Strategic Management Case Study

Coca-Cola Co.

Presented by: Carter Vaillancourt, Megan Land, and Emily Michaud UMFK, 2013

Overview
1. Company Overview
A brief history about Coca Cola Existing Mission and Vision Statement Existing Objectives and Strategies New Mission and Vision Statement Industry Analysis Current Opportunities and Threats CPM Matrix EFE Matrix Organizational Structure Strengths and Weaknesses Financial Condition IFE Matrix

4. Strategy Formation
SWOT matrix Space Matrix BCG Matrix Grand Strategy Matrix Matrix Analysis QSPM Matrix

2. External Audit

5. Strategic Plan for the Future

Strategies
EPS/EBIT Projected Financials

6. Implementation

3. Internal Assessment

7. Evaluation
Balanced Score Card

8. Coca-Cola Update

The Coca-Cola Bottle from the Beginning, to Present

In 1886 is when Atlanta pharmacist created the first Coca-Cola mixture out various ingredients, where he then put it up for sale for 5 cents a glass

Due to beverage companies copying CocaCola they began to manufacture the contour bottle in 1916 19051918

In 1943, during WWII General Eisenhower requested 10 bottle plants to be shipped to them overseas, which then created an overseas business.

In 1985, was the release of a new taste for Coca-Cola, the first change in formulation in 99 years. It wasnt long until they changed to their original

18861892 18931904

19411959 19191940 In the 1928 Olympics located in Amsterdam, CocaCola traveled with the team and began global expansion 19601981

19821890 19901999

1984 is when Joseph Biedenharn was hired to be the first to put the Coca Cola in bottles

After 70 years, Coca-Cola added new flavors: Fanta, originally developed in the 1940s and introduced in the 1950s; Sprite followed in 1961, with TAB in 1963 and Fresca in 1966

New beverages joined the Company's line-up, including Powerade sports drink, Qoo children's fruit drink and Dasani bottled water

Revenue and Cash Flow Growth 2005-2010

Existing Vision Statement

Our vision serves as a framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth. People: Be a great place to work where people are inspired to be the best they can be. Portfolio: Bring to the world a portfolio beverage brands that anticipate and satisfy peoples desires and needs. Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value. Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities. Profit: Maximize long-term return to shareholders while being mindful of our overall responsibilities. Productivity: be a highly effective, lean and fast-moving organization

Existing Mission Statement

Our Roadmap starts with out mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions. To refresh the world To inspire moments of optimism and happiness To create value and make a difference.

Existing Growth Strategy

Driving global beverage leadership Accelerate innovation Leverage our balanced geographic portfolio

Proposed Vision Statement

Coca-Colas vision is to inspire moments of happiness while refreshing the world.

Proposed Mission Statement

With six main operating segments in North America, Latin America, Europe, Eurasia, Africa, the Pacific,(3) and bottling investments, Coca-Cola is dedicated to being a highly effective refreshments and fast-moving organization. (5) Our mission is to bring consumers quality refreshments that anticipate and satisfy their desires and needs. (1)(2). As a company we strive to be responsible citizens by helping to rebuild and support sustainable communities (8), while maximizing longterm return to shareowners (6). Through modern technology (4) and inspiring employees to be the best they can be (9) we know we can continue to provide the best products on the market.
Customers Products or Services 3. Markets 4. Technology 5. Concern for Survival 6. Philosophy 7. Self-Concept 8. Concern for Public Image 9. Concern for Employees 2. 1.

External Audit

Industry Market Analysis

Stock Price 2010

70

60

50

40

Coca Cola Pepsi Cola

30

Nestle Dr. Pepper Snapple

20

10

0 Coca Cola Pepsi Cola Nestle Dr. Pepper Snapple

Opportunities
1) 2) 3) 4) 5) 6) 7) 8) 9) Spurring demand for energy drinks, especially in the US where estimates show about 2 billion. Approximately 85% of the companys unit case volume is delivered in recyclable bottles and cans, and the company targets to recover at least 50% of the equivalent bottles and cans sold worldwide. Bottled water drinking has increased 11%. European and China market show large potential to grow by an estimated amount of 7%. Has the option, but no obligation, to assist bottlers with promotional and marketing activities ($5 billion in 2010). 55 billion beverage servings are consumed worldwide each day Global beverage industry is expected to grow from a valued $1.4 trillion in 2008, to $1.6 trillion by 2013. India currently only consumes 11 8oz servings of Coca Cola per person per year. The non-alcoholic ready to drink(NARTD) beverage industry is expected to grow by 50 billion unit cases by 2020.

