Strategic Management Case Study Coca-Cola Co.

Strategic Management Case StudyCoca-Cola Co. Presented by: Carter Vaillancourt, Megan Land, and Emily MichaudUMFK, 2013

OverviewCompany OverviewA brief history about Coca ColaExisting Mission and Vision StatementExisting Objectives and Strategies New Mission and Vision Statement2. External AuditIndustry AnalysisCurrent Opportunities and ThreatsCPM MatrixEFE Matrix3. Internal AssessmentOrganizational StructureStrengths and WeaknessesFinancial ConditionIFE Matrix

4. Strategy FormationSWOT matrixSpace MatrixBCG MatrixGrand Strategy MatrixMatrix AnalysisQSPM Matrix5. Strategic Plan for the FutureStrategies6. ImplementationEPS/EBITProjected Financials7. EvaluationBalanced Score Card8. Coca-Cola Update

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The Coca-Cola Bottle from the Beginning, to Present

1886-18921893-19041905-19181919-19401941-19591960-19811982-18901990-1999In 1886 is when Atlanta pharmacist created the first Coca-Cola mixture out various ingredients, where he then put it up for sale for 5 cents a glass1984 is when Joseph Biedenharn was hired to be the first to put theCoca Colain bottles

Due to beverage companies copying Coca-Cola they began to manufacture the contour bottle in 1916

In the 1928 Olympics located in Amsterdam, Coca-Cola traveled with the team andbegan global expansion

In 1943, during WWII General Eisenhower requested 10 bottle plants to be shipped to them overseas, which then created an overseas business.

After 70 years, Coca-Cola added new flavors: Fanta, originally developed in the 1940s and introduced in the 1950s; Sprite followed in 1961, with TAB in 1963 and Fresca in 1966

In 1985, was the release of a new taste for Coca-Cola, the first change in formulation in 99 years. It wasnt long until they changed to their originalNew beverages joined the Company's line-up, including Powerade sports drink, Qoo children's fruit drink and Dasani bottled water

Revenue and Cash Flow Growth 2005-2010

Existing Vision StatementOur vision serves as a framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth.People: Be a great place to work where people are inspired to be the best they can be.Portfolio: Bring to the world a portfolio beverage brands that anticipate and satisfy peoples desires and needs.Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value.Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities.Profit: Maximize long-term return to shareholders while being mindful of our overall responsibilities.Productivity: be a highly effective, lean and fast-moving organization

Existing Mission StatementOur Roadmap starts with out mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions.To refresh the worldTo inspire moments of optimism and happinessTo create value and make a difference.

Existing Growth StrategyDriving global beverage leadershipAccelerate innovationLeverage our balanced geographic portfolio

Proposed Vision StatementCoca-Colas vision is to inspire moments of happiness while refreshing the world.

Proposed Mission StatementWith six main operating segments in North America, Latin America, Europe, Eurasia, Africa, the Pacific,(3) and bottling investments, Coca-Cola is dedicated to being a highly effective refreshments and fast-moving organization. (5) Our mission is to bring consumers quality refreshments that anticipate and satisfy their desires and needs. (1)(2). As a company we strive to be responsible citizens by helping to rebuild and support sustainable communities (8), while maximizing long-term return to shareowners (6). Through modern technology (4) and inspiring employees to be the best they can be (9) we know we can continue to provide the best products on the market. CustomersProducts or ServicesMarketsTechnologyConcern for SurvivalPhilosophySelf-ConceptConcern for Public ImageConcern for Employees

External Audit

Industry Market Analysis

Spurring demand for energy drinks, especially in the US where estimates show about 2 billion.Approximately 85% of the companys unit case volume is delivered in recyclable bottles and cans, and the company targets to recover at least 50% of the equivalent bottles and cans sold worldwide.Bottled water drinking has increased 11%. European and China market show large potential to grow by an estimated amount of 7%. Has the option, but no obligation, to assist bottlers with promotional and marketing activities ($5 billion in 2010). 55 billion beverage servings are consumed worldwide each day Global beverage industry is expected to grow from a valued $1.4 trillion in 2008, to $1.6 trillion by 2013.India currently only consumes 11 8oz servings of Coca Cola per person per year.The non-alcoholic ready to drink(NARTD) beverage industry is expected to grow by 50 billion unit cases by 2020.

