Strategic Management Case Study

Coca-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

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

1886
1892

1893
1904
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
1905
1918

In 1943, during
WWII General
Eisenhower
requested 10
bottle plants
to be shipped
to them
overseas,
which then
created an
overseas business.

1919
1940

1941
1959

In the 1928
Olympics located in
Amsterdam, CocaCola traveled
with the
team and
began
global
expansion

19601981

In 1985, was
the release of
a new taste
for Coca-Cola,
the first
change in
formulation
in 99 years. It
wasnt long
until they
changed to
their original

1982
1890

After 70 years, CocaCola added new

flavors: Fanta,
originally developed
in the
1940s and
introduced in
the 1950s;
Sprite followed
in 1961, with
TAB in 1963
and Fresca in 1966

1990
1999
New
beverages
joined the
Company's
line-up,
including
Powerade
sports drink,
Qoo
children's
fruit drink
and Dasani
bottled
water

Revenue and Cash Flow Growth 20052010

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 peoples 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-Colas 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 longterm return to shareowners (6). Through modern
technology (4) and inspiring
employees to be the best
1.
Customers
2.
Products or Services
they can be (9) we know
we can continue to provide
3.
Markets
4.
Technology
the best products
on the market.
5.
Concern for Survival
8.
9.

6.
Philosophy
7.
Self-Concept
Concern for Public Image
Concern for Employees

External Audit

Industry Market Analysis

Stock Price 2010

70

60

50

40
Stock Price 2010
30

20

10

0
Coca Cola

Pepsi Cola

Nestle

Dr. Pepper Snapple

Opportunities
1) Spurring demand for energy drinks, especially in the US where estimates
show about 2 billion.
2) Approximately 85% of the companys 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.

Threats
1)
2)

3)

4)

5)
6)
7)
8)
9)

Increasing preference for non carbonated healthy drinks. The Coca Cola soda saw a
5% volume declines respectively in the carbonated soda brands category.
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.
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.
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.
The primary beverage of Coca Cola is sparkling beverages, the most popular drinks
consumed worldwide, in their respective order, are water, tea, and beer.
Changes in currency rates. Coca-cola uses 74 functional currencies in 2010.
In 2010 had approximately 18,600 associates represented by labor unions.
PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67
Billion respectively. They are strong competitors in the market
PepsiCo dominated North America with sales of US $22billion,while Coca-Cola only
had about US $7billion.

CPM
KO
Critical Success factors

Weights

Rating

0.0 to 1.0

1 to 4

NSRGY

Weighted Score

Rating

PEP

Weighted Score

Rating

1 to 4

Weighted Score

1 to 4

Advertising

0.08

0.32

0.24

0.32

Product Quality

0.12

0.48

0.36

0.36

Price Competitiveness

0.10

0.4

0.3

0.4

Finanical Position

0.10

0.30

0.40

0.30

Customer Loyalty

0.14

0.56

0.42

0.56

Global Expansion

0.11

0.44

0.33

0.33

Market Share

0.07

0.21

0.28

0.21

Organization Structure

0.06

0.24

0.18

0.18

Customer Service

0.08

0.32

0.24

0.24

Production Capacity

0.10

0.40

0.30

0.40

Employee Dedication

0.04

0.12

0.16

0.12

Totals

1.00

3.79

3.21

3.42

EFE
Key External Factors

Opportunities

Weights
0.0 to 1.0

This is spurring demand for energy drinks, especially in the US which

according to the latest industry estimates is about 2 billion
Approximately 85% of the companys 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
Bottled water drinking has increased 11%.
European and China market show large potential to grow, growing into
these divisions more will help the revenue sales
Has the option, but no obligation, to assist bottlers with promotional
and marketing activities ($5 billion in 2010).
55 billion beverage servings are consumed worldwide each day
Global beverage industry is expected to grow from a valued $1.4 trillion
in 2008, to $1.6 trillion by 2013
India currently only consumes 11 8oz servings of KO per person per
year
The non-alcoholic ready to drink(NARTD) beverage industry is expected
to grow by 50 billion unit cases by 2020
Threats

