Executive Summary of Coca Cola

Execute Summary about the products of Coca-Cola:

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Question: I In need of executive summary only

2.      Marketing Audit

Complete the Marketing Audit begun in Week Two, using the Marketing
Audit Overview as a guide.

Write a 3,500-4,200-word executive memo, summarizing your findings and

recommendations. The memo should consist of the following:

a.      Executive Summary

b.      Table of Contents

c.      Summary conclusion for each part of the audit, followed by

bullet points listing key findings and supporting evidence, including
numerical data

d.      Recommendations to improve the marketing effectiveness of

the subject organization

History

There are some major events in the life of the Coca-Cola Company that
have an impact on the company today, these include:

1886: Coca-Cola, the beverage, was first produced by John Pemberton. It

was sold at fountains at a Jacobs’s pharmacy, a local pharmacy in
Atlanta, for 5 cents a glass. Frank Robinson named the drink Coca-Cola
and wrote it in his own unique script, to this day Coca-Cola is written
in the exact same way. They used to sell an average of 9 glasses of
Coca-Cola a day.

1891: John Pemberton sells the company to Atlanta businessman, Asa

Griggs Candler for $2300. Asa brought vision to the business and the
brand. He used innovative ways to introduce people to the drink. He made
sure people saw the Coca-Cola symbol everywhere by using aggressive
promotion.
1893: Pepsi-Cola, Coca-Cola’s biggest rival, is created, originally
called “Brads Drink”

1894: The drink gets put into bottles- the beginning of the portable
drink.

1895: The drink started to go national, Candler opened syrup factories

in Dallas, Chicago and LA.

1898: Ernest Woodruff purchases the company from Asa Candlar

1899: Coca-Cola is now sold for $1.00 per bottle

1900: Two bottling companies operate for Coca-Cola

1902: The first Pepsi-Cola factory is formed due to its increasing

popularity and demand

1916: The formation of the contour Coca-Cola bottle, to counter against

competitors. It is still used today.

1920: Total of 1000 bottlers for Coca-Cola

1923: Robert Woodruff becomes new company president- vision for the
company was to make Coca-Cola within “arms reach of desire, across the
globe”

1941: America enters WWII, Woodruff orders that “every man in uniform
gets a bottle of Coca-Cola for 5 cents, wherever he is, and whatever is
costs the company.”- This strategy helped introduce the Europeans to
the beverage for the first time. By the time peace came, Coca-Cola was
already doing business overseas. Coca-Colas “post-war America” that
it painted in its advertisements was alive with optimism and prosperity-
happy couples at the drive-in, carefree moms driving big yellow
convertibles thus it incorporated itself into what we now know as the
American Culture.

1960: The number of countries carrying out Coca-Cola bottling operations

doubled from what they were in 1940.

1961-1966: Coca-Cola Company decided to expand its product line; they

introduced Sprite in 1961, TAB in 1963 and Fresca in 1966

1970: Coca-Cola really honed in on their advertising technique- their

advertisements from now on would reflect a brand totally in tune with
fun, playfulness and freedom

1971: “I’d like to buy the World a Coke” advertised for the first
time- embodying the international appeal of Coca-Cola.

1978: the only foreign company selling packaged cold drinks in the
People’s Republic of China.

1981: The introduction of Diet Coke, a reaction to the world’s new

craze of fitness and health.

1985: The introduction of New Coke, a BIG MISTAKE, according to critics

as “the biggest marketing blunder ever”. They changed it back to
Coca-Cola Classic, after sales and profit plummeted well below
competition. The changes back to the original lead them into a lead over
competition- a lead that continues today.
1989: After the fall of the Berlin Wall, the Coca-Cola Company invested
heavily to build plants in Eastern Europe. As the century closed, more
than $1.5 billion was committed to new bottling facilities in Africa.

1990: PowerAde® and Fruitopia® introduced

1993: The introduction of the popular, “Always Coca-Cola”

advertising campaign. New brands further expanded through acquisitions
of popular, local, companies across 120 countries around the world
(Thumbs-Up- India).

2004: Implementation of Manifesto for Growth

2006: More than 1.3 billion servings from a brand of The Coca-Cola
Company each day.

