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Coca Cola ANALYSIS for NYSE : KO APRIL 25, 2013 COCA-COLA $ 39. 10 Trefis Estimate $ 42. 35 Market Price $177. 1 B MKT CAP $188.

4 B MKT CAP Coca-Cola’s International Revenue per Case 4 Coca-Cola’s International CSD Market Share 5 Coca-Cola’s US Revenue per Case 6 Coca-Cola’s US CSD Market Share 8 Coca-Cola Gross Profit Margin 9 POWERADE & OTHER BRANDS See the Full Analysis for Coca Cola on Trefis — CORPORATE SNAPSHOT — The Coca-Cola Company is the world’s largest manufacturer, distributor, and marketer of non-alcoholic beverage concentrates and syrups.The company sells these syrups and concentrates to bottlers who, in turn sell the finished product. Some of the most famous and valuable brands include Coke, Diet Coke, Sprite, Fanta, Minute Maid, Powerade, Dasani etc. In 2010, Coca-Cola Co completed the acquisition of North American operations of Coca-Cola Enterprises. The company’s market share in the Liquid Refreshment Beverage (LRB) market was 34.

0% in the U. S. during the same period. — VALUATION HIGHLIGHTS —Powerade ; Other Brands Global Revenue per Case 11 Powerade ; Other Brands’ Global Market Share 12 Global Fruit Juices & Energy Drinks Market Size 13 Fruit Juices & Soft Drinks Gross Profit Margin 14 DIET COKE 1. Coca-Cola constitutes 29% of the Trefis price estimate for Coca Cola’s stock.

2. Powerade ; Other Brands constitute 19% of the Trefis price estimate for Coca Cola’s stock. 3. Diet Coke constitutes 15% of the Trefis price estimate for Coca Cola’s stock.Diet Coke’s International Revenue per Case 16 Diet Coke’s International CSD Market Share 17 Diet Coke’s US Revenue per Case 18 Diet Coke’s US CSD Market Share 20 Coca Cola Family Gross Profit Margin 21 SPRITE ; FANTA Sprite’s Global Revenue per Case 22 Sprite’s Global CSD Market Share 24 Global Carbonated Soft Drinks Market Size 25 Sprite ; Fanta Gross Profit Margin 27 DASANI Dasani International Revenue per Case 28 Dasani’s International Market Share 29 International Bottled Water & Beverages Market Size 30 Dasani Gross Margin 32 MINUTE MAIDSee the Interactive Valuation Breakdown on Trefis Our share price estimate and the overall company value is derived by summing-up the values of individual divisions/businesses in a sum-of-theparts analysis.

The value of each division is calculated using a discounted cash flow (DCF) methodology. We forecast fundamental drivers like pricing, market share, and profit margins for different businesses in estimating the division’s value within theMinute Maid International Revenue per Case 33 Minute Maid’s International Market Share 35 Fruit Juices ; Energy Drinks Gross Profit Margin 36 COKE ZERO, SPRITE ZERO, BARQ ; OTHER Coke Zero, Barq ; Other Brands DCF framework. The analysis below primarily focuses on those important forecasts that drive our share price and value estimate. Our complete analysis, including sources of historical data, underlying equations and additional discussion are available on www. trefis.

com. — POTENTIAL UPSIDE ; DOWNSIDE TO TREFIS PRICE —Global Revenues 37 Coke Zero, Barq ; Other Brands Profit Margin 38 APPENDICES Below are key drivers of the Coca-Cola Company that present opportunities for upside or downside to the current Trefis price estimate: Coca-Cola Family Gross Profit Margin • Coca-Cola Gross Profit Margin : Margins declined substantially in 2011 due to acquisition of Coca-Cola Enterprises'(CCE) North American bottling operations. Moreover, higher cost of goods in recent years caused the gross profit margin to fall from 64. 4% in 2008 to 60. 9% in 2011 and 60. 3% in 2012.If the commodity prices remain high and the margins deteriorated to 58%, we could see the Trefis price estimate revised downwards by 5%. — SOURCES OF VALUE — Summary P&L for Coca Cola 42 Detailed Coca-Cola P&L 43 Detailed Powerade & Other Brands P&L 44 Detailed Diet Coke P&L 45 Detailed Sprite & Fanta P&L 46 Detailed Dasani P&L 47 Detailed Minute Maid P&L 48 Detailed Coke Zero, Sprite Zero, Barq & Other P&L 49 The company primarily derives its value from the Coca-Cola brand (Coke).

This is the flagship brand of Coca-Cola and has established itself as the most famous soft drink worldwide.The Coca-Cola (Coke) brand has a high market share in global carbonated soft drink market Coca-Cola has worldwide brand recognition and commands a volume share of about 17. 0% in the US and about 22. 6% in the international carbonated soft drinks market. The share has remained relatively stable over the past few years, indicating Coca-Cola’s ability to withstand competition.

The size of the global market (billion cases) has witnessed slow growth in recent years amounting to approximately 37. 5 billion cases in 2012.With a large market size and share, the Coca-Cola brand contributes most value to the value of the company’s stock. — KEY TRENDS — Soft drink companies adapting to changing consumer needs Soft drink consumption is on a decline in developed countries as consumers switch to healthier alternatives such as juices, Ready-to-Drink (RTD) teas, RTD coffee, water mixers etc. Moreover, soft drinks are prone to higher taxation due to their unhealthy nature. Hence, volume consumption is on a decline in the U. S. and Europe.

Developing nations, on the other hand, offer tremendous potential in terms of volume growth.Soft drink consumption ( per capita) in countries like China, India and Brazil is still only a fraction of what it is in the developed world. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •2 Soft drink manufactures are taking steps to integrate bottlers into the business Pepsi’s recent acquisition of a bottling company and The Coca-Cola Company’s decision to acquire Coca-Cola Enterprises’ North American bottling operations indicate that soft drinks manufacturers are realizing the importance of in-house bottling.This can potentially add flexibility, cost savings and result in improved supply chain for the company’s products. Moreover, with its own bottling operations, Coca-Cola signed an agreement with Dr Pepper Snapple in 2010 which will see the company selling Dr Pepper Snapple’s beverage concentrates as finished products in specific territories in the U.

S. for 20 years. See the Full Analysis for Coca Cola on Trefis TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •3 Coca-Cola The Coca-Cola division constitutes 29. 3% of our $39. 0 price estimate for this stock, based on our sum of the parts analysis.

The most important drivers for the Coca-Cola business are: • Coca-Cola’s International Revenue per Case • Coca-Cola’s International CSD Market Share • Coca-Cola’s US Revenue per Case • Coca-Cola’s US CSD Market Share • Coca-Cola Gross Profit Margin — COCA-COLA’S INTERNATIONAL REVENUE PER CASE — Coca-Cola’s International Revenue per Case refers to implied revenue per Coke case sold Internationally. A case refers to a 192 oz volume of finished product. Coca-Cola sells syrups and concentrates to bottlers as well as finished bottled products.Thus Coca-Cola’s International Revenue per Case refers to an average revenue that Coca-Cola earns by selling concentrates and finished bottled beverages under the Coke brand. Finished bottled beverages sell at a much higher price than the concentrate used for it. Coca-Cola’s International Revenue per Case ($) 1. 75 1.

50 1. 25 1. 00 0. 75 0. 50 0.

25 0. 00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Coca-Cola’s International Revenue per Case has increased from about $1. 24 per case in 2009 to about $1. 52 per case in 2012.This is a direct result of slight price rises and increasing contribution of bottling investments to overall Coca-Cola revenues.

Going forward, we expect Coca-Cola’s International Revenue per Case to increase by around 2. 5% every year. Forecast Rationale Supporting: 1.

COCA-COLA CO HAS RESORTED TO PRICING INCREASES AS VOLUMES LAG – Soft drink consumption is on a decline in Europe and the U. S. Therefore, soft drink companies are increasing their prices periodically to compensate for the TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •4 volume growth. 2.HIGHER COST OF COMMODITIES – For 2012, the company incurred more than $200 million on incremental costs related to its most important four products – sweeteners, metals, juices and PET.

The incremental cost related to these products in 2013 is expected to be around $100 million. Higher cost of commodities will be passed on to consumers, increasing revenues per unit. Mitigating: 3.

GREATER PROPORTION OF VOLUME TO COME FROM DEVELOPING COUNTRIES – Coca-Cola Co’s highest volume growth came from India, China and Turkey. All of these are emerging markets where the revenue per cause is usually lower than what it is in Europe or the U.S. An increasing volume contribution from developing economies will have a lowering effect on the revenue per case. 4. A STRONG US DOLLAR NEGATIVELY IMPACTS THE REVENUE/CASE – Coca-Cola’s overseas revenue when converted back to the US dollar translate to a lower value when the US dollar is relatively strong against the foreign currencies. This negatively impacts the revenue/case as well. Sources for historical data and explanations can be found on the Trefis.

com website (link) — COCA-COLA’S INTERNATIONAL CSD MARKET SHARE — Coca-Cola (better known simply as Coke) is the flagship brand of Coca-Cola.It has been around for more than 120 years and is sold globally. It is also the most popular soft drink brand worldwide.

Coca-Cola’s International CSD Market Share refers to Coke’s share (by volume) of the international Carbonated Soft Drink (or the CSD) market. Coca-Cola’s International CSD Market Share (%) 20 15 10 5 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Coke is the most popular and most widely sold soft drink globally and commands an international market share of about 22. 6% as per our estimates. The share has hovered in the 21. 5-23.

5% range in recent years.We expect the market share to increase gradually in the coming years. We believe the under-penetrated markets to be the key driver for international growth. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS.

COM + 1 617 394 8763 •5 Forecast Rationale We considered the following factors for this forecast: Supporting: Mitigating: 1. GLOBAL INVESTMENTS TO DRIVE THE GROWTH – Coca-Cola acquired a 49% stake in Aujan industries for $980 million in 2011. This has significantly increased its presence in the Middle East.

