Pepsi versus Coca-Cola Analysis (Companies Overview in 2010-2012)

Investors always consider companies whereby they can get great returns in the shortest time possible. For this reason, investors need to get consultations from experts to find out the best investments, as a way of ensuring that they do not take unnecessary risks (Friedlob & Schleifer; Black). Investment analyst helps investor to make the best choice based on evidence. In addition, an expert can look at a company from past, present and future perspectives. This helps to build enough evidence for decision making when it comes to the real investment. In this case, I will consider Coca-Cola Company and Pepsi Company. An investor wants to invest in one of the two, and thus, I will look at the history of the companies, their stock analysis, and financial analysis, scandals they have faced in the past and then make recommendations. This is crucial, since the two companies are the biggest beverage companies in the world and operate in a very competitive environment. It would be difficult to guess who the best among the two is without any analysis.

Pepsi

Pepsi, Inc. is a multinational food and beverage company operating in more than 200 countries in the world. The headquarters of the company is in New York City, U. S. In 1893, Pepsi was first opened as Brad’s drink in New Bern, North Carolina by Caleb Bradham. The guy had a drugstore where he started selling the drink. Bradham was aiming at creating a new drink that would help in digestion besides boosting energy (Jones; Thompson, Strickland & Gamble). For this reason, the pepsin, a digestive enzyme and kola nuts were added to the drink. This made it labeled as Pepsi Cola. The beverage company began expanding in 1903 when Bradham moved from his drugstore to a warehouse. In that year, the sales phenomenally rose up to 7,968 gallons of the drink. In 1904, the sales increased much more than expected and unimaginably went up to 19,848 gallons (Peirer). In 1909, the first celebrity, Barney Oldfield endorsed the company’s product describing it as “A bully, refreshing and a fine drink before a race.” This resulted in use of the advert theme “Delicious and Healthful” in the 1920’s. In 1926, the company got its first logo; however, this was later changed in 1929.

In 1931, Pepsi cola Company was announced bankrupt because of the great depression. In result of World War I, there were fluctuations in sugar prices, which made the company experience financial losses (Thompson, Strickland & Gamble; Rory). The company’s assets were sold to different people, but the Pepsi Trademark was bought by Charles Guth who was the then president of Loft, Inc. He had worked with Coca-Cola, and thus he wanted to replace the company in his stores, since they denied giving him a discount. The Coca-Cola Company offered to purchase the Pepsi-Cola company in 1922 and 1933; however, they declined the offer on both occasions (Giebelhaus). In 1965, the company was officially opened, and it engaged in diversification, marketing and advertisement strategies in order to sell the brand.

In 2012, the company launched the latest global campaign termed as “Embrace your past, but live for now” which has featured Beyonce. The current CEO of the company is Idra Nooyi. The company has manufacturers in the different countries, where it has made investments. For instance, in Australia the company’s manufacturer is Schweppes Australia. It manufactures and distributes Pepsi, Pepsi Next, Pepsi Max Kick and Pepsi Light within the country (Giebelhaus). In most cases, the company relies on local suppliers (Black). For instance, in India the company has partnered with farmers and aids them to practice sustainable agriculture in order to support the company. To ensure this works properly, the management has come up with the Supplier Code of Conduct which clarifies all the issues related to the supplier and supplier management (Jones). The most popular company’s brands in America and Canada include Pepsi, SoBe, IZZE, Propel, Aquafina, Sierra Mist and AMP Energy among others. Internationally, the company has four brands that are widely accepted, including Kas Mas, Manzanita Sol, Fiesta Mirinda Pina and Fiesta Mirinda Mango. The company makes huge sales in other countries including Japan, India, Vietnam, Malaysia, South Africa, Slovakia, and Thailand among many other countries.

Coca-Cola

Coca-Cola Company is a multi-billionaire American beverage corporation that is termed to be the leading beverage company in the world. Coca-Cola Company began its operations with the first coupon being distributed widely in 1888 in order to promote the drink. By 1913, the company had become very popular having redeemed 8.5 million tickets (Giebelhaus). The company was officially founded in 1892 by John Pemberton and Asa Griggs Candler. The company’s headquarters is in Atlanta, GA (Friedlob & Schleifer). Its main investments are in Africa, Asia and North America. The company has widely grown over the years, despite criticisms that have at times affected its financial performance. The company has different manufacturers in the more than 200 countries, where its products are consumed. It relies on local suppliers as a way of lowering shipping costs (Jones; Peirer). Therefore, manufacturing of the company’s products is done at the local level. The company has more than 500 brands with some of the most popular being Coke, Sprite, Fanta.

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Stock Price of Coca-Cola

The graph below shows clearly that the stock price of the Coca-Cola Company has increased from 2010 to 2012. This is a positive trend; however, the revenue is still below that of PepsiCo.

Stock Price of Pepsi

The above graph shows an increase in the company’s stock price. The overall amount is higher than that of the Coca-Cola Company. This is because it is at 59 million in 2010 while that for the Coca-Cola Company it at 30.99 million. Therefore, the overall stock performance of PepsiCo is higher than that of Coca-Cola Company. In addition, when it comes to changes in stock list performance, PepsiCo shows a better performance. This means that there is a great probability of PepsiCo having a better stock list performance compared to its core competitor. Therefore, an investor who is future oriented and in need of healthy returns should consider PepsiCo.

