Portfolio Management for Coca-Cola: Diversification, Investment, Management, Exchange Rates and Currency Forecast

This presentation discusses Coca-Cola's portfolio management strategies including diversification, investment, management, exchange rates and currency forecast. It highlights the success of Coca-Cola in creating a brand value worth $78.14 billion. The presentation also covers the company's investment programs worth billion dollars in international markets exhibiting high growth like Russia, India, Mexico, Thailand and China. The management style exhibited in Coca-Cola are: Democratic, Autocratic, Laissez-Faire, Consultative democratic, Teamwork and Employee engagement. The presentation also discusses how exchange rates and currency forecasting impact the company's revenue.

Portfolio
Management
COCO- COLA

Index
1. Introduction
2. Diversification
3. Investment
4. Management
5. Exchange Rates
6. Currency Forecast
7. Reference

Introduction
• Coco-Cola created for itself the most
admired and the trademarks best known
in world.
• It saw its birth in 1886 in Georgia, Atlanta
established as a manufacturer of
carbonated soft drinks.
• Across the globe Coco-Cola products every
second 19400 beverages.
• The company has an employee force of
92400 and production plants in more than

Introduction
• The product range more than 3500
merchandise including Diet Coke, Coco-Cola
Citra, Coco-Cola Life, Coco-Cola Vanilla.
• Coco-Cola has been successful in creating a
brand value worth $78.14 billion.
• The company has placed itself in the equity
market successfully where current return
equal opportunity cost of the investment for
most of its investors making it a attractive
option.

Introduction
• The shares have appreciated in value
and also protected its investors
against purchasing power’s attrition
in times of inflation (Shapiro, 2014).
• With massive product campaigning
Coco-Cola has been able to create for
itself a well known place and a leader
in the soft drink industry.

Diversification
• Coco-Cola has been an active diversifier of
its portfolio.
• Diversification proved key in the business
and company’s cornerstone success. There
is only so much of cola which the world
was willing to drink.
• Coke had always been about expansion for
capture of new markets and change to
respond the trend of market.

Diversification
• Diversification ensured that capabilities are
distinct and value is created for revenue
generation.
• Diversification has also powered value
proposition in the beverage industry (Laskin,
2018).
• During the century long operations of the
company the core business stay focused on
juices and soft drinks.

Diversification
• Although on bigger stage the company was
well known for Coke. Still it knew that
although popular it cannot serve
everyone’s taste and hence for share
maximization of the market it offered broad
range of carbonated soft drinks from
Coke’s diet version to orange
(Santandercb.co.uk, 2018).
• Presently the company’s revenue from
carbonated soft drink is 77% and the rest is
from non carbonated ranging from water,
fruit juices, tea and sport drinks (Liu,

Diversification
• There has been a trio outside of the
signature fizzy line of product which
moulds Coco-Cola into a behemoth namely
Minute Maid, Columbia Pictures and Keurig
Green Mountain.
• Seeing consumer lean towards health
drinks, the company decide to invest in the
same by acquiring VitaminWater in year
2007 and Honest Tea in year 2011.

Diversification
• Diversification has helped to showcase the
company as producer of healthy drinks. Over $17
billion were invested to take advantage of beverage
market in Africa in 2014 (Sotunde, 2014).
• To understand the diversification plan its important
to note that the Company acquired a Nigerian
based juice industry.
• In the first quarter of 2017 the company announced
its brand of premium ice teas, “Gold Peak” to
launch coffee and tea lattes.

Diversification
• To keep up with the changing market pace in
Japan, Coco-Cola decided for the first time to
branch into alcohol with a cocktail that
consists of carbonated water fruit juice and
distilled spirits (Weinbren, 2018).
• As a part of Diversification, Coke tried its
hands on market saturation and artificial
competition with a number of brands
(Osman, 2018).
• Finally last strategy which the company
chose was to find a ally which can help
against common competitor.

Investment
• Coco-Cola’s success in arena of investment is
based on four pillars.
• The company’s product choice has been top
notch. It focuses on those products which can
help its profit margins.
• With natural products being seek more by
customers company geared up for production
of healthy products in comparison to sticking
to traditional sugary products.

Investment
• The company eyes high cash productivity
through improvement of net working capital
• It is also improving financial operations
efficiency and resource management.
• The main line for revenue generation of the
company consists of producing, selling,
licensing and distribution of concentrates
and still beverages or sparkles to retailers,
wholesalers and bottling partners.

Investment
• Coco-Cola launched investment programs
worth billion dollars in international
markets exhibiting high growth like
Russia, India, Mexico, Thailand and China
(Mordeno, Olaskiewicz & Palcic, 2018).
• The investments are company’s
commitment towards emerging
economies and indication of positive
outlook in worldwide non alcoholic
beverage industry.