In Brazil, the company will invest a staggering $7. billion in its operations through 2016. In Mexico, Coca-Cola Co’s planned spending in 2012 stood at over $1 billion. In March 2012, Coca-Cola Co opened its 42nd bottling plant in China which represents an investment of $160 million. In 2011, the company announced its plans to spend $4 billion in China in the subsequent three years. Coca-Cola Co is investing $50 million to set up its first bottling plant in Bangladesh. The country is an important market for carbonated soft drink makers as it has a population of about 150 million, almost half of that of the U. S.

ith a low soft drink penetration rate. 2. STRONG BRAND RECOGNITION – 3. Coca-Cola enjoys strong brand recognition and is even identifiable by consumers in countries where the company doesn’t have a significant presence.

As a result, Coca-Cola has been able to increase its market share in the international CSD market over time. This highlights the company’s ability to withstand local competition. 4. INCREASED DISTRIBUTION – In 2011, Coca-Cola added over 1. 2 million new pieces of cold drink equipment.

Since 2010, the company has added over 2. 2 million pieces of cold drink equipment. . MARKETING STRATEGIES – Beverage companies spend a great deal on marketing since there is hardly any product differentiation in terms of taste. More often than not, the companies spending the highest on marketing end up selling the highest volume of beverages. 6.

COKE HAS AN OPPORTUNITY TO INCREASE MARKET SHARE IN UNDER-PENETRATED MARKETS – In international markets, especially in emerging markets, carbonated soft drink penetration is still low. As disposable income in these geographies increases, Coke has the opportunity to grab market share.As consumers in emerging markets tend to be price sensitive, Coke can work up different packaging strategies to cater to different price points that different consumer segments respond to.

7. SOFT DRINK INDUSTRY IS AN EASY TARGET FOR GOVERNMENTS TO RAISE TAXATION FROM – With governments across the globe in financial difficulty, there is a possibility of nations to increase taxes on soft drinks in order to help boost government revenues. At the start of 2012, France imposed a soda tax. France is not the only country to impose such a tax.

In 2011, Hungary passed a legislation which imposed a fat tax on items with high fat, salt and sugar contents. 8. INCREASED FOCUS ON THE NEGATIVE HEALTH IMPACTS OF CARBONATED DRINKS MIGHT ERODE SOME MARKET SHARE – In the recent years, due to the constant sustained efforts of health officials and NGOs, soft drinks have been under the spotlight for increasing obesity levels in the society. Young children are perceived to be at a greater risk since CSDs are the primary source of calorie consumption for them and they compete with a balanced diet. As a result, a number of schools have even prevented the sale of CSDs on their premises.

Sources for historical data and explanations can be found on the Trefis. com website (link) — COCA-COLA’S US REVENUE PER CASE — Coca-Cola’s US Revenue per Case refers to implied revenue per Coke case sold in the US. A case refers to 192 oz volume of finished product which is equivalent to 16, 12-oz cans. Coca-Cola sells syrups and concentrates to bottlers as well as finished bottled products. Thus Coca-Cola’s US Revenue per Case refers to an average revenue that Coca-Cola earns by selling concentrates and finished bottled beverages under the Coke brand.This is equivalent to 1 case of finished product (192 oz). Finished bottled beverages sell at a much higher price than the concentrate used for it. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS.

COM + 1 617 394 8763 •6 Coca-Cola’s US Revenue per Case ($) 3. 5 3. 0 2. 5 2. 0 1. 5 1. 0 0.

5 0. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Coca-Cola’s US Revenue per Case has increased from about $1. 23 per case in 2008 to about $1.

54 per case in 2010. The figure jumped to $2. 55 in 2011 and $2. 66 in 2012 due to acquisition of CCE’s North American bottling operations.Going forward, we expect the Coca-Cola’s US Revenue per Case to grow at an annual rate of 4. 5%.

Forecast Rationale We considered the following two factors for this forecast: Mitigating: 1. STRONG PRICING IN THE U. S.

– Soft drink companies are struggling to generate volume growth in the U. S. Therefore, most companies increase the prices of their products periodically to maintain profitability. In 2011, the total retail dollars of soft drinks grew by 2% to $75. 7 billion in spite of a 1% volume decrease. Similarly in 2013, the total dollar sales of soft drinks in the US fell by only 0. 6%, despite a 1.

% drop in volume sales. 2. HIGHER COST OF GOODS – Commodity prices plummeted in 2009 and 2010 but have rebounded since. Going forward, prices are expected to remain firm. Therefore, companies will have to resort to periodic price hikes in order to maintain profitability. For 2012, the company incurred more than $200 million on incremental costs related to its most important four products – sweeteners, metals, juices and PET.

The incremental cost related to these products in 2013 is expected to be around $100 million. Higher cost of commodities will be passed on to consumers, increasing revenues per unit. .

DIET COKE’S RELATIVELY POSITIVE IMAGE IS LIKELY TO HELP – Diet Coke is the diet version of Coca-Cola’s flagship brand, Coke. Thus this brand addresses positively, some of the health concerns that consumers usually associate with carbonated soft drinks. Over the years, many CSD consumers have shifted to Diet Coke. The company can take advantage of the demand to sustain pricing growth for its concentrates. Mitigating: 4.

INCREASING POPULARITY OF NON-CARBONATED SOFT DRINKS MAY ERODE COKE’S PRICING POWER – Consumers are increasingly preferring beverages like energy drinks, enhanced water, fruit juices etc. n order to adopt a healthier lifestyle. Hence, the company can only increase the prices in a manner which ensures that a price hike does not deter a large number of consumers. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS.

COM + 1 617 394 8763 •7 Sources for historical data and explanations can be found on the Trefis. com website (link) — COCA-COLA’S US CSD MARKET SHARE — Coca-Cola (better known simply as Coke) is the flagship brand of Coca-Cola. It has been around for more than 120 years and is sold globally. It is also the most popular soft drink brand in the US.Coca-Cola’s US CSD Market Share refers to Coke’s share (by volume) of the US Carbonated Soft Drink (or the CSD) market. Coca-Cola’s US CSD Market Share (%) 17. 5 15. 0 12.

5 10. 0 7. 5 5. 0 2. 5 0. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Coke is the most popular and most widely sold soft drink globally and commands a market share of about 17%. The share has been relatively stable with small fluctuations around that level. We do not expect the market share to change significantly from here although it may be under sustained pressure going forward.

Forecast Rationale We considered the following factors for this forecast: Supporting: 1. MARKETING EXPENDITURES – Beverage companies spend a great deal on marketing since there is hardly any product differentiation in terms of taste. More often than not, the companies spending the highest on marketing end up selling the highest volume of beverages. 2. COKE HAS BEEN ABLE TO BUILD A VERY LOYAL CORE CUSTOMER BASE – A large number of customers in the US as well as abroad see Coke as an integral part of their consumption choice. For example, in 1985 this loyal base forced the Coca-Cola management to roll back its introduction of New Coke.They are unlikely to switch to alternatives, even in the wake of increased focus on the unhealthy nature of the drink. Mitigating: 3.

AGGRESSIVE MARKETING BY PEPSICO – PepsiCo has recently become more agressive with its US marketing strategy. The company increased its marketing spend in 2012 by $600 million with a greater focus on soft drinks in the U. S.

TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •8 The company brought on board several celebrities as part of its ‘Live For Now’ ad campaign and also sponsored the Superbowl. . THREAT OF NEW ENTRANTS – Kraft Foods has tied up with SodaStream which will see the company entering the U.

S. carbonated soft drink industry. Energy drinks such as Red Bull and Rockstar are getting more popular and have been eating up the market shares of traditional colas. Sources for historical data and explanations can be found on the Trefis. com website (link) — COCA-COLA GROSS PROFIT MARGIN — Gross margin represents gross profit as a percentage of revenue. Gross profit is determined as revenue minus cost of goods and services sold.Coca-Cola Gross Profit Margin refers to the gross profit margin of the division. Coca-Cola normally sells its product in the concentrate form to bottlers, which in turn bottle the concentrate and sell the finished products to retail customers.

In smaller quantities, it also sells the finished products directly as fountain cola in restaurants and in other public places. Coca-Cola Gross Profit Margin (%) 60 50 40 30 20 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Gross profit margins have been relatively constant at around the 64-66% mark for the past few years.This is because of the stable nature of the business which resulted in raw material costs having been relatively stable and the prices have been unchanged. Margins declined in 2011 due to the acquisition of Coca-Cola Enterprises’ North American bottling operations.

Margins for bottlers hover around the 35%-40% range. Therefore, we have adjusted the margins for Coca-Cola as a whole. For 2011, the gross profit margins were 60. 9%, while for 2012 the figure stood at 60. 3%. Going forward, we do not expect any major deviation from this figure.

Forecast Rationale TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •9We considered the following factors for the forecast: Supporting: 1. COCA-COLA CO PASSES ON THE HIGH COST OF GOODS TO CONSUMERS IN THE U.

S. – For 2011 as well as 2012, the carbonated soft drink (CSD) industry in the U. S.

witnessed lower volume sales at a higher retail value. The CSD market size (in terms of volume) in the U. S. has been declining for eight consecutive years.

As such, cola companies increase the prices periodically since competitive pricing is not having the desired intention for the additional volume sales. Mitigating: 2. PRICING PER CASE IS USUALLY LOWER THAN FULL-YEAR INCREASE IN COST OF GOODS SOLD PER CASE. For 2012, the company incurred more than $200 million on incremental costs related to its most important four products sweeteners, metals, juices and PET.

The incremental cost related to these products in 2013 is expected to be around $100 million. Sources for historical data and explanations can be found on the Trefis. com website (link) Total Revenue (Bil $) Coca-Cola International Revenues (% of total) 2009 2010 2011 9. 21 11. 2 13. 3 79. 3 20. 7 3.

30 4. 81 5. 91 n/a 78. 2 21. 8 4.

05 4. 98 7. 17 n/a 69. 8 30. 2 5. 20 7. 07 8. 08 n/a 2012 13.

9 70. 5 29. 5 5.

54 6. 54 8. 41 n/a 2013 14. 7 71. 1 28. 9 5.

