Slide #1.

Strategic Management Case Study Coca-Cola Co. Presented by: Carter Vaillancourt, Megan Land, and Emily Michaud UMFK, 2013
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Slide #2.

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
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Slide #3.

The Coca-Cola Bottle from the Beginning, to Present
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Slide #4.

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 wasn’t 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
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Slide #6.

Revenue and Cash Flow Growth 2005-2010
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Slide #8.

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
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Slide #9.

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.
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Slide #10.

Existing Growth Strategy • Driving global beverage leadership • Accelerate innovation • Leverage our balanced geographic portfolio
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Slide #11.

Proposed Vision Statement Coca-Cola’s vision is to inspire moments of happiness while refreshing the world.
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Slide #12.

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 orcan Services continue to provide the they can be (9) we know we 3. Markets 4. Technology best products the market. 5. Concernon for Survival 8. 9. 6. Philosophy 7. Self-Concept Concern for Public Image Concern for Employees
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Slide #13.

External Audit
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Slide #14.

Industry Market Analysis
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Slide #16.

Stock Price 2010 70 60 50 40 Stock Price 2010 30 20 10 0 Coca Cola Pepsi Cola Nestle Dr. Pepper Snapple
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Slide #18.

Opportunities 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.
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Slide #19.

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.
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Slide #20.

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 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
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Slide #21.

EFE Key External Factors   Opportunities   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 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 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 Weights 0.0 to 1.0 Rating 1 to 4 Weighted Score       0.06 4 0.24 0.04 0.04 3 2 0.12 0.08 0.04 2 0.08 0.05 0.06 2 3 0.1 0.18 0.05 3 0.15 0.04 2 0.08 3 0.15 0 0.06 3 0.18 0.06 2 0.12 0.09 2 0.18 0.07 3 0.21 0.07 4 0.28 0.04 2 0.08 0.05 2 0.1 0.05 4 0.2 0.08 4 0.05   1  0.32 2.85
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Slide #22.

Internal Audit
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Slide #24.

Financial Information Income Statement
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Slide #25.

Financial Information Balance Sheet (1)
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Slide #26.

Financial Information Balance Sheet (2)
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Slide #27.

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
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Slide #28.

Ratio Analysis Ratio (2010) Coca-Cola Pepsi Nestle Liquidity Ratios Current 1.17 1.11 1.29 Quick 1.02 0.89 1.03 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 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 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 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% Leverage Ratios Activity Ratios Profitability Ratios Growth Ratios
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Slide #29.

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 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 CocaCola Hellenic, 32% in Coca-Cola FEMSA, and 30% in Coca-Cola Amatil. 6)Acquired Coca-Cola Enterprises, Inc., one of the major bottlers for CocaCola 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.
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Slide #30.

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
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Slide #31.

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 world’s top five nonalcoholic sparkling beverage brands including Coca-Cola, Diet Coke, Sprite and Fanta Weighted Score   3 or 4   0.07 4 0.28 0.08 4 0.32 0.07 3 0.21 0.06 3 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 3 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 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 Coca-Cola sells 1.7 Billion servings of beverages per day in over 200 countries 0.06 4 0.24 0.05 3 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 Coca-Cola generated 8.5 billion in cash from operations in 2010, up 16% over 2009 Internal Weaknesses 0.06   3 1 or 2 0.18   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 Acquiring Coca-Cola Enterprises (CCE) resulted in assuming additional $7.9 billion in debt 0.02 2 0.04 0.07 1 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 0.03 1 0.03 0.03 2 0.06 0.02 2 0.04 0.02 2 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 Totals 1  0.04 2.71
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Slide #32.

Strategy Formation
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Slide #33.

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) 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 3. Take advantage of the increasing demand for bottled water by creating flavored water drops. (W2, O3, O6, O9) 1.Create a lower calorie sports drink line to promote healthy drinking habits while still providing the essential electrolyte balance. (W2, W4, T1, T2) Threats 2. Diversify products by entering the healthy snack/snack food market. (W3, T2) Weaknesse s
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Slide #34.

