrup and carbonated water. The product was first
sold at Jacob’s Pharmacy as a soda fountain drink for five cents per glass. The Coca-Cola logo
was invented by Dr. Pemberton’s partner Frank Robinson, who drew it himself (“Coca-Cola,”
2009). One of the reasons that Coca-Cola continues to be successful is its aggressive brand
management. The company has been an active sponsor of the Olympics since the 1984 games,
which includes being on key committees and involved in key partnerships that organize the
games. Other sports activities are also sponsored by the company, which provides global and
frequent opportunities to promote the brand (Wedekind, 2008).
The Coca-Cola Company operates in more than 200 countries and markets more than 500
brands and 3,300 beverage products. These products include sparkling beverages and still
beverages such as waters, juices and juice drinks, teas, coffees, sports drinks and energy drinks.
The Company has four of the world’s top five nonalcoholic sparkling beverage brands: Coca-
Cola, Diet Coke, Sprite and Fanta (2009 Annual Review).
The Coca-Cola System
The Coca-Cola Company is a global business that operates on a local scale in every
community where they do business. Coke created global reach with local focus because of the
strength of the Coca-Cola system, which comprises of the Company and the bottling partners,
more than 300 worldwide. The Company manufactures and sells concentrates, beverage bases
and syrups to bottling operations; owns the brands; and is responsible for consumer brand
marketing initiatives. The bottling partners manufacture, package, merchandise and distribute the

Coca-Cola 3
finished branded beverages to Coke’s customers and vending partners, who then sell the products
to consumers (2009 Annual Review).
All bottling partners work closely with customers; grocery stores, restaurants, street
vendors, convenience stores, movie theaters and amusement parks, among many others; to
execute localized strategies developed in partnership with the Company. Customers then sell the
products to consumers at a rate of 1.6 billion servings a day. The business operations are divided
into the following geographies: Eurasia and Africa, Europe, Latin America, North America and
Pacific, as well as the Bottling Investments Group (2009 Annual Review).
Over the next decade, The Coca-Cola Company management see a world of
extraordinary growth unfolding in the beverage industry, and plan to capture as much of that
growth as they can by 2020 and beyond. Coke management believes that the Company and their
global bottling partners (the Coca-Cola system) are uniquely positioned to lead in this growing
world of refreshment through portfolio of brands, innovation, integrated marketing capabilities
and unmatched product availability. Coke management also believes that keeping connected with
consumers and knowing what they want to drink and how they want to interact with the Coca-
Cola brands will help the company grow. By working toward each goal of the 2020 Vision, Coke
is preparing for tomorrow’s market today (2009 Annual Review).

Review of Literature
Coca-Cola 4
The Coca-Cola Company continued to grow during the worst economic environment
since World War II. Coke’s intense focus on growing their brands, gaining share, driving
revenue growth and leveraging productivity enabled the Company to meet their 2009 volume
and profit growth goals, in line with long-term targets (2009 Annual 10-K Filing, 2010).
Coke entered 2009 with a simple and clear purpose: to confront the global economic
uncertainty by focusing on what they could control. Coke worked to ensure that they would
come out of this crisis in an even stronger position by communicating with their consumers and
retail customers; investing in innovation; and enhancing their distribution, sales and production
capabilities around the world (2009 Annual 10-K Filing, 2010).
Coke worked with their more than 300 bottling partners, and added approximately 650
million incremental unit cases of volume to their business, a 3 percent gain over 2008. The 2009
incremental unit case volume from China, India, Mexico and Brazil alone was equal to adding
another Germany, Coke’s sixth-largest market. The Company also grew individual brands,
including Coke’s Simply ®
trademark which reached retail sales of more than $1 billion (2009
Annual 10-K Filing, 2010).
In 2009, the Company generated $8.2 billion in cash from operations, up 8 percent from
2008 and marking the first time Coke has surpassed the $8 billion mark. Coke reinvested $2
billion back into the business, repurchased $1.5 billion in Company stock and paid $3.8 billion to
shareowners through dividends. Indeed, 2009 marked the 47th consecutive year of increased
dividend payments (2009 Annual 10-K Filing, 2010).
Throughout the year, Coke made significant productivity enhancements across multiple
facets of the business. The leadership efforts across the sustainability spectrum, meanwhile,

