The Coca-Cola Company
Fiscal Year Ended December 31, 2018
Professor Trang Phan
ACCT 301 7982
The Coca-Cola Company
The Coca-Cola Company began in the great city of Atlanta, Georgia in 1886 by the
pharmacist, Dr. John S. Pemberton. The original intent was to create a unique soft drink that
could be distributed via soda fountains. Having a pharmacological background enabled him to
mix the syrup with carbonated water until an acceptable formula was created. Dr. Pemberton is
also credited with the original script branding which is still used today. Coca-Cola often referred
to as “Coke”, went from a daily sales average of nine servings to now well over 1.9 billion
globally (Coca-Cola History, n.d.).
Coca-Cola is arguably one of the most recognized brands in the world. In fact, it is routinely
listed on Interbrand’s “Best Global Brands” list, coming in at number 5 for the year 2019 (Best
Global Brands 2019 Rankings, 2019). This recognition is the byproduct of an enterprise that can
boast as “the world’s largest nonalcoholic beverage company”. With a catalog that produces over
more than 500 separate beverages spanning from carbonated soft drinks, water, sports drinks,
juice, teas, coffees, dairy to energy drinks. This includes housing four of the world’s top
nonalcoholic soft drinks: Coca-Cola, Diet Coke, Fanta and Sprite. Coming from humble
beginnings in 1886, to being sold in more than 200 countries and territories around the world
(Coca-Cola Annual Form 10-K, 2019).
Globally, there are over 900 bottling and manufacturing facilities tied to the Coca-Cola brand
(The Coca-Cola System, 2019). This includes the manufacturing of fountain machine syrups,
which are also distributed globally from these locations. These partners also work closely with
stores, restaurants, vendors, theme parks, theaters and countless other associates to ensure the
product reaches consumers throughout the world. This system allows Coca-Cola to control both
the production and distribution of its products throughout the world, a pretty impressive feat.
Sales and Profitability
a) When looking at total sales for 2018, Coca-Cola reported selling unit case volume of 29.6
billion. This is an increase in comparison to the 29.2 billion and 29.3 Billion reported in
the years 2017 and 2016 (Coca-Cola Annual Form 10-K, 2019). This increase can be
directly associated with a strategic push to expand the company’s presence in new and
emerging markets. This also includes introducing products that fill consumer specific
needs, like products that utilize organic ingredients or reduced calories (Sanchez, 2019).
b) An impressive feat the Coca-Cola company can claim a reduction in the cost of goods
sold from the year 2017 to 2018. In fact, the company reported an 11.2% reduction in the
cost of goods sold over the last year, going from 13.25 billion to 11.77 billion (Coca-Cola
Annual Form 10-K, 2019). This is directly linked to a slight increase in sales, reducing
bottling operations and pushing smaller sized products that are cheaper to produce
(Reuters, 2016). By taking more control of the actual distribution costs, Coca-Cola was
able to dramatically reduce its cost of goods sold over the last three years. This coupled
with the use of foreign currency hedges helped to reduce the impact normally associated
with exchange rates (Coca-Cola Annual Form 10-K, 2019).
c) Another area of great pride is Coca-Cola’s increase in net income witnessed from 2017 to
2018. According to their 10-K report, the company pulled in $6.4 billion in consolidated
net income. This is quite the increase from the $1.2 billion reported in the year 2017
(Coca-Cola Annual Form 10-K, 2019). This upturn has been directly tied to Coca-Cola’s
approach to its consumer’s needs. The company has focused on its production of lowcalorie beverages, such as Coke-Zero and increased its manufacturing of smaller sized
products. Both of these filled the ever-changing needs of a more health-conscious market
d) Sales and accounts receivable are interrelated through a ratio. This can be calculated by
dividing the accounts receivable by the actual sales during a specific timeline. Accounts
receivable are the sales that have occurred on credit, meaning no money was received yet.
Sales refer to both the credit and cash sales a company has collected. This ratio can help
illustrate how much of a business's sales were actualized and is important in highlighting
any liquidity problems. Of the 31.85 billion in reported sales in 2018, 23.23 billion was
recorded as accounts receivable or on credit (Coca-Cola Annual Form 10-K, 2019).
