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Filed under: News, US, Good News FORT SMITH (KFSM) — Fred Kirkpatrick has been working at the Coca-Cola Bottling Company of Fort Smith for nearly 80 years. Read more...   Permalink | Email this | Linking Blogs | Comments
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Forbes  Jan 23  Comment 
Looking at the universe of stocks we cover at Dividend Channel, on 1/25/17, Coca-Cola Bottling Co. Consolidated (NASD: COKE), Lennar Corp. (NYSE: LEN), and Signet Jewelers Ltd (NYSE: SIG) will all trade ex-dividend for their respective upcoming...


Brief Summary

Coca-Cola Bottling Company Consolidated (COKE) is the second largest beverage bottler in the United States. COKE produces and bottles numerous types of waters, juices and carbonated drinks that span the entire beverage industry.

About COKE

Coca-Cola Bottling Company Consolidated was established in Greensboro, North Carolina in 1902. It is the second largest Coca-Cola bottler in the United States, which is now headquartered in Charlotte, North Carolina. Coca-Cola Bottling Co. Consolidated is in the beverage industry and delivers carbonated and noncarbonated beverages that are primarily products of the Coca-Cola Company. They specialize in carbonated soft drinks, bottled water, teas, juices, energy drinks, isotonics, POWERade, Vitamin Water, and Minute Maid Juices. Retail stores, food markets, institutional accounts, and vending machine outlets are where they sell and distribute their products. They do business in eleven states, primarily located throughout the Southeast of the United States. Coca-Cola Bottling Company Consolidated is listed on the NASDAQ under the symbol COKE. [1]

Bottle/Can sales continued to be major source of revenue
Bottle/Can sales continued to be major source of revenue[2]

The majority of the revenue, 82.2% to be exact, comes from the sales of bottles/cans. This category can be further broken up into sparkling beverages and still beverages, which account for 68.1% and 14.1% to the total revenue respectively. The other 17.8% of the revenues are a result of sales to other Coca-Cola bottlers and sale of fountain products. These two sub-categories account for 9.3% and 8.5% of the total revenue respectively. [3] Historically looking, COKE has been able to diversify its revenue streams by reducing its dependence on bottle/can sales and increasing its sales of fountain products.

Porters 5 Forces

Competitive Rivalry

The competitive rivalry within the beverage industry, particullarly in soft drinks, is extremely high for COKE. Large competitors such as Pepsi and the Dr. Pepper Snapple Group both have a world-wide presence and are extremely competetive over every fraction of market share. Many of these companies are consistently finding new ways to introduce new products to the beverage industry including soft drinks, sports drinks and energy drinks. There is a history within the industry of intense product line buyouts and as the world market becomes more accesible, rivalry will continue to grow within the industry.

Threat of Substitute Products

The threat of substitute products is quite high for Coca-Cola Bottling Co. Consolidated. There are all types of beverages out there for consumers to purchase. There are numerous companies out there that sell water, juices, energy drinks, carbonated beverages, and teas. When a customer walks down an aisle at a grocery store there is usually an aisle full of different types of beverages that they can purchase. There is an aisle just for carbonated beverages and then there is another aisle for water, juices, energy drinks, and tea. They have over a hundred different choices to make and several different brands to choose from. Most of them are also around the same price point, thus the customer chooses what is their most favorite.

Bargaining Power of Buyers

The bargaining power of one buyer is low. If one customer switches brands, for example from Coca-Cola to Pepsi, it is not going to have a huge affect on the company. One customer is usually not purchasing millions of dollars of Coca-Cola products a year. They are only purchasing around several hundred dollars worth. If Coca-Cola were to raise their prices than a customer could just easily switch to another brand because there are several other choices that they are able to choose from. However, as a whole if customers were not satisfied then it could do major damage to the company. Currently, there are 1.4 billion servings of Coca-Cola beverages per day. [4]

Bargaining Power of Suppliers

The bargaining power of suppliers is quite low for CCBCC. As the United States' second large bottler, CCBCC has the resources to shop around for the best resources and best prices. CCBCC is also taking the initiative of constantly innovating their bottling methods and methods of distribution. This dedication to innovation will surely guard their profits from any future price spikes from suppliers within the industry.