Background

Coca-Cola Beverages Ltd. is the largest bottler of soft drink products

in Canada and one of the largest Coca-Cola bottlers in the world. The
Company, through its subsidiary Coca-Cola Bottling Ltd., sells,
distributes and produces under license Coca-Cola soft drink products and
non-carbonated beverages, as well as various Canada Dry, Schwepps, A&W
and Nestea trade-mark products. The Company also distributes Evian and
Volvic natural spring waters and is responsible for approximately 98
percent of all production of Coca-Cola soft drink brands in the country
and accounts for 95 percent of all sales of Coca-Cola products. Coca
Cola Beverages operates in all ten provinces with over 3,700 employees.
The Company markets and distributes beverages to Canadian retail
consumers and customers, as well as to wholesalers and other bottlers.

Five Year Financial Analysis

In 1995, Coca-Cola Enterprises experienced their first annual profit

since 1991. (see exhibit #1 for financial graphs) Their profit was $4
million compared to a loss of $16 million in 1994. Their three years of
losses totaled over $200 million with their largest in 1993 at $139
million.

Coca-Cola's sales volume increased for the second consecutive year with
an 8% increase over 1994 totaling $232.8 million. Their stock price
nearly doubled over the previous year with a closing market price of
$4.30 in 1994 and a closing market price of $8.50 in 1995. The earnings
per share for 1995 were 0.01 per common share compared to a net loss of
$0.47 in 1994. The earnings per share had a net loss since 1991.

Throughout 1995 Coca-Cola also embarked upon and continued various

programs to cut costs and increase revenues. The company succeeded, by
decreasing their operating expenses by 4% in 1995. Operating income was
double 1994's at $60.3 million and a $9 million decrease was achieved in
Selling, General and Administrative expenses.

Importantly, Coca-Cola was able to decrease their long term debt by $18
million throughout 1995. They still have high interest payments but
will continue to pay off their debt in the future. Their debt-to-assets
ratio shows they are increasing relying on borrowed funds to finance
their investments. Their debt-to-equity ratio reveals that they have a
high debt balance in their capital structure.

The company's liquidity is in a stable position. Their current ratio is

currently approximately 1.0 which is the recommended rate. Their quick
ratio is approximately 0.6 Coca-Cola is a good position to meet their
short term obligations.

Analysis

Strategy

Goals

Coca-Cola Enterprise's primary goal is to increase shareholder value

over the long term. This goal is one that has been evident in the
company for a number of years. Their secondary goals include keeping
costs low while providing quality products to their customers, and to
increase consumer per capita growth.

Product

Coca-Cola offers a wide range of products to meet the demands of their

customers. Coca-Cola sells, distributes, and produces soft drink
products and non-carbonated beverages in Canada. The company also
distributes Evian and Volvic natural spring bottled waters.

Market Scope

Their target markets are primarily adults, principal grocery shoppers,

youth, and young adult.

Competitive Premise

Superior efficiency

In 1995, Coca-Cola completed their strategy-based restructuring and

re-engineering which enhanced their operational efficiency and
effectiveness. The aggressive acquisition strategy in 1992 and the
subsequent restructuring program, such as consolidating production
facilities and reducing inventory points, have created a consolidated
bottling system across Canada. This results in reducing operation costs
and increasing efficiencies in production. In addition, by using their
Beverage Provider Model, a process to re-engineer the business practices
and the information technologies, they are able to improve the
flexibility in operations and reduce costs.

The company's Vision 2000 initiative focuses on measuring how they will
become the best beverage company in the world by the year 2000. This
builds on the progress that was started with the restructuring and
re-engineering in 1993. Vision 2000's ultimate objective is to increase
shareholder value. This goal will be achieved through improving the
link between strategy and operations, improving competitive advantage,
removing unnecessary complexity from the business area, and improving
productivity.

Over the past few years, the company established various cost saving and
revenue enhancing programs. In 1993, the company cut costs by closing
some bottling plants and decreasing the work force. As the result, the
company reduced a significant among of net loss in 1994 and achieved a
net income in 1995. In 1995, the company launched a revenue enhancing
campaign, called Operation RED. It was designed to grow per capita
consumption in all of the company's product lines. These strategies
resulted in significant growth in gross profit and a decrease in
operating expenses.
Superior quality

Through Total Product Management, which emphasizes quality in every

stage of the operations, and through data codes, which help ensuring
optimum taste for products, the company can achieve and maintain
excellence in quality.

