An Analysis of PepsiCo and Coca-cola

Since the mid 1980’s many of us have become familiar with the terms “the Cola Wars” (Wikipedia, 2010). Coca Cola and Pepsi have been the two largest soft drink competitors in the world for quite some time now. What makes these companies successful? What gives them the retention to prosper for years across the globe? For this project I analyzed the financial statements from 2003 through 2005 of both companies to gain insight as to these questions and others. By reviewing and then analyzing the data it becomes visible that these two companies are still standing strong in a market that is still dominated only by each other.

To begin we will examine three ratios for each company. The first ratio is a liquidity ratio. Liquidity focuses on the reliability or availability of a borrower to pay back the loan they borrowed. A common liquidity metric is ccurrent ratio. Current ratio measures a company’s ability to pay back short term obligations or debts. We get this calculation by taking the current assets and dividing by current liabilities. For instance, PepsiCo’s current ratio is equivalent to current assets in 2005 (10,454) divided by current liabilities in 2005(9,406) which equals 1.11:1. Their current ratio in 2004 was 1:28:1. (Current assets for 2004/current liabilities for 2004; 8639/6752). Coca Cola’s current ratio for 2005 was taken by computing their current assets for 2005 (10,250) and divided by the current 2005 liabilities 99836) which equaled a ratio of 1.04:1. In 2004 Coca’ Cola’s current ratio was equal to current assets for 2004 of 12,281 divided by current liabilities for 2004 of 11, 133, which totaled 1.10:1. What this means is that for every dollar of current liabilities, Coca Cola has $1.04 of ...

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...ges and soft drinks. They have ventured out to non carbonated beverages like iced tea and juices but now need to move into the food market space. My final recommendation for Coca cola is to stay with their product. One of the biggest setbacks for Coca Cola occurred when they introduced their “new coke” in the 1990’s. (Wikipedia, 2010) This new formula did not go over well with their consumers and they were forced to quickly stop the new Coke production.

In conclusion I think both companies are stable and strong. Obviously both companies are able to compete globally which in and of itself says an awful lot. Each company has its strengths and minor weaknesses but their overall financial success has been proven. Their ability to remain the only two competitors amongst their carbonated beverage industry is a strong indicator of their future potential.