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Comparative Financial Analysis of Softdrink Industry

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					“A COMPARATIVE FINANCIAL ANALYSIS OF
        SOFTDRINK INDUSTRY ”

With reference to pepsi co. and cocacola enterprise
                  incorporation

A Project Report Submitted in Partial Fulfillment of
              award of MBA Degree

                  Project Guide
             Prof.Sandhya Harkawat

                  Submitted by
               Akshaykumar Jadav
                   Roll No:034




S.K. PATEL INASTITUTE OF MANAGEMENT &
             COMPUTER STUDIES,
                Gandhinagar,India
  (A constituent of Kadi Sarva Vishwavidyalaya)
                  February,2010




                                                       i
                        CERTIFICATE



This is to certify that Mr. AKSHAY KUMAR JITENDRABHAI JADAV
of S.K. Patel Institute of Management and Computer Studies, Gandhinagar
have submitted his Grand Project titled “A COMPARATIVE
FINANCIAL ANALYSIS OF SOFTDRINK INDUSTRY”in the year
2009-2010 in partial fulfillment of Kadi Sarva Vishwavidhyalaya
requirements for the award of the title of Master of Business Administration.




Prof.Sonu V.Gupta     Prof. Prakash M. Chawla      Prof. Sandhya Harkawat
Director              Coordinator                  Grand project Guide

Date:26-feb-2010




                                                                            ii
                         Acknowledgment

We are indebted to Prof.Sonu Gupta, Director of S.K.P.I.M.C.S., for
providing an opportunity of preparing “A comparative financial analysis
softdrink industry .” and allowing us to use the resources of the institution
during this project.


We are extremely thankful to our Project Guide Prof. Sandhya Harkawat for
her precious guidance regarding the preparation format of the project report.
Her guidance has proved to be very useful and without which the
preparation of this report might not had been possible.


We are also thankful to the other faculty members of the S.K.P.I.M.C.S. for
extending their valuable support for this project.


Finally we would also like to thank our family members, who are always a
source for inspiration for us, for showing their understanding, patience and
for all their possible help for the preparation of this project.




Jadav Akshaykumar




                                                                           iv
                       DECLARATION


I, hereby, declare that the Minor Capstone Project title , “A
COMPARATIVE FINANCIAL ANALYSIS OF SOFTDRINK
INDUSTRY” is original to the best of my knowledge and has not been
published elsewhere. This is for the purpose of partial fulfillment of Kadi
Sarva Vishwavidyalaya requirements for the award of the title of Master of
Business Administration, only.




Student name                                            Signature
AKSHAYKUMAR JADAV




                                                                         vi
               INDEX



Sr.             Topic             Page
 1    Executive summary            1
 2    Industry profile             3
 3    Company profile of pepsi     8
 4    Company profile of           21
      cocacola
5     Balancesheet analysis        26
6     Cashflow analysis            32
7     Income statement analysis    45
8     Weighted average cost of     48
      capital
 9    Ratio analysis               50
10    Conclusion                   61
11    Annexure                     62
12    Bibliography                 70




                                         1
               EXECUTIVE SUMMARY

The primary purpose of this report is to identify and analyze the two
dominant companies in the soft drink industry and determine the strongest
performer as an investment opportunity. Coca-Cola and PepsiCo have been
competing in the soft drink sector for over a century and both companies
enjoy a high degree of brand consciousness globally. Coca-Cola has, until
recently, outpaced its number two rival considerably, both in the U.S. and
overseas. I will compare the two companies using the following criteria: (a)
comparative statistics (b) key ratios, and (c) the weighted average cost of
capital (WACC).

For the purpose of my report, all relevant financial data on both Coca-Cola
and PepsiCo was derived from the reliable Yahoo Finance and Morningstar
website and the accompanying 10-k reports. Coca-Cola's revenues have been
generally outpaced by PepsiCo's revenues with notable exception in 2000
when both companies approached parity in terms of revenue. The Financial
Times   reveals that Coca-Cola has made minimal gains which may be
attributed to the slow growth in the soft drink sector. Coca-Cola's income is
derived from 80% of its soft drink products, while PepsiCo's soft drinks are
responsible for only 20% of its income. Clearly, PepsiCo's wide range of
snack products serves to cushion the company from changing consumer
preferences. This is illustrated by the explosive growth of the bottled water
sector-a lucrative sector for both companies (i.e., Coca-Cola's Dasani and
PepsiCo's AquaFina). Consumers are quickly drawing a connection between
high-fructose corn syrup beverages (e.g., most soft drinks) and obesity and
are gradually shying away from them.




                                                                            1
The combined market share of PepsiCo's soft drink brands increased to
49.1% in early 2005, outpacing Coca-Cola for the first time since Pepsi
entered Thailand 52 years ago. Thailand is one of a handful of world
markets where Pepsi is ahead of Coke in cola sales alone (Thai Press
Reports, 2007). Recently, PepsiCo announced its plans to boost its presence
in the Turkish market, with the goal of overtaking Coca-Cola. In order to
achieve this goal, the company will invest $30 to $40 million a year to
strengthen its presence. PepsiCo has the largest market share in the Middle
Eastern region, but faces strong competition in Turkey from Coca-Cola and
Ulker, producer of Cola Turka.




                                                                          2
                         INTRODUCTION




The FMCG sector represents consumer goods required for daily or frequent use. The
main segments of this sector are personal care (oral care, hair care, soaps, cosmetics,
toiletries), household care (fabric wash and household cleaners), branded and packaged
food, beverages (health beverages, soft drinks, staples, cereals, dairy products,
chocolates, bakery products) and tobacco.


The Indian FMCG sector is an important contributor to the country's GDP. It is the fourth
largest sector in the economy and is responsible for 5% of the total factory employment
in India. The industry also creates employment for 3 m people in downstream activities,
much of which is disbursed in small towns and rural India. This industry has witnessed
strong growth in the past decade. This has been due to liberalization, urbanization,
increase in the disposable incomes and altered lifestyle. Furthermore, the boom has also
been fuelled by the reduction in excise duties, de-reservation from the small-scale sector
and the concerted efforts of personal care companies to attract the burgeoning affluent
segment    in   the   middle-class   through   product    and   packaging    innovations.


Unlike the perception that the FMCG sector is a producer of luxury items targeted at the
elite, in reality, the sector meets the every day needs of the masses. The lower-middle
income group accounts for over 60% of the sector's sales. Rural markets account for 56%
of the total domestic FMCG demand.




                                                                                        3
Many of the global FMCG majors have been present in the country for many decades.
But in the last ten years, many of the smaller rung Indian FMCG companies have gained
in scale. As a result, the unorganized and regional players have witnessed erosion in
market share.


History of FMCG in India


       In India, companies like ITC, HLL, Colgate, Cadbury and Nestle have been a
dominant force in the FMCG sector well supported by relatively less competition and
high entry barriers (import duty was high). These companies were, therefore, able to
charge a premium for their products. In this context, the margins were also on the higher
side. With the gradual opening up of the economy over the last decade, FMCG
companies have been forced to fight for a market share. In the process, margins have
been compromised, more so in the last six years (FMCG sector witnessed decline in
demand.


Current Scenario


       The growth potential for FMCG companies looks promising over the long-term
horizon, as the per-capita consumption of almost all products in the country is amongst
the lowest in the world. As per the Consumer Survey by KSA-Technopak, of the total
consumption expenditure, almost 40% and 8% was accounted by groceries and personal
care products respectively. Rapid urbanization, increased literacy and rising per capita
income are the key growth drivers for the sector. Around 45% of the population in India
is below 20 years of age and the proportion of the young population is expected to
increase in the next five years. Aspiration levels in this age group have been fuelled by
greater media exposure, unleashing a latent demand with more money and a new
mindset. In this backdrop, industry estimates suggest that the industry could triple in
value by 2015 (by some estimates, the industry could double in size by 2010).



                                                                                       4
In our view, testing times for the FMCG sector are over and driving rural penetration will
be the key going forward. Due to infrastructure constraints (this influences the cost-
effectiveness of the supply chain), companies were unable to grow faster. Although
companies like HLL and ITC have dedicated initiatives targeted at the rural market, these
are still at a relatively nascent stage.


The bottlenecks of the conventional distribution system are likely to be removed once
organized retailing gains in scale. Currently, organized retailing accounts for just 3% of
total retail sales and is likely to touch 10% over the next 3-5 years. In our view, organized
retailing results in discounted prices, forced-buying by offering many choices and also
opens up new avenues for growth for the FMCG sector. Given the aggressive expansion
plans of players like Pantaloon, Trent, Shopper’s Stop and Shoprite, we are confident that
the FMCG sector has a bright future.


Budget Measures to Promote FMCG
Sector
  2% education cess corporation tax, excise duties and custom duties
  Concessional rate of 5% custom duty on tea and coffee plantation machinery



 Budget Impact
The education cess will add marginally to the tax burden of all FMCG companies
The dividend distribution tax on debt funds is likely to adversely effect the other
income components of companies like Britannia, Nestle and HLL
The measure to abolish excise duty on dairy machinery is a positive for companies like
Nestle
Concessional rate for tea and coffee plantation machinery is a positive for Tata Tea,
HLL, Tata Coffee and other such companies
Duty reduction in food grade hexane will have a marginally positive impact on
companies like Marico and HLL
Area specific excise exemptions for North East, J&K, Himachal Pradesh will continue
to encourage FMCG companies to relocate to these areas.


India offers a large and growing market of 1 billion people of which 300 million are
middle class consumers. India offers a vibrant market of youth and vigor with 54% of



                                                                                           5
population below the age of 25 years. These young people work harder, earn more, spend
more and demand more from the market, making India a dynamic and aspirational
society. Domestic demand is expected to double over the ten-year period from 1999 to
2008. The number of households with "high income" is expected to increase by 60% in
the next four years to 44 million households.


        India is rated as the fifth most attractive emerging retail market. It has been
ranked second in a Global Retail Development Index of 30 developing countries drawn
up by A T Kearney. A.T. Kearney has estimated India's total retail market at $202.6
billion, is expected to grow at a compounded 30r5 per cent over the next five years. The
share of modern retail is likely to grow from its current 2 per cent to 15-20 percent over
the next decade, analysts feel.


       The Indian FMCG sector is the fourth largest sector in the economy with a total
market size in excess of US$ 13.1 billion. The FMCG market is set to treble US$ 33.4
billion in 2015. Penetration level as well as per capita consumption in most product
categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the
untapped market potential. Burgeoning Indian population, particularly the middle class
and the rural segments, presents an opportunity to makers of branded products to convert
consumers to branded products.


       India is one of the world’s largest producers for a number of FMCG products but
its FMCG exports are languishing at around Rs 1,000 crore only. There is significant
potential for increasing exports but there are certain factors inhibiting this. Small-scale
sector reservations limit ability to invest in technology and quality up gradation to
achieve economies of scale. Moreover, lower volume of higher value added products
reduce scope for export to developing countries.
       The FMCG sector has traditionally grown at a very fast rate and has generally out
performed the rest of the industry. Over the last one year, however the rate of growth has
slowed down and the sector has recorded sales growth of just five per cent in the last four
quarters.



                                                                                          6
       The outlook in the short term does not appear to be very positive for the sector.
Rural demand is on the decline and the Centre for Monitoring Indian Economy (CMIE)
has already downscaled its projection for agriculture growth in the current fiscal. Poor
monsoon in some states, too, is unlikely to help matters. Moreover, the general slowdown
in the economy is also likely to have an adverse impact on disposable income and
purchasing power as a whole. The growth of imports constitutes another problem area
and while so far imports in this sector have been confined to the premium segment,
FMCG companies estimate they have already cornered a four to six per cent market
share. The high burden of local taxes is another reason attributed for the slowdown in the
industry At the same time, the long term outlook for revenue growth is positive. Give the
large market and the requirement for continuous repurchase of these product.




