Coke-Pepsi Part II

Business 30130 Michael Minnis
The Coca-Cola Company and PepsiCo

Part II: Evaluating Corporate Profitability 1
Purpose:
The purpose of this assignment is to:
1. Increase your familiarity with 10-K filings.

2. Illustrate the application and interpretation of a traditional framework for evaluating corporate
profitability and compare it to the Penman framework.
3. Illustrate how differences in profitability measures and their components are related to underlying
inter-firm differences or inter-temporal differences in corporate objectives and strategies.
Materials:
1. Excerpts from the 2010 10-K reports for both PepsiCo (PEP) and Coca-Cola (KO).
2. Press articles describing the purchases by both companies of their bottling units.
3. Profitability analysis model spreadsheet located on Chalk.
Directions:
• Read the background materials listed above. The excerpts contain some of the detail regarding the
acquisitions of the bottlers. You do not need to know all of the technicalities of the purchase
accounting (other classes at Booth cover these transactions in detail), but I include the discussion in
the packet to give you a sense for the nature of deal.
• Answer the questions below for both Part I, Traditional Profitability Analysis and Part II, Penman
Framework.
• Complete the profitability analysis spreadsheet.
• Submit both your written answers and spreadsheet analysis to Chalk electronically and be prepared to
discuss in class.
1 The case was developed for Business 30130 by Abbie Smith and modified by Michael Minnis.
I. Traditional Profitability Analysis
1. In 2010, both PEP and KO purchased their large bottling companies.2 Read the press articles
associated with this case and discuss the likely reasons driving PEP and KO to purchase their bottlers.
What has changed since 1999 when PEP spun-off its bottling company in an IPO? Given what you
learned in the previous Coke vs. Pepsi assignment, what effect do you expect the consolidation of the
bottlers to have on the financial results for both PEP and KO?
2. Open the “Pepsi vs Coke” spreadsheet model (download from Chalk). You will note that I have
imported the income statements and balance sheets for both PEP and KO. I have also completed all of
the analyses for PEP for you to use as a guide (I did the hard work already!!). First, it may be useful if
you peruse the financial statements in the 10-Ks and compare them to the financial statements that are
entered into the spreadsheet. The spreadsheet uses a consistent format for both PEP and KO, but you
will notice that the actual financial statements are in different formats.3 Next, using the KO financial
statements go to the “Common Size Financials” tab and complete the “Common Size Income
Statements” and “Common Size Balance Sheets” for KO. (I have created the spreadsheet such that
you should only have to create the formulas for one year and then copy-paste the formulas for the
other two years.)
Recall your answer to Part II, Question 4 in the previous assignment about the bottling business. Do
the changes from 2009 to 2010 in the common size statements reflect your expectations about the
performance of the bottling industries? From 2009 to 2010, what two asset accounts increased as a
percentage of total assets for both PEP and KO? Why? What liability account increased as a
percentage for both PEP and KO? Why?
3. Using the definitions provided in the “Trad Framework-Definitions” tab, and the results on the “Trad
Framework-PEP” tab as a guide, complete the traditional profitability analysis for KO on the “Trad
Framework-KO” tab. The traditional framework spreadsheet tabs contain flow charts that
disaggregate Return on Common Equity (ROCE). (Note: Place the data in the left cell within the bold
box of the flow chart. This cell is referenced by the “Profitability Analysis Summary” tab.) Check
your calculations by multiplying across the four subcomponents as indicated on the chart. After you
are satisfied that you completed the flow chart for KO (for both 2009 and 2010), go to the
“Profitability Analysis Summary” tab. Compare the performance of PEP to KO. Which is better?
Why? How have the performances changed between 2009 and 2010? Is this consistent with the
strategy and what you saw on the common size financial statements? Discuss.
(Be careful to note the difference between “Net Income available for Common Stock” and “Net
Income”)
2Note, however, that both PEP and KO still have smaller bottlers that remain independently owned and operated.
3Also note that I adjusted the Income Statements to remove one-time gains associated with the bottling purchases
by both KO and PEP. We will discuss this in class.
II. Penman Framework
1. We will now examine the profitability of PEP and KO using the Penman Framework. Be sure to read
the Penman chapters (on Chalk) before proceeding. Go to the “Penman Framework-PEP” tab and
look at the flow chart. You will note that this flow chart starts with Return on Common Equity just as
the traditional analysis tab does, but the rest of the analysis is different. In order to construct the ratios
for the flow chart, we need to reconstruct the Income Statement and Balance Sheet according to the
Penman approach. To do this, go to the “BS-PEP” tab. You will notice that next to the “Traditional
Balance Sheet” for PEP, I allocated each financial statement account to the operating and financing
categories by placing an amount in the blue cells on the right hand side of the spreadsheet. To allocate
cash, I assumed that 1% of revenues is required for operating cash and the remaining cash is
financing (or “excess”) cash. Do this same allocation exercise for KO for both the balance sheets and
income statements (for each year). To allocate the cash balance, assume that KO also needs 1% of
revenues in its operating cash balance with the remainder as “Financing.” At the bottom of the “BS-
KO” spreadsheet you will see a summary of the Penman balance sheet. Be sure that the Net Operating
Assets (NOA) equals the sum of the Net Financial Obligations + Common Stockholders’ Equity.
2. After allocating the balance sheet and income statement accounts, use this data to complete the
“Penman Framework” flow charts for KO. I completed the Penman profitability analysis for PEP, but
first try to complete the KO analysis without using the PEP formulas. The definitions for each of the
ratios are given in the “Penman Framework-Definitions” tab. (Note: Place the data in the left cell
within the bold box – this cell is referenced by the “Profitability Analysis Summary” tab.) Check your
calculations by adding and multiplying the subcomponents of ROCE as indicated on the chart.
Compare the Penman profitability of PEP and KO. Which performance seems better? Talk briefly
about each of the subcategories of ROCE – are there any particular ratios which seem to be driving
the differences? How have the performances changed over the two years of the analysis? What seems
to be driving these changes?
3. Go to the “Profitability Analysis Summary” tab. (Note: if you completed Traditional and Penman
flow charts correctly, then your data should flow to this table without needing to input anything.)
Compare the results of PEP and KO under the traditional analysis and the Penman analysis. Which is
greater: ROA or RNOA? Why? For 2010 you should find that ROA is slightly better for KO but that
RNOA is slightly better for PEP. Why? What seems to be driving this difference?
4. On the Penman Framework tabs, an alternative disaggregation of RNOA into ROOA + OLLEV *
OLSPREAD is provided. Discuss what these components mean. To what extent are the differences in
RNOA between PEP and KO driven by the different components. Why? Try to be specific.
A note of caution: Because I have included the formulas in the spreadsheet for PEP, it will be tempting
to mindlessly replicate this for KO. The point here is to learn something. I know you know how to use
CTRL-C and CTRL-V in a spreadsheet, but make sure you know why the formulas are the way that they
are!
EXCERPTS FROM PEPSICO’S 2010 10-K
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the shorter of the economic or contractual life, as a reduction of revenue, and the remaining balances of $296 million, as of both
December 25, 2010 and December 26, 2009, are included in current assets and other assets on our balance sheet.
We estimate and reserve for our bad debt exposure based on our experience with past due accounts and collectibility, the aging of
accounts receivable and our analysis of customer data. Bad debt expense is classified within selling, general and administrative
expenses in our income statement.
Goodwill and Other Intangible Assets
We sell products under a number of brand names, many of which were developed by us. The brand development costs are expensed as
incurred. We also purchase brands in acquisitions. Upon acquisition, the purchase price is first allocated to identifiable assets and
liabilities, including brands, based on estimated fair value, with any remaining purchase price recorded as goodwill. Determining fair
value requires significant estimates and assumptions based on an evaluation of a number of factors, such as marketplace participants,
product life cycles, market share, consumer awareness, brand history and future expansion expectations, amount and timing of future
cash flows and the discount rate applied to the cash flows.
We believe that a brand has an indefinite life if it has a history of strong revenue and cash flow performance, and we have the intent
and ability to support the brand with marketplace spending for the foreseeable future. If these perpetual brand criteria are not met,
brands are amortized over their expected useful lives, which generally range from five to 40 years. Determining the expected life of a
brand requires management judgment and is based on an evaluation of a number of factors, including market share, consumer
awareness, brand history and future expansion expectations, as well as the macroeconomic environment of the countries in which the
brand is sold.
Perpetual brands and goodwill, including the goodwill that is part of our noncontrolled bottling investment balances, are not
amortized. Perpetual brands and goodwill are assessed for impairment at least annually. If the carrying amount of a perpetual brand
exceeds its fair value, as determined by its discounted cash flows, an impairment loss is recognized in an amount equal to that excess.
Goodwill is evaluated using a two-step impairment test at the reporting unit level. A reporting unit can be a division or business within
a division. The first step compares the book value of a reporting unit, including goodwill, with its fair value, as determined by its
discounted cash flows. If the book value of a reporting unit exceeds its fair value, we complete the second step to determine the
amount of goodwill impairment loss that we should record. In the second step, we determine an implied fair value of the reporting
unit's goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill (including any
unrecognized intangible assets). The amount of impairment loss is equal to the excess of the book value of the goodwill over the
implied fair value of that goodwill.
Amortizable brands are only evaluated for impairment upon a significant change in the operating or macroeconomic environment. If
an evaluation of the undiscounted future
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Consolidated Statement of Income

PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 25, 2010, December 26, 2009 and December 27, 2008
(in millions except per share amounts)
2010 2009 2008
Net Revenue $ 57,838 $ 43,232 $ 43,251
Cost of sales 26,575 20,099 20,351
Selling, general and administrative expenses 22,814 15,026 15,877
Amortization of intangible assets 117 63 64
Operating Profit 8,332 8,044 6,959
Bottling equity income 735 365 374
Interest expense (903) (397) (329)
Interest income 68 67 41
Income before income taxes 8,232 8,079 7,045
Provision for income taxes 1,894 2,100 1,879
Net income 6,338 5,979 5,166
Less: Net income attributable to noncontrolling interests 18 33 24
Net Income Attributable to PepsiCo $ 6,320 $ 5,946 $ 5,142
Net Income Attributable to PepsiCo per Common Share
Basic $ 3.97 $ 3.81 $ 3.26
Diluted $ 3.91 $ 3.77 $ 3.21
Cash dividends declared per common share $ 1.89 $ 1.775 $ 1.65
See accompanying notes to consolidated financial statements.
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Consolidated Statement of Cash Flows

(in millions)
2010 2009 2008
Operating Activities
Net income $ 6,338 $ 5,979 $ 5,166
Depreciation and amortization 2,327 1,635 1,543
Stock-based compensation expense 299 227 238
Restructuring and impairment charges — 36 543
Cash payments for restructuring charges (31) (196) (180)
Merger and integration costs 808 50 —
Cash payments for merger and integration costs (385) (49) —
Gain on previously held equity interests in PBG and PAS (958) — —
Asset write-off 145 — —
Non-cash foreign exchange loss related to Venezuela devaluation 120 — —
Excess tax benefits from share-based payment arrangements (107) (42) (107)
Pension and retiree medical plan contributions (1,734) (1,299) (219)
Pension and retiree medical plan expenses 453 423 459
Bottling equity income, net of dividends 42 (235) (202)
Deferred income taxes and other tax charges and credits 500 284 573
Change in accounts and notes receivable (268) 188 (549)
Change in inventories 276 17 (345)
Change in prepaid expenses and other current assets 144 (127) (68)
Change in accounts payable and other current liabilities 488 (133) 718
Change in income taxes payable 123 319 (180)
Other, net (132) (281) (391)
Net Cash Provided by Operating Activities 8,448 6,796 6,999
Investing Activities
Capital spending (3,253) (2,128) (2,446)
Sales of property, plant and equipment 81 58 98
Acquisitions of PBG and PAS, net of cash and cash equivalents acquired (2,833) — —
Acquisition of manufacturing and distribution rights from DPSG (900) — —
Investment in WBD (463) — —
Other acquisitions and investments in noncontrolled affiliates (83) (500) (1,925)
Divestitures 12 99 6
Cash restricted for pending acquisitions — 15 (40)
Cash proceeds from sale of PBG and PAS stock — — 358
Short-term investments, by original maturity
More than three months – purchases (12) (29) (156)
More than three months – maturities 29 71 62
Three months or less, net (229) 13 1,376
Other investing, net (17) — —
Net Cash Used for Investing Activities (7,668) (2,401) (2,667)
(Continued on following page)
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Consolidated Statement of Cash Flows (continued)