Threats
1)

2)

3) 4)

5) 6) 7) 8) 9)

Increasing preference for non carbonated healthy drinks. The Coca Cola soda saw a 5% volume declines respectively in the carbonated soda brands category. With rising obesity rates of 35.7% for adults and 17% for youth in the U.S. alone, health concerns may cause reduced consumption of sugar sweetened beverages, impacting profitability. Water is the main and most significant ingredient in beverages, quality and abundance of water is scarce worldwide, where 70% is used for agriculture and irrigation. With $24.5 billion in net operating revenue generated from international markets, and operating in over 200 countries, unstable economic conditions in foreign countries can dramatically decrease revenues. The primary beverage of Coca Cola is sparkling beverages, the most popular drinks consumed worldwide, in their respective order, are water, tea, and beer. Changes in currency rates. Coca-cola uses 74 functional currencies in 2010. In 2010 had approximately 18,600 associates represented by labor unions. PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67 Billion respectively. They are strong competitors in the market PepsiCo dominated North America with sales of US $22billion,while Coca-Cola only had about US $7billion.

CPM
KO
Critical Success factors Weights 0.0 to 1.0 Advertising Product Quality Price Competitiveness Finanical Position Customer Loyalty Global Expansion Market Share Organization Structure 0.08 0.12 0.10 0.10 0.14 0.11 0.07 0.06 Rating 1 to 4 4 4 4 3 4 4 3 4 0.32 0.48 0.4 0.30 0.56 0.44 0.21 0.24 Weighted Score Rating 1 to 4 3 3 3 4 3 3 4 3 0.24 0.36 0.3 0.40 0.42 0.33 0.28 0.18

NSRGY
Weighted Score Rating 1 to 4 4 3 4 3 4 3 3 3

PEP
Weighted Score

0.32 0.36 0.4 0.30 0.56 0.33 0.21 0.18

Customer Service
Production Capacity Employee Dedication Totals

0.08
0.10 0.04 1.00

4
4 3

0.32
0.40 0.12

3
3 4

0.24
0.30 0.16

3
4 3

0.24
0.40 0.12

3.79

3.21

3.42

EFE
Key External Factors Opportunities This is spurring demand for energy drinks, especially in the US which according to the latest industry estimates is about 2 billion Approximately 85% of the companys unit case volume is delivered in recyclable bottles and cans, and the company targets to recover at least 50% of the equivalent bottles and cans sold worldwide Bottled water drinking has increased 11%. European and China market show large potential to grow, growing into these divisions more will help the revenue sales Has the option, but no obligation, to assist bottlers with promotional and marketing activities ($5 billion in 2010). 55 billion beverage servings are consumed worldwide each day Global beverage industry is expected to grow from a valued $1.4 trillion in 2008, to $1.6 trillion by 2013 India currently only consumes 11 8oz servings of KO per person per year The non-alcoholic ready to drink(NARTD) beverage industry is expected to grow by 50 billion unit cases by 2020 Threats Increasing preference for non carbonated healthy drinks. The Coca Cola soda saw a 5% volume declines respectively in the carbonated soda brands category With rising obesity rates of 35.7% for adults and 17% for youth in the U.S. alone, health concerns may cause reduced consumption of sugar sweetened beverages, impacting profitability. Water is the main and most significant ingredient in beverages, quality and abundance of water is scarce worldwide, where 70% is used for agriculture and irrigation With $24.5 billion in net operating revenue generated from international markets, and operating in over 200 countries, unstable economic conditions in foreign countries can dramatically decrease revenues The primary beverage of Coca Cola is sparkling beverages, the most popular drinks consumed worldwide, in their respective order, are water, tea, and beer Changes in currency rates. Coca-cola uses 74 functional currencies in 2010 In 2010 had approximately 18,600 associates represented by labor unions PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67 Billion respectively. They are strong competitors in the market PepsiCo dominated North America with sales of US $22billion,while Coca-Cola only had about US $7billion Totals 0.06 4 0.24 Weights 0.0 to 1.0 Rating 1 to 4 Weighted Score