                                                                                        7
 Type               Public (NYSE: PEP)
 Founded            1965
 Headquarters              New York, USA
 Key people         Indra Nooyi, Chairwoman,
  President & CEO
 Industry           Food and beverage
 Products:
      Pepsi
      Tropicana Products
      Gatorade
      Lay's
      Doritos
      Frappuccino (for Starbucks)
      Mountain Dew
 Operating income   $6.44 billion USD (2006)
 Net income         $5.64 billion USD (2006)
  profit margin             16.06%
 Employees                 153,000(2005)
 GROUP OF COMPANIES

      Frito-Lay North America
      PepsiCo Beverages North America,
      PepsiCo International
      Quaker Foods North America




                                                8
Mission




The main objective of the company is to provide best quality
products to its consumer. Another objective is to provide healthy
rewards to its investor, good reward to its employee and other
investor and partners who financially help the company




                                                                9
   Vision




The vision of the company is to improve in all aspects in which they
operate. By improving in social and economical environment, they
want to make tomorrow better than today.




A Brief Pepsi History

In 1893, Caleb Bradham,a young pharmacist from New Bern, North Carolina,
begins experimenting with many different soft drink concoctions. Like many
pharmacists at the turn of the century he had a soda fountain in his drugstore,
where he served his customers refreshing drinks, that he created himself. His most




                                                                                     10
popular beverage was something he called "Brad's drink" made of carbonated water,
sugar, vanilla, rare oils, pepsin and cola nuts.


One of Caleb's formulations, known as "Brad's drink", created in the summer of 1893,
was later renamed Pepsi Cola after the pepsin and cola nuts used in the recipe. In 1898,
Caleb Bradham wisely bought the trade name "Pep Cola" for $100 from a competitor
from Newark, New Jersey that had gone broke. The new name was trademarked on June
16th, 1903. Bradham's neighbor, an artist designed the first Pepsi logo and ninety-seven
shares of stock for Bradham's new company were issued.


                                        1898 - One of Caleb's formulations, known as
                                        "Brad's Drink," a combination of carbonated water,
                                        sugar, vanilla, rare oils and cola nuts, is renamed
                                        "Pepsi-Cola" on August 28, 1898. Pepsi-Cola
                                        receives its first logo.


                                        1905 - Pepsi-Cola's first bottling franchises are
                                        established in Charlotte and Durham, North
                                        Carolina. Pepsi receives its new logo, its first
                                        change since 1898.


                                        1906 - Pepsi gets another logo change, the third in
eight years. The modified script logo is created with the slogan, "The Original Pure Food
Drink."


1908 - Pepsi-Cola becomes one of the first companies to modernize delivery

from horse drawn carts to motor vehicles. Two hundred fifty
bottlers in 24 states are under contract to make and sell Pepsi-
Cola.




                                                                                        11
1910 - The first Pepsi-Cola bottlers' convention is held in New Bern, North Carolina.


1920 - Pepsi theme line speaks to the consumer with "Drink Pepsi-Cola, it will satisfy
you."


1928 - After five continuous losing years, Megargel reorganizes his company as the
National Pepsi-Cola Company, becoming the fourth parent company to own the Pepsi
trademark.


1934 - A landmark year for Pepsi-Cola. The drink is a hit and to attract even more sales,
the company begins selling its 12-ounce drink for five cents (the same cost as six ounces
of competitive colas). The 12-ounce bottle debuts in Baltimore, where it is an instant
success. The cost savings proves irresistible to Depression-worn Americans and sales
skyrocket nationally.
Caleb Bradham, the founder of Pepsi-Cola and "Brad's Drink," dies at 66 (May 27th,
1867-February 19th, 1934).


1935 - Guth moves the entire Pepsi-Cola operation to Long Island City, New York, and
sets up national territorial boundaries for the Pepsi bottler franchise system.


1936 - Pepsi grants 94 new U.S. franchises and year-end profits reach $2,100,000.


In 1940, the Pepsi Cola company made history when the first advertising jingle was
broadcast nationally on the radio. The jingle was "Nickel Nickel" an advertisement for
Pepsi Cola that referred to the price of Pepsi and the quantity for that price "Nickel
Nickel" became a hit record and was recorded into fifty-five languages.




                                                                                        12
                                                   1941    -   The   New       York   Stock
                                                   Exchange trades Pepsi's stock for the
                                                   first time. In support of the war
                                                   effort, Pepsi's bottle crown colors
                                                   change to red, white, and blue.


                                                   1942 - One on many company
                                                   sponsored efforts to allow soldiers to
                                                   communicate with friends or family.
                                                   This record was made in New York
                                                   City but often booths would be set up
                                                   with mobile recording equipment that
was bought to where the soldiers were. Shell material on solid core. 78 rpm.
1943 - Pepsi's theme line becomes "Bigger Drink, Better Taste."


1948 - Corporate headquarters moves from Long Island City, New York, to midtown
Manhattan.


1950 - Alfred N. Steele becomes President and CEO of Pepsi-Cola. Mr. Steele's wife,
Hollywood movie star Joan Crawford, is instrumental in promoting the company's
product line.


           Pepsi receives its new logo, which incorporates the "bottle cap" look. The new
           logo is the fifth in Pepsi history.


1953 - "The Light Refreshment" campaign capitalizes on a change in the product's
formula that reduces caloric content.


1955 - Herbert Barnet is named President of Pepsi-Cola.




                                                                                        13
1959 - Pepsi debuts at the Moscow Fair. Soviet Premier Khrushchev and U.S. Vice
President Nixon share a Pepsi.


1960 - Young adults become the target consumers and Pepsi's advertising keeps pace
with "Now it's Pepsi, for those who think young."


1962 - Pepsi receives its new logo, the sixth in Pepsi history. The 'serrated' bottle cap
logo debuts, accompanying the brand's groundbreaking "Pepsi Generation" ad campaign.


1963 - After climbing the Pepsi ladder from fountain syrup salesman, Donald M. Kendall
is named CEO of Pepsi-Cola Company. Pepsi-Cola continues to lead the soft drink
industry in packaging innovations, when the 12-ounce bottle gives way to the 16-ounce
size. Twelve-ounce Pepsi cans are first introduced to the military to transport soft drinks
all over the world.


1964 - Diet Pepsi, introduced as America's first national diet soft
drink. Pepsi-Cola acquires Mountain Dew from the Tip Corporation.


1965 - Expansion outside the soft drink industry begins. Frito-Lay of
Dallas, Texas, and Pepsi-Cola merge, forming PepsiCo, Inc.


                             Military 12-ounce cans are such a success that full-scale
                             commercial distribution begins.


                             Mountain Dew launches its first campaign, "Yahoo
                             Mountain Dew...It'll tickle your innards."


                             1970 - Pepsi leads the way into metrics by introducing the
                             industry's first two-liter bottles. Pepsi is also the first
                             company to respond to consumer preference with light-



                                                                                        14
weight, recyclable, plastic bottles. Vic Bonomo is named President of Pepsi-Cola. The
Pepsi World Headquarters moves from Manhattan to Purchase, NY.


1974 - First Pepsi plant opens in the U.S.S.R. Television ads introduce the new theme
line, "Hello, Sunshine, Hello Mountain Dew."


1976 - Pepsi becomes the single largest soft drink brand sold in American supermarkets.
The campaign is "Have a Pepsi Day!" and a classic commercial, "Puppies," becomes one
of America's best-loved ads. As people get back to basics, Pepsi is there as one of the
simple things in life.


1977 - At 37, marketing genius John Sculley is named President of Pepsi-Cola.


1978 - The company experiments with new flavors. Twelve-pack cans are introduced.


1980 - Pepsi becomes number one in sales in the take home market.


1981 - PepsiCo and China reach agreement to manufacture soft drinks, with production
beginning next year.


1982 - Pepsi Free, a caffeine-free cola, is introduced nationwide. Pepsi Challenge activity
has penetrated 75% of the U.S. market.


1984 - Pepsi advertising takes a dramatic turn as Pepsi becomes "the choice of a New
Generation." Lemon Lime Slice, the first major soft drink with real fruit juice, is
introduced, creating a new soft drink category, "juice added." In subsequent line of
extensions, Mandarin Orange Slice goes on to become the number one orange soft drink
in the U.S. Diet Pepsi is reformulated with NutraSweet (aspertame) brand sweetener.


1985 - After responding to years of decline, Coke loses to Pepsi in preference tests
by reformulating. However, the new formula is met with widespread consumer rejection,



                                                                                        15
forcing there-introduction of the original formulation as "Coca-Cola Classic." The cola
war takes "one giant sip for mankind," when a Pepsi "space can" is successfully tested
aboard the space shuttle. By the end of 1985, the New Generation campaign earns more
than 58 major advertising and film-related awards. Pepsi's campaign featuring Lional
Richie is the most remembered in the country, according to consumer preference polls..


1987 - Pepsi-Cola President Roger Enrico is named President/CEO of PepsiCo
Worldwide Beverages. Pepsi-Cola World Headquarters moves from Purchase to Somers,
New York. After a 27 year absence, Pepsi returns to Broadway with the lighting of a
spectacular new neon sign in Times Square.
1988 - Craig Weatherup is appointed President/CEO of Pepsi-Cola Company.


1989 - Pepsi lunges into the next decade by declaring Pepsi lovers "A Generation
Ahead." Chris Sinclair is named President of Pepsi-Cola International. Pepsi-Cola
introduces an exciting new flavor, Wild Cherry Pepsi.


1990 - American Music Award and Grammy winner rap artist Young MC writes and
performs songs exclusively for national radio ads for Pepsi. Ray Charles joins the Pepsi
family by endorsing Diet Pepsi. The slogan is "You Got The Right One Baby."


1991 - Craig E. Weatherup is named CEO of Pepsi-Cola North America, as Canada
becomes part of the company's North American operations. Pepsi introduces the first
beverage bottles containing recycled polyethylene terephthalate (or PET) into the
marketplace. The development marks the first time recycled plastic is used in direct
contact with food in packaging.


1992--Pepsi-Cola launches the "Gotta Have It" theme which supplants the longstanding
"Choice of a New Generation."


1993 - Brand Pepsi introduces its slogan, "Be Young. Have Fun. Drink Pepsi." Pepsi-
Cola profits surpass $1 billion. Pepsi introduces an innovative 24-can multipack that



                                                                                         16
satisfies growing consumer demand for convenient large-size soft drink packaging. "The
Cube" is easier to carry than the traditional 24-pack and it fits in the refrigerator.


1994 - New advertising introducing Diet Pepsi's freshness dating initiative features Pepsi
CEO Craig Weatherup explaining the relationship between freshness and superior taste to
consumers. Pepsi Foods International and Pepsi-Cola International merge, creating the
PepsiCo Foods and Beverages Company.


1995 - In a new campaign, the company declares "Nothing else is a Pepsi" and takes top
honors in the year's national advertising championship.


1996 - In February of this year, Pepsi makes history once again, by launching one of the
most ambitious entertainment sites on the World Wide Web. Pepsi World eventually
surpasses all expectations, and becomes one of the most landed, and copied, sites in this
new media, firmly establishing Pepsi's presence on the Internet.


1997 - In the early part of the year, Pepsi pushes into a new era with the unveiling of
the GeneratioNext campaign. GeneratioNext is about everything that is young and fresh;
a celebration of the creative spirit. It is about the kind of attitude that challenges the norm
with new ideas, at every step of the way.


PepsiCo. announces that, effective October 6th, it will spin off its restaurant division to
form Tricon Global Restaurants, Inc. Including Pizza Hut, Taco Bell, & KFC, it will be
the largest restaurant company in the world in units and second-largest in sales.