Barriers to Entry

There are not very many barriers to entry in the beverage industry. It is easy for a company to start their own company and sell beverages to customers. However, it may be difficult to stand out because there are already so many different brands and products of beverages out there for customers to choose from. The per capita soft drink consumption rate is the highest for Coca-Cola Bottling Company Consolidated in the world. In addition, it has a consumer base of over eighteen million people. [5]

SWOT Analysis

Strengths EDI/ACH - EDI/ACH is a website which coordinates electronic payments for COKE. ACH is the new preffered method of payment which will eliminate paper billing to customers. Customers have the option of choosing to pay EDI which is a format for direct electronic transfer. This is a free service offered by COKE. The elimination of paper billing and invoices will result in a swifter and more reliable delivery of payments via comprehensive electronic billing. [6]

Weaknesses Coca-Cola bottling company has a pretty strong business but this may be a weakness as well. COKE may be satisfied with their dominant market share and may decide not to continue to push to try and keep growing. As a result, its competitors may gain ground and ever pass Coca-Cola as the dominant company in the market. Coca-Cola bottling company also faces a weakness with the Coca-Cola company. The prices that the bottling company uses are fixed by the prices Coca-Cola controls. Pollution may also weakness the bottling business. Bottled water sales for example fell for the first time in 2009. The awareness of consumers and the realization of how much pollution that is coming from these bottles is what is causing a decrease.[7]

Opportunities Going green - Starting in 2005, COKE began converting its shipping fleet of about 2,500 vehicles to hybrid ones. COKE's shipping fleet traveled on average 40 million miles per year. With less dependency on fossil fuels, especially with rising costs, make this a great opportunity for COKE. COKE has recently powered with Duke Power Company to convert their fleet to plug-in hybrids which would be able to travel 100 miles on a single gallon of gas. This opportunity to save millions on fuel costs annually presents a great opportunity to reduce overhead costs within the organization and may continue to spread to other operations. [8]

Threats Competition in the industry is a big threat to Coca-Cola Bottling. Companies like Pepsi, which own soft drinks such as Pepsi, Diet Pepsi, Mountain Dew, and Sierra Mist. Pepsi owns about 29% of the soft drink market with these products while Coca Cola owns 42% of the market. The threat that competitor Pepsi has over Coca-Cola bottling is that it can take market share away from them causing them to produce less. [9]

Marketing Strategies


The Company markets, distributes and produces the sparkling beverages of Coca-Cola beverages; like Coke, Diet Coke, Sprite etc. in certain regions and has the rights to market and distribute their still beverages as well like POWERade and Vitamin Water. They do not just distribute Coca-Cola products but over the last couple years have developed and begun distributing their own line of beverages such as Country Breeze Tea, vitamin –C enhanced flavored drinks, Bean and Body, and Simmer and Bazza Energy Tea. яяя


The Coca-Cola Company sets all of it’s prices charged to the company under the Incidence Pricing Agreement. The pricing agreement allows them to set the price under which they charge the company to use Coca-Cola concentrates and their Allied Beverage. Coca-Cola must give the company 90 days of a written agreement if they are going to change the price they charge for the use of their products, but they cannot set the prices they are going to use for resale that is the company’s job. The Incidence agreement was set into place in 2008 and will continue through Dec. 31 2011.


The Coca-Cola Bottling Company has put into place a program to promote recycling. The Coca-Cola Recycle and Win program is a way to get citizens in communities where the bottling company operates to recycle their products as well as any other to help the environment. They reward the citizens in a few states where they have implemented the program such as Tennessee, North Carolina and West Virginia when they are “caught” in the act of recycling. This way the company can help the environment by promoting the recycling of their products while giving back to the community.


The Company currently has bottling rights that expand to a population of about 20 million in the middle southeastern section of the United States. The states that are included are West Virginia, western Virginia, North Carolina, South Carolina, South Alabama, South Georgia, and the middle of Tennessee. Most sales regions have about 4 sales/distribution facilities and service a population of anywhere of 1 to 4 million people. The largest area being North Carolina with a production/distribution in Charlotte and 13 sale/distribution centers that service 9 million people. The reason their recycling programs are located in the states and areas they are due to the population their sales facilities service, which is the main reason it started out in North Carolina.


We must note that the below competitors are not strictly focused on their bottling distribution sector like COKE is. Rather, these companies perform full scale operations that include developing, manufacturing, marketing and distributing the product. However, the below companies are still the closest competitors as they perform their a majority of their bottling services in-house. Although they sometimes hire third party contractors such as COKE to handle their distribution services, the in-house distribution takes away from COKE's potential revenues.

Pepsi Co. Inc. (PEP)

PepsiCo, Inc. is a global food, snack and beverage company. Founded in 1898, PepsiCo is headquartered in Purchase, New York. The business division that is of interest to COKE is the PepsiCo Americas Beverages (PAB) unit. Either independently or through contract manufacturers, PAB makes and distributes fountain syrups, beverage concentrates, and finished goods. The beverage brands include Pepsi, Mountain Dew, Gatorade, Tropicana Pure Premium, Electropura, Sierra Mist, 7UP (outside the U.S.), Epura and Mirinda. In addition, PAB sells ready-to-drink tea, coffee and water products through joint ventures with Unilever under the Lipton brand name. In addition, PAB licenses the Aquafina water brand to its independent bottlers and markets this brand. PAB owns or leases approximately 115 bottling and production facilities and approximately 620 warehouses, distribution centers and offices.[10]

