Analysis of Coca-Cola's Share Price: Contemporary Accounting Issues

This report examines the fluctuations in Coca-Cola's share price, focusing on the period before and after specific strategic announcements made in October 2018. The analysis centers on two key strategies: the introduction of new flavors of Diet Coke and Coca-Cola Zero Sugar, and the divestiture of its bottling operations. The report references a news article from The Motley Fool to understand the market context and the company's performance. It reviews the changes in share price before and after the announcements, identifying factors such as consumer preferences and market trends that influenced the stock's performance. The study also considers the impact of Coca-Cola's responses to the news article, analyzing its restructuring efforts, organic revenue, and adjusted earnings. The report concludes by summarizing the key drivers behind the share price movements and the implications of Coca-Cola's strategic decisions on its market position and financial outcomes, with references to academic articles.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues in Accounting
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Introduction..........................................................................................................................2
Selected news article............................................................................................................2
Share Price Before Announcement......................................................................................6
Share Price After Announcement........................................................................................6
Conclusion...........................................................................................................................7
References............................................................................................................................8

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Introduction
Coca-Cola initially started its business as a patent medicine, which was invented in the
late 19th century by John Stith Pemberton. Originally the business started with the inclusion of
the ingredients such as the adding of the Coca Leaves and Kola Nuts. The present formula for the
company remains a trade secret pertaining to importing of variety of recipes and experimental
recreations. The present study aims to identify the changes in the share price of Coca Cola before
and after introduction of specific strategic changes made in October 2018. The implementation
of the first strategy relates to refinements made by CEO James Quincey in considering new
flavours of Diet Coke and Coca-Cola Zero Sugar. Second strategy adopted by the company
relates to divesting its bottling operations. The study will review the new article published by
Motley Fool on Nov 15, 2018.
Selected news article
“Why Coca-Cola's Up 9% in 2018”- Dan Caplinger (TMFGalagan) The Motley Fool
Coca Cola is identified as one of the popular soda brand in the U.S. and succeeded well
in the market for decades. The company is seen to maintain a significant position in the market
by able to brand the products in a way that they are unmatched in the distribution network and
includes several types of partnerships with the several types of the other brands which are needed
to be seen in terms of the initatives with partnerships such as McDonald's. Over the years, the
company has been able to establish as a strong competitor and also invest in the companies in
U.S. and globally. The year 2018 may be considered as a strong year as it was able to break out
the sales by brand and also reported a 1% overall increase in the case volume in North America
as per the recent report published in the reported quarter. The main aspect driven by growth
needs to be further considered with number of factors which are depicted as per the inclusion of

3CONTEMPORARY ISSUES IN ACCOUNTING
the noncarbonated beverages. The various evidences collected from the report also relates to the
decline in the consumption made by Coca-Cola from the previous year. It has been able to
reverse this volume sales increase of 0.1% in 2017. The brand further commands a market share
worth 18% among the sodas. As stated by Nielsen these was a increase in the dollar value of
Coca Cola by 2%.
As per the discourse of the news article, it needs to be observed that for a significant time
beverage industry was not having an efficient growth in the industry. As a cash cow, the
company was able to produce regular sales and growth in the earnings recognized among
majority of the brands in the world. In terms of the recent reports it needs to be seen that Coca-
Cola had encountered significant challenges. The shifting taste of the consumer has pushed the
traditional soft drinks manufacturers to consider the different types of the alternatives such as
bottled water, energy drinks, tea and juices to foster the business model. Despite of this,
company has adopted the changing condition with the stock spending before October 2018. This
has showed climb in the stock performance of the company (Caplinger 2018).
In order to deal with the changes Coca Cola has identified with divesting its bottling
operations. In order to proceed with the changes, the company has proceeded with the approach
of acquiring the bottling franchises and in later refranchising them as independent entities in
various occasions. However, the latest promise made by the company has put more light on the
capital-light operation (Simon 2016). This has been considered with a downward impact on the
GAAP revenue and continued to promote smaller beverage sizes and also improve the profit
margin. The early results taken from the company has been able to show that it was not able to
inspire much confidence in the company. Despite of the significant increase in the operating
revenue, the share price increased by 5% during the first quarter. The investors were seen to be

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nervous about the 16% fall in the overall revenue and made adjustments in the revenue
pertaining to the 8% lesser than several companies (Ilomäki, Laurila and McAleer 2018).
In the recent times, the company started to gain speed in terms of better restructuring
efforts. In a more recent quarter, Coca Cola accounted for a 6% rise in the organic revenue and
decrease in net sales by 9% pertaining to the refranchising efforts. It needs to be also seen that
the overall adjusted earnings increased to 14% on an individual share basis despite of the gap of
8% negative impact on the share price for strong U.S. dollar value on international profits
(Cheptegei and Yabs 2016).
It is further stated in the news article that the management is more enthusiastic about the
future decisions. The acquisition worth $5.1 in the Costa Coffee accounts for new strategic
direction for Coca-Cola. The company further plans to consider the sports drinks, fruit juices,
and kombucha for aiding the growth areas of the business. The marketing effort considered by
the company needs to be further promoted by adding no sugar and sodas resulted from careful
pricing and greater case volume. This shows that Coca Cola has still maintained a high pricing
power pertaining to the consumers along with accounting for the challenges (Zhou, Simnett and
Green 2017).
The recent increase in the share price of the company has originated from the factors
which has shed light on the nervousness about the stock market. The corrective actions taken
from the company’s perspective can be discerned with several types of the measures which are
needed to be identified as per making corrections to the investments flooded with defensive
mechanisms such as investing in consumer staples. It can be further considered that the company
has included several beneficiaries with increased interest. It may be clearly seen that the dividend
yield exceeded 3% income which was an attractive attributed for the stock of Coca Cola to fasten
the growing company’s other sectors as well. It needs to be also seen that the modest gains in