2 6. 88 8. 84 1. 96 2014 2015 15.

4 16. 2 71. 7 28. 3 6. 11 7.

42 9. 29 1. 87 72. 2 27. 8 6. 41 7.

67 9. 75 2. 08 2016 2017 17. 0 17.

9 72. 5 27. 5 6. 75 8. 11 10. 3 2. 15 72. 9 27.

1 7. 10 8. 41 10. 8 2.

39 2018 18. 8 73. 2 26. 8 7. 48 8. 62 11. 4 2.

74 2019 19. 9 73. 4 26. 6 7. 88 8.

86 12. 0 3. 12 Coca-Cola US Revenues (% of total) Direct Expense (Bil $) Indirect Expense (Bil $) Gross Profit (Bil $) Free Cash Flow (Bil $) In addition, you can see the detailed P;L for the Coca-Cola business in the Appendix (link) TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS.

COM + 1 617 394 8763 •10 Powerade ; Other BrandsThe most important drivers for the Powerade ; Other Brands business are: • Powerade ; Other Brands Global Revenue per Case • Powerade ; Other Brands’ Global Market Share • Global Fruit Juices & Energy Drinks Market Size • Fruit Juices & Soft Drinks Gross Profit Margin — POWERADE & OTHER BRANDS GLOBAL REVENUE PER CASE — Powerade & Other Brands Global Revenue per Case refers to implied revenue per case sold Internationally for Powerade and other smaller brands. A case refers to 192 oz volume of finished product which is equivalent to 16 12-oz cans. CocaCola sells syrups and concentrates to bottlers as well as finished bottled products.Thus Powerade & Other Brands Global Revenue per Case refers to an average revenue that Coca-Cola earns by selling concentrates and finished bottled beverages under Powerade and other smaller non-CSD brands, equivalent to 1 case of finished product (192 oz) Finished bottled beverages sell at a much higher price than the concentrate used for it. Powerade & Other Brands Global Revenue per Case ($) 2. 5 2. 0 1.

5 1. 0 0. 5 0. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Powerade & Other Brands Global Revenue per Case was relatively stable from 2008 to 2010.In 2008, the figure was $1. 49 per case whereas in 2010, it stood at $1.

51. However, in 2011, Powerade & Other Brands Global Revenue per Case witnessed a substantial growth due to Coca-Cola’s acquisition of CCE’s North American bottling operations. Going forward, we expect Powerade & Other Brands Global Revenue per Case to grow at a moderate rate of 2% annually. Forecast Rationale We considered the following two factors for this forecast: Supporting Factors 1. ENERGY DRINKS SEEN AS A STRONG ALTERNATIVE TO CARBONATED SOFT DRINKS – Energy drinks attract health conscious individuals.With health awareness on the rise, demand for such beverages is likely to remain strong. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •11 Strong demand will help the company sustain pricing growth for these products.

2. HIGHER COST OF COMMODITIES – For 2012, the company incurred more than $200 million on incremental costs related to its most important four products – sweeteners, metals, juices and PET. The incremental cost related to these products in 2013 is expected to be around $100 million. Higher cost of commodities will be passed on to consumers, increasing revenues per unit.Mitigating Factors 3. GREATER PROPORTION OF VOLUME TO COME FROM DEVELOPING COUNTRIES – Coca-Cola Co’s highest volume comes from countries such as India, China and Turkey.

All of these are emerging markets where the revenue per cause is usually lower than what it is in Europe or the U. S. An increasing volume contribution from developing economies will have a lowering effect on the revenue per case. 4. A STRONG US DOLLAR NEGATIVELY IMPACTS THE REVENUE/CASE – Coca-Cola’s overseas revenue when converted back to the US dollar translate to a lower value when the US dollar is relatively strong against the foreign currencies.

This negatively impacts the revenue/case as well. Sources for historical data and explanations can be found on the Trefis. com website (link) — POWERADE & OTHER BRANDS’ GLOBAL MARKET SHARE — Powerade ; Other Brands’ Global Market Share refers to market share of Powerade and other smaller brands spanning across energy drinks, juices, ready-to-drink tea and coffee etc. Powerade & Other Brands’ Global Market Share (%) 30 25 20 15 10 5 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 We estimate that the Global market share has gone up from just around 21.

7% in 2008 to 28. 5% in 2012.Powerade was partially helped by PepsiCo’s failed attempt to rebrand its Gatorade brand in 2009. However, Gatorade’s sales have picked up in the last two years and we do not expect Powerade to eat up its market share significantly. Forecast Rationale TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •12 We considered the following factors for this forecast: Supporting: 1. LOWER PRICING AND MORE ACCESSIBLE POSITIONING IN THE US – Coca-Cola’s Powerade has been targeting the midto-low price segment than PepsiCo, which continues to position Gatorade as a premium-segment ‘athlete’s drink’.Due to the uncertain economic conditions in developed countries, consumers are likely to favor a more economicallypositioned energy drink.

2. Mitigating: 3. INTENSE COMPETITION EXISTS IN THE US MARKET – Gatorade, owned by Pepsico, is the market leader, with close to 75% of the US sports drinks market. Powerade benefited from Gatorade’s rebranding in 2009 which did not go down well with the consumers. However, since 2010, Gatorade has seen volume growth and we do not expect it to concede its market share easily. Sources for historical data and explanations can be found on the Trefis. om website (link) — GLOBAL FRUIT JUICES & ENERGY DRINKS MARKET SIZE — Global Fruit Juices & Energy Drinks Market Size refers to the volume (in billion cases) of sales of fruit juices and drinks, sports drinks and energy drinks globally. A case refers to 192 oz volume of finished product which is equivalent to 16 12-oz cans.

Fruit juices and drinks refers to liquid beverages extracted from fruits by crushing them or soft drinks with added fruit flavors. Sports and energy drinks are aimed at refurbishing body fluids lost during vigorous physical activity like sports and outdoor activities. Global Fruit Juices & Energy Drinks Market Size (Bil) 5. 0 12. 5 10. 0 7. 5 5.

0 2. 5 0. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The market has increased slightly from 14. 5 billion cases in 2008 to about 14. 5 billion cases in 2012. The primary reason for the slow growth was the weak economic conditions. Recessionary pressure meant that customers cut down on all nonessential expenditure they could.

Going forward, we expect the Global Fruit Juices & Energy Drinks Market Size to grow TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •13 by an annual rate of 2%. Forecast Rationale We considered the following factors for this forecast: Supporting Factors 1.PER CAPITA CONSUMPTION OF DEVELOPING ECONOMIES IS STILL VERY LOW COMPARED TO DEVELOPED COUNTRIES – Developing countries offer plenty of scope for the soft drink companies to increase their volumes as their per capita consumption is a fraction of what it is in the developed world. For example, India’s per capita consumption is 23 servings (8 ounces each) compared to 714 in the US. 2. HIGHER TAXATION OF SOFT DRINKS IN THE DEVELOPED WORLD – With budget deficits of most nations in a tough situation, increasing the taxes on soft drinks industry is an easy source of revenue for the governments around the world.

At the start of 2012, France imposed a soda tax. France is not the only country to impose such a tax. Earlier in 2011, Hungary passed a legislation which imposed a fat tax on items with high fat, salt and sugar contents. 3. NEGATIVE PUBLICITY OF SOFT DRINKS – The traditional markets like the US and Western Europe are on a decline as consumers switch to healthier options such as juices, RTD teas, water mixers etc. Sources for historical data and explanations can be found on the Trefis. com website (link) — FRUIT JUICES ; SOFT DRINKS GROSS PROFIT MARGIN —This represents the gross margins associated with the Fruit Juices ; Soft Drinks division.

Fruit Juices ; Soft Drinks Gross Profit Margin (%) 60 50 40 30 20 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The gross profit margin has been relatively constant at around 64-66% mark for the past few years. This is because of the stable nature of the business and because the raw material costs have been relatively stable. We have assumed the margin to witness a decrease in 2011 due to its acquisition of Coca-Cola Enterprise’s North American Bottling Operations.Margins for bottlers hover around the 35%-40% range. Therefore, we have adjusted the margins for Coca-Cola as a whole.

For 2011, the gross profit margins was 60. 9%, while for 2012 the figure stood at 60. 3%. Going forward, we do not expect any major deviation from this figure. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS.

COM + 1 617 394 8763 •14 Forecast Rationale Supporting: 1. COCA-COLA CO PASSES ON THE HIGH COST OF GOODS TO CONSUMERS IN THE U. S.

– For 2011 as well as 2012, the carbonated soft drink (CSD) industry in the U. S. witnessed lower volume sales at a higher retail value.

The CSD market size (in terms of volume) in the U. S. has been declining for eight consecutive years. As such, cola companies increase the prices periodically since competitive pricing is not having the desired intention for the additional volume sales. Mitigating: 2. PRICING PER CASE IS USUALLY LOWER THAN FULL-YEAR INCREASE IN COST OF GOODS SOLD PER CASE. – For 2012, the company incurred more than $200 million on incremental costs related to its most important four products sweeteners, metals, juices and PET.

The incremental cost related to these products in 2013 is expected to be around $100 million.Sources for historical data and explanations can be found on the Trefis. com website (link) Total Revenue (Bil $) Direct Expense (Bil $) Indirect Expense (Bil $) Gross Profit (Bil $) Free Cash Flow (Bil $) 2009 5. 44 1. 95 2. 84 3. 49 n/a 2010 5. 71 2.

06 2. 53 3. 65 n/a 2011 9.

29 3. 64 4. 95 5. 66 n/a 2012 9. 59 3. 81 4. 50 5.

79 n/a 2013 10. 0 3. 99 4. 72 6. 06 1. 34 2014 10. 5 4. 16 5.

05 6. 33 1. 28 2015 11. 0 4. 35 5.

20 6. 61 1. 41 2016 11. 4 4.

54 5. 45 6. 90 1. 45 2017 11. 9 4. 72 5. 59 7.

18 1. 58 2018 12. 4 4. 91 5. 66 7. 47 1. 80 2019 12.