Superior innovation

Coca-Cola continues to produce new products and improve their existing

lines. Their mission is to be the best beverage company in the world.
They are in a good position because of their wide range of products to
satisfy all of their customers.

In 1995, the company continued to capture new markets and respond to

changing consumer tastes by introducing new flavors of their Fruitopia
line, Powerade sports drinks, and adding Evian and Volvic bottled water
to their product line.

Superior customer responsiveness

Through 1995, the company developed a multi-year initiative, Project

MAX, that pursues superior customer responsiveness, quality and
efficiency altogether. The company is focused on flexibility,
reliability, quality and costs. Its task is to increase the
responsiveness of the customers' needs, while producing the highest
quality products at the lowest cost.

Through the advance Electronic Data Interchange (EDI) technologies which

are implemented into the company's information system, the employees
can easily access to the operational information, such as consumer
information, sales, and promotions. This enhances the employees'
knowledge and increases their responsiveness to the customers.

The company's Billing and Accounts Receivable quality initiative

enhances the quality of their invoicing and collection process which
will in turn improve customer satisfaction and reducing operating
expenses.

Environment

Soft Drink Industry

Soft drinks represent about one-third of the $4.4 billion beverages

Canadians purchase in supermarkets each year. (see exhibit#4) Soft
drinks are the largest selling food category in Canadian grocery stores.
It ranks sixth among all consumer products sold in Canada's drug
stores, with annual sales over $130 million. Soft drinks sales are
expected to grow rapidly with sales volumes increasing more than 22
percent since 1988. The total consumption of soft drinks is
approximately 3.1 billion litres annually in Canada.

Competition

Coca-Cola operates in a very competitive environment. Their main

competitor is Pepsi Cola Company. There is also significant competition
from private label competitors. In 1993, Coca-Cola was loosing market
share to the cheaper private label firms, but reacted quickly with a new
marketing program, new technologies and packaging in 1994.

The intense competition results in downward pressures on the price.

There is an increasing need for continual innovation of products and
packaging. Every one cent movement in the selling price of their
products results in a drastic change in their net income. Based on
current sales volume and net operating revenues, a one cent decrease in
selling price can result in an approximate decrease of $1.1 million in
net income before taxes.

In 1994, Cott beverages held 25% of the soft drink market share.
Coca-Cola and Pepsi were determined to regain their market share and
were partaking in price wars. They reduced their price as much as 25%,
which put Cott in a difficult position. It is also harmful for
Coca-Cola to partake in such activities because they could potentially
decrease their total sales revenue. It is very important for Coca-Cola
to maintain a healthy market share because of the flat nature of the
soft drink market. Growth in this industry comes from increasing your
market share.

Government Regulations

Ontario regulations require soft drink companies to produce their

products in refillable containers to reduce waste. Since 1988,
Coca-Cola Beverages has reduced its overall packaging waste by more than
50 percent, surpassing the National Packaging Protocol's target. The
company has stringent environmental standards. However, the company's
objective for the future is to significantly increase the sales of it's
refillable containers in Ontario.

Human Resources

Coca-Cola's Board of Directors is formed by 11 directors, each of whom

is responsible for different geographical areas which are all strongly
experienced and highly academic. The chairman of the board, Joseph
R.Gladden has been a director in Coca-Cola since 1987. William P.
Casey, President and Chief Executive Officer of Coca-Cola Beverages, has
28 years of experience in the soft drink industry.

William P. Casey has been instrumental in the Company's continued

transformation of introducing new initiatives during 1995. For his
efforts, he was honored by Beverage Industry magazine as its 1995
Executive of the Year for "...his determination and dedication to the
business and for being a great team-builder."

Technology

In 1995, Coca-Cola introduced automatic stretching machines to their

production plant to reduce pallet shipping damage and increase their
speed distribution. This new innovative technology reduced their
overall expenses and will increase the company's profitability for the
future. In 1995, a new packaging system was developed which made it much
easier and faster for Toronto plants to service food service outlets.
Coca-Cola is continually invoking new programs and technology to
increase their product quality and profitability.