Dr. Pepper Snapple Group Inc. (DPS)

The company was incorporated in 2007 and is based in Plano, Texas. Dr Pepper Snapple Group, Inc. is an combined brand owner, manufacturer and distributor of non-alcoholic beverages in the United States, Canada and Mexico with a varied portfolio of flavored carbonated soft drinks and non-carbonated beverages including ready-to-drink teas, juices, juice drinks and mixers. The key carbonated soft drink brands are Dr Pepper, 7UP, Sunkist soda, A&W, Canada Dry and Crush, but DPS also sells regional and smaller niche brands. Non-carbonated beverage brands consist of Snapple, Mott’s, Hawaiian Punch, Clamato, Rose’s and Mr & Mrs T mixers. DPS operates primarily in the United States, Mexico and Canada, but it also distributes the products in the Caribbean. As of December 31, 2010, DPS had 18 manufacturing facilities and 174 distribution centers in the U.S., as well as three manufacturing facilities and 23 distribution centers in Mexico.[11]

Cott Corp. (COT)

Cott Corporation engages in the production and distribution of retailer brand and branded bottled and canned soft drinks in North America and internationally. In addition to carbonated soft drinks, its product includes clear, still and sparkling flavored waters, juice-based products, bottled water, energy-related drinks and ready-to-drink teas. Cott’s manufacturing capabilities result from their 33 strategically located facilities, which includes 21 in the United States, five in Canada, four in the UK and two in Mexico. [12] Cott operates in the following operating segments: North America, United Kingdom, Mexico, Royal Crown International, and all other. Founded in 1955, Cott Corp. is based in Mississauga, Ontario.

National Beverage Corp. (FIZZ)

Based in Ft. Lauderdale, FL, National Beverage Corp. develops and distributes a portfolio of beverage products throughout the United States. Included within this portfolio are a range of flavored soft drinks, juices, waters and energy drinks. Its brands contain Shasta and Faygo, which has over 50 flavors each. The company also offers a variety of flavored beverage products for consumers who choose a healthier alternative. Brands in this category consist of Everfresh, Home Juice, and Mr. Pure 100% juice. The flavored, sparkling water category is made up by LaCroix, Crystal Bay and ClearFruit, and Asante waters brands. In addition, the Company produces Rip It energy drinks, Ohana fruit-flavored drinks, St. Nick’s holiday soft drinks. There are also powder beverage enhancers sold under the brand name, NutraFizz. The company operates through twelve manufacturing facilities that are strategically placed near major urban markets throughout United States. The company was founded in 1985.

Trends and Forces

Declining demand for Carbonated Soft Drinks

Demand for carbonated soft drinks (CSD) has been negatively affected from the concerns of the growing health, nutrition and obesity concerns of today’s population. CSD have dropped from 60% to 35% of the total US beverage volume. [13] CSD companies have also been under a lot of heat because of public policy challenges regarding the sales of soft drinks in grade schools. Recent trends have led to a change from CSD to diet beverages, sports drinks, and flavored water.

Increasing Commodity Costs

COKE faces a risk from increasing price movements for commodities that are required in for its operations. Changes in the prices of these raw materials will pass onto the customers if the company wishes to remain profitable. This change and potential increase in price of products could potentially result in a loss of customers, as they may choose to switch to more inexpensive alternatives. COKE faces price risk on commodities such as aluminum, corn and resin which affects the cost of raw materials used in the production of finished products. In addition, COKE is exposed to commodity price fluctuations on crude oil. This is important because this affects the company's cost of fuel used in the movement and delivery of its products. However, on a brighter note, COKE makes use of derivative instruments to reduce its risk from exposure to movements in fuel prices, aluminum prices, and interest rates.[14].

Financial Analysis

In the fiscal year 2010, COKE reported very strong financial performance with a reported net income of $36.1 million, or $3.93 net income per share. Throughout the year, COKE saw an improvement across many channels of their business that helped drive an increase in case volume of 4.4%. This was the highest volume growth COKE has seen in over five years. COKE is also focusing its efforts to improve the balance sheet in order to better position the company to react to opportunities when they are available. This dedication is shown through the decrease of long-term debt by over $450 million in past 10 years. COKE plans to continue to use its available annual cash flows to reduct long-term debt.


Image:General.jpg [15]

COKE is on the smaller end when compared in market capitalization to its competitors and the industry. This is because COKE strictly focuses on bottling distribution aspects, whereas its competitors develop, market, sell, and distribute their products. Looking at the Beta, the average of COKE and its competitors is below 1, showing very little sensitivity to the market conditions. One thing to note from the above comparable is that COKE has a large number of employees relative to similar market cap companies, COT and FIZZ.