Opportunities

ThreatsIncreasing preference for non carbonated healthy drinks. The Coca Cola soda saw a 5% volume declines respectively in the carbonated soda brands category. With rising obesity rates of 35.7% for adults and 17% for youth in the U.S. alone, health concerns may cause reduced consumption of sugar sweetened beverages, impacting profitability.Water is the main and most significant ingredient in beverages, quality and abundance of water is scarce worldwide, where 70% is used for agriculture and irrigation.With $24.5 billion in net operating revenue generated from international markets, and operating in over 200 countries, unstable economic conditions in foreign countries can dramatically decrease revenues. The primary beverage of Coca Cola is sparkling beverages, the most popular drinks consumed worldwide, in their respective order, are water, tea, and beer.Changes in currency rates. Coca-cola uses 74 functional currencies in 2010.In 2010 had approximately 18,600 associates represented by labor unions.PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67 Billion respectively. They are strong competitors in the marketPepsiCo dominated North America with sales of US $22billion,while Coca-Cola only had about US $7billion.

KONSRGYPEPCritical Success factorsWeightsRatingWeighted ScoreRatingWeighted ScoreRatingWeighted Score0.0 to 1.01 to 41 to 41 to 4Advertising0.0840.3230.2440.32Product Quality0.1240.4830.3630.36Price Competitiveness0.1040.430.340.4Finanical Position0.1030.3040.4030.30Customer Loyalty0.1440.5630.4240.56Global Expansion0.1140.4430.3330.33Market Share0.0730.2140.2830.21Organization Structure0.0640.2430.1830.18Customer Service0.0840.3230.2430.24Production Capacity0.1040.4030.3040.40Employee Dedication0.0430.1240.1630.12Totals1.003.793.213.42

CPM

Key External FactorsWeightsRatingWeighted Score0.0 to 1.01 to 4OpportunitiesThis is spurring demand for energy drinks, especially in the US which according to the latest industry estimates is about 2 billion0.0640.24Approximately 85% of the companys unit case volume is delivered in recyclable bottles and cans, and the company targets to recover at least 50% of the equivalent bottles and cans sold worldwide0.0430.12Bottled water drinking has increased 11%. 0.0420.08European and China market show large potential to grow, growing into these divisions more will help the revenue sales0.0420.08Has the option, but no obligation, to assist bottlers with promotional and marketing activities ($5 billion in 2010).0.0520.155 billion beverage servings are consumed worldwide each day0.0630.18Global beverage industry is expected to grow from a valued $1.4 trillion in 2008, to $1.6 trillion by 20130.0530.15India currently only consumes 11 8oz servings of KO per person per year0.0420.08The non-alcoholic ready to drink(NARTD) beverage industry is expected to grow by 50 billion unit cases by 20200.0530.15Threats0Increasing preference for non carbonated healthy drinks. The Coca Cola soda saw a 5% volume declines respectively in the carbonated soda brands category0.0630.18With rising obesity rates of 35.7% for adults and 17% for youth in the U.S. alone, health concerns may cause reduced consumption of sugar sweetened beverages, impacting profitability.0.0620.12Water is the main and most significant ingredient in beverages, quality and abundance of water is scarce worldwide, where 70% is used for agriculture and irrigation0.0920.18With $24.5 billion in net operating revenue generated from international markets, and operating in over 200 countries, unstable economic conditions in foreign countries can dramatically decrease revenues0.0730.21The primary beverage of Coca Cola is sparkling beverages, the most popular drinks consumed worldwide, in their respective order, are water, tea, and beer0.0740.28Changes in currency rates. Coca-cola uses 74 functional currencies in 20100.0420.08In 2010 had approximately 18,600 associates represented by labor unions0.0520.1PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67 Billion respectively. They are strong competitors in the market0.0540.2PepsiCo dominated North America with sales of US $22billion,while Coca-Cola only had about US $7billion0.0840.32Totals12.85EFE

