Comparative Statistics: Relevant Figures Affecting Profitability

Comparative Statistics: Relevant Figures Affecting Profitability

For the purpose of my report, all relevant financial data on both Coca-Cola and PepsiCo was derived from the reliable Yahoo Finance and Morningstar website and the accompanying 10-k reports. Coca-Cola is the largest manufacturer and distributor of non-alcoholic beverage concentrates and syrups in the world. Additionally, the company has ownership interests in numerous bottling and canning operations. Furthermore, Coca-Cola groups its products into eight business divisions including: Africa, Eurasia, European Union, Latin America, North America, Pacific, Bottling Investments, and Corporate. Finished beverage products are sold in more than 200 countries worldwide. Coca-Cola's major products are comprised of: Coca-Cola, Crush, Sprite, Fanta, Diet Coke, POWERade, Fruitopia, Minute Maid juices, Dasani water and various coffees and teas.

The next important area reviewed is stock price and revenues. Please refer to Figure 1 as we examine Coca-Cola's stock price in the five-year range. In 2003, Coca-Cola's stock was trading at an average valuation of approximately $45.00 dollars per share, approaching $50.00 dollars (i.e., an all-time high). As of April 25, 2008, Coca-Cola's stock price is valued at $59.33 dollars per share, a significant drop from the $100.00 dollar price range which briefly traded during the late 1990s. A contributing factor is the change in consumers' tastes in that they are favoring bottled water and other healthier beverages more often. According to The Financial Times, the stock price clearly reflects this fact. This drop in value should compel investors to think twice before engaging in a sizeable stock purchase in this company. Company stock, if purchased, would fall under the headline "Long-term investment."

PepsiCo is a leading global snack and beverage company. The company manufactures, markets, and sells a variety of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages and foods. The company operates in 200 countries outside the U.S. and Canada. PepsiCo generates revenues through its four business divisions including: Frito-Lay North America (FLNA), PepsiCo International (PI), PepsiCo Beverages North America (PBNA), and Quaker Foods North America (QFNA). Some of PepsiCo's major products include: AquaFina, Aunt Jemima, Cheetos, Cracker Jack, Doritos, Frito-Lay, Gatorade, Mountain Dew, Pepsi, Quaker Oats, Sierra Mist, Slice, SoBe, Tostitos, and Tropicana juices.

Please refer to Figure 2 to examine PepsiCo's stock price in the five-year range. According to Yahoo Finance (2008), PepsiCo's stock valuation averaged approximately $45.00 dollars per share. Five years later, its valuation is rapidly approaching $68.00 dollars per share, a generous appreciation in value. This appreciation is due to PepsiCo's product diversification strategy. PepsiCo has benefited greatly from its mergers with Frito-Lay and Quaker Oats. These acquisitions have been responsible for its consistently high revenues and strong overall financial numbers. PepsiCo stock is expected to appreciate in value and is therefore highly recommended. Please refer to Figure 3 for a financial comparison between Coca-Cola and PepsiCo for years 2003 to 2008.

According to Coca-Cola's 10-K report (2007), the company generated revenues that totaled $28.8 billion. The company's revenues are derived from eight distinct segments including: North America, Bottling Investments, European Union, Pacific, Latin America, Africa, Eurasia, and Corporate. These revenues accounted for 26.9%, 26.2%, 14.4%, 13.9%, and 10.6%, 4.40%, 3.40%, and 0.20%, respectively.

PepsiCo achieved revenues of $39.5 billion during the fiscal year 2007. The FLNA division recorded revenues of $11.6 billion, constituting 29% of total net revenue in 2007. The PI division recorded revenues of $15.8 billion, approximating 40% of total net revenues. The PBNA division recorded revenues of $10.2 billion, approximating 26% of total revenues in 2007.The QFNA division recorded revenues of $1.90 billion, approximating 5% of total revenue in 2007.

Coca-Cola's revenues have been generally outpaced by PepsiCo's revenues with notable exception in 2000 when both companies approached parity in terms of revenue. The Financial Times (2007) reveals that Coca-Cola has made minimal gains which may be attributed to the slow growth in the soft drink sector. Coca-Cola's income is derived from 80% of its soft drink products, while PepsiCo's soft drinks are responsible for only 20% of its income. Clearly, PepsiCo's wide range of snack products serves to cushion the company from changing consumer preferences. This is illustrated by the explosive growth of the bottled water sector-a lucrative sector for both companies (i.e., Coca-Cola's Dasani and PepsiCo's AquaFina). Consumers are quickly drawing a connection between high-fructose corn syrup beverages (e.g., most soft drinks) and obesity and are gradually shying away from them (Rodwan, 2006). Figure 4 reveals a comparison of two indices which clearly demonstrates Coca-Cola's sluggish performance versus its peers and the S&P 500 index.

When top marketers in China are asked to identify the strongest youth brand in that country, among all categories, the answer usually is Pepsi. Since 1997, market share for PepsiCo doubled to 22%, bringing it roughly level, for the first time, with Coca-Cola in 2005. As soon as owners of St. Petersburg-based Melton sold their company to Coca-Cola, its rival Nidan granted PepsiCo the right to sell its products in the Northwestern region. Nidan is the fourth largest