BEVERAGE INDUSTRY

ANALYSIS
The Beverage Industry is a mature sector and includes companies that market nonalcoholic and
alcoholic items. Since growth opportunities are few compared to existing business, many members
of the industry endeavor to diversify their offerings to better compete and gain share.

The Nonalcoholic Segment

Historically, two large entities have dominated the nonalcoholic beverage
landscape: Pepsi and Coca-Cola. The bottlers depend on these two industry leaders to create new
products, improve existing offerings and maintain sufficient advertising. Related capital spending
amounts to several billion dollars each year. The industry titans often boost their results (and those
of their subsidiaries) by purchasing smaller market players or by inking promising distribution
agreements. In prosperous economic times, consumers usually favor the most famous brand
names. Still, when customers are short of disposable income, they can turn to competing,
inexpensive private label and lesser-known beverages. Some carry significant debt leverage, but
cash flow is fairly predictable and usually more than sufficient to cover annual interest payments
(and dividends) and maturities.

Wine, Beer, and Spirits

The range of wine, beer and distilled spirits offered by brand and type is wide. Demand is
somewhat inelastic across good and bad economic times Investors should consider, though, that
this trend is disrupted during recessions, when people trade down to cheaper, low-margined
products. Small brewers, paying close attention to quality, expand slowly, but, over time, can win
a decent share of business. Large brewers, mindful not to lose sales, have developed their own
premium brands, while some have acquired smaller rivals. Like their nonalcoholic peers, makers
of alcoholic beverages invest large amounts of cash in marketing and advertising to build brand
recognition. Debt burdens can be rather hefty here, as well, especially when a company is
aggressively expanding through acquisitions as has been the case in recent years. Indeed, a steady
wave of consolidation has left this group much less fragmented than it was last decade.

Common Characteristics
Both the nonalcoholic and alcoholic sides of the Beverage Industry are dominated by a few
sizeable players and competition among them is often intense. Changing consumer tastes adds
operating risk. Pricing and margins frequently come under pressure. Also, volatile commodity
costs will challenge managements to protect profitability. Good operating efficiency and cost-
control practices, mostly on an ongoing basis, are important. It is seen that beverage makers with
the most established brands produce the widest operating and net income margins
 Suntory Beverage

INTRODUCTION

Suntory Beverage is a Japanese brewing and distilling company group. Established in 1899, it is
one of the oldest companies in the distribution of alcoholic beverages in Japan, and
makes Japanese whisky. Its business has expanded to other fields, and the company now also
makes soft drinks and operates sandwich chains. With its 2014 acquisition of Beam, Inc., it has
diversified internationally and become one of the largest makers of distilled beverages in the
world. Suntory is headquartered in Dojimahama 2-chome, Kita-ku, Osaka, Osaka Prefecture.

Suntory was started by Shinjirō Torii , who first opened his store Torii Shōten in Osaka on
February 1, 1899, to sell imported wines. In 1907, the store began selling a fortified
wine called Akadama Port Wine. The store became the Kotobukiya Company in 1921 to further
expand its business and in 1923, Torii built Japan's first malt whisky distillery Yamazaki Distillery.
Production began in December 1924 and five years later Suntory Whisky Shirofuda (White Label),
the first single malt whisky made in Japan, was sold.

Due to shortages during World War II, Kotobukiya was forced to halt its development of new
products, but in 1946 it re-released Torys Whisky, which sold well in post-war Japan. In 1961,
Kotobukiya launched the "Drink Torys and Go to Hawaii" campaign. At the time, a trip abroad
was considered a once-in-a-lifetime opportunity. In 1963, Kotobukiya changed its name to
"Suntory", taken from the name of the whisky it produces. In the same year, Musashino Beer
Factory began its production of the Suntory Beer. In 1997, the company became Japan's sole
bottler, distributor, and licensee of Pepsi products.

On July 14, 2009, Kirin announced that it was negotiating with Suntory on a merger. On February
8, 2010, it was announced that negotiations between the two were terminated.

In 2009 Suntory acquired Orangina, the orange soft drink for 300 billion yen, and Frucor energy
drinks for 600 million euros. On 2 July 2013 the company debuted on the Tokyo stock
exchange and raised almost US$4 billion in the process.
In September 2013, Suntory purchased the drinks division of GlaxoSmithKline. This included the
brands Lucozade and Ribena, however, the deal did not include Horlicks.

In January 2014, Suntory announced an agreement to buy the largest U.S. bourbon producer, Beam
Inc. (producers of Jim Beam) for US$16 billion.This deal would make Suntory the world's third
largest spirits maker.The acquisition was completed on April 30, 2014, when it was also announced
that Beam would be renamed as Beam Suntory.

OPERATIONS OF THE COMPANY:

Suntory Group is among the world's leading consumer products companies, with annual revenue
(excluding excise taxes) of $20.4 billion. We offer a uniquely diverse portfolio of beverage
products enjoyed by millions around the world: from award-winning Japanese
whiskies Yamazaki and Hibiki, The Premium Malt's beer, and iconic American spirits Jim
Beam and Maker's Mark to non-alcoholic favorites Orangina, Lucozade, Ribena, TEA
plus, BOSS coffee, Iyemon tea, and Suntory Tennensui water. Suntory also produces wellness
products and operates a flower business.

The Company is mainly in the field of Beverages & Food and has another six related operation
which are as follows:

 Spirits
 Beer
 Wine
 Health & Wellness Products
 Other Services
 Cross-Functional and Integrated Services

VISION & MISSION OF THE COMPANY:

Vision: Growing for Good

Our Vision describes what Suntory wants to achieve. It applies both to the company as a whole,
and to each individual within the company. The bigger we are, the greater our positive impact can
be. We will grow to become a company that always benefits its community. By doing good things
for society and the environment, we will help make a better, brighter future.

Mission: To create harmony with people and nature

Suntory’s Mission is the fundamental reason for Suntory to exist, and guides and inspires our
organization. We will focus on the needs of our customers and consumers. We deeply respect
nature and will strive to protect the environment. By forging greater bonds of appreciation between
people and the world around them, we will seek to promote richer, more fulfilling lives.

STRATEGIC DECISION TOWARDS ACHIEVING VISION:

It goes without saying that excellent business practices and results are a prerequisite for continued
corporate growth and CSR plays an important role in further strengthening our company and
product branding. Our CSR policy aims at maximizing our business sustainability by
implementing a triple bottom line approach: looking beyond just financial profitability and
measuring our activities that can contribute to society and the environment as well.

We look towards Growing for Good with our people and our values. Whilst striving to deliver the
highest quality products and services to our customers, we also make every effort to contribute to
the fruitful development of culture, lifestyles and a global sustainable environment. With a mission
to bring happiness and wellness into everyday life, SBFA believes in fostering valuable
relationships with consumers, partners, employees and communities to achieve a sustainable
balance between People, Planet & Profit. These have been achieved through the following:

 Customer Focus
 Enhanced Innovation
 Risk Management
 Essence of Lean, Clean & Green
 Brand Image & Reputation Protection
 Ownership, Shared Responsibility & Accountability
 Strategic Partnership
FINANCIAL PERFORMANCE OF THE COMPANY:

The operating income decreased by 1% to 250,859 during the year 2018 from 253,639 in the year
2017.

The company has reported a growth of 2.4% on profit before income tax of 232,347 during the
financial year 2018-19 compared to of 226,890 in the previous financial year 2017-18. It has a net
profit of 181,387 for the financial year 2018-19 as compared to 251,846 for the financial year
2017-18.

The company always places greater importance to manage its affairs with highest levels of
transparency, accountability and integrity and is committed to achieve and maintain the high
standards of corporate governance on sustained basis.
COMPANY ANALYSIS

WORKING CAPITAL

Working capital is a financial metric which represents operating liquidity available to a business,
organisation or other entity, including governmental entities.