Manufacturing

One major cost of production for the company is the cost of the
aluminum. Throughout the beginning of 1995, the cost of aluminum
increased. Due to the increase, the company decided to switch from
aluminum to steel cans with $70 per ton of steel compared with $1500 per
ton of aluminum.

A significant portion of the company's product costs are attributable to

commodities such as aluminum and steel. Coca-Cola works closely with
their suppliers to improve cost efficiencies for the company and the
supplier. An increase in their product costs can put upward pressure on
the selling price of their products.

Marketing

Coca-Cola Enterprise strengthened their sales leadership through

innovative marketing programs, the introduction of new brands and unique
packaging designs in the past few years. They focused on consumer
demand for a wide variety of brands and products and on the
understanding of the diverse beliefs, motivation and needs of distinct
consumer groups.

The company's marketing objectives include increasing brand preference,

obtaining greater consumer satisfaction and increased sales. They
accomplish this through innovative packaging, value enhancing
promotions, point of purchase merchandising techniques, and high impact
advertising.

Throughout 1995 the company continued to capture new markets with the
introduction of new brands and products. They introduced 5 new brands of
Fruitopia fruit flavored iced teas. Fruitopia sales increased by 400%
throughout 1995 and became one of the leading non-carbonated beverages
in convenience stores. Non-carbonated drinks represent one of the
company’s key opportunities to increase revenue in the future. The
company's non-carbonated beverage volume grew by 25.6 percent over 1994.

In May1995, the company continued to build upon their non-carbonated

drinks by introducing PowerAde sport drink. This is the official drink
of the 1996 Atlanta Olympics. This represents a large opportunity for
the company to advertise and increase their sales. The Coca-Cola
product line also started a intense advertising campaign for the
Olympics. Throughout 1995, the company reinforced their position as the
official beverage provider at key Canadian venues. They had a new theme
park association with Paramount Canada's Wonderland. They also promoted
Sprite as the drink choice for the Vancouver Grizzlies, one of the new
Canadian NBA teams.

To further expand their product line, they finalized an agreement to

distribute Evian and Volvic bottled water. These brands are the leading
natural spring waters in the world. With this addition, Coca-Cola
enhanced it's ability to be the primary provider of non-alcohol and
non-diary beverages for a number of its customers.

In 1995 and previous years, the company utilized point of purchase

displays, various contests to encourage purchase of different products
and brands, and intense television, radio, magazine, and newspaper
advertising.

In 1991, Coca-Cola took advantage of a large untapped market. They

installed thousands of counter top fountains in small businesses and
offices. This marketing project targeted small businesses that did not
qualify for the large vending machines. The company continued to
install over 100,000 units.

Service

The company has a 1-800 number for customers who are interested in
obtaining information on the company. They ensure that they are
portrayed as an approachable and caring company to their consumers and
customers.
Values

Coca-Cola's management team's objective, along with the rest of the

organization, is to create and increase value for the shareholder. They
obtain results through their people. Their employees are very important
to them and receive continued thanks for their contributions, enthusiasm
and dedication.

Organization

Structure

Coca Cola Beverages Ltd. has a functional structure (see exhibit #6).
By establishing the functional structure, the organization becomes more
specialized and productive in each function. By focusing on the best way
to divide into functions, Coca Cola has created core competencies that
allowed its products to outperform its competitors.

In 1995, the company created an efficient distribution department to

manage the flow of beverages from the warehouse to the customers so that
beverages would be available to customers in the shortest possible time.
Coca Cola has also developed a sophisticated sales and marketing
department to target the company's main market segment , design
marketing campaigns and install vending machines country-wide.

Culture

The company continues to move to a "learning culture", a company culture

that will institutionalize the process of rapidly learning from every
aspect of its environment: its consumers, its customers, its partners,
its competitors, seemingly unrelated organizations, and, its own
mistakes.

Year 2000 Challenges

The soft drink industry is very competitive and the management team of
Coca-Cola doesn't expect any change in the future. The company faces
the difficulty of generating year on year profit growth in a market that
is essentially flat. In order to grow in this industry, you need to
increase your market share.

