The Coca-cola Company is the largest beverage company in the world, with over 25% market share of the global beverage industry by volume. The company’s flagship product, Coca-cola, was invented in 1886 and purchased in 1989 by Asa Griggs Candler, who established the Coca-cola Company in 1892. The company was incorporated in 1919 in the state of Delaware. The company’s principal executive offices are in Atlanta, Georgia (Coca-cola Company, 2013).
Since the 1960’s the company has expanded through acquisitions of other non-alcoholic beverage companies and brand licensing. In 1982 the company made its only significant move to diversify its business with the purchase of Columbia Pictures, but this ended after only 7 years with the sale of Columbia Pictures to Sony in 1989 (Sellers and Woods, 1997).
Sector and Operations
The Coca-cola Company manufactures and distributes non-alcoholic beverage products through a combination of company-owned or -controlled bottling and distribution operations and independent bottling partners, distributors, wholesalers, and retailers. Products include beverage bases sold in bulk and finished products sold in cans or bottles (Coca-cola Company, 2013).
Sales of the company’s products are geographically diversified, with no single geographic region accounting for more than 24% of revenues. The company has a the largest and most diverse product mix and distribution network of any company in the beverage sector, with more than 3500 products and over 500 brands, available in over 24 million outlets in over 200 countries (Coca-cola Company, 2014).
Combined Analysis
Liquidity ratios. In terms of both the Current Ratio and the Quick Ratio, Coca-cola Company and Pepsico have comparable liquidity. However Pepsico has recently overtaken Coca-cola Company in both measures, and Pepsico’s liquidity by both measures is increasing faster than Coca-cola Company, indicating that Pepsico is likely to continue to exceed Coca-cola Company in liquidity at least for the near future.
Profitability ratios. In almost all profitability ratios, Coca-cola Company has significantly higher ratios than Pepsico. The one important exception is EPS, where the EPS of Pepsico is more than double the EPS of Coca-cola Company. However the share price of Pepsico is also roughly twice the share price of Coca-cola, so considering the comparable P/E and M/B between the 2 companies, the total return on investment is still comparable.
Market ratios. Although Coca-cola Company exceeds Pepsico in M/B for most of the past 3 years, the difference is small (average difference less than 4%), and the P/E and M/B of both Coca-cola Company and Pepsico have increased from 2011-2013 by a comparable amount. However in P/E, Coca-cola Company consistently exceeds Pepsico, by an average of 11%, indicating Coca-cola Company may have slightly higher or less risky earnings growth than Pepsico.
- Sellers, P., & Woods, W. (1997). Where Coke Goes From Here. Fortune.
- The Coca-cola Company (2014). Form 10-K Annual Report for Fiscal Year Ended December 31 2013.
- The Coca-cola Company (2014). Investor Relations Overview 2014.