(in millions)
2010 2009 2008

Financing Activities
Proceeds from issuances of long-term debt $ 6,451 $ 1,057 $ 3,719
Payments of long-term debt (59) (226) (649)
Debt repurchase (500) — —
Short-term borrowings, by original maturity
More than three months – proceeds 227 26 89
More than three months – payments (96) (81) (269)
Three months or less, net 2,351 (963) 625
Cash dividends paid (2,978) (2,732) (2,541)
Share repurchases – common (4,978) — (4,720)
Share repurchases – preferred (5) (7) (6)
Proceeds from exercises of stock options 1,038 413 620
Excess tax benefits from share-based payment arrangements 107 42 107
Acquisition of non-controlling interest in Lebedyansky from PBG (159) — —
Other financing (13) (26) —
Net Cash Provided by/(Used for) Financing Activities 1,386 (2,497) (3,025)
Effect of exchange rate changes on cash and cash equivalents (166) (19) (153)
Net Increase in Cash and Cash Equivalents 2,000 1,879 1,154
Cash and Cash Equivalents, Beginning of Year 3,943 2,064 910
Cash and Cash Equivalents, End of Year $ 5,943 $ 3,943 $ 2,064
Non-cash activity:
Issuance of common stock and equity awards in connection with our acquisitions of PBG and PAS, as
reflected in investing and financing activities $ 4,451 — —
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Consolidated Balance Sheet

December 25, 2010 and December 26, 2009
(in millions except per share amounts)
2010 2009
ASSETS
Current Assets
Cash and cash equivalents $ 5,943 $ 3,943
Short-term investments 426 192
Accounts and notes receivable, net 6,323 4,624
Inventories 3,372 2,618
Prepaid expenses and other current assets 1,505 1,194
Total Current Assets 17,569 12,571
Property, Plant and Equipment, net 19,058 12,671
Amortizable Intangible Assets, net 2,025 841
Goodwill 14,661 6,534
Other nonamortizable intangible assets 11,783 1,782
Nonamortizable Intangible Assets 26,444 8,316
Investments in Noncontrolled Affiliates 1,368 4,484
Other Assets 1,689 965
Total Assets $ 68,153 $ 39,848
LIABILITIES AND EQUITY
Current Liabilities
Short-term obligations $ 4,898 $ 464
Accounts payable and other current liabilities 10,923 8,127
Income taxes payable 71 165
Total Current Liabilities 15,892 8,756
Long-Term Debt Obligations 19,999 7,400
Other Liabilities 6,729 5,591
Deferred Income Taxes 4,057 659
Total Liabilities 46,677 22,406
Commitments and Contingencies
Preferred Stock, no par value 41 41
Repurchased Preferred Stock (150) (145)
PepsiCo Common Shareholders' Equity
Common stock, par value 12/3¢ per share (authorized 3,600 shares, issued 1,865 and 1,782 shares, respectively) 31 30
Capital in excess of par value 4,527 250
Retained earnings 37,090 33,805
Accumulated other comprehensive loss (3,630) (3,794)
Repurchased common stock, at cost (284 and 217 shares, respectively) (16,745) (13,383)
Total PepsiCo Common Shareholders' Equity 21,273 16,908
Noncontrolling interests 312 638
Total Equity 21,476 17,442
Total Liabilities and Equity $ 68,153 $ 39,848
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2010 2009 2008 2010 2009 2008

(a)
Net Revenue Operating Profit
FLNA $ 13,397 $ 13,224 $ 12,507 $ 3,549 $ 3,258 $ 2,959
QFNA 1,832 1,884 1,902 568 628 582
LAF 6,315 5,703 5,895 1,004 904 897
PAB(b) 20,401 10,116 10,937 2,776 2,172 2,026
Europe(b) 9,254 6,727 6,891 1,020 932 910
AMEA 6,639 5,578 5,119 742 716 592
Total division 57,838 43,232 43,251 9,659 8,610 7,966
Corporate Unallocated
Net impact of mark-to-market on commodity hedges — — — 91 274 (346)
Merger and integration costs — — — (191) (49) —
Restructuring and impairment charges — — — — — (10)
Venezuela currency devaluation — — — (129) — —
Asset write-off — — — (145) — —
Foundation contribution — — — (100) — —
Other — — — (853) (791) (651)
$ 57,838 $ 43,232 $ 43,251 $ 8,332 $ 8,044 $ 6,959
(a) For information on the impact of restructuring, impairment and integration charges on our divisions, see Note 3.
(b) Changes in 2010 relate primarily to our acquisitions of PBG and PAS.
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Corporate
Corporate includes costs of our corporate headquarters, centrally managed initiatives, such as our ongoing business transformation
initiative and research and development projects, unallocated insurance and benefit programs, foreign exchange transaction gains and
losses, certain commodity derivative gains and losses and certain other items.
Other Division Information
2010 2009 2008 2010 2009 2008
Total Assets Capital Spending
FLNA $ 6,284 $ 6,337 $ 6,284 $ 526 $ 490 $ 553
QFNA 960 997 1,035 37 33 43
LAF 4,053 3,575 3,023 370 310 351
PAB(a) 31,622 7,670 7,673 973 182 344
Europe(a) 12,853 9,321 8,840 503 357 401
AMEA 5,748 4,937 3,756 624 585 479
Total division 61,520 32,837 30,611 3,033 1,957 2,171
Corporate(b) 6,394 3,933 2,729 220 171 275
Investments in bottling affiliates(a) 239 3,078 2,654 — — —
$ 68,153 $ 39,848 $ 35,994 $ 3,253 $ 2,128 $ 2,446
(a) Changes in total assets in 2010 relate primarily to our acquisitions of PBG and PAS.
(b) Corporate assets consist principally of cash and cash equivalents, short-term investments, derivative instruments and property,
plant and equipment.
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2010 2009 2008 2010 2009 2008