Working capital is calculated by using the following formula:

Working capital = Current Assets – Current Liabilities

CURRENT ASSETS

Current asset Dec 31, 2016 Dec 31, 2017 Dec 31, 2018
Cash and cash 352,519 359,518 272,425
equivalents
Trade and other 379,286 396,645 405,556
receivables
Other financial assets 3,269 19,687 3,671
Inventories 383,861 408,822 415,841
Other current assets 72,940 66,914 68,231
Sub-total 1,191,877 1,251,588 1,165,726
Assets held for sale - 23,152 27
Total current assets 1,191,877 1,274,741 1,165,753

CURRENT LIABILITIES

Current liabilities Dec 31, 2016 Dec 31, 2017 Dec 31, 2018
Bonds and 307,702 291,501 243,396
borrowings
Trade and other 493,850 515,323 529,616
payables
Other financial 90,187 103,578 98,190
liabilities
 Accrued income taxes 22,472 29,478 24,499
Provisions 7,674 12,383 16,490
Other current 85,349 84,614 84,765
liabilities
Sub-total 1,007,237 1,036,880 996,959
Liabilities directly - 6,215 -
associated with assets
held for sale
Total current 1,007,237 1,043,096 996,959
liabilities

Particular Dec 31, 2016 Dec 31, 2017 Dec 31, 2018
Total current assets 1,191,877 1,274,741 1,165,753
Total current 1,007,237 1,043,096 996,959
liabilities
Working capital 184,640 231,645 168,794
From the above table it is evident that working capital rose from 184,640 in 2016 to 231,645 in
2017 and decreased to 168,794 in 2018. Therefore operating liquidity available for Suntory for the
year 2019 is 168,794 which is a very good amount.

ACCOUNTS PAYABLE TURNOVER

Accounts payable turnover is a ratio that measures the speed with which a company pays its
suppliers. If the turnover ratio declines from one period to the next, this indicates that the
company is paying its suppliers more slowly, and may be an indicator of worsening financial
condition.

Accounts payable turnover is calculated by using the following formula:

Accounts payable turnover = cost of goods sold / average Accounts payable

 Particular Dec 31, 2016 Dec 31, 2017 Dec 31, 2018
Accounts payable 493,850 515,323 529,616
Cost of goods sold 1,072,782 1,095,535 1,172,720
Accounts payable
turnover ratio (times) 2.09148 2.135839 2.286317
Accounts payable
turnover ratio (days) 175 171 160

Average account payables is calculated to be 512929.7

From the above analysis it shows that Suntory had an increasing speed in paying its suppliers back
which shows that the financial conditions are improving.

INVENTORY TURNOVER RATIO

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is managed
by comparing cost of goods sold with average inventory for a period. This measures how many
times average inventory is “turned” or sold during a period.

Inventory turnover is calculated by using the following formula:

Inventory turnover ratio = cost of goods sold / average inventory

Particular Dec 31, 2016 Dec 31, 2017 Dec 31, 2018
Inventories 383,861 408,822 415,841
Cost of goods sold 1,072,782 1,095,535 1,172,720
Inventory turnover 2.663039 2.71952 2.911121
ratio
(times)
Inventory turnover 137 134 125
ratio
(days)
Average inventories is calculated to be 402841.3

From the above analysis it shows that Suntory had an increasing efficiency from 2.6 to 2.9 and
thereby the inventory turnover ratio in days has decreased from 137 to 125 days.

PROFIT MARGIN

Profit margin is one of the commonly used profitability ratios to gauge the degree to which a
company or a business activity makes money. It represents what percentage of sales has turned
into profits.

Profit Margin is calculated by using the following formula:

Profit Margin = operating income / net revenue

Particular Dec 31, 2016 Dec 31, 2017 Dec 31, 2018
Gross profit 1,028,815 1,061,995 1,078,062
Revenue 2,101,598 2,157,531 2,250,782
Profit margin
percentage 48.95394 49.2227 47.89722

The analysis shows that about 50 percent of the sales has been converted into profits. In the year
2017 shows the highest profit margin of 49% while in the year 2018 shows the lowest profit margin
of 47.8%.

LIQUIDITY RATIO

CURRENT RATIO

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations
or those due within one year. It tells investors and analysts how a company can maximize
the current assets on its balance sheet to satisfy its current debt and other payables.

Current ratio is calculated by using the following formula:

Current ratio = current assets / current liabilities

 Particular Dec 31, 2016 Dec 31, 2017 Dec 31, 2018
Total current assets 1,191,877 1,274,741 1,165,753
Total current 1,007,237 1,043,096 996,959
liabilities
Current ratio 1.1:1 1.2:1 1.1:1

Current ratio shows the liquidity position of the company. A current ratio of 2:1 is considered to
be satisfactory. Therefore Suntory ‘s current ratios are not satisfactory between 2016 to 2018.
 PepsiCo

a) Introduction

PepsiCo is an American multinational beverage, food, Snack Corporation headquartered in

Harrison, New York. PepsiCo has interests in the manufacturing, marketing and distribution of
grain based snack food, beverages and other products. It was formed in 1965 with the merger of
Pepsi-Cola Company and Frito-Lay, Inc. It is an expanded form of Pepsi which is usually used
worldwide.

The Coca Cola Company has historically been considered PepsiCo’s primary competitor in the
beverage market, and in December 2005, PepsiCo surpassed the Coca Cola Company in market
value for the first time 112 years since both began to compete.

PepsiCo is made up of six divisions: PepsiCo Beverages North America; Frito lay North America;
Quaker foods North America; Latin America; Europe Sub-Saharan Africa and Asia; Middle East
and North Africa.

In 1966, Frito Lay introduces Doritos brand tortilla chips, destined to become the most popular
tortilla chips in the United States.

In 2007, PepsiCo introduces Performance with Purpose, making it one of the first contemporary
companies to recognize the important independence between corporations and society. Also in
2014 it introduced Pepsi Spire, a portfolio of innovative fountain beverage dispensers. Consumers
can create more than 1000 customized beverages with a touch of button.

b) Various operations of the company

Various operations of PepsiCo consist of beverage concentrates, fountain syrups, and finished
goods under various beverage brands such as Pepsi, Gatorade, Mountain Dew, Diet Pepsi,
Aquafina, Diet Mountain Dew, Tropicana Pure Premium, Sierra Mist.

PepsiCo not only concentrates on beverages but also in snacks like lays, Cheetos, Rold Gold chips.

c)Mission and Vision

Mission

Create more smiles with every sip and every bit for our customers, for our associates and our
communities, for our planet, for our shareholders.

Vision

Be the global leader in convenient foods and beverages by winning with purpose.

d)Strategic decision towards vision of the company

The strategic decision area has the objective of optimizing quality based on business and consumer
expectations. PepsiCo provides the highest quality products under the company’s Human
Sustainability goals. For e.g., they have introduced low-calories Pepsi products and less-salt Frito-
Lay products.

In order have an efficient utilization of the capacity, company’s manufacturing facilities are
designed with high-output assembly lines and also its production process are automated for optimal
efficiency.
The area of operations management focusses on adequate workforce and other resources that grow
with the business. PepsiCo continues to hire individuals and promotes from within the organisation
to grow its workforce.

PepsiCo’s approach is to diversify and distribute its supply chain hubs. The company operates
supply chain hubs for each regional market. In this way PepsiCo optimizes response times to
fluctuations demand.

In 2016, PepsiCo announced new Performance with Purpose goals for the next decade. By
continuously improving the products we sell, protecting the planet, and empowering people and
communities around the world.

e) Summary on financial performance of the company

2018

Beverage volume declined 1%, reflecting a high-single-digit decline in Brazil, a low-single-digit

decline in Mexico and a mid-single-digit decline in Argentina, partially offset by double-digit
growth in Colombia, mid-single-digit growth in Guatemala. Overall profit has been decreased. On
an organic basis, sales fell 3% and volumes fell 2%. The segment’s profit declined 23%. The food
and beverage giant swung to a quarterly loss, weighed down by charges stemming from the U.S.
tax overhaul and its restructuring plan.

