Coca-Cola Company 2007

Forest David: Francis Marion University Alan Badal: The Union Institute

A.

Case Abstract
Coca Cola (www.cocacola.com) is a comprehensive business policy and strategic management case that includes the companys fiscal year-end December 2006 financial statements, competitor information and more. The case time setting is the year 2007. Sufficient internal and external data are provided to enable students to evaluate current strategies and recommend a three-year strategic plan for the company. Headquartered in Atlanta, Georgia, Coca Colas common stock is publicly-traded on the New York Stock Exchange under the ticker symbol KO. Coca Cola operates in over 200 nations around the world and sells carbonated and non carbonated beverages. Coca Colas line of non carbonated drinks includes: water, juice, and teas. The company has over 70,000 employees and is led by CEO Neville Isdell. The Coca-Cola Companys (Cokes) operating segments include 1) Africa, 2) East, South East Asia & Pacific Rim, 3) European Union, 4) Latin America, 5) North America, 6) North Asia, Eurasia, and the Middle East, and 7) bottling investments. Not all soft drink products/flavors of the company are available in all the operating groups. The Coca-Cola Company has two major rivals: PepsiCo and Cadbury Schweppes PLC. Its interesting to note that PepsiCo has more that double the employees as Coca-Cola as listed in Exhibit 6. Groupe Danone competes to a lesser degree with Coke. The number 3 soft drink producer, Cadbury Schweppes PLC (behind Coca-Cola and PepsiCo Inc.), is a diversified company that produces and markets beverages, chocolate, and chewing gum. Cadbury plans to divest its beverage division in 2007. Hershey Foods has expressed interest as well as various private-equity firms. The soft drink industry primarily consists of PepsiCo, Coca Cola Company, and Cadbury Schweppes PLC. Federal regulations may prohibit PepsiCo and Coke from bidding for Cadburys carbonated soft drink business. Analysts however believe the brand Snapple, which Cadbury sells, would be a good fit for Coke. PepsiCo would likely benefit most from acquiring Cadburys Mexican assets with such strong brands as Squirt, Crush, and Canada Dry.

B.

Vision Statement (actual)

To maintain our reputation as the leading cola company in the world.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

57

C.

Mission Statement (actual)

Everything we do is inspired by our enduring mission: To Refresh the World... in body, mind, and spirit. To Inspire Moments of Optimism... through our brands and our actions. To Create Value and Make a Difference... everywhere we engage.

(proposed) At Coca Cola we believe our main responsibility is providing customers (1) with refreshing beverages including soft drinks, water, energy drinks, juices, and tea (2) to fit any occasion in their day to day lives (6). Our signature product, Coke (7), is a favorite around the world and a wide variety of our products are sold in over 200 nations (3). We use the only the most sophisticated equipment (4) to process and make our products to ensure each glass of Coke product is as good as the last (5). Our employees (9) are fairly compensated and we practice fair trade in all markets we compete. We value our responsibility to all communities we serve and support many educational and leadership programs (8). 1. 2. 3. 4. 5. 6. 7. 8. 9. Customer Products or services Markets Technology Concern for survival, profitability, growth Philosophy Self-concept Concern for public image Concern for employees

D.

External Audit
Opportunities 1. Bottled water consumption has increased 11 percent. 2. According to the S&P Industry Survey, consumers are drawn to new smaller beverage brands that are not sold on a mass scale. 3. Word Economic Forums annual Davos, Switzerland gathering grants international voice. 4. Less developed countries are in desperate need to improve community water supplies. 5. Energy drink sales are expected to increase 7 to 8 percent in 2007. 6. Disposable income has increased 6.2 percent. 7. Consumers are striving to drink and eat their way to better health than pervious generations.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