Investment
• The main drivers of investment in Coco-Cola are:
leading brand having loyal customer base that is
extensive, ROE and high margins, market leadership,
worldwide network consisting of bottling partners.
• Coco-Cola has wide, “economic moat” or a distinct
competitive advantage that benefits company in
myriad of ways: pricing power, high brand equity
and market leadership.
• Coco-cola is also taking advantage of its investment
portfolio expanding.

Management
• The leadership style and management of Coco-Cola
are more centralized.
• Company is run through headquarters, and partners
and subsidiaries report to parent before any decision
making (Wiley, n.d.).
• Management is done on three capabilities namely:
commercial leadership, consumer marketing and
franchise leadership.
• It uses management style concerned with consumer
marketing to create emotional bond with consumers.

Management
• The commercial leadership involves strategic
actions which guide relation between Coke
and 20 million distributors and retailers.
• The franchise leadership style is concerned
with relation between 300 bottling partners
and Coke (Statista, n.d.).
• Management performs four main functions:
Planning, Organizing, Leading and
Controlling.

Management
• The management style exhibited in Coco-
Cola are: Democratic, Autocratic, Laissez-
Faire, Consultative democratic, Teamwork
and Employee engagement.
• The different management styles are taken
in different departments.

Exchange Rates
• All multinational company (MNC) are
directly impacted by exchange rates
and so is Coca Cola.
• The operational cost, sales and
borrowing (from foreign financial
institutions) for MNCs fluctuate when
the exchange rate changes.
• For instance, revenue/payment
from/to subsidiary branches is
affected by the foreign exchange.

Exchange Rates
• Accounts Coca-Cola are consolidated in
the US. from its global operations.
• Therefore, the exchange rate has a
direct implication on the final revenue
for the company (Laskin, 2017).

Exchange Rates
• Take an example of the Coca-Cola
subsidiary operating in Mexico that
has reported a 10% revenue growth.
• However, the Mexico peso declined
versus the US dollar during the
financial period with a devaluation
value of 5% (Gabaix & Maggiori 2015).
• Therefore the final income statement
prepared in the US will show that the
Mexican.

Currency
Forecast• Currency forecasting helps a company
to project its future performance
based on market forces, and past
performance.
• Coca-Cola showed a positive revenue
in 2017, which was better than
expected.
• The growth was as a result of strong
demand of company’s brand in the
developed markets helped in
minimizing the fluctuating exchange
rates in the foreign markets (Bekaert
& Hodrick, 2012).

Currency
Forecast
• The company net revenue growth only dropped by
6% compared to the projected 8.6% (Whipp, 2017).
• Based on the currency forecasting, organic revenue
grew by 6%.
• However, Earnings per Share dropped by 55%
compared to the projected drop of 37%. In 2018,
the company projects growth of 3% in its organic
revenues and 8% growth of its pre-tax income
(Whipp, 2017).

References
• Bekaert, G., & Hodrick, R. (2012). International
financial management (2nd ed.). Upper
Saddle River, NJ. Prentice Hall.
• Gabaix, X., & Maggiori, M. (2015). International
liquidity and exchange rate dynamics:
The quarterly journal of economics, 130(3), 1369-
1420.
• Mordeno, K., Olaskiewicz, A., & Palcic, M. (2018).
The Coco-Cola Company Equity
Research Report. Spring 2012.
• Osman, L. (2018). Coca-Cola town: How
corporations sweeten city’s bottom line.
Retrieved from
http://www.cbc.ca/news/canada/ottawa/coke-and-
corporations-pay-to- play-with-city-of-
ottawa-1.4463141
• Santandercb.co.uk. (2018). The Benefits of
Diversification. Retrieved from
https://www.santandercb.co.uk/insight-

References
• Shapiro, A. (2014). Multinational financial
management. Hoboken, NJ: J. Wiley.
• Statista (n.d.). Coca-Cola’s brand value from 2006 to
2017 (in billion U.S. dollars). Retrieved from
https://www.statista.com/statistics/326065/coca-cola-
brand-value/
• Wiley (n.d.). The Coca Cola company and subsidaries.
[Data file]. Retrieved from
https://www.wiley.com/college/kieso/cokefinancial/coke
annual.pdf
• Weinbren, E. (2018). Coca-Cola’s diversification drive is
raising eyebrows – but it’s a sensible
move. Retrieved from
https://www.thegrocer.co.uk/buying-and-supplying/new
- product-development/coca-colas-
diversification-drive-is-raising-eyebrows-but-its-a-
sensible-move/564195.article.