1998 - Pepsi celebrates its 100th anniversary. PepsiCo. Chairman and CEO Roger A.
Enrico donates his salary to provide scholarships for children of PepsiCo
employees. Pepsi introduces PepsiOne - the first one calorie drink without
that diet taste!




                                                                                            17
2000 - Although Pepsi is a great place to work, Steven Truitt (aka 'struitt') takes his skills
and hard work elsewhere (for more money of course!), therefore putting an end to his
Pepsi page! For more information about Pepsi, choose a search engine and search for
'Pepsi' or visit www.pepsi.com or www.pepsico.com.

2005 - Pepsi invited to introduce new brand cola




PEPSICO IN INDIA

PepsiCo gained entry to India in 1988 by creating a joint venture with the Punjab
government-owned Punjab Agro Industrial Corporation (PAIC) and Voltas India Limited.
This joint venture marketed and sold Lehar Pepsi until 1991, when the use of foreign
brands was allowed; PepsiCo bought out its partners and ended the joint venture in 1994.
Others claim that firstly Pepsi was banned from import in India, in 1970, for having
refused to release the list of its ingredients and in 1993, the ban was lifted, with Pepsi
arriving on the market shortly afterwards. These controversies are a reminder of "India's
sometimes acrimonious relationship with huge multinational companies." Indeed, some
argue that PepsiCo and The Coca-Cola Company have "been major targets in part
because they are well-known foreign companies that draw plenty of attention."


In 2003, the Centre for Science and Environment (CSE), a non-governmental
organization in New Delhi, said aerated waters produced by soft drinks manufacturers in
India, including multinational giants PepsiCo and The Coca-Cola Company, contained
toxins, including lindane, DDT, malathion and chlorpyrifos — pesticides that can
contribute to cancer, a breakdown of the immune system and cause birth defects. Tested
products included Coke, Pepsi, 7 Up, Mirinda, Fanta, Thums Up, Limca, and Sprite. CSE
found that the Indian-produced Pepsi's soft drink products had 36 times the level of
pesticide residues permitted under European Union regulations; Coca Cola's 30 times.
CSE said it had tested the same products in the US and found no such residues. However,




                                                                                           18
this was the European standard for water, not for other drinks. No law bans the presence
of pesticides in drinks in India.
The Coca-Cola Company and PepsiCo angrily denied allegations that their products
manufactured in India contained toxin levels far above the norms permitted in the
developed world. But an Indian parliamentary committee, in 2004, backed up CSE's
findings and a government-appointed committee, is now trying to develop the world's
first pesticides standards for soft drinks. Coke and PepsiCo opposed the move, arguing
that lab tests aren't reliable enough to detect minute traces of pesticides in complex
drinks. On December 7, 2004, India's Supreme Court ruled that both PepsiCo and
competitor.
The Coca-Cola Company must label all cans and bottles of the respective soft drinks
with a consumer warning after tests showed unacceptable levels of residual
pesticides.[citation needed]


Both companies continue to maintain that their products meet all international safety
standards without yet implementing the Supreme Court ruling.[citation needed] As of
2005, The Coca-Cola Company and PepsiCo together hold 95% market share of soft-
drink sales in India. PepsiCo has also been alleged[attribution needed] to practice "water
piracy" due to its role in exploitation of ground water resources resulting in scarcity of
drinking water for the natives of Puthussery panchayat in the Palakkad district in Kerala,
India. Local residents have been pressuring the government to close down the PepsiCo
unit in the village.


In 2006, the CSE again found that soda drinks, including both Pepsi and Coca-Cola, had
high levels of pesticides in their drinks. Both PepsiCo and The Coca-Cola Company
maintain that their drinks are safe for consumption and have published newspaper
advertisements that say pesticide levels in their products are less than those in other foods
such as tea, fruit and dairy products. In the Indian state of Kerala, sale and production of
Pepsi-Cola, along with other soft drinks, has been banned. Five other Indian states have
announced partial bans on the drinks in schools, colleges and hospitals.
3.1 Highlights of PepsiCo in India:



                                                                                          19
 World leader - Convenient Foods and Beverages
 Revenues of more than $35 billion
 More than 1,68,000 employees
 Available in nearly 200 countries and territories
 Group’s 37 bottling plants in India
 16 are company owned and 21 are franchisee owned
 Tropicana was acquired in 1998 and PepsiCo merged with The Quaker Oats
    Company in 2001
 Generates direct employment for more than 4000 people in India and indirect
    employment for 60,000 people

   Set up 8 greenfield sites in backward regions of different states. PepsiCo intends
    to expand its operations and is planning an investment of approximately US$ 150
    million in the next two-three years.

 Annual exports from India are worth over U.S$60 million
 PepsiCo Founded in 1965 through the merger of Pepsi-Cola and Frito-Lay
 PepsiCo entered India in 1989




                                                                                     20
Cocacola

HISTORY OF COCA COLA
Coca-Cola originated as a soda fountain beverage in 1886 selling for five cents a glass.
Early growth was impressive, but it was only when a strong bottling system developed
that Coca-Cola became the world-famous brand it is today.


1894 – A modest start for a Bold Idea
In a candy store in Vicksburg, Mississippi, brisk sales of the new fountain beverage
called Coca-Cola impressed the store's owner, Joseph A. Biedenharn. He began bottling
Coca-Cola to sell, using a common glass bottle called a Hutchinson.

Biedenharn sent a case to Asa Griggs Candler, who owned the Company. Candler
thanked him but took no action. One of his nephews already had urged that Coca-Cola be
bottled, but Candler focused on fountain sales.
1899 The first bottling agreement
Two young attorneys from Chattanooga, Tennessee believed they could
build a business around bottling Coca-Cola. In a meeting with Candler,
Benjamin F. Thomas and Joseph B. Whitehead obtained exclusive
rights to bottle Coca-Cola across most of the United States (specifically
excluding Vicksburg) -- for the sum of one dollar. A third Chattanooga
lawyer, John T. Lupton, soon joined their venture.
1900-1909 … Rapid growth
The three pioneer bottlers divided the country into territories and sold bottling rights to
local entrepreneurs. Their efforts were boosted by major progress in bottling technology,
which improved efficiency and product quality. By 1909, nearly 400 Coca-Cola bottling
plants were operating, most of them family-owned businesses. Some were open only
during hot-weather months when demand was high.
                1916 … Birth of the contour bottle
                Bottlers worried that the straight-sided bottle for Coca-
                Cola was easily confused with imitators. A group
                representing the Company and bottlers asked glass
                manufacturers to offer ideas for a distinctive bottle. A
                design from the Root Glass Company of Terre Haute,
                Indiana won enthusiastic approval in 1915 and was
                introduced in 1916. The contour bottle became one of the
                few packages ever granted trademark status by the U.S.


                                                                                        21
Patent Office. Today, it's one of the most recognized icons in the world - even in the
dark!


1920s … Bottling overtakes fountain sales
As the 1920s dawned, more than 1,000 Coca-Cola bottlers were operating in the U.S.
Their ideas and zeal fueled steady growth. Six-bottle cartons were a huge hit after their
1923 introduction. A few years later, open-top metal coolers became the forerunners of
automated vending machines. By the end of the 1920s, bottle sales of Coca-Cola
exceeded fountain sales.
1920s and 30s … International expansion
Led by longtime Company leader Robert W. Woodruff, chief
executive officer and chairman of the Board, the Company began
a major push to establish bottling operations outside the U.S.
Plants were opened in France, Guatemala, Honduras, Mexico, Belgium, Italy, Peru,
Spain, Australia and South Africa. By the time World War II began, Coca-Cola was
being bottled in 44 countries.
                       1940s … Post-war growth

                       During the war, 64 bottling plants were set up around the world to
                       supply the troops. This followed an urgent request for bottling
                       equipment and materials from General Eisenhower's base in North
                       Africa. Many of these war-time plants were later converted to
                       civilian use, permanently enlarging the bottling system and
                       accelerating the growth of the Company's worldwide business.
1950s … Packaging innovations

For the first time, consumers had choices of Coca-Cola package
size and type -- the traditional 6.5-ounce contour bottle, or larger
servings including 10-, 12- and 26-ounce versions. Cans were also
introduced, becoming generally available in 1960.
1960s … New brands introduced
Following Fanta® in the 1950s, Sprite®, Minute Maid®, Fresca® and TaB® joined
brand Coca-Cola in the 1960s. Mr. Pibb® and Mello Yello® were added in the 1970s.
The 1980s brought diet Coke® and Cherry Coke®, followed by POWERADE® and
DASANI® in the 1990s. Today hundreds of other brands are offered to meet consumer
preferences in local markets around the world.
1970s and 80s … Consolidation to serve customers
As technology led to a global economy, the retailers who sold Coca-Cola merged and
evolved into international mega-chains. Such customers required a new approach. In
response, many small and medium-size bottlers consolidated to better serve giant


                                                                                      22
international customers. The Company encouraged and invested in a number of bottler
consolidations to assure that its largest bottling partners would have capacity to lead the
system in working with global retailers.


1990s … New and growing markets
Political and economic changes opened vast markets that were closed or underdeveloped
for decades. After the fall of the Berlin Wall, the Company invested heavily to build
plants in Eastern Europe. And as the century closed, more than $1.5 billion was
committed to new bottling facilities in Africa.
21st Century
The Coca-Cola bottling system grew up with roots deeply planted in local communities.
This heritage serves the Company well today as people seek brands that honor local
identity and the distinctiveness of local markets. As was true a century ago, strong locally
based relationships between Coca-Cola bottlers, customers and communities are the
foundation on which the entire business grows.

BRANDS OF COCA COLA



                 Coca-Cola Zero® has been one of the most successful product launch
                 hes in Coca Cola’s history. In 2007, Coca Cola’s sold nearly 450
                 million cases globally. Put into perspective, that's roughly the same size
                 as Coca Cola’s total business in the Philippines, one of our top 15
                 markets. As of September 2008, Coca-Cola Zero is available in more
                 than 100 countries.



Energy Drinks

For those with a high-intensity approach to
life, Coca Cola’s brands of Energy Drinks
contain ingredients such as ginseng
extract, guarana extract, caffeine and B
vitamins.




Juices/Juice Drinks
We bring innovation to the goodness of
juice in Coca Cola’s more than 20 juice and


                                                                                         23
juice drink brands, offering both adults and children nutritious, refreshing and flavorful
beverages.




Soft Drinks

Coca Cola’s dozens of soft drink brands
provide flavor and refreshment in a variety
of choices. From the original Coca-Cola to
most recent introductions, soft drinks from
The Coca-Cola Company are both icons and
innovators in the beverage industry.
Sports Drinks

Carbohydrates, fluids, and electrolytes team
together in Coca Cola’s Sports Drinks,
providing rapid hydration and terrific taste
for fitness-seekers at any level


Tea and Coffee

Bottled and canned teas and coffees
provide consumers' favorite drinks in
convenient take-anywhere packaging,
satisfying both traditional tea drinkers and
today's growing coffee culture.


Water

Smooth and essential, our Waters and
Water Beverages offer hydration in its
purest form.




                                                                                       24
Other Drinks

So much more than soft drinks. Coca
Cola’s brands also include milk products,
soup, and more so you can choose a Coca
Cola Company product anytime, anywhere
for nutrition, refreshment or other needs.