0.04 0.04 0.04 0.05 0.06 0.05 0.04 0.05

3 2 2 2 3 3 2 3

0.12 0.08 0.08 0.1 0.18 0.15 0.08 0.15 0

0.06

0.18

0.06

0.12

0.09

0.18

0.07

0.21

0.07 0.04 0.05 0.05 0.08 1

4 2 2 4 4

0.28 0.08 0.1 0.2 0.32

2.85

Internal Audit

Financial Information Income Statement

Financial Information Balance Sheet (1)

Financial Information Balance Sheet (2)

Coca-Cola Worth Analysis for 2010 (in millions)

Shareholder's equity - Goodwill - Intangibles Net Income * 5 (Stock Price/EPS) * NI # of Shares Out * Stock Price Four Method Average 4,094 59,045 71,177 71,225 51,385

Ratio Analysis
Ratio (2010)
Liquidity Ratios Current Quick Leverage Ratios 1.17 1.02 1.11 0.89 1.29 1.03

Coca-Cola

Pepsi Nestle

Debt to total assets

Debt to equity Long-term debt to equity Times-interest-earned ratio Activity Ratios Fixed Assets Turnover Total Assets Turnover

0.57
1.35 0.45 20.43 2.38 0.48

0.68
2.19 0.94 9.23 3.03 0.85

0.44
0.78 0.12 41.25 5.12 0.98

Inventory Turnover
Profitability Ratios Gross Profit Margin % EBT Margin % Net Profit Margin % Return on total assets % Return on Stockholder's equity %

13.25
63.86 40.56 33.63 19.42 38.09

17.15
54.05 14.23 10.93 11.7 33.27

13.84
58.21 34.69 31.2 27.56 49.17

Price-earnings ratio
Growth Ratios Sales Growth (5-years) Net Income Growth (5-years Average) Earnings per share Growth (5-year Average)

6.03
8.74% 19.37% 19.92%

15.35
12.18% 9.16%

5.43
3.80% 32.08%

10.35% 37.77%

Strengths
1) With revenues of $35,119,000 million, Coca-Cola is one of the largest beverage manufacturers globally. 2) Coca-Cola owns four of the worlds top five nonalcoholic sparkling beverage brands including Coca-Cola, Diet Coke, Sprite and Fanta. 3) Sold 25.5 billion cases of products in 2010 4) Accounted for 51% of U.S. unit case volume, and 50% of non-U.S. case volume for 2010 5) Has ownership interest in its bottling/distributing partners; 23% in Coca-Cola Hellenic, 32% in Coca-Cola FEMSA, and 30% in Coca-Cola Amatil. 6) Acquired Coca-Cola Enterprises, Inc., one of the major bottlers for Coca-Cola in North America which had $3.6 billion in revenues 7) In Eurasia and Africa, unit case volume increased 12% in 2010 8) Coca-Cola has more than 500 brands and 3,500 beverages and products. 9) Coca-Cola sells 1.7 Billion servings of beverages per day in over 200 countries. 10) Coca-Cola generated 9.5 billion in cash from operations in 2010, up 16% over 2009.

Weaknesses
1) 2) Weak performance in Europe achieving a 0% growth in 2010 Does not hold number 1 spot for either the water brand or the leading sports drink 3) Currently does not hold a snacks segment, where Pepsi Co. has a food division which creates for 60% of their total revenue. 4) Does not perform best in North America, only accounting for 31.7% in total revenue in 2010 5) Has a high number of current liabilities accounting for 18,508 million 6) Acquiring Coca-Cola Enterprises (CCE) resulted in assuming additional $7.9 billion in debt 7) Operating income for Europe operations decreased by $50 million in 2010 8) Interest expense increased $378 million mainly due to premiums paid on repurchasing long term debt 9) Common Stock Market Prices decreased between the first and second quarter in 2010 from $52.23 and $49.47 10) Other operating expenses grew to $5,959 million in 2010 from $5,699 million in 2009