9 5. 11 5. 74 7. 77 2. 02In addition, you can see the detailed P&L for the Powerade & Other Brands business in the Appendix (link) TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS.

COM + 1 617 394 8763 •15 Diet Coke The most important drivers for the Diet Coke business are: • Diet Coke’s International Revenue per Case • Diet Coke’s International CSD Market Share • Diet Coke’s US Revenue per Case • Diet Coke’s US CSD Market Share • Coca Cola Family Gross Profit Margin — DIET COKE’S INTERNATIONAL REVENUE PER CASE — Diet Coke’s International Revenue per Case refers to implied revenue per Diet Coke case sold Internationally.A case refers to 192 oz volume of finished product which is equivalent to 16 12-oz cans. Coca-Cola sells syrups and concentrates to bottlers as well as finished bottled products. Thus Diet Coke’s International Revenue per Case refers to an average revenue that Coca-Cola earns by selling concentrates and finished bottled beverages under Diet Coke brand, equivalent to 1 case of finished product (192 oz) Finished bottled beverages sell at a much higher price than the concentrate used for it. Diet Coke’s International Revenue per Case ($) 1.

75 1. 50 1. 25 1. 00 0.

75 0. 50 0. 25 0.

0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Diet Coke’s International Revenue per Case has increased from about $1. 24 per case in 2009 to about $1. 52 per case in 2012.

This is a direct result of slight price rises and increasing contribution of bottling investments to overall Coca-Cola revenues. Going forward, we expect Diet Coke’s International Revenue per Case to increase by around 2. 5% every year. Forecast Rationale We considered the following two factors for this forecast: Supporting Factors TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •16 1.COCA-COLA CO HAS RESORTED TO PRICING INCREASES AS VOLUMES LAG – Soft drink consumption is on a decline in Europe and the U. S.

Therefore, soft drink companies are increasing their prices periodically to compensate for the volume growth. 2. HIGHER COST OF COMMODITIES – For 2012, the company incurred more than $200 million on incremental costs related to its most important four products – sweeteners, metals, juices and PET. The incremental cost related to these products in 2013 is expected to be around $100 million.

Higher cost of commodities will be passed on to consumers, increasing revenues per unit.Mitigating Factors 3. GREATER PROPORTION OF VOLUME TO COME FROM DEVELOPING COUNTRIES – Coca-Cola Co’s highest volume growth came from India, China and Turkey. All of these are emerging markets where the revenue per cause is usually lower than what it is in Europe or the U.

S. An increasing volume contribution from developing economies will have a lowering effect on the revenue per case. 4. A STRONG US DOLLAR NEGATIVELY IMPACTS THE REVENUE/CASE – Coca-Cola’s overseas revenue when converted back to the US dollar translate to a lower value when the US dollar is relatively strong against the foreign currencies.This negatively impacts the revenue/case as well. Sources for historical data and explanations can be found on the Trefis.

com website (link) — DIET COKE’S INTERNATIONAL CSD MARKET SHARE — Diet Coca-Cola (better known as Diet Coke) is a sugar free version of Coca-Cola’s company flagship brand, Coca-Cola Classic (or Coke). Instead of sugar, the product uses a compound called aspartame as a sweetener. Diet Coke’s International CSD Market Share refers to Diet Coke’s share (by volume) of the International Carbonated Soft Drink (or the CSD) market.Diet Coke’s International CSD Market Share (%) 12. 5 10. 0 7.

5 5. 0 2. 5 0. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Diet Coke was first introduced in the US in 1982 and has enjoyed great success internationally as well.