2017

Beverage volume declined 2%, reflecting a mid-single-digit decline in Brazil and a low-single-
digit decline in Argentina, partially offset by high-single-digit growth in Guatemala. Additionally,
Mexico experienced a slight decline.
2016

Beverage volume decreased 2%, reflecting a double-digit decline in Argentina and a low-single-
digit decline in Mexico and Honduras, partially offset by a low-single-digit increase in Brazil and
a mid-single-digit increase in Guatemala.

PARTICULARS 2016 2017 2018

PROFITABILITY RATIOS
Gross profit margin 55.0598 54.6698 54.5615
Return on assets 8.6801 6.1501 16.1743
Net profit margin 10.0782 7.6458 19.3548

LIQUIDITY RATIOS
Current ratio 1.2515 1.5134 0.9889
Quick ratio 1.08 1.29 0.82

TOTAL CURRENT ASSETS 26450 31027 21893

TOTAL CURRENT LIABILITIES 21135 20502 22138

Working capital 5315 10525 (245)

Inventory turnover 10.782 9.7713 9.3929

ratio(times)
Inventory turnover (days) 34 37 39

Receivables turnover ratio 9.38 9.04 9.05

Payable turnover ratio 4.58 4.28 4.07

Operating cycle 74 77 79

Cash conversion cycle (6) (8) (11)

 Working capital management

Profitability ratios

•Gross profit margin indicates the percentage of revenue available to cover operating and other
expenditure.

PepsiCo Inc.’s gross profit margin ratio deteriorated from 2016 to 2017 and from 2017 to 2018.
Revenue rose in a slower pace of PepsiCo's business segments except its North American
beverages unit, its largest.

The company, whose drinks include Gatorade, Tropicana and its namesake cola, reported revenue
at its North American beverages unit of $5.9 billion. On an organic basis, sales fell 3% and volumes
fell 2%. The segment’s profit declined 23%. The food and beverage giant swung to a quarterly
loss, weighed down by charges stemming from the U.S. tax overhaul and its restructuring plan.

•Return on assets is calculated as net income divided by total assets. It tells how much profit a
company can make with its assets. PepsiCo Chief Executive Indra Nooyi told investors on an
earnings call that its beverage business will take a couple of quarters to recover after battling a
"confluence of factors" in 2017. That included shifting too much advertising spending to newer
products such as the Lifewtr bottled water brand. In 2018, they had a strong marketing program of
beverage unit and there was an improvement.

PepsiCo Inc.’s ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018
exceeding 2016 level.

•Net profit margin is calculated as net income divided by revenue. Net profit margin helps
investors assess if a company's management is generating enough profit from its sales and whether
operating costs PepsiCo Inc.’s net profit margin ratio deteriorated from 2016 to 2017 but then
improved from 2017 to 2018 which exceeded 2016 level. During 2016, Net revenue declined 1%,
reflecting unfavourable foreign exchange, which negatively impacted net revenue, as well as
unfavourable net pricing.
Liquidity ratios

•The current ratio is used to assess a company's short-term liquidity Current ratio is calculated as
current assets divided by current liabilities. PepsiCo Inc.’s current ratio improved from 2016 to
2017 but then deteriorated significantly from 2017 to 2018. PepsiCo holds assets, incur liabilities,
earn revenues and pay expenses in a variety of currencies other than the U.S dollar. Fluctuations
in exchange rates, including as a result of currency controls or other currency exchange restrictions
had an adverse impact on PepsiCo’s business in 2018, which also deteriorated financial condition
and results of operations.

•Quick ratio is a liquidity ratio calculated as (cash plus short-term marketable investments plus
receivables) divided by current liabilities. The quick ratio or acid test ratio is a liquidity ratio that
measures the ability of a company to pay its current liabilities when they come due with only quick
assets PepsiCo Inc. quick ratio is improved from 2016 to 2017 but then deteriorated significantly
from 2017 to 2018.

Working capital

•Inventory turnover ratio is basically, an activity ratio calculated as cost of goods sold divided by
inventory. PepsiCo Inc.’s inventory turnover ratio deteriorated from 2016 to 2017 and from 2017
to 2018. Decrease in inventory turnover ratio indicates that the stock is not being sold quickly.

•Receivables turnover is an activity ratio equal to revenue divided by receivables. PepsiCo Inc.’s
receivables turnover ratio deteriorated from 2016 to 2017 but then slightly improved from 2017 to
2018.

•Payables turnover is an activity ratio calculated as cost of goods sold divided by payables. Payable
turnover shows how many times a company pays off its accounts payable during a period.. PepsiCo
Inc.’s payables turnover ratio decreased from 2016 to 2017 and from 2017 to 2018.It shows that
the company is taking long time pay off their suppliers than the previous years.

•Cash conversion cycle is a financial metric that measures the length of time required for a
company to convert cash invested in its operations to cash received as a result of its operations;
equal to average inventory processing period plus average receivables collection period minus
average payables payment period. PepsiCo Inc.’s cash conversion cycle improved from 2016 to
2017 and from 2017 to 2018.This means that PepsiCo is cash holding period is decreasing in from
2016-2018.

By analysing 3 years financial reports, we have come to a conclusion that, the company ‘PepsiCo’
is facing bit difficulty in the market. The gross profit margin has been deteriorating year by year.
The main reason concluded was because of US tax and some restructuring plans of the company.
The profit derived from the sales has decreased over the years. Also there is a decrease in the
revenue due to some unfavourable pricing and foreign exchange.

These years the world economy faced downturn which has affected the company. Overall we can
say there is a negative impact in the company, as the sales are not increasing, profits are
deteriorating. Also the receivables are decreasing over the past 3 years. These all results explains
that PepsiCo is not facing a good time in the beverage market.
 Tata Global Beverages Limited

a) About the Company

Tata Global Beverages Limited is an Indian multinational non-alcoholic beverages company

headquartered in Kolkata, West Bengal, India and a subsidiary of the Tata Group. With a long
history and experience in the beverages market, and a heritage of innovation and development, the
Company has evolved from a predominantly domestic Indian tea farming entity to a marketing
and brand-focused global organization.
Tata Global Beverages is the 2nd largest player in branded tea in the world. The company’s
ambition is to expand its global footprint by entering new markets and fresh channels with its
brands. It has a strong portfolio of brands, including Tata Tea, Tetley, Vitax, Eight O’clock Coffee,
Himalayan, Grand Coffee and Joekels. Around 300 million servings of the company’s products
are consumed every day, which helps bringing many magical beverage moments to consumers
across the world.
Over 60% of its consolidated revenue originates from markets outside India and more than 90%
of our turnover are from branded products. The business has diversified and expanded significantly
over the last decade, with the company now employing 3,000 plus people, and having a significant
brand presence in 40 countries worldwide.
Tata Global Beverages has grown through innovation, strategic alliances and acquisitions, and
organic growth.

b) Operations of the company

The company was renamed as Tata Global Beverages to include the range of health and nutritional
beverages it wants to enter into. Via subsidiary companies, Tata Global Beverages manufactures
7 crore kilograms of tea in India, controls 54 tea estates, ten tea blending and packaging factories
and employs around 59,000 people. The company owns 51 tea estates in India and Sri Lanka,
especially in Assam, West Bengal in eastern India and Kerala in the south. The company is the
largest manufacturer of Assam tea and Darjeeling tea and the second-largest manufacturer
of Ceylon tea.

Set up in 1964 as a joint venture with UK based James Finlay and Company to develop value-
added tea, Tata Global Beverages has now product and brand presence in 50 countries. It is one of
India's first multinational companies. The operations of Tata Global Beverages and its subsidiaries
focus on branded product offerings in tea, but with a significant presence in plantation activity in
India and Sri Lanka.

