Coca-Cola Enterprises: Company Analysis and SWOT Review

Company Overview

The Coca-Cola Company is one of the oldest and largest companies in the United States. Its roots trace back to 1886, when Dr. John Pemberton began producing Coca-Cola syrup for fountain drink dispensers. Coca-Cola bottling operations began in 1899, and from there the franchise network grew into the global giant it is today. Its most recent major accomplishment has been its entry into the global marketplace (CCE, 2002).

Coca-Cola's primary objective is to maintain its current position as a leader among beverage producers in the global marketplace. Although it is a large corporate entity, the company holds to a philosophy of maintaining a strong local image and presence in the communities where it operates.

Coca-Cola has 463 facilities, which generate annual revenue of $16 billion. The Coca-Cola Company currently stands as the world's largest beverage company, controlling over half of the worldwide market share. Its primary brand is Coca-Cola, and the company owns an additional 240 soft drink products ranging from Coca-Cola spin-offs to Fanta, bottled water, and iced coffee.

Soft drinks are a major consumer item with a large customer base. Recently, the soft drink industry has been experiencing an economic downturn and a saturated market. Several prospects exist in emerging markets, such as those in Asia and South America. At this time, however, the beverage market carries significant risk for those wishing to enter. If expenditures rise and new emerging markets do not generate sufficient revenues, even major players may be forced to scale back operations, making the beverage industry a less attractive proposition.

Market Information

The key factors behind Coca-Cola's success have been the efforts of its marketing department. Although marketing is never finished and maintaining a market presence requires constant effort, Coca-Cola now benefits from over 100 years of marketing success. This, combined with sound risk management strategies, has been central to the company's sustained performance. Coca-Cola's most valuable asset is its trademark (CCE, 2002). It is one of the oldest and most established brands in the United States and is gaining equivalent recognition globally.

Aside from its number-one brand, "Coke," the company also holds the brand equity of the top ten soft drink brands in the United States. Coca-Cola Enterprises is the entity behind many familiar brands, including Fanta, Sprite, Perrier, and others.

Coca-Cola Enterprises maintains an increasing presence in the global marketplace. The company operates in 46 states in the United States, all 10 provinces in Canada, and portions of Europe including Belgium, continental France, Great Britain, Luxembourg, Monaco, and the Netherlands. Coca-Cola remains its flagship product with the largest share of sales, though the company also owns the top ten soft drink brands in the United States.

Coca-Cola Enterprises is organized across many divisions at multiple levels. At the top level is CEO Lowry F. Kline, who has held the position since 1997. Major company-wide decisions rest with the CEO, Vice President, other corporate officers, and a Board of Directors. The corporation also maintains numerous management levels from district to local operations.

Coca-Cola Enterprises is the largest beverage company in the world. Its franchise territories encompass a population of 398 million people, representing 80% of the population of North America and the entire populations of Belgium, continental France, Great Britain, Luxembourg, Monaco, and the Netherlands (CCE, 2002). Coca-Cola distributed approximately 4.2 billion cases of soft drinks in 2001, up from 3.8 billion in 2000. Bottle and can varieties comprised 87% of that volume, with only 13% coming from the fountain drink sector (Proforma Cash Statement, 2001).

Financial Position

Currently, Coca-Cola Enterprises has a current ratio of 0.63. Its profit margin for the trailing twelve months is 0.6%, with an operating margin of 4.6%. Its debt-to-equity ratio is 4.32. The return on assets for the trailing twelve months is 0.39%, with a return on equity for the same period of 3.02% (Yahoo Finance, 2002). Although these numbers do not indicate immediate difficulties, they do reflect rising production costs coupled with the need to expand into new markets. Current management philosophy aims to maintain debt levels consistent with cash flow, interest coverage, and the percentage of debt relative to total capital.

SWOT Analysis: Competitive Forces

Coca-Cola's major rival is PepsiCo. A more recent emerging competitor is Richard Branson's Virgin Group, which owns businesses across beverages, cosmetics, clothing, financial services, health clubs, Internet services, mobile phone services, passenger trains, publishing, record labels, tour operations, and TV production.

The principal raw material used by the Company in the United States is high-fructose corn syrup, available from numerous domestic sources and historically subject to market price fluctuations. Due to the Company's longstanding relationship with a supplier of high-quality Brazilian orange juice concentrate, the supply of juice meeting the Company's standards is normally adequate to meet demand.

The primary threat of substitution comes from PepsiCo and its directly competing products. While smaller companies do compete with Coke at local levels, PepsiCo remains the chief rival. These two companies continuously launch campaigns and counter-campaigns to gain additional market share.

Coca-Cola's distributors and customers are located worldwide. The company has over 53,000 vendors and more than 100,000 employees globally. Its customer base comprises over 80% of the U.S. population, with a growing presence overseas.

Entry into the beverage industry carries high costs associated with building manufacturing facilities. Coca-Cola has effectively established itself as a barrier to market entry. Any company seeking to enter the beverage market must first compete against Coke's 100 years of established brand equity and then contend with its enormous, well-established distribution network.

Coca-Cola has secured its top market position largely through sheer scale and over a century of marketing superiority. The chief weakness lies in the market itself: the product may be approaching the end of its product life cycle. While it is unlikely that consumers will simply stop purchasing Coca-Cola products, the company already controls a majority of the existing market share. Costs continue to rise, and the only way to maintain competitive advantage is to seek new markets.

Coca-Cola's key competitive advantage is its size, its long history, and its worldwide brand recognition. The company may be able to leverage this advantage to establish distribution networks in currently underserved regions, much as it did successfully in Japan. Similar strategies may prove effective in other countries to increase market share.

The key issues facing Coca-Cola involve market risks — specifically, the risk of loss arising from adverse changes in market rates and prices. The primary exposures include changing interest rates on debt and short-term investment portfolios, foreign exchange rates generating translation and transaction gains and losses, and commodity prices affecting the cost of its products.

Works Cited

Adbrands.net. The Coca-Cola Company (U.S.). 2002. http://www.adbrands.net

Coca-Cola Enterprises. Proforma Cash Statement, 2001.

Coca-Cola Enterprises Corporate Website (CCE). 2002. http://www.cokecce.com/srclib/1.0.html. July 12, 2002.

Head-Lines. 2002. http://www.head-lines.co.uk/cola/company.htm#1

Yahoo Finance. Coca-Cola Company Information. 2002. http://biz.yahoo.com/fin/l/c/cce.html