Internal Audit

Financial InformationIncome Statement

Financial InformationBalance Sheet (1)

Financial InformationBalance Sheet (2)

Coca-Cola Worth Analysis for 2010 (in millions)

Shareholder's equity - Goodwill - Intangibles 4,094 Net Income * 5 59,045 (Stock Price/EPS) * NI 71,177 # of Shares Out * Stock Price 71,225 Four Method Average 51,385

Ratio AnalysisRatio (2010)Coca-ColaPepsiNestleLiquidity Ratios Current1.171.111.29 Quick1.020.891.03Leverage Ratios Debt to total assets0.570.680.44 Debt to equity1.352.190.78 Long-term debt to equity0.450.940.12 Times-interest-earned ratio20.439.2341.25Activity Ratios Fixed Assets Turnover2.383.035.12 Total Assets Turnover0.480.850.98 Inventory Turnover13.2517.1513.84Profitability Ratios Gross Profit Margin %63.8654.0558.21 EBT Margin %40.5614.2334.69 Net Profit Margin %33.6310.9331.2 Return on total assets %19.4211.727.56 Return on Stockholder's equity %38.0933.2749.17 Price-earnings ratio6.0315.355.43Growth Ratios Sales Growth (5-years)8.74%12.18%3.80% Net Income Growth (5-years Average)19.37%9.16%32.08% Earnings per share Growth (5-year Average)19.92%10.35%37.77%

StrengthsWith revenues of $35,119,000 million, Coca-Cola is one of the largest beverage manufacturers globally.Coca-Cola owns four of the worlds top five nonalcoholic sparkling beverage brands including Coca-Cola, Diet Coke, Sprite and Fanta.Sold 25.5 billion cases of products in 2010Accounted for 51% of U.S. unit case volume, and 50% of non-U.S. case volume for 2010Has ownership interest in its bottling/distributing partners; 23% in Coca-Cola Hellenic, 32% in Coca-Cola FEMSA, and 30% in Coca-Cola Amatil.Acquired Coca-Cola Enterprises, Inc., one of the major bottlers for Coca-Cola in North America which had $3.6 billion in revenuesIn Eurasia and Africa, unit case volume increased 12% in 2010Coca-Cola has more than 500 brands and 3,500 beverages and products. Coca-Cola sells 1.7 Billion servings of beverages per day in over 200 countries. Coca-Cola generated 9.5 billion in cash from operations in 2010, up 16% over 2009.

WeaknessesWeak performance in Europe achieving a 0% growth in 2010Does not hold number 1 spot for either the water brand or the leading sports drink Currently does not hold a snacks segment, where Pepsi Co. has a food division which creates for 60% of their total revenue. Does not perform best in North America, only accounting for 31.7% in total revenue in 2010Has a high number of current liabilities accounting for 18,508 million Acquiring Coca-Cola Enterprises (CCE) resulted in assuming additional $7.9 billion in debt Operating income for Europe operations decreased by $50 million in 2010Interest expense increased $378 million mainly due to premiums paid on repurchasing long term debtCommon Stock Market Prices decreased between the first and second quarter in 2010 from $52.23 and $49.47Other operating expenses grew to $5,959 million in 2010 from $5,699 million in 2009