The consolidated worldwide branded tea business of Tata Global Beverages contributes to around
86 per cent of its consolidated turnover with the remaining 14 per cent coming from bulk
tea, coffee and investment income. With an area of approximately 159 square kilometers under tea
cultivation, Tata Global Beverages produces around 30 million kg of black tea annually. Instant
tea is used for light density 100% teas, iced tea mixes and in the preparation of ready-to-drink
(RTD) beverages.

c) Vision and Mission

Vision:

To be the most admired Natural Beverage Company in the world by making a big and lasting
difference in Tea, Coffee and Water.

Purpose:

We will focus on creating magical beverage moments for consumers and an eternity of
sustainable goodness for our consumers

Values:

The company values to add up to something unique that gives a sense of responsible irreverence
in all that they do.
d) Strategic decision towards vision of the company

Tata Global Beverages aims to be the most admired natural beverage company in the world. It is
a business with rich traditions and big ambitions. It is also the largest tea company in the worlds
and on the journey to become the global leader in branded natural beverages.

Their strategy focuses on product innovation, building global brands, achieving success in new
channels and more countries along with greater efficiency. It focuses on building unique
competencies, differentiated offerings, appealing brands and significant scale in the three natural
beverage categories of tea, coffee and water.

e) Summary on the financial performance of the company

For the year 2016-2017, improved performances were recorded in the branded business mainly in
Europe, Middle East, Africa and India with a strong performance by the non-branded business.
Profit before exceptional items and taxes reflected an improvement of 31% mainly due to higher
sales, lower commodity costs, good cost management and lower interest costs. Profit for the year
at Rs. 455 crores are significantly higher than the prior year mainly due to better operational
performance and lower exceptional items.

In the year 2017-18, the consolidated revenue from operations at Rs. 6,815 crores grew by 1%
during financial year 2017-18. Improved performances were recorded mainly in the branded
business. Non- branded business had a challenging year mainly due to abnormal and extreme
weather conditions. Profit before exceptional items at Rs. 774 crores were higher by 18% as
compared to the previous year despite the adverse non-branded performance, driven by improved
operating performance by the branded business, good cost management, restructuring benefits and
lower finance costs. Post the impact of exceptional items, tax and share of profits of joint ventures
and associates, the profit for the year 2017-18 at Rs. 557 crores grew by 22% and saw 72% increase
in market capitalization.

The consolidated revenue from operations at Rs. 7,252 crores grew by 6% during financial year
2018-19. Excluding the impact of business exit, revenue from operations grew by 8% (5% on
constant currency basis). The increase in revenue is led by the growth in Indian tea brands, business
model change for single serve K Cup coffee sales in the US and growth in Coffee Extractions
business in Tata Coffee. Profit before exceptional items and tax at Rs. 768 crores which is
marginally lower than the previous year mainly due to higher tea commodity costs in India and
higher brand support costs partly offset by lower tea and coffee commodity costs in the
International market. Profit for the year at Rs. 457 crores are impacted mainly due to higher level
of exceptional expenditure, higher tax expense in the current year and lower share of profits from
Associates and Joint Ventures.

IMPACT OF WORKING CAPITAL MANAGEMENT ON FINANCIAL

PERFORMANCE OF TATA GLOBAL BEVERAGES

A company’s working capital essentially consists of current assets and current liabilities. Current
assets refer to those assets that can be converted into cash within one year, like debtors, and stock
and prepaid expenses- expenses that have already been paid for. Current liabilities are the day-to-
day debts incurred by a business in its operation. These could be credit purchases made from
vendors (creditors) and outstanding expenses (expenses that are yet to be paid). Thus, working
capital management refers to monitoring these two components or the short-term liquidity of your
firm.

Working capital can be calculated by taking the difference between Current Assets and Current
Liabilities.

YEAR WORKING CAPITAL (CURRENT ASSETS-CURRENT

LIABILITIES) (in Cr.)
2019 1762.63
2018 1531.26
2017 525.67

The table above shows the working capital for Tata Global Beverages for the years 2017,2018
and 2019. The company’s working capital can be seen to increase every year. The is primarily
because they have been able to increase its current assets over the years and are able to meet its
short-term obligations. The company monitors rolling forecast of its liquidity position on the
basis of expected cash flows. The company’s approach is to ensure that it has sufficient liquidity
or borrowing headroom to meet its obligations at all point in time.

PROFITABILITY
RATIOS
March 2019 March 2018 March 2017
Net Profit margin (%) 11.98% 16.60% 9.00%
Profit before tax 11.25% 14.09% 10.72%
margin (%)

LIQUIDITY
RATIOS
2018-2019 2017-2018 2016-2017
Current Ratio 3.41 2.60 1.89

Net Profit Margin

The net profit margin for the company has increased from 9.00% in 2016-2017 to 16.60% in the
year 2017-2018 which was higher than previous year’s and was largely driven by improvement in
operating performance. However, for the financial year 2018-2019, the net profit margin was
11.98%, lower than previous year. This was mainly due to higher exceptional items, one-time tax
credit mainly in the US in the previous year coupled with the lower share of profits from associate
companies and joint ventures, due to one-off items.

Profit Before Tax

Similar to Net Profit Margin, the company saw an increase in its profit before tax for the years
2016-2017 which was % mainly due to higher sales, lower commodity costs, good cost
management and lower interest costs and in the financial year 2017-2018 which was aided by
lower tea commodity costs in India, good cost management, restructuring of businesses and lower
finance costs. For the years 2018-2019, the value is lower than previous year mainly on account
of higher tea commodity costs and discretionary/one-off items

Current Ratio

The current ratio determines whether the company has enough short-term assets to pay for short
term liabilities. The company has an increasing current ratio for the 3 years, because the company
is increasing its current assets through the years and reducing its current liabilities.
Tata Global’s average current ratio over the last 3 financial years has been 2.63 times which
indicates that the company has been maintaining sufficient cash to meet its short-term obligations.

IMPACT OF ACCOUNTS RECEIVALES DAYS, ACCOUNTS PAYABLE

DAYS AND CASH CONVERSION CYCLE ON FINANCIAL
PERFORMANCE

WORKING CAPITAL
RATIOS
March 2019 March 2018 March 2017
Inventory turnover ratio 90 days 84 days 91 days
(days)
Receivable turnover 17 days 13 days 13 days
ratio(days)
Payables turnover ratio 58 days 67 days 73 days
Operating cycle 107 days 98 days 104 days
Cash cycle 49 days 31 days 31 days
Inventory Turnover Ratio (days)

Inventory Turnover Ratio (days) is an activity ratio measuring the efficiency of the company's
inventories management. It indicates how many days the firm averagely needs to turn its inventory
into sales. During the year, 2017-2018, the company has a lower inventory turnover (days) of 84
that the previous and following years. This is because of a high inventory ratio for the year which
was achieved by lowering Cost of Goods Sold (COGS). For the year 2018-2019, the company had
a higher COGS which shows increased inventory turnover ratio (days).

Accounts Receivable Turnover (days)

Accounts Receivable Turnover (days) (Average Collection Period) is a ratio measuring how many
days per year averagely needed by a company to collect its receivables.

The year 2018-2019, shows a higher receivable turnover ratio(days) when compared to the
previous two years. The decrease in accounts turnover ratio is because of increase in average
accounts receivable and hence has more receivable turnover(days).

Payable Turnover Ratio (days)

The accounts payable days formula measures the number of days that a company takes to
pay its suppliers. It is calculated by 365/Payable Turnover Ratio.

The company has consistently decreased its payable turnover ratio(days). Which may imply
that the company only has short-term credit arrangements with its creditors or the company is not
fully utilizing its credit period offered by creditors.

Operating Cycle

Operating cycle refers to number of days a company takes in converting its inventories to cash. It
equals the time taken in selling inventories (days inventories outstanding) plus the time taken in
recovering cash from trade receivables (days sales outstanding). The company saw an increase in
its accounts receivable turnover ratio (days) from 2018 to 2019, the operating cycle of the company
also increased.