Depreciation and
Amortization of Intangible
Assets Other Amortization
FLNA $ 7 $ 7 $ 9 $ 462 $ 440 $ 441
QFNA — — — 38 36 34
LAF 6 5 6 213 189 194
PAB(a) 56 18 16 749 345 334
Europe(a) 35 22 23 343 227 210
AMEA 13 11 10 306 248 213
Total division 117 63 64 2,111 1,485 1,426
Corporate — — — 99 87 53
$ 117 $ 63 $ 64 $ 2,210 $ 1,572 $ 1,479
2010 2009 2008 2010 2009 2008
(b) (c)
Net Revenue Long-Lived Assets
U.S.(a) $ 30,618 $ 22,446 $ 22,525 $ 28,631 $ 12,496 $ 12,095
Mexico(a) 4,531 3,210 3,714 1,671 1,044 904
Canada(a) 3,081 1,996 2,107 3,133 688 556
Russia(a) 1,890 1,006 585 2,744 2,094 577
United Kingdom 1,888 1,826 2,099 1,019 1,358 1,509
All other countries 15,830 12,748 12,221 11,697 8,632 6,889
$ 57,838 $ 43,232 $ 43,251 $ 48,895 $ 26,312 $ 22,530
(a) Increases in 2010 relate primarily to our acquisitions of PBG and PAS.
(b) Represents net revenue from businesses operating in these countries.
(c) Long-lived assets represent property, plant and equipment, nonamortizable intangible assets, amortizable intangible assets and
investments in noncontrolled affiliates. These assets are reported in the country where they are primarily used.
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2010 2009 2008