Coca-Cola faces the difficulty of keeping costs low and producing high
quality products at the same time. In a highly competitive industry,
there is an increasing downward pressure on sale price. Their Vision
2000 initiative shows that the company is serious about becoming the
best beverage company in the world by the year 2000. They need to
continually evaluate their current strategies to see if they are in line
with the year 2000 goals.

The company also needs to continue working closely with their suppliers.
It is important to try and keep their product costs low. They could
face rising costs of steel and sweetener in the future.

Coca-Cola needs to be aware of what is going on in the external

environment at all times. They operate in a rapidly changing
environment and it is extremely important that they are aware of all
major issues and update their strategies to reflect any changes.

With the increasing popularity of juice and bottled water, the company
may find their major brand sales shifting from carbonated to
non-carbonated beverages. Currently, 76% of their brand sales volume is
from their Coca-Cola and Sprite line. This may require the company to
shift their focus and target their marketing efforts more to the group
of individuals who drink bottled water, sport drinks, and juices.

Coca-Cola, with their various 1995 initiatives, seemed prepared for the
year 2000. They have various programs that will bring them closer to
their goals.

Internal & External Factors

There are many factors, internal as well as external that impact the
planning function of management within an organization, and Coca-Cola is
no exception. More than a billion times every day, thirsty people
around the world reach for Coca-Cola products for refreshment.
Coca-Cola is the most popular and biggest-selling soft drink in history,
as well as the best-known product in the world. The Coca-Cola franchise
covers a population of approximately 398 million people. Coca-Cola
Enterprises employs approximately 72,000 people who operate 463
facilities, 54,000 vehicles and approximately 2.4 million vending
machines, beverage dispensers and coolers.

Rapid Change

The Coca-Cola Company experienced a period of rapid change during the

1900 through

1909 timeframe when the company experienced a period of rapid growth.

This rapid growth was attributed to three pioneers sectioning off the
country into territories and selling bottling rights to local
entrepreneurs. Their combined efforts attributed to advancements in
bottling technology which improved efficiency and product quality. “By
1909, nearly 400 Coca-Cola bottling plants were operating, most of them
family-owned businesses. Some were only open during hot-weather months
when demand was high” (Coca-Cola, 2004). During the 1920’s and
1930’s Coca-Cola began its international expansion led by Robert W.
Woodruff, who was the Chief Executive Officer and Chairman of the Board.
Coca-Cola plants were opened in France, Guatemala, Honduras, Mexico,
Belgium, Italy and South Africa. “By the time World War II began,
Coca-Cola was being bottled in 44 countries” (Coca-Cola, 2004).
These two different periods of time were when Coca-Cola experienced its
most crucial rapid change due to bottling innovation and company
expansion.

Globalization

Beginning in the 1920’s building their global network, Coca-Cola is

now the “world's leading manufacturer, marketer, and distributor of
nonalcoholic beverage concentrates and syrups, used to produce nearly
400 beverage brands in over 200 countries” (Coca-Cola, 2004).
Competing globally is a difficult task due to the unpredictability of
foreign markets (Bateman &Snell, 2003). Coca-Cola not only recognized
the opportunity in the global market but was able to expand
successfully. Canada and Panama were the start of their global market in
1906. Since then they have expanded throughout the world. Coca-Cola
successfully meets consumer’s tastes globally; as a result 70% of
their income is from outside the United States (Coca-Cola, 2004).

Technology

Coca-Cola originated as a soda fountain beverage in 1886, and at that

time sold for only five cents a glass. While “early growth was
impressive, it was only when a strong bottling system developed that
Coca-Cola became the world famous brand it is today” (Coca-Cola,
2004). Along with its network of bottlers, the company comprises the
most sophisticated distribution system in the world.

When we think of how far we come, it’s somewhat difficult to believe

that not all places have risen to our level. “In some of the higher
elevations of the Andes, Coca-Cola is sometimes transported by
four-legged power” (Coca-Cola, 2004).

