Executive Summary of Coca Cola
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Coca Cola Marketing Audit.doc
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 Executive Summary
b.
Table of Contents
c. Summary conclusion for 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 effectivenes s 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 ³Brads 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 ³arms reach of desire, across the globe´ 1941: America enters WWII, Woodruff orders that ³every 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 ³post-war America´ that it painted in its advertisements was alive with optimism and prosperityhappy 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: ³I¶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 ³the 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, ³Always 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. ³By 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. ³By 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 ³world'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 ³early 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. ³In 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 ³dependent 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 ³the 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, ³As 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. ³New 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 ³OK.´ 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 ³holding´ 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.