Other supplemental information
Rent expense $ 526 $ 412 $ 357
Interest paid $ 1,043 $ 456 $ 359
Income taxes paid, net of refunds $ 1,495 $ 1,498 $ 1,477
Acquisitions(a)
Fair value of assets acquired $ 27,665 $ 851 $ 2,907
Cash paid, net of cash acquired (3,044) (466) (1,925)
Equity issued (4,451) — —
Previously held equity interests in PBG and PAS (4,293) — —
Liabilities and noncontrolling interests assumed $ 15,877 $ 385 $ 982
(a) In 2010, amounts primarily reflect our acquisitions of PBG and PAS. During 2008, together with PBG, we jointly acquired
Lebedyansky, for a total purchase price of $1.8 billion.
Note 15 — Acquisitions
PBG and PAS
On August 3, 2009, we entered into a Merger Agreement (the PBG Merger Agreement) with PBG and Metro pursuant to which PBG
merged with and into Metro, with Metro continuing as the surviving corporation and a wholly owned subsidiary of PepsiCo. Also on
August 3, 2009, we entered into a Merger Agreement (the PAS Merger Agreement and together with the PBG Merger Agreement, the
Merger Agreements) with PAS and Metro pursuant to which PAS merged with and into Metro, with Metro continuing as the surviving
corporation and a wholly owned subsidiary of PepsiCo. On February 26, 2010, we acquired PBG and PAS to create a more fully
integrated supply chain and go-to-market business model, improving the effectiveness and efficiency of the distribution of our brands
and enhancing our revenue growth. The total purchase price was approximately $12.6 billion, which included $8.3 billion of cash and
equity and the fair value of our previously held equity interests in PBG and PAS of $4.3 billion.
Under the terms of the PBG Merger Agreement, each outstanding share of common stock of PBG not held by Metro, PepsiCo or a
subsidiary of PepsiCo or held by PBG as treasury stock (each, a "PBG Share") was canceled and converted into the right to receive, at
the holder's election, either 0.6432 shares of common stock of PepsiCo (the "PBG Per Share Stock Consideration") or $36.50 in cash,
without interest (the "PBG Cash Election Price"), subject to proration provisions which provide that an aggregate 50% of such
outstanding PBG Shares were converted into the right to receive common stock of PepsiCo and an aggregate 50% of such outstanding
PBG Shares were converted into the right to receive cash and each PBG Share and share of Class B common stock of PBG held by
Metro, PepsiCo or a subsidiary of PepsiCo was canceled or converted to the right to receive 0.6432 shares of common stock of
PepsiCo. Under the terms of the PAS Merger Agreement, each outstanding share of common stock of PAS not held by Metro,
PepsiCo or a subsidiary of PepsiCo or held by PAS as treasury stock (each, a "PAS Share") was canceled and converted into the right
to receive, at the holder's election, either 0.5022 shares of common stock of PepsiCo (the "PAS Per Share Stock Consideration") or
$28.50 in cash, without interest (the "PAS Cash Election Price"), subject to proration provisions which provide that an aggregate 50%
of such outstanding PAS Shares were converted into the
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right to receive common stock of PepsiCo and an aggregate 50% of such outstanding PAS Shares were converted into the right to
receive cash and each PAS Share held by Metro, PepsiCo or a subsidiary of PepsiCo was canceled or converted into the right to
receive 0.5022 shares of common stock of PepsiCo.
Under the terms of the applicable Merger Agreement, each PBG or PAS stock option was converted into an adjusted PepsiCo stock
option to acquire a number of shares of PepsiCo common stock, determined by multiplying the number of shares of PBG or PAS
common stock subject to the PBG or PAS stock option by an exchange ratio (the "Closing Exchange Ratio") equal to the closing price
of a share of PBG or PAS common stock on the business day immediately before the acquisition date divided by the closing price of a
share of PepsiCo common stock on the business day immediately before the acquisition date. The exercise price per share of PepsiCo
common stock subject to the adjusted PepsiCo stock option is equal to the per share exercise price of PBG or PAS stock option
divided by the Closing Exchange Ratio.
Under the terms of the PBG Merger Agreement, each PBG restricted stock unit (RSU) was adjusted so that its holder is entitled to
receive, upon settlement, a number of shares of PepsiCo common stock equal to the number of shares of PBG common stock subject
to the PBG RSU multiplied by the PBG Per Share Stock Consideration. PBG performance-based RSUs were converted into PepsiCo
RSUs based on 100% target achievement, and, following conversion, remain subject to continued service of the holder. Each PBG
RSU held by a non-employee director was vested and canceled at the acquisition date, and, in exchange for cancellation of the PBG
RSU, the holder received the PBG Per Share Stock Consideration for each share of PBG common stock subject to the PBG RSU.
Under the terms of the PAS Merger Agreement, each cash-settled PAS RSU was canceled in exchange for a cash payment equal to the
closing price of a share of PAS common stock on the business day immediately before the closing of the PAS merger for each share of
PAS common stock subject to each PAS RSU. Each PAS restricted share was converted into either the PAS Per Share Stock
Consideration or the PAS Cash Election Price, at the election of the holder, with the same proration procedures applicable to PAS
stockholders described above.
Pursuant to the terms of PBG's executive retention arrangements, PBG equity awards granted to certain executives prior to the PBG
merger vest immediately upon a qualifying termination of the executive's employment except for certain PBG executives whose
equity awards vested immediately at the effective time of the PBG merger pursuant to the terms of PepsiCo's executive retention
agreements. Each PAS equity award granted prior to the PAS merger vested immediately at the effective time of the PAS merger
pursuant to the original terms of the awards.
Prior to the acquisitions, we had equity investments in PBG and PAS. In addition to approximately 32% of PBG's outstanding
common stock that we owned at year-end 2009, we owned 100% of PBG's class B common stock and approximately 7% of the equity
of Bottling Group, LLC, PBG's principal operating subsidiary. At year-end 2009, we owned approximately 43% of the outstanding
common stock of PAS.
The guidance on accounting for business combinations requires that an acquirer remeasure its previously held equity interest in an
acquiree at its acquisition date fair value and recognize the resulting gain or loss in earnings. Thus, in connection with our acquisitions
of PBG and PAS, the carrying amounts of our previously held equity interests in PBG and PAS were revalued to
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fair value at the acquisition date, resulting in a gain in the first quarter of 2010 of $958 million, comprising $735 million which is non-
taxable and recorded in bottling equity income and $223 million related to the reversal of deferred tax liabilities associated with these
previously held equity interests.
As discussed in Note 9, in January 2010, we issued $4.25 billion of fixed and floating rate notes. A portion of the net proceeds from
the issuance of these notes was used to finance our acquisitions of PBG and PAS.
Our actual stock price on February 25, 2010 (the last trading day prior to the closing of the acquisitions) was used to determine the
value of stock, stock options and RSUs issued as consideration in connection with our acquisitions of PBG and PAS and thus to
calculate the actual purchase price.
The table below represents the computation of the purchase price excluding assumed debt and the fair value of our previously held
equity interests in PBG and PAS as of the acquisition date:
Total Number of
Shares/Awards
Total Fair
Issued Value
Payment in cash, for the remaining (not owned by PepsiCo and its subsidiaries) outstanding shares of
PBG and PAS common stock and equity awards vested at consummation of merger — $ 3,813
Payment to PBG and PAS of shares of PepsiCo common stock for the remaining (not owned by
PepsiCo and its subsidiaries) outstanding shares of PBG and PAS common stock and equity awards
vested at consummation of merger 67 4,175
Issuance of PepsiCo equity awards (vested and unvested) to replace existing PBG and PAS equity
awards 16 276
Total purchase price 83 $ 8,264
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The following table summarizes the fair value of identifiable assets acquired and liabilities assumed in the acquisitions of PBG and
PAS and the resulting goodwill as of the acquisition date:
Acquisition
Date Fair Value
Inventory $ 1,006
Property, plant and equipment 5,574
Amortizable intangible assets 1,298
Nonamortizable intangible assets, primarily reacquired franchise rights 9,036
Other current assets and current liabilities(a) 751
Other noncurrent assets 281
Debt obligations (8,814)
Pension and retiree medical benefits (962)
Other noncurrent liabilities (744)
Deferred income taxes (3,246)
Total identifiable net assets 4,180
Goodwill 8,059
Subtotal 12,239
Fair value of acquisition of noncontrolling interest 317
Total purchase price $ 12,556
(a) Includes cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and other
current liabilities.