Increasing preference for non carbonated healthy drinks. The Coca

Cola soda saw a 5% volume declines respectively in the carbonated
soda brands category
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.
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
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
The primary beverage of Coca Cola is sparkling beverages, the most
popular drinks consumed worldwide, in their respective order, are
water, tea, and beer
Changes in currency rates. Coca-cola uses 74 functional currencies in
2010
In 2010 had approximately 18,600 associates represented by labor
unions
PEP operating income and revenues both exceeded KO's by .85 Billion
and 7.67 Billion respectively. They are strong competitors in the market
PepsiCo dominated North America with sales of US $22billion,while
Coca-Cola only had about US $7billion
Totals

Rating
1 to 4

Weighted Score

0.06

0.24

0.04
0.04

3
2

0.12
0.08

0.04

0.08

0.05
0.06

2
3

0.1
0.18

0.05

0.15

0.04

0.08

0.15
0

0.06

0.18

0.06

0.12

0.09

0.18

0.07

0.21

0.07

0.28

0.04

0.08

0.05

0.1

0.05

0.2

0.08

0.05

0.32

2.85

Internal Audit

Financial Information
Income Statement

Financial Information
Balance Sheet (1)

Financial Information
Balance 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)
Liquidity Ratios
Current
Quick

Coca-Cola Pepsi Nestle

1.17
1.02

1.11
0.89

1.29
1.03

Leverage Ratios
Debt to total assets
Debt to equity
Long-term debt to equity
Times-interest-earned ratio

0.57
1.35
0.45
20.43

0.68
2.19
0.94
9.23

0.44
0.78
0.12
41.25

Activity Ratios
Fixed Assets Turnover
Total Assets Turnover
Inventory Turnover

2.38
0.48
13.25

3.03
0.85
17.15

5.12
0.98
13.84

Profitability Ratios
Gross Profit Margin %
EBT Margin %
Net Profit Margin %
Return on total assets %
Return on Stockholder's equity %
Price-earnings ratio

63.86
40.56
33.63
19.42
38.09
6.03

54.05
14.23
10.93
11.7
33.27
15.35

58.21
34.69
31.2
27.56
49.17
5.43

Growth Ratios
Sales Growth (5-years)
Net Income Growth (5-years Average)
Earnings per share Growth (5-year
Average)

8.74%
19.37%
19.92%

12.18
%
3.80%
9.16% 32.08%
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 worlds top five nonalcoholic sparkling beverage
brands including Coca-Cola, Diet Coke, Sprite and Fanta.
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

IFE
Key Internal Factors

Weights

Rating

0.0 to 1.0

1, 2, 3 or 4

Internal Strengths
With revenues of $35,119,000 million, Coca-Cola is one of the largest
beverage manufacturers globally
Coca-Cola owns four of the worlds top five nonalcoholic sparkling
beverage brands including Coca-Cola, Diet Coke, Sprite and Fanta

Weighted Score

3 or 4

0.07

0.28

0.08

0.32

0.07

0.21

0.06

0.18

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

0.05

0.15

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

0.09

0.36

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

0.04

0.12

Coca-Cola has more than 500 brands and 3,500 beverages and products
Coca-Cola sells 1.7 Billion servings of beverages per day in over 200
countries
Coca-Cola generated 8.5 billion in cash from operations in 2010, up 16%
over 2009

0.06

0.24

0.05

0.15

Sold 25.5 billion cases of products in 2010

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

Internal Weaknesses
Weak performance in Europe achieving a 0% growth in 2010
Does not hold number 1 spot for either the water brand or the leading
sports drink

0.06

3
1 or 2

0.18

0.02

0.02

0.06

0.12

0.07

0.07

0.03

0.03

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

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

0.02

0.04

0.07

0.07

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

Interest expense increased $378 million mainly due to premiums paid on
repurchasing long term debt
Common Stock Market Prices decreased between the first and second
quarter in 2010 from $52.23 and $49.47
Other operating expenses grew to $5,959 million in 2010 from $ 5,699
million in 2009

0.03

0.03

0.03

0.06

0.02

0.04

0.02

Currently does not hold a snacks segment, where Pepsi Co. has a food
division which creates for 60% of their total revenue
Does not perform best in North America, only accounting for 31.7% in total
revenue in 2010