earned The Coca-Cola Company a place on the Dow Jones Sustainability World Index.
Coca-Cola 5
Positioning Coke among the top 10 percent of the world’s largest 2,500 companies in terms of
advancing sustainable business practices (2009 Annual 10-K Filing, 2010).
The company's recent financial performance has been strong, with third-quarter fiscal
results in 2009 showing a 22 percent gain in net profit despite a 3 percent loss in revenues. This
was accompanied by a 17 percent growth in earnings per share. The company continues to
emphasize its international performance for sodas abroad, while in the United States, it is
emphasizing healthy beverage alternatives as evidenced by its purchase of Glaceau, maker of
Vitamin water and its introduction of the Coke Zero brand in 2008 (2009 Annual 10-K Filing,
2010).
Ratio Analysis
Coca-Cola's current ratio was .94:1 in 2008 and 1.28:1 in 2009, indicating that the
company maintains almost the same amount in its current assets needed to cover its current
liabilities. The fact that the ratio has remained steady and even seen a 25% upturn during this
two-year period is positive. The company's inventory turnover, which indicates how effectively
the company is using its assets, increased from 14.5 in 2008 to more than 15.5 in 2009. This
indicates that the company is becoming slightly more efficient at managing its assets. The
company's total debt to total assets percentage moved downward from 48.5 percent to 47.9
percent during the 2008 to 2009 time period, possibly due to the company's acquisition strategy
during that time. The company's profit margin increased from 18 percent in 2008 to 22 percent
in 2009 (2009 Annual 10-K Filing, 2010). In general, the company's finances are strong, and its
recent financial performance with regard to net income is slightly higher.
Company’s Debt

Coca-Cola 6
Coca-Cola has pursued a strategy that includes acquiring other companies in order to
expand its market share. This includes the acquisition of Glaceau, manufacturer of Vitamin
water, which is part of Coca-Cola's strategy of offering more products which do not have the
negative stereotypes associated with sodas. Such acquisitions can require the addition of debt,
but Coca-Cola has seen its total liabilities decline in recent years. This indicates that the
company is able to move forward without incurring additional debt. This is an important
consideration for shareholders and potential investors as they want to see the company grow, but
are concerned that debt can burden a company to the point that it is no longer able to pursue
attractive market opportunities (2009 Annual 10-K Filing, 2010). This is currently not the
situation at Coca-Cola.
Stock Performance
A company's past stock performance is not an absolute predictor of its future stock
performance as many factors affect stock price, with current economic conditions and events
having a significant effect. Nonetheless, historic performance can indicate whether a stock is
particularly risky, and historic comparisons with competitors can be instructive in understanding
the company's investment potential. The following chart illustrates stock prices for Coca-Cola
and two of its largest competitors, Pepsi and Dr. Pepper/Snapple ("The Coca-Cola Company,"
2009; "Pepsico," 2009; "Dr. Pepper," 2009): *Prices are not available for Dr. Pepper for the
entire five-year period because it was spun off from Cadbury.

80
70
60
50
40
30
20
10
0
1/2/2004
5-Year Price History, Coca-Cola (KO), Pepsi (PEP) and Dr. Pepper / Snapple (DPS)
4/2/2004
7/2/2004
10/2/2004
1/2/2005
4/2/2005
7/2/2005
10/2/2005
1/2/2006
4/2/2006
7/2/2006
10/2/2006
Date
KO DPS PEP
1/2/2007
4/2/2007
7/2/2007
10/2/2007
1/2/2008
4/2/2008
7/2/2008
10/2/2008
Coca-Cola 7
This chart illustrates that the industry as a whole tracks the same, but that Coca-Cola has
been consistently lower valued than Pepsi by the market in recent years, despite having
approximately the same price five years ago. The chart also illustrates that the gap between the
two companies has narrowed significantly recently, suggesting that Coca-Cola might be
undervalued relative to Pepsi by the market.
Opening the Pipeline
Coca-Cola had been criticized for keeping its eyes mainly on carbonated soft drinks for
many years longer than it should have, while consumers and the competition were embracing
energy drinks, sports drinks, ready-to-drink teas and the like (Theodore, 2008).
During the past several years, Coca-Cola acquired and developed a number of new
brands to broaden its presence in additional categories. In its largest acquisition to date, it bought
1/2/2009