Goodwill is calculated as the excess of the purchase price paid over the net assets recognized. The goodwill recorded as part of the
acquisitions of PBG and PAS primarily reflects the value of adding PBG and PAS to PepsiCo to create a more fully integrated supply
chain and go-to-market business model, as well as any intangible assets that do not qualify for separate recognition. Goodwill is not
amortizable nor deductible for tax purposes. Substantially all of the goodwill is recorded in our PAB segment.
In connection with our acquisitions of PBG and PAS, we reacquired certain franchise rights which had previously provided PBG and
PAS with the exclusive and perpetual rights to manufacture and/or distribute beverages for sale in specified territories. Reacquired
franchise rights totaling $8.0 billion were assigned a perpetual life and are, therefore, not amortizable. Amortizable acquired franchise
rights of $0.9 billion have weighted-average estimated useful lives of 56 years. Other amortizable intangible assets, primarily
customer relationships, have weighted-average estimated useful lives of 20 years.
Under the guidance on accounting for business combinations, merger and integration costs are not included as components of
consideration transferred but are accounted for as expenses in the period in which the costs are incurred. See Note 3 for details on the
expenses incurred during 2010.
The following table presents unaudited consolidated pro forma financial information as if the closing of our acquisitions of PBG and
PAS had occurred on December 27, 2009 for purposes of the financial information presented for the year ended December 25, 2010;
and as if the closing
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Table of Contents
of our acquisitions of PBG and PAS had occurred on December 28, 2008 for purposes of the financial information presented for the
year ended December 26, 2009.
2010 2009
Net Revenue $ 59,582 $ 57,471
Net Income Attributable to PepsiCo $ 5,856 $ 6,752
Net Income Attributable to PepsiCo per Common Share – Diluted $ 3.60 $ 4.09
The unaudited consolidated pro forma financial information was prepared in accordance with the acquisition method of accounting
under existing standards, and the regulations of the U.S. Securities and Exchange Commission, and is not necessarily indicative of the
results of operations that would have occurred if our acquisitions of PBG and PAS had been completed on the dates indicated, nor is it
indicative of the future operating results of PepsiCo.
The historical unaudited consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly
attributable to the acquisitions, (2) factually supportable, and (3) expected to have a continuing impact on the combined results of
PepsiCo, PBG and PAS.
The unaudited pro forma results have been adjusted with respect to certain aspects of our acquisitions of PBG and PAS to reflect:
• the consummation of the acquisitions;
• consolidation of PBG and PAS which are now owned 100% by PepsiCo and the corresponding gain resulting from the
remeasurement of our previously held equity interests in PBG and PAS;
• the elimination of related party transactions between PepsiCo and PBG, and PepsiCo and PAS;
• changes in assets and liabilities to record their acquisition date fair values and changes in certain expenses resulting therefrom;
and
• additional indebtedness, including, but not limited to, debt issuance costs and interest expense, incurred in connection with the
acquisitions.
The unaudited pro forma results do not reflect future events that may occur after the acquisitions, including, but not limited to, the
anticipated realization of ongoing savings from operating synergies in subsequent periods. They also do not give effect to certain one-
time charges we expect to incur in connection with the acquisitions, including, but not limited to, charges that are expected to achieve
ongoing cost savings and synergies.
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EXCERPTS FROM COCA-COLA’S 2010 10-K
FORWARD-LOOKING STATEMENTS
This report contains information that may constitute ‘‘forward-looking statements.’’ Generally, the words ‘‘believe,’’ ‘‘expect,’’
‘‘intend,’’ ‘‘estimate,’’ ‘‘anticipate,’’ ‘‘project,’’ ‘‘will’’ and similar expressions identify forward-looking statements, which
generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a
statement is not forward-looking. All statements that address operating performance, events or developments that we expect or
anticipate will occur in the future — including statements relating to volume growth, share of sales and earnings per share
growth, and statements expressing general views about future operating results — are forward-looking statements.
Management believes that these forward-looking statements are reasonable as and when made. However, caution should be
taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date
when made. Our Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as
a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to differ materially from our Company’s historical
experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those
described in Part I, ‘‘Item 1A. Risk Factors’’ and elsewhere in this report and those described from time to time in our future
reports filed with the Securities and Exchange Commission.
PART I
ITEM 1. BUSINESS
In this report, the terms ‘‘The Coca-Cola Company,’’ ‘‘Company,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ mean The Coca-Cola
Company and all entities included in our consolidated financial statements.
General
The Coca-Cola Company is the world’s largest nonalcoholic beverage company. We own or license and market more
than 500 nonalcoholic beverage brands, primarily sparkling beverages but also a variety of still beverages such as waters,
enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks. Along with
Coca-Cola, which is recognized as the world’s most valuable brand, we own and market four of the world’s top five
nonalcoholic sparkling beverage brands, including Diet Coke, Fanta and Sprite. Finished beverage products bearing our
trademarks, sold in the United States since 1886, are now sold in more than 200 countries.
We make our branded beverage products available to consumers throughout the world through our network of
Company-owned or controlled bottling and distribution operations, bottling partners, distributors, wholesalers and
retailers — the world’s largest beverage distribution system. Of the approximately 55 billion beverage servings of all
types consumed worldwide every day, beverages bearing trademarks owned by or licensed to us account for
approximately 1.7 billion.
We believe that our success depends on our ability to connect with consumers by providing them with a wide variety of
options to meet their desires, needs and lifestyle choices. Our success further depends on the ability of our people to
execute effectively, every day.
Our goal is to use our Company’s assets — our brands, financial strength, unrivaled distribution system, global reach
and the talent and strong commitment of our management and associates — to become more competitive and to
accelerate growth in a manner that creates value for our shareowners.
We were incorporated in September 1919 under the laws of the State of Delaware and succeeded to the business of a
Georgia corporation with the same name that had been organized in 1892.
Acquisition of Coca-Cola Enterprises Inc.’s North American Business and Related Transactions
On October 2, 2010, we acquired the North American business of Coca-Cola Enterprises Inc. (‘‘CCE’’), one of our
major bottlers, consisting of CCE’s production, sales and distribution operations in the United States, Canada, the
British Virgin Islands, the United States Virgin Islands and the Cayman Islands, and a substantial majority of CCE’s
corporate segment. CCE shareowners other than the Company exchanged their CCE common stock for common stock
in a new entity named Coca-Cola Enterprises, Inc. (‘‘New CCE’’), which after the closing of the transaction continued
to hold the European operations that had been held by CCE prior to the acquisition. The Company does not have any
1
ownership interest in New CCE. Upon completion of the CCE transaction, we combined the management of the
acquired North American business with the management of our existing foodservice business, Minute Maid and
Odwalla juice businesses, North America supply chain operations and Company-owned bottling operations in
Philadelphia, Pennsylvania, into a unified bottling and customer service organization called Coca-Cola Refreshments
(‘‘CCR’’). In addition, we reshaped our remaining Coca-Cola North America (‘‘CCNA’’) operations into an organization
that primarily provides franchise leadership and consumer marketing and innovation for the North American market.
As a result of the transaction and related reorganization, our North American businesses operate as aligned and agile
organizations with distinct capabilities, responsibilities and strengths.
In contemplation of the closing of our acquisition of CCE’s North American business, we reached an agreement with
Dr Pepper Snapple Group, Inc. (‘‘DPS’’) to distribute certain DPS brands in territories where DPS brands had been
distributed by CCE prior to the CCE transaction. Under the terms of our agreement with DPS, concurrently with the
closing of the CCE transaction, we entered into license agreements with DPS to distribute Dr Pepper trademark brands
