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Financial Analysis of Gatorade - February 11th, 2011

Financial Analysis of Gatorade : Gatorade is a brand of flavored non-carbonated sports drinks manufactured by PepsiCo and distributed in over 80 countries.[1] It was first developed in 1965 by researchers at the University of Florida, as a means of replenishing the fluid, carbohydrates and electrolytes that are divested from the body during physical exertion. Its name was derived from the school’s football team, the Gators.
Originally produced and marketed by Stokley-Van Camp, the Gatorade sports drink brand was purchased by the Quaker Oats Company in 1983, which was acquired by PepsiCo in 2001. As of 2009, Gatorade is PepsiCo’s 4th-largest brand, on the basis of worldwide annual retail sales. It primarily competes with Powerade and Vitaminwater worldwide, as well as Lucozade Sport in the United Kingdom. Within the U.S., Gatorade accounts for approximately 75 percent market share in the sports drink category.[2]

PepsiCo Inc. (NYSE:PEP) is a global manufacturer, distributor, and marketer of food and beverages, owning many well-known brands including Pepsi, Frito-Lay, Tropicana, Gatorade, and Quaker Oats.[1] PepsiCo operates in over 200 countries, with its largest markets in North America and the United Kingdom.[2] In 2009, the company's revenues were $43.23 billion with net income of $5.95 billion.[3]

Unlike its major competitor, the Coca-Cola Company (KO), the majority of PepsiCo's revenues do not come from carbonated soft drinks.[4] In fact, beverages account for less than 50% of total revenue.[4] Additionally, over 60% of PepsiCo's beverage sales come from its key noncarbonated brands like Gatorade and Tropicana.[5] PepsiCo's diverse portfolio can mitigate the impact of poor conditions in any one of its markets. Strong demand growth in international markets -- the company serves 86% of the world's population and international sales account for 48% of revenue -- is helping to offset a sluggish domestic market and provided the company with opportunities for continued expansion.[6] [7]

PepsiCo is highly exposed to raw materials costs. Prices for the most important input materials, aluminum, PET plastic, corn, sugar, and juice concentrates fluctuate widely. For example, aluminum prices have fallen nearly 60% from their 2008 highs of $1.50/pound to less than $0.90/pound.[8] PepsiCo has benefitted from lower input prices after the collapse of the commodities super spike of 2008.

Contents
1 Company Overview
1.1 Quarterly Earnings
1.2 Bottlers
1.3 Operating Segments
2 Trends & Forces
2.1 PepsiCo Must Survive a US Slowdown While Capturing International Growth
2.2 Commodity Costs are Pressuring Margins
2.2.1 Pepsi Must Face a Declining Demand for Carbonated Soft Drinks
2.2.2 The Dollar Affects International Performance
3 Competition
3.1 Beverages
3.2 Snacks and Convenient Foods
3.3 Coke vs. Pepsi
3.3.1 Global Footprint
3.3.2 Diversified Product Offering
4 References
On April 20, 2009, PepsiCo made an offer to acquire its two largest bottlers, Pepsi Bottling Group (PBG) and Whitman (PAS), for $6 billion in a combined cash and stock deal. The deal was turned down, forcing PepsiCo to make a sweetened $7.8 billion offer on August 4, 2009. PepsiCo hopes to streamline manufacturing and distribution through the acquisitions, allowing it to bring new products to market more quickly and efficiently. The company expects to gain full control of 80% of its North American market and increase pre-tax profit by $300 million, increasing eps by $.15.[9] The deal adds $4 billion in debt to PepsiCo's balance sheet. According to PepsiCo CEO Indra Nooyi, the acquisition is necessary to consolidate profit as there is not enough total profit in the North American beverage industry to support investments in several different companies.[10] The acquisition closed on March 1, 2010.[11]