We estimate that Diet Coke’s International CSD Market Share has seen some weakness in recent years with the figure declining from TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •17 13. 4% in 2008 to around 12% in 2012. We expect the market share to decrease gradually in the coming years.Forecast Rationale We considered the following two factors for this forecast: Supporting Factors: 1. INCREASED FOCUS ON UNHEALTHY NATURE OF CSDS IS LIKELY TO ACT AS A BOOST TO DIET COKE – In the recent few years, soft drinks have faced a lot of negative coverage around their unhealthy aspects. It has primarily been centered around the excess sugar in the products and the consequent obesity effects. Since Diet Coke is completely sugar free, Coca-Cola has been able to reasonably successfully market it as a healthier alternative to Coca-Cola Classic (or Coke).A number of traditional Coke drinkers who are concerned about the fattening effects of sugared drinks might switch over to Diet Coke, without losing out completely on the Coke experience. Diet Coke also contains limited amount of caffeine that provides extra energy and acts as mild appetite suppressant. These are desirable effects on body for those who are trying to lose weight. 2. ALTHOUGH EMERGING MARKET CUSTOMERS ARE LESS SENSITIVE TO HEALTH IMPACTS OF SOFT DRINKS, HEALTH AWARENESS IS ON A GRADUAL RISE – Coca-Cola has opportunity to increase its market share internationally.Most of this growth in share is likely to come from emerging markets. Diet Coke’s value proposition may become slightly less powerful as consumers in these markets tend to be less sensitive to the health impact of carbonated soft drinks. With improving education and mass media, health awareness is on a rise and many of carbonated soft drink consumers are shifting to Diet Coke. 3. THE DIET COKE BRAND CAPITALIZES ON PSYCHOLOGY OF CONSUMERS WHO ARE EITHER HEALTH CONSCIOUS OR TRYING TO LOSE WEIGHT – Consumers view diet drinks as a health alternative without knowing in detail the actual health benefits or the value.Thus, aggressive marketing, along with a brand name that itself portrays a healthy lifestyle, is expected to drive growth for Diet Coke. Mitigating Factors: 4. COKE ZERO MIGHT LEAD TO SOME CANNIBALIZATION – Coca-Cola has been marketing Coke Zero as an even healthier alternative to Diet Coke, claiming that it has absolutely no calories and hence no fattening effect. Since Coke Zero is a relatively new product, it is likely to gain more traction in the coming few years. We estimate that a substantial portion of new converts to Coke Zero might come from Diet Coke. 5.COMPETITION FROM NON-CARBONATED SOFT DRINKS MAY POSE A HINDRANCE – Beverage categories like sports drinks, energy drinks, fruit juices, enhanced water and ready-to-drink coffee have witnessed significant growth due to their increasing popularity among consumers. Diet Coke value proposition lies in minimal health impacts, while the above mentioned drinks bring additional nutritional value and thus pose competition to Diet Coke. This is especially significant in some of the more mature markets like Western Europe. Sources for historical data and explanations can be found on the Trefis. com website (link) — DIET COKE’S US REVENUE PER CASE —Diet Coke’s US Revenue per Case refers to implied revenue per Diet Coke case sold Internationally. A case refers to 192 oz volume of finished product which is equivalent to 16 12-oz cans. Coca-Cola sells syrups and concentrates to bottlers as well as finished bottled products. Thus Diet Coke’s US Revenue per Case refers to an average revenue that Coca-Cola earns by selling concentrates and finished bottled beverages under Diet Coke brand, equivalent to 1 case of finished product (192 oz) Finished bottled beverages sell at a much higher price than the concentrate used for it. TREFIS ANALYSIS for COCA COLA [email protected] + 1 617 394 8763 •18 Diet Coke’s US Revenue per Case ($) 3. 0 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Diet Coke’s US Revenue per Casehas increased from about $1. 23 per case in 2008 to about $1. 54 per case in 2010. The figure jumped to $2. 55 in 2011 and $2. 66 in 2012 due to the acquisition of CCE’s North American bottling operations. Going forward, we expect the Diet Coke’s US Revenue per Case to grow at an annual rate of 3%. Forecast Rationale Mitigating: 1. STRONG PRICING IN THE U. S. – Soft drink companies are struggling to generate volume growth in the U.S. Therefore, most companies increase the prices of their products periodically to maintain profitability. In 2011, the total retail dollars of soft drinks grew by 2% to $75. 7 billion in spite of a 1% volume decrease. Similarly in 2013, the total dollar sales of soft drinks in the US fell by only 0. 6%, despite a 1. 8% drop in volume sales. 2. HIGHER COST OF GOODS – Commodity prices plummeted in 2009 and 2010 but have rebounded since. Going forward, prices are expected to remain firm. Therefore, companies will have to resort to periodic price hikes in order to maintain profitability.For 2012, the company incurred more than $200 million on incremental costs related to its most important four products – sweeteners, metals, juices and PET. The incremental cost related to these products in 2013 is expected to be around $100 million. Higher cost of commodities will be passed on to consumers, increasing revenues per unit. 3. DIET COKE’S RELATIVELY POSITIVE IMAGE IS LIKELY TO HELP – Diet Coke is the diet version of Coca-Cola’s flagship brand, Coke. Thus this brand addresses positively, some of the health concerns that consumers usually associate with carbonated soft drinks.Over the years, many CSD consumers have shifted to Diet Coke. The company can take advantage of the demand to sustain pricing growth for its concentrates. Mitigating: 4. INCREASING POPULARITY OF NON-CARBONATED SOFT DRINKS MAY ERODE COKE’S PRICING POWER – Consumers are increasingly preferring beverages like energy drinks, enhanced water, fruit juices etc. in order to adopt a healthier lifestyle. Hence, the company can only increase the prices in a manner which ensures that a price hike does not deter a large number of consumers. Sources for historical data and explanations can be found on the Trefis. com website (link)TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •19 — DIET COKE’S US CSD MARKET SHARE — Diet Coca-Cola (better known as Diet Coke) is a sugar free version of Coca-Cola’s company flagship brand, Coca-Cola Classic (or Coke). Instead of sugar, the product uses a compound called aspartame as a sweetener. Diet Coke’s US CSD Market Share refers to Diet Coke’s share (by volume) of the US Carbonated Soft Drink (or the CSD) market. Diet Coke’s US CSD Market Share (%) 10. 0 7. 5 5. 0 2. 5 0. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Diet Coke was first introduced in the US in 1982 and has since been very successful.Its US market share has been just under 10% for the last few years. In 2011, the company’s market share plunged 0. 3% to 9. 6%. We expect the market share to change modestly over the next few years. Forecast Rationale We considered the following factors for this forecast: Supporting: 1. LARGE INVESTMENTS IN THE U. S. – In 2012, Coca-Cola spent $3 billion in the U. S. alone. 2. THE DIET COKE BRAND CAPITALIZES ON PSYCHOLOGY OF CONSUMERS WHO ARE EITHER HEALTH CONSCIOUS OR TRYING TO LOSE WEIGHT – Consumers view diet drinks as a health alternative without knowing in detail the actual health benefits or the value.Thus, aggressive marketing, along with a brand name that itself portrays a healthy lifestyle, is expected to drive growth for Diet Coke. 3. COKE HAS BEEN ABLE TO BUILD A VERY LOYAL CORE CUSTOMER BASE – A large number of customers in the US as well as abroad see Coke as an integral part of their consumption choice. For example, in 1985 this loyal customer base forced the Coca-Cola management to roll back its introduction of New Coke. They are unlikely to switch to alternatives, even in the wake of increased focus on the unhealthy nature of the drink. Mitigating: 4.AGGRESSIVE MARKETING BY PEPSICO – PepsiCo has recently become more agressive with its US marketing strategy. The company increased its marketing spend in 2012 by $600 million with a greater focus on soft drinks in the U. S. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •20 The company brought on board several celebritiesas part of its ‘Live For Now’ ad campaign and also sponsored the Superbowl. 5. THREAT OF NEW ENTRANTS – Kraft Foods has tied up with SodaStream which will see the company entering the U. S. carbonated soft drink industry.Energy drinks such as Red Bull and Rockstar are getting more popular and have been eating up the market shares of traditional colas. 6. COKE ZERO MIGHT LEAD TO SOME CANNIBALIZATION – Coca-Cola has been marketing Coke Zero as an even healthier alternative to Diet Coke, claiming that it has absolutely no calories and hence no fattening effect. Since Coke Zero is a relatively new product, it is likely to gain more traction in the coming few years. We estimate that a substantial portion of new converts to Coke Zero might come from Diet Coke. Sources for historical data and explanations can be found on the Trefis. om website (link) — COCA COLA FAMILY GROSS PROFIT MARGIN — This represents the gross margins of Coca-Cola division. Coca Cola Family Gross Profit Margin (%) 60 50 40 30 20 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The gross profit margin has been relatively constant at around 64-66% mark for the past few years. This is because of the stable nature of the business and because the raw material costs have been relatively stable. We have assumed the margin to witness a decrease in 2011 due to its acquisition of Coca-Cola Enterprise’s North American Bottling Operations.Margins for bottlers hover around the 35%-40% range. Therefore, we have adjusted the margins for Coca-Cola as a whole. For 2011, the gross profit margins was 60. 9%, while for 2012 the figure stood at 60. 3%. Going forward, we do not expect any major deviation from this figure. Forecast Rationale Supporting: 1. COCA-COLA CO PASSES ON THE HIGH COST OF GOODS TO CONSUMERS IN THE U. S. – For 2010 as well as 2011, the carbonated soft drink (CSD) industry in the U. S. witnessed lower volume sales at a higher retail value. The CSD market size (in terms of volume) in the U. S. has been declining for seven consecutive years.As such, cola companies TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •21 increase the prices periodically since competitive pricing is not having the desired intention for the additional volume sales. Mitigating: 2. PRICING PER CASE IS USUALLY LOWER THAN FULL-YEAR INCREASE IN COST OF GOODS SOLD PER CASE. – For 2012, the company incurred more than $200 million on incremental costs related to its most important four products sweeteners, metals, juices and PET. The incremental cost related to these products in 2013 is expected to be around $100 million.Sources for historical data and explanations can be found on the Trefis. com website (link) Total Revenue (Bil $) Diet Coke International Revenues (% of total) 2009 2010 2011 5. 36 6. 54 7. 47 79. 3 20. 7 1. 92 2. 80 3. 44 n/a 78. 2 21. 8 2. 36 2. 90 4. 18 n/a 69. 7 30. 3 2. 93 3. 98 4. 55 n/a 2012 7. 50 69. 6 30. 4 2. 97 3. 52 4. 52 n/a 2013 7. 82 70. 0 30. 0 3. 10 3. 67 4. 72 1. 04 2014 2015 8. 16 8. 54 70. 4 29. 6 3. 24 3. 93 4. 92 0. 99 71. 1 28. 9 3. 39 4. 05 5. 15 1. 10 2016 2017 8. 94 9. 36 71. 9 28. 1 3. 55 4. 26 5. 39 1. 13 72. 6 27. 4 3. 72 4. 40 5. 65 1. 25 2018 9. 81 73. 3 26. 7 3. 89 4. 49 5. 92 1. 43 019 10. 3 73. 9 26. 1 4. 08 4. 59 6. 21 1. 62 Diet Coke US Revenues (% of total) Direct Expense (Bil $) Indirect Expense (Bil $) Gross Profit (Bil $) Free Cash Flow (Bil $) In addition, you can see the detailed P&L for the Diet Coke business in the Appendix (link) Sprite & Fanta The most important drivers for the Sprite & Fanta business are: • Sprite’s Global Revenue per Case • Sprite’s Global CSD Market Share • Global Carbonated Soft Drinks Market Size • Sprite & Fanta Gross Profit Margin — SPRITE’S GLOBAL REVENUE PER CASE — Sprite’s Global Revenue per Case refers to implied revenue per Sprite case sold globally.A case refers to 192 oz volume of finished product which is equivalent to 16 12-oz cans. Coca-Cola sells syrups and concentrates to bottlers as well as finished bottled products. Thus Sprite’s Global Revenue per Case refers to an average revenue that Coca-Cola earns by selling concentrates and finished bottled beverages under the Sprite brand, equivalent to 1 case of finished product (192 oz). Finished bottled beverages sell at a much higher price than the concentrate used for it. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •22 Sprite’s Global Revenue per Case ($) 2. 0 1. 5 1. 0 0. 5 0. 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sprite’s Global Revenue per Case has increased from about $1. 24 per case in 2008 to close to $1. 43 per case in 2010. This is a direct result of slight price rises and increasing contribution of bottling investments to overall Coca-Cola revenues. In 2011, Sprite’s Global Revenue per Case witnessed a substantial increase due to Coca-Cola’s acquisition of CCE’s North American Bottling Operations. In later years, we expect Sprite’s Global Revenue per Case to grow at the rate of 3% annually. Forecast Rationale We considered the following two factors for this forecast: Supporting Factors 1.COCA-COLA CO HAS RESORTED TO PRICING INCREASES AS VOLUMES LAG – Soft drink consumption is on a decline in Europe and the U. S. Therefore, soft drink companies are increasing their prices periodically to compensate for the volume growth. 2. HIGHER COST OF COMMODITIES – For 2012, the company incurred more than $200 million on incremental costs related to its most important four products – sweeteners, metals, juices and PET. The incremental cost related to these products in 2013 is expected to be around $100 million. Higher cost of commodities will be passed on to consumers, increasing revenues per unit. Mitigating Factors 3.GREATER PROPORTION OF VOLUME TO COME FROM DEVELOPING COUNTRIES – Coca-Cola Co’s highest volume growth came from India, China and Turkey. All of these are emerging markets where the revenue per cause is usually lower than what it is in Europe or the U. S. An increasing volume contribution from developing economies will have a lowering effect on the revenue per case. 4. A STRONG US DOLLAR NEGATIVELY IMPACTS THE REVENUE/CASE – Coca-Cola’s overseas revenue when converted back to the US dollar translate to a lower value when the US dollar is relatively strong against the foreign currencies. This negatively impacts the revenue/case as well.Sources for historical data and explanations can be found on the Trefis. com website (link) TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •23 — SPRITE’S GLOBAL CSD MARKET SHARE — Sprite is the leading ‘lemon soda’ based soft drink brand globally. It was first introduced in the US in 1961 and has since then primarily targeted the teenage group. Sprite’s Global CSD Market Share refers to Sprite’s share (by volume) of the global Carbonated Soft Drink (or the CSD) market. Sprite’s Global CSD Market Share (%) 8 7 6 5 4 3 2 1 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019We estimate Sprite’s Global CSD Market Share to be around 7. 6%. According to our estimates, Sprite’s Global CSD Market Share has remained in the range of 7. 4-7. 7% in the last few years. Barring any major marketing offensive or any significant repositioning of the brand, we don’t expect any major change in the market share as it is a very stable brand and operates in a very stable market segment. Forecast Rationale We considered the following factors for this forecast: Supporting: Mitigating: 1. GLOBAL INVESTMENTS TO DRIVE THE GROWTH – Coca-Cola acquired a 49% stake in Aujan industries for $980 million in 2011.This has significantly increased its presence in the Middle East. In Brazil, the company will invest a staggering $7. 6 billion in its operations through 2016. In Mexico, Coca-Cola Co’s planned spending in 2012 stood at over $1 billion. In March 2012, Coca-Cola Co opened its 42nd bottling plant in China which represents an investment of $160 million. In 2011, the company announced its plans to spend $4 billion in China in the subsequent three years. Coca-Cola Co is investing $50 million to set up its first bottling plant in Bangladesh.The country is an important market for carbonated soft drink makers as it has a population of about 150 million, almost half of that of the U. S. with a low soft drink penetration rate. 2. STRONG BRAND RECOGNITION – TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •24 3. Coca-Cola enjoys strong brand recognition and is even identifiable by consumers in countries where the company doesn’t have a significant presence. As a result, Coca-Cola has been able to increase its market share in the international CSD market over time. This highlights the company’s ability to withstand local competition. 4.INCREASED DISTRIBUTION – In 2011, Coca-Cola added over 1. 2 million new pieces of cold drink equipment. Since 2010, the company has added over 2. 2 million pieces of cold drink equipment. 5. MARKETING STRATEGIES – Beverage companies spend a great deal on marketing since there is hardly any product differentiation in terms of taste. More often than not, the companies spending the highest on marketing end up selling the highest volume of beverages. 6. COKE HAS AN OPPORTUNITY TO INCREASE MARKET SHARE IN UNDER-PENETRATED MARKETS – In international markets, especially in emerging markets, carbonated soft drink penetration s still low. As disposable income in these geographies increases, Coke has the opportunity to grab market share. As consumers in emerging markets tend to be price sensitive, Coke can work up different packaging strategies to cater to different price points that different consumer segments respond to. 7. SOFT DRINK INDUSTRY IS AN EASY TARGET FOR GOVERNMENTS TO RAISE TAXATION FROM – With governments across the globe in financial difficulty, there is a possibility of nations to increase taxes on soft drinks in order to help boost government revenues. At the start of 2012, France imposed a soda tax.France is not the only country to impose such a tax. In 2011, Hungary passed a legislation which imposed a fat tax on items with high fat, salt and sugar contents. 8. INCREASED FOCUS ON THE NEGATIVE HEALTH IMPACTS OF CARBONATED DRINKS MIGHT ERODE SOME MARKET SHARE – In the recent years, due to the constant sustained efforts of health officials and NGOs, soft drinks have been under the spotlight for increasing obesity levels in the society. Young children are perceived to be at a greater risk since CSDs are the primary source of calorie consumption for them and they compete with a balanced diet.As a result, a number of schools have even prevented the sale of CSDs on their premises. Sources for historical data and explanations can be found on the Trefis. com website (link) — GLOBAL CARBONATED SOFT DRINKS MARKET SIZE — Global Carbonated Soft Drinks Market Size refers to the sales volume (in billion cases) of Carbonated Soft Drinks (or CSDs) globally. Carbonated soft drinks refer to popular beverages like colas and citrus drinks. They are sweetened water, with added carbon dioxide to add the fizz. Some globally popular soft drinks are Coca-Cola, Pepsi, Sprite, 7 Up and Mountain Dew.A case refers to 192 oz volume of finished product which is equivalent to 16 12-oz cans. A market size of 37. 0 billion cases amounts to per capita consumption of carbonated soft drinks globally to about 85 12-oz cans per year (based on 6. 7 billion population). TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •25 Global Carbonated Soft Drinks Market Size (Bil) 40 30 20 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The size of the global CSD market has increased at a slow place. It increased from about 34. 8 billion cases in 2008 to over 37 billion cases in 2012.This is a result of two opposing trends at work. In the US and the better part of the rest of the developed world (mainly UK and Europe), an increasing focus on the health impacts of carbonated drinks has led to market stagnation and even minor declines. On the other hand, the market continues to grow rapidly in under-saturated markets in the developing world such as China,India, Turkey and Brazil among others. We expect the two trends to continue to work in opposition and consequently, expect the market size to grow at a rate of around 1. % annually before it eventually stagnates. Forecast Rationale We considered the following three factors for this forecast: Supporting: 1. PER CAPITA CONSUMPTION OF DEVELOPING ECONOMIES IS STILL VERY LOW COMPARED TO DEVELOPED COUNTRIES – Developing countries offer plenty of scope for the soft drink companies to increase their volumes as their per capita consumption is a fraction of what it is in the developed world. For example, India’s per capita consumption is 23 servings (8 ounces each) compared to the U. S. ‘s 714. Mitigating: 2.HIGHER TAXATION IN THE DEVELOPED WORLD – With budget deficits of most developed nations in a tough situation, increasing the taxes on the soft drinks industry is an easy source of revenue for the governments around the world. 3. At the start of 2012, France imposed a soda tax. France is not the only country to impose such a tax. Earlier in 2011, Hungary passed a legislation which imposed a fat tax on items with high fat, salt and sugar contents. 4. NEGATIVE PUBLICITY – The traditional markets like the US and Western Europe are on a decline as consumers switch to healthier options such as juices, RTD teas, water mixers etc.Soft drinks have been blamed as especially harmful for young children where it is alleged that soft drink consumption competes with a balanced diet consumption. As a result, a number of educational institutions across the globe have taken preventive steps with some even going to the extreme lengths of banning their sale on the premises. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •26 Sources for historical data and explanations can be found on the Trefis. com website (link) — SPRITE ; FANTA GROSS PROFIT MARGIN — This refers to the gross profit margin of the Sprite ; Fanta division.Sprite ; Fanta Gross Profit Margin (%) 60 50 40 30 20 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The gross profit margins have been relatively constant at around the 64-66% mark for the past few years. This is because of the stable nature of the business and because the raw material costs have been relatively stable. We have assumed the margin to witness a decrease in 2011 due to its acquisition of Coca-Cola Enterprise’s North American Bottling Operations. Margins for bottlers hover around 35%-40%. Therefore, we have adjusted the margins for Coca-Cola as a whole.For 2011, the gross profit margins was 60. 9%. Going forward, we do not expect any major deviation from this figure. Forecast Rationale We considered the following factors for the forecast: Supporting: 1. COCA-COLA CO PASSES ON THE HIGH COST OF GOODS TO CONSUMERS IN THE U. S. – For 2011 as well as 2012, the carbonated soft drink (CSD) industry in the U. S. witnessed lower volume sales at a higher retail value. The CSD market size (in terms of volume) in the U. S. has been declining for eight consecutive years. As such, cola companies increase the prices periodically ince competitive pricing is not having the desired intention for the additional volume sales. Mitigating: 2. PRICING PER CASE IS USUALLY LOWER THAN FULL-YEAR INCREASE IN COST OF GOODS SOLD PER CASE. – For 2012, the company incurred more than $200 million on incremental costs related to its most important four products sweeteners, metals, juices and PET. The incremental cost related to these products in 2013 is expected to be around $100 million. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •27 Sources for historical data and explanations can be found on the Trefis. om website (link) Total Revenue (Bil $) Sprite Revenues (% of total) Fanta Revenues (% of total) Direct Expense (Bil $) Indirect Expense (Bil $) Gross Profit (Bil $) Free Cash Flow (Bil $) 2009 4. 18 75. 5 24. 5 1. 50 2. 19 2. 69 n/a 2010 5. 25 75. 5 24. 5 1. 90 2. 33 3. 36 n/a 2011 6. 35 75. 2 24. 8 2. 49 3. 38 3. 87 n/a 2012 6. 56 75. 2 24. 8 2. 60 3. 08 3. 96 n/a 2013 6. 93 75. 4 24. 6 2. 75 3. 25 4. 18 0. 93 2014 7. 31 75. 5 24. 5 2. 90 3. 52 4. 41 0. 89 2015 7. 72 75. 6 24. 4 3. 06 3. 67 4. 66 0. 