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2018 had been able to reflect on the significant nature of the challenges which are seen to be
based on the factors to place Coca Cola on top of the beverage industry for years to come
(Aobdia, Lin and Petacchi 2015).
The aforementioned factors for changes in the stock prices may be referred with the
diagram represented below as follows:
Figure: Coca Cola change in share price between January 2018 to October 2018
(Source: Caplinger 2018)
The above figure clearly represents that during the year there has been significant nature
of changes in the strategic decisions which and the impact on the share price is evident in the
months of January 2018 to October 2018. However, the strategic changes brought by the
company may be seen with sudden increase in the share price in October 2018 (Bengtsson and
Hsu 2015). The recent changes encountered in the report needs to be identified as per the reason
stated below as follows:

6CONTEMPORARY ISSUES IN ACCOUNTING
i) The shifting taste of the consumer has pushed the traditional soft drinks manufacturers to
consider the different types of the alternatives such as bottled water, energy drinks, tea and juices
to foster the business model. However, the company has introduced new flavors of Diet Coke
and Coca-Cola Zero Sugar. This has been able to complement the increase in stock price (Akbas
et al. 2015).
ii) The company was seen to adopt significant strategy such as divesting its bottling operations.
The company has gone through cycling of franchises of bottling division and franchising as
independent entities in several occasions. The company has been able to highlight on the
restatement possibilities to make Coca-Cola a more capital-light operation. Despite of reducing
impact on the revenue from the GAP, there has been increased opportunities for the companies to
promote smaller beverage size and pack few containers thereby improving the overall profit
margin (Christensen, Hail and Leuz 2016).
Share Price Before Announcement
Month Close Return
Jan-18 47.59 NA
Feb-18 43.22 -9%
Mar-18 43.43 0%
Apr-18 43.21 -1%
May-18 43 0%
Jun-18 43.86 2%
Jul-18 46.63 6%
Aug-18 44.57 -4%
Sep-18 46.19 4%
Share Price After Announcement
Month Close Return
Sep-18 46.19
Oct-18 47.88 4%
Nov-18 50.4 5%

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The above figure shows that the return percentage showed several fluctuations before the
announcement. However, after October 2018 thee increase in share price is linear for October
and November 2018.
Conclusion
Based on the news article, it needs to be observed that for a significant time beverage
industry was not having an efficient growth in the industry. The shifting taste of the consumer
has pushed the traditional soft drinks manufacturers to consider the different types of the
alternatives such as bottled water, energy drinks, tea and juices to foster the business model. It
needs to be further seen that the recent changes encountered in the report needs to be identified
that the company has introduced new flavors of Diet Coke and Coca-Cola Zero Sugar. This has
been able to complement the increase in stock price. Secondly, the various types of the other
assertions can be inferred as per adopting the strategy of divesting in its bottling operations. The
company has gone through cycling of franchises of bottling division and franchising as
independent entities in several occasions.

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References
Akbas, F., Armstrong, W.J., Sorescu, S. and Subrahmanyam, A., 2015. Smart money, dumb
money, and capital market anomalies. Journal of Financial Economics, 118(2), pp.355-382.
Aobdia, D., Lin, C.J. and Petacchi, R., 2015. Capital market consequences of audit partner
quality. The Accounting Review, 90(6), pp.2143-2176.
Bengtsson, O. and Hsu, D.H., 2015. Ethnic matching in the US venture capital market. Journal
of Business Venturing, 30(2), pp.338-354.
Caplinger, D. 2018. Why Coca-Cola's Up 9% in 2018 -- The Motley Fool. [online] The Motley
Fool. Available at: https://www.fool.com/investing/2018/11/15/why-coca-colas-up-9-in-
2018.aspx [Accessed 23 Jan. 2019].
Cheptegei, D.K. and Yabs, J., 2016. Foreign market entry strategies used by multinational
corporations in Kenya: A case of Coca Cola Kenya Ltd. European Journal of Business and
Strategic Management, 1(2), pp.71-85.
Christensen, H.B., Hail, L. and Leuz, C., 2016. Capital-market effects of securities regulation:
Prior conditions, implementation, and enforcement. The Review of Financial Studies, 29(11),
pp.2885-2924.
Ilomäki, J., Laurila, H. and McAleer, M., 2018. Market timing with moving
averages. Sustainability, 10(7), p.2125.
Simon, B., 2016. Citizen Coke: The Making of Coca-Cola Capitalism. Agricultural
History, 90(1), p.158.

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Zhou, S., Simnett, R. and Green, W., 2017. Does integrated reporting matter to the capital
market?. Abacus, 53(1), pp.94-132.