58

8. EPS is expected to rise 7 to 8 percent in 2007. Threats 1. Consumption of American beverages is denounced by foreign officials in areas where conflicting interest exist. 2. Multiple lawsuits against the new Enviga beverage for calorie burning claims in advertising 3. Smaller, lesser known brands are turning to major beer distributors for bottling. 4. Overall carbonated drink sales have been flat due to links of sugar to obesity and high fructose corn syrup to heart disease. 5. Pepsi is more diversified offering beverage and food products. 6. High cost of commodities such as sugar, and metals used in production of cans. 7. Many smaller companies are fierce competitors around the world in their local markets. CPM Competitive Profile Matrix
Critical Success Factors Market Share Price Comp Financial Position Product Quality Product Lines Customer Loyalty Employees Marketing Total Weight 0.15 0.10 0.12 0.15 0.15 0.15 0.11 0.07 1.00 Coca-Cola Rating Weighted Score 4 0.60 3 0.30 4 0.48 3 0.45 4 0.60 4 0.60 3 0.33 3 0.21 3.71 Rating 3 3 4 3 4 4 3 3 Pepsi Weighted Score 0.45 0.30 0.48 0.45 0.60 0.60 0.33 0.21 3.56 Cadbury Schweppes Rating Weighted Score 2 0.30 3 0.30 3 0.36 3 0.45 3 0.45 3 0.45 3 0.33 3 0.21 2.85

External Factor Evaluation (EFE) Matrix

Key External Factors Opportunities 1. Bottled water consumption has increased 11 percent. 2. According to the S&P Industry Survey, consumers are drawn to new smaller beverage brands that are not sold on a mass scale. 3. Word Economic Forums annual Davos, Switzerland gathering grants international voice. 4. Less developed countries are in desperate need to improve community water supplies. 5. Energy drink sales are expected to increase 7 to 8 percent in 2007. 6. Disposable income has increased 6.2 percent. 7. Consumers are striving to drink and eat their way to better health than pervious generations. 8. EPS is expected to rise 7 to 8 percent in 2007. Weight 0.06 0.05 0.02 0.02 0.06 0.05 0.07 0.07 Rating 4 2 2 2 3 3 3 4 Weighted Score 0.24 0.10 0.04 0.04 0.18 0.15 0.21 0.28 59

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Threats 1. Consumption of American beverages is denounced by foreign officials in areas where conflicting interest exist. 2. Multiple lawsuits against the new Enviga beverage for calorie burning claims in advertising 3. Smaller, lesser known brands are turning to major beer distributors for bottling. 4. Overall carbonated drink sales have been flat due to links of sugar to obesity and high fructose corn syrup to heart disease. 5. Pepsi is more diversified offering beverage and food products. 6. High cost of commodities such as sugar, and metals used in production of cans. 7. Many smaller companies are fierce competitors around the world in their local markets. TOTAL

0.02 0.04 0.06 0.10 0.20 0.10 0.08 1.00

3 2 2 2 3 3 3

0.06 0.08 0.12 0.20 0.60 0.30 0.24 2.84

E.

Internal Audit
Strengths 1. 2. 3. 4. 5. 6. 7. Product line has over 400 brands. Strong global presence, located in over 200 countries. Long history has built excellent brand recognition. Partnership longevity with established sporting events including the Olympics. Industry leader in market capitalization with $112 billion. Return on Equity yielded 30 percent in 2006. Leader of dividend yields of 2.6 percent. The company has had 43 consecutive years of an annual dividend increase. 8. Joint venture between The Coca Cola Company and Nestle has resulted in the establishment of Beverage Partners Worldwide (BPW). 9. Coca-Cola has formed a strong partnership with McDonalds, with McDonalds becoming their largest customer. Weaknesses 1. Product line is limited to beverages. 2. A failed $16 billion acquisition of Quaker Oats hinders long-term growth. 3. Negative publicity in India because of water issues, has led to poor brand image and hindered growth there. 4. Lack of management willingness to place foreign products into American markets. 5. Marketing deficiencies due to turnover in leadership and a 16 percent decrease in advertising spending. 6. Coca Colas inventory turnover is only 5.4 compared to Pepsi Co.s 8.0.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

60

Financial Ratio Analysis (December 2006)