With the purchase of Pepsi Bottling Group (PBG) and Whitman (PAS) in 2010, company executives have said that it will lead to increased joint marketing that will bundle the company's snack and beverage offerings together.[12]

In December 2010, PepsiCo announced the purchase of 66% of Wimm-Bill-Dann Foods, a Russian food and beverage company, for $3.8 billion. After completing this acquisition, the company is planning to buy the remaining 34%.[13] Wimm-Bill-Dan is the leading producer of dairy products in Russia and they also have a large market share for juice; the purchase significantly expands Pepsi's presence in Eastern Europe and Central Asia. The addition of Wimm-Bill-Dann moves Pepsi closer to their goal of creating a global nutrition business worth $20 billion by 2020.[14] The acquisition comes three months after the Coca-Cola Company's purchase of Nidan Juices, a leading Russian juice manufacturer.[15]

Company Overview


PEP Revenues by Segment[16]
PepsiCo is the largest snack and non-alcoholic drink producer in the United States, with 39% and 25% of the respective market shares.[16] Although the carbonated soft drink market in the US has gradually declined since the mid-2000s, PepsiCo has been able to grow revenues and net income through product diversification and international expansion. In 2008, the company posted revenues of $43.3 billion, a 9.6% increase from 2007; net income fell by 9% to $5.1 billion.[17] The increase in revenues was primarily driven by higher sales volumes in the key European and Asian markets as well as company wide price increases.[18] The fall in net income was attributable to two reasons. First, PepsiCo recognized a $346 million mark-to-market loss on derivatives used to hedge its commodity exposure.[19] Next, the company incurred restructuring costs of $543 million in relation to its Productivity for Growth program.[20] PepsiCo expects to record another $30-60 million charge in 2009 to complete the program, which will close six plants in an effort to streamline PepsiCo's global supply chain.[20]


Quarterly Earnings
Q1 2009

In the first quarter of 2009, PepsiCo posted revenues of $8.263 billion, a 1% decrease from Q1 2008 figures; net income fell less than 1% to $1.135 billion.[21] Although net pricing across PepsiCo's product line increased by 7% during the quarter, the company was negatively impacted by a 7% foreign exchange loss due to the strengthening US dollar, as well as a 2% net decrease in sales volume.[22]

Q2 2009

In the second quarter of 2009, PepsiCo posted revenues of $10.592 billion, a 3% decrease from Q2 2008 figures; net income fell less than 1% to $1.66 billion.[23] PepsiCo's volumes remained roughly constant between the quarters, with snack gaining 1% and beverages losing 1%. The decrease in net revenues was due to a weakening of the company's US beverage operations, which decreased by 9%, in addition to the strengthening dollar, which adversely affected revenues by 8.5%. Ignoring these changes, revenues would have grown by 5.5%, driven by gains in the the Latin America Foods and Asia/Middle East/Africa divisions. Net income remained roughly constant as input costs fell in line with net revenues. Ignoring currency fluctuations, Earnings Per Share (EPS) would have grown by 8%.[23]

Q3 2009

In the third quarter of 2009, PepsiCo had revenues of $11.08 billion, a 1.5% decrease from Q3 2008; net income increased 12% to $2.23 billion.[24] The increasing value of the US Dollar negatively affected net income by 7% and the company had $9 million in costs associated with its merger with PBG and PAS, its two largest bottlers.[25] Worldwide, beverage volume increased 0.5% while snack volume increased 2%. Frito-Lay North America, the largest division of PepsiCo, grew net revenue by 5% and increased volume by 3%.[26] Through the first three quarters of 2009, Frito-Lay was the fastest growing consumer goods company in North America.[27] The second largest division, PepsiCo Americas Beverages, saw net revenues decline by 9% and total volume decline of 6%.[28] Both Gatorade and Aquafina had double-digit volume declines; discussing Gatorade, executives attribute the decline to casual consumers' budget worries and insist that the core consumer, athletes, are still buying the brand.[29] In Latin America and Europe, net revenue declined 10% and 2% respectively, driven primarily by foreign currency weakness compared to the US Dollar.[30]