Key Internal Factors

IFE

Weights 0.0 to 1.0

Rating 1, 2, 3 or 4 3 or 4

Weighted Score

Internal Strengths With revenues of $35,119,000 million, Coca-Cola is one of the largest beverage manufacturers globally Coca-Cola owns four of the worlds top five nonalcoholic sparkling beverage brands including Coca-Cola, Diet Coke, Sprite and Fanta Sold 25.5 billion cases of products in 2010 Accounted for 51% of U.S. unit case volume, and 50% of non-U.S. case volume for 2010 Has ownership interest in its bottling/distributing partners; 23% in CocaCola Hellenic, 32% in Coca-Cola FEMSA, and 30% in Coca-Cola Amatil Acquired Coca-Cola Enterprises, Inc., one of the major bottlers for Coca-Cola in North America which had $3.6 billion in revenues In Eurasia and Africa, unit case volume increased 12% in 2010 Coca-Cola has more than 500 brands and 3,500 beverages and products Coca-Cola sells 1.7 Billion servings of beverages per day in over 200 countries Coca-Cola generated 8.5 billion in cash from operations in 2010, up 16% over 2009 Internal Weaknesses Weak performance in Europe achieving a 0% growth in 2010 Does not hold number 1 spot for either the water brand or the leading sports drink Currently does not hold a snacks segment, where Pepsi Co. has a food division which creates for 60% of their total revenue Does not perform best in North America, only accounting for 31.7% in total revenue in 2010 Has a high number of current liabilities accounting for 18,508 million Acquiring Coca-Cola Enterprises (CCE) resulted in assuming additional $7.9 billion in debt Operating income for Europe operations decreased by $50 million in 2010 Interest expense increased $378 million mainly due to premiums paid on repurchasing long term debt Common Stock Market Prices decreased between the first and second quarter in 2010 from $52.23 and $49.47 Other operating expenses grew to $5,959 million in 2010 from $ 5,699 million in 2009 Totals

0.07 0.08 0.07 0.06

4 4 3 3

0.28 0.32 0.21 0.18

0.05 0.09 0.04 0.06 0.05 0.06 1 or 2 0.02 0.06 0.07 0.03 0.02 0.07 0.03 0.03 0.02 0.02 1

3 4 3 4 3 3 1 2 1 1 2 1 1 2 2 2

0.15 0.36 0.12 0.24 0.15 0.18 0.02 0.12 0.07 0.03 0.04 0.07 0.03 0.06 0.04 0.04

2.71

Strategy Formation

SWOT Matrix
ST Strengths
1. Create a line of energy drinks to meet a growing demand of those products. (S8, S9, S10, O1, O9) 2. Increase marketing in Latin America. (S8, S9, S10, O6, O7, O9)

Opportunities WO
1. Increase sports drink product sales through sponsorship of collegiate sports. (W2, W4, O1, O6, O9) 2. Increase marketing in Europe. (W1, O4, O6) 3. Take advantage of the increasing demand for bottled water by creating flavored water drops. (W2, O3, O6, O9)

ST
1. Diversify beverage line by offering alcoholic beverages. (S1, S8, S9, T5)

2. Increase R&D spending to research production methods to ensure that we are utilizing resources in the most efficient manner. (S1, S10, T3)

WT
1.Create a lower calorie sports drink line to promote healthy drinking habits while still providing the essential electrolyte balance. (W2, W4, T1, T2) 2. Diversify products by entering the healthy snack/snack food market. (W3, T2)

Threats

Weaknesses

Space Matrix
Financial Strength 1 Cash Flow Price Earnings 2 Ratio 3 Earnings per Share 4 Working Capital 5 Liquidity 6 Net Income 7 Return on Assets Financial Strength Average Ratings 5.0 3.0 5.0 7.0 6.0 6.0 4.0 5.14 Industry Strength 1 Profit Potential 2 Financial Stability Resource 3 Utilization Productivity, Capacity 4 utilization 5 Market Entry 6 Growth Potential 7 Extent Leveraged Industry Strength Average Competitive Advantage 1 Market Share Product 2 Quality Customer 3 Loyalty Capacity 4 Utilization Technologically 5 Advanced Global 6 Expansion Product Life 7 Cycle Competitive Advantage Average Rating 6.0 7.0
6

FS
Aggressive
5

4.0 4.0 6.0 3.0 2.0 4.6

Conservative

Environmental Stability Rating Rate of 1 Inflation -5.0 Barriers to Enter 2 the Market -4.0 Competitive 3 pressure -2.0 Price 4 Elasticity -4.0 Demand 5 Variability -4.0 Price Range of Competing 6 Products -4.0 Ease of Exit from 7 Market -6.0 Environmental Stability Average -4.14