Totals

0.04

2.71

Strategy Formation

SWOT Matrix
ST
Strength
s
ST

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. 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)

Threats

Opportunitie
s
W
1. Increase sports
O drink product
sales through sponsorship of
collegiate sports. (W2, W4, O1,
O6, O9)

2. Increase marketing in Europe.

(W1, O4, O6)

WT
1.Create a lower calorie sports drink line
to promote healthy drinking habits while
still providing the essential electrolyte
balance. (W2, W4, T1, T2)
2. Diversify products by entering the
healthy snack/snack food market. (W3, T2)

3. Take advantage of the

increasing demand for bottled
water by creating flavored water
drops. (W2, O3, O6, O9)

Weaknesse
s

Space Matrix
Financial
Strength

Ratings
1 Cash Flow
5.0
Price Earnings
2 Ratio
3.0
Earnings per
3 Share
5.0
4 Working Capital
7.0
Liquidit
5y
6 Net Income
Return on
7 Assets
Financial Strength
Environmental
Average
Stability

6.0
6.0

Profit
1 Potential

Rating

F
S

6.0

Financial
2 Stability

7.0

Resource
3 Utilization
Productivity,
4 Capacity utilization

Aggressive

Conservative
5

4.0

4.0

4.0

Rate of
1 Inflation
Barriers to Enter
2 the Market
Competiti
ve
3 pressure
Price
4 Elasticity
Demand
5 Variability
Price Range of
6 Competing Products
Ease of Exit
7 from Market
Environmental
Stability

Industry
Strength

Ratin
5.14
g
-5.0
-4.0
-2.0
-4.0
-4.0
-4.0
-6.0

5 Market Entry
Growth
Competitive
6 Potential
Advantage
Extent
Market
7 Leveraged
1 Share
Industry Strength
Product
Average
2 Quality

6.0
1

Ratin
3.0
g

C
S

-6

-5

-4

Customer
3 Loyalty
Capacity
4 Utilization
Technologically
5 Advanced
Global
6 Expansion
Product
7 Life Cycle
Competitive
Advantage
Average

-1.0
-3.0
-2.14

-2.0

-3.0

-1

4.6
-3.0

-2.0

-2

-1.02.0

-3

4
5

Defensive

Competitive

E
S

X Coordinate
Y Coordinate

2.43
1.00

IS

BCG Matrix

Segments
North America
Pacific

Europe
Latin America
Eurasia &
Africa
Total

Revenue
$11,205.
00
$5,271.0
0

$5,249.0
0
$4,121.0
0
$2,556.0
0
$28,402.
00

%rev
39.45%

profit
$1,520.0
0

%pft

18.56
%
18.48
%
14.51
%

$2,048.
00
$2,976.
00
$2,405.
00

20.63
%
29.97
%
24.22
%

9.00%
100.0
0%

$980.00
$9,929.
00

9.87%
100.0
0%

15.31%

Relative Market Industry Growth

Share
Rate (%)
1.00

4.40%

1.00

5.60%

1.00

5.30%

1.00

6.00%

1.00

6.50%

BCG Continued

Grand Strategy Matrix

Quadrant I
1. Market
development
2. Market
penetration
3. Product
development
4. Forward
integration
5. Backward
integration
6. Horizontal
integration
7. Related

Rapid Market Growth

Quadrant II
1. Market
development
2. Market penetration
3. Product
development
4. Horizontal
integration
5. Divestiture
6. Liquidation

diversification

Quadrant III
1. Retrenchment
2. Related
diversification
3. Unrelated
diversification
4. Divestiture
5. Liquidation
Weak
Competitve
Position

Quadrant IV
1. Related
diversification
2. Unrelated
diversification
3. Joint ventures

Strong
Competitive
Position

Matrix Analysis
Alternative Strategies

SPACE

GRAND

BCG

COUNT

Forward Integration

Backward Integration

Horizontal Integration

Market Penetration

Market Development

Product Development

Related Diversification

Unrelated Diversification

Retrenchment
Divestiture
Liquidation

IE

2
1

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 different countries prior to 2010
Unrelated or Related Diversification
We dont offer a food segment (Unrelated)
None of our main competitors offer an alcoholic beverage (Related)

QSPM
Create a
lower
calorie
sports drink
line/ while
still
providing
essential
electrolyte
balance.