Q4 2009

In the fourth quarter of 2009, PepsiCo had revenues of $13.3 billion, a 4.7% increase from Q4 2008; net income increased 99% to $1.43 billion.[31] Operating income for the quarter was $2 billion.[32] Pepsi American Foods' net revenues increased 4%, with a 5% revenues decrease for Quaker Foods being offset by 2% revenue growth for Frito-Lay and 10% revenue growth for Latin American Foods. Pepsi American Beverages' net revenues decreased 2% as a result of a 5% decrease in volume. Pepsi International's net revenues increased 5%, supported by 4% revenue growth in Europe and 7% growth in AMEA. Volumes for AMEA increased 13% in the quarter while volumes for Europe decreased 3%.[33] AMEA's strong quarter was based on a 13% increase in snack sales and 5% increase in beverage volumes, with 21% growth in beverage volume in India.[34] However, China's beverage volume decreased, which implies a market share loss to Coca-Cola Company (KO), whose China volumes grew 29% during the same period.[35]

Q1 2010

In the first quarter of 2010, PepsiCo had revenues of $9.4 billion, a 13.4% increase from Q1 2009; net income increased 26% to $1.4 billion. Operating income for the quarter decreased 47% to $840 million.[36] On February 26, PepsiCo completed the acquisition of its two largest bottlers for approximately $12.6 billion; charges related to the merger in this quarter were approximately $282 million .[37] Worldwide snack volume for the quarter increased 1% while beverages volume dropped 0.5%. Frito-Lay's operating profit increased 10%, primarily as a result of increased sales of variety product packs and the decreased cost of cooking oil.[38] Quaker Foods revenue decreased 1% because of declines in ready-to-eat cereals and oatmeal, which were partially offset by substantial growth in the Roni brand; operating profit declined by 12% mainly as a result of insurance recoveries related to last year's flood at Cedar Rapids.[39] In Latin America, favorable net pricing and a 1% increase in volume resulted in a 13% increase in revenues; however unfavorable currency exchange rates in Venezuela (19% decrease) accounted for a 12% decline in operating profit.[40] In Europe, favorable currency exchange rates offset 4% declines in snack and beverage volumes, for net revenues increase of 5% and operating income increase of 16%.[41] Double-digit growth in snacks and beverages volumes for India and China drove net revenues up 23% and operating income up 17% for the Asia, Middle East, and Africa segment.[42] The company's Americas Beverages segment saw volumes slip 4% (despite a 2% gain from a recent distribution agreement with Dr Pepper Snapple Group (DPS)) with a double-digit decline in Aquafina volume. However, net revenues increased 32% while operating income decreased 83% as a result of the completed merger with PepsiCo's two largest bottlers.[43] The merger makes comparisons to previous quarters very challenging, however the Americas Beverages segment is in the process of de-emphasizing less-profitable products in favor of higher end offerings, such as Gatorade, which saw nearly 10% volume gains in the quarter. [44]

