strategic-management

Coca-Cola will continue to concentrate on its cola business but expand its water and
juice sales and continue growth in international markets. However, the North American
market generates 25.7 percent of revenue, and Coke will continue to spend heavily on promotion
and advertising in this market. Interestingly, Coke’s recent purchases of bottling
facilities account for 27 percent of revenues. Europe is the second largest market; it contributes
15 percent to revenues and it should also see continued promotional activity.
Kraft
Kraft Foods is currently in the process of reinventing itself by restructuring the organization
into two major divisions, North America and International. The North American division
is composed of Beverages, Cheese & Foodservice, Convenient Meats, Grocery, and
Snacks & Cereals. The International division consists of European Union and Developing
Markets. Additionally they have brought in new top management and six new independent
board directors. These changes are designed to strengthen the position of Kraft in the
highly competitive and dynamic markets in which it currently operates.
The Kraft financials in Exhibit 9 for 2008 show a 13.32 percent increase in net revenues
over 2007 to $42.201 billion. This growth is a continuation of increasing growth
from 2007. Growth from 2004 to 2006 was relatively stagnant with growth rates of 3.76
percent, 6.02 percent, and 0.71 percent, respectively. Kraft’s new strategies seem to be paying
off in increased revenue and possible future growth.
The North American Snacks and Cereals division produced $5.025 billion in
revenues in 2008, an increase of 3 percent over 2007 revenue of $4.879 billion. This division’s
products include Oreo, Chips Ahoy!, Newtons, Nilla, Nutter Butter and SnackWell’s
EXHIBIT 9 Kraft
Two-Year Annual Income Statement
(all numbers in millions) 12/31/08 12/31/07
Sales $ 42,201.00 $ 37,241.00
Cost of Goods Sold 27,185.00 23,711.00
Depreciation, Depletion
& Amortization 986.00 886.00
Gross Income 14,030.00 12,644.00
Selling, General & Admin Expenses 8,992.00 7,749.00
Total Operating Expenses 37,163.00 32,346.00
Operating Income 5,038.00 4,895.00
Non-Operating Interest Income 0.00 20.00
Earnings Before Interest & Taxes 3,849.00 4,351.00
Interest Expense on Debt 1,272.00 624.00
Pretax Income 2,577.00 3,727.00
Income Taxes 728.00 1,137.00
Minority Interest 0.00 0.00
Equity Interest Earnings 0.00 0.00
Net Income Before Extraordinary
Items & Disc Ops 1,849.00 2,590.00
Extraordinary Items & Gain(Loss)
Sale of Assets 1,052.00 0.00
Net Income Before Preferred Dividends 2,901.00 2,590.00
Preferred Dividend Requirements 0.00 0.00
Net Income Available to Common 1,849.00 2,590.00
Source: Thompson Banker (2008).
CASE 24 • PEPSICO — 2009 241