Key Internal FactorsWeightsRatingWeighted Score0.0 to 1.01, 2, 3 or 4Internal Strengths3 or 4With revenues of $35,119,000 million, Coca-Cola is one of the largest beverage manufacturers globally0.0740.28Coca-Cola owns four of the worlds top five nonalcoholic sparkling beverage brands including Coca-Cola, Diet Coke, Sprite and Fanta0.0840.32Sold 25.5 billion cases of products in 20100.0730.21Accounted for 51% of U.S. unit case volume, and 50% of non-U.S. case volume for 20100.0630.18Has ownership interest in its bottling/distributing partners; 23% in Coca-Cola Hellenic, 32% in Coca-Cola FEMSA, and 30% in Coca-Cola Amatil0.0530.15Acquired Coca-Cola Enterprises, Inc., one of the major bottlers for Coca-Cola in North America which had $3.6 billion in revenues0.0940.36 In Eurasia and Africa, unit case volume increased 12% in 20100.0430.12Coca-Cola has more than 500 brands and 3,500 beverages and products0.0640.24Coca-Cola sells 1.7 Billion servings of beverages per day in over 200 countries0.0530.15Coca-Cola generated 8.5 billion in cash from operations in 2010, up 16% over 20090.0630.18Internal Weaknesses1 or 2Weak performance in Europe achieving a 0% growth in 20100.0210.02Does not hold number 1 spot for either the water brand or the leading sports drink0.0620.12Currently does not hold a snacks segment, where Pepsi Co. has a food division which creates for 60% of their total revenue0.0710.07Does not perform best in North America, only accounting for 31.7% in total revenue in 20100.0310.03Has a high number of current liabilities accounting for 18,508 million0.0220.04Acquiring Coca-Cola Enterprises (CCE) resulted in assuming additional $7.9 billion in debt0.0710.07Operating income for Europe operations decreased by $50 million in 20100.0310.03Interest expense increased $378 million mainly due to premiums paid on repurchasing long term debt0.0320.06Common Stock Market Prices decreased between the first and second quarter in 2010 from $52.23 and $49.470.0220.04Other operating expenses grew to $5,959 million in 2010 from $ 5,699 million in 20090.0220.04Totals12.71

IFE

Strategy Formation

SWOT MatrixStrengthsWeaknessesOpportunitiesThreats1. Diversify beverage line by offering alcoholic beverages. (S1, S8, S9, T5)2. Increase R&D spending to research production methods to ensure that we are utilizing resources in the most efficient manner. (S1, S10, T3)1.Create a lower calorie sports drink line to promote healthy drinking habits while still providing the essential electrolyte balance. (W2, W4, T1, T2)2. Diversify products by entering the healthy snack/snack food market. (W3, T2)1. Create a line of energy drinks to meet a growing demand of those products. (S8, S9, S10, O1, O9)2. Increase marketing in Latin America. (S8, S9, S10, O6, O7, O9)1. Increase sports drink product sales through sponsorship of collegiate sports. (W2, W4, O1, O6, O9)2. Increase marketing in Europe. (W1, O4, O6)3. Take advantage of the increasing demand for bottled water by creating flavored water drops. (W2, O3, O6, O9)

STSTWOWT

Space MatrixFinancial StrengthRatings1Cash Flow5.02Price Earnings Ratio3.03Earnings per Share5.04Working Capital7.05Liquidity6.06Net Income6.07Return on Assets4.0Financial Strength Average5.14Industry StrengthRating1Profit Potential6.02Financial Stability7.03Resource Utilization4.04Productivity, Capacity utilization4.05Market Entry6.06Growth Potential3.07Extent Leveraged2.0Industry Strength Average4.6Environmental StabilityRating1Rate of Inflation-5.02Barriers to Enter the Market-4.03Competitive pressure-2.04Price Elasticity-4.05Demand Variability-4.06Price Range of Competing Products-4.07Ease of Exit from Market-6.0Environmental Stability Average-4.14Competitive AdvantageRating1Market Share-1.02Product Quality-3.03Customer Loyalty-2.04Capacity Utilization-2.05Technologically Advanced-3.06Global Expansion-1.07Product Life Cycle-3.0Competitive Advantage Average-2.14FSCSESIS-1-2-3-4-5-6654321ConservativeAggressiveCompetitiveDefensive123456-6-5-4-3-2-1X Coordinate2.43Y Coordinate1.00