in the U.S., Canada Dry in the Northeast U.S., and Canada Dry and C’ Plus in Canada, and we made a net one-time
cash payment of $715 million to DPS. Under the license agreements, the Company agreed to meet certain performance
obligations to distribute DPS products in retail and foodservice accounts and vending machines. The license agreements
have initial terms of 20 years, with automatic 20-year renewal periods unless otherwise terminated under the terms of
the agreements. The license agreements replaced agreements between DPS and CCE existing immediately prior to the
completion of the CCE transaction. In addition, we entered into an agreement with DPS to include Dr Pepper and Diet
Dr Pepper in our Coca-Cola Freestyle fountain dispensers in certain outlets throughout the United States. The
Coca-Cola Freestyle agreement has a term of 20 years.
On October 2, 2010, we sold all of our ownership interests in Coca-Cola Drikker AS (the ‘‘Norwegian bottling
operation’’) and Coca-Cola Drycker Sverige AB (the ‘‘Swedish bottling operation’’) to New CCE for approximately
$0.9 billion in cash. In addition, in connection with the acquisition of CCE’s North American business, we granted to
New CCE the right to acquire our majority interest in our German bottler at any time from 18 to 39 months after
February 25, 2010, at the then current fair value and subject to terms and conditions as mutually agreed.
Operating Segments
The Company’s operating structure is the basis for our internal financial reporting. As of December 31, 2010, our
operating structure included the following operating segments, the first six of which are sometimes referred to as
‘‘operating groups’’ or ‘‘groups’’:
• Eurasia and Africa
• Europe
• Latin America
• North America
• Pacific
• Bottling Investments
• Corporate
Our North America operating segment includes the CCE North American business we acquired on October 2, 2010.
Except to the extent that differences among operating segments are material to an understanding of our business taken
as a whole, the description of our business in this report is presented on a consolidated basis.
For financial information about our operating segments and geographic areas, refer to Note 19 of Notes to
Consolidated Financial Statements set forth in Part II, ‘‘Item 8. Financial Statements and Supplementary Data’’ of this
report, incorporated herein by reference. For certain risks attendant to our non-U.S. operations, refer to ‘‘Item 1A.
Risk Factors,’’ below.
2
Products and Brands
As used in this report:
• ‘‘concentrates’’ means flavoring ingredients and, depending on the product, sweeteners used to prepare syrups or
finished beverages, and includes powders for purified water products such as Dasani;
• ‘‘syrups’’ means beverage ingredients produced by combining concentrates and, depending on the product,
sweeteners and added water;
• ‘‘fountain syrups’’ means syrups that are sold to fountain retailers, such as restaurants and convenience stores,
which use dispensing equipment to mix the syrups with sparkling or still water at the time of purchase to
produce finished beverages that are served in cups or glasses for immediate consumption;
• ‘‘sparkling beverages’’ means nonalcoholic ready-to-drink beverages with carbonation, including carbonated
energy drinks and carbonated waters and flavored waters;
• ‘‘still beverages’’ means nonalcoholic beverages without carbonation, including noncarbonated waters, flavored
waters and enhanced waters, noncarbonated energy drinks, juices and juice drinks, ready-to-drink teas and
coffees and sports drinks;
• ‘‘Company Trademark Beverages’’ means beverages bearing our trademarks and certain other beverage products
bearing trademarks licensed to us by third parties for which we provide marketing support and from the sale of
which we derive economic benefit; and
• ‘‘Trademark Coca-Cola Beverages’’ or ‘‘Trademark Coca-Cola’’ means beverages bearing the trademark
Coca-Cola or any trademark that includes Coca-Cola or Coke (that is, Coca-Cola, Diet Coke and Coca-Cola
Zero and all their variations and line extensions, including Coca-Cola Light, Coke Zero, caffeine free Diet Coke,
Cherry Coke, etc.). Likewise, when we use the capitalized word ‘‘Trademark’’ together with the name of one of
our other beverage products (such as ‘‘Trademark Fanta,’’ ‘‘Trademark Sprite’’ or ‘‘Trademark Simply’’), we mean
beverages bearing the indicated trademark (that is, Fanta, Sprite or Simply, respectively) and all its variations
and line extensions (such that ‘‘Trademark Fanta’’ includes Fanta Orange, Fanta Zero Orange and Fanta Apple;
‘‘Trademark Sprite’’ includes Sprite, Diet Sprite, Sprite Zero and Sprite Light; and ‘‘Trademark Simply’’ includes
Simply Orange, Simply Apple and Simply Grapefruit).
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’’); and
• finished sparkling and still beverages (we refer to this part of our business as our ‘‘finished products business’’ or
‘‘finished products operations’’).
Generally, finished products operations generate higher net operating revenues but lower gross profit margins than
concentrate operations.
In our concentrate operations, we typically generate net operating revenues by selling concentrates and syrups to
authorized bottling and canning operations (to which we typically refer as our ‘‘bottlers’’ or our ‘‘bottling partners’’).
Our bottling partners either combine the concentrates with sweeteners (depending on the product), still water and/or
sparkling water or combine the syrups with sparkling water to produce finished beverages. The finished beverages are
packaged in authorized containers bearing our trademarks or trademarks licensed to us — such as cans and refillable
and nonrefillable glass and plastic bottles — and are then sold to retailers directly or, in some cases, through
wholesalers or other bottlers. Outside the United States, we also sell concentrates for fountain beverages to our bottling
partners who are typically authorized to manufacture fountain syrups, which they sell to fountain retailers such as
restaurants and convenience stores which use the fountain syrups to produce beverages for immediate consumption, or
to fountain wholesalers who in turn sell and distribute the fountain syrups to fountain retailers.
Our finished products operations consist primarily of the production, sales and distribution operations managed by CCR
and our Company-owned or controlled bottling and distribution operations. CCR is included in our North America
operating segment, and our Company-owned or controlled bottling and distribution operations are included in our
Bottling Investments operating segment. Our finished products operations generate net operating revenues by selling
3
sparkling beverages and a variety of still beverages, such as juices and juice drinks, energy and sports drinks,
ready-to-drink teas and coffees, and certain water products, to retailers or to distributors, wholesalers and bottling
partners who distribute them to retailers. In addition, in the United States, we manufacture fountain syrups and sell
them to fountain retailers such as restaurants and convenience stores 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. In the United States, we authorize wholesalers to resell our fountain syrups through nonexclusive
appointments that neither restrict us in setting the prices at which we sell fountain syrups to the wholesalers nor restrict
the territories in which the wholesalers may resell in the United States.
For information about net operating revenues and unit case volume related to our concentrate operations and finished
products operations, respectively, refer to the heading ‘‘Our Business — General’’ in Part II, ‘‘Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations’’ of this report, which is incorporated herein
by reference.
Most of our branded beverage products, particularly outside of North America, are manufactured, sold and distributed
by independently owned and managed bottling partners. However, from time to time we acquire or take control of
bottling or canning operations, often in underperforming markets where we believe we can use our resources and
expertise to improve performance. Owning such a controlling interest enables us to compensate for limited local
resources; help focus the bottler’s sales and marketing programs; assist in the development of the bottler’s business and
information systems; and establish an appropriate capital structure for the bottler. The Company-owned or controlled
bottling operations, other than those managed by CCR, are included in our Bottling Investments group.
In line with our long-term bottling strategy, we may periodically consider options for reducing our ownership interest in
a Bottling Investments group bottler. One such option is to combine our bottling interests with the bottling interests of
others to form strategic business alliances. Another option is to sell our interest in a bottling operation to one of our
other bottling partners in which we have an equity method investment. In both of these situations, our Company
continues to participate in the bottler’s results of operations through our share of the strategic business alliances’ or
equity method investees’ earnings or losses.
4
The following table sets forth the percentage of total net operating revenues related to concentrate operations and
finished products operations, respectively:
Year Ended December 31, 2010 2009 2008
Concentrate operations1 51% 54% 54%

