Coca Cola and PepsiCo: Financial Statements

There are several strategies used to compare the performance of different companies operating on the global market. For example, the financial performance of the companies may be reviewed to determine their rate of success. In addition, the marketing strategies adopted by the organization, together with the market share controlled, may be analyzed to identify the target customers served by the companies. In this paper, the performance of two companies operating in the beverages industry is reviewed. The two are Coca Cola and Pepsi companies. The performance of the two multinationals is compared using their financial statements. Given that the author of this paper could not access internal financial information on the two entities, external data that is available to the public was used. A comparative analysis of the two companies’ performance within a period of two years is made. The items reviewed include, among others, revenues, cost of goods sold, accounts receivable, accounts payable, and inventory. The aim is to determine the best performer between the two companies. The comparison will be made from a managerial perspective, analyzing the significance of the information reviewed to a manager operating in the two entities.

Review of the Companies’ Background

Coca Cola Company: Background Information

Coca Cola Company is one of the largest organizations in the world. It manufactures, distributes, and markets non-alcoholic beverages. The company is the world’s most dominant entity in relation to the production of beverages. It has more than 500 sparkling and still brands (Coca Cola, 2013). The portfolio of Coca Cola Company features 16 billion dollar brands. They include, among others, Fanta, Diet Coke, Sprite, and Minute Maid. In addition, the organization is known for the production and distribution of Coca-Cola Zero, PowerAde, Vitamin Water, and Del Valle (Coca-Cola, 2013).

Pepsi Company: Background Information

Pepsi Company is among the world’s leading beverage and food production companies. It is one of the major competitors in the market, coming close behind Coca Cola. The company has more than 22 brands of complimentary food and beverages (PepsiCo, 2014). In the recent past, the company has expanded its operations to many parts of the world. The aim is to expand its market beyond the traditional segments.

Review of the Companies’ Financial Statements

Overview

Both Coca Cola Company and PepsiCo have been competitors in the beverages industry for several decades. It is interesting to note that the operations of the two companies are very similar. As a result, an analysis of the dual’s financial statements provides a lot of information with regards to cost behavior. The statements analyzed are for 2011 and 2012 financial years.

PepsiCo versus Coca Cola’s Revenues and Cost of Sales

The operations of Coca Cola are very costly. The reason is the extensive nature of these global processes. The table below highlights the company’s revenues for 2011 and 2012 financial years:

Table 1. 2011 and 2012 revenues for Coca Cola. Source: The Coca Cola Company (2012, par. 50).

Percent Change
Year Ended December 31
(values in millions except %s and per share data)
2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Net Operating Revenues $48,017 $46,542 $35,119 3% 33%
Cost of Goods Sold $19,053 $18,215 $12,693 5 44

The company’s revenues increased between 2011 and 2012. An estimated 3% rise in this ratio indicates increased operations in the organization. As a result, the cost of goods sold also increased.

PepsiCo also recorded vigorous operations during the same duration. The table below indicates the operating revenues recorded in this company. According to Indra K. Nooyi, Chairman and CEO of PepsiCo, the organization made significant investments in 2012. The aim was to build its global brand (PepsiCo, 2012).

Table 2. 2011 and 2012 revenues for PepsiCo. Source: PepsiCo (2012, par. 68).

% Change
Fiscal years ended Dec 29, 2012, Dec 31, 2011 and Dec 25, 2010.
(values in millions except per share amounts)
2012 2011 2010 2012
Total net revenue $65,492 $66,504 $57,838 (1.5%)
Cost of Sales $31,291 $31,593 $26,575
Selling, general, and administrative expenses $24,970 $25,145 $22,814
Amortization of intangible assets $119 $133 $117

In 2012, PepsiCo recorded a significant decline in relation to operating revenues. The figures dropped by 1.5% compared to the same in 2011. The reduction might have been due to the expansion of operations as indicated by the CEO. However, the cost of sales stood at a fairly constant rate.

PepsiCo versus Coca Cola’s Accounts Payable, Inventories, and Accounts Receivable

The following table is an overview of Coca Cola’s financial position in 2011 and 2012 financial years. The consolidated balance sheet readings are in millions.

Table 3. Coca Cola’s financial position in 2011 and 2012. Source: The Coca Cola Company (2012, par.75).

December 31, 2012 2011 Increase(Decrease) Percent Change
Assets
Trade accounts receivable-net $4,759 $4,920 (161) (3)
Inventories $3,264 $3,092 172 6
Liabilities
Accounts payable and accrued expenses $8,680 $9,009 (329) (4)

The following table illustrates PepsiCo’s consolidated balance sheet in relation to the company’s accounts payable, and receivables, and inventories for 2011 and 2012 financial years:

Table 4. PepsiCo’s consolidated balance sheet for 2011 and 2012 financial years. Source: PepsiCo (2012, par. 72).

Difference
2012 vs. 2011
Dec. 29, 2012, and Dec. 31, 2011
(in millions except per share amounts)
2012 2011
Assets- Current assets
Accounts and notes receivable-net $7,041 $6,912 1.9%
Inventories $3,581 $3,827 (246)
Liabilities-Current Liabilities
Accounts payable and other current liabilities $11,903 $11,757 1.2%

Between 2011 and 2012, Coca Cola Company recorded a decline of 3% with regards to its accounts receivable. In addition, the accounts payable reduced by 4%. The negative growth is attributed to reduced sales since the inventories experienced a paltry 6% increment over the duration.

On the other hand, PepsiCo exhibited a more positive trend. The accounts receivables increased by 1.9%. Furthermore, the accounts payable rose by 1.2%. The company’s inventories, however, exhibited a slight between 2011 and 2012.

The Performance of PepsiCo and Coca Cola Company

Business operations between the two companies differed significantly over the 2011- 2012 review period. Based on the balance sheets and income statements of the two companies, it appears that Coca Cola Company performed better than PepsiCo. PepsiCo’s operating revenues declined by 1.5% between 2011 and 2012. However, the company recorded an increment of 1.2% in liabilities. The organization was investing heavily during this period to expand its operations in the global market. In addition, PepsiCo has a wide range of products, while Coca Cola Company primarily focuses on beverages.

Financial statements are crucial to managers in the decision-making process. For instance, by reviewing Coca Cola’s income statements, managers at PepsiCo can come up with a strategy to reduce liabilities and expenses associated with the production of beverages. The managers can also gauge the degree of competition in the market by reviewing their rival’s financial statements.

References

Coca Cola. (2013). Our company. Web.

PepsiCo. (2014). Who we are. Web.

PepsiCo. (2012). PepsiCo 2012 annual report. Web.

The Coca Cola Company. (2012). United States Securities and Exchange Commission form 10-K. Web.