Coke is it -- it being the #1 nonalcoholic beverage company, as well as one of the world's most recognizable brands. The Coca-Cola Company is home to 16 billion dollar brands, including four of the top five soft drinks: Coca-Cola, Diet Coke, Fanta, and Sprite. Other top brands include Minute Maid, Powerade, and vitaminwater. All told, the company owns or licenses and markets more than 500 beverage brands, mainly sparkling drinks but also waters, juice drinks, energy and sports drinks, and ready-to-drink teas and coffees. With the world's largest beverage distribution system, The Coca-Cola Company reaches thirsty consumers in more than 200 countries. Atlanta pharmacist John Pemberton invented Coke in 1886.
In line with its Vision 2020 strategy, which seeks growth opportunities and operational efficiencies, The Coca-Cola Company adopted a new global operating structure in January 2013. The company's business is divided into three operating segments: Coca-Cola International, Coca-Cola Americas, and Bottling Investments Group (BIG). The Coca-Cola International business consists of the company's Europe, Pacific, and Eurasia & Africa groups, while Coca-Cola Americas includes the company's North America and Latin America groups. BIG focuses on the beverage company's owned bottling operations outside of North America.
The Coca-Cola Company's bottling investments help to maximize the efficiency of its production, distribution, and marketing efforts. They include a 29% stake in Mexico's bottler Coca-Cola FEMSA (now the largest independent Coke bottler), 23% of European bottler Coca-Cola Hellenic Bottling, and 29% of Coca-Cola Amatil, a bottler and distributor of Coke products in Australia, New Zealand, and surrounding countries. In mid-2013 Coca-Cola opened a new bottling plant in Myanmar as part of a planned $200 million investment during the next five years there which also includes adding more than 22,000 jobs during that time period.
The world's largest beverage company rings up nearly 60% of its sales outside the US, in some 200 countries worldwide across Eurasia, Africa, Europe, North America, and the Pacific Region. Important international markets include Asia and Latin America.
Sales and Marketing
Not only is Coca-Cola one of the world's most recognizable and valuable brands, but The Coca-Cola Company supports the largest beverage distribution system in the world, made up of company-owned or controlled bottling and distribution operations, as well as independently owned bottling partners, distributors, wholesalers, and retailers. To keep its brand foremost in the mind of consumers, the company incurred advertising expenses in excess of $3.3 billion in 2012, an increase of more than 2% versus the prior year.
The Coca-Cola Company's sales topped $48 billion in 2012, a 3% increase versus 2011. Net income rose 5% over the same period. 2012 marked the third consecutive year of rising sales, following a dip during the global financial crisis. Indeed, the company's sales have doubled since 2006. Price, product, and geographic mix all contributed to rising sales. Sales in Eurasia, Latin America, and Africa got a boost from price increases and an improved product mix. Higher prices in North America, particularly for sparkling beverages, led to a 5.5% increase in sales.
The beverage giant met or exceeded its long-term growth targets in 2012, reporting 4% global volume growth, driven by international volume growth of 4% and North American volume growth of 1%. That growth was led by brand Coca-Cola, up 3% for the year.
The popularity of soft drinks, especially in mature markets, has been on the decline since about 2005 as negative publicity about obesity and other health risks continues to threaten sales. As a result, The Coca-Cola Company and other top soft drink makers are turning toward other parts of their noncarbonated product portfolio for growth, such as fruit juices, sports and energy drinks, and bottled water and tea beverages. This is reflected in some of the acquisitions the company has made in recent times, including its buyout of ZICO Beverages, a maker of ZICO Pure Premium Coconut Water, in late 2013, and in 2010 a majority stake in UK smoothie maker innocent ltd, which corners more than two-thirds of the UK smoothie market. More recently, Coca-Cola in August 2014 agreed to acquire a 16.7% equity stake in Monster Beverage Corp., a leading maker of energy drinks. Under the terms of the deal, The Coca-Cola Company will transfer ownership of its worldwide energy business, including NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless, to Monster; and Monster will transfer its non-energy business, including Hansen's Natural Sodas, Peace Tea, Hubert's Lemonade and Hansen's Juice Products, to The Coca-Cola Company.
The Coca-Cola Company is also looking to relatively undeveloped markets with a growing middle class and money to spend on soft drinks and juices. To that end, it announced it will invest $5 billion with its bottling partners in Africa by 2020, raising its investment in the region to $17 billion from 2010 to 2020. Coke plans to build new manufacturing capacity, develop sustainability initiatives and create jobs.
In a move that supports expanding its fruit-based drinks portfolio and investing in Africa, in late 2014 The Coca-Cola Company announced a partnership with alcoholic beverage company SABMiller and South Africa's Gutsche Family Investments to create Coca-Cola Beverages Africa, the continent's largest bottler. The new company will serve about a dozen high-growth markets, where disposable incomes and the population are growing, and handle about 40% of the beverage company's African volume. In exchange for its $260 million investment, The Coca-Cola Company will receive an 11% interest in the bottler and SABMiller's global Appletiser brand of carbonated juices as well as about 20 other African and Latin American non-alcoholic beverage brands. Gutsche Family Investments already controls Coca-Cola Sabco, a Coke bottler since 1940 with operations in seven African countries. Coca-Cola Beverages Africa will absorb most of SABMiller's non-alcoholic operations on the continent as well as Coca-Cola Sabco's plants.
Mergers and Acquisitions
Among other recent, notable acquisitions made by The Coca-Cola Company are its $980 million purchase of approximately half of Aujan Industries, one of the Middle East's largest independent beverage companies. Completed in 2012, the buy is part of a larger plan to invest about $5 billion in the Middle East and North Africa regions over the next decade.
Still one of its most significant moves to date, however, was Coca-Cola's 2010 $12.3 billion acquisition of one of its major bottlers, the North American business of Coca-Cola Enterprises Inc. (CCE), a deal made just six months after rival PepsiCo made moves to bring its bottlers in-house to cut costs. The acquisition gave The Coca-Cola Company direct control over more than 90% of its North American sales volume and a closer relationship with retailers as it renamed the North American business Coca-Cola Refreshments USA. It followed up the big bottler purchase in 2013 by buying Sacramento Coca-Cola Bottling Company, the sixth-largest independent Coca-Cola bottler in the nation that serves nine northern California counties.
The European operations of CCE went on to be held by a successor entity to CCE, similarly named Coca-Cola Enterprises, Inc. (or new CCE), which continues to stand as one of the world's largest Coca-Cola bottlers operating mainly in western Europe. Despite taking in about $8.8 billion in debt as part of the deal, The Coca-Cola Company remains in strong financial shape. As a result of the transaction, the company anticipates about $350 million in savings and revenue opportunities over four years.
Concurrent with the closing of the CCE transaction, The Coca-Cola Company paid $715 million in cash to secure 20-year license agreements with Dr Pepper Snapple Group (DPS) to distribute certain DPS brands in US and Canadian territories where DPS brands had formerly been distributed by CCE.
Warren Buffett's Berkshire Hathaway owns about 9% of The Coca-Cola Company.