                                             25
ANALYSIS




           26
                                      Balancesheet analysis
PERIOD

ENDING(       cocacola                  31-Dec-
                                             06
                                                      31-Dec-
                                                           07    31-Dec-08
                                                                                31-Dec-
                                                                                     09
                                                                                           31-Dec-
                                                                                                10
                                                                                                      31-Dec-
                                                                                                           11
                                                                                                                 31-Dec-
                                                                                                                      12
                                                                                                                             31-Dec-
                                                                                                                                  13
Assets
CURRENT ASSETS
Cash and cash equivalents              2440000        4093000      4701000     3744667    4179556    4208407    4044210     4144058
Short term investments                  150000         215000       278000       214333     235778     242704     230938    236473.3
Net receivables                        2704000        3317000      3090000     3037000    3148000    3091667    3092222     3110630
Inventory                              1614000        2220000      2187000     2007000    2138000    2110667    2085222     2111296
Other current assets                   1506000        2260000      1920000     1895333    2025111    1946815    1955753     1975893
TOTAL CURRENT ASSETS                   8414000       12105000     12176000     10898333   11726444   11600259   11408346    11578350
long term investments                  6783000        7777000      5779000     6779667    6778556    6445741    6667988     6630761
Property plants and equipments         6903000        8493000      8326000     7907333    8242111    8158481    8102642     8167745
Goodwill                               1403000        4256000      4029000     3229333    3838111    3698815    3588753     3708560
Intangible assets                      3732000        7963000      8476000     6723667    7720889    7640185    7361580     7574218
Accumulated amortization                         0          0              0          0          0          0          0           0
Other assets                           2533000        2675000      1733000     2313667    2240556    2095741    2216654     2184317
deffered long term charges              168000                                   168000     168000     168000     168000      168000
TOTAL ASSETS                          29936000       43269000     40519000     38020000   40714667   39807222   39513963    40011951
Liabilities
CURRENT LIABILITIES
Accounts payable                       5622000        7173000      6152000     6315667    6546889    6338185    6400247     6428440
Short/long term debt                   3268000        6052000      6531000     5283667    5955556    5923407    5720877     5866613

Other current liabilities                        0          0    305,000.00      101667     135556     180741     139321    151872.4
TOTAL CURRENT LIABILITES               8890000       13225000     12988000     11701000   12638000   12442333   12260444    12446926

Long term debt                        1,314,000      3,277,000   2,781,000     2457333    2838444    2692259    2662679     2731128

Other liabilities                     1,873,000      3,133,000   3,401,000     2802333    3112111    3105148    3006531     3074597

deffered long term liabiity charges   608,000        1,890,000   877,000       1125000    1297333    1099778    1174037     1190383
minority interest                     3,58,000              0              0          0          0          0          0           0
Negative goodwill                                0                                    0          0          0          0           0
TOTAL LIABILITIES                     12685000       21525000     20047000     18085667   19885889   19339519   19103691    19443033



SHARE HOLDER'S EQUITY
prefered stocks                                  0                                    0          0          0          0           0
common stocks                           807000         880000       880000       855667   871888.9   869185.2     865580    868884.8
Retain earnings                       33468000       36235000     38513000     36072000   36940000   37175000   36729000    36948000
                                                                                                            -                      -
                                             -              -                         -          -   23685370          -    23600867
treasury stocks                       22118000       23375000    -24213000     23235333   23607778              23509494
capital surplus                        5983000        7378000      7966000     7109000    7484333    7519778    7371037     7458383
Other stock holder equity             -1291000         626000     -2674000     -1113000   -1053667   -1613556   -1260074    -1309099


TOTAL STOCKHOLDER EQUITY              16920000       21744000     16920000     18528000   19064000   18170667   18587556    18607407
NET TANGIBLE ASSETS                   11785000        9525000     79670000     33660000   40951667   51427222   42012963    44797284




                                                                                                                       27
PERIOD ENDING        pepsi           31-Dec-06         31-Dec-07       31-Dec-08    31-Dec-09       31-Dec-10    31-Dec-11    31-Dec-12       31-Dec-13
Assets
CURRENT ASSETS

Cash and cash equivalents            629,000             647,000         966,000    747,333           786,778      833,370    789,160           803,103
Short term investments           -                 -               -

Net receivables                      1,332,000         1,520,000       1,371,000     1,407,667       1,432,889    1,403,852   1,414,802        1,417,181

Inventory                              533,000           577000          528000       546,000         550,333      541,444    545,926           545,901

other current assets                   255000            342000          276000       291,000         303,000      290,000    294,667           295,889

TOTAL CURRENT ASSETS             2,749,000         3,086,000       3,141,000        2,992,000       3,073,000     3,068,667   3,044,556       3,062,074

long term investments            -                 -                     619000       619,000         619,000      619,000    619,000           619,000
Property plants and
equipments                           3,785,000         4,080,000       3,882,000     3,915,667       3,959,222    3,918,963   3,931,284        3,936,490

Goodwill                             1,490,000         1,533,000       1,434,000     1,485,667       1,484,222    1,467,963   1,479,284        1,477,156

Intangible assets                    3,768,000         4,181,000       3,751,000     3,900,000       3,944,000    3,865,000   3,903,000        3,904,000
Accumulated amortization                       0               0                                0           0            0               -            0

other assets                           135,000           235,000         155,000      175,000         188,333      172,778    178,704           179,938

TOTAL ASSETS                     11,927,000        13,115,000      12,982,000       13,087,333      13,267,778   13,112,370   13,155,827      13,178,658
Liabilities
CURRENT LIABILITIES

accounts payable                     1,375,000         1,968,000       1,675,000     1,672,667       1,771,889    1,706,519   1,717,025        1,731,811

short/long term debt                   374,000           247,000       1,408,000      676,333         777,111      953,815    802,420           844,449

other current liabilities              302,000                 0                0     100,667          33,556       44,741    59,654             45,984

TOTAL CURRENT LIABILITES             2,051,000         2,215,000       3,083,000     2,449,667       2,582,556    2,705,074   2,579,099        2,622,243

Long term debt                       4,754,000         4,770,000       4,784,000     4,769,333       4,774,444    4,775,926   4,773,235        4,774,535

other liabilities                    1,205,000         1,186,000       1,658,000     1,349,667       1,397,889    1,468,519   1,405,358        1,423,922

deffered long term liabilities       1,293,000         1,356,000   9,66,000          1,324,500       1,340,250    1,332,375   1,332,375        1,335,000

minority interest                      540,000           973,000       1,148,000      887,000        1,002,667    1,012,556   967,407           994,210
Negative goodwill                              0               0                0               0           0            0               -            0

TOTAL LIABILITIES                    7,792,000         8,285,000       7,590,000     8,330,500       3,740,806    8,589,375   6,886,894        6,405,691
SHARE HOLDER'S EQUITY
prefered stocks                                0               0                0               0           0            0               -            0

common stocks                            3000              3000            3000          3,000           3,000       3,000    3,000                3,000

retain earnings                      2,708,000     31,24,000       31,30,000         2,708,000       2,708,000    2,708,000   2,708,000        2,708,000

treasury stocks                      -2017000          -2269000        -2703000     -2,329,667      -2,433,889   -2,488,852   (2,417,469)     -2,446,737

capital surplus                       1751000           1805000         1851000      1,802,333       1,819,444    1,824,259   1,815,346        1,819,683

other stock holder equity        (3,61,000)              -48,000   (9,38,000)          -48,000         -48,000      -48,000   (48,000)           -48,000

TOTAL STOCKHOLDER
EQUITY                               2,084,000     26,15,000       13,43,000         2,084,000       2,084,000    2,084,000   2,084,000        2,084,000




                                                                                                                                         28
NET TANGIBLE ASSETS     -3174000   -3099000   -3842000   -3,371,667   -3,437,556   -3,550,407   (3,453,210)   -3,480,391




         The analysis of three years of balancesheet of pepsi and pepsi has been done
         and from those data the projected balacesheet for the years of 2009 to 2013
         of five years has been counted with the simple average method.

         ASSETS:

         Assets are the most important part of the company it provides resources to
         the company.company’s position can be predicted by the assets holding
         capacity.larger the capacity ,stronger the position of the company.assets
         includes cash receivables,short term investment ,inventory which will come
         under title of current assets.other assets like goodwill,plant,intangible assets
         will also included in the non title of fixed assets

         As per the projected data the cocacola’s last 3 years assets are 29936000(in
         06),(in 2007) and 3802000 (in 2008).while the projected assets calculated
         with simple average method the assets of cocacola is increasing every year
         than past three years.in 2009 the assets will be 40714667, which is highest
         for the cocacola.pepsi is having the assets as of half than cocacola. In the
         year 2006 pepsi is having assets of 11927000,in 2007(13115000)and in year
         8 (12982000) that has decreased from the previous year. The main reason for
         the pepsi is having higher assets is it’s long term investment and property
         plant and equity more than pepsi.in 2008 cocacola is having 2% decrease in
         the assets while pepsi is having 8% decrease in the assets.from the projected
         data of 10 the assets of pepsi should be increased by 2% but cocacola will
         increase its assets more 7% in 2010.cocacola is having larger assets than
         pepsi so we can say that cocacola is very larger firm than pepsi.comparing
         the cash and cash equivalents cocacola is generating higher cash than
         pepsi.pepsi’s cash generation is very small and it will take long time to
         incease because it is almost 4 time lesser than of cocacola. Othe assets
         including inventory ,goodwill,intangible assets are more of cocacola than
         pepsi..



         LIABILITIES:


                                                                                                         29
Liabilities are the application of the resource of assets.liabilies are the
responsibility of the company.company has to pay all it’s liability with in
certain time period.liabilites include two parts one is fixed liabilities and
othe is current liabilities.account payabe,short term debt will come under
title of current liabilities.long term debt and other liabilities will come under
title of fixed liabilities.
Pepsi is having less liabilities than cocacola.for the year 2006 it is of
7792000(in thousand) than it increase in 2007 to 8285000 because of
increase in the deffered long term liabilitesand interest.than it again reduces
to 759000 in 2008 this year company has reduced its deffered long term
iabilies.for the year 2009 company had paid the amount of 100667 under
title of other current liabilities.which has increased to the total liability for
pepsi.cocacola is having more liabilities than pepsi which is almost of 2
times than pepsi. for the year 2006 to 2008 the lianilities are
12685000,21525000,20047000 respectively. Of which 21525000 is the
highest even comparing with projected liability of the next five year.there
has been consistent stability has been seen in the projected liability of
cocacola .for the year 2009 it is of 18085607 it increases in the 2010 to
19885889 than there has not been much change in the liability of the year
2010 to 2013 as seen in the balance sheet above Comparing both companies
liabilities The ratio of the liabilities of the both companies ate of 6:4 in the year of 2006
than the ratio incease to 7:3 in year 2007.in 2008 it remains 7;3.for the projected years the
ratio In 2009 the ratio is of 8:2 which tells how cocacola is having giant
liabilities than pepsi.




                                                                                          30
working capital helps the company to maintain the level of cash for the day
to day transactions. It helps to cycle of provide adequate cash for the
working of firm.Working capital, also known as net working capital or
NWC, is a financial metric which represents operating liquidity available to
a business. Along with fixed assets such as plant and equipment, working
capital is considered a part of operating capital. It is calculated as current
assets minus current liabilities. If current assets are less than current
liabilities, an entity has a working capital deficiency, also called a working
capital deficit.

Working Capital = Current Assets − Current Liabilities

A company can be endowed with assets and profitability but short of
liquidity if its assets cannot readily be converted into cash. Positive working
capital is required to ensure that a firm is able to continue its operations and
that it has sufficient funds to satisfy both maturing short-term debt and
upcoming operational expenses. The management of working capital
involves managing inventories, accounts receivable and payable and cash.


Working         Pepsi                            Cocacola
capital
06              698,000         -                -476000         -
07              871,000         25%in            -1120000        135%dec
08              58,000          93%dec           -812000         27.5%in
09              542,333         835%in           -802667         1.2%in
10              490,444         9.6%dec          -911556         13.6dec
11              363,593         26%dec           -842074         7.6%in
12              465,457         28%in            -852098         1.2%dec
Total in/dec    -               753%inc          -               115.5dec

As from the table pepsi is having total increase increase in the working
capital of 753% .cocacola’s working capital is decreasing every year.major
change in working capital of pepsi came in 2009 which is projected
data.working capital in year 2008 is lowest after a year it will increase to
542333from just 58000.though cocacola is having more assets than pepsi it
lack in working capital as importance of working capital mentioned above.




