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  • With more than 1.9 billion drinks served every day, Coca

  • Cola is one of the world's largest beverage companies. From

  • its humble beginnings selling a single product at a drugstore

  • for five cents a glass, the company now has a roster of 200

  • brands that includes Coke, Fanta, and Sprite. But with US

  • soda consumption on the decline, the soft drink maker has been

  • forced to pivot. In 2021, Coke launched Topo Chico hard

  • seltzer, the company's first move into alcoholic beverages in

  • the US in almost four decades. The company has also made recent

  • investments into the sports performance drink category with

  • Body Armor and the purchase of UK coffeemaker Costa. And while

  • the pandemic has caused major disruptions in the first quarter

  • of 2021 Coke reported net revenue was up 5% to $9 billion

  • dollars.

  • We were very focused over the last 12 months on focusing on

  • really improving our marketing, we cut the portfolio of brands

  • in half. We got really focused on our innovation pipeline, we

  • work with our bottlers to really support the customers in new and

  • different ways where they're open. And the sum of all that,

  • along with a new organization we've stood off has allowed us

  • as you say, to come back to the pre pandemic levels.

  • Coke is eagerly anticipating some reopenings and vaccine

  • rollouts. In the meantime, it faces a number of challenges,

  • including further COVID-19 disruptions and ongoing tax

  • litigation with the IRS. In November 2020, a US tax court

  • said that Coca Cola had to pay the bulk of its $3.4 billion tax

  • bill. Coke said it would ultimately prevail in litigation

  • with the IRS, but that is potential liability could be as

  • high as $12 billion. So after 135 years in business, can the

  • soft drink giant stay on top? And what will the secular

  • decline of sugar sweetened beverages in the US mean for the

  • future of Coca Cola?

  • Coca Cola traces its history to a soda fountain in Atlanta,

  • Georgia. In 1886, pharmacist John Pemberton created a carmel

  • colored syrup took the mixture to a nearby drugstore, where

  • carbonated water was added, and the drink sold for five cents a

  • glass. According to author Mark Pendergrast, the mixture

  • contained caffeine, lots of sugar, and for the first few

  • years, a small amount of extract from coke leaves, in other

  • words, cocaine.

  • And at first, their ads were primarily promoting it as a

  • medicine. It was supposed to cure morphine addiction for one

  • thing, which it did not in Pemberton's case unfortunately,

  • but it was supposed to be an aphrodisiac. It was supposed to

  • cure basically whatever ails you.

  • In 1888, Pemberton began to sell the recipe to a well capitalized

  • businessmen named Asa Candler, and by 1895 Coca Cola was

  • available in every state in the US. By the turn of the century,

  • Coca Cola adverts were appearing on clocks, trays, and posters

  • and the drink was moving from soda fountains and into bottles.

  • The company's advertising budget reach a million dollars in 1911,

  • the equivalent of about $27 million today,

  • And that became wildly successful by 1900-1910, there

  • were Coca Cola bottling plants in every small town not only in

  • the south, but throughout the country.

  • By the 1920s and 30s, Coca Cola had reinvented itself as an all

  • American soft drink and was entering new markets abroad.

  • Exempted from sugar rationing during World War Two and in

  • support of GIs, the company since 64 portable bottling

  • plants around the globe, distributing more than 5 billion

  • bottles of Coca Cola. And it wasn't just Americans who are

  • hooked on sugary drinks. According to Pendergrast's book

  • for 'God Country and Coca Cola', in Germany with the supply of

  • key ingredients being curtailed due to the war, local operators

  • invented a new drink Fanta. The flavored beverage the first new

  • product from the company eventually made its way to the

  • US in 1960. Coke produced a slew of other new innovations too. In

  • 1960, steel 12 ounce cans were introduced, in 1963 tab, the

  • company's first diet drink launched in 1971. The 'I'd like

  • to Buy the World of Coke' commercial aired, and 1982 saw

  • the debut of diet coke. In 1985, in an attempt to boost sales and

  • compete with rival Pepsi in the soda wars, the company

  • reformulated its classic soda and launched New Coke. The move

  • was a major misstep, with widespread disapproval from fans

  • and pundits alike. Just 79 days after the soda was launched the

  • company reversed course and the original formula was reinstated.

  • And while the consumption of sugar sweetened beverages in the

  • US was rising during the 1990s, the company was about to face an

  • even bigger threat. In the early 2000s, health and wellness

  • concerns rose to the top of most consumers agenda. Soda

  • consumption began to decline.

  • The peak happened around in the early 2000s from a consumption

  • standpoint, if you look at per capita consumption, and then

  • it's it's been declining ever since.