Coca-Cola 8
Glaceau’s Vitaminwater and Smartwater brands in 2007. Several months before that, it acquired
fruit and tea drink-maker Fuze Beverages (Theodore, 2008).
This year, the company acquired 40 percent of Honest Tea, giving it an organic ready-to-
drink tea, as well as a presence in the natural foods retail channel. It partnered with Minneapolis-
based coffee chain Caribou Coffee on ready-to-drink coffee products in the United States and
Italy’s Illy Caffe internationally. Also internationally, the company acquired Jugos del Valle in
Mexico, and it made an offer last month for the Huiyuan juice company in China, which will be
its second-largest acquisition, at $2.4 billion, if approved (Theodore, 2008).
But Coca-Cola Chairman and 2008 beverage Industry’s Executive of the year Neville
Isdell says he did not want to see the company or the industry forget about the core carbonated
soft drink business in the rush to enter so many other categories. Isdell wanted to kick-start that
segment as well. The health and wellness movement had made an enemy of carbonated
beverages, but the primary concern was calories, Isdell has said. The company began using the
terminology “sparkling” beverages to distance itself from the negative connotations that had
taken over “carbonated soft drinks,” and it focused much of its research and development work
on zero-calorie beverages (Theodore, 2008).
Coca-Cola Zero, a zero-calorie cola that incorporated a blend of aspartame and
acesulfame potassium to taste more like full-calorie sweeteners, hit the market in March 2005.
The product steered clear of references to diet, and even low-carbohydrate, which was the diet
catch-phrase of the moment. Instead, it went with an edgy black label and tie-ins to NASCAR,
Fantasy Football and other more male-oriented promotions. The strategy paid off in reaching
male consumers who previously refused to drink diet products, and last year the brand hit the
billion-dollar mark with sales in 55 countries. That made Coke Zero the company’s most

Coca-Cola 9
successful new product launch in 25 years, which coincidentally, was the introduction of Diet
Coke. With both its diet bases covered, the company devised what it calls the “three-cola
strategy” for its trademark brands, with Coca-Cola Classic, Diet Coke and Coke Zero each
hitting a specific target audience (Theodore, 2008).
Water “the real thing”
Along an industrial stretch of North Cobb Parkway in Marietta sits a bottling
facility, owned and operated by Coca-Cola Enterprises. It was built in 1968, a sprawling plateau
of blond brick and siding. On the front, facing the parkway, a weathered Coca-Cola logo hangs
next to a long tinted window. Inside, bottles wind down a gleaming silver production line,
watched over by some of the facility's 112 workers. Unseen by passersby, however, are the
millions of gallons of municipal water being pumped into the building, water which since 2001
has been used to fill bottle after bottle of Dasani (Kwon, 2009).
The Marietta facility is one of roughly thirty Dasani bottling plants around the United
States, each of them using water from local municipalities. The company pays for the raw
material, of course; in Marietta, Coca-Cola Enterprises buys water from Marietta Power &
Water, which gets its supply from the Cobb County-Marietta Water Authority, which itself
draws the water from the Chattahoochee and Lake Allatoona. For every thousand gallons above
the 2,000-gallon mark, the Marietta utility charges $2.88. So in January, for example, when the
plant that bottles Dasani (along with other beverages. such as Diet Coke) consumed 9.6 million
gallons, its water bill was likely around $27,000 (Kwon, 2009).
That may look like a hefty bill, but considering the profitability of bottled water, it is
more like a drop in the bucket. For example, a bottle of Coca-Cola and a bottle of Dasani may
retail for relatively the same, but a can of Coke requires syrups and flavorings, additives not

