Project Report, Valuations and Real Options
Relevance of the Study7
Objective of the Study9
Income based valuation methods (Dividend Discount Approach)11 Valuation Description12
Method 1: 3 stage Dividend Discount Model approach12
Method 2: Relative Valuation Approach14
Method 3: Cost Based Approach14
Conclusion & Uniqueness about this study16
The global beverage industry consists of the total revenues generated through the sale of soft drinks, beers, ciders, flavored alcoholic beverages (FABS), spirits and wines. For the purpose of this report we are concentrating only on the soft drinks sectors as that is where coca cola deals in. The global beverages industry had total revenues of $1749.4 billion in 2010, representing a CAGR of 1.9% for 5 year period of 2006-2010. The industry forecast is that the industry will decelerate and will have an anticipated CAGR of 1.8% for five year period of 2010-2015. A report by Rabobank, global financial services says that industry consolidation will take place in 2012-2013 and will be driven by the five mega trends such as volatility, emerging market demand, bifurcation of value, convergence of distribution and sustainable sourcing. Soft drinks have been a custom of passage among the youth of modern generations which sets up this category for future generations. With margins getting slim, it is important that brands continue to attract new customers and patronize them towards their brand. Consumer conversations are increasingly driving the perception of the brands which implies that the soft drinks and beverages brands will have to focus more on customer engagement and look for new entry points. The soft drinks segment contributed revenue of $559.8 billion in 2010 having a share of around 32% in the overall beverage industry. The Coca-Cola Company is the leading player in the global beverages industry, generating 16.3% share of the industry’s value and next is PepsiCo, Inc, which accounts for 9.2% of the industry. Coca-Cola turned 125 years young in 2011 and has set a 2020 vision with focus and intensity along the 6Ps of Profit, People, Portfolio, Partners, Planet and Productivity. Coca-Cola continues to occupy a unique place in the hearts of the people worldwide. It is also investing billions of dollars in India to increase presence and preference and outpace competitors and envisages China to become its biggest market eventually.
We have carried out a valuation of the “Coca-Cola” brand and have used generally accepted brand valuation methodologies viz Income based valuation method (Dividend Discount Approach), Market base brand valuation methods (Relative Valuation), Cost based Brand valuation method (Historical Method). We have provided a rationale for the various methodologies pointing out the pros and cons of the various methodologies. The brand valuation has been carried out based on the consolidated financials and forecasts provided by the company on public sources. The brand valuation is based on 2011 data available in Annual Report FY 2012. The valuation of the brand as per the above methods is estimated at around 100 bn$ based on our analysis of the brand and the company and subject to the assumptions and limitations described in this report. COCA-COLA Company
The Coca-Cola Company engages in the manufacturing, distribution and marketing of non-alcoholic beverage concentrates and syrups. The company owns the world’s most valuable brand: Coca-Cola and is sold in more than 200 countries worldwide. Most of the Coca-Cola’s products are manufactured and sold by bottling partners, who convert them into finished packaged products for sale to distributors and other customers. Its major beverage products include Coca-Cola, caffeine free...