  • At the same time that we started to see, carbonated soft drinks

  • decline in consumption was about the same time that we started to

  • see increased concerns about sugars and simple carbohydrates.

  • But despite that drop Americans and people everywhere were still

  • hooked on soda. Between 2011 and 2014, almost half of us adults

  • were drinking at least one sugar sweetened beverage a day.

  • The soda market in the US is a $38.5 billion dollar business

  • according to IBISWorld and includes companies like PepsiCo,

  • Keurig Dr. Pepper, and of course Coca Cola. With consumers mostly

  • stuck at home forgoing restaurants, concerts, and

  • sporting events, the pandemic has been a mixed bag for soft

  • drink makers. PepsiCo announced first quarter 2021 net sales

  • reach more than $14.8 billion almost 7% higher than a year

  • earlier, fueled by pandemic snacking in its Frito Lay

  • division and higher sales of drinks like Bubly sparkling

  • water and Starbucks ready to drink coffees. With more people

  • reaching for a caffeine fix while working out of their home

  • office, Keurig Dr. Pepper's coffee business got a jolt too.

  • The company announced first quarter 2021 net sales of $2.9

  • billion more than 11% higher than the prior year. And while

  • Coca Cola saw 2020 net revenue decline 11%, the soft drink

  • maker bounced back with first quarter 2021 net revenue of $9

  • billion up 5% from a year earlier.

  • Coca Cola has really been hit hard by the pandemic and it's

  • definitely not out of the woods yet.

  • Whilst there is uncertainty and volatility particularly in the

  • near term ahead of us we feel confident about the corridors

  • what we're setting for the top line and the bottom line

  • guidance, and we believe that we will be able to emerge stronger

  • from this crisis.

  • A major issue for the soda giant. According to one analyst,

  • Coke has more exposure to restaurants like McDonald's and

  • sports venues than its peers PepsiCo or Keurig Dr. Pepper.

  • What that means is they had a lot of market share to lose in

  • those channels. And so as those channels closed, they had

  • obviously disproportionate impact in terms of their

  • revenues and their market share.

  • To make up for that loss, the soft drink maker slashed its

  • global workforce in 2020 by about 11% and trimmed its roster

  • of brands from 400 to 200. Tab, the company's first diet soda

  • was culled. But Coca Cola has several key advantages that will

  • allow the company to reinvigorate its business

  • according to analysts. For starters, Coke's diverse

  • geographic position should provide the company with a

  • steady stream of growth. Coca Cola products are sold in more

  • than 200 countries and territories worldwide. Coke also

  • has one of the world's largest non alcoholic beverage

  • distribution systems and derives more than 40% of sales from

  • developing and emerging economies with a growing middle

  • class. In 2020, Coca Cola had net operating revenue of $33

  • billion, almost 66% of that came from outside the US. In

  • developed markets where Coke is firmly established and

  • competition is rife. The company has proven profit growth

  • strategies driven by innovation.

  • Even in the US as soda consumption has been declining,

  • the value of the category has still been been increasing.

  • According to Johnson, one strategy coke uses is price pack

  • architecture, which generally refers to consumers willingness

  • to pay extra for packaging innovations. In Coke's case, it

  • discovered consumers not only preferred smaller size drinks,

  • but were willing to pay more per ounce for them. Another key

  • advantage Coke has positioned itself in an area of the supply

  • chain that is less capital intensive and requires less

  • labor and overhead than rival beverage companies like Pepsi.

  • Most of Coke's trademark beverages are not packaged and

  • delivered by the company. In general, Coke focuses its

  • operations on producing the concentrate for its beverages

  • and ships those mixtures to bottlers for processing

  • packaging and distribution.

  • In 2020, environmental group Break Free From Plastic took a

  • global audit of plastic trash working with almost 15,000

  • volunteers in 55 countries collecting plastic bottles,

  • coffee cup lids, shampoo bottles, and surgical masks in a

  • two month cleanup. The group said that for the third year in

  • a row soft drink giant Coca Cola emerged as a top global polluter

  • with almost 14,000 Coca Cola branded plastics collected in 51

  • countries. According to Greenpeace as of 2018, Coca Cola

  • has produced over 110 billion single use plastic bottles. The

  • environmental group estimates than in the decade leading up to

  • 2018, Coca Cola increased the number of single use plastic

  • bottles by about a third accounting for almost 70% of

  • Coke's packaging globally. While Coca Cola is not the only

  • multinational corporation that relies on plastic packaging, the

  • company's size illustrates the scale of the problem. Other top

  • polluters according to Break Free From Plastic include