Rating

C -1.0 S
-3.0 -2.0 -2.0 -3.0 -1.0 -3.0

-6

-5

-4

-3

-2

-1 1 2 3 4 5

IS

Defensive

Competitive

ES
2.43 1.00

X Coordinate Y Coordinate

-2.14

BCG Matrix
Segments North America Pacific Revenue $11,205.00 $5,271.00 %rev 39.45% profit $1,520.00 %pft 15.31% Relative Market Share Industry Growth Rate (%) 1.00 4.40%

18.56%

$2,048.00

20.63%

1.00

5.60%

Europe
Latin America Eurasia & Africa Total

$5,249.00
$4,121.00 $2,556.00 $28,402.00

18.48%
14.51% 9.00% 100.00%

$2,976.00
$2,405.00 $980.00 $9,929.00

29.97%
24.22% 9.87% 100.00%

1.00
1.00 1.00

5.30%
6.00% 6.50%

BCG Continued

Grand Strategy Matrix

Rapid Market Growth

Quadrant II 1. Market development 2. Market penetration 3. Product development 4. Horizontal integration 5. Divestiture 6. Liquidation

Quadrant I 1. Market development 2. Market penetration 3. Product development 4. Forward integration 5. Backward integration 6. Horizontal integration 7. Related diversification

Weak Competitve Position

Quadrant III 1. Retrenchment 2. Related diversification 3. Unrelated diversification 4. Divestiture 5. Liquidation

Quadrant IV 1. Related diversification 2. Unrelated diversification 3. Joint ventures

Strong Competitive Position

Slow Market Growth

Matrix Analysis
Alternative Strategies IE SPACE GRAND BCG COUNT Forward Integration Backward Integration x x x x X X 3 3

Horizontal Integration Market Penetration Market Development

x x x

x x x

X X X

3 3 3

Product Development Related Diversification Unrelated Diversification Retrenchment Divestiture Liquidation

x x x

x x

3 2 1

Strategy Evaluation
Integration Strategies We have integrated into many suppliers prior to 2010 We recently purchased CCE which helps integrate our bottling and marketing Product and Market Development We are highly established worldwide prior to 2010 Market Penetration We are currently in 200 different countries prior to 2010 Unrelated or Related Diversification We dont offer a food segment (Unrelated) None of our main competitors offer an alcoholic beverage (Related)

QSPM
Quantitative Strategic Planning Matrix-QSPM

Create a lower calorie sports drink line/ while still providing essential electrolyte balance.
Weigh t AS 1 to 4 0.06 0.04 0.04 0.04 0.05 0.06 0.05 0.04 0.05 4

Diversify Diversify beverage line products by by offering entering the alcoholic healthy beverages. snack/snack food market.

Key factors External Opportunities 1. There is spurring demand for energy drinks, especially in the US which according to the latest industry estimates is about 2 billion 2. Approximately 85% of the companys unit case volume is delivered in recyclable bottles and cans, and the company targets to recover at least 50% of the equivalent bottles and cans sold worldwide. 3. Bottled water drinking has increased 11%. 4. European and China market show large potential to grow, growing into these divisions more will help the revenue sales. 5. Has the option, but no obligation, to assist bottlers with promotional and marketing activities ($5 billion in 2010). 6. 55 billion beverage servings are consumed worldwide each day 7. Global beverage industry is expected to grow from a valued $1.4 trillion in 2008, to $1.6 trillion by 2013. 8. India currently only consumes 11 8oz servings of KO per person per year. 9. The non-alcoholic ready to drink(NARTD) beverage industry is expected to grow by 50 billion unit cases by 2020.
Threats

TAS

AS 1 to 4

TAS

AS 1 to 4

TAS

0.24

3 2 4 4 2 0.1 0.24 0.2 0.08

0.12 3 4 4 2 4 0.15 0.24 0.2 0.08 0.2

0.12

1. Increasing preference for non carbonated healthy drinks. The Coca Cola soda saw a 5% volume declines respectively in the carbonated soda brands category. 2. With rising obesity rates of 35.7% for adults and 17% for youth in the U.S. alone, health concerns may cause reduced consumption of sugar sweetened beverages, impacting profitability. 3. Water is the main and most significant ingredient in beverages, quality and abundance of water is scarce worldwide, where 70% is used for agriculture and irrigation. 4. With $24.5 billion in net operating revenue generated from international markets, and operating in over 200 countries, unstable economic conditions in foreign countries can dramatically decrease revenues. 5. The primary beverage of Coca Cola is sparkling beverages, the most popular drinks consumed worldwide, in their respective order, are water, tea, and beer. 6. Changes in currency rates. Coca-cola uses 74 functional currencies in 2010. 7. In 2010 had approximately 18,600 associates represented by labor unions 8. PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67 Billion respectively. They are strong competitors in the market 9. PepsiCo dominated North America with sales of US $22billion,while Coca-Cola only had about US $7billion.
total should be 1.0