Pepsi Financial Analysis

PepsiCo has brands in its portfolio that on their own generate $ 1 billion or even more on an annual basis. A financial report filed in 2012 showed the company’s annual sales at $ 65.49 billion (Friedlob & Schleifer). The company has also assets worth $ 74.64 billion. At the same time, the cash at hand was valued at $ 6.62 billion. The gross profit of the company was valued at $ 34.2 billion. When it comes to capital and financial performance, Pepsi performs much better than its main competitor, the Coca-Cola Company, because of its investments in the food industry.

Coca-Cola Financial Analysis

The company has a long term debt of $ 12.68 billion. In the last five years, the company has showed positive results with its revenue of $ 47.6 billion in 2012. This was an increase from 2011, when the revenue was at $ 46.5; thus, there is an increase of 2.2%. The net income of the company in 2012 was $ 8.8 billion.
The general financial performance of Coca-Cola is lower than that of PepsiCo. The latter has assets valued at a higher price. This makes it safe for investment since the assets are security in the future. In case of any crisis, the assets will help the company to survive, since they are security and can be used to protect investors’ capital.

News Events Facing Coca-Cola

There are different events that have affected the Coca-Cola Company since 2010. Such events have been a big challenge and an obstacle to the company, since they have, in most cases, led to a decline in stock price. One of the news events is the issue of pollution that began hitting the company in 2009, but became worse in 2010 (Black). Consumers became aware that the company was causing much pollution in its bottling. This was in India, where the matter was even taken to court. This greatly threatened the investments of the company not only in India, but in other countries, since the news became spread globally. This resulted in the decline in bottled water sales (Giebelhaus). This was the first time the company faced declines in bottled water sales. The memories of this are still fresh in consumers’ minds. Additionally, in many other cases, the company has been criticized for polluting the environments where it did its manufacturing. This means that in case the company appears in the news in the future it will be at a great risk of running bankrupt for zero sales. This makes it risky for investment.

Coca-Cola Company, in its turn, faced much criticism from its Asian consumers (Giebelhaus). Generally, Asians have negative attitudes towards foreign companies. This has made the company criticized for unhealthy products that affect Asian population. In 2010, the company’s products were pronounced unsafe for young children. This is because of the chemicals these contained. The matter was also taken to court, and some traces of unsafe chemicals were found in some of its products. Although the company changes its manufacturing practice, this still remains an issue that may affect its sales in future (Friedlob & Schleifer). At that time, the company stock price declined; however the company did not undergo a complete loss. However, this makes it risky for investment.

News Events Facing PepsiCo

Unlike the Coca-Cola Company, most of PepsiCo’s news events have been positive. One of these news events is the announcement of a great increase and investment in beverage container recycling. This was in 2010, and the strategy was set to be fully effective by 2018. The company set recycling kiosks termed as “Dream Machines” in supermarkets and convenient stores. The packaging of the company was also reduced by adopting plastic bottles. This saw an increase in the company’s distribution, and eventually the stock price of the company increased (Friedlob & Schleifer). This greatly shocked the Coca-Cola Company to the extent that it sued PepsiCo for unhealthy competition. This makes the company the best option for investment.
Despite much of the positive news events, the company was accused of collaborating with biotech companies that use human fetuses to develop new food products in 2012 (Black). The company workers were said to be key players in this and provided consumers with products that were unsafe for consumption. The stock price of the company underwent a minimal reduction because of this.

Conclusion and Recommendations

In conclusion, PepsiCo and the Coca-Cola Company have competed for a long time. The two still remain to be the leading beverage companies in the world. Analyzing their financial performance, PepsiCo is the leader probably because of its investment in snack and food industry. The two almost cover the same geographical regions, since they all have made investments in more than 200 countries. When it comes to news events, the Coca-Cola Company has not being favored due to its many investments in Asia. Asians have negative attitudes towards foreign companies, and this is probably the reason why the Coca-Cola Company has had many negative news events that have affected its stock price. On the other hand, PepsiCo was favored by news events because of its concern for the consumers and investments in technology. Therefore, Coca-Cola has been severely hit by the news events far and wide compared to Pepsi. This is to the extent that Coca-Cola products have been burned in some countries.

Comparing PepsiCo and the Coca-Cola Company, I would recommend PepsiCo for investment to my client. One of the main reasons is that the company has invested in potential of sustainable economies. Its major investments are in America, parts of Europe and Australia. These are stable economies that have remained that way for many years. Considering the case of Coca-Cola, the company has its major investments in Asia. This is a continent that is never safe for foreign investment, despite the fact that there are leading world economies, including India and China. Generally, Asians have a negative attitude towards foreign companies, and this is the reason why Coca-Cola has received much criticism in the previous years. In addition, the economies are not yet defined as sustainable, since they have just arose in previous years and are still suffering from poverty among other economic and social issues. Therefore, PepsiCo would be the best option for investment.

Technology has taken the leading position in the modern business world. One of the competitive edges that PepsiCo has enjoyed over the years is great investment in technology. This is aimed at making all services efficient with the key interest being the end consumer. In 2010, the company signed a $ 30 million technological research contract with Senomyx. This means that the company can survive and compete in a healthy and sustainable manner, unlike Coca-Cola which only aims at selling the brand name. Consumers have become wise, and thus they are not after the brand name, but the quality and design of the product. This makes PepsiCo have a brighter future than Coca-Cola and thus, it becomes the best option for investment.

Another reason why I would recommend PepsiCo is because its revenues are higher than that of its main competitor. This is because of its investment in snacks and convenient foods business, a market in which Coca-Cola Company does not take part. The latter investment gives PepsiCo a more balanced portfolio that that of its core competitor. This is, therefore, secures the company against any market declines and makes PepsiCo less risky for investment than its rival, the Coca-Cola Company.