BCG MatrixSegmentsRevenue%revprofit %pftRelative Market ShareIndustry Growth Rate (%)North America$11,205.0039.45%$1,520.0015.31%1.004.40%Pacific$5,271.0018.56%$2,048.0020.63%1.005.60%Europe$5,249.0018.48%$2,976.0029.97%1.005.30%Latin America$4,121.0014.51%$2,405.0024.22%1.006.00%Eurasia & Africa$2,556.009.00%$980.009.87%1.006.50%Total$28,402.00100.00%$9,929.00100.00%

BCG Continued

Grand Strategy MatrixRapid Market GrowthWeak Competitve PositionStrong Competitive PositionSlow Market GrowthQuadrant II1. Market development2. Market penetration3. Product development4. Horizontal integration5. Divestiture6. LiquidationQuadrant III1. Retrenchment2. Related diversification3. Unrelated diversification4. Divestiture5. LiquidationQuadrant IV1. Related diversification2. Unrelated diversification3. Joint venturesQuadrant I1. Market development2. Market penetration3. Product development4. Forward integration5. Backward integration6. Horizontal integration7. Related diversification

Matrix AnalysisAlternative Strategies IE SPACE GRAND BCGCOUNT Forward Integration xxX3Backward Integration xxX3Horizontal Integration xxX3Market Penetration xxX3Market Development xxX3Product Development xxX3Related Diversification xx2Unrelated Diversification x1Retrenchment Divestiture Liquidation

Strategy Evaluation Integration StrategiesWe have integrated into many suppliers prior to 2010We recently purchased CCE which helps integrate our bottling and marketingProduct and Market DevelopmentWe are highly established worldwide prior to 2010Market PenetrationWe are currently in 200 different countries prior to 2010Unrelated or Related DiversificationWe dont offer a food segment (Unrelated)None of our main competitors offer an alcoholic beverage (Related)

Quantitative Strategic Planning Matrix-QSPMCreate a lower calorie sports drink line/ while still providing essential electrolyte balance.Diversify products by entering the healthy snack/snack food market.Diversify beverage line by offering alcoholic beverages.Key factorsWeightASTASASTASASTASExternal1 to 41 to 41 to 4Opportunities1. There is spurring demand for energy drinks, especially in the US which according to the latest industry estimates is about 2 billion0.0640.242. Approximately 85% of the companys unit case volume is delivered in recyclable bottles and cans, and the company targets to recover at least 50% of the equivalent bottles and cans sold worldwide.0.043. Bottled water drinking has increased 11%. 0.044. European and China market show large potential to grow, growing into these divisions more will help the revenue sales.0.0430.125.Has the option, but no obligation, to assist bottlers with promotional and marketing activities ($5 billion in 2010).0.0520.130.156.55 billion beverage servings are consumed worldwide each day0.0640.2440.247. Global beverage industry is expected to grow from a valued $1.4 trillion in 2008, to $1.6 trillion by 2013.0.0540.240.28. India currently only consumes 11 8oz servings of KO per person per year.0.0420.0830.1220.089. The non-alcoholic ready to drink(NARTD) beverage industry is expected to grow by 50 billion unit cases by 2020. 0.0540.2Threats1.Increasing preference for non carbonated healthy drinks. The Coca Cola soda saw a 5% volume declines respectively in the carbonated soda brands category.0.0620.122.With rising obesity rates of 35.7% for adults and 17% for youth in the U.S. alone, health concerns may cause reduced consumption of sugar sweetened beverages, impacting profitability.0.0620.1240.243. Water is the main and most significant ingredient in beverages, quality and abundance of water is scarce worldwide, where 70% is used for agriculture and irrigation.0.0910.0940.3610.094. With $24.5 billion in net operating revenue generated from international markets, and operating in over 200 countries, unstable economic conditions in foreign countries can dramatically decrease revenues. 0.075.The primary beverage of Coca Cola is sparkling beverages, the most popular drinks consumed worldwide, in their respective order, are water, tea, and beer.0.0740.286.Changes in currency rates. Coca-cola uses 74 functional currencies in 2010.0.047.In 2010 had approximately 18,600 associates represented by labor unions0.058. PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67 Billion respectively. They are strong competitors in the market0.0510.0540.220.19. PepsiCo dominated North America with sales of US $22billion,while Coca-Cola only had about US $7billion.0.0810.0840.3220.16total should be 1.01