0.06 0.06 0.09 0.07 0.07 0.04 0.05 0.05 0.08

1

2 2 1

0.12 0.12 0.09 4 4 0.24 0.36 1 0.09

0.28

1 1

0.05 0.08

4 4

0.2 0.32

2 2

0.1 0.16

QSPM (2)
Create a lower calorie sports drink line/ while still providing essential electrolyte balance.
Strengt hs 1. With revenues of $35,119,000 million, Coca-Cola is one of the largest beverage manufacturers globally. 2. Coca-Cola owns four of the worlds top five nonalcoholic sparkling beverage brands including Coca -Cola, Diet Coke, Sprite and Fanta. 3. Sold 25.5 billion cases of products in 2010 4. Accounted for 51% of U.S. unit case volume, and 50% of non-U.S. case volume for 2010 5. Has ownership interest in its bottling/distributing partners; 23% in Coca-Cola Hellenic, 32% in Coca-Cola FEMSA, and 30% in Coca-Cola Amatil. 6. Acquired Coca-Cola Enterprises, Inc., one of the major bottlers for Coca-Cola in North America which had $3.6 billion in revenues 7. In Eurasia and Africa, unit case volume increased 12% in 2010 8. Coca-Cola has more than 500 brands and 3,500 beverages and products. 9. Coca-Cola sells 1.7 Billion servings of beverages per day in over 200 countries. 10. Coca-Cola generaged 8.5 billion in cash from operations in 2010, up 16% over 2009. Weaknesses 1. Weak performance in Europe achieving a 0% growth in 2010. 2. Does not hold number 1 spot for either the water brand or the leading sports drink. 3. Currently does not hold a snacks segment, where Pepsi Co. has a food division which creates for 60% of their total revenue. 4. Does not perform best in North America, only accounting for 31.7% in total revenue in 2010. 5. Has a high number of current liabilities accounting for 18,508 million 6. Acquiring Coca-Cola Enterprises (CCE) resulted in assuming additional $7.9 billion in debt 7. Operating income for Europe operations decreased by $50 million in 2010 8. Interest expense increased $378 million mainly due to premiums paid on repurchasing long term debt 9. Common Stock Market Prices decreased between the first and second quarter in 2010 from $52.23 and $49.47. 10. Other operating expenses grew to $5,959 million in 2010 from $ 5,699 million in 2009. total should be 1.0

Diversify products by entering the healthy snack/sna ck food market.

Diversify beverage line by offering alcoholic beverages .

0.07 0.08 0.07 0.06

1 2 2

0.07 0.14 0.12

0.28

2 2 3 3

0.14 0.16 0.21 0.18

0.05 0.09 0.04 0.06 0.05 0.06

0.02 0.06 0.07 0.03 0.02 0.07 0.03 0.03 0.02 0.02

3 3 2

0.18 0.15 0.12

0.24

4 3 2 3

0.24 0.15 0.12 0.06

0.18 4 3 0.28 0.09 2 0.06

2.28

2.25

2.82

Strategic Fit
Competitive Risks Pepsi Co. and Nestle currently have market share in the Food Industry Funding Aggressive Growth Market Capitalization of 190 billion Current Assets exceed current liabilities by over 3 billion Strong Brand Utilization Moving into the food industry and having very strong customer loyalty, customers will be drawn to new products

Kellogg Company
Currently located in 180 different countries Sales totaled 12.4 billion in 2010 Includes brands such as: Special K, Cheez-It, Pringles, Keebler, Austin, Famous Amos, and Townhouse Crackers Food Consumer Products Industry Kellogg's is ranked number 2, behind Pepsi Co. and ahead of General Mills