99 2016 8. 11 75. 6 24. 4 3. 22 3. 87 4. 89 1. 03 2017 8. 52 75. 6 24. 4 3. 38 4. 01 5. 14 1. 4 2018 8. 95 75. 6 24. 4 3. 55 4. 10 5. 40 1. 30 2019 9. 41 75. 6 24. 4 3. 73 4. 20 5. 67 1. 48 In addition, you can see the detailed P&L for the Sprite & Fanta business in the Appendix (link) Dasani The most important drivers for the Dasani business are: • Dasani International Revenue per Case • Dasani’s International Market Share • International Bottled Water ; Beverages Market Size • Dasani Gross Margin — DASANI INTERNATIONAL REVENUE PER CASE — Dasani International Revenue per Case refers to implied revenue per Dasani case sold Internationally. A case refers to 192 oz volume of finished product.Coca-Cola typically markets and promotes the brand and thus its costs are much lower than that of bottlers. Consequently, Coca-Cola gets small share of retail sales. Dasani International Revenue per Case ($) 2. 00 1. 75 1. 50 1. 25 1. 00 0. 75 0. 50 0. 25 0. 00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •28 Dasani International Revenue per Case remained relatively stable from 2008 to 2010. In 2008, the figure was $1. 45 per case whereas in 2010, it was $1. 50. However, in 2011, the figure jumped 24. % due to Coca-Cola’s acquisition of North American bottling operations. Going forward, we expect Dasani International Revenue per Case to increase at a rate of 1% annually. Forecast Rationale We considered the following factors for our forecast: Supporting: 1. TO INCREASE VOLUMES, COMPANIES HAVE TO ENCOURAGE BIGGER-SIZED PACKS WHICH HAVE A SIGNIFICANTLY LOWER RETAIL PRICE PER UNIT CASE. – According to Beverage Marketing Corporation, bottled water volume grew 3. 5% in 2010 whereas the retail vale of the sales remained flat. Lower retails will subsequently generate lower revenues (per unit case) for the company. . BOTTLED WATER LESS PRONE TO INFLATION – The cost of goods in bottled water products is usually lower than that of juices and soft drinks. Hence, the lower costs can help maintain competitive pricing. 3. POOR WATER QUALITY CHARGE AGAINST DASANI – Dasani has faced allegations that it does not contain source water from springs unlike some other famous bottled water brands. With Coca-Cola purifying tap water, the value proposition and appeal of the brand has suffered a setback. This might reduce the company’s pricing power and impact revenue per case negatively. 4.A STRONG US DOLLAR NEGATIVELY IMPACTS THE REVENUE/CASE – Coca-Cola’s overseas revenue when converted back to the US dollar translate to a lower value when the US dollar is relatively strong against the foreign currencies. This negatively impacts the revenue/case as well. Sources for historical data and explanations can be found on the Trefis. com website (link) — DASANI’S INTERNATIONAL MARKET SHARE — Dasani is a brand of bottled water from Coca-Cola. It used to be the flagship brand till Coca-Cola’s acquisition of Glaceau/Enery Brands in 2007. It was first launched in the US in 1993, to compete with Pepsi’s Aquafina.Since then, it has been introduced globally but has been unable to carve a niche for itself and trails Aquafina globally to this day. Dasani’s International Market Share refers to Dasani’s share (by volume) of the international bottled water and beverages market (includes flavored water, colored water, non carbonated drinks amongst other drinks along with bottled water). TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •29 Dasani’s International Market Share (%) 5 4 3 2 1 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Although Dasani has struggled globally, it has still captured respectable market share. However, it trails behind its competitor Aquafina. We estimate its market share to be over 5% in 2012 whereas the figure was 4. 76% in 2008. The market share has increased gradually in the last few years. We expect the market share growth to remain stagnant in the future. Forecast Rationale We considered the following factors for the forecast: Supporting: 1. DASANI DOESN’T HAVE A PRESENCE IN THE FASTER GROWING MARKETS OF THE WORLD – China, Indonesia and India are some of the fastest growing markets for the bottled water industry.Dasani is not present in either of these markets. Missing out on these countries will reduce its market share in the global bottled water market. 2. NEGATIVE PUBLICITY – Dasani has been subject to a lot of negative publicity as well. It was forced to withdraw its line of products from the UK market in 2004, after the UK authorities discovered traces of bromate, a potential cancer causing compound in the water. This was revealed to be a by-product of Dasani’s processing, which converted the harmless bromide present in tap water to potentially carcinogenic bromate.As a result, Dasani pulled out the brand from the UK market and subsequently also canceled its plans to enter the continental European market in France and Germany. Sources for historical data and explanations can be found on the Trefis. com website (link) — INTERNATIONAL BOTTLED WATER & BEVERAGES MARKET SIZE — Bottled water refers to drinking water packaged in glass or plastic containers for retail consumption. We also include a number of other non-carbonated derivatives like flavored water, water with added minerals (also termed as mineral water) and other products in our definition of the market.International Bottled Water & Beverages Market Size refers to the sales volume (in billion cases) of the sale of bottled water and these derivatives in the international market. These differ from soft drinks as they are non-carbonated in nature. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •30 In some of the developed economies (like the US and parts of Europe), bottled water is regulated as a food product and is (normally) little more than purified tap water packaged and marketed for sale. International Bottled Water & Beverages Market Size (Bil) 50 40 30 20 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019We estimate the market size to be around 40 billion cases for 2012. This has gone up considerably from just under 32. 2 billion cases in 2008. The category, as a whole, has been showing higher growth rates compared to the Carbonated Soft Drink (or CSD) market, which has stagnated in the same time period. We expect the market to continue to grow at a rate of 5% for the next few years. Forecast Rationale We considered the following factors for this forecast: Supporting: 1. GROWTH WILL BE DRIVEN PRIMARILY BY DEVELOPING ECONOMIES – Some of the fastest growing markets for bottled water are China, Indonesia and India.All of these markets have low per capita consumption currently and there is tremendous potential for the bottled water market size to grow. Rising income levels and increased awareness on the need for safe drinking water has resulted in a willingness to pay for drinking water (something which the customers were accustomed to get for free earlier). 2. BOTTLED WATER PRODUCTS ENJOY LOWER TAXATION – Soft drinks attract higher taxation due to their relatively unhealthy nature. Countries like France and Hungary impose soda taxes. Lower retail prices for bottled water products will help improve the market size.Mitigating Factors 3. INCREASING FOCUS ON NEGATIVE ENVIRONMENTAL IMPACT AND HEALTH IMPACTS – Most of the bottled water is sold after packaging into a Polyethylene Terephthalate(or PET) – a kind of plastic container. A significant portion of these bottles are not recycled and end up as waste. Furthermore, a number of studies have suggested that bottled water lacks fluoride ions (normally present in tap or ground water) and can lead to tooth decay, especially in young children. Sources for historical data and explanations can be found on the Trefis. com website (link) TREFIS ANALYSIS for COCA COLACONTENT@TREFIS. COM + 1 617 394 8763 •31 — DASANI GROSS MARGIN — This refers to the gross profit margin of the Dasani division. Dasani Gross Margin (%) 60 50 40 30 20 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Gross profit margins have been relatively constant at around the 64-66% mark for the past few years. This is because of the stable nature of the business which resulted in raw material costs having been relatively stable and the prices have been unchanged. Margins declined in 2011 due to acquisition of Coca-Cola Enterprises’ North American bottling operations.Margins for bottlers hover around the 35%-40% range. Therefore, we have adjusted the margins for Coca-Cola as a whole. For 2011, the gross profit margins was 60. 9%, while for 2012 the figure stood at 60. 3%. Going forward, we do not expect any major deviation from this figure. Forecast Rationale We considered the following factors for the forecast: Supporting: 1. COCA-COLA CO PASSES ON THE HIGH COST OF GOODS TO CONSUMERS IN THE U. S. – For 2011 as well as 2012, the carbonated soft drink (CSD) industry in the U. S. witnessed lower volume sales at a higher retail value. The CSD market size (in terms of volume) in the U.S. has been declining for eight consecutive years. As such, cola companies increase the prices periodically since competitive pricing is not having the desired intention for the additional volume sales. Mitigating: 2. PRICING PER CASE IS USUALLY LOWER THAN FULL-YEAR INCREASE IN COST OF GOODS SOLD PER CASE. – For 2012, the company incurred more than $200 million on incremental costs related to its most important four products sweeteners, metals, juices and PET. The incremental cost related to these products in 2013 is expected to be around $100 million. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM 1 617 394 8763 •32 Sources for historical data and explanations can be found on the Trefis. com website (link) Total Revenue (Bil $) Dasani International Revenues (% of 79. 8 total) Dasani US Revenues (% of total) Direct Expense (Bil $) Indirect Expense (Bil $) Gross Profit (Bil $) Free Cash Flow (Bil $) 2009 2010 2011 2. 85 3. 20 4. 49 81. 9 18. 1 1. 15 1. 42 2. 04 n/a 79. 6 20. 4 1. 76 2. 39 2. 73 n/a 2012 4. 85 79. 7 20. 3 1. 92 2. 27 2. 92 n/a 2013 5. 11 79. 7 20. 3 2. 03 2. 40 3. 08 0. 68 2014 2015 5. 39 5. 70 79. 7 20. 3 2. 14 2. 59 3. 25 0. 66 79. 9 20. 1 2. 26 2. 71 3. 44 0. 73 2016 2017 6. 03 6. 4 2018 6. 66 2019 6. 99 80. 0 80. 0 80. 0 80. 0 20. 0 2. 39 2. 88 3. 64 0. 76 20. 0 2. 52 2. 98 3. 82 0. 84 20. 0 2. 64 3. 05 4. 02 0. 97 20. 0 2. 78 3. 12 4. 22 1. 10 20. 2 1. 02 1. 49 1. 83 n/a In addition, you can see the detailed P;L for the Dasani business in the Appendix (link) Minute Maid The most important drivers for the Minute Maid business are: • Minute Maid International Revenue per Case • Minute Maid’s International Market Share • Fruit Juices & Energy Drinks Gross Profit Margin — MINUTE MAID INTERNATIONAL REVENUE PER CASE — Minute Maid International Revenue per Case refers to implied revenue perMinute Maid case sold Internationally. A case refers to 192 oz volume of finished product which is equivalent to 16 12-oz cans. Coca cola sells syrups and concentrates to bottlers as well as finished bottled products. Thus Minute Maid International Revenue per Case refers to the average revenue that Coca Cola earns by selling concentrates and finished bottled beverages under the Minute Maid brand, equivalent to 1 case of finished product (192 oz). Finished bottled beverages sell at a much higher price than the concentrate used for it. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •33Minute Maid International Revenue per Case ($) 2. 0 1. 5 1. 0 0. 5 0. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Minute Maid International Revenue per Case has increased from about $1. 35 per case in 2008 to about $1. 55 per case in 2010. In 2011, Minute Maid International Revenue per Case witnessed a substantial increase due to Coca-Cola’s acquisition of CCE’s North American Bottling Operations. In the coming years, we expect Minute Maid International Revenue per Case to grow at a moderate rate of 2% annually. Forecast Rationale We considered the following two factors for this forecast: Supporting: 1.HIGHER COST OF COMMODITIES – In 2011, Coca-Cola incurred $800 million of incremental costs related to goods over the previous year. For 2012, the company expect the incremental cost to be in the region of $300-$400 million. Higher cost of goods will eventually be passed on to consumers. 