Q2 2010

In the second quarter of 2010, PepsiCo had revenues of $14.8 billion, up 40% from Q2 2009; net income decreased 3.4% to $1.6 billion. Operating income increased 12.3% to $2.46 billion.[45] The primary reason for the discrepancy in revenues and net income was the ongoing costs associated with the company's purchase of its primary bottlers. In Q2 2010 charges related to the restructuring decreased income by $155 million.[46] Worldwide volume increased 7% with an 11% increase in beverages and 1% increase in snacks. Frito-Lay pound volume fell 3% but net income increased 2%. The segment also benefited from lower commodity costs, in particular lower prices for cooking oil. Quaker Foods North America's revenue fell by 4% with a 2% decline in volume that was primarily attributable to a decrease in cereal volume.[47] Latin America Foods net revenue increased 12% with a 2% increase in volume. However, operating profit fell by 5% after an unfavorable court settlement decreased profits by 5% and unfavorable currency exchange rates added another 5% to the decrease. The company's Americas Beverages increased revenues by 112% as a result of the merger with its major bottlers; volume for the quarter increased 13% with 8% coming from the acquisition of bottling operations in Mexico and 6% from PepsiCo's contract with Dr. Pepper Snapple Group.[48] In Europe, net revenues increased 47% with snack volumes growing at 2% and beverage volume growing at 10%. Sales improved in most of Western Europe and Russia but declined slightly in Eastern European countries such as Romania and Ukraine (with the one exception of double-digit beverage growth in Turkey).[49] In Asia, Middle East, and Africa, where the company has recently invested significant funds in increasing manufacturing capabilities, net revenue grew 22%. Snack volume grew 16% and beverage volumes increased by 8%. India saw double-digit growth in both categories, while snack volume in the Middle East and China grew more than 10%.[50]

Q3 2010

In the third quarter of 2010, PepsiCo had revenues of $15.5 billion, up nearly 40% from Q3 2009; net income increased more than 11% to $1.9 billion. Operating income increased by 25% to $2.8 billion.[51] The company's volume and revenues increased worldwide for both food (+2.5%) and beverages (+11%). Quaker Foods was the company's only division that failed to grow its operating income from 2009 with the largest gains posted by North American beverages, Europe, and Latin America Foods.[52] PepsiCo Americas Beverages operating profit grew nearly 80% for the quarter with the majority of this growth related to the company's purchase of its main bottlers in Q1 2010. However, volume grew by 13% during the quarter reflecting 8% growth in Mexico (operations in Mexico were included in the bottling merger), 6% volume growth due to the company's new contract with Dr Pepper Snapple Group (DPS), and a 4% decline in carbonated beverages in North America that was more than offset by a 5% increase in non-carbonated beverages. The success of the latter was due primarily to a double-digit increase in volume for Gatorade; water sales continued to fall during the quarter.[53] In Europe, volume growth related to the bottling merger accounted for a 7% increase, while double-digit growth in Russia, the UK, and Turkey pushed volume up 17% in total. Snack volume for the quarter grew by 3%, again supported by Russia, the UK, Turkey, and France. Both beverages and snack volume fell by more than 10% in Romania during the quarter.[54] Latin America Foods operating profit grew by 22% as a result of a double-digit volume increase in Brazil and nearly 10% increase in volume for the Sabritas brand in Mexico.[55] Operating profit for Quaker Foods decreased by more than 5% as a result of a 1% decline in volume, especially for Roni and Oatmeal brands. For Frito-Lay North America, pound volume declined 2% as a result of overlap with the company's "20% More Free" promotion; sales of Sun Chips fell by more than 10% forced the company to abandon its compostable, albeit noisy, packaging.[56] In the Asia, Middle East, and Africa segment snack volume grew by 16% and beverage volume grew by 4%. Snack volumes grew significantly in the Middle East, China, India, and Australia while only China exhibited strong single-digit beverage growth.[57]

Bottlers
*Note - Pepsi's acquisition of Pepsi Bottling Group (PBG) and PepsiAmericas (PAS) was completed on March 1, 2010

PepsiCo's beverage division manufactures concentrated syrup forms for all of Pepsi's beverage brands. PEP sells these concentrates to bottlers for production, packaging, and distribution of the final products. PepsiCo grants bottlers the use of Pepsi trademarks and other brand rights within certain geographic regions.

In August 2009, Pepsi made a $7 billion offer to acquire Pepsi Bottling Group (PBG) and PepsiAmericas (PAS). As the US carbonated beverage market shrinks - from 60% of all nonalcoholic beverages in 1999 to 35% in 2009 - PepsiCo hopes to consolidate the earnings of the three companies for shareholders.[9] Additionally, PepsiCo believes the acquisitions will streamline company-wide distribution through economies of scales.