Finished products operations2 493 46 46
Net operating revenues 100% 100% 100%
1
Includes concentrates sold by the Company to authorized bottling partners for the manufacture of fountain syrups. The bottlers
then typically sell the fountain syrups to wholesalers or directly to fountain retailers.
2
Includes fountain syrups manufactured by the Company, including consolidated bottling operations, and sold to fountain retailers or
to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers.
3
Includes net operating revenues related to the acquired CCE North American business from October 2, 2010.
The following table sets forth the percentage of total worldwide unit case volume related to concentrate operations and
Concentrate operations1 76% 78% 77%

Total worldwide unit case volume 100% 100% 100%
1
Includes unit case volume related to concentrates sold by the Company to authorized bottling partners for the manufacture of
fountain syrups. The bottlers then typically sell the fountain syrups to wholesalers or directly to fountain retailers.
2
Includes unit case volume related to fountain syrups manufactured by the Company, including consolidated bottling operations, and
sold to fountain retailers or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain
retailers.
3
Includes unit case volume related to the acquired CCE North American business from October 2, 2010.
Acquisition of CCE’s North American Business and Related Transactions

Pursuant to the terms of the business separation and merger agreement entered into on February 25, 2010, as amended
(the ‘‘merger agreement’’), on October 2, 2010 (the ‘‘acquisition date’’), we acquired CCE’s North American business,
consisting of CCE’s production, sales and distribution operations in the United States, Canada, the British Virgin
Islands, the United States Virgin Islands and the Cayman Islands, and a substantial majority of CCE’s corporate
segment. We believe this acquisition will result in an evolved franchise system that will enable us to better serve the
unique needs of the North American market. The creation of a unified operating system will strategically position us to
better market and distribute our nonalcoholic beverage brands in North America.
Under the terms of the merger agreement, the Company acquired the 67 percent of CCE’s North American business
that was not already owned by the Company for consideration that included: (1) the Company’s 33 percent indirect
ownership interest in CCE’s European operations; (2) cash consideration; and (3) replacement awards issued to certain
current and former employees of CCE’s North American and corporate operations. At closing, CCE shareowners other
than the Company exchanged their CCE common stock for common stock in a new entity, which was renamed
Coca-Cola Enterprises, Inc. (which is referred to herein as ‘‘New CCE’’) and which continues to hold the European
operations held by CCE prior to the acquisition. At closing, New CCE became 100 percent owned by shareowners that
held shares of common stock of CCE immediately prior to the closing, other than the Company. As a result of this
transaction, the Company does not own any interest in New CCE.
As of October 1, 2010, our Company owned approximately 33 percent of the outstanding common stock of CCE. Based
on the closing price of CCE’s common stock on the last day of trading prior to the acquisition date, the fair value of
our investment in CCE was approximately $5,373 million, which reflected the fair value of our ownership in both CCE’s
North American business and its European operations. We remeasured our equity interest in CCE to fair value upon
35
the close of the transaction. As a result, we recognized a gain of approximately $4,978 million, which was classified in
the line item other income (loss) — net in our consolidated statement of income. The gain included a $137 million
reclassification adjustment related to foreign currency translation gains recognized upon the disposal of our indirect
investment in CCE’s European operations. The Company relinquished its indirect ownership interest in CCE’s
European operations to New CCE as part of the consideration to acquire the 67 percent of CCE’s North American
business that was not already owned by the Company.
Although the CCE transaction was structured to be primarily cashless, under the terms of the merger agreement, we
agreed to assume approximately $8.9 billion of CCE debt. In the event that the actual CCE debt on the acquisition date
was less than the agreed amount, we agreed to make a cash payment to New CCE for the difference. As of the
acquisition date, the debt assumed by the Company was approximately $7.9 billion. The total cash consideration paid to
New CCE as part of the transaction was approximately $1.3 billion, which included approximately $1.0 billion related to
the debt shortfall.
DPS to distribute certain DPS brands in territories where DPS brands had been distributed by CCE prior to the CCE
transaction. Under the terms of our agreement with DPS, concurrently with the closing of the CCE transaction, we
entered into license agreements with DPS to distribute Dr Pepper trademark brands in the U.S., Canada Dry in the
Northeast U.S., and Canada Dry and C’ Plus in Canada, and we made a net one-time cash payment of $715 million to
DPS. Under the license agreements, the Company agreed to meet certain performance obligations to distribute DPS
products in retail and foodservice accounts and vending machines. The license agreements have initial terms of
20 years, with automatic 20-year renewal periods unless otherwise terminated under the terms of the agreements. The
license agreements replaced agreements between DPS and CCE existing immediately prior to the completion of the
CCE transaction. In addition, we entered into an agreement with DPS to include Dr Pepper and Diet Dr Pepper in our
Coca-Cola Freestyle fountain dispensers in certain outlets throughout the United States. The Coca-Cola Freestyle
agreement has a term of 20 years.
On October 2, 2010, we sold all of our ownership interests in our Norwegian and Swedish bottling operations to New
CCE for approximately $0.9 billion in cash. In addition, in connection with the acquisition of CCE’s North American
business, we granted to New CCE the right to acquire our majority interest in our German bottler at any time from 18
to 39 months after February 25, 2010, at the then current fair value and subject to terms and conditions as mutually
agreed.
The Nonalcoholic Beverages Segment of the Commercial Beverages Industry

We operate in the highly competitive nonalcoholic beverages segment of the commercial beverages industry. We face
strong competition from numerous other general and specialty beverage companies. We, along with other beverage
companies, are affected by a number of factors, including, but not limited to, cost to manufacture and distribute
products, consumer spending, economic conditions, availability and quality of water, consumer preferences, inflation,
political climate, local and national laws and regulations, foreign currency exchange fluctuations, fuel prices and weather
patterns.
Our Objective
Our objective is to use our formidable assets — brands, financial strength, unrivaled distribution system, global reach,
and a strong commitment by our management and associates worldwide — to achieve long-term sustainable growth.
Our vision for sustainable growth includes the following:
• People: Being a great place to work where people are inspired to be the best they can be.
• Portfolio: Bringing to the world a portfolio of beverage brands that anticipates and satisfies people’s desires and
needs.
• Partners: Nurturing a winning network of partners and building mutual loyalty.
• Planet: Being a responsible global citizen that makes a difference.
• Profit: Maximizing return to shareowners while being mindful of our overall responsibilities.
• Productivity: Managing our people, time and money for greatest effectiveness.
36
sales volume when we sell concentrate to the authorized unconsolidated bottling and canning operations and we
typically report unit case volume when finished products manufactured from the concentrates and syrups are sold to the
customer. When we analyze our net operating revenues we generally consider the following four factors: (1) volume
growth (unit case volume