Cash Cycle

The cash conversion cycle is a cash flow calculation that attempts to measure the time it takes a
company to convert its investment in inventory and other resource inputs into cash. The cash cycle
for the company has increased from 31 days to 49 days in 2019. This can be seen because of a
shorter payable turnover ratio (days). The company pays off the creditors quickly and hence has a
longer cash cycle for the year.

From the values above, we see the company has an increasing its working capital and has well
managed their current assets and liabilities, because of which current ratio is also seen to be
growing for the years. The company has and also seen an increase in its profitability, however it
was not continuous. If they can manage their cash, accounts receivables, accounts payables, and
inventories in a more efficient way, this will ultimately increase profitability of the company.
 Britannia Soft Drinks Ltd (Britvic)
Introduction

Britannia Soft Drinks Ltd. is the holding company for its more well-known business, Britvic, the
number two-selling soft drinks company in the United Kingdom. Britvic commands a strong stable
of brands, including the Britvic fruit juices and mixers lines. The company also holds the franchises
for producing and bottling Pepsi Cola and 7Up in the United Kingdom. Other prominent national
and regional brands include Robinsons, R Whites lemonades, the youth-oriented Tango brand, and
J20, targeting the 18- to 45-year-old segment. Britvic has been making acquisitions in the first half
of the 2000s in order to boost its portfolio. In 2000, for example, the company acquired Orchard
Drinks and Purdey's, followed by the purchase of Red Devil, an "energy" drink, in 2002. At the
end of 2004, the company boosted its profile in the fast-growing bottled water market with the
purchase of the Ben Shaws water division of soft drinks maker Birkby. Britvic itself is controlled
by the Intercontinental Hotels Group, which owns 50 percent, as well as minority investors Allied
Domecq and Whitbread, each holding 23.75 percent. PepsiCo Inc. owns the remainder of the
company. Britvic called off its planned 2005 initial public offering, although the company was
committed to launching a public offering before 2008. In 2004, Britvic's sales reached
approximately £600 million ($1.1 billion).

Britvic sets itself apart from its competitors through our unrivalled combination of market-leading
brands and track record in innovation, our expert knowledge of the soft drinks market, long-
standing and sustainable relationships partners and a highly talented and committed workforce.

Britvic Operation

1. treating water
2. compounding ingredients
3. carbonating product
4. filling product
5. packaging
6. Distribution
Other operations:

 Waste management
 Using excess water for gardening
 Waste disposing

Vision

The most dynamic, creative and trusted soft drinks company in the world.

Mission

 Building iconic brands loved by consumers

 Being the most valued by the customers and partners
 An inspiring place to be for employees
 Delivering consistently superior returns for shareholders
 Trusted and Respected in communities

Strategic Decision Towards the Vision of The Company

 Complete the installation of three new PET lines and an aseptic production line in our
Rugby site
 Complete the installation of a combined heat and power plant and on-site high bay
warehouse at Rugby.
 Close the Norwich site and transfer production to Rugby, London and Leeds sites
 Overall, complete the business capability programme and optimise the supply chain
network to prepare for delivery of the cost benefits in 2020.
 Deliver our 2019 KPIs across each of A Healthier Everyday pillars.
 Develop 2025 A Healthier Everyday strategy, establishing stretching new sustainability
goals for the business, including science-based targets.
 Launch our three-year strategic partnership with Diabetes UK.

Summary on Financial Performance of The Company

2015-16
In Fiscal year 2015-16 company’s total asset increased from 1299£m on 27th September to
1634.4£m on 2nd October by acquiring the assets and total liabilities also increased from
1087.3£m to 1353.4£m on the same period. The cash balance of the company decreased from
239.6£m to 205.9£m. There was an increase in the profit of the company from 103.8£m on 27 th
September to 114.5£m on 2nd October

2016-17

In Fiscal year 2016-17 company’s total asset decreased from 1634.4£m on 2nd October 2016 to
1613£m on 1st October 2017 by selling or depreciation of the value of the assets and total
liabilities decreased from 1353.4£m to 1273.7£m on the same period. The cash balance of the
company decreased from 205.9£m to 82.5£m which is a drastic reduction in the liquid assets of
the organisation. There was an decrease in the profit of the company from 114.5£m on 2nd October
2016 to 111.6£m on 1st October 2017.

2017-18

In Fiscal year 2017-18 companies’ total asset increased 1613£m on 1st October 2017 to 1760£m
on 30th September 2018 and total liabilities also increased from 1273.7 to 1383.1 on the same
period. The cash balance of the company increased from 82.5£m to 109.5£m increased the liquid
assets of the organization which also facilitate smooth functioning of organization. There was an
increase in the profit of the organization from 111.6£m on 1st October 2017 to 117.1 30th
September2018 .

Working Capital

Working capital, also known as net working capital (NWC), is the difference between a
company’s current assets. Working capital is a measure of a company's liquidity, operational
efficiency and its short-term financial health. If a company has substantial positive working
capital, then it should have the potential to invest and grow. If a company's current assets do not
exceed its current liabilities, then it may have trouble growing or paying back creditors, or even
go bankrupt.

Working Capital Management

Working capital management is a business strategy designed to ensure that a company operates
efficiently by monitoring and using its current assets and liabilities to the best effect. The primary
purpose of working capital management is to enable the company to maintain sufficient cash flow
to meet its short-term operating costs and short-term debt obligations.

Current assets 2016 2017 2018

£m £m £m
Inventories 112.7 146.7 144.5
Trade and other receivables 317.9 321.1 356.8
Current income tax receivables 5.1 4.5 2.3
Derivative financial instruments 81.0 17.2 37.9
Cash and cash equivalents 205.9 82.5 109.5
Total current assets 722.6 572.0 651.0

Current liabilities 2016 2017 2018

£m £m £m
Trade and other payables (437.2) (472.6) (424.3)
Contract liabilities – rebate accruals - - (97.4)
Interest bearing loans and (288.1) (89.7) (171.4)
borrowings
Derivative financial instruments (1.1) (2.7) (0.7)
Current income tax payable (13.1) (12.4) (2.2)
Provisions (6.8) (3.7) (2.6)
Other current liabilities (33.1) (36.7) (0.2)
Total current liabilities (779.4) (617.8) (698.8)
Working capital

= Current Asset – Current Liablity

2016 : 722.6 – 779.4 = (56.8)

2017 : 572 – 617.8 = (45.8)

2018 : 651 – 698.8 = (47.8)

Working Capital Ratio : Current Asset / Current Liablity

2016 : 722.6 / 779.4 = .927

2017 : 572 / 617.8 = .926

2018 : 651 / 698.8 = .932

Interpretation

The desirable working capital ratio is 1.2 to 2, ratio below 1 is generally indicating that company
having a trouble in meeting the short term obligations ie. the companies debt will not be covered
with its liquid assets. Over 3 years the company has working capital ratio less than 1 but on FY
2018 the company shows a slight improvement in Working capital ratio.

Accounts Receivables Turnover Ratio

The accounts receivable turnover ratio is an accounting measure used to quantify a company's
effectiveness in collecting its receivables or money owed by clients.

= Net credit sales / Average accounts receivable

2016 : 1431.3 / 317.9 = 4.50

2017 : 1540 / 321.1 = 4.8

2018 : 1540.8 / 356.8 = 4.32

Average collection period

The average collection period is the amount of time it takes for a business to receive payments
owed by its clients in terms of accounts receivable (AR).

2016 : 365 / 4.5 = 81.11 days

2017 : 365 / 4.8 = 76 days

2018 : 365 / 4.32 = 84.5 days

Interpretation

Average Collection period over 60 is way too longer and over the years the average collection
period increased from 81.11 days to 84.5 days but there was a substantial decrease in collection
period on 2017 76 days. The company must focus on the credit policy to reduce Average collection
period.

Accounts Payable Turnover Ratio

The accounts payable turnover ratio is a short-term liquidity measure used to quantify the rate at
which a company pays off its suppliers. Accounts payable turnover shows how many times a
company pays off its accounts payable during a period.