E-Business

Innovation

The market today is always changing. A company must be in tune with what
consumers want. Consumers get bored, and often want new products. In
order to meet the wants and needs of customers a company must introduce
new products or services (Bateman &Snell, 2003). Coca-Cola in an effort
to meet customer’s needs created C2 which is a low carb soft drink.
This was in response to the low carb diets and the demands of consumers.
They also intend to launch a new soft drink called Coca-Cola Zero.
This is a zero calorie soft drink. Knowing the importance of innovation
the Coca-Cola Company has always strived to create new products. They
already have Coke with Lime, Lemon, Vanilla and Cherry. Raspberry will
be the new flavor added to Coke coming soon. They also have plans to
sweeten Diet Coke with Splenda, a sugar substitute that is safe for
diabetics” (Coca-Cola, 2004).

Diversity

The diversity at the Coca-Cola is evident with their presence in more

than 200 counties. They feel that they are empowered within their
business structure as well as the communities they serve because of
their differences. Their attribute their success to their consistent
values. They understand that their future growth is “dependent upon
their ability to develop a worldwide team that is rich in its diversity
of people, cultures and ideas” (Coca-Cola, 2004). Knowing that
diversity is not limited to the internal structure of an organization,
Coca-Cola has used this same approach regarding their suppliers.
Through their supplier diversity program they are building relationships
with minority and women owned businesses by giving them equal access to
procurement opportunities.

Ethics

The Coca Cola Company seems to pride itself on the ethical foundations
of honesty and integrity. Coca Cola believes that these two ethical
foundations are “the cornerstone values of the Coca-Cola Company”
(Coca-Cola, 2004). The following from The Coca-Cola Company regarding
their employee’s obligation to uphold the company’s ethical
standards, “As company representatives, we all have the responsibility
to act in every situation according to the highest standards of ethical
conduct” (Coca-Cola, 2004). Coca-Cola institutes that its employees
are the representation of the ethical standards behind the product.
Coca-Cola has had some challenges throughout its existence as a company
(i.e. “New Coke”) and has felt the need to face each and every
situation with Honesty and Integrity, believing that in order to remain
valid and legit in the market place, a company must retain its ethical
standards at all times.

Market Position of Coca Cola in the US

Coca Cola plays a major in its industry, not only in the U.S, but also
all over the globe. Coke is single handedly the most popular soft drink
anywhere, beating out its competition, Pepsi Co. Overseas, Coke has
established its empire from South America to Africa to all of Asia and
Europe. Coke is the world's top soft-drink company. The Coca-Cola
Company owns four of the top five soft-drink brands (Coca-Cola, Diet
Coke, Fanta, and Sprite). Among its other brands are Barq's, Fruitopia,
Minute Maid, PowerAde, and Dasani water. In the US it sells Group
Danone's spring water brands (Dannon and Sparkletts). Coca-Cola sells
Crush, Dr Pepper, and Schweppes outside Australia, Europe, and North
America. The firm, which does no bottling, sells about 400 drink brands,
including coffees, juices, sports drinks, and teas, in some 200 nations.
Coke’s position is so powerful in the market that it is the second
most recognized word anywhere in the world after “OK.” Even though
many nations overseas feel the impact that Coke has, the individuals at
Coke has assured that their presence is felt here in the US also. Coke
has established itself into many facets in the US that makes this
company stand out. For instance, Coke makes a continuous effort to
introduce a new product, i.e. new Vanilla Coke. Coke also boosts its
market positioning the states with the many youth partnerships, TV
commercials, sports, music, and community service.

Major Moves by Coke

Like many companies, Coke is far from perfect and like many other
companies may sometimes go through their share of crisis and their fair
share of big decisions. Recently, it was reported in the Boston
Business Journal, that Coca Cola is going to sign an eight year
extension with there long time team sponsor, world champion Boston Red
Sox. This deal was brought because of the clubs big success and to
commensurate the attendance and market size of Boston. Since Coke is
the clubs most active sponsor, the deal solidifies Coke as a major
player within major league baseball. This move is especially
significant because Pepsi is Major League Baseball’s official soft
drink sponsor; however Coke is attempting to acquire this from its
competition by getting pouring rights in all of the parks, which it
already has in about half of the MLB ball parks.