Because COKE is in the beverages industry and has positive earnings, the PE and Price to Book ratios are the most appropriate valuation measures. The Price to Sales ratio is less instructive than the PE since the company has positive earnings. When compared with its competitors, COKE seems highly valued with a P/E ratio of 22.18, and a P/B of 5.08. However, we can see that COKE is in-line when compared to the industry averages. This is further reinforced when looking at the EV/EBITDA ratios between COKE and its competitors. We see that COKE’s EV/EBITDA ratio is very similar to COT and FIZZ, but is lower relative to DPS and PEP. This similarity of these ratios compared to the industry and competitors can lead us to believe that the company is fairly valued.

Growth and Profitability

Image:Growth.jpg [15]

Based on its positive operating, gross, and net margins, we can see that COKE is operates under profitable conditions. Although COKE converts an above median percentage of its revenues to gross profits, it fails to do the same for operating and net profits. The company’s 6.36% operating margin and 2.61% net profit margin is far lower than the competitors listed and the overall industry average. In addition, COKE saw its earnings drop despite of positive revenue growth during the past fiscal year. When compared to the industry average, COKE is heavily lagging behind in both these metrics.

Image:Histgrowth.jpg [15]

In the last 7 years, the company has been averaging a compound annual growth rate of just under 5%. In addition to the higher revenues, profit margin is slightly improving year over year.

Financial Strength

Image:Leverage.jpg [15]

COKE has a debt to total capital ratio of 75.44% which is relatively high when compared with the non-acoholic beverages industry's norm. We can further deduce that COKE is moving in the right direction as it is decreasing its debt-to-total capital ratio quarter over quarter. On the other hand, the industry is actually moving the opposite direction as its debt-to-total capital ratio is increasing.When compared with competitors that are similar in market capitalization (COT and FIZZ), the company’s quick ratio is high but its interest coverage is average. With a quick ratio of 1.13 and an interest coverage ratio of 1.75, the company should be able to comfortably repay its debt. Looking at COKE’s cash conversion cycle (CCC), we see that it is almost twice as large as the industry average. This is a bad sign as this shows that the company takes a longer time than its competitors to convert resource inputs into cash flows.

Image:HistLev.jpg [15]

In the 7 year timespan, COKE is showing steps in both reducing its dependence on debt and also increasing its liquidity. Its LT Debt/Equity ratio has decreased substantially from 765.15 to 315.76. This is the same case for LT Debt/ Total Capital ratio, which decreased from 87.34 to 75.44. Looking at the liquidity metrics, we see that all three ratios have increased during the timeline. This is a positive sign as the company is better positioning itself to handle any unanticipated conditions.

Management Effectiveness

Image:Mgmt.jpg [15]

COKE’s management effectiveness ratios are overall below the companies in the nonalcoholic beverages industry. With an ROA, ROE, and ROI of 3.05%, 29.53%, and 3.69% respectively, the company is by all measures lower than average compared to it's industry peers. However, it shows its strength through the revenues generated per employee, which is at $291,269. This number is among the highest in the entire nonalcoholic beverage industry, displaying COKE’s efficiency in managing its employees.

Image:HistMgmt.jpg [15]

From the above timeline, we can see that while ROA, ROC, and revenue per employee are on an upward trend, ROE has been very volatile. ROA has almost doubled from 1.64% in 2004 to 3.05% in 2010. ROC has increased from 5.87% to 8.10% in these same 7 years. Revenue per employee has been on a constant rise and increased almost by $93,000 within this timespan. However, we cannot really deduce anything from ROE since there doesn’t seem to be a noticeable trend. ROE hit its high in 2004 at 37.38% and had its low in 2008 at 9.24%. Since then, ROE has recovered and continued to hover around its usual range of 30%.

Corporate Governance


COKE currently employs over 5,200 personel within the United States and operates in 7 states nationwide. At the very top of the company is a group of directors whose combined knowledge and past experience are doing there best to lead COKE into the future.


  1. www.cokeconsolidated.com
  2. http://edgar.sec.gov/Archives/edgar/data/317540/000095012311026807/g26462e10vk.htm
  3. Coca-Cola Bottling Co. Consolidated10-K 2010 Annual Report
  4. Heritage of Coca-Cola
  5. www.cokeconsolidated.com
  6. Company FAQ
  7. www.washingtonpost.com
  8. Company FAQ
  9. www.beverage-digest.com
  10. PepsiCo 10-K 2010 Annual Report
  11. Dr. Pepper Snapple Group 10-K 2010 Annual Report
  12. Cott Corporation 10-K 2010 Annual Report
  13. CNBC- Soft Drink Sales Fall
  14. COKE 10-Q 2010 Quarterly Report
  15. 15.0 15.1 15.2 15.3 15.4 15.5 15.6 15.7 Bloomberg Professional Service
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