...PepsiCo – CocaCola Case Write-Up 11/09/15 Danny Blanks Ben Crook Will Dauterive Alberto Fernandez Zijian “Justus” Jia Case Questions Coke vs Pepsi 1) What is EVA? What are the advantages and disadvantages of using EVA as a measure of company performance? EVA stands for economic value added. EVA is a value based financial performance measure based on Net Operating Profit after Taxes, the invested capital required to generate that income, and the WACC. The primary advantage of EVA is that it provides a measure of wealth creation that aligns the goals of divisional or plant managers with the goals of the entire company. A primary disadvantage with EVA is that it struggles to control for size differences across organizational units compared to Return on Investment (ROI). Another disadvantage with EVA is that numbers can be easily altered or manipulated to boost EVA, therefore painting a better picture than what actually exist. EVA also places a large emphasis on producing immediate results, thereby creating a disincentive for management to invest in quality projects. 2) Please examine the historical performance of Coca-Cola and PepsiCo in terms of EVA. What trends do you observe? What are the factors behind those trends? What do you think are the key drivers of EVA? Through observing EVA for Coca-Cola and PepsiCo, we noticed a few things. First, Coca-Cola’s EVA seems to be more stable, but PepsiCo, which although was negative from 1994-1997...
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...Coke vs. Pepsi: Battle of the Brands Posted Apr 10th 2007 4:40PM by Eric Buscemi Filed under: Products and services, Consumer experience, Competitive strategy, Coca-Cola (KO), PepsiCo (PEP), Marketing and advertising, Coca-Cola Enterprises (CCE), Battle of the Brands This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and watch out for more Battle of the Brands posts. Some people drink Pepsi, some people drink Coke, The wacky morning DJ says democracy's a joke. -- Cake, Comfort Eagle Unless you are a rare RC Cola drinker, your carbonated beverage decision in the supermarket comes down to the two heavyweights: the flagship products from the Coca-Cola Company (NYSE: KO) and PepsiCo Inc (NYSE: PEP). But the battle between these brands spans much further than the supermarket shelves. From which brand restaurants stock, to what countries each operates in, this rivalry is all-encompassing and global. But instead of a list of countries or restaurant chains, lets take a deeper look at the actual products. Cola and Beyond We don't have space to list, nor would you have time to read, every different variant of Coca-Cola and Pepsi, which would force me to include failed ideas such as Crystal Pepsi. Suffice it to say, you won't find many original ideas here, and when a successful idea comes from either company, an imitator just as quickly appears from the other. Coke/Pepsi, Diet Coke/Diet Pepsi, Cherry Coke/Wild Cherry Pepsi, Coke with Lime/Pepsi...
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...on their differences. Coca-Cola was founded in 1886, nowadays is available in more than 200 countries being the most popular beverage with its 94% worldwide recognition and being world’s third valuable brand. Its headquarters are in Atlanta Georgia and they employ nearly 30,000 individuals around the world. PepsiCo was created in 1893 in North Carolina and is sweeter than coke. PepsiCo is one of the World’s top consumer products company with one of the best valuable trademarks, also available in more than 200 countries worldwide. Coca-Cola and PepsiCo control nearly 40% of the entire beverage market but based on Interbrand’s best global brand 2011, Coca-Cola is world’s third most valuable brand; however PepsiCo is number 25 in the list (Saeidinia M., 2010). Moreover, competitors are catching up. The Coca-Cola company main rival is PepsiCo, being the second in the soft drink industry. Coca cola global products are 100% soft drinks and beverage, while PepsiCo global is both 48% snacks and 52% beverage corporation. PepsiCo contains more sugar and caffeine than Coca-Cola; each can of Pepsi contain approximately 8 teaspoons of sugar so if consumer’s need sugar and energy, PepsiCo appropriate better fit. According to studies, in December 2005, PepsiCo surpassed Coca-Cola in market value for the first time. PepsiCo has more extended...