                                                                             31
                             Cash flow analysis
The cash flow statement is partitioned into three segments, namely: cash
flow resulting from operating activities, cash flow resulting from investing
activities, and cash flow resulting from financing activities.

The money coming into the business is called cash inflow, and money going
out from the business is called cash outflow.

Cash flow of cocacola.

                                                           31-Dec-    31-Dec-    31-Dec-
PERIOD ENDING         cocacola                                  06        07          08
NET INCOME                                                5080000    5981000    5807000

Operating activity,cash flow provided by or Used in
depriciation                                               938000    1163000    1228000
adjustments to net income                                  554000    -          1224000
changes in accounts receivables                           -214000     -406000    148000
changes in liabilities                                     -99000      914000   -734000
changes in inventory                                      -150000     -258000   -165000
change in other operating activity                        -152000     -244000     63000
TOTAL CASH FLOW FROM OPERATING
ACTIVITES                                                 5957000    7150000    7571000
   investing activities,cash flows provided by or Used
in
                                                                -          -          -
capital expenditure                                       1407000    1648000    1968000
Investmesnt                                                558000     349000    -240000
                                                                           -
other cash flows from investing activities                -851000    5420000     155000
TOTAL CASH FLOWS FROM INVESTING                                 -          -
ACTIVITIES                                                1700000    6719000    2363000
Financing activities ,cash flows provided by or used in
                                                                -          -          -
dividend paid                                             2911000    3149000    3521000
                                                                -
sale purchase of stock                                    2268000    -219000    -493000
                                                                -
net borrowings                                            1404000    4341000      29000
other cash flowsfrom financing activities                 -          -
                                                                -                     -
TOTAL CASH FROM FIANACING ACTIVITIES                      6583000     973000    3985000
EFFECT OF EXCHANGE RATE CHANGES                             65000     249000    -615000
                                                                -
CHANGE IN CASH AND EQUIVALENTS                            2261000    1653000     608000



                                                                                           32
         Projected cash flow of cocacola

                                                           31-Dec-    31-Dec-    31-Dec-    31-Dec-     31-Dec-
PERIOD ENDING cocacola                                          09         10         11        12           13
NET INCOME                                                5622667    5803556    5744407    5723543     5757169

Operating activity,cash flow provided by or Used in

Depriciatio n                                             1109667    1166889    1168185    1148247     1161107
adjustments to net income                                  889000    1056500    1056500    1000667     1037889
changes in accounts receivables                           -157333    -138444     -49259    -115012     -100905
changes in liabilities                                      27000      69000    -212667     -38889      -60852
changes in inventory                                      -191000    -204667    -186889    -194185     -195247
change in other operating activity                        -111000     -97333     -48444     -85593      -77123
TOTAL CASH FLOW FROM OPERATING
ACTIVITES                                                 6892667    7204556    7222741    7106654     7177984
Investing activities,cash flows provided by or Used in
                                                                -                                -           -
capital expenditure                                       1674333    -1763444   -1801926   1746568     1770646
investmesnt                                                222333      110444      30926    121235       87535

                                                                -                                -           -
other cash flows from investing activities                2038667    -2434556   -1439407   1970877     1948280
TOTAL CASH FLOWS FROM INVESTING                                 -                                -           -
ACTIVITIES                                                2018667    -2124889    -593519   1579025     1432477

Financing activities ,cash flows provided by or used in
                                                                -                                -           -
Dividend paid                                             3193667    -3287889   -3334185   3271914     3297996
sale purchase of stock                                    -993333     -568444    -684926   -748901     -667424
net borrowings                                             988667     1786222     934630   1236506     1319119
other cash flowsfrom financing activities
                                                                -                                -           -
TOTAL CASH FROM FIANACING ACTIVITIES                      3198333    -2070111   -3084481   2784309     2646300
EFFECT OF EXCHANGE RATE CHANGES                           -100333     -155444    -290259   -182012     -209239

CHANGE IN CASH AND EQUIVALENTS                                  0     753667     453889     402519         536691




                                                                                                      33
Cash flow of pepsi



                                                              31-Dec-   31-Dec-    31-Dec-
PERIOD ENDING pepsi                                               06         07        08
NET INCOME                                                    522000    532000     162000

Operating activity,cash flow provided by or Used in

depriciation                                                   649000    669000     673000
adjustments to net income                                      329000    404000     516000
changes in accounts receivables                               -120000   -110000      40000
changes in liabilities                                          86000    194000    -120000
changes in inventory                                           -57000    -19000       3000
TOTAL CASH FLOW FROM OPERATING
ACTIVITES                                                 1228000       1437000    1284000

investing activities,cash flows provided by or Used in
capital expenditure                                           -725000    -854000    -760000
Investmesnt                                               -             -          -
other cash flows from investing activities                      -6000     -29000    -998000
TOTAL CASH FLOWS FROM INVESTING                                                           -
ACTIVITIES                                                    -731000   -883000    1758000

Financing activities ,cash flows provided by or used in
dividend paid                                                 -109000   -130000    -208000
sale purchase of stock                                        -385000   -280000    -139000
net borrowings                                                 104000   -168000    1198000
other cash flowsfrom financing activities                       19000     14000      -1000
TOTAL CASH FROM FIANACING ACTIVITIES                          -371000   -564000     850000
EFFECT OF EXCHANGE RATE CHANGES                                  1000     28000     -57000

CHANGE IN CASH AND EQUIVALENTS                                127000      18000     319000




                                                                                              34
Projected cash flow of pepsi



                                                           31-Dec-    31-Dec-    31-Dec-                31-Dec-
PERIOD ENDING                                                   09        10          11   31-Dec-12         13
NET INCOME                                                 405333     366444     311259       361012    346239

Operating activity,cash flow provided by or Used in

depriciation                                               663667     668556     668407      666877     667947
Adjustments to net income                                  416333     445444     459259      440346     448350
changes in accounts receivables                            -63333     -44444     -22593      -43457     -36831
changes in liabilities                                      53333      42444      -8074       29235      21202
changes in inventory                                       -24333     -13444     -11593      -16457     -13831
TOTAL CASH FLOW FROM OPERATING
ACTIVITES                                                 1316333    1345778    1315370     1325827    1328992

investing activities,cash flows provided by or Used in
capital expenditure                                       -779667    -797889    -779185      -785580   -787551
Investmesnt
other cash flows from investing activities                -344333    -457111    -599815      -467086   -508004
TOTAL CASH FLOWS FROM INVESTING                                 -          -          -                      -
ACTIVITIES                                                1124000    1255000    1379000    -1252667    1295556

Financing activities ,cash flows provided by or used in
                                                                            -
dividend paid                                             -149000    162333.3   -173111    -161481.5    -165642
                                                                                                              -
Sale purchase of stock                                    -268000     -229000    -212000   -236333.3   225777.8
net borrowings                                             378000    469333.3   681777.8    509703.7   553604.9
other cash flowsfrom financing activities                   10667        7889       5852        8136       7292
TOTAL CASH FROM FIANACING ACTIVITIES                       -28333       85889     302519      120025     169477
EFFECT OF EXCHANGE RATE CHANGES                             -9333      -12778     -26370      -16160     -18436

CHANGE IN CASH AND EQUIVALENTS                            154666.7   163888.9   212518.5   177024.69   184477.4




                                                                                                        35
Operating activities

Operating activities include the production, sales and delivery of the company's
product as well as collecting payment from its customers. This could include
purchasing raw materials, building inventory, advertising, and shipping the product.

Under IAS 7, operating cash flows include:

      Receipts from the sale of goods or services
      Receipts for the sale of loans, debt or equity instruments in a trading portfolio
      Interest received on loans
      Dividends received on equity securities
      Payments to suppliers for goods and services
      Payments to employees or on behalf of employees
      Interest payments (alternatively, this can be reported under financing activities
       in IAS 7, and US GAAP)

Items which are added back to [or subtracted from, as appropriate the net income
figure (which is found on the Income Statement) to arrive at cash flows from
operations generally include:

      Depreciation (loss of tangible asset value over time)
      Deferred tax
      Amortization (loss of intangible asset value over time)
      Any gains or losses associated with the sale of a non-current asset, because
       associated cash flows do not belong in the operating section.(unrealized
       gains/losses are also added back from the income statement)

   As cocacola’s investment in the long term assets increasing it’s depreciation is also
   increasing .i has been increased 1163000 in 2007 from 938000 in 2006and it
   increase more in 2008 of 1228000,for the year 06 and 07 the amount receivable
   has been in negative.2008 has account receivable has been positive which is
   148000.liabilites has been increased of 99000 in 2006.then it is decreased of
   914000 in 2007 but then again increased of 734000.total cash flow from operating
   activities has been increased over year.

   Cocacola’s operating cash flow is more than pepsi.which shows that cocacola
   handles its cash operations more effectively. pepsi’s operating activity cashflow for
   the year 2008 is 1284000.while the projected amount is much more higher than
   20008 and previous years.it increases of 29445 than decreases in 2011 of
   30408.again increase in 2012 and in 2013. the projected data of cocacola is very

                                                                                       36
stable there has been not much change from 2010 to 2013.which remains around
7106654 to 7222741.

Investing activities:

Cocacola has purchased more assets in 2007 .the other investment has been
decreasing evry year it remarks sharp decrease in 2008.projected investment is also
decreasing .total cash flow from investing activities of cocacola is decreasing
which tells total investment of company is reducing .pepsi’s capital expenditure
includes the purchasing and selling of assets while there is no investment .total
cash flow is positive in 2008 then it came neagative in 2012.



Financing activities:

Cocacola’s dividend distribution increases every year.in 2007 cocacola has paid
8% more dividend than 2006.while pepsi has reatained earnings for all years.
Retain earning is increasing in the projected years.

Coca-Cola has paid uninterrupted dividends on its common stock since 1893 and
increased payments to common shareholders every year for 47 years. rom the end
of 1998 up until December 2009 this dividend growth stock has delivered a egative
annual average total return of 2.10% to its shareholders. The stock has largely
raded between $65 and $40 over the past decade.




                                                                                37
Source:big charts.com



The company has managed to deliver a 10.90% average annual increase in its EPS
between 1999 and 2009. Analysts are expecting an increase in EPS to $3.05-$3.10 for
2010 and $3.25-$3.30 by 2011. This would be a nice increase from the 2009 earnings
per share of $2.49. Future drivers for earnings could be the company’s tea, coffee and
water perations. Cost savings initiatives could also add to the bottom line over time.




Source: morning star.com

Some analysts believe that Coca Cola could follow arch rival Pepsi Co’s moves to
acquire its own bottlers in an effort to gain more control over the production and


                                                                                   38
distribution of its beverages in key markets. Coke holds a 35% interest in its largest
manufacturer and distributor of Coca Cola products, Coca-Cola Enterprises In. . Coca-
ola Enterprises Inc. accounts for about 40% of Coke’s concentrate sales and 16% of
the company’s worldwide volume, which makes it a likely target of acquisition, The
Return on Equity has been in a decline after hitting a high in 2001. Rather than focus
on absolute values for this indicator, Investors generally want to see at least a stable
return on equity over time.




Source: morning star.com

Annual dividends have increased by an average of 10.10% annually since 1999, which
is slightly lower than the growth in EPS. The company last raised its dividend by 8%
in February 2009, for the 47th year in a row.




                                                                                     39
Source: morning star.com

A 10 % growth in dividends translates into the dividend payment doubling every
seven years. If we look at historical data, going as far back as 1969, The Coca Cola
Company has indeed managed to double its dividend payment every seven years on
average.