Risk Factors Associated with Coca-Cola
Manufacturing a product that must be physically consumed by customers creates several risk
factors in itself. For instance, the Coca-Cola company must be prepared for any health-related
concerns with their problem, such as obesity and the financial ramifications this can have on
them. There are also risks associated with the key ingredients needed for production, such as
sugars and sugar-like sweeteners. Taxes on the ingredients, the total cost of correct labeling and
distribution of products provide plenty of risks (Coca-Cola Annual Form 10-K, 2019).
Coca-Cola is not alone in its production of non-alcoholic beverages. Increased competition
also presents plenty of risk to the company. The brand faces contest in all of their product lines
to include low-calorie soft drinks, syrup production, juices, enhanced waters, coffees, teas, and
energy drinks. The competition is also present in many of the same countries as Coca-Cola,
creating an even bigger risk of losing marketing ground globally (Coca-Cola Annual Form 10-K,
There are also plenty of risk factors associated with conducting business in multiple
countries. For instance, the ever-changing currency rate presents plenty of financial fluctuation
and risk (Coca-Cola Annual Form 10-K, 2019). Additionally, operating in foreign countries
opens a company up to litigation from governing agencies. Coca-Cola must remain abreast of
any policy/regulation changes within 200 plus counties of operation (Martin Zwilling, 2016).
Discussion on Income Statement
An income statement is a required measure routinely included in a financial report (SEC 10K) and it specifics a company’s revenues and expenditures from functional and non-functional
activities during a certain period of time (Walther, 2012). This document can help provide
insight into a company’s profitability which is essential to accounting. When comparing 2018
($31.85B) and 2017 ($35.41B) net revenues, Coca-Cola reported a 10% decline associated with
the companies push to re-franchise bottling services and currency headwinds. This decline was
expected and is in line with the company’s strategic plan to improve its margin. Coca-Cola
countered this revenue decrease by lowering the cost of goods sold between 2017 and 2018.
Dropping from 13.25B in 2017 to 11.77B in 2018, Coca-Cola has worked tirelessly to reduce
their operating expenses. Net income is defined as the total earnings of a company after expenses
have been accounted for ( Hermanson, Edwards, & Maher, 1993). Net income is also a line item
in which Coca-Cola has reported an increase in the last year. Growing from $6.7B to $8.3B
during the span of 12 months. This can be closely tied to their continued growth in low-calorie
Discussion on Disclosure Requirements
Financial disclosure in business can be a delicate balance. In one regard, a company must
disclose all accounting principles to operate within good business practice compliance. However,
they must weigh that against the threat of weakening their company’s competitive advantage
over an industry. The disclosure also provides a company with control of the message associated
with the data. For instance, Coca-Cola’s SEC 10-K showed a decrease in total revenue, however,
the company was able to explain the circumstances associated with the decline. They were also
able to clearly outline a plan for going forward and how this data validated their strategy.
Revealing such numbers could subject the company to criticism, especially if a competitor is
reporting growth. However, controlling the narrative can circumvent certain fallout.
Hermanson, R., Edwards, J. D., & Maher, M. (1993). Accounting Principles: A Business
Best Global Brands 2019 Rankings. (2019). Retrieved from Interbrand:
Coca-Cola Annual Form 10-K. (2019). Retrieved from https://www.cocacolacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2019/annualshareholders-meeting/2018-Annual-Report-on-Form-10-K.pdf
Coca-Cola History. (n.d.). Retrieved from https://www.worldofcoca-cola.com/about-us/cocacola-history/
Martin Zwilling. (2016, April 7). 6 Key Risk Factors When Scaling A Business To Global.
Retrieved from https://www.forbes.com/sites/martinzwilling/2016/04/07/6-key-riskfactors-when-scaling-a-business-to-global/#3cdd10ef2a89
Reuters. (2016, February 9). Cost-Cutting is Helping Coke Make More Money. Retrieved from
Sanchez, L. (2019, April 15). How Coca-Cola Is Thriving Despite Declining Soda Consumption.
Retrieved from https://www.fool.com/investing/2019/02/12/how-coca-cola-is-thrivingdespite-declining-soda-c.aspx
Scribner, H. (2019, October 18). Coca-Cola is doing really well. Coke Zero is the reason why.
Retrieved from https://www.deseret.com/2019/10/18/20920909/coca-cola-coke-zerominute-maid-simply
The Coca-Cola System. (2019). Retrieved from https://www.coca-colacompany.com/ourcompany/the-coca-cola-system
Walther, L. (2012). Principles of accounting: Chapter 16.
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