QSPM

Strengths1.With revenues of $35,119,000 million, Coca-Cola is one of the largest beverage manufacturers globally.0.0710.0740.2820.142.Coca-Cola owns four of the worlds top five nonalcoholic sparkling beverage brands including Coca-Cola, Diet Coke, Sprite and Fanta.0.0820.163.Sold 25.5 billion cases of products in 20100.0720.1430.214. Accounted for 51% of U.S. unit case volume, and 50% of non-U.S. case volume for 20100.0620.1230.185. Has ownership interest in its bottling/distributing partners; 23% in Coca-Cola Hellenic, 32% in Coca-Cola FEMSA, and 30% in Coca-Cola Amatil.0.056.Acquired Coca-Cola Enterprises, Inc., one of the major bottlers for Coca-Cola in North America which had $3.6 billion in revenues0.097. In Eurasia and Africa, unit case volume increased 12% in 2010 0.048.Coca-Cola has more than 500 brands and 3,500 beverages and products. 0.0630.1840.249. Coca-Cola sells 1.7 Billion servings of beverages per day in over 200 countries. 0.0530.1530.1510. Coca-Cola generaged 8.5 billion in cash from operations in 2010, up 16% over 2009.0.0620.1240.2420.12Weaknesses1.Weak performance in Europe achieving a 0% growth in 2010.0.0230.062.Does not hold number 1 spot for either the water brand or the leading sports drink. 0.0630.183.Currently does not hold a snacks segment, where Pepsi Co. has a food division which creates for 60% of their total revenue. 0.0740.284.Does not perform best in North America, only accounting for 31.7% in total revenue in 2010.0.0330.0920.065.Has a high number of current liabilities accounting for 18,508 million0.026.Acquiring Coca-Cola Enterprises (CCE) resulted in assuming additional $7.9 billion in debt0.077.Operating income for Europe operations decreased by $50 million in 2010 0.038.Interest expense increased $378 million mainly due to premiums paid on repurchasing long term debt0.039. Common Stock Market Prices decreased between the first and second quarter in 2010 from $52.23 and $49.47.0.0210. Other operating expenses grew to $5,959 million in 2010 from $ 5,699 million in 2009.0.02total should be 1.012.282.252.82Create a lower calorie sports drink line/ while still providing essential electrolyte balance.Diversify products by entering the healthy snack/snack food market.Diversify beverage line by offering alcoholic beverages. QSPM (2)

Strategic Fit Competitive RisksPepsi Co. and Nestle currently have market share in the Food IndustryFunding Aggressive GrowthMarket Capitalization of 190 billion Current Assets exceed current liabilities by over 3 billionStrong Brand UtilizationMoving into the food industry and having very strong customer loyalty, customers will be drawn to new products

Kellogg CompanyCurrently located in 180 different countries Sales totaled 12.4 billion in 2010Includes brands such as: Special K, Cheez-It, Pringles, Keebler, Austin, Famous Amos, and Townhouse CrackersFood Consumer Products Industry Kellogg's is ranked number 2, behind Pepsi Co. and ahead of General Mills

3-Year GoalsIn 3 Years- Acquire ownership of Kellogg Company by the end of 2013Expand Healthy Food choices through acquisitionYear 1: Begin Acquisition Process with Kellogg Company Year 2: Attain Ownership of Kellogg Company Year 3: Begin Marketing and Sales with Kellogg Company

Strategic Implementation

Kelloggs Worth Analysis for 2010 (in millions)Shareholder's equity - Goodwill - Intangibles (2,930)Net Income * 5 6,235 (Stock Price/EPS) * NI 17,849 # of Shares Out * Stock Price 17,868 Four Method Average 9,755