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...Jessica Salazar 01/15/12 Pepsi vs. Coca Cola Flavored drinks have been around since man discovered the use of water. It was not until the 1900’s that the industry announced carbonated soft drinks. They took the market by storm. People were rushing to their neighborhood markets to buy the new soft drink. Male, female, young or old were buying the new tasty drinks, yet the one question remained in everyone’s mind. There was one single debate lingering in everyone’s mind, Pepsi or Coke? Both soft drinks of the same formula have been revised throughout the years numerous of times, each still has its own set of fans. Pepsi has always been smoother, sweeter, and doesn’t leave an after taste. There’s something about Coke’s beverage that causes an after taste that lingers after it is down. Coke is too carbonated and Pepsi is smoother. Now for the sake of comparison the following will be an objective analysis on both brands. The debate between Pepsi and coke ranges on, yet there are some distinct differences between the two brands, not only in taste, but in history. There’s not a soul in the world that does not know what Coke is. But what is it? Many assume that Coke’s secret recipe is only known by two men, in which each only knows half. People say that is incorrect, but one knows the truth. That hasn’t been a bad thing for their advertising executives. If two people talk about an advertisement for a while then that means the advertisers job is done. The Advertisement and all...
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...Coke Versus Pepsi : Differences in Cultural History Rather than Taste Posted by Nicole Smith, Jan 16, 2012 Food And Drink No Comments Print For many years, Coca Cola and Pepsi have enjoyed the position as the two most enjoyed soft drinks in the USA, as they have maintained their popularity over the past several decades. One can divide soft drink fans into two major camps: Coke-lovers and Pepsi-lovers. Each of the camps substantiates its favoritism not only on flavor, but also on ideas, facts, and preferences that justify its choice and allow it to stay true to its selection. The following analysis of the history of Pepsi and Coca Cola explores Pepsi and Coke with an emphasis on advertising and cultural significance of these efforts, discovering what makes these soft drinks so popular and what differentiates them from each other. What emerges is that there is little in the way of differences between Coke and Pepsi outside of different cultural histories. There are many similarities between Coca Cola and Pepsi and the history of Coca Cola is nothing like the history of Pepsi outside of the fact that both companies were advertising soda. Both were intended to serve as recreational drinks associated with parties, fun, sex, and entertainment. The two drinks have just about the same color, the same amount of carbon dioxide, and have a similar taste. While in the past they both used different natural extracts from the coca nut, nowadays they both rely on artificial flavors and man-made...
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...Coca-Cola as the Leading Brand in the Soft Drink Industry A Term Paper Presented To Dr. Sterling Plata In partial Fulfillment of the Requirements for ENGLRES 2nd Trimester, A.Y. 2013 – 2014 Alexandra Beatrice Brion December 11, 2013 Life is a collection of moments. Some are great. Some are bad. Anniversaries, birthdays, gatherings, holidays, weddings, and every defining memory that is etched one’s life makes each moment uniquely significant. In all these occurrences, Coca-Cola is unnoticeably always there. It is a reminder of good times and a recollection of warm feelings (Journey Staff, 2012). The remarkable drink’s amazing journey began when it was formulated and created by pharmacist John Pemberton on May 1886 in Atlanta, Georgia. Frank Robinson, Pemberton’s bookkeeper later coined the brand Coca-Cola and designed its signature logo that is now recognized by 94% of the world’s population (Smith, 2012). In 1895, it was said that, “Coca-Cola is consumed in every state and territory in the United States” (Business Week, n.d., n.p.). The company eventually spread through Latin America, Canada, Europe, and the Asia-Pacific region. Coca-Cola continues to rapidly grow and is present in over 200 countries worldwide (Girard, 2005). Despite the company’s notable achievements, its success did not happen over night as it had its fair share of challenges and obstacles to face over the years. Up until today, the Coca-Cola Company has managed to maintain its products...
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...I. Introduction Coca-Cola and Pepsi have been competitors for over a century, but their fiercest competition has risen out of the fight to gain an advantage in the carbonated soft drink (CSD) industry, specifically in the United States. In the beginning, the competition yielded benefits for both firms. They were constantly trying to keep up with the other, which proved to be a mutually beneficial relationship. However, following the end of the millennium, US CSD consumption began to decline. By 2009, Americans were consuming CSDs at the lowest rates since 1989. During this decline, Coca-Cola struggled operationally and Pepsi attempted forays into new products and new markets. Forging ahead into the 21st century, both Coca-Cola and Pepsi faced the problems of sustaining growth and profitability in a declining CSD market and the challenges associated with non-CSD products. The ever-famous Coca-Cola formula was created by John Pemberton in 1886 and was marketing as a “potion for mental and physical disorders.” It was acquired in 1891 by Asa Candler and with marketing help, grew enough to grant a bottling franchise in 1899. Candler thought the company would perform better in fountains than bottles. Candler sold the company to investors in 1919, the same year Coca-Cola went public. Robert Woodruff took the reigns as CEO in 1923. He not only oversaw the pioneering of many technical innovations that would become critical to the CSD industry, but he also introduced the “lifestyle”...