3-Year Goals
In 3 Years - Acquire ownership of Kellogg Company by the end of 2013 - Expand Healthy Food choices through acquisition
Year 1: Begin Acquisition Process with Kellogg Company Year 2: Attain Ownership of Kellogg Company Year 3: Begin Marketing and Sales with Kellogg Company

Strategic Implementation

Kellogg Company Net Worth Analysis

Kelloggs Worth Analysis for 2010 (in millions) Shareholder's equity - Goodwill Intangibles Net Income * 5 (Stock Price/EPS) * NI # of Shares Out * Stock Price

(2,930) 6,235 17,849 17,868

Four Method Average

9,755

EPS/EBIT
Assumptions
Capital Needed 6,000,000,000 EBIT Range $7 bil. - $15 bil. Interest Rate 4% Tax Rate 16% Stock Price (Dec. 31, 2010-year end) 30.86 Current Shares Outstanding (Basic) 2,308,000,000 CS Shares needed 194,426,442

Common Stock Financing

Recession EBIT Interest EBT Taxes EAT # of Shares 7,000,000,000 7,000,000,000 2,030,000,000 4,970,000,000 2,502,426,442 Normal 10,000,000,000 10,000,000,000 2,900,000,000 7,100,000,000 2,502,426,442 Boom 15,000,000,000 15,000,000,000 4,350,000,000 10,650,000,000 2,502,426,442

Debt Financing Recession Normal Boom EBIT 7,000,000,000 10,000,000,000 15,000,000,000

Interest 240,000,000 240,000,000 240,000,000 EBT 6,760,000,000 9,760,000,000 14,760,000,000 Taxes 1,960,400,000 2,830,400,000 4,280,400,000 EAT 4,799,600,000 6,929,600,000 10,479,600,000 # of Shares 2,308,000,000 2,308,000,000 2,308,000,000

EPS

1.99

2.84

4.26

EPS

2.08

3.00

4.54

EPS/EBIT Continued
Assumptions
Stock needed Debt needed Interest CS shares needed
90% Stock - 10% Debt Financing Recession Normal EBIT 7,000,000,000 10,000,000,000

5,400,000,000 600,000,000 24,000,000 174,983,798

Stock needed Debt needed Interest CS shares needed

10% Stock - 90% Debt Financing Recession Normal EBIT

600,000,000 5,400,000,000 216,000,000 19,442,644

Boom 15,000,000,000

Boom 15,000,000,000

7,000,000,000 10,000,000,000

Interest 24,000,000 24,000,000 24,000,000 EBT 6,976,000,000 9,976,000,000 14,976,000,000 Taxes 2,023,040,000 2,893,040,000 4,343,040,000 EAT 4,952,960,000 7,082,960,000 10,632,960,000 # of Shares 2,482,983,798 2,482,983,798 2,482,983,798 EPS 1.99 2.85 4.28

Interest 216,000,000 216,000,000 216,000,000 EBT 6,784,000,000 9,784,000,000 14,784,000,000 Taxes 1,967,360,000 2,837,360,000 4,287,360,000 EAT 4,816,640,000 6,946,640,000 10,496,640,000 # of Shares 2,327,442,644 2,327,442,644 2,327,442,644 EPS 2.07 2.98 4.51

Projected Financial Assumptions

Capital needed Debt needed 10,000,000,000 6,000,000,000

Cash Used
Interest (estimate) Tax Rate Stock Price (Dec. 31, 2010 - year end) Additional Interest Dividends Paid $1.83 per share

4,000,000,000
4% 16% 30.86 240,000,000 4,223,640,000

Kellogg's pays off own liabilities

Kellogg's shareholders are paid off

Projected Income Statement (in millions) Total Revenue Cost of Revenue Gross Profit Operating Expenses Research and Development Selling General & Administrative Nonrecurring Others Total Operating Expenses Operating Income or Loss Income from Continuing Operations Total Other Income/Expense Net EBIT Interest Expense Income Before Tax Income Tax Expense Consolidated Net Income Less: Non-Controlling Interests Net Income
Basic EPS Diluted EPS Basic Average Shares Outstanding Diluted Average Shares Outstanding Dividends Per Share

Projected Financials Income Statement

2009 30,990 11,088 19,902 11,671 8,231 289 9,301 355 8,946 2,040 6,906 82 6,824
2.95 2.93 2,314 2,329 1.64

