Coca-Cola’s top investors include Warren Buffet’s company, Berkshire Hathaway, with 9.25% of shares, and other mutual funds like The Vanguard Group, holding 8.51% of shares, and BlackRock owning over 7.19% of shares of the company. Other individual investors like Herbert A. Allen, director of The Coca-Cola Company since 1982, and Barry Diller, Chairman of the Coca-Cola board since 2002. And former CEO Muhtar Kent.
Breaking down Coca-Cola ownership
Who is Herbert A. Allen?
Director of The Coca-ColaCompany since 1982. Mr. Allen is the President, Chief Executive Officer, and Director of Allen & Company Incorporated, a privately held investment firm.
Who is Barry Diller?
Director of The Coca-Cola Company since 2002, he is also Chairman of the Board and Senior Executive of Expedia Group, Inc. Barry Diller has served as Special Advisor to TripAdvisor, Inc.
Who is Muhtar Kent?
Muhtar Kent is Chairman of the Board of Directors of TheCoca-Cola Company. From 2009-2017 he served as CEO of the company. He joined Coca-Cola in 1978, holding several marketing and operations leadership positions throughout his career.
What is the Coca-Cola incentive formula?
As of 2017, the Coca-Cola incentive formula comprises a base salary multiplied by a target percentage times the company performance factor. To which the individual performance amount is added.
For instance, Mr. Kent, with a 200% target, got an annual target incentive of $2 million, two times his base salary.
Before we move forward, I’d like to show you why I think Coca-Cola has been so successful over the years, and it has nothing to do with its secret formula.
Coca-Cola in the desert
Although a few people wonder about the Coca-Cola business model (they might give it for granted, just like I did not long ago), my curiosity was sparked in the middle of nowhere.
While traveling toward the Arizona Grand Canyon, I passed through a Dolan Springs town.
Situated in the middle of nowhere, at 3,400 feet of elevation, with less than four thousand people living there (according to Wikipedia estimate in 2010), I saw one thing that got my attention.
In front of a local shop, there was a Coca-Cola automatic distributor. I couldn’t see anyone around but I could get a fresh Coke!
I understand that Coca-Cola is a company born at the end of the 1800s.
Thus it had quite some time to get people accustomed to its brand and taste, as to become a habit (or a vice) for millions, if not billions of people (unfortunately, I’m one of them).
Yet, it doesn’t matter in which country you are in; Coca-Cola will be there.
What’s the secret of this company besides its formula? I bet that is about its business model and its distribution strategy. That’s why I looked into its financials to dissect its operations.
Coca-Cola operating segments
Coca-Cola can be divided into a few operating segments across Europe, the Middle East, and Africa:
• Latin America
• North America
• Asia Pacific
• Bottling Investments
• Corporate
Coca-Cola products line
Beverage concentrates, referred to as “beverage bases,” and syrups, including fountain syrups.
Finished sparkling soft drinks and other nonalcoholic beverages are referred to as “finished productbusiness” or “finished product operations.”
Finished product operations generate higher net operating revenues but lower gross profit margins than concentrate operations.
How does the Coca-Cola manufacturing process work? unfinished vs. finished products
As explained in the annual report:
In our concentrate operations, we typically generate net operating revenues by selling concentrates and syrups to authorized bottling operations (to which we usually refer to as our “bottlers” or our “bottling partners”). Our bottling partners either combine the concentrates with sweeteners (depending on the product), still water and sparkling water, or combine the syrups with sparkling water to produce finished beverages. The finished beverages are packaged in authorized containers — such as cans and refillable and nonrefillable glass and plastic bottles — bearing our trademarks or trademarks licensed to us and are then sold to retailers directly or, in some cases, through wholesalers or other bottlers. Outside the United States, we also sell concentrates for fountain beverages to our bottling partners who are typically authorized to manufacture fountain syrups, which they sell to fountain retailers such as restaurants and convenience stores which use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers who in turn sell and distribute the fountain syrups to fountain retailers.
In our finished product operations, we typically generate net operating revenues by selling sparkling soft drinks and a variety of other nonalcoholic beverages, including water, enhanced water, and sports drinks; juice, dairy and plant-based beverages; tea and coffee; and energy drinks, to retailers or to distributors, wholesalers and bottling partners who distribute them to retailers. These finished product operations consist primarily of our Company-owned or -controlled bottling, sales and distribution operations which are included in our Bottling Investments operating segment. Also, in the United States, we manufacture fountain syrups and sell them to fountain retailers, such as restaurants and convenience stores who use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers. We authorize these wholesalers to resell our fountain syrups through nonexclusive appointments that neither restrict us in setting the prices at which we sell fountain syrups to the wholesalers nor restrict the territories in which the wholesalers may resell in the United States. Our finished product business also includes juice and other still beverage production operations in North America. Our fountain syrup sales in the United States and the juice and other still beverage production operations in North America are included in our North America operating segment.
How does the Coca-Cola distribution system work?
Coca-Cola follows a business strategy (implemented since 2006) where through its operating arm – the Bottling Investment Group – it invests initially in bottling partners operations. As they take off, Coca-Cola divests its equity stakes, and it establishes a franchising model, as long-term growth and distributionstrategy.
Coca-Cola drinks are available to consumers in more than 200 countries through a network of Company-owned or -controlled bottling and distribution operations, independent bottling partners, distributors, wholesalers, and retailers.
This is a massive beverage distribution system able to serve 1.9 billion beverages each day.
What brands does Coca-Cola own?