Three companies distribute 60% of PepsiCo's North American beverage volume:[58]

The Pepsi Bottling Group (PBG) is the largest of PepsiCo's bottlers. PepsiCo has a 33% stake in Pepsi Bottling Group (PBG), and claims its share of income under the equity method of accounting.[59]
PepsiAmericas (PAS) is the second-largest bottler in the Pepsi system. PepsiCo has a 43% stake in PepsiAmericas (PAS), and claims its share of income under the equity method of accounting.[60]
Pepsi Bottling Ventures is the third-largest domestic bottling company within the Pepsi system. The company was formed in 1999 when five of Pepsi’s bottling companies consolidated to form PBV.
Operating Segments
PepsiCo operates in six divisions:

Frito-Lay North America (29% of Revenue, 43% of Operating Income)[61] manufactures, markets and sells branded snacks. Popular products include Lay's Potato Chips, Doritos Tortilla Chips, Cheetos, Rold Gold Pretzels, and SunChips.[1] Following the company's purchase of Pepsi Bottling Group (PBG) and Whitman (PAS), company executives have said that it will lead to increased joint marketing, bundling the company's snack and beverage offerings.[62]
Quaker Foods North America (4% of Revenue, 8% of Operating Income)[61] manufactures, markets and sells cereals, rice, pasta and other branded products. Popular products include Quaker Oatmeal, Aunt Jemima mixes and syrups, Cap n' Crunch cereal, Rice-A-Roni, and Life cereal.[1]
Latin America Foods (14% of Revenue, 13% of Operating Income)[61] manufactures, markets and sells a number of leading salty and sweet snack brands. Popular products include Gamesa, Doritos, Cheetos, and Ruffles.[4]
PepsiCo Americas Beverages (25% of Revenue, 29% of Operating Income)[61] manufactures, markets and sells beverage concentrates, fountain syrups and finished goods, under various beverage brands. Popular products include Pepsi, Mountain Dew, Gatorade, Tropicana, and Izze.[4]
United Kingdom & Europe (15% of Revenue, 10% of Operating Income)[61] manufactures, markets and sells a number of leading salty and sweet snack brands. Popular products include Lay's, Walker's, Doritos, and Cheetos.[4]
Middle East, Africa, and Asia (13% of Revenue, 8% of Operating Income)[61] manufactures, markets and sells a number of leading salty and sweet snack brands. Popular products include Lay's, Smith's, Doritos, and Cheetos.[63]
Trends & Forces

PepsiCo Must Survive a US Slowdown While Capturing International Growth
Soaring food and energy prices[64], the housing slump[65] and a weakening job market[66] are putting the breaks on consumer spending in North America, even in the typically recession proof drinks and snacks market.

Emerging markets such as China, India, Eastern Europe and Latin America present strong growth opportunities for Pepsico. In December 2010, Pepsi announced their purchase of Wimm-Bill-Dann Foods, a Russian food and beverage company, for $5.4 billion[67]; the purchase followed Coca-Cola's purchase of a Russian juice company for $300 million in summer 2010.[68] Wimm-Bill-Dan is the leading producer of dairy products in Russia and they also have a large market share for juice; the purchase significantly expands Pepsi's presence in Eastern Europe and Central Asia. The company had sales of $2.6 billion in 2010 and serves approximately 280 million customers in Eurasia.[69]

In addition to making international acquisitions, PepsiCo is investing significant resources in expanding their manufacturing capabilities in developing markets. The company has pledged to invest $3.5 billion in China through 2013, mainly through the construction of 10 to 12 new manufacturing facilities (in addition to the 27 it currently operates). In China, Pepsi is also pursuing a strategy of buying back stakes in its Chinese operations from local partners. These acquisitions will give the company greater control over its operations while increasing profits. Unlike the saturated North American market, China's carbonated drink market is growing at almost 20% annually.[70] In late August 2010, PepsiCo announced its plan to invest $250 million in new manufacturing plants in Vietnam further expanding its footprint in the region. In the past two years, the company invested in two other manufacturing plants in Vietnam, and it currently operates five plants in the country.[71] In Latin America, the company has pledged $3 million over the next three years to create an agriculture research center in Peru, which will focus on the discovery of new potato and other vegetable varieties.[72]