2010 35,119 12,693 22,426 13,977 8,449 5,502 14,976 733 14,243 2,384 11,859 50 11,809
5.12 5.06 2,308 2,333 1.76

2011 52,784 15% increase, plus Kelloggs 12,397 21,324 % of revenue, plus Kelloggs 7,108 31,460 17,276 Add Kelloggs 3,299 14,184 6,052 10% increase 20,236 1,221 Add Kelloggs 248, add 240 from financing 19,015 3,042 16% tax rate 15,973 50 Same 15,923
6.90 6.82 2,308 2,333 1.83

Same Same

Projected Financials Balance Sheet (1)

Projected Balance Sheet (in millions) ASSETS Current Assets Cash & Cash Equivalents Short-term Investments Net Receivables Inventory Other Current Assets Total Current Assets Long-term Investments Property Plant & Equipment 6,959 2,192 3,758 2,354 2,226 17,551 6,755 9,561 8,379 2,820 4,430 2,650 3,162 21,579 7,585 14,727 4,379 3,666 5,316 4,236 4,336 21,933 9,861 21,537 30% increase 25% increase, plus Kelloggs 3,128 Decrease by $4 billion for funds 30% increase 20% increase 20% increase, plus Kelloggs 1,056 30% increase, plus Kelloggs 225

Goodwill
Intangible Assets Accumulated Amortization Other Assets Deferred Long-term Asset Charges Total Assets -

4,224
8,604

11,665
15,244 -

15,876
18,696 -

5% increase, plus Kelloggs 3,628

10% increase, plus Kelloggs 1,456 7% increase like previous year, add Kelloggs 720

1,976 48,671

2,121 72,921

2,989 90,892

Projected Financials Balance Sheet (2)

LIABILITIES Current Liabilities Accounts Payable Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Debt Other Liabilities Deferred Long-term Liability Charges Minority Interest Negative Goodwill Total Liabilities STOCKHOLDERS' EQUITY Misc. Stock Opt Warrants Redeemable Pref. Stock Preferred Stock Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholders' Equity Total Stockholders' Equity Total Liabilities and Stockholders' Equity 6,921 6,800 13,721 5,059 2,965 1,580 547 23,872 880 41,537 (25,398) 8,537 (757) 24,799 48,671 9,132 9,376 18,508 14,041 4,794 4,261 314 41,918 880 49,278 (27,762) 10,057 (1,450) 31,003 72,921 10,045 11,176 21,221 18,241 5,033 4,261 314 49,070 880 60,977 (27,762) 10,057 (1,450) 41,822 90,892 Increases from Net Income, Dividends paid out Same Same Same 10% increase Add 30% of $6 billion from financing Add 70% of $6 billion from financing 5% increase Same Same

Projected Financial Ratios

Coca-Cola's Projected Ratios 2010 v. 2011 Current Ratio Quick Ratio Debt to Total Assets Debt to Equity Times Interest Earned Fixed Asset Turnover Total Asset Turnover Inventory Turnover 2010 1.17 1.02 0.57 1.35 20.43 2.38 0.48 13.25 2011 0.97 0.83 0.54 1.17 16.57 2.45 0.58 12.46

Gross Profit Margin %

Return on Stockholders' Equity %

63.86
38.09

59.60
38.07

Strategic Evaluation

Balanced Scorecard
Area of Objectives Customers 1 Brand Identity 2 Satisfaction Employees 1 Employee Moral Measure or Target Time Expectation Primary Responsibility

Industry reports/Market Cap. Customer Survey

Survey

Yearly Yearly
Yearly Yearly

Marketing Officer Marketing Officer

People Officer Administrative Officer Administrative Officer People Officer

2 Service Training # of seminars Operations 1 Diversify product line Acquire Kelloggs Company Business Ethics 1 Ethics Training # of ethics training sessions 2 Recycling Recycle 50% of total wastes Financial 1 Revenues Increase by 50% each year Better than 2 Ratio Analysis competitors/industry Avg.

Yearly Yearly

Yearly Yearly

Financial Officer Financial Officer

Update

Update
Currently serving 3,500 products worldwide Global volume growth in the first quarter of 2013 was 4% On Earth Day Coca Cola donated more than 55,000 recycling bins to parks, schools, colleges, and homes in a 115 communities across the US 63,290,877 likes on Facebook Coca Cola Rewards program is now offered

Stock Performance