Growth Rates % Coca Cola Sales (Qtr vs year ago qtr) 19.20 Net Income (YTD vs YTD) 8.30 Net Income (Qtr vs year ago qtr) 13.30 Sales (5-Year Annual Avg.) 6.54 Net Income (5-Year Annual Avg.) 5.01 Dividends (5-Year Annual Avg.) 11.49 Price Ratios Current P/E Ratio 25.4 P/E Ratio 5-Year High NA P/E Ratio 5-Year Low NA Price/Sales Ratio 5.00 Price/Book Value 6.97 Price/Cash Flow Ratio 21.10 Profit Margins Gross Margin 64.2 Pre-Tax Margin 26.0 Net Profit Margin 19.8 5Yr Gross Margin (5-Year Avg.) 64.4 5Yr PreTax Margin (5-Year Avg.) 27.9 5Yr Net Profit Margin (5-Year Avg.) 21.1 Financial Condition Debt/Equity Ratio 0.49 Current Ratio 0.8 Quick Ratio 0.6 Interest Coverage 55.1 Leverage Ratio 2.1 Book Value/Share 8.52 Investment Returns % Return On Equity 28.9 Return On Assets 14.9 Return On Capital 22.6 Return On Equity (5-Year Avg.) 32.0 Return On Assets (5-Year Avg.) 16.7 Return On Capital (5-Year Avg.) 24.6 Management Efficiency Income/Employee 76,690 Revenue/Employee 386,732 Receivable Turnover 9.8 Inventory Turnover 5.4 Asset Turnover 0.8 Adapted from www.moneycentral.msn.com Industry 22.20 25.70 30.00 8.45 9.38 12.61 26.2 49.9 20.7 3.96 5.71 19.60 52.7 17.5 14.2 59.1 20.1 14.9 0.69 1.0 0.7 41.0 2.5 10.25 22.0 11.2 16.9 25.4 12.6 18.2 56,327 360,922 10.1 6.8 0.8 SP-500 11.60 17.10 9.30 13.09 19.82 10.00 20.3 26.8 6.8 2.37 3.45 10.70 34.5 17.8 12.6 34.3 16.4 11.4 1.06 1.1 0.9 31.8 3.7 18.53 24.9 7.6 10.2 18.5 6.4 8.6 92,892 806,706 14.3 7.8 0.8

Date 12/06 12/05 12/04

Avg. P/E 20.30 21.00 23.30

Price/Sales 4.71 4.18 4.65

Price/Book 6.61 5.84 6.29

Net Profit Margin (%) 21.1 21.1 22.3 61

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

12/03 12/02

25.00 31.10

5.99 5.56

8.79 9.18 ROE (%) 30.0 29.8 30.4 30.9 33.7 ROA (%) 17.0 16.6 15.4 15.9 16.3

20.8 20.3 Interest Coverage 28.7 25.4 29.1 29.3 27.4

Date Book Value/ Share Debt/Equity 12/06 $7.30 0.27 12/05 $6.90 0.35 12/04 $6.61 0.45 12/03 $5.77 0.38 12/02 $4.78 0.45 Adapted from www.moneycentral.msn.com

Net Worth Analysis (December 2006 in millions)

1. Stockholders Equity + Goodwill = 17,000 + 1,400 2. Net income x 5 = $5,000 x 5= 3. Share price = $58.00/EPS 2.34 =$24.78 x Net Income $5,000= 4. Number of Shares Outstanding x Share Price = 1,600 x $58.00 = Method Average $ 18,400 $ 25,000 $ 123,931 $ 92,800 $65,032

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Strengths 1. Product line has over 400 brands. 2. Strong global presence, located in over 200 countries. 3. Long history has built excellent brand recognition. 4. Partnership longevity with established sporting events including the Olympics. 5. Industry leader in market capitalization with $112 billion. 6. Return on Equity yielded 30 percent in 2006. 7. Leader of dividend yields of 2.6 percent. The company has had 43 consecutive years of an annual dividend increase. 8. Joint venture between The Coca Cola Company and Nestle has resulted in the establishment of Beverage Partners Worldwide (BPW). 9. Coca-Cola has formed a strong partnership with McDonalds, with McDonalds becoming their largest customer. Weaknesses 1. Product line is limited to beverages. 2. A failed $16 billion acquisition of Quaker Oats hinders long-term growth. 3. Negative publicity in India because of water issues, has led to poor brand image and hindered growth there. 4. Lack of management willingness to place foreign products into American markets. 5. Marketing deficiencies due to turnover in leadership and a 16 percent decrease in advertising spending. 6. Coca Colas inventory turnover is only 5.4 compared to Pepsi Co.s 8.0. Weight Rating Weighted Score 0.36 0.40 0.24 0.20 0.48 0.12 0.16 0.24 0.40

0.09 0.10 0.06 0.05 0.12 0.04 0.04 0.06 0.10

4 4 4 4 4 4 4 4 4

0.09 0.10 0.03 0.02 0.05 0.05

1 1 2 2 2 2

0.09 0.10 0.06 0.04 0.10 0.10

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

62

TOTAL

1.00

3.09

F.