The dividend payout ratio remained above 50% for the majority of the past decade. A
lower payout is always a plus, since it leaves room for consistent dividend growth
minimizing the impact of short-term fluctuations in earnings.




Source: morning star.com



                                                                                 40
Currently Coca Cola is trading at 20 times earnings and yields 3.30%. In comparison
arch rival in the cola wars Pepsi Co trades at a P/E multiple of 15 and yields 3.50%.
thus,The Coca Cola Company is not as attractively valued at the moment as Pepsi Co


Dividend stock analysis of pepsi


PepsiCo has been consistently increasing its dividends for 36 consecutive years. From
the end of 1998 up until December 2009 this dividend growth stock has delivered a
4.70% annual average total return to its shareholders.




source:big charts.com

At the same time company has managed to deliver a 9.90% average annual increase in
its EPS since 1999.




                                                                                  41
Source: morning star.com

The ROE has remained largely between 31% and 38%, with the exception of 2004,
when it fell to as low as 22%.




Source: morning star.com

Annual dividend payments have increased by an average of 13.50% annually since
1999, which is much higher than the growth in EPS. Analysts are expecting slight
increase in EPS for 2009 compared to 2008; given the sluggish state of North
American economies. The strong US dollar could potentially hurt sales, as over 44%
of PepsiCo’s revenues are derived internationally.


A 13.50 % growth in dividends translates into the dividend payment doubling almost



                                                                                42
every five years. Since 1978 PepsiCo has actually managed to double its dividend
payment every six years on average.




Source: morning star.com

The dividend payout has remained in a range between 31% and 42%. In 2008 the
dividend payout ratio has surged to 51%. A lower payout is always a plus, since it
leaves room for consistent dividend growth minimizing the impact of short-term
fluctuations in earnings. The slow growth in earnings could put future dividend
increases at risk.




Source: morning star.com




                                                                               43
PepsiCo is currently attractively valued. The stock trades at a price/earnings multiple
of 15, has an adequately covered dividend payout and the current dividend yield at
3.50%,




                                                                                    44
                       Income statement analysis
Cocacola’s income statement

Cocacola                                           2006    2007    2008
NET Oin revenuePerat                              24088   28857   31944
cost of goods sold                                 8164   10406   11374
gross profit                                      15924   18451   20570

SELLING GENERAL AND administrative exp             9431   10945   11774
other operating chareges                            185     254     350
Operating income                                   6308    7252    8446

interst income                                      193     236     333
interest exp.                                       220     456     438
equity income(loss)                                 102     668    -874
other income loss                                   195     173     -28
Pbt                                                6578    7873    7439

income tax                                         1498    1892    1632
NET INCOME                                         5080    5981    5807



Projected income statement for cocacola

                                           2009    2010    2011    2012    2013
 NET Operating revenue                    28296   29699   29980   29325   29668
 cost of goods sold                        9981   10587   10647   10405   10547
 gross profit                             18315   19112   19332   18920   19121

 SELLING GENERAL AND administrative exp           10717   11145   11212   11025
 other operating chareges                   263     289     301     284     291
 operating income                          7335    7678    7820    7611    7703

 interst income                             254     274     287     272     278
 interest exp.                              371     422     410     401     411
 equity income(loss)                        -35     -80    -330    -148    -186
 other income loss                          113      86      57      86      76
 Pbt                                       7297    7536    7424    7419    7460

 income tax                                1674    1733    1680    1695    1703
 NET INCOME                                5623    5804    5744    5724    5757




                                                                             45
Income statement of pepsi.
Pepsi                          2006    2007    2008
net revenue                   43251   39474   35137
Cogs                          20351   18038   15762
selling,general exp.          15901   14208   12711
amortazation of intangible
assets                           64      58     162
operating profit               6935    7170    6502

bottaling equit incomr          374     560     553
int.exp                        -329    -224    -239
int.income                       41     125     173
PBT                            7021    7631    6989

Tax                            1879    1973    1347

net income                     5142    5658    5642

Projected income statement for pepsi.
                               2009    2010     2011     2012    2013
 net revenue                  39287   37966    37463    38239   37890
 Cogs                         18050   17283    17032    17455   17257
 selling,general exp.         14273   13731    13572    13859   13720
 amortazation of intangible
 assets                          95     105      121      107     111
 operating profit              6869    6847     6739     6818    6802

 bottaling equit incomr         496     536      528      520     528
 int.exp                       -264    -242     -248     -252    -247
 int.income                     113     137      141      130     136
 PBT                           7214    7278     7160     7217    7218

 Tax                           1733    1684     1588     1668    1647

 net income                    5481    5594     5572     5549    5571



Opearintg profit :

For the year 2008 operating profit for the cocacola is more than pepsi.cocacola’s profit
is increasing every year but there has not been any major change in the profit of
pepsi.profit for cocacola in year 2008 is 8446 $ mill.pepsi’s profit in the same year is
6502.there has been defference of 7% in the profit of both companies.



                                                                                     46
Net income:

Cocacola is earning 165 mill $ more profit than pepsi which in % term 1.44 % more
than pepsi. We can say that pepsi is earning very good profit though the assets of the
pepsi is less than cocacola, pepsi is having almost similar profit.




                                                                                   47
              Weighted Average Cost of Capital

All the financial figures utilized in the weighted average cost of capital computation
were derived from the companies’ 10-K reports and from Yahoo Finance, unless
otherwise noted

Common Equity:
10-Year T-bond=6.27%
S&P 500 return=12%
PepsiCo beta =0.5
Coca-Cola beta=0.63

CAPM Equation: Rs=Rrf +(RPm)b

PepsiCo: Rs=6.27+(12-6.27)0.5
=9.135

Coca-Cola: Rs=6.27+(12-6.27)0.63
=9.89

Long-Term Debt:

PepsiCo
debt: 4,203,000,000 = 3.5%
Common stock: 115,360,876,600 =96.5%
119,563,876,600 =100%

Coca-Cola
debt: 3,277,000,000 = 2.4%
Common stock: 135,513,142,200 =97.6%
138,790,142,200 =100%

PepsiCo WACC:
WdRd + WceRs
=.035(7.0%) + .965(9.135%)
=9.045%




                                                                                   48
Coca-Cola WACC:
WdRd + WceRs
= .024(7.1%) + .976(9.89)
= 9.87%

It’s important to note here that neither PepsiCo nor Coca-Cola issue preferred stock,
so that component was not utilized in the WACC computation. A surprising discovery
was the low tax rate for both of these corporations: 26% for PepsiCo and 22% for
Coca-Cola. This may be attributed to lower tax rates overseas, where these companies
derive a significant portion of their revenues from.
PepsiCo’s lower WACC (9.135%) versus Coca-Cola’s (9.89%) gives it greater
latitude in selecting investment projects. PepsiCo’s lower WACC will also result in
greater valuation for its stock. This has happened within the last 10 years: Its stock
price has climbed in value from $40.81 in 1998 to its most recent price of $68.20.
Coca-Cola, meanwhile, seems to have suffered a reversal of fortune in the same time
frame. Its stock price has declined from $78.38 to its most recent price of $58.72.
Conclusion and Recommendation
My research reveals that the strongest candidate as an investment opportunity is
PepsiCo. The WACC computation MAde the choice easier. Nevertheless, Coca-Cola
is a strong performer and is poised for a comeback. PepsiCo cannot rest on its laurels,
if it neglects any aspect of its core business it is bound to be overtaken by its eternal
rival.




                                                                                      49
                                  Ratio analysis
Financial Ratios



Financial ratios are useful indicators of a firm's performance and financial situation. Most
ratios can be calculated from information provided by the financial statements. Financial
ratios can be used to analyze trends and to compare the firm's financials to those of other
firms. In some cases, ratio analysis can predict future bankruptcy.

Financial ratios can be classified according to the information they provide. The
following types of ratios frequently are used:

       Liquidity ratios
       Asset turnover ratios
       Financial leverage ratios
       Profitability ratios
       Dividend policy ratios

Liquidity Ratios
Liquidity ratios provide information about a firm's ability to meet its short-term financial
obligations. They are of particular interest to those extending short-term credit to the
firm. Two frequently-used liquidity ratios are the current ratio (or working capital ratio)
and the quick ratio.

The current ratio is the ratio of current assets to current liabilities:

                                                 Current Assets
                            Current Ratio =
                                                 Current Liabilities

Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders
may prefer a lower current ratio so that more of the firm's assets are working to grow the
business. Typical values for the current ratio vary by firm and industry. For example,
firms in cyclical industries may maintain a higher current ratio in order to remain solvent
during downturns.

One drawback of the current ratio is that inventory may include many items that are
difficult to liquidate quickly and that have uncertain liquidation values. The quick ratio is
an alternative measure of liquidity that does not include inventory in the current assets.
The quick ratio is defined as follows:




                                                                                          50
                                          Current Assets - Inventory
                        Quick Ratio =
                                          Current Liabilities

The current assets used in the quick ratio are cash, accounts receivable, and notes
receivable. These assets essentially are current assets less inventory. The quick ratio often
is referred to as the acid test.

Finally, the cash ratio is the most conservative liquidity ratio. It excludes all current
assets except the most liquid: cash and cash equivalents. The cash ratio is defined as
follows:

                                      Cash + Marketable Securities
                     Cash Ratio =
                                      Current Liabilities

The cash ratio is an indication of the firm's ability to pay off its current liabilities if for
some reason immediate payment were demanded.

Asset Turnover Ratios
Asset turnover ratios indicate of how efficiently the firm utilizes its assets. They
sometimes are referred to as efficiency ratios, asset utilization ratios, or asset
management ratios. Two commonly used asset turnover ratios are receivables turnover
and inventory turnover.

Receivables turnover is an indication of how quickly the firm collects its accounts
receivables and is defined as follows:

                                                  Annual Credit Sales
                    Receivables Turnover =
                                                  Accounts Receivable

The receivables turnover often is reported in terms of the number of days that credit sales
remain in accounts receivable before they are collected. This number is known as the
collection period. It is the accounts receivable balance divided by the average daily credit
sales, calculated as follows:

                                                  Accounts Receivable
                                              =
                Average Collection Period         Annual Credit Sales / 365




                                                                                            51
The collection period also can be written as:

                                                   365
                  Average Collection Period =
                                                   Receivables Turnover

Another major asset turnover ratio is inventory turnover. It is the cost of goods sold in a
time period divided by the average inventory level during that period:

                                                Cost of Goods Sold
                      Inventory Turnover =
                                                Average Inventory

The inventory turnover often is reported as the inventory period, which is the number of
days worth of inventory on hand, calculated by dividing the inventory by the average
daily cost of goods sold:

                                        Average Inventory
                 Inventory Period =
                                        Annual Cost of Goods Sold / 365

The inventory period also can be written as:

                                                365
                        Inventory Period =
                                                Inventory Turnover

Other asset turnover ratios include fixed asset turnover and total asset turnover.

Financial Leverage Ratios
Financial leverage ratios provide an indication of the long-term solvency of the firm.
Unlike liquidity ratios that are concerned with short-term assets and liabilities, financial
leverage ratios measure the extent to which the firm is using long term debt.

The debt ratio is defined as total debt divided by total assets:

                                                Total Debt
                                            =
                               Debt Ratio       Total Assets




                                                                                         52
The debt-to-equity ratio is total debt divided by total equity:

                                                     Total Debt
                         Debt-to-Equity Ratio =
                                                     Total Equity

Debt ratios depend on the classification of long-term leases and on the classification of
some items as long-term debt or equity.

The times interest earned ratio indicates how well the firm's earnings can cover the
interest payments on its debt. This ratio also is known as the interest coverage and is
calculated as follows:

                                                 EBIT
                         Interest Coverage =
                                                 Interest Charges

where EBIT = Earnings Before Interest and Taxes

Profitability Ratios
Profitability ratios offer several different measures of the success of the firm at
generating profits.

