COCA COLA & PEPSI ASSIGNMENT Harvard Case Solution & Analysis

COCA COLA & PEPSI ASSIGNMENT Case Solution

Introduction

            Coca Cola is one of the largest beverage companies in the world and currently it is ranked as the 3rd biggest global brand. The largest consumption rate of the soft drinks is for the soft drinks of Coca Cola, which are consumed at about 600 million times per day and there has been consistent increase in this rate(McKay, 2014). The management of the company has always focused on increasing the market share of the company and expanding the business in new markets around the world. In terms of distribution Coca Cola is the biggest distributor of soft drinks in the world. Over the period of past 5 years, the stock price of the company had reached to a high level of $ 63.81 and a low price of $ 39.10(YahooFinance, 2016). The company has a higher price earnings ratio, which has been maintained by the company which shows the confidence of the investors in the future growth prospects of the company.

            The closest competitor of Coca Cola is the Pepsi Company. The company is growing rapidly and its brand value increased by 4% in 2015. The product mix of the company in 2015 consisted of 47% beverages and 53% foods(Kaplan, 2014). On a global basis, the company has several brands and in 2009, it had been estimated that these brands generated approximately around $ 108 billion cumulative sales in the retail sector. The global operations of Pepsi and its structure have changed significantly over the course of the history but as of 2016, there are 6 main divisions of the company and 73% of the revenue for the company comes from South and North America(Morris, 2013).

Pepsi and Coca Cola have both been involved in many sustainability and environmental initiatives to serve their corporate social responsibility(Hack, 2012).This report attempts to perform a financial analysis for the Coca Cola and the Pepsi Company through a detailed ratio analysis, horizontal and vertical analysis. Along with this, the evaluation of the performance of the business units through financial and non-financial measures would also be performed and finally, recommendations would be made to both the companies.

Analysis

            First of all, we begin with a detailed ratio analysis for Coca Cola and Pepsi. A range of ratios have been calculated for the company regarding the profitability, liquidity, efficiency and leverage position of Coca Cola Beverages Company and the Pepsi Company. These are evaluated and analyzed below:

Ratio Analysis

            All those ratios, which are suitable for Coke and Pepsi, have been calculated as shown in exhibit 1 in the appendix. These are explained as follows:

Profitability Ratios

            First of all, if we analyze the profitability position of both the companies in terms of return on capital employed, then we can see that the return on capital employed had increased for both the companies from 2013 to 2014 however, it decreased in 2015. This shows that both the companies are not generating a good return on their invested capital. Another reason for the decline in ROCE ratio might be the decline in the sales growth of both the companies. Although the sales for Coca Cola have actually increased however, the growth rate is lower as compared to past years. Another reason could be the increasing trend of the health conscious customers, negative publicity for soft drinks and the sugar problem for diabetic patients....................

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