Space Matrix Financial Strength Ratings 1 Cash Flow 5.0 Price Earnings 2 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 1 Profit Potential Financial 2 Stability Resource 3 Utilization Productivity, Capacity 4 utilization 5 Market Entry 6 Growth Potential 7 Extent Leveraged Industry Strength Average Rating 6.0 FS 7.0 6 Aggressive Conservative 4.0 5 4.0 6.0 3.0 2.0 4.6 4 3 2 1 Environmental Stability Rating Rate of 1 Inflation -5.0 Barriers to Enter the 2 Market -4.0 Competitive 3 pressure -2.0 Price 4 Elasticity -4.0 Demand 5 Variability -4.0 Price Range of Competing 6 Products -4.0 Ease of Exit from 7 Market -6.0 Environmental Stability Average -4.14 Competitive Advantage 1 Market Share Product 2 Quality Customer 3 Loyalty Capacity 4 Utilization Technologically 5 Advanced Global 6 Expansion Product Life 7 Cycle Competitive Advantage Average Rating -1.0 C S -6 -5 -4 -3 -2 -1 1 2 3 4 5 1 -3.0 2 -2.0 3 -2.0 4 -3.0 -1.0 -3.0 -2.14 5 Defensive 6 Competitive ES X Coordinate Y Coordinate 2.43 1.00 6 IS
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Slide #35.

BCG Matrix Segments North America Revenue $11,205.00 %rev 39.45% profit $1,520.00 %pf 15.31% $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% $28,402.00 100.00% $9,929.00 100.00% Pacific Total Relative Market Share Industry Growth Rate (%) 1.00 4.40%
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Slide #36.

BCG Continued
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Slide #37.

Grand Strategy Matrix Rapid Market Growth Quadrant I 1. Market development 2. Market penetration 3. Product development 4. Forward integration 5. Backward integration 6. Horizontal integration 7. Related diversification Quadrant II 1. Market development 2. Market penetration 3. Product development 4. Horizontal integration 5. Divestiture 6. Liquidation Weak Competitve Position Quadrant IV 1. Related diversification 2. Unrelated diversification 3. Joint ventures Quadrant III 1. Retrenchment 2. Related diversification 3. Unrelated diversification 4. Divestiture 5. Liquidation Slow Market Growth Strong Competitive Position
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Slide #38.

Matrix Analysis Alternative Strategies 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 Unrelated Diversification x Retrenchment Divestiture Liquidation IE 2 1
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Slide #39.

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 don’t offer a food segment (Unrelated) •None of our main competitors offer an alcoholic beverage (Related)
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Slide #40.

QSPM Create a lower calorie sports drink line/ while still providing essential electrolyte balance. Quantitative Strategic Planning Matrix-QSPM Diversify Diversify beverage line products by by offering alcoholic entering the beverages. healthy snack/snack food market. Weigh Key factors t AS TAS AS TAS AS External 1 to 4 1 to 4 1 to 4 Opportunities 1. There 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 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. 0.04 3. Bottled water drinking has increased 11%. 0.04 3 0.12 4. European and China market show large potential to grow, growing into these divisions more will help the revenue sales. 0.04 0.1 5. Has the option, but no obligation, to assist bottlers with promotional and marketing activities ($5 billion in 2010). 0.05 2 4 0.24 6. 55 billion beverage servings are consumed worldwide each day 0.06 0.2 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 3 0.12 8. India currently only consumes 11 8oz servings of KO per person per year. 0.04 2 0.08 9. The non-alcoholic ready to drink(NARTD) beverage industry is expected to grow by 50 billion unit cases by 2020. 0.05 TAS 3 4 4 2 4 0.15 0.24 0.2 0.08 0.2 1 0.09 4 0.28 2 2 0.1 0.16 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. total should be 1.0 0.06 2 0.12 0.06 2 0.12 4 0.24 0.09 1 0.09 4 0.36 0.07 0.07 0.04 0.05 0.05 0.08 1 1 1 0.05 0.08 4 4 0.2 0.32
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Slide #41.

QSPM (2) Strengt hs 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 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 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 Create a lower calorie sports drink line/ while still providing essential electrolyte balance. 0.07 0.08 0.07 0.06 0.05 0.09 0.04 0.06 0.05 0.06 0.02 0.06 0.07 0.03 0.02 0.07 0.03 0.03 0.02 0.02 Diversify products Diversify by beverage entering line by the offering healthy alcoholic snack/sna beverages ck food . market. 1 0.07 2 2 4 0.14 0.12 2 2 3 3 0.14 0.16 0.21 0.18 3 3 2 0.18 0.15 0.12 4 3 2 0.24 0.15 0.12 3 0.06 3 0.18 2 0.06 4 4 3 0.28 0.24 0.28 0.09 1 2.28 2.25 2.82
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Slide #42.

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
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Slide #43.

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
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Slide #44.

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
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Slide #45.

Strategic Implementation
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Slide #46.

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
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Slide #47.

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, 2010-year end) 30.86 Current Shares Outstanding (Basic) 2,308,000,000 CS Shares needed 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 4.26 194,426,442 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 EAT 4,799,600,000 6,929,600,000 10,479,600,000 4,280,400,000
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Slide #48.