SWOT Strategies
SO Strategies 1. Improve environmental awareness with community involvement (S2, S4, O2, O3). 2. Market new diet drinks that have healthier sugar substitutes (S5, O7). WO Strategies 1. Market international beverages to American consumers (W4, O2, O6, O7). 2. Increase marketing efforts for bottled water (W5, W6, O1). ST Strategies 1. Acquire Krispy Kreme (KKD) to help diversify the product line (S5, T5). 2. Acquire Golden Enterprises (GLDC) to help diversify the product line (S5, T5). WT Strategies 3. Acquire Krispy Kreme (KKD) to help diversify the product line (W1, T5). 4. Acquire Golden Enterprises (GLDC) to help diversify the product line (W1, T5).

G.

SPACE Matrix

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

63

Conservative

FS 6 5 4 3 2 1

Aggressive

CA

-6

-5

-4

-3

-2

-1 -1 -2 -3 -4 -5 -6

IS

Defensive

ES

Competitive

Financial Strength (FS) Return on Assets (ROA) Leverage Net Income Income/Employee Inventory Turnover Financial Strength (FS) Average Competitive Advantage (CA) Market Share Product Quality Customer Loyalty Technological know-how Control over Suppliers and Distributors Competitive Advantage (CA) Average

6 6 6 6 3 5.4

Environmental Stability (ES) Rate of Inflation Technological Changes Price Elasticity of Demand Competitive Pressure Barriers to Entry into Market Environmental Stability (ES) Average Industry Strength (IS) Growth Potential Financial Stability Ease of Entry into Market Resource Utilization Profit Potential

-3 -2 -2 -6 -3 -3.2

-1 -1 -1 -2 -2

5 6 4 5 5 5.0

-1.4 Industry Strength (IS) Average

x-axis: -1.4 + 5.0 = 3.6 y-axis: 5.4 + -3.2 = 2.2 Coordinate: (3.6, 2.2)

H.

Grand Strategy Matrix

64

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Rapid Market Growth Quadrant II Quadrant I

Weak Competitive Position

Strong Competitive Position

Quadrant III Slow Market Growth

Quadrant IV

I.

The Internal-External (IE) Matrix

The IFE Total Weighted Score

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

65

Strong 3.0 to 4.0 High 3.0 to 3.99 I

Average 2.0 to 2.99 II

Weak 1.0 to 1.99 III

Medium The EFE Total 2.0 to 2.99 Weighted Score

IV

VI

Coca Cola

Low 1.0 to 1.99

VII

VIII

IX

Grow and Build

Divisions North America Bottling Investments North Asia, Eurasia & Middle East European Union Latin America Africa East, South Asia & Pacific Rim Corporate Percent Revenue 2006 29.1 21.2 16.5 14.6 10.3 4.6 3.3 0.4

J.

QSPM

Strategic Alternatives Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 66

Acquire KKD and GLDC Key Internal Factors Strengths 1. Product line has over 400 brands. 2. Strong global presence, located in over 200 countries. 3. Long history has built excellent brand recognition. 4. Partnership longevity with established sporting events including the Olympics. 5. Industry leader in market capitalization with $112 billion. 6. Return on Equity yielded 30 percent in 2006. 7. Leader of dividend yields of 2.6 percent. The company has had 43 consecutive years of an annual dividend increase. 8. Joint venture between The Coca Cola Company and Nestle has resulted in the establishment of Beverage Partners Worldwide (BPW). 9. Coca-Cola has formed a strong partnership with McDonalds, with McDonalds becoming their largest customer. Weaknesses 1. Product line is limited to beverages. 2. A failed $16 billion acquisition of Quaker Oats hinders long-term growth. 3. Negative publicity in India because of water issues, has led to poor brand image and hindered growth there. 4. Lack of management willingness to place foreign products into American markets. 5. Marketing deficiencies due to turnover in leadership and a 16 percent decrease in advertising spending. 6. Coca Colas inventory turnover is only 5.4 compared to Pepsi Co.s 8.0. SUBTOTAL Weight 0.09 0.10 0.06 0.05 0.12 0.04 0.04 0.06 0.10 AS 2 --2 --4 4 ------TAS 0.18 --0.12 --0.48 0.16 -------