= Total purchases / Average accounts payable

2016 : 956.7 / 437.2 = 2.2

2017 : 834.6 / 472.6 = 1.76

2018 : 977.4 / 424.3 = 2.31

Payable turnover in days

2016 : 365 / 2.2 = 166 days

2017 : 365 / 1.76 =207.4 days

2018 : 365 / 2.31 = 158 days

Interpretation

Company have a low Accounts payable ratio and the amount is paid back to the suppliers after a
long credit period so company will have enough liquid assets to increase the operations. But in FY
2018 the credit period has decreased comparing to the previous years.

Inventory Turnover Ratio

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is managed
by comparing cost of goods sold with average inventory for a period. This measures how many
times average inventory is “turned” or sold during a period. In other words, it measures how many
times a company sold its total average inventory dollar amount during the year.

= Cost of goods sold / Average inventory

2016 : 659.3 / 112.7 = 5.85

2017 : 724.3 / 146.7 = 5

2018 : 727.43 / 144.8 = 5.023

Average Selling Period

2016 : 365 / 5.85 = 62.4 days

2017 : 365 / 5 = 73 days

2018 : 365 / 5.023 = 72.66 days

Interpretation

Average selling period was 62.4 days but now they will take 72.66 days to sell an average
inventory it is 10 days more when it is compared to the performance of FY 2016.
Cash conversion cycle

The cash conversion cycle (CCC) is a metric that expresses the time (measured in days) it takes
for a company to convert its investments in inventory and other resources into cash flows from
sales. Also called the Net Operating Cycle or simply Cash Cycle, CCC attempts to measure how
long each net input dollar is tied up in the production and sales process before it gets converted
into cash received. CCC is one of several quantitative measures that helps evaluate the efficiency
of a company's operations and management. CCC is one of several quantitative measures that helps
evaluate the efficiency of a company's operations and management. CCC is one of several
quantitative measures that helps evaluate the efficiency of a company's operations and
management. CCC is one of several quantitative measures that helps evaluate the efficiency of a
company's operations and management. CCC is one of several quantitative measures that helps
evaluate the efficiency of a company's operations and management.

CCC = DIO + DSO – DPO

Cash conversion cycle = Days of inventory outstanding + Days of sales outstanding – Days of
payables outstanding

Days of inventory outstanding

(Avg inventory / Cost of goods sold) * 365

2016 : (112.7 / 659.3) * 365 = 62.4

2017 : (149.7 / 724.3) * 365 = 75.44

2018 : (144.8 / 727.43) * 365 = 72.66

Days of sales outstanding

=Avg accounts receivables / Revenue per day

2016 : 317.9 / (1431.3 / 365) = 81

2017 : 321.1 / (1540 / 365) = 76.1

2018 : 356.8 / (1540.8 / 365) = 84.5

Days payable outstanding

= Avg accounts payable / Cost of goods sold per day

2016 : 437.2 / (659.3 / 365) = 242.04

2017 : 472.6 / (834.6 / 365) = 206.7

2018 : 424.3 / (977.4 / 365) = 158.45

Cash conversion cycle

CCC = DIO + DSO – DPO

2016 : 62.4 + 81 – 242.04 = (98.64)

2017 : 75.44 + 76.1 – 206.7 = (55.16)

2018 : 72.66 + 84.5 – 158.45 = (1.29)

Interpretation

Cash conversion of company. shows negative values which means that the company generating
revenues from its customers before it actually pays for the suppliers CCC of 2016 shows (98.64)
ie. The revenue from customer’s are available but 2018 event it shows a negative value (1.29) the
CCC has drastically increased. The company is in a very good position as far as the CCC shows a
negative value.

Profit Margin

Net profit margin = (Net income / Revenue) * 100

2016: (178.7 / 1431.3) * 100 = 12.48%

2017: (176.4 / 1540) * 100 = 11.45%

2018: (163 / 1540.8) * 100 = 10.58 %

Interpretation

The net profit margin of the company decreases each year drastically it reduces profit for the
company. When the profit decreases there won’t be retained earning for the future prospects of the
business.

Conclusion

The company shows a negative working capital for an extended period of time, it indicates that
company is struggling to meet their short term liabilities. They need borrowings or stock issuance
to meet the working capital requirements of the organization. They have incurred a large outlay of
substantial increase in the accounts payable as a result of borrowings from vendors.

Company have a high average collection period ie. It takes a long period to get the receivables to
be paid by the customers and the company have a very high payable turnover days ie. The company
should pay the debts only after a long credit period it increases the liquidity and helps to have a
high amount of working capital.

Average selling period is increasing year by year thus increased number of inventories will also
cause extra expenses to the firm. Cash conversion of company shows negative values which means
that the company generating revenues from its customers before it actually pays for the suppliers
which is really a benefit for the organization. Net profit margin of the company is drastically
decreasing it will affect the smooth running of the firm.

The major disadvantage for the firm is the negative working capital they extensively depend upon
the borrowings and debt short term capital. The company must increase the sales and acquire more
current asset than the current liability to get a positive working capital and smooth running of
business.
 THE COCA– COLA COMPANY

The Coca-Cola Company is an American multinational corporation and manufacturer, retailer, and
marketer of non-alcoholic beverage concentrates and syrups. The company is best known for its
flagship product Coca-Cola, invented in 1886 by pharmacist John Stith Pemberton in Atlanta,
Georgia. The Coca-Cola formula and brand were fully bought with US$2,300 in 1889 by Asa
Griggs Candler, who incorporated The Coca-Cola Company in Atlanta in 1892.

The company is headquartered in Atlanta, Georgia, but incorporated in Wilmington, Delaware—

has operated a franchised distribution system since 1889: the company largely produces syrup
concentrate, which is then sold to various bottlers throughout the world who hold exclusive
territories. The company owns its anchor bottler in North America, Coca-Cola Refreshments. The
company's stock is listed on the NYSE and is part of DGIA, the S&P index, the Russell Index, and
the Russell 1000 Growth Stock Index.

Revenue and Sales

According to The Coca-Cola Company's 2005 Annual Report, the firm at that time sold beverage
products in more than 200 countries. The 2005 report further states that of the more than 50 billion
beverage servings of all types consumed worldwide, daily beverages bearing the trademarks
owned by or licensed to Coca-Cola account for approximately $1.5 billion. Of these, beverages
bearing the trademark "Coca-Cola" or "Coke" accounted for approximately 78% of the company's
total gallon sales.

In 2010, it was announced that Coca-Cola had become the first brand to top £1 billion in annual
UK grocery sales. In 2017, Coke sales were down 11% from a year earlier due to consumer tastes
shifting away from sugary drinks and health risks associated with artificial sweeteners in diet
drinks.

Operations of the company

Our Company markets, manufactures and sells

 Beverage concentrates, sometimes referred to as “beverage bases” and syrups including

fountain syrups (we refer to this part of our business as our “concentrate business” or
“concentrate operations”).

 Finished sparkling soft drinks and other non-alcoholic beverages (we refer to this part of
our business as our finished product business” or “finished product operations).

 The finished product operations generate net operating revenues by selling sparkling soft
drinks and a variety of other finished non-alcoholic beverages such as water, enhanced
water and sports drinks; juice, dairy and plant-based beverages; tea and coffee and energy
drinks to retailers or to distributors and wholesalers who distribute them to retailers.

 In the United States, we manufacture fountain syrups and sell them to fountain retailers,
who use the fountain syrups to produce beverages for immediate consumption, or to
authorized fountain wholesalers or bottling partners, who resell the fountain syrups to
fountain retailers. These fountain syrup sales are included in our North America operating
segment.
Mission

The roadmap starts with our mission, which is enduring. It declares our purpose as a company and
serves as the standard against which we weigh our actions and decisions.

 To refresh the world.

 To inspire moments of optimism and happiness.
 To create value and make a difference.

