Beverage Industry Financial Ratio Report
The soft drink industry is more than a business, it is part of American history and American culture. The industry is almost as old as the country itself. The soft drink industry dates back to 1798, beginning with a carbonated beverage called “soda water”. Soda water spawned the invention of ginger ale and the popular ice cream soda drinks. Then in 1876, root beer became available for sale. Next was a cola flavored beverage, followed by Dr. Pepper and in 1886 Coca-Cola was made in Atlanta, Georgia. Just fourteen years later Pepsi-Cola was developed.
Today, the soft drink industry is not just a part of history, but its steady business provides jobs for thousands of Americans. Soft drinks are America’s favorite drink. The leaders in this non-alcoholic, carbonated beverage industry are Coca-Cola, Pepsi-Cola and Cadbury-Schweppes. Their profiles include soft drinks, juices, sports drinks, water, and tea. Traditionally, Coca-Cola and Pepsi-Cola have competed as the soft drink industry leader. Cadbury-Schweppes provides competition to the two leaders; however, they have taken their focus away from winning that battle.
They are competing for other titles in the beverage industry. By looking at the financial ratios of the beverage industry and comparing the ratios of the
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Carbonated beverages bring in more revenue when comparing them to non-carbonated beverage industry. Coca-Cola, Pepsi-Cola and Cadbury-Schweppes dominate the soft drink industry. They control nearly 80% of the global market (Hoover’s online). Coca-Cola’s current market share of the global industry is approximately 50%, followed by Pepsi-Cola at 21% and Cadbury-Schweppes at 7% (Hoover’s online). After a turbulent year in 2003, Coca-Cola managed to reorganize and introduce new products such as vanilla coke to boost their earning in 2004.
Pepsi-Cola is Coca-Cola’s main competitor and a strong one at that. There are many beverage companies, but many attempt to steer away from competition with these two. Coca-Cola and Pepsi, however, are not afraid to dominate. Coca-Cola originated with its carbonated cola drink, as did Pepsi. Both companies have since grown into other areas of the industry; they are no longer just carbonated beverage companies. Their repertoire includes bottled water, sports drinks, ice tea and even fruit juices. Cadbury-Schweppes is one of the few companies with the gusto to take on these powerhouses.
This company owns products such as Snapple, Canada Dry, 7-Up, RC Cola, Yoo-Hoo and Mott’s juices. They rely on their non-carbonated beverages for company growth. The Coca-Cola Company (KO) As Hoover’s Online Business Information Authority states, Coke is it- “it” being the world’s top soft-drink company. This company originated in 1886 from an Atlanta pharmacist. Throughout the decades, Coca-Cola has evolved by adding new flavors to their original formula. In spite of a huge mistake, namely New Coke, the company has been an industry leader for most of its lifetime.
The Coca-Cola Company, which does no bottling of its own, sells approximately 400 drink brand in some 200 nations. The company has ownership interests in numerous bottling and canning operations worldwide. Currently, the company estimates it is responsible for one in every 10 nonalcoholic beverages sold in the world (www. coca-cola. com). Growth Rates The Coca-Cola Company, as well as PepsiCo, is a well established company whose growth rates have evened out over the past few decades. It has well-known products that it can survive on, while occasionally introducing new products.
Coca-Cola’s sales have grown 12. 9 percent in the past year, which is lower than the industry, but in line with its major competitor, PepsiCo. The other major competitor in the market, Cadbury Schweppes, showed substantial growth due to their attempt of diversifying their products to “catch up” to Coke and Pepsi. The most important Per-Share Data item is Earnings Per Share (EPS). That’s because ultimately, the price of the company’s stock is related in some way to the value of the stream of earnings attributable to that share.
Coca-Cola’s EPS growth shows a 16. 7 percent increase and is consistent with the industry’s growth. Coca-Cola’s rate falls directly between the growth rates of its major competitors. In evaluating Dividends as a growth rate, MSN Money Central shows Coca-Cola’s dividend growth for a 5 year annual average of 4. 85 percent. However, the growth rate for the past year alone is shown as 10 percent. This rate shows that Coca-Cola could be recovering from the downturn in the economy and has now attempted to regain the support of investors from the dividends paid.