EPS/EBIT Continued Assumptions Stock needed 5,400,000,000 Debt needed 600,000,000 Interest 24,000,000 CS shares needed 600,000,000 Debt needed 5,400,000,000 Interest 216,000,000 CS shares needed 19,442,644 174,983,798 90% Stock - 10% Debt Financing Recession Normal EBIT Stock needed 7,000,000,000 10,000,000,000 Boom 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 EBIT 7,000,000,000 10,000,000,000 Boom 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
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Slide #49.

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 Stock Price (Dec. 31, 2010 - year end) 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
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Slide #50.

Projected Financials Income Statement Projected Income Statement (in millions) Total Revenue Cost of Revenue Gross Profit Operating Expenses Research and Development Selling General & Administrative Nonrecurring Others Total Operating Expenses Operating Income or Loss Income from Continuing Operations Total Other Income/Expense Net EBIT Interest Expense Income Before Tax Income Tax Expense Consolidated Net Income Less: Non-Controlling Interests Net Income 2009 30,990 11,088 19,902 11,671 8,231 289 9,301 355 8,946 2,040 6,906 82 6,824 2010 35,119 12,693 22,426 13,977 8,449 5,502 14,976 733 14,243 2,384 11,859 50 11,809 Basic EPS Diluted EPS Basic Average Shares Outstanding Diluted Average Shares Outstanding 2.95 2.93 2,314 2,329 5.12 5.06 2,308 2,333 6.90 6.82 2,308 2,333 1.64 1.76 1.83 Dividends Per Share 2011 52,784 15% increase, plus Kelloggs 12,397 21,324 % of revenue, plus Kelloggs 7,108 31,460 17,276 Add Kelloggs 3,299 14,184 6,052 10% increase 20,236 1,221 Add Kelloggs 248, add 240 from financing 19,015 3,042 16% tax rate 15,973 50 Same 15,923 Same Same
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Slide #51.

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, plus Kelloggs 1,056 Other Current Assets 2,226 3,162 4,336 30% increase, plus Kelloggs 225 17,551 21,579 21,933 Long-term Investments 6,755 7,585 9,861 Property Plant & Equipment 9,561 14,727 21,537 25% increase, plus Kelloggs 3,128 Goodwill 4,224 11,665 15,876 5% increase, plus Kelloggs 3,628 Intangible Assets 8,604 15,244 18,696 10% increase, plus Kelloggs 1,456 Total Current Assets Accumulated Amortization - Other Assets 1,976 Deferred Long-term Asset Charges - Total Assets 48,671 30% increase 2,121 72,921 2,989 90,892 7% increase like previous year, add Kelloggs 720
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Slide #52.

Projected Financials Balance Sheet (2) LIABILITIES Current Liabilities Accounts Payable Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Debt Other Liabilities Deferred Long-term Liability Charges Minority Interest Negative Goodwill Total Liabilities STOCKHOLDERS' EQUITY Misc. Stock Opt Warrants Redeemable Pref. Stock Preferred Stock Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholders' Equity Total Stockholders' Equity Total Liabilities and Stockholders' Equity 6,921 6,800 13,721 5,059 2,965 1,580 547 23,872 - 9,132 9,376 18,508 14,041 4,794 4,261 314 41,918 - 10,045 11,176 21,221 18,241 5,033 4,261 314 49,070 10% increase Add 30% of $6 billion from financing Add 70% of $6 billion from financing 5% increase Same Same - 880 880 880 41,537 49,278 60,977 (25,398) 8,537 (27,762) 10,057 (27,762) 10,057 Same Same (757) 24,799 48,671 (1,450) 31,003 72,921 (1,450) 41,822 90,892 Same Increases from Net Income, Dividends paid out
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Slide #53.

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
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Slide #54.

Strategic Evaluation
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Slide #55.

Balanced Scorecard Measure or Target Time Expectation Primary Responsibility Industry reports/Market Cap. Customer Survey Yearly Yearly Marketing Officer Marketing Officer Survey Yearly 2 Service Training # of seminars Operations 1 Diversify product line Acquire Kelloggs Company Business Ethics 1 Ethics Training # of ethics training sessions 2 Recycling Recycle 50% of total wastes Financial 1 Revenues Increase by 50% each year Better than 2 Ratio Analysis competitors/industry Avg. Yearly People Officer Administrative Officer Yearly Administrative Officer Yearly People Officer Yearly Financial Officer Yearly Financial Officer Area of Objectives Customers 1 Brand Identity 2 Satisfaction Employees 1 Employee Moral
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Slide #56.

Update
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Slide #57.

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
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Slide #59.

Stock Performance
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