The gross profit margin is a measure of the gross profit earned on sales. The gross profit
margin considers the firm's cost of goods sold, but does not include other costs. It is
defined as follows:

                                            Sales - Cost of Goods Sold
                 Gross Profit Margin =
                                            Sales

Return on assets is a measure of how effectively the firm's assets are being used to
generate profits. It is defined as:

                                                    Net Income
                            Return on Assets =
                                                    Total Assets




                                                                                       53
Return on equity is the bottom line measure for the shareholders, measuring the profits
earned for each dollar invested in the firm's stock. Return on equity is defined as follows:

                                               Net Income
                        Return on Equity =
                                               Shareholder Equity

Dividend Policy Ratios
Dividend policy ratios provide insight into the dividend policy of the firm and the
prospects for future growth. Two commonly used ratios are the dividend yield and payout
ratio.

The dividend yield is defined as follows:

                                              Dividends Per Share
                        Dividend Yield =
                                              Share Price

A high dividend yield does not necessarily translate into a high future rate of return. It is
important to consider the prospects for continuing and increasing the dividend in the
future. The dividend payout ratio is helpful in this regard, and is defined as follows:

                                            Dividends Per Share
                         Payout Ratio =
                                            Earnings Per Share

Use and Limitations of Financial Ratios
Attention should be given to the following issues when using financial ratios:

      A reference point is needed. To to be meaningful, most ratios must be compared
       to historical values of the same firm, the firm's forecasts, or ratios of similar firms.
      Most ratios by themselves are not highly meaningful. They should be viewed as
       indicators, with several of them combined to paint a picture of the firm's situation.
      Year-end values may not be representative. Certain account balances that are used
       to calculate ratios may increase or decrease at the end of the accounting period
       because of seasonal factors. Such changes may distort the value of the ratio.
       Average values should be used when they are available.

Ratios are subject to the limitations of accounting methods. Different accounting choices
may result in significantly different ratio value


                                                                                            54
Ratio Analysis

To illustrate efficiency as a good investment choice, we will use data from
the annual reports of PepsiCo, Coca-Cola, for the fiscal year 2008, in order
to form comparative ratios. To realize the values of the ratios, it is necessary
to compare them with benchmark values. One benchmark consists of similar
firms in the same industry.

Liquidity:


Liquidity refers to a company's ability to meet its requirements for cash.
Liquidity is necessary to meet both expected and unexpected cash demands.
All businesses need liquidity to operate. Inadequate liquidity can stunt
growth and ultimately lead to bankruptcy if debts cannot be repaid.
However, too much liquidity can detract from profits because liquid assets
are low returning investments. The standard measure of liquidity is the
current ratio, calculated by dividing "current assets" by "current liabilities”.
The current ratio for PepsiCo of 1.1 indicates it is the more liquid of coke,
and also performing better than the beverage industry with a 1.00 figure. The
ratios for Coca-Coca is close to 1.00. However, this is not the norm for high
quality company with easy access to capital markets to finance unexpected
cash requirements.

                    Pepsi                Cocacola            industry
Current ratio       1.1                  1                   1

Profitability:

Two common measures of profitability are the net profit margin and the
return on assets ratios. Each provides a different perspective about the firm's
profits. To measure the profitability of a company's operations, you calculate
the net profit margin (NPM) by dividing "net income" with "sales”. Both
entries come from the income statement. Net profit margin indicates the
percentage of each dollar of sales that the firm is able to flow to the bottom
line as profit. NPM is a function of the price of the product (which produces
sales revenue) and efficiency of operations (cost of goods sold). A firm
selling a unique product to a captive market may be able to charge a


                                                                             55
premium price and thus generate greater NPM. Conversely, a firm selling a
generic product in a highly competitive market will have a low NPM. It
must be a very efficient company, or it will not survive. The net profit
margins of our 2 sample firms illustrate these concepts. Coca-Cola’s NPM
of 8.8 percent is low compared with PepsiCo’s NPM of 16.6 percent.This is
due primarily to its proprietary product and monopolies in certain foreign
markets. PepsiCo derives the majority of its income from lower margin
snack foods and restaurants. Less than half its sales come from soft drinks.

The Return on Assets ratio (ROA), which is also known as the Return on
Investment ratio, is calculated by dividing "net profit" by "total assets”. It
indicates the rate of return provided by the book value of the company's
assets. The higher the ROA, the more profitable the company is. Consistent
with the NPM, PepsiCo has the highest ROA with 15.81 percent, making
Coca-Cola's 14.46 percent second. This reflects PepsiCo’s ability to generate
significant sales volume from its asset base.

                  Pepsi                 Cocacola            Industry
Net profit margin 10.6                  9.8                 8.05
Return on assets 15.81                  14.46               10.97
Total asset turn 2                      1.81                2.30
over
Inventory    turn 7.9                   5.4                 2.19
over

Total Asset Turnover Ratio:

Another indicator of a company's ability to generate profits is the total asset
turnover ratio, calculated by dividing "sales" by "total assets”. It indicates
how effectively the company generates sales from its asset base. The more
effective the company is in generating sales revenue, the higher the asset
turnover ratio will be. However, PepsiCo and Coca-Cola's ratios are, 2.00
and 1.81 respectively. these are driven primarily by their high inventory
turnover, and efficient use of fixed assets. Thus, coke’s low NPM is offset
to some extent by its ability to generate sales from its asset base (the
company is a high volume, low overhead
producer).

Inventory Turnover Ratio:


                                                                            56
For companies that have a large investment in inventory, it is useful to
calculate the Inventory turnover ratio, which is the "cost of goods sold" from
the income statement divided by the "inventory" shown on the balance sheet.
A low turnover ratio indicates too much investment in inventory. Whereas a
high turnover ratio could cause lost sales due to lack of merchandise to meet
customer demand. PepsiCo's is higher,This reflects differences in their
distribution methods, with Pepsi's snack foods driving the ratio higher than
for typical merchandisers.

Financial Leverage:

Financial leverage is the use of fixed cost funds such as debt or preferred
stock to increase the common stockholder's return. Using debt in the firm
produces a stream of earnings that has greater volatility (risk) than would
occur in the same firm if it had less debt. One major factor is management's
willingness to accept financial risk. A second factor is earnings
predictability. Two debt ratios that were computed are the debt to total assets
ratio, or the "debt ratio," and the equity multiplier.

Debt Ratio:

The Debt ratio is calculated as the sum of all the liability accounts divided
by "total assets." For our four sample firms, the numerator is the sum of
everything on the right side of the balance sheet from "current liabilities"
through "deferred income taxes”.
As you can see for our firms, their debt ratios vary from PepsiCo’s 71.2
percent. We can conclude that Pepsi is using more financial leverage in the
firm and thus is exposed to more financial risk than cocacola.

                    Pepsi               Cocacola            Industry
Debt ratio          71.2                64.2                52
Equity multiplier   1.87                1.62                1.55

The Equity multiplier is a similar calculation, determined by dividing "total
assets" by the
"common equity" account. If a firm is totally financed by equity, the equity
multiplier will equal 1.00. The larger the number, the more highly leveraged
is the firm. Consistent with the "debt ratio," the equity multipliers of the 2
firms display that Pepsi has the greatest amount of leverage, and cocacola
has lower.

                                                                            57
Return on Equity:

Many would argue that the most important ratio to calculate for a company
is its return on equity (ROE), which is "net income available to common
stockholders" divided by "common equity”. ROE represents the rate of
return the company earned on the book value of its equity investment. The
higher the number, the greater the return the company
is earning for its shareholders. For our companies, PepsiCo has the greatest
ROE, 39.84 percent, which is an exceptionally high number. Coca-Cola’s is
28.73 percent. Both are relatively high compared with industry, which is
extremely low compared to the industry’s 28.69% consensus.

                    Pepsi               Cocacola            Industry
Return on equity    39.84               28.73               28.69

PepsiCo has an excellent ROE. It is a result of its high profit margin,
effective asset utilization, and use of leverage. PepsiCo probably is pursuing
an aggressive debt strategy
because of the lower profitability of some of its product lines.


                Return      on Net    profit Total       turn Equity
                equity         margin        over             muliplier
Pepsi           39.64          10.6          2                1.86
Cocacola        28.73          9.8           1.81             1.62

Price/Earnings Ratio:

The Price/ Earnings Ratio is used to gauge the relative value of a security in
the light of current market conditions. It is determined by dividing the price
of a share of stock by its earnings per share for a 12-month period.
Sometimes the P/E is referred to as the "multiple” because it shows how
much investors are willing to pay per dollar of earnings. PepsiCo has a high
P/E, which means high projected earnings in the future, in comparison to its
competitors in the beverage industry.

                    Pepsi               Cocacola            Industry


                                                                           58
p/e                 22.16                21.72               23.24

Price/Cash Flow:

The Price/ Cash Flow is calculated by dividing the closing price with the
cash flow per share from the last 12 months. An alternative to the P/E ratio,
this ratio removes depreciation and other non-cash charges from the
equation. Another advantage of the Price/Cash Flow ratio is that it makes it
easier to analyze various companies across the board. As displayed above,
Coca-Cola has the most efficient Price/Cash Flow ratio than PepsiCo’s 17.28
ratio, which displays that three of the four companies have ample money
available to spend on research and development, to expand operations, and
to pay dividends to investors.

                    Pepsi                Cocacola            Industry
Price/cash flow     17.28                21.14               12.5

Gross Profit Margin Ratio:

The Gross Profit Margin ratio indicates how efficiently a business is using
its materials and labor in the production process. In other words, gross
margin is equal to gross income divided by net sales, and is expressed as a
percentage. Coca- Cola and PepsiCo have the highest gross profit margin
values of 63.68 and 53.67. Both are outperforming the industry, which
indicates that the companies can make a reasonable profit on sales, as
long as it keeps overhead costs in control.

                    Pepsi                Cocacola            Industry
Gross margin        53.67                63.68               43

Total Debt-Equity Ratio:

Total debt-equity ratio is the ratio of a company's long-term liabilities to its
equity. cocacola has the higher level of debt, making it very important for
the company to have positive earnings and steady cash flow. Debt in and of
itself is not harmful, but it does require the timely payout of interest to debt
holders. PepsiCo has the chances of defaulting on debt.
                     Pepsi                Cocacola           Industry
Debt to equity       .3                   .45                .63


                                                                             59
Long term debt .23                      .24                 .76
to total equity


Earnings per Share:

Earnings per share is the proportionate amount of a company's profit, or
earnings, for each outstanding share of common stock. It is calculated as net
income minus dividends divided by average outstanding shares. This is the
single most popular variable in dictating a share's price. EPS indicates the
profitability of a company. PepsiCo, Coca- Cola are outperforming the
industry average of 1.52.

                      Pepsi             Cocacola            Industry
EPS                   1.85              1.6                 1.52



Return on Sales:

This ratio is a measure of profitability expressed as a percent of sales. It is
the usual definition of percent profit. The calculation is net income divided
by net sales. It can help you determine if you are making enough of a return
on your sales effort. If your company is experiencing a cash flow crunch, it
could be because its mark-up is not enough to cover expenses. Return on
sales can help point this out, and allow you to adjust prices for an adequate
profit. Also, be sure to look for trends in this figure. If it appears to be
dropping over time, it could be a signal that you will soon be experiencing
financial problems. Coca-Cola has the highest Return on Sales ratio, 20.32,
detecting operational efficiency, accompanied by PepsiCo’s 13.19 ratio.

                      Pepsi             Cocacola            Industry
Return on sales       13.19             20.32               10.51



                              Conclusion
Pepsi Co.:


                                                                            60
   -   current ratio is high – short-term solvency is favorable
   -   greater volatility in ratios
   -   greatly reduces D/E ratio
   -   increases TIE ratio – solvency
   -   shorter days sales of inventory period – better inventory management
   -   increases slightly asset turnover
   -   capital intensity increases – better capital utilization to realize sales
   -   profit margin increases significantly
   -   both ROA and ROE increase significantly and even exceed those of
       Coca Cola Co.

