Financial Analysis For Managers’ Assignment

September 2016

Submission Date: 17^th November 2016

This assignment will be based on real data which can be taken primarily from the annual reports of Pepsi and Coca-Cola for the 3 years ended 2015.  Full copies of Pepsi and Coca-Cola annual financial reports can be accessed through their web pages and are copied for your information on Moodle.

Scenario

ranked as 3rd biggest global brand with a value of $78,423m has experienced a 4% drop in its brand value in 2015. “When the celebrated TV series Mad Men wrapped up earlier this year, viewers were left with an iconic moment of marketing genius: Coca-Cola’s “Hilltop” ad. The 1971 commercial, which features a multicultural mix of youths singing “I’d like to buy the world a Coke,” speaks to a simpler time for America—and for the brand. Now, the world’s biggest beverage brand is trying to recapture that magic for millennials through its “Share a Coke” campaign, a global marketing initiative that began in Australia in 2011. The personalized bottles were so successful in the U.S. in 2014 that the campaign was expanded this year. In September 2015, Coca-Cola teamed up with Twitter to create a custom emoji—two Coke bottles clinking—that appeared in tweets bearing the hashtag #ShareaCoke. The result: a record 170,500 mentions over a 24-hour period. Few companies can harness the emotional horsepower that Coca-Cola can. The challenge, instead, for the 129-year-old beverage giant is that sales of cola and its carbonated cousins have been declining over the past decade amid health concerns. As a result, the company has broadened its array of lower-calorie and lower-sugar sodas, introduced smaller container sizes, and added healthier beverages to its brand portfolio, ranging from iced tea to coconut water.  Coca-Cola also spent almost USD $120 million over the past five years to fund health and wellness programs—as well as on research that drew criticism for downplaying the role of sugary drinks in causing obesity. Coca-Cola’s commitment to corporate citizenship and sustainability has earned praise, especially for its leadership in water conservation. Coca-Cola and its bottlers at Coca-Cola Enterprises say they will reach their 2020 goal of replenishing 100 percent of the water they use by the end of this year—five years early. The initiative helped Coca-Cola Enterprises earn its first spot in the Dow Jones Sustainability Index this year.

Despite its slight decline in brand value in this year’s report, Coca-Cola stands firm at number three—a true marketing juggernaut and a favored global brand” http://interbrand.com/best-brands/best-global-brands/2015/ranking/

ranked 24th in the global brands top 100 is valued at $19.622m and has experienced a 4% increase in its brand value in 2015. Financial Analysis For Managers’ Assignment

“This year, Pepsi celebrated the 40th anniversary of the Pepsi Challenge, its legendary marketing campaign. What began as a simple taste test in 1975 has evolved into a global integrated marketing campaign targeting social media savvy consumers.  The Pepsi Challenge of today has been “reinterpreted for a new generation.” Less focused on Coke comparisons, Pepsi is now homing in on a new breed of Pepsi fan. Long gone are blind taste tests—the new Pepsi Challenge takes on real-life trials that resonate deeply with the millennial generation. Pepsi is relying on a trait that has helped it stay relevant for the past 50 years: innovation. In an increasingly health-conscious market, Pepsi is addressing growing concerns over aspartame. In August 2015, it created a new Diet Pepsi formula, swapping aspartame for the less-contentious sucralose. There’s also Pepsi True, a low-calorie cola sweetened with cane sugar and stevia that’s sold exclusively through Amazon. Pepsi is also experimenting with different flavors and has even partnered with SodaStream to let people craft their own Pepsi beverages at home.  These efforts address a major brand challenge: building a new Pepsi generation. The brand is engaging new consumers with campaigns that reinforce both social good and pure enjoyment. For every mention of the #pepsichallenge on social media, for example, Pepsi has pledged to give USD $1 to a group called Liter of Light, which creates, among other things, low-cost solar lamps from old soda bottles. Pepsi is also sponsoring the hit Fox TV series Empire and recently replaced Coke as theofficial soft drink of concert giant Live Nation.  The Pepsi brand also benefits from the sustainability initiatives of its parent company, PepsiCo, which have earned the company widespread social clout, along with significant financial returns. PepsiCo’s environmental sustainability programs, across all brands, have saved the company more than USD $375 million since 2010, supporting its commitment to “Performance with Purpose.” PepsiCo’s continued progress on water, energy, packaging, and waste-reduction initiatives have delivered a twofold of business benefits: double-digit net revenue and operating profit growth. Indra Nooyi, Chairman and CEO—who ranked second on Fortune’s Most Powerful Women list in 2015—states, “by continuing to apply our scale and capabilities to address shared societal challenges, we will further strengthen our company and the communities where we operate.”

Pepsi has continued to build momentum (its brand value rose 3 percent on this year’s Best Global Brands report) for a number of reasons, but the clearest reason of all lies in Pepsi’s ability to prove its relevance among younger and more connected as well as more socially conscious and health-savvy consumers.” http://interbrand.com/best-brands/best-global-brands/2015/ranking/

Financial Analysis For Managers’ Assignment

You have been commissioned to conduct a financial analysis of the two main giants in the soft drinks market,  Coca-Cola and Pepsi and to report your findings in a formal written report. Financial Analysis For Managers’ Assignment

Required

A professionally produced report which should include a detailed analysis of the following areas:-

• Profitability
• Efficiency
• Liquidity
• Gearing
• Horizontal common size analysis (using 2013 as a base)
• Vertical common size analysis (using total assets as a base)
• The evaluation of performance of business units in either Coca-Cola OR Pepsi using financial and non-financial measures
• Conclusions and Recommendations

You should state any assumptions made and you are not required to comment on the investment performance of -Cola nor Pepsi.

Please make sure you are aware of the rules regarding plagiarism. Whilst we encourage you to discuss ideas and issues with your colleagues, the final piece of work must be entirely your own.

A sample of students may be selected to come and present their work in a 15 minute question and answer session with one or more members of the postgraduate council

Assessment Criteria (marking scheme is attached for your reference)

Financial Analysis For Managers’ Assignment