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

PepsiCo, Nestle, Unilever, Mondelez International, and

Mars. According to a report by the World Economic Forum, at

least 8 million tonnes of plastic enters the ocean each

year, the equivalent of dumping the contents of an entire

garbage truck into the ocean every minute, plastic packaging

makes it the largest share of this problem. To do its part in

2018, Coca Cola announced it would use at least 50% recycled

material in its bottles and cans by 2030. And by the same date,

collect or recycle a bottle or can for each one it sells. The

company also launched a plastic bottle made up of 30% plant

based materials in 2009. And in 2020, Coca Cola partnered with

Danish startup Pabaco to develop an 100% paper bottle, that

project is in its infancy, But critics argue that due to the

high costs associated with recycling, and with less than

30% of plastic bottles in the US recycled, those efforts might

not be enough.

Another criticism Coca Cola is faced is over its water use

about a third of Coca Cola bottling plants operate in water

stressed areas and more than 73% of the water used by the company

goes to growing ingredients like cane sugar, oranges, and apples.

To improve water efficiency, the company reduced or removed water

using its manufacturing process. In 2004, Coke was using 2.7

liters of water to make one liter of product. By 2018, it

was using 1.92 liters of water to make one liter of product.

The company also announced in 2016, that by replenishing

watersheds and partnering with organizations, it was returning

100% of the water used in its drinks back to the environment

and to local communities.

With the pandemic slowing down its North American fountain

business and its western Europe away from home channels, Coke

saw 4% decline in the sale of sparkling soft drinks in 2020.

Clearly the consumers have adapted and the ones that I

think are very likely to stick are clearly a big uptick in e

commerce. And obviously e commerce is much more important

to a number of other sectors it's really started to

accelerate in terms of grocery in terms of beverages, I think

that will endure and I don't mean ecommerce just in terms of

what you buy, to have delivered to the house but also in the

away from home channels. The amount of takeaway the amount of

delivery,

But it may be new product offerings that have the biggest

impact for the soft drink maker. Roughly 25% of Coca Cola's

revenue was generated from new or reformulated products like

Coke Zero and Coke Energy in 2020 compared with roughly 15%

two years ago, according to Morningstar. In 2021, Cok

launched Topo Chico hard seltze the company's first move int

alcoholic beverages on its hom turf in almost four decades. I

2019, hard seltzers volume mor than tripled

Bery early days for Topo Chico hard seltzer in certain

countries in Latin America and also Europe, but we're very

exciting. Good consumer reaction, good customer action,

good rates of sale, very early days and coming very soon to the

US.

The company is investing other categories too. In 2018, Coca