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...The aim of this case study - “Coke Versus Pepsi, 2001” is to analyze the trend of both companies – Coke and Pepsi, after announcement of Pepsi’s acquirement to Quaker Oats, based on the past and forecasted information and materials. This essay would use “Economic Value Added” (EVA) measure, in order to identify the expected values of both companies. Carolyn Keene, the consumer analyst at mutual fund firm SPL, believed that the value comparison of Coca-Cola and PepsiCo should be measured by EVA. So what is EVA? Economic Value Added is a popular method of value creation developed by Stern Stewart and Co of New York. It is a measure of economic profit. The EVA is the difference between the firm’s after-tax return on capital and its cost of capital. Stewart states that the earnings, earnings per share, and earnings growth are misleading measures of corporate performance, and the best practical periodic performance measure is economic value-added. The formula to measure EVA is: EVA= NOPAT – (invested Capital x WACC). EVA is a dollar amount and if that amount is positive, the company can earn more net operating profit after tax than the cost of capital used to generate the profit. There are a number of advantages that should be addressed of using EVA as a measure of company performance. The first one is the close relationship with NPV who is the most common measure of company performance. EVA is closest in spirit to corporate finance theory that argues that the value of the firm...
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...distribution groups include the Eurasia, Africa, Europe, Latin America, North America, and the Pacific Group. Selling products from diet and regular sparkling beverages to still beverages such as 100 percent fruit juices and fruit drinks, water, sports and energy drinks, teas and coffees, and milk and soy based beverages; selling 1.7 billion servings per day across the world. Coca Cola’s mission statement, "Our commitment is to provide products and services that meet the beverage and business needs of our customers and consumers. In doing so, we provide sound and rewarding business opportunities and benefits for customers, suppliers, distributors and communities. " PepsiCo was founded in 1898. It is home to hundreds of brands around the globe Pepsi-Cola, Frito-Lay, Gatorade, Tropic, and Quaker Brands. Pepsi’s mission is to be the world’s leading consumer convenient foods and beverage product company; seeking to yield financial rewards to their investors, providing prospects for growth and development to their employees, business partners and the communities which they operate, and striving for honesty, fairness and integrity. Pepsi’s main mission statement, “PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate-environment, social, economic-creating a better tomorrow than today.” PepsiCo’s food and snack business is located in North and South America. PepsiCo Europe being the region’s leading food and beverage company; spanning from Russia...
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...How to Unlever and Relever The Beta for a Firm According to MM, the required rate of return for the equity of a company increases when debt is a higher proportion of the capital structure. This also affects the beta of a firm’s equity by the following formula: | βL = βU 1+DE 1-t | ( [ 1 ]) | where βL = the levered beta of a firm (i.e., including debt in the capital structure), βU = the unlevered beta of a firm (i.e., when there is no debt in the capital structure), (D/E) = the debt to equity ratio, and t = the tax rate. This means that the beta for the equity of a firm will increase as the relative amount of debt in the capital structure is increased. This equation can be rearranged so that the unlevered beta can be calculated as | βU = βL1+DE 1-t | ( [ 2 ]) | If you want to find out how the beta for a firm’s equity might change if there is a change in the capital structure for the firm, you can use this equation to calculate the change in beta. For example, suppose that you know that the beta for a firm’s equity is currently 1.40 and the firm has a debt to equity ratio of 0.50 and a tax rate of 30%. What would be an estimate of the new beta if the firm repurchased some of the outstanding debt such that the debt to equity ratio is reduced to 0.30? To do this, you first have to find what the unlevered beta would be by substituting in Equation 2, | βU = 1.401+0.5 1-0.3 = 1.037 | ( [ 3 ]) | Note that the unlevered beta for this...
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...international companies. These issues could not have been anticipated prior to market entry, however, Coke could have agreed to start new bottling plants instead of what they actually did, which was buying out Parle, and then would have not have had to sell a whopping 49% of it’s equity. 2) For Pepsi, one advantage was that it gained 26% market share by 1993, by entering the market before Coca-Cola was able to become a popular choice in the market while it was still in development. A disadvantage was that they were forced to change their name to Lehar Pepsi. Another disadvantage for Pepsi was that the government limited their sales to less than 25% of total sales. For Coca-Cola, an advantage was that the company was able to buy four bottling plants from Parle (an industry leader), in addition to buying out some of Parle’s leading brands. A disadvantage for Coca-Cola was the fact that the company was denied entry into the market until 1993 because Pepsi already had a place before them. That made it much more difficult to establish market share while Pepsi was there. 3) For product policies, both entered with products close to those already available in India in regards to drinks. (For example, Coca-Cola introduced Sprite and new bottled water products). For promotional activities, both advertise and use promotional material such as giveaways and paid vacations. For pricing policies, Pepsi started out aggressively introducing price policies in order to get immediate market share from...