Vision

Our vision serves as the framework for our Roadmap and guides every aspect of our business by
describing what we need to accomplish in order to continue achieving sustainable, quality growth.

 People: Be a great place to work where people are inspired to be the best they can be.
 Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate
and satisfy people's desires and needs.
 Partners: Nurture a winning network of customers and suppliers, together we create
mutual, enduring value.
 Planet: Be a responsible citizen that makes a difference by helping build and support
sustainable communities.
 Profit: Maximize long-term return to shareowners while being mindful of our overall
responsibilities.
 Productivity: Be a highly effective, lean and fast-moving organization.

STRATEGIC DECISIONS TOWARDS VISION OF THE COMPANY

1. FOCUSED ON DRIVING REVENUE AND PROFIT GROWTH

Each of the 200-plus nations we serve plays a critical role in our growth plans. We
used segmented revenue growth strategies across our business in a way that varied
by market type. And we aligned our employee incentives accordingly. In emerging
markets, we focused primarily on increasing volume, keeping our beverages
affordable and strengthening the foundation of our future success.
2. INVESTED IN OUR BRANDS AND BUSINESS
Healthy businesses require continuous investment. We made a choice to invest in
more and better marketing for our brands, increasing both the quantity and quality
of our advertising. We increased spending on media advertising by more than $250
million, and we used these funds to share stronger, more impactful ads.

3. BECAME MORE EFFICIENT

As we took steps to rebuild our growth momentum, we knew we needed to invest
in more and better marketing while also increasing our financial flexibility. To these
ends, we increased our efficiency and productivity while reducing costs.
Part of the solution was “zero‑based work”—a way of looking at our business that
starts from the assumption that organizational budgets start at zero and must be
justified annually, not simply carried over at levels established in the previous year.

4. SIMPLIFIED THE COMPANY

Few industries have changed more rapidly in recent years than the non-alcoholic
beverage industry. Evolving consumer tastes and preferences, coupled with
sweeping innovations in the retail and supply chain landscapes, have created an
environment in which speed, precision and empowered employees determine who
wins in the marketplace.

5. REFOCUSED ON THE CORE BUSINESS MODEL

The Coca‑Cola Company has always been a creator of refreshing beverage brands.
Today, our expansive portfolio includes more than 500 brands, including sparkling
beverages, juices and juice drinks, coffee, tea, sports drinks, water, value‑added
dairy, energy and enhanced hydration drinks. Among these brands are 20 that
generate more than a billion dollars in annual retail sales.
FINANCIAL ANALYSIS

Coca-Cola annual revenue for 2018 was $31.856B, a 10.04% decline from 2017.Coca-Cola annual
revenue for 2017 was $35.41B, a 15.41% decline from 2016. Coca-Cola annual revenue for 2016
was $41.863B, a 5.49% decline from 2015. Coca-Cola revenue for the quarter ending September
30, 2019 was $9.507B, a 8.34% increase year-over-year. Coca-Cola revenue for the twelve months
ending September 30, 2019 was $33.558B, a 0.67% increase year-over-year. Coca-Cola EPS for
the quarter ending September 30, 2019 was $0.60, a 36.36% increase year-over-year. Coca-Cola
EPS for the twelve months ending September 30, 2019 was $1.80, a 168.66% increase year-over-
year. Coca-Cola 2018 annual EPS was $1.5, a 417.24% increase from 2017. Coca-Cola 2017
annual EPS was $0.29, a 80.54% decline from 2016. Coca-Cola 2016 annual EPS was $1.49, a
10.78% decline from 2015.

The total assets for 2018 were $83.216B, a 5.32% decline from 2017.Total assets for 2017 were
$87.896B, a 0.72% increase from 2016.Total assets for 2016 were $87.27B, a 3.03% decline from
2015. Coca-Cola total liabilities for 2018 were $64.158B, a 6.91% decline from 2017.Coca-Cola
total liabilities for 2017 were $68.919B, a 7.6% increase from 2016.Coca-Cola total liabilities for
2016 were $64.05B, a 0.28% decline from 2015. Coca-Cola total liabilities for the quarter ending
September 30, 2019 were $66.750B, a 0.08% increase year-over-year.

WORKING CAPITAL MANAGEMENT

Working capital management is a business strategy designed to ensure that a company operates
efficiently by monitoring and using its current assets and liabilities to the best effect. The primary
purpose of working capital management is to enable the company to maintain sufficient cash flow
to meet its short-term operating costs and short-term debt obligations. A company's working
capital is made up of its current assets minus its current liabilities.

Working capital management can improve a company's earnings and profitability through efficient
use of its resources. Management of working capital includes inventory management as well as
management of accounts receivables and accounts payables. The objectives of working capital
management, in addition to ensuring that the company has enough cash to cover its expenses and
debt, are minimizing the cost of money spent on working capital, and maximizing the return on
asset investments.

COMPONENTS OF WORKING CAPITAL MANAGEMENT

1. Cash / Money:
Cash is the most liquid form of funds, hence it is one of the huge important components of working
capital. It is necessary for every business to maintain optimum level of cash in hand regardless if
other existing assets is substantial. Cash act as an effective instrument at various stages of product
life cycle. Cash in hand plays an important role to balance any gaps arising between productions
to distribution cycle.

2. Account Receivable:
Accounts receivable tend to be profits due which is owed to a business by their clients for the sale
of goods. Efficient, timely collection of account receivable is most essential to maintain financial
health of the company’s operation. For example: marketable securities consist of commercial
papers offered by companies, acceptance letter, treasury bill, etc. These instruments can be bought
and sold at quicker and reasonable rate. They usually have less than one year as their maturity
period. This attract company’s to investment additional cash reserves and also can be used as
highly liquid assets. Accounts receivable have always been under assets side of a company’s
balance sheet, but they are not actually assets until these are typically collected. A commonly used
method by analysts to evaluate the organization’s accounts receivable cycle is that, day’s sales
outstanding, that reveals that the typical average days an organization sales cycle to collect profits
from sale of goods.

3. Account Payable:
Account payable, the money an organization need to pay out throughout the short term, is also an
another key components of working capital management. Normally company’s effectively
maintain balance between maximum cash flow simply by delaying payments as long as it is fairly
potential. In addition, they need to keep positive credit ranks / scores while dealing with creditors
as well as suppliers. Commonly, a business’s average time for account receivables are significantly
shorter than the average time for account payable
 4. Stock / Inventory:

Stock is one of the main components of working capital. An organization’s main asset that it
transforms in to sales profits and earnings. The speed at which business sells and restock is
significant to determine its success. Stock are of various types, which includes stock as raw
material, stock as work in progress or stock in finished goods. Investors give consideration to their
stock turnover level become a sign of this strength to sales and as a measure towards how efficient
the business looks in their buying as well as production process. Stock that is minimal, puts the
company into danger zone of getting rid of off product sales. A gain excessively high stock levels
express inefficient utilization of working capital.

From the above table, it is evident that the working capital increased to 9351in 2008 from 7478 in
2017 and again declined to 3852 in 2019.

WORKING CAPITAL MANAGEMENT OF COCA COLA

The working capital management of Coca Cola can be explained with the help of the following
ratios:

1. WORKING CAPITAL
Working capital is a financial metric which represents operating liquidity available to a business,
organization or other entity, including governmental entities along with fixed assets such as plant
and equipment, working capital is considered as a part of operating capital.

Working capital = current assets-current liabilities

2019 2018 2017

CURRENT ASSETS

Cash and Short Term Investments 16115 20675 22201

Cash & Equivalents 9077 6006 8555

Short Term Investments 7038 14669 13646

Total Receivables, Net 3685 3667 3856

Accounts Receivables - Trade, Net 3685 3667 3856

Total Inventory 3071 2655 2675

Prepaid Expenses 1946 1902 1766

Other Current Assets 113 7646 3512

TOTAL 24930 36545 34010

CURRENT LIABILITIES

Accounts Payable 2498 2288 2682

Payable/Accrued 9361 8748 -163

Accrued Expenses 6265 6284 6116

Notes Payable 13835 13205 12498

Current Port. of LT Debt 3298 3527 2676

Other Current liabilities, Total 583 2119 1872

TOTAL 28782 27194 26532

WORKING CAPITAL 3852 9351 7478

2. INVENTORY TURNOVER RATIO

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. This
measures how many times average inventory is “turned” or sold during a period.