Quantitative Strategic Planning Matrix-QSPM

Key factors
Extern
al

Weigh
t
AS

Opportunities
1. There is spurring demand for energy drinks, especially in the US which according to the latest industry estimates is about 2 billion
2. Approximately 85% of the companys 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, growing into these divisions more will help the revenue sales.
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 KO 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.

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.

TAS

1 to 4

0.06
0.04
0.04
0.04
0.05
0.06
0.05
0.04
0.05

Diversify
beverage line
Diversify
by offering
products by
alcoholic
entering the beverages.
healthy
snack/snack
food market.
AS

TAS

1 to 4

4 0.24

1 to 4

0.12

3 0.15
4 0.24
4 0.2
2 0.08
4 0.2

0.12

0.06

2 0.12

0.06

2 0.12

0.24

0.09

1 0.09

0.36

Threats

TAS

0.1
2
4 0.24
0.2
4
2 0.08

AS

1 0.09

0.07

0.07
0.04
0.05
0.05
0.08

1 0.05
1 0.08

4
4

0.2
0.32

4 0.28

2 0.1
2 0.16

QSPM (2)

Create a
lower
calorie
sports
Diversify
drink
beverage
line/
Diversify
line by
while
products offering
still
by
alcoholic
providin entering beverages
g
the
.
essential healthy
electroly snack/sna

ck food

te
0.07
1 0.07
4 0.28
2 0.14
balance.
market.

Strengt

hs
1. With revenues of $35,119,000 million, Coca-Cola is one of the largest beverage manufacturers globally.
0.08
2. Coca-Cola owns four of the worlds top five nonalcoholic sparkling beverage brands including Coca-Cola, Diet Coke, Sprite and Fanta.
0.07
3. Sold 25.5 billion cases of products in 2010
0.06
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
0.05
Amatil.
0.09
6. Acquired Coca-Cola Enterprises, Inc., one of the major bottlers for Coca-Cola in North America which had $3.6 billion in revenues
0.04
7. In Eurasia and Africa, unit case volume increased 12% in 2010
0.06
8. Coca-Cola has more than 500 brands and 3,500 beverages and products.
0.05
9. Coca-Cola sells 1.7 Billion servings of beverages per day in over 200 countries.
0.06
10. Coca-Cola generaged 8.5 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.
total
should

be 1.0

0.02
0.06
0.07
0.03
0.02
0.07
0.03
0.03
0.02
0.02
1

0.14
0.12

0.18
0.15
0.12

2
2

3
3
2

0.18

2.2

2 0.16
3 0.21
3 0.18

4 0.24
3 0.15
2 0.12

4 0.24

4 0.28
3 0.09

3 0.06

2 0.06

2.2

2.8

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

Kellogg Company Net Worth Analysis

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

EPS/EBIT
Assumptions

Capital Needed
6,000,000,000
EBIT Range
$7 bil. - $15 bil.
Interest Rate
4%
Tax Rate
16%
Stock Price (Dec. 31, 2010year end)
30.86
Current Shares Outstanding
(Basic)
2,308,000,000
CS Shares needed
Common Stock
Financing

