PepsiCo Summary
PepsiCo is the biggest food and beverage business in North America and the biggest in the world. Some of its brands in America include Quaker Oats, Pepsi-Cola, Gatorade and Tropicana. In addition, it has Aquifana, Naked, 7UP and Cheetos outside America. Brands that exist in Europe include Mirinda whereas, in Latin America, the popular brand is the Gamesa. PepsiCo has employed over 290,000 employees worldwide in its 700 facilities. These facilities include research and development facilities, manufacturing sites as well as the distribution centers and offices. PepsiCo’s success is attributed to its high standards of performance, distinctive competitive strategies, high quality products and a committed workforce. PepsiCo’s headquarters is situated in Purchase, in New York (PepsiCo).
The Pepsi-Cola Brands fall under the beverage section of the company. Some of the U.S. brands include Pepsi, Mountain Dew, Sierra Mist, SoBe, IZZE, AMP Energy, Propel, Naked Juice, Mug the company and Aquifina. Furthermore, the company sells iced teas via Lipton and coffees via Starbucks. Frito-Lay is a food brand of PepsiCo and is developed in the food section unit of the company. Its brand provides consumers with a wider range of healthier options. In addition, PepsiCo applies environmental tools to reduce the impact of their snacks on the environment. These snacks have zero grams of transfat. The Tropicana brand consists of fruit juices. Juices under this brand include the Dole juices and the Trop50 juices. The Quaker brands include Quaker Oats, Chewy Granola Bars, Quaker Rice Cakes and the Rice-A-Roni. Additionally, the Quaker brand includes pancake syrups and mixes. The Gatorade brand consists of performance drinks that are common in sports.
PepsiCo’s purpose relies on performance, environmental sustainability, human sustainability and talent sustainability. Its performance can be elaborated from its financial information. PepsiCo has experienced growth in its mega-brand portfolio. As of 2010, the mega-brand portfolio was 19 $ 1 billion brands and increase from 11 in 2000. This contributed to the increase in revenue among the retail centers worldwide.
In 2011, 11% of PepsiCo’s revenue came from sales made to Wal-Mart. 30% of the net revenue in North America came from sales made to PepsiCo’s top five retailers.
Coca-Cola Company Summary
The Coca-Cola Company is the largest beverage company in the world. Some of its brands include Diet Coke, Coca-Cola, Fanta and Sprite. These brands are sold in over 200 hundred countries. Its global workforce is about 146,200 thousand employees. Every year the company increases its dividends. In February 2012, the quarterly dividend was increased from 8.5% to $0.51 per share (Coca-Cola Information).
Reason for Choosing PepsiCo and Coca-Cola Companies
These two companies are the biggest competitors in the soft drink industry. This has resulted to both companies changing and adopting different and innovative strategies frequently. Most of the profits from the beverage market are distributed between these two companies. When making a comparison of these two companies in a free market it becomes difficult to decide which company is performing better than the other one. Furthermore, it becomes interesting to compare these two companies since in 2008 both their financial results were almost similar.
Current Ratio
Current ratio is a liquidity ratio that is used to measure a company’s ability to pay short-term liabilities. This includes the use of cash to pay debts. A high current ratio indicates that the company’s ability to pay its short terms liabilities. When the current ratio falls below one, it indicates that the company is unable to pay its short-term liabilities. Current ratio is useful when comparing companies that have similar business operations, and in this case, PepsiCo and Coke Company have similar business operations.
Debt Ratio
This ratio provides an indication of the proportion of debt that a company has in relation to the company’s assets. When the debt ratio is greater than one, a company can be said to have more debt than its assets whereas a debt to of less than one indicates that the company has more assets than debts. This is critical since it provides the investor with an idea of where to make investments depending on the potential risk the companies faces concerning debts.
Equity Ratio
This ratio provides a description of a company’s financial debt. It is calculated by dividing the total liabilities by the equity of the stakeholders. Sometimes the long-term debt is used to calculate the equity ratio. Consequently, it shows what proportion of the equity the company is using to finance its assets. This ratio becomes effective in determining how a company such as Coke or PepsiCo finances its assets. The use of debt to finance a company’s growth results to more earnings and in the process, the shareholders benefit.
Profit Margin Ratio
This ratio gives an indication of whether a company’s profit is increasing or decreasing. This ratio is essential since it presents a much-detailed picture of the profitability of the company since an increase in earnings do not necessarily indicate an increase in profits. A high profit margin indicates that the company is more profitable.
Gross Margin Ratio
This ratio provides an indication of the proportion of the total sales that a company has after incurring direct costs used in the production of their products. A high gross margin indicates that the company retains a higher dollar amount for each cost incurred in the production of the products. This becomes crucial especially when the company has an increase in administrative and other operating costs.
Summary and Conclusion
PepsiCo performance is greater than that of the Coca-Cola Company. This is largely attributed to the fact that most revenues for the Coca-Cola Company mainly come from the sale of the soft drinks. For PepsiCo, only a small percentage of its revenue comes from the sale of soft drinks. PepsiCo also generates income from the sale of snack products. The profit margin for PepsiCo is higher than that of Coca-Cola. This provides an indication that operating costs for PepsiCo Company are better manage compared to that of Coca-Cola Company.
Both companies are efficient in terms of converting products into cash as indicated by the current ratios. Most of the finances for growth of the Coca-Cola Company are financed by debt. Most of the risk falls on the external financiers. For PepsiCo, the equity ratio of less than one indicates that most of the finances come from the shareholders and indicates that the company is much influenced by the shareholders.
Conclusion
Investors willing to invest in either of the two companies will undoubtedly select to invest in PepsiCo. This is because it presents a more stable outlook and boasts higher margins compared to Coca-Cola Company. For companies that are seeking growth a higher profit margin is a clear indicator of the level of growth of a company.
Works Cited
"Coca-Cola Company Information: The Coca-Cola Company." Coca-Cola: The Coca-Cola
Company. N.p., n.d. Web. 5 June 2012.
“PepsiCo Home ." PepsiCo Home | PepsiCo.com. N.p., n.d. Web. 5 June 2012.