YEAR 2019 2018 2017

ITR 4.4 4.3 5.0
The inventory turnover for the year 2019 in days is 83 days.

The inventory turnover for the year 2018 in days is 85 days.

The inventory turnover for the year 2017 in days is 73 days.

Inventory Turnover Ratio

5
4.4 4.3
4.5

4
3.5
3.5

2.5

1.5

0.5

0
2019 2018 2017

There was a considerable increase in the inventory turnover ratio from 3.5 in 2017 to 4.3 in
2018 and to 4.4 in 2019. This shows great consistency in the stock velocity and also the
company have great efficiency in managing inventory in 2019.
3. RECEIVABLE TURNOVER RATIO

The accounts receivable turnover ratio is an accounting measure used to quantify a

company's effectiveness in collecting its receivables or money owed by clients. The ratio
shows how well a company uses and manages the credit it extends to customers and how
quickly that short-term debt is collected or is paid.

YEAR 2019 2018 2017

RTR 9.38 9.66 10.86

The Receivables turnover for the year 2019 is 40 days.

The Receivables turnover for the year 2018 is 38 days.
The Receivables turnover for the year 2017 is 34 days.

Receivables Turnover Ratio

11
10.86

10.5

10

9.66
9.5
9.38

8.5
2017 2018 2019

The graph clearly shows that there is an increasing trend in receivable turnover ratio.
This increasing trend shows the ability of the company in collecting its receivables and
thus increases the liquidity of the company by realizing the debtors
 4. PAYABLES TURNOVER RATIO

The accounts payable turnover ratio is a liquidity ratio that shows a company's ability to
pay off its accounts payable by comparing net credit purchases to the average accounts
payable during a period. Vendors also use this ratio when they consider establishing a
new line of credit or floor plan for a new customer.

YEAR 2019 2018 2017

PTR 11.770 13.256 16.465

The Payables turnover ratio for the year 2019 in days is 31 days.
The Payables turnover ratio for the year 2018 in days is 27 days.
The Payables turnover ratio for the year 2017 in days is 22 days.

Payables Turnover Ratio

18 16.465
16

14 13.256
11.77
12

10

0
2019 2018 2017

The decline in payables ratio from 2018 to 2019 shows that the company were able pays its bill
regularly. This gives the company more weightage while availing the credit.
5. CURRENT RATIO

The current ratio is a liquidity ratio that measures a company's ability to pay short-term
obligations or those due within one year. It tells investors and analysts how a company
can maximize the current assets on its balance sheet to satisfy its current debt and other
payables.
YEAR 2019 2018 2017
CR 1.05 1.34 1.28

Current Ratio
1.6

1.34
1.4 1.28

1.2
1.05
1

0.8

0.6

0.4

0.2

0
2019 2018 2017

The graph shows stability in the current ratio and thus it shows that the company is
slightly ineffectively managing its working capital but the company was able to meet its
working capital requirements.

6. QUICK RATIO
Liquidity ratios are an important class of financial metrics used to determine a debtor's ability to
pay off current debt obligations without raising external capital. Liquidity ratios measure a
company's ability to pay debt obligations and its margin of safety through the calculation of metrics
including the current ratio, quick ratio, and operating cash flow ratio.

YEAR 2019 2018 2017

QR 0.7 0.9 1.0

Quick Ratio
4
3.5
3.5

2.5

1.5
0.9
1 0.7

0.5

0
2019 2018 2017

The graph shows that the company is inconsistent in liquid ratio. This shows the
ineffective management of liquid assets and also it adds to ineffective management of
working capital
 7. NET PROFIT
On the income statement, subtract the cost of goods sold, operating expenses, other expenses, interest
(on debt), and taxes from revenue. Divide the result by revenue. Convert the figure to
a percentage by multiplying it by 100

YEAR 2019 2018 2017

NET PROFIT 505.8 471.62 589.8

Net Profit
700
600
500
400
300
200
100
0
2019 2018 2017

The graph shows that there was decline in profit in 2018 from 2017. This is mainly because of
ineffective management of working capital as the company couldn’t control the liquidity and
solvency ratios which resulted the company to take huge risks. But now at 2019 the sales are
improving.

Operating Cycle

The operating cycle is the average period of time required for a business to make an initial outlay
of cash to produce goods, sell the goods, and receive cash from customers in exchange for the
goods. It is calculated in days.

The operating cycle of a company is calculated by the following formula:

Operating Cycle = Inventory Turnover + Receivables Turnover

Year 2019 2018 2017

Operating Cycle 123 123 107

Operating Cycle
123 123
125
120
115
110 107

105
100
95
2019 2018 2017

Cash Cycle

The cash cycle is the time it takes a company to turn raw materials into cash. It is also a common
concept in any business which processes materials. It is calculated in days.

The cash cycle of a company is calculated by the following formula:

Cash Cycle = Operating Cycle - Payable Turnover

Year 2019 2018 2017

Cash Cycle 92 96 85
 Cash Cycle
98 96
96
94 92
92
90
88
85
86
84
82
80
78
2019 2018 2017

The cash cycle of the company has increased in the year 2018 it show that the efficiency of the
company has reduced but the cash cycle has reduced in 2019 to 92 which shows that the efficiency
of the company has improved.

INTERPRETATON

The activity ratios clearly show that there was few ups and downs in maintaining the working
capital of the company. These fluctuations are clearly reflected in the financial statements and thus
it can be concluded that working capital management is a important determinant in analyzing the
financial performance of the company.

CONCLUSION

The company shows a increasing and decreasing working capital in the given period of time. It
indicates that company is struggling to meet their short-term liabilities at a point of time. Data
shows that there is an increase of 125% from the year 2017 to 2018, but it highly declined from
the year 2018-2019. They need borrowings or stock issuance to meet the working capital
requirements of the organization. They have incurred a large outlay of substantial increase in the
accounts payable as a result of borrowings from vendors. Company have a medium average
collection period ie. It takes a medium period to get the receivables to be paid by the customers
and the company have a medium payable turnover days ie. the company should pay the debts only
after a medium credit period it increases the liquidity and helps to have a high amount of working
capital. Average selling period is increasing year by year thus increased number of inventories will
also cause extra expenses to the firm. Net profit margin of the company is increasing so it will
helps in the smooth running of the firm.

The major disadvantage for the firm is the declining working capital, they extensively depend upon
the borrowings and debt short term capital. The company must increase the sales and acquire more
current asset than the current liability to get a much better working capital and smooth running of
business.
INTER COMPANY ANALYSIS

By analyzing these beverage companies, we have noticed that Suntory beverage and Tata global
beverage is having a good time in the market when compared to other companies. Coca Cola
company is also having a good market position. There is an increase in profit in the previous years.
Talking about working capital, both the companies are having good amount of current assets to
pay off their liabilities. These companies are having good working capital and are able to cover up
their expenses. Decrease in the keeping the inventory has helped in cutting extra expenses for
maintaining them. Overall, their financial status is bit satisfactory

Whereas talking about PepsiCo and Britannia Soft Drinks Ltd (Britvic), they are facing a tough
time in the market. Both the companies are finding it difficult to generate profits from the sales
and thus their profit margin has been decreasing and also, they are not having enough working
capital which means they are finding it difficult to pay off their liabilities. The average selling
period is also increasing which means they have to pay extra for keeping the goods in the inventory
which raises their expenses. Overall their financial status is not satisfactory. Coco Cola, also is not
able to meet its short-term liabilities as well. They are showing an inconsistent pattern in their
working capital and need borrowings or stock issuance to meet the working capital requirements
of the organization.