Produce new diet drinks that have healthier sugar substitutes AS TAS 4 0.36 ----4 --3 3 ------0.24 --0.36 0.12 -------

0.09 0.10 0.03 0.02 0.05 0.05 1.00

4 --------4

0.36 --------0.20 1.50

1 --------1

0.09 --------0.05 1.22

Key External Factors

Weight

Acquire KKD and GLDC

Opportunities 1. Bottled water consumption has increased 11 percent. 2. According to the S&P Industry Survey, consumers are drawn to new smaller beverage brands that are not sold on a mass scale. 3. Word Economic Forums annual Davos, Switzerland gathering grants international voice. 4. Less developed countries are in desperate need to improve community water supplies. 5. Energy drink sales are expected to increase 7 to 8

0.06 0.05 0.02 0.02 0.06

AS --1 -------

TAS --0.05 -------

Produce new diet drinks that have healthier sugar substitutes AS TAS ----3 ------0.15 -------

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

67

percent in 2007. Disposable income has increased 6.2 percent. Consumers are striving to drink and eat their way to better health than pervious generations. 8. EPS is expected to rise 7 to 8 percent in 2007. Threats 1. Consumption of American beverages is denounced by foreign officials in areas where conflicting interest exist. 2. Multiple lawsuits against the new Enviga beverage for calorie burning claims in advertising 3. Smaller, lesser known brands are turning to major beer distributors for bottling. 4. Overall carbonated drink sales have been flat due to links of sugar to obesity and high fructose corn syrup to heart disease. 5. Pepsi is more diversified offering beverage and food products. 6. High cost of commodities such as sugar, and metals used in production of cans. 7. Many smaller companies are fierce competitors around the world in their local markets. SUB TOTAL SUM TOTAL ATTRACTIVENESS SCORE 6. 7.

0.05 0.07 0.07

--2 4

--0.14 0.28

--4 3

--0.28 0.21

0.02 0.04 0.06 0.10 0.20 0.10 0.08

------2 4 -----

------0.20 0.80 ----1.47 2.97

------4 2 -----

------0.40 0.40 ----1.44 2.66

K.

Recommendations
The QSPM strategies assessed whether acquiring KKD and GLDC (a potato chip and snack food company) was a better option than producing a new diet soda line made form more healthy sugar alternatives. Both scores on the QSPM are relatively close and given the financial condition of KKD and GLDC, it is recommended Coca Cola undertake both strategic alternatives. The Net Worth of both companies is provided below. It is estimated it would cost $200 million to research, produce and market the new diet drinks.

Krispy Kreme (KKD) Net Worth January 2008 (in millions).

1. Stockholders Equity + Goodwill = 79 + 28 2. Net income x 5 = $-42 x 5= 3. Share price = $2.73/EPS -0.94 = NAx Net Income $-42= 4. Number of Shares Outstanding x Share Price = 65 x $2.73 = Method Average $ 107 $ NA $ NA $ 177 $142

Golden Enterprises (GLDC) Net Worth January 2008 (in millions).

1. Stockholders Equity + Goodwill = 19.4 + 0 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall $ 19.4 68

2. Net income x 5 = $1.2 x 5= 3. Share price = $2.95/EPS 0.19 =$15.52 x Net Income $1.2= 4. Number of Shares Outstanding x Share Price = 11.2 x $2.95 = Method Average

$ 6.0 $ 18.6 $ 33.0 $19.3

L.

