Coca Cola Cost Analysis

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  • Topic: Revenue, Linear regression, Regression analysis
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COCA COLA COMPANY

Research Project

For
ACC 412

Presented to:

Overview of Coca-Cola

Leading the beverage industry for the third consecutive year, Coca-Cola, a common household name known around the world, climbs to the 4th spot in Fortune's 50 Most Admired Companies in the world for year 2012. When it comes to a refreshing cold soda, who does not know of Coca-Cola? The company was established in 1886 in Atlanta, Georgia at the Jacobs' Pharmacy soda fountain by pharmacist John Pemberton. In its humble beginning, a glass of this drink costed only five cents and only 9 glasses of Coca-Cola were sold each day.

Since then, Coca-Cola has grown to be a multi-billion dollar company. Employing approximately 139,600 workers worldwide, it operates in more than 200 countries with more than 300 bottling partners around the world to produce more than 3,500 types of regular, diet and caffeine-free drinks, water, and mixers such as A&W, Bacardi Mixers, Cherry Coke Zero, Dasani, Eva Water, Fanta, Glacéau Smartwater, Hi-C, Minute Maid Light, Nestea, Powerade, and the list goes on. In expanding its empire, Coca-Cola currently has headquarters all over the world leaving footsteps in the continents of North America, Latin America, Europe, Eurasia, Africa, and the Middle-East.

Marking the 49th consecutive year of increased dividends, in his March 31, 2011 letter to shareholders, Chairman and Chief Executive Officer Muhtar Kent announced that the company has "added more than 1 billion incremental unit cases of volume to [the] business in 2010. Our unit case volume grew 5 percent and we exceeded our long-term growth target for unit case volume and operating income." In 2010 alone the company generated $9.5 billion in cash from operations, an increase of 16 percent since 2009, and the drink, Minute Maid Pulpy, which was developed only five years ago in China achieved the status of the 14th brand to earn an annual retail sales of more than $1 billion. Kent happily exclaimed that in 2010, the company returned $7.2 billion back to shareholders by repurchasing $3.1 billion in company stock and paying $4.1 billion in dividends.

Although the company continues to grow, CEO Kent explains that they will not stop there. With even greater goals set for 2020, the 2020 Vision lays out more milestones the company plans to achieve and actions already underway to achieve doubled revenues, to develop new beverage products, to save on manufacturing costs while maintaining quality, and to bring innovations to the market faster; this is to name only a few of the goals set for 2020. For a more detailed roadmap, look to Figure 1 below for a comprehensive list of visions, goals, priorities, and a metric system to measure accomplishments along the way.

Figure 1: Goals for 2020

The company's effort to maintain its stand in the worldwide market through the deliverance of quality innovations to the world has gained a great return for Coca-Cola as well as its investors and partners. To gain even greater interest and support from old and new investors, Coca-Cola must demonstrate the ability to meet its goals which can be attained through actions to achieve higher revenues and lower costs. In the following we examine Coca-Cola's financial results for years 2007 to 2011, each with four quarters to determine the predictability of future revenues and the probability that these figures will grow in future years. Data and Analysis

In our first analysis, we begin by determining the equation for projection of sales using data of sales and GDP through a variety of methods- High-Low, Regression, and Multiple Regression.
Figure 2: Sales Revenue and GDP Data

Net Sales (Net revenue)
GDP (in billions)
Year 2011
QTR 4
10,292,000
15,320.8

QTR 3
12,248,000
15,176.1

QTR 2
12,737,000
15,012.8

QTR 1
10,517,000
14,867.8
Year 2010
QTR 4
10,494,000
14,755.0

QTR 3
8,426,000
14,605.5

QTR 2
8,674,000
14,467.8...
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