Pepsi's expects their global nutrition business will be worth $20 billion by 2020.[73]

Commodity Costs are Pressuring Margins




2007-2009 PET resin prices, ¢/pound [74]
PepsiCo's profitability can be affected directly and indirectly by the costs of various production inputs. PEP is responsible for purchasing the raw materials used to make its products in all its markets and also acts as an agent for the purchase of its bottlers' raw materials. Some of the raw materials used by PEP include grains such as corn, wheat flour, oats and rice; fruit and vegetable products like oranges, potatoes, and juice concentrates; sugar; and vegetable and essential oils. For example, aluminum prices have fallen more than 60% from their 2008 highs of $1.50/pound to less than $0.65/pound.[8] Changes in the prices of such raw materials could impact total production costs and the company’s profit margins. Changes in bottlers' production input costs can also indirectly impact PEP's profits. If a bottler's raw materials become more expensive, it might pass on the increase to customers, which could lead to a loss of market share as customers switch to more affordable alternatives. The primary raw materials used by bottlers are high fructose corn syrup, which is used as a sweetener, aluminum, used to make cans, and PET Resin, used for plastic bottles.

In an effort to insulate itself from market forces, PepsiCo has invested $29.3 million in five farms in China, making it one of the country's largest agricultural companies.[75] The farms primarily produce potatoes for the company's potato chip brands and by 2005, the company was the largest private potato grower in the country.[76] In her 2008 visit to China, CEO Indra Nooyi said that the company is planning to invest $1 billion in China by 2012.[77] In addition to its farms in China, Pepsi has 12,000 contract farmers in India growing potatoes on 16,000 acres of land. In addition to potatoes, the company is hoping to expand its contract farming initiative to include oats in the near future.[78]

Pepsi Must Face a Declining Demand for Carbonated Soft Drinks
Consumer demand for CSD has been negatively affected by concerns about health and wellness. Since 1999, carbonated soft drinks have dropped from 60% to 35% of total US beverage volume.[9] Rising health and wellness concerns can be attributed to increasing concern for obesity as well as education campaigns on the part of the FDA as well as non-profit groups. Public campaigns to ban sales of soft drinks and fatty snacks in schools have also negatively impacted demand for sugary sodas. These factors have driven a shift in consumption away from CSD to healthier alternatives, such as tea, juices, and water. Even within the CSD segment, consumers have been moving away from the sugared drinks, opting instead for diet beverages, which do not generally contain any sugar or calories. In response to this shift in consumer demand, PEP has increased its development of both diet CSD and non-CSD beverages. With its popular Tropicana and Gatorade brands, PepsiCo is much better situated than Coca-Cola Company (KO) to react to these changing trends. Facing lower Gatorade sales in 2010, Pepsi developed a social marketing department to track the brand's performance and online reputation. By tracking user discussions online and Gatorade groups on Facebook, the company has been able to quickly respond to consumer demands. The results of Pepsi's new marketing initiative is inconclusive because the brand rose 2.4% during the first half of 2010 but this is compared with low sales in 2009.[79]

The Dollar Affects International Performance

Changes in the strength of the dollar compared to foreign currency could impact the company by decreasing both costs and revenue in dollars. As the strength of the dollar increases, all sales made in foreign currency end up being worth less because the amount of US dollars the company gets per sale decreases. On the other hand the cost of foreign inputs (food and other commodities that go into PepsiCo products) sold in foreign currencies would decrease with the strengthening dollar. Since over half of PepsiCo's sales are in international markets, the increasing value of the dollar could be a significant factor driving revenues down overseas. Specifically the company primarily deals with the British Pound, Euro, Australian dollar, and Canadian dollar. Between July and December 2008, the dollar regained nearly all its 2007 losses against foreign currencies, and has continued this trend through 2009.[23]
Competition