EPS/EBIT Analysis
$ Amount Needed: 360M Stock Price: $58 Tax Rate: 35% Interest Rate: 5% # Shares Outstanding: 1,600M
Common Stock Financing Recession Normal Boom 4,000,000,000 6,000,000,000 8,000,000,000 0 0 0 4,000,000,000 6,000,000,000 8,000,000,000 1,400,000,000 2,100,000,000 2,800,000,000 2,600,000,000 3,900,000,000 5,200,000,000 1,606,206,897 1,606,206,897 1,606,206,897 1.62 2.43 3.24 70 Percent Stock - 30 Percent Debt Recession Normal Boom 4,000,000,000 6,000,000,000 8,000,000,000 5,400,000 5,400,000 5,400,000 3,994,600,000 5,994,600,000 7,994,600,000 1,398,110,000 2,098,110,000 2,798,110,000 2,596,490,000 3,896,490,000 5,196,490,000 1,604,344,828 1,604,344,828 1,604,344,828 1.62 2.43 3.24 Debt Financing Normal 6,000,000,000 18,000,000 5,982,000,000 2,093,700,000 3,888,300,000 1,600,000,000 2.43

EBIT Interest EBT Taxes EAT # Shares EPS

Recession 4,000,000,000 18,000,000 3,982,000,000 1,393,700,000 2,588,300,000 1,600,000,000 1.62

Boom 8,000,000,000 18,000,000 7,982,000,000 2,793,700,000 5,188,300,000 1,600,000,000 3.24

EBIT Interest EBT Taxes EAT # Shares EPS

70 Percent Debt - 30 Percent Stock Recession Normal Boom 4,000,000,000 6,000,000,000 8,000,000,000 12,600,000 12,600,000 12,600,000 3,987,400,000 5,987,400,000 7,987,400,000 1,395,590,000 2,095,590,000 2,795,590,000 2,591,810,000 3,891,810,000 5,191,810,000 1,601,862,069 1,601,862,069 1,601,862,069 1.62 2.43 3.24

M.

Epilogue
U.S. sales of both Coca-Cola and Pepsi-Cola are declining sharply. In the first nine months of 2007, sales of cases of Coca-Cola Classic declined 5.6%, while Pepsi-Cola's volume slid 8.3%, according to Beverage Digest, an industry publication. Both companies are suffering from the broader decline in soda sales as more people switch to water and juices. Coke and Pepsi are beginning to advertise more and to aim ads at each other. Historically, ad wars between Coke and Pepsi have benefited both firms. The Coca-Cola company has been examining Hansen Natural (NASAQ:HANS) as a possible new acquisition. Analysts say such an acquisition would save $500M in manufacturing immediately. Analysts believe a potential sale is more likely in the $80-

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

69

$100 range rather than lower speculation of $60. KO views recent weakness in HANS as a buying opportunity. KO is expanding its tea business and will look at acquisitions to improve its position. "Tea is a priority area," Chief Executive Neville Isdell told Reuters on the sidelines of the World Economic Forum. "Tea is one area where we've seen our performance has not been as good as we would like it to be." He declined to confirm or deny recent reports that Coca-Cola might buy or make an investment in Honest Beverages, a privately-held maker of Honest Tea. "The honest answer is we look at everything and when we decide that we are going to do something we will let you know," Isdell said. Both Coca-Cola and PepsiCo Inc. have suffered a domestic slowdown in sales of its traditional soft drinks as health-conscious consumers opt for bottled water or tea, which they view as healthier. Pepsi already has a strong position in water, where it ranks third in the world, helped by last year's acquisition of vitamin-water maker Glaceau. KOs Isdell, who will hand over the CEO job to Chief Operating Officer Muhtar Kent in July 2008, says Coca-Cola is not interested in large-scale M&A deals. "We will be acquiring bolt-on but no major acquisitions," he said. On January 30, 2008, PepsiAmericas (PAS), the No. 2 Pepsi bottler, reported a 60 percent jump in fourth-quarter net income helped by acquisitions, volume growth in Central Europe and a weaker U.S. dollar, but forecast fiscal 2008 profit below expectations. PAS forecasts fiscal 2008 earnings per share of $1.77 a share to $1.83 a share, short of analysts' expectations of $1.89 a share for the same period. Based in Minneapolis, PepsiAmericas has pursued deals in Central and Eastern Europe in an effort to capture a share of the rapidly growing markets in these regions. The company earned $42 million, or 32 cents a share, for the quarter, versus $26.1 million, or 20 cents a share, a year earlier. The current quarter included a charge of 1 cent a share. Volume growth in the United States continued to decline this quarter but a net pricing growth of 3.8 percent helped sales growth. Central European volume grew 56.1 percent. Net sales in the U.S., which were about 71 percent of the company's total for the quarter, rose 4 percent to $812.2 million.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

70