CLC – Case Study Component 4 (1) coursehero PDF

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CLC case study componenet 4 my part coca cola finance principles...

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The three to five year plan of Coca-Cola should generate cash flow from operations in an incremental of 2% for revenue, income, and EPS. Coca-Cola has been able to generate this type of increase due to brand reduction and new digital investments. By upgrading formulas, and bottle types this has driven them to be key in consumer eyes. Coca-Cola 3-5 year plan is viable and should keep being used in order to continue growth. The three to five year plan for a company focuses on the long-term strategy of a business to ensure that the company will continue to be profitable. This ensures investors are protected and creates a sustainable plan to create more capital and meet the financial needs of the company. When assessing the viability of Coca Cola’s three-to-five-year plan we will focus on questions such as will the strategic, competitive, and financial goals be achieved and how will the firm’s competitive, organizational, and financial health and the end of the plan compare with beginning condition (Piper, 2010)? The long-term goals of Coca Cola are to have organic revenue growth of 4% to 6%, operating income 6% to 8%, earnings per share growth of 7% to 9%, and free cash flow 90% to 95% (Financials, 2021). The company wants cash from operations to go towards both a return to shareholders, which will continue to grow their divined, and investing for growth, which will reinvest in the business. These goals are viable as Coca Cola focuses on asset optimization which ensures that the right return on capital is being generated. The company also focuses on maximizing free cash flow conversion by capital investment and reduction in reinvestment costs. Going into further depth into these strategies is how Coca-Cola is going to deal with stress.

3 Every time there is stress Coca-Cola reiterates its brand and generates new growth strategies while integrating earlier strategies to ensure that the plans every year go smoothly. During the last 3-5 years there has been stress such as the Covid-19 pandemic. During this time the plan was to decrease folio brands from 400 to 200 and generate expert brands that can be networked. Doing such, to execute strong targeted innovation where relevant to increase sales. (Investor Relations, 2021) During this time, they have set up platform services to accelerate data thus freeing up time and resources. With this done they have generated world class marketing with human insights on the digital frontier. Using targeted resource allocation by generating models that align with keeping growth in company revenue so that they can reinvest into their own brands. (Investor Relations 2021) This is done with mobile innovation by increasing new drinkers weekly, increasing the frequency of drinkers, and significantly increase the value of each transaction. (Investor Relations, 2021) This is done through new digital fronts that they are creating that can in turn use innovation lenses, objectives, and pipelines. This is going to generate new data for them to build and grow their brand such as 40% new projects, 45% more value in projects, and 20% incremental contributions. (Investor Relations, 2021) Doing all these innovations will allow them to stay practical even if their company is under stress. During the Covid-19 pandemic and any stressful situation, keeping true to these models that they have innovated and keep innovating allow them to keep generating growth and revenue. To continue upon Coca-Cola’s current financial strategy. They are focused on leveraging the growth strategy to drive bottom-line profitability and maximize returns. Their revenue in the first quarter of 2021 grew 5% and organic revenues grew 6%. (Coca-Cola Reports First Quarter 2021 Results, 2021) They have plans to continue to see that grow as society continues to open and people start getting back to normal life. Their operating margin increased to 30.2%. They

4 saw an increase from cash operations, up 1.1 billion versus the prior year. Coke has made some smart choices in their investments and that continues to help them. They have closed some of their items that were not performing and increased the ones that are. They recently announced that they are changing the formula for the Coca-Cola Zero Sugar, as well as changing the designs of the cans. They also are working on upgrading their bottles to an eco-friendlier. (Olshansky, 2021) This will help increase their financial strategy as it will bring Coca-Cola back to the main front of the consumer eye. Coca-Cola is staying current by meeting what the customer needs. They have added sugar free drinks, invested in energy drinks, and introducing new flavors. As society is looking for more eco-friendly and healthier options, the current strategy is to continue delivering the same taste that is expected but also changing and adding drinks to meet as many consumers demands as possible. The other things I looked at for them is their debt-to-equity ratio. In June of 2021 it was 2.72 which was a decrease from March of 2021. ("Coca Cola Debt to Equity Ratio 2006-2021 | KO", 2021) This shows that they do have higher risk right now but as it decreases it means they are paying off their debt and gaining equity. Focusing on maximizing free cash flow to help generate higher equity and lower debt. Using digital fronts for data to maximize projects and resource allocation. Generating more options to be consumer demands more possible. Even if Coca-Cola experiences another pandemic with their current financial plans they will still prosper based on their 3-5 year profile.

5 References Coca Cola. (2021). Financials. The Coca Cola Company. https://investors.cocacolacompany.com/strategy/financials Coca Cola Debt to Equity Ratio 2006-2021 | KO. (2021). Macrotrends. https://www.macrotrends.net/stocks/charts/KO/cocacola/debt-equity-ratio. Coca Cola. (2021). Coca-Cola Reports First Quarter 2021 Results. The Coca-Cola Company. https://investors.coca-colacompany.com/news-events/press-releases/detail/1019/cocacola-reports-first-quarter-2021-results. Investor Relations (2021) Growth strategy. The Coca-Cola Company. Growth Strategy: The Coca-Cola Company (KO) Olshansky, C. (2021). Coca-Cola Just Made This Major Change to Its Sodas — Eat This Not That. Eat This. https://www.eatthis.com/news-coca-cola-can-redesign-2021/. Piper, T. R. (2010). Assessing a company's future financial health. Boston, MA: Harvard Business School. https://viewer.gcu.edu/JMMTHC...