The Coca-Cola Company owns a portfolio of brands beyond the Coca-Cola drink, which comprises:
Schweppes is owned by the Company in certain countries other than the United States
Gold Peak is a juice and juice drink brand sold in North America
Sprite
Aquarius
FUZE TEA
Minute Maid is a juice drink brand sold primarily in the Asia Pacific
Minute Maid Pulpy
Glacéau Smartwater is vapor-distilled water with added electrolytes that is sold mainly in North America and Great Britain
The secret isn’t in the secret formula but in the bottling partners
The Coca-Cola Company has five large independent bottling partners based on unit case volume that in 2017 were:
Coca-Cola FEMSA, S.A.B. de C.V. (“Coca-Cola FEMSA”), which has bottling and distribution operations in Mexico, Guatemala, Panama, Colombia, Venezuela, Brazil), Argentina, and the Philippines;
Coca-Cola European Partners plc (“CCEP”) Andorra, Belgium, France, Germany, Great Britain, Iceland, Luxembourg, Monaco, the Netherlands, Norway, Portugal, Spain, and Sweden
Coca-Cola HBC AG (“Coca-Cola Hellenic”) Armenia, Austria, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, the Former Yugoslav Republic of Macedonia, Greece, Hungary, Italy, Latvia, Lithuania, Moldova, Montenegro, Nigeria, Northern Ireland, Poland, Republic of Ireland, Romania, the Russian Federation, Serbia, Slovakia, Slovenia, Switzerland and Ukraine;
Arca Continental, S.A.B. de C.V. northern and western Mexico, northern Argentina, Ecuador, Peru, and the state of Texas and parts of the states of New Mexico, Oklahoma, and Arkansas in the United States
Swire Beverages Swire Beverages Hong Kong, Taiwan, 11 provinces and the Shanghai Municipality in the eastern and southern areas of mainland China, and territories in 13 states in the western United States.
This distribution system represented 2017 41% of the total unit case volume. This is a key ingredient to Coca-Cola’s overall business strategy.
Coca-Cola distribution plants
With distribution plants all over the world, Coca-Cola is able to make its products available everywhere:
As of 2017, the concentrated operations represented 51% of the production compared to 49% of the finished product operations.
Source: The Coca-Cola Company Annual Report
Net operating revenues were over $35 billion in 2017, compared to over $41 billion in 2016. Coca-Cola’s distribution channels are another key element of its overall business strategy.
A glance at the Coca-Cola ecosystem
With a massive portfolio of soft drinks with more than four thousand products worldwide, 250 bottling partners, 900 plants, and 27 million retail customers, The Coca-Cola system is probably the most extensive distribution ecosystem on earth.
Coca-Cola follows a business strategy (implemented since 2006) where it invests initially in bottling partners’ operations through its operating arm – the Bottling Investment Group.
As they take off, Coca-Cola divests its equity stakes and establishes a franchising model as a long-term growth and distributionstrategy.
Coca-Cola’s Purpose is to “refresh the world. make a difference.” Its vision and mission are to “craft the brands and choice of drinks people love, to refresh them in body & spirit.
And done in ways that create a more sustainable business and better-shared future that makes a difference in people’s lives, communities, and our planet.”
Coca-Cola is the market leader in the soft drink industry. It is also the most widely recognized brand, with a Business Insider study revealing that a staggering 94% of the world population recognizes the red and white logo.
However, Coca-Cola faces significant challenges with increasingly health-conscious consumers and less access to water resources.
Coca-Cola follows a business strategy (implemented since 2006) where through its operating arm – the Bottling Investment Group – it invests initially in bottling partners operations. As they take off, Coca-Cola divests its equity stakes, and it establishes a franchising model, as long-term growth and distributionstrategy.
Coca-Cola’s Purpose is to “refresh the world. make a difference.” Its vision and mission are to “craft the brands and choice of drinks that people love, to refresh them in body & spirit. And done in ways that create a more sustainable business and better-shared future that makes a difference in people’s lives, communities, and our planet.”
Coca-Cola is the market leader of the soft drink industry. It is also the most widely recognized brand, with a Business Insider study revealing that a staggering 94% of the world population recognizes the red and white logo. However, Coca-Cola faces significant challenges with increasingly health-conscious consumers and less access to water resources.
The Coca-Cola Company is an American multinational beverage corporation founded in 1892 by pharmacist Asa Griggs Candler. Many consumers associate the company with its signature soda in a red can or bottle. In truth, however, The Coca-Cola Company owns a plethora of soft drink, juice, tea, coffee, and other beverage brands.
The Coca-Cola Company has 21 different billion-dollar brands or brands that generate more than $1 billion or more in revenue each year. The company also sells its products in nearly every country in the world, with Cuba and North Korea the only two countries where it is not sold officially. What’s more, the Coca-Cola brand is worth $87.6 billion, making it one of the most valuable among all companies. Though these figures allow Coca-Cola to enjoy market dominance in many countries, the company is nevertheless subject to intense competition.
PepsiCo was founded in 1902 by American pharmacist and businessman Caleb Bradham as the Pepsi-Cola Company. Bradham, who hoped to emulate the success of Coca-Cola, marketed the beverage from his pharmacy and registered a patent for its recipe the following year. Today, Pepsi is a global company with a portfolio of 23 billion-dollar brands, or brands earning more than $1 billion in annual revenue. Sixteen of these brands are beverage-related, while the remaining seven are associated with snacks and other food products.
In 1965, PepsiCo acquired Frito-Lay in what the chairmen of both companies called a “marriage made in heaven”. The resultant company transformed PepsiCo from a soft drink organization and set it on a path to becoming one of the world’s leading food and beverage companies. Today, PepsiCo claims to operate in more than 200 countries and territories around the world with seven distinct divisions and many successful brands.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