Ratio Analysis

Profitability ratios are reported to assist in the interpretation of

the companies, in this case Coke’s, operating efficiency. One
profitability ratio is the return on assets (ROA) of a company, which
measures the net income stated as a percentage of total assets.
Currently, Coke has an ROA of 15.6%. This means that 15.6% of there net
income is a total of there net assets. Compared to the industry, which
has an ROA of 9.2%, Coke is has large amount there net income going into
there total assets. This means that eventually, Coke will acquire
greater income in the future. Another profitability ratio is the ROE,
return on equity. Return on equity measures the net income stated as a
percentage of stockholders equity. This means that whatever a companies
ROE is it is the percentage of stockholders equity of that particular
company. In Cokes case, there ROE is 30.6%, compared to the industry
average which is only 25.1%. After analyzing this, I see that coke has
a major part of its income going to stockholders, whereas most other
companies do not have as much. With this said Coke gives more incentive
to invest in its firm because if gives a higher return compared to other
companies in the industry. This appears to not be a new trend for Coke
because when you take a look at their 5-year average, they have totally
been consistent in their actions. There 5 year ROA average is 14.5%
compared to 5-year industry average of 7.9%. There 5 year ROE average
is 30.2% compared to the 5-year industry average of 23.4%. Consistency
is truly the key to success.

Market Value

The most popular price ratios used are the Price/Earnings ratio and the
Price-Cash flow Ratio. Both of the following ratios measure or try to
measure the value of a companies stock. In term of Coke, their current
P/E ratio is 21.7 and the industries current P/E ratio is 20.3. What
does all of this mean? Well when analyzing the P/E ratio of Coke
compared to the industry, Coke appears to be value stock. This means
that compared to the industry, Coke’s P/E ratio is relatively equal so
this investment would represent a good investment value. The second
popular price ratio is the price-cash flow ratio, which is defined as
the current stock price divided by the current cash flow per share. In
regards to Coke, there price cash flow ratio is 18.20 compared to an
industry average of 13.5. Also when analyzing, we took into
consideration Cokes earnings per share (EPS); since there EPS is 6.60
which is lower than there cash flow of 18.20 than you can assume that
this is a signal of good quality earnings. This makes Coke an
interesting stock to consider.

Recent Stock Price Analysis

Recent tracking of Coca Cola Co. shows volatility in stock price. The
exhibit 1 on page 6 shows a stock price chart for the months of October
and November. Coca- Cola is traded on the New York Stock Analysis
(NYSE). The Coca-Cola Co. (KO) stock price hit a 52- week low of $38.30
on October 26th 2004, Just 4 days after Coca-Cola Co. announced 3
quarter earnings for 2004. The announcement on October 21st 2004
reported earnings per share of $0.39, compared with $0.50 for the prior
year’s third quarter. Due to the impact of weak operating conditions
in key business units, particularly North America, Germany and in
Northern Europe and other operating charges, operating income for the
3rd quarter declined 24%. Coca-Cola Co. announced on Nov.11th 2004 a
lowering of long-term targets and increase in spending on innovations
and marketing. The market responded by trading the highest volume in the
last two months of almost 20 million shares. Overall stock price in the
last 3 months have declined -11.52%. Overall the stock price has been
not indicated any big changes between October 18th and November 22nd,
with $39.24 and $39.87 respectively.

The Coca-Cola Company’s performance relative to the industry and to

its main competitor PepsiCo has been weak and the future seems trends
will remain the same. The chart below shows the performance of
Coca-Colas stock price compared to PepsiCo is the last 3 months.

After lower expectations for the future and a decrease in earnings due
to operation costs and weak sales the company is increasing their
investment in the innovation research and marketing. The Wall Street
Journal reported that the average response of investment analysts is
that “holding” the stock is the best choice for an investor. At this
point, as conservative investors, Jimmy, Reueul and Javier would not
short sell Coca-Cola stock because liquidity ratios are lower than the
industry average. Coca-Cola’s current ratio and quick ratios are 1.02
and .74 compared to the industry averages of 1.21 and .86. On the other
hand if you invested 10,000 on Coca-Coca Co. common stock on October
18th 2004, the value of your investment today would be 10,247.20. Due to
the jump in price from $39.24 to $40.39 you would have earned 2.47% on
your investment. In conclusion, the Coca-Cola Co. is a profitable
investment. Depending on the type of investor, decisions made will
determine your return on your investment with the Coca-Cola Co.