2. ENERGY DRINKS EMERGING AS AN ATTRACTIVE ALTERNATIVE TO CARBONATED SOFT DRINKS – Energy drinks naturally attract health conscious individuals. With health awareness on the rise, demand for such beverages is likely to remain strong. Strong demand will help the Coca Cola Company to sustain pricing growth for these products.Mitigating: 3. GREATER PROPORTION OF VOLUME TO COME FROM DEVELOPING COUNTRIES – Coca-Cola Co’s highest volume growth came from India, China and Turkey. All of these are emerging markets where the revenue per cause is usually lower than what it is in Europe or the U. S. An increasing volume contribution from developing economies will have a lowering effect on the revenue per case. 4. FRUIT JUICES APPEAL TO HEALTH CONSCIOUS CUSTOMERS, STRONG DEMAND CAN HELP SUSTAIN PRICING GROWTH – Fruit Juices are naturally associated with fresh nature extracts and are considered good for health due to their nutritional content.Such beverages naturally attract health conscious individuals. With health awareness on a consistent rise, demand for fruit juices is likely to remain strong. Strong demand will help the Coca Cola Company to sustain pricing growth for Minute Made products. 5. A STRONG US DOLLAR NEGATIVELY IMPACTS THE REVENUE/CASE – Coca-Cola’s overseas revenue when converted back to the US dollar translate to a lower value when the US dollar is relatively strong against the foreign currencies. This negatively impacts the revenue/case as well. TREFIS ANALYSIS for COCA COLA [email protected] + 1 617 394 8763 •34 Sources for historical data and explanations can be found on the Trefis. com website (link) — MINUTE MAID’S INTERNATIONAL MARKET SHARE — Minute Maid is the world’s largest manufacturer of fruit juices and drinks and has substantial international operations. Minute Maid’s International Market Share refers to the international or non US market share (by volume) of products sold under the Minute Maid brand name. Minute Maid’s International Market Share (%) 15. 0 12. 5 10. 0 7. 5 5. 0 2. 5 0. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Minute Maid faces intense competition from local and regional brands worldwide, apart from established brands like Pepsico’s Tropicana. We estimate that Minute Maid’s international market share has increased from 12. 4% in 2008 to 14% in 2012. We expect the growth to slow down over the next few years. Forecast Rationale We considered the following factors for the rationale: Supporting: 1. EXPANSION INTO NEW MARKETS – Minute Maid was launched in Uganda, Kenya and Tanzania in 2011. Entering new markets will help Minute Maid gain international market share.Moreover, the fruits required for the production will be sourced locally thus benefiting local farmers. The move will help Coca-Cola build a healthy image in the eyes of the general public, which is important in a region in which western companies are viewed with skepticism. 2. DIVERSE PORTFOLIO WITHIN MINUTE MAID BRAND – Minute Maid, Minute Maid Pulpy and the Simply line of products all fall within the Minute Maid brand. Varied pricing levels will help the company compete against local, inexpensive options in developing countries. Mitigating: TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •35 3.CONTROVERSIES AND NEGATIVE PUBLICITY – Juice companies are often victims of consumer watchdogs who argue the juices aren’t as healthy or natural as the companies claim to be. Moreover, most juice products contain added flavors and preservatives and possess high sugar content. Sources for historical data and explanations can be found on the Trefis. com website (link) — FRUIT JUICES ; ENERGY DRINKS GROSS PROFIT MARGIN — This refers to the gross profit margins of the Fruit Juices and Energy Drinks division. Fruit Juices ; Energy Drinks Gross Profit Margin (%) 60 50 40 30 20 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Gross profit margins have been relatively constant at around the 64-66% mark for the past few years. This is because of the stable nature of the business which resulted in raw material costs having been relatively stable and the prices have been unchanged. Margins declined in 2011 due to acquisition of Coca-Cola Enterprises’ North American bottling operations. Margins for bottlers hover around the 35%-40% range. Therefore, we have adjusted the margins for Coca-Cola as a whole. For 2011, the gross profit margins was 60. 9%, while for 2012 the figure stood at 60. 3%. Going forward, we do not expect any major deviation from this figure.Forecast Rationale We considered the following factors for the forecast: Supporting: 1. COCA-COLA CO PASSES ON THE HIGH COST OF GOODS TO CONSUMERS IN THE U. S. – For 2011 as well as 2012, the carbonated soft drink (CSD) industry in the U. S. witnessed lower volume sales at a higher retail value. The CSD market size (in terms of volume) in the U. S. has been declining for eight consecutive years. As such, cola companies increase the prices periodically since competitive pricing is not having the desired intention for the additional volume sales. TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •36 Mitigating: 2.PRICING PER CASE IS USUALLY LOWER THAN FULL-YEAR INCREASE IN COST OF GOODS SOLD PER CASE. – For 2012, the company incurred more than $200 million on incremental costs related to its most important four products sweeteners, metals, juices and PET. The incremental cost related to these products in 2013 is expected to be around $100 million. Sources for historical data and explanations can be found on the Trefis. com website (link) Total Revenue (Bil $) Minute Maid US Revenues (% of total) 2009 2010 2011 2. 25 2. 62 3. 59 27. 5 72. 5 0. 81 1. 18 1. 45 n/a 24. 9 75. 1 0. 95 1. 16 1. 68 n/a 29. 6 70. 4 1. 40 1. 91 2. 18 n/a 012 3. 80 29. 8 70. 2 1. 51 1. 78 2. 29 n/a 2013 3. 99 29. 9 70. 1 1. 58 1. 87 2. 41 532 2014 2015 4. 18 4. 39 30. 0 70. 0 1. 66 2. 01 2. 52 509 30. 1 69. 9 1. 74 2. 08 2. 65 563 2016 2017 4. 57 4. 75 30. 1 69. 9 1. 81 2. 18 2. 75 578 30. 1 69. 9 1. 89 2. 23 2. 87 632 2018 4. 94 30. 1 69. 9 1. 96 2. 26 2. 98 719 2019 5. 14 30. 1 69. 9 2. 04 2. 29 3. 10 808 Minute Maid International Revenues (% of total) Direct Expense (Bil $) Indirect Expense (Bil $) Gross Profit (Bil $) Free Cash Flow (Mil $) In addition, you can see the detailed P&L for the Minute Maid business in the Appendix (link) Coke Zero, Sprite Zero, Barq & OtherThe most important drivers for the Coke Zero, Sprite Zero, Barq & Other business are: • Coke Zero, Barq & Other Brands Global Revenues • Coke Zero, Barq & Other Brands Profit Margin — COKE ZERO, BARQ & OTHER BRANDS GLOBAL REVENUES — Coke Zero, Barq & Other Brands Global Revenues refers to revenues generated via sales of Coca-Cola’s other smaller brands like Barq, Coke Zero, Diet Sprite, Sprite Zero, Fresca, Thums Up etc. , as well as distribution of some of the brands from DPS including Dr. Pepper, Canada Dry, Schweppes and Crush. Coca-Cola distributes DPS’ beverage products in many countries outside the US.TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •37 Coke Zero, Barq & Other Brands Global Revenues ($ Bil) 3. 0 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 We estimate the revenues from these smaller and licensed brands to be approximately $1. 7 billion in 2009. The revenues plummeted to $0. 6 billion in 2010. In 2011, Coke Zero, Barq & Other Brands Global Revenues witnessed a substantial increase due to Coca-Cola’s acquisition of CCE’s North American Bottling Operations. Going forward we expect revenues to grow at a moderate growth.Forecast Rationale We considered the following two factors for this forecast: Supporting: 1. COKE ZERO EXPANDING INTO NEW MARKETS – In Netherlands, ‘Coca-Cola Zero Caffeine Free’ was launched at the start of 2011. In 2010, the company introduced Coca-Cola Zero Free in Japan. Similarly, a caffeine free version of Coca-Cola Zero was launched in France in 2010. Sources for historical data and explanations can be found on the Trefis. com website (link) — COKE ZERO, BARQ & OTHER BRANDS PROFIT MARGIN — This refers to the gross profit margin associated with the Coke Zero, Barq and Other Brands division.TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •38 Coke Zero, Barq & Other Brands Profit Margin (%) 60 50 40 30 20 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Gross profit margins have been relatively constant at around the 64-66% mark for the past few years. This is because of the stable nature of the business which resulted in raw material costs having been relatively stable and the prices have been unchanged. Margins declined in 2011 due to acquisition of Coca-Cola Enterprises’ North American bottling operations. Margins for bottlers hover around the 35%-40% range.Therefore, we have adjusted the margins for Coca-Cola as a whole. For 2011, the gross profit margins was 60. 9%, while for 2012 the figure stood at 60. 3%. Going forward, we do not expect any major deviation from this figure. Forecast Rationale We considered the following factors for the forecast: Supporting: 1. COCA-COLA CO PASSES ON THE HIGH COST OF GOODS TO CONSUMERS IN THE U. S. – For 2011 as well as 2012, the carbonated soft drink (CSD) industry in the U. S. witnessed lower volume sales at a higher retail value. The CSD market size (in terms of volume) in the U. S. has been declining for eight consecutive years.As such, cola companies increase the prices periodically since competitive pricing is not having the desired intention for the additional volume sales. Mitigating: 2. PRICING PER CASE IS USUALLY LOWER THAN FULL-YEAR INCREASE IN COST OF GOODS SOLD PER CASE. – For 2012, the company incurred more than $200 million on incremental costs related to its most important four products sweeteners, metals, juices and PET. The incremental cost related to these products in 2013 is expected to be around $100 million. Sources for historical data and explanations can be found on the Trefis. om website (link) Total Revenue (Bil $) Direct Expense (Bil $) 2009 2010 2011 1. 69 0. 59 2. 06 0. 60 0. 21 0. 81 2012 2. 17 0. 86 2013 2014 2015 2. 27 2. 39 2. 51 0. 90 0. 95 1. 00 2016 2017 2. 63 2. 76 1. 04 1. 10 2018 2. 90 1. 15 2019 3. 05 1. 21 TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •39 Indirect Expense (Bil $) Gross Profit (Bil $) Free Cash Flow (Mil $) 2009 0. 88 1. 08 n/a 2010 0. 26 0. 37 n/a 2011 1. 10 1. 26 n/a 2012 1. 02 1. 31 n/a 2013 1. 07 1. 37 303 2014 1. 15 1. 44 290 2015 1. 19 1. 51 322 2016 1. 25 1. 59 333 2017 1. 30 1. 67 368 2018 1. 33 1. 75 422 2019 1. 36 1. 84 478In addition, you can see the detailed P;L for the Coke Zero, Sprite Zero, Barq ; Other business in the Appendix (link) TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM + 1 617 394 8763 •40 Learn More — Related Trefis Coverage — If you’re interested in Coca Cola, you may also want to see the Trefis coverage for companies such as: Best Buy Colgate-Palmolive Costco Home Depot Kimberly-Clark Lowe’s See the list of all companies covered by Trefis — 2 Week Free Trial of Trefis Pro — Liked this report? Get access to even more comprehensive reports along with interactive analyses with Trefis Pro Try Trefis Pro for 2 weeks — About Trefis — Trefis. om was founded by MIT engineers and former Wall Street analysts who realized that most people do not understand the seemingly familiar companies around them including well known companies like Apple, Google, Coca Cola, GE, Ford and Gap to name a few. The Trefis platform uses extensive data to show in a single snapshot what drives the value of a company’s business. We move beyond the qualitative notion “if you love the coffee at Dunkin’ Donuts, you should think about buying the stock,” to answer quantitative questions like “If their coffee sales are up 10% next year but doughnut sales are down 5%, what happens to the value of the company? Trefis analysts spend weeks evaluating each stock that we cover and utilize commonly used valuation methodologies to determine a Trefis price for each company. We present you with not only our synthesized view but also every single step within the valuation process used to determine the Trefis price which you can see via our interactive analysis on Trefis. com. Learn more about the Trefis story Read the Trefis FAQ TREFIS ANALYSIS for COCA COLA CONTENT@TREFIS. COM