necessary for the production of Dasani. According to a four year study of the bottled water
Coca-Cola 10
industry by the New York, based Natural Resources Defense Council, a bottle's worth of water
costs the manufacturer only around 10 percent of the products marked up price. The other 90
percent goes to pay for things like bottling, packaging, shipping, retailing, a profit, and of course
marketing (Kwon, 2009).
While 80 percent of Coke's business worldwide is in carbonated drinks, water is on the
rise. Last year, the company's soft drink sales in North America were down, while sales of "still"
beverages such as Dasani were increasing. Coca-Cola Enterprises, the world's largest bottler of
Coca-Cola products (and an independent company, though 35 percent owned by Coca-Cola),
also credited growing still-beverage sales as contributing to its turnaround from a worldwide
$1.1 billion loss in 2006 to a $711 million profit in 2007. And the bottled water market, already
raking in $12 billion a year, is only getting bigger (Kwon, 2009).
Intrinsic Value
The legend of the Christmas benefactor with long white whiskers bearing gifts for good
boys and girls has its origins in St Nicholas, Bishop of Myra and patron saint of Russia and
Greece, who lived in the third century. The image of Santa with Coca-Cola red trousers, short
trimmed jacket, and shiny black boots and belt, carrying a sack full of toys on his back, was
firmly embedded in American culture with an advertising campaign used by The Coca-Cola
Company (Thorton, 2007).
The man responsible for creating the warm, friendly, rather plump gentleman with the
twinkling eyes and rosy cheeks used in so many of Coke's advertising campaigns, is Swedish-
American, Haddon Sundblom (1899-1976). He designed the annual Coca-Cola Christmas
advertisements that ran from the early 1930s until 1964. The images depicting Santa delivering

Coca-Cola 11
and playing with toys, raiding the fridge for a bottle of Coke, and chatting with wakeful children,
have been reproduced on Christmas collectibles ever since. They appear on die cast trucks,
jigsaw puzzles, tins of playing cards, pins, plates and ornaments. The characters in the original
oil paintings, which have been exhibited around the world, were based on real people. Sundblom
first modeled Santa after a friend, and then, himself. The children he drew lived in the
neighborhood and even the dog featured in Sundblom's final advertisement belonged to a local
florist (Thorton, 2007).
Discussion
As Coca-Cola enters an exciting new decade of growth, they do so with a strong
foundation. Coke’s widely recognized and valued brands, solid financial position and unmatched
global presence gives great confidence that Coke can continue to capture a growing share of the
projected $1 trillion market for nonalcoholic ready-to-drink beverages by 2020. As global
populations grow, economies expand, and middle-class, urban lifestyles emerge, Coke can see an
environment that is very positive for a business that provides simple and affordable moments of
pleasure and refreshment, for cents at a time, more than one and a half billion times every single
day.
Review of Findings
The past year was one chapter in an ongoing growth story for The Coca-Cola Company.
It was an important year because it reaffirmed confidence in the company’s ability to weather an
extraordinary global economic crisis and continue to grow. Looking ahead to the year 2020,
Coke management is convinced that these next few years will be critical in defining the future
for The Coca-Cola Company and system partners. In a growing world of refreshment, the
opportunities ahead are tremendous.

Summary and Conclusions
Coca-Cola 12
Coca-Cola's longevity and relatively strong performance even during the recent stock
market turmoil indicates that this is a stock that has the most appeal to long-term investors. This
is not a stock where investors can "get rich quick" because it is going to have a revolutionary
new product enter the market, as a high-tech company might, nor is it a company that pays large
dividends. However, with a current dividend yield of 3 percent, smaller investors and those who
do not want to tie up their money for long periods of time may find this an attractive investment
and relatively safe in terms of principal for providing an alternative to savings accounts.

References
The Coca-Cola company. (2009). Yahoo.com. Retrieved April 2, 2010, from
http://finance.yahoo.com/q/bc?s=KO
Coca-Cola realizes big third quarter earnings. (2009, July 21). Convenience Store News.
Dr. Pepper Snapple group. (2009). Yahoo.com. Retrieved April 2, 2010, from
http://finance.yahoo.com/q?s=pep
Coca-Cola 13
Kwon, E. (2009, November 12). Coca-Cola: A powerful brand. Business Week Online. Retrieved
April 2, 2010, from
http://www.businessweek.com/investor/content/nov2009/pi20091110_159147.htm
Pepsico, Inc. (2009). Yahoo.com. Retrieved April 2, 2010, from
http://finance.yahoo.com/q?s=pep
2009 10-K filing, Coca-Cola company. (2010, February 23). Atlanta, GA: The Coca-Cola
Company. Retrieved April 2, 2010, from http://www.thecoca-
colacompany.com/investors/pdfs/form_10K_2009.pdf
Wedekind, J. (2008, September-October). The commercial games. Multinational Monitor, 29,
47-53.
Thorton, Z. (2007, December). Happy coca-cola Christmas. Antiques & Collecting Magazine,
12, 46-49.
Theodore, S. (2008, October). E. Neville Isdell, 2008 Executive of the year. Beverage Industry
Magazine, 10, 44-50.