2008 U.S. non-alcoholic beverage market by volume[80]
Beverages
In the domestic beverage market, the Coca-Cola Company (KO) is PepsiCo's main competitor. In 2008, Coca-Cola had a 23% share of the U.S. non-alcoholic beverage volume, while PEP held a 25% share. Coca-Cola Company (KO) has a higher worldwide share of carbonated soda beverages, but PepsiCo has a more diverse product line and leads the industry in non-carbonated soft drink innovations.[81] PepsiCo's revenues are also substantially higher than Coca-Cola's, due to PepsiCo's snack and convenient foods business, a market in which KO does not participate. PepsiCo's presence in the snack and convenient food industries, as well as its industry-leading innovations in the non-carbonated soft drink segment, gives it a somewhat more balanced portfolio than Coca-Cola and provides the company with some protection against further declining demand for CSD.

Pepsi also pays the Dr Pepper Snapple Group (DPS) for the rights to sell its products, along with Coca-Cola Company (KO). In December 2009, Pepsi agreed to pay Dr Pepper Snapple Group (DPS) $900 million for the continued rights to sell Dr. Pepper products following the company's acquisition of its North American bottlers.[82] This deal was similar to a contract signed by Coke and Dr. Pepper in June 2010, worth $$715 million, that gave Coke similar distribution rights following their acquisition of Coca-Cola Enterprises (CCE).[83]

Snacks and Convenient Foods


2008 U.S. Snack Market by volume[80]
PepsiCo's Frito-Lay and Quaker brands compete in various parts of the larger food industry. Its snack foods manufactured by the Frito-Lay segment hold a commanding share of the U.S. market, accounting for around 39% of domestic snack food sales in 2006. PepsiCo's main competitor in the food market overall is Kraft Foods (KFT). Kraft's products include snacks, cheese, diary, and cereal products, which puts it in competition both with Frito-Lay and Quaker products. Much like the Coca-Cola Company (KO), Kraft does not participate in both the food and soft drink markets, giving PEP the advantage of having a more diverse offering of products.

Coke vs. Pepsi

For decades now, Coke and Pepsi have battled for our hearts and minds... but what about our capital? Which company will add the best flavor to your investment portfolio? Although both companies share powerful brand names and global franchises, there are two important distinctions between Pepsico and Coca-Cola that any investor should consider before choosing between these comestible titans:
Global Footprint
When it comes to international presence, Coca-Cola easily trumps Pepsico. In 2009, Coca-Cola generated 74% of its revenue overseas compared to 48% revenue for Pepsico.[84][85] Coca-Cola's impressive global footprint puts it in a better position to benefit from strong growth across the globe, particularly in the developing world. Furthermore, because Coke generates so much of its revenue abroad, it stands to benefit greatly from the continuing weakening of the dollar as sales denominated in foreign currencies are suddenly worth more dollars back home. At the same time, Pepsico's heavy dependence on North America makes it much more susceptible to a slowing US economy.

Diversified Product Offering
Another important distinction between the two companies is their product offering. While KO is essentially a one-product company that focuses on beverages, Pepsico has a much broader product base that includes beverages, foods and snacks. Coca-Cola's heavy dependence on beverages, particularly carbonated beverages, makes it more susceptible than Pepsico to a growing aversion to soda which is perceived as fattening and unhealthy. On the other hand, Pepsico's extensive portfolio of beverages, foods and snacks puts it in a better position from the trend to healthier eating.
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Re: Financial Analysis of Gatorade - June 3rd, 2015

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