Kellogg Company Net Worth Analysis

EPS/EBITCapital Needed 6,000,000,000 EBIT Range$7 bil. - $15 bil.Interest Rate4%Tax Rate16%Stock Price (Dec. 31, 2010-year end)30.86Current Shares Outstanding (Basic)2,308,000,000CS Shares needed 194,426,442 Assumptions Common Stock FinancingRecessionNormalBoomEBIT 7,000,000,000 10,000,000,000 15,000,000,000 Interest - - - EBT 7,000,000,000 10,000,000,000 15,000,000,000 Taxes 2,030,000,000 2,900,000,000 4,350,000,000 EAT 4,970,000,000 7,100,000,000 10,650,000,000 # of Shares 2,502,426,442 2,502,426,442 2,502,426,442 EPS1.992.844.26Debt FinancingRecessionNormalBoomEBIT 7,000,000,000 10,000,000,000 15,000,000,000 Interest 240,000,000 240,000,000 240,000,000 EBT 6,760,000,000 9,760,000,000 14,760,000,000 Taxes 1,960,400,000 2,830,400,000 4,280,400,000 EAT 4,799,600,000 6,929,600,000 10,479,600,000 # of Shares 2,308,000,000 2,308,000,000 2,308,000,000 EPS2.083.004.54

Stock needed 5,400,000,000 Debt needed 600,000,000 Interest 24,000,000 CS shares needed 174,983,798 Assumptions Stock needed 600,000,000 Debt needed 5,400,000,000 Interest 216,000,000 CS shares needed 19,442,644 90% Stock - 10% Debt FinancingRecessionNormalBoomEBIT 7,000,000,000 10,000,000,000 15,000,000,000 Interest 24,000,000 24,000,000 24,000,000 EBT 6,976,000,000 9,976,000,000 14,976,000,000 Taxes 2,023,040,000 2,893,040,000 4,343,040,000 EAT 4,952,960,000 7,082,960,000 10,632,960,000 # of Shares 2,482,983,798 2,482,983,798 2,482,983,798 EPS1.992.854.2810% Stock - 90% Debt FinancingRecessionNormalBoomEBIT 7,000,000,000 10,000,000,000 15,000,000,000 Interest 216,000,000 216,000,000 216,000,000 EBT 6,784,000,000 9,784,000,000 14,784,000,000 Taxes 1,967,360,000 2,837,360,000 4,287,360,000 EAT 4,816,640,000 6,946,640,000 10,496,640,000 # of Shares 2,327,442,644 2,327,442,644 2,327,442,644 EPS2.072.984.51

EPS/EBIT Continued

Projected Financial Assumptions Capital needed10,000,000,000Debt needed6,000,000,000Cash Used4,000,000,000Interest (estimate)4%Tax Rate16%Stock Price (Dec. 31, 2010 - year end)30.86Additional Interest 240,000,000 Dividends Paid $1.83 per share 4,223,640,000 Kellogg's pays off own liabilitiesKellogg's shareholders are paid off

Projected FinancialsIncome StatementProjected Income Statement (in millions)200920102011Total Revenue30,990 35,119 52,784 15% increase, plus Kelloggs 12,397Cost of Revenue11,088 12,693 21,324 % of revenue, plus Kelloggs 7,108 Gross Profit19,902 22,426 31,460 Operating Expenses- - - Research and Development- - - Selling General & Administrative11,671 13,977 17,276 Add Kelloggs 3,299Nonrecurring- - -Others- - - Total Operating Expenses- - -Operating Income or Loss 8,231 8,449 14,184 Income from Continuing Operations- - - Total Other Income/Expense Net289 5,502 6,05210% increaseEBIT 9,301 14,976 20,236 Interest Expense3557331,221Add Kelloggs 248, add 240 from financingIncome Before Tax 8,946 14,24319,015 Income Tax Expense 2,040 2,384 3,042 16% tax rateConsolidated Net Income 6,906 11,859 15,973 Less: Non-Controlling Interests 82 50 50 SameNet Income 6,824 11,809 15,923 Basic EPS2.955.12 6.90 Diluted EPS2.935.06 6.82Basic Average Shares Outstanding 2,314 2,308 2,308 SameDiluted Average Shares Outstanding 2,329 2,333 2,333 SameDividends Per Share 1.64 1.76 1.83