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...Caledonia Products Integrative Problem 1. Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project? Free cash flows are being focused on because it the amount that Caledonia will receive and they will be able to reinvest that amount. Caledonia should analyze the free cash flow so that they are able to see the real amount of value or what the cost may be. The marginal value from the project would be in the incremental cash flow. The earnings would be much less if they were looking at it through the accounting profits. It would be less because of the depreciation would be considered an expense causing a larger expense for Caledonia. Describe factors Caledonia must consider if it were to lease versus buy First Caledonia must figure out if they will have enough cash flow to pay the bill each month. Leasing would give Caledonia the benefit of decreasing costs. The down side of leasing would mean that Caledonia will not be out of the lease until it has been paid off and the company who leased the property will be the owners until that is completed. Buying property means that the item is usually in better condition, better value, and they will own it. Prices are often better when buying than with leasing. Tax expenses may be a downside of owning the property. 2. Incremental Cash Flow Year1 Year2 Year3 Year4...
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...India with a population of more the 100 cores is potentially one of the largest consumer markets in the world. With urbanization and development of economy, tastes and interests of the people changes according to the advance nation. Marketing is about winning this new environment. It is about understanding what consumers want and supplying it more conveniently. Marketing deals with identifying and meeting human needs and social needs. One of the shortest definitions of marketing is “meeting needs profitably”. The consumer market may be identified as the market for product and services that are purchased by individuals as household for their personal consumption. soft drinks is a typical consumer product purchased by individual primarily quench their thirst and also for refreshment. Different types of soft drinks are available in the market and more or less content of all soft drinks is same. The market of soft drinks is facing a cutthroat competition and many companies are floating in the market with their product with different brands names. Thus in a country like India where more than 50% of total population exists below poverty line, the consumer cannot afford such high price for soft drinks. As a result the trading activities of the soft drinks industry are concentrated in and around big cities and town where the purchasing power of population is considered comparatively high. Soft drinks industry in India has an annual sale of about 4000crores, with per capita consumption...
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...issue in this case study. The situation is both Coke and Pepsi are trying to gain market share in this beverage market, which is valued at over $30 billion a year (98). Just how is this done in such a competitive market is the underlying issue. The facts are that each company is coming up with new products and ideas in order to increase their market share. The creativity and effectiveness of each company's marketing strategy will ultimately determine the winner with respect to sales, profits, and customer loyalty (98). Not only are these two companies constructing new ways to sell Coke and Pepsi, but they are also thinking of ways in which to increase market share in other beverage categories. Although the goal of both companies are exactly the same, the two companies rely on somewhat different marketing strategies (98). Pepsi has always taken the lead in developing new products, but Coke soon learned their lesson and started to do the same. Coke hired marketing executives with good track records (98). Coke also implemented cross training of managers so it would be more difficult for cliques to form within the company (98). On the other hand, Pepsi has always taken more risks, acted rapidly, and was always developing new advertising ideas. Both companies have also relied on finding new markets, especially in foreign countries. In the foreign markets, Coke has been more successful than Pepsi. For example, in Eastern Europe, Pepsi has relied on a barter system that proved to fail...
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...Managerial Economics Coke vs. Pepsi: An Economic Analysis Rebecca Simmons Managerial Economics Dr Sol Drescher December 4, 2012 Executive Summary In this case study we will do an economic analysis of two major competitors; Coke® and Pepsi®. We will look at the history of these to competitive giants and discuss how they have evolved over the years to become rivals in the 21st Century. In this case study we will also look at the supply and demand of each company’s products. Coke and Pepsi are not only in the beverage business they have branched out into other arenas to continue being the leaders in their market. Both companies do business all over the world; we will also look at how they size up internationally as well as nationally. We will look at production and cost in the short run and long run by analyzing each company economically. Each company has foreta where they will be financially in the 21st Century and in this analysis we will calculate if they have forecasted close to where they are today. Management is a big part of the success of large firms such as Coke and Pepsi so we will look at the management styles of each one. By looking at management will analyze the strategic decision making of each firm and note any issues they have had in the past or present with upper management. Finally strategic decisions in oligopoly markets with regards to profit maximization is vital to the...
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