Coca Cola Co.:
  - current ratio is slightly increasing, under that of Pepsi Co.
  - low volatility in ratios
  - stable Debt ratios
  - decreases TIE ratio – lowers ability to cover interest expenses
  - significantly high inventory turnover – not as good inventory
     management as Pepsi Co.
  - improvement in asset turnover
  - capital intensity increases slightly
  - profit margin decreases sharply
  - both ROA and ROE decrease greatly, starting around 1998 and reach
     a stage below those of Pepsi Co.

In conclusion, the ratios of Pepsi Co. significantly improve and lose their
worrisome volatility with time. They reach levels as high, if not higher, than
those of their main competitor, Coca Cola Co. These changes are evidence
for the stable positioning of Pepsi Co. and their increase in market share
compared to that of Coca Cola Co. Therefore, the comparative ratio analysis
of the two competing companies supports the conclusion that Pepsi Co. is
doing better within its internal operations and market penetration. Thus,
Pepsi Co. would be the more profitable investment




                                                                               61
                                   Annexure


Balncesheet of cocacola.
          PERIOD ENDING                       31-Dec-08    31-Dec-07    31-Dec-06
                                      Assets
                                   Current Assets
  Cash And Cash Equivalents                  4,701,000     4,093,000    2,440,000
    Short Term Investments                     278,000      215,000      150,000
        Net Receivables                      3,090,000     3,317,000    2,704,000
           Inventory                         2,187,000     2,220,000    1,641,000
      Other Current Assets                   1,920,000     2,260,000    1,506,000
         Total Current Assets               12,176,000    12,105,000    8,441,000
       Long Term Investments                 5,779,000     7,777,000    6,783,000
    Property Plant and Equipment             8,326,000     8,493,000    6,903,000
              Goodwill                       4,029,000     4,256,000    1,403,000
          Intangible Assets                  8,476,000     7,963,000    3,732,000
      Accumulated Amortization                        -            -            -
            Other Assets                     1,733,000     2,675,000    2,533,000
  Deferred Long Term Asset Charges                    -            -     168,000
             Total Assets                   40,519,000    43,269,000   29,963,000
                                     Liabilities
                                Current Liabilities
       Accounts Payable                      6,152,000     7,173,000    5,622,000
 Short/Current Long Term Debt                6,531,000     6,052,000    3,268,000
    Other Current Liabilities                  305,000             -            -
       Total Current Liabilities            12,988,000    13,225,000    8,890,000
           Long Term Debt                    2,781,000     3,277,000    1,314,000
           Other Liabilities                 3,401,000     3,133,000    1,873,000
 Deferred Long Term Liability Charges          877,000     1,890,000     608,000
           Minority Interest                          -            -     358,000
          Negative Goodwill                           -            -            -

           Total Liabilities                20,047,000    21,525,000   13,043,000




                                                                                    62
Cashflow of cocacola
             PERIOD ENDING                   31-Dec-08      31-Dec-07      31-Dec-06
               Net Income                    5,807,000      5,981,000     5,080,000


            Operating Activities, Cash Flows Provided By or Used In
               Depreciation                  1,228,000      1,163,000       938,000
       Adjustments To Net Income             1,224,000              -       554,000
    Changes In Accounts Receivables            148,000       (406,000)     (214,000)
          Changes In Liabilities              (734,000)      914,000         (99,000)
          Changes In Inventories              (165,000)      (258,000)     (150,000)
  Changes In Other Operating Activities         63,000       (244,000)     (152,000)

Total Cash Flow From Operating Activities    7,571,000      7,150,000     5,957,000


            Investing Activities, Cash Flows Provided By or Used In
           Capital Expenditures              (1,968,000)   (1,648,000)    (1,407,000)
               Investments                    (240,000)      349,000        558,000
 Other Cashflows from Investing Activities    (155,000)    (5,420,000)     (851,000)

Total Cash Flows From Investing Activities (2,363,000)     (6,719,000)    (1,700,000)


            Financing Activities, Cash Flows Provided By or Used In
              Dividends Paid                 (3,521,000)   (3,149,000)    (2,911,000)
          Sale Purchase of Stock              (493,000)      (219,000)    (2,268,000)
             Net Borrowings                     29,000      4,341,000     (1,404,000)
Other Cash Flows from Financing Activities            -             -              -

Total Cash Flows From Financing Activities (3,985,000)       973,000      (6,583,000)
    Effect Of Exchange Rate Changes           (615,000)      249,000         65,000

  Change In Cash and Cash Equivalents        $608,000      $1,653,000    ($2,261,000)




                                                                                  63
Income statement of cocacola

Cocacola                                        2006 2007 2008
NET Oin revenuePerat                           24088 28857 31944
cost of goods sold                              8164 10406 11374
Gross profit                                   15924 18451 20570

SELLING GENERAL AND
administrative exp                              9431 10945 11774
Other operating chareges                         185   254   350
operating income                                6308 7252 8446

interst income                                   193     236       333
interest exp.                                    220     456       438
equity income(loss)                              102     668      -874
Other income loss                                195     173       -28
Pbt                                             6578    7873      7439

Income tax                                      1498    1892      1632   .
NET INCOME                                      5080    5981      5807
Equity of cocacola
                             Stockholders' Equity
Misc Stocks Options Warrants               -               -                 -
Redeemable Preferred Stock                 -               -                 -
      Preferred Stock                      -               -                 -
      Common Stock                  880,000         880,000          878,000
     Retained Earnings           38,513,000      36,235,000       33,468,000
      Treasury Stock             (24,213,000)    (23,375,000)     (22,118,000)
      Capital Surplus             7,966,000       7,378,000        5,983,000
  Other Stockholder Equity        (2,674,000)       626,000        (1,291,000)

 Total Stockholder Equity        20,472,000      21,744,000       16,920,000


  Net Tangible Assets          $7,967,000 $9,525,000            $11,785,000




                                                                                 64
Balancesheet of pepsi co.

                                        Assets
                                    Current Assets
   Cash And Cash Equivalents                     966,000       647,000      629,000
     Short Term Investments                              -            -            -
         Net Receivables                       1,371,000      1,520,000    1,332,000
            Inventory                            528,000       577,000      533,000
      Other Current Assets                       276,000       342,000      255,000

         Total Current Assets                  3,141,000      3,086,000    2,749,000
       Long Term Investments                     619,000              -            -
    Property Plant and Equipment               3,882,000      4,080,000    3,785,000
               Goodwill                        1,434,000      1,533,000    1,490,000
          Intangible Assets                    3,751,000      4,181,000    3,768,000
      Accumulated Amortization                           -            -            -
             Other Assets                        155,000       235,000      135,000
  Deferred Long Term Asset Charges                       -            -            -

             Total Assets                     12,982,000     13,115,000   11,927,000


                                       Liabilities
                                   Current Liabilities
        Accounts Payable                       1,675,000      1,968,000    1,375,000
  Short/Current Long Term Debt                 1,408,000       247,000      374,000
     Other Current Liabilities                           -            -     302,000

       Total Current Liabilities               3,083,000      2,215,000    2,051,000
           Long Term Debt                      4,784,000      4,770,000    4,754,000
           Other Liabilities                   1,658,000      1,186,000    1,205,000
 Deferred Long Term Liability Charges            966,000      1,356,000    1,293,000
           Minority Interest                   1,148,000       973,000      540,000
          Negative Goodwill                              -            -            -

           Total Liabilities                  11,639,000     10,500,000    9,843,000




                                                                                  65
Cash flow of pepsi.

     View: Annual DataQuarterly Data                   All numbers in thousands
              PERIOD ENDING                   27-Dec-08 29-Dec-07 30-Dec-06
                Net Income                      162,000      532,000      522,000


            Operating Activities, Cash Flows Provided By or Used In
                Depreciation                    673,000      669,000      649,000
        Adjustments To Net Income               516,000      404,000      329,000
     Changes In Accounts Receivables             40,000      (110,000)    (120,000)
           Changes In Liabilities              (120,000)     194,000       86,000
           Changes In Inventories                 3,000       (19,000)     (57,000)
   Changes In Other Operating Activities         10,000      (233,000)    (181,000)


 Total Cash Flow From Operating Activities    1,284,000     1,437,000    1,228,000


            Investing Activities, Cash Flows Provided By or Used In
            Capital Expenditures               (760,000)     (854,000)    (725,000)
                Investments                            -            -            -
  Other Cashflows from Investing Activities    (998,000)      (29,000)      (6,000)


 Total Cash Flows From Investing Activities   (1,758,000)    (883,000)    (731,000)


            Financing Activities, Cash Flows Provided By or Used In
               Dividends Paid                  (208,000)     (130,000)    (109,000)
           Sale Purchase of Stock              (139,000)     (280,000)    (385,000)
              Net Borrowings                  1,198,000      (168,000)    104,000
 Other Cash Flows from Financing Activities       (1,000)     14,000       19,000


 Total Cash Flows From Financing Activities     850,000      (564,000)    (371,000)
     Effect Of Exchange Rate Changes            (57,000)      28,000        1,000


   Change In Cash and Cash Equivalents        $319,000       $18,000     $127,000




                                                                                 66
Incomestatement of pepsi.
Pepsi                      2006 2007                    2008
net revenue               43251 39474                  35137
Cogs                      20351 18038                  15762
selling,general exp.      15901 14208                  12711
amortazation of
intangible assets             64       58                162
operating profit            6935     7170               6502

Bottaling equit incomr       374      560                553
int.exp                     -329     -224               -239
int.income                    41      125                173
PBT                         7021     7631               6989

Tax                         1879     1973               1347

net income                  5142     5658               5642


Equity of pepsi.


                          Stockholders' Equity
      Misc Stocks Options
                                            -           -             -
           Warrants
Redeemable Preferred Stock                  -           -             -
        Preferred Stock                    -           -             -
        Common Stock                   3,000       3,000         3,000
      Retained Earnings            3,130,000    3,124,000    2,708,000
        Treasury Stock             (2,703,000) (2,269,000) (2,017,000)
        Capital Surplus            1,851,000    1,805,000    1,751,000
  Other Stockholder Equity          (938,000)     (48,000)     (361,000)

 Total Stockholder Equity          1,343,000    2,615,000    2,084,000

   Net Tangible Assets         ($3,842,000) ($3,099,000) ($3,174,000)

                                                                     67
Key ratios

                   Pepsi   cocacola   Industry
Current ratio      1.1     1          1
Net profit         10.6    9.8        8.05
margin
Return on assets   15.81   14.46      10.97
Total asset turn   2       1.81       2.30
over
Inventory turn     7.9     5.4        2.19
over
Debt ratio         71.2    64.2       52
Equity             1.87    1.62       1.55
multiplier
Return on          39.84   28.73      28.69
equity
p/e                22.16   21.72      23.24
Price/cash flow    17.28   21.14      12.5
Gross margin       53.67   63.68      43
Debt to equity     .3      .45        .63
Long term debt     .23     .24        .76
to total equity
EPS                1.85    1.6        1.52
Return on sales    13.19   20.32      10.51




                                                 68
                  Bibliography
 PEPSICO WEBSITE,www.pepsico.com
 COCACOLA WEBSITE,WWW.COCACOLA.COM
 WWW.YAHOOFINANCE.COM
 WWW.MORNINGSTAR.COM
 WWW.BIGCHARTS.COM
 COCACOL INTERNATIONAL INTERNAL REPORT
 PEPSICO INTERNATIONAL INTERNAL REPORT
 WWW.SCRIBD.COM
 WWW.AUTHORSTREAM.COM




                                          69

				
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