Projected Financials Balance Sheet (1)Projected Balance Sheet (in millions)ASSETSCurrent AssetsCash & Cash Equivalents 6,959 8,379 4,379Decrease by $4 billion for funds Short-term Investments 2,192 2,820 3,66630% increaseNet Receivables 3,758 4,430 5,316 20% increaseInventory 2,354 2,650 4,236 20% increase, plus Kelloggs 1,056Other Current Assets 2,226 3,162 4,336 30% increase, plus Kelloggs 225Total Current Assets 17,551 21,579 21,933 Long-term Investments 6,755 7,585 9,861 30% increaseProperty Plant & Equipment 9,561 14,727 21,537 25% increase, plus Kelloggs 3,128Goodwill 4,224 11,665 15,876 5% increase, plus Kelloggs 3,628Intangible Assets 8,604 15,244 18,696 10% increase, plus Kelloggs 1,456Accumulated Amortization---Other Assets1,9762,121 2,989 7% increase like previous year, add Kelloggs 720Deferred Long-term Asset Charges - - - Total Assets 48,671 72,921 90,892

Projected Financials Balance Sheet (2)LIABILITIESCurrent LiabilitiesAccounts Payable 6,921 9,132 10,04510% increaseShort-term Debt 6,800 9,376 11,176 Add 30% of $6 billion from financingOther Current Liabilities - - - Total Current Liabilities 13,721 18,508 21,221 Long-term Debt5,05914,041 18,241Add 70% of $6 billion from financingOther Liabilities2,9654,794 5,033 5% increase Deferred Long-term 1,580 4,261 4,261 SameLiability Charges---Minority Interest547314 314SameNegative Goodwill - - - Total Liabilities 23,872 41,918 49,070 STOCKHOLDERS' EQUITYMisc. Stock Opt Warrants - - - Redeemable Pref. Stock-- - Preferred Stock - - - Common Stock 880 880 880 Retained Earnings 41,537 49,278 60,977 Increases from Net Income, Dividends paid outTreasury Stock (25,398) (27,762) (27,762)SameCapital Surplus 8,537 10,057 10,057 SameOther Stockholders' Equity (757) (1,450) (1,450)SameTotal Stockholders' Equity 24,799 31,003 41,822 Total Liabilities and Stockholders' Equity 48,671 72,921 90,892

Coca-Cola's Projected Ratios 2010 v. 201120102011Current Ratio1.170.97Quick Ratio1.020.83Debt to Total Assets0.570.54Debt to Equity1.351.17Times Interest Earned20.4316.57Fixed Asset Turnover2.382.45Total Asset Turnover0.480.58Inventory Turnover13.2512.46Gross Profit Margin %63.8659.60Return on Stockholders' Equity %38.0938.07 Projected Financial Ratios

Strategic Evaluation

Balanced Scorecard Area of ObjectivesMeasure or TargetTime ExpectationPrimary ResponsibilityCustomers1 Brand IdentityIndustry reports/Market Cap.YearlyMarketing Officer2 SatisfactionCustomer SurveyYearlyMarketing OfficerEmployees1 Employee MoralSurveyYearlyPeople Officer2 Service Training# of seminarsYearlyAdministrative OfficerOperations1 Diversify product lineAcquire Kelloggs CompanyYearlyAdministrative OfficerBusiness Ethics1 Ethics Training# of ethics training sessions YearlyPeople Officer2 RecyclingRecycle 50% of total wastes Financial1 RevenuesIncrease by 50% each yearYearlyFinancial Officer2 Ratio AnalysisBetter than competitors/industry Avg.YearlyFinancial Officer

Update

Update Currently serving 3,500 products worldwide Global volume growth in the first quarter of 2013 was 4%On Earth Day Coca Cola donated more than 55,000 recycling bins to parks, schools, colleges, and homes in a 115 communities across the US63,290,877 likes on Facebook Coca Cola Rewards program is now offered

Stock Performance