Recession

EBIT
Interest

Normal

Boom

10,000,000,00 15,000,000,00
7,000,000,000 0
0
-

194,426,442
Debt Financing

Recession

Normal

Boom

EBIT

10,000,000,00 15,000,000,00
7,000,000,000 0
0

Interest

240,000,000

EBT

14,760,000,00
6,760,000,000 9,760,000,000 0

Taxes

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

240,000,000

240,000,000

EBT

10,000,000,00 15,000,000,00
7,000,000,000 0
0

Taxes

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

EPS/EBIT Continued
Assumptions
Stock needed

5,400,000,000

Stock needed

600,000,000

Debt needed

600,000,000

Debt needed

5,400,000,000

Interest

24,000,000

Interest

216,000,000

CS shares needed

174,983,798

CS shares needed

19,442,644

90% Stock - 10% Debt Financing

Recession
Normal

Boom

10% Stock - 90% Debt Financing

Recession
Normal

Boom

EBIT

10,000,000,00 15,000,000,00
7,000,000,000 0
0

EBIT

10,000,000,00 15,000,000,00
7,000,000,000 0
0

Interest

24,000,000

Interest

216,000,000

EBT

14,976,000,00
6,976,000,000 9,976,000,000 0

EBT

14,784,000,00
6,784,000,000 9,784,000,000 0

Taxes

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

Taxes

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

EAT
# of
Shares
EPS

24,000,000

24,000,000

10,632,960,00
4,952,960,000 7,082,960,000 0
2,482,983,798 2,482,983,798 2,482,983,798
1.99
2.85
4.28

EAT
# of
Shares
EPS

216,000,000

216,000,000

10,496,640,00
4,816,640,000 6,946,640,000 0
2,327,442,644 2,327,442,644 2,327,442,644
2.07
2.98
4.51

Projected Financial Assumptions

Capital needed
Debt needed
Cash Used
Interest (estimate)
Tax Rate
Stock Price (Dec. 31, 2010 - year
end)

10,000,000,000
6,000,000,000
4,000,000,000
4%
16%
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 Financials
Income Statement

Projected Income Statement (in

millions)

2009

2010

2011

Total Revenue

30,990 35,119

52,784

Cost of Revenue

11,088 12,693

21,324

Gross Profit

19,902 22,426

31,460

Operating Expenses

Research and Development

Selling General & Administrative

11,671 13,977

17,276

Nonrecurring

Others

Total Operating Expenses

8,231

8,449

Operating Income or Loss

Income from Continuing Operations
Total Other Income/Expense Net
EBIT

289 5,502
9,301

14,976

15% increase, plus Kelloggs

12,397
% of revenue, plus Kelloggs
7,108

Add Kelloggs
3,299

14,184
6,052
20,236

10% increase

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

Inventory

2,354

2,650

Other Current Assets

2,226

3,162

5,316 20% increase

20% increase, plus Kelloggs
4,236 1,056
30% increase, plus Kelloggs
4,336
225

17,551

21,579

21,933

7,585

9,861

Total Current Assets

Long-term Investments
Property Plant & Equipment
Goodwill
Intangible Assets

6,755
9,561
4,224
8,604

14,727
11,665
15,244

30% increase
25% increase, plus Kelloggs
21,537
3,128
5% increase, plus Kelloggs
15,876 3,628
10% increase, plus Kelloggs
18,696
1,456

Projected Financials Balance Sheet (2)

LIABILITIES
Current Liabilities
Accounts Payable

6,921

9,132

Short-term Debt

6,800

9,376

Other Current Liabilities

Total Current Liabilities

13,721
5,059

Other Liabilities

2,965

Liability Charges

1,580
-

Minority Interest
Negative Goodwill
Total Liabilities

23,872

21,221
Add 70% of $6 billion from
18,241 financing

14,041
4,794 5,033

5% increase

4,261
-

547
-

18,508

Long-term Debt

Deferred Long-term

10,045 10% increase

Add 30% of $6 billion from
11,176 financing

4,261 Same
-

314
41,918

314 Same
49,070

STOCKHOLDERS' EQUITY
Misc. Stock Opt Warrants

Projected Financial Ratios

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

Strategic
Evaluation

Balanced Scorecard
Area of
Objectives
Customers
1 Brand
Identity
2 Satisfaction
Employees
1 Employee
Moral
2 Service
Training
Operations
1 Diversify
product line
Business
Ethics
1 Ethics
Training

Customer Survey

Time
Expectatio Primary
n
Responsibility

Marketing
Yearly
Officer
Marketing
Yearly
Officer

Survey

Yearly

# of seminars

Acquire Kelloggs
Company

Yearly

Yearly

People Officer
Administrative
Officer

Administrative
Officer

# of ethics training
sessions

Yearly

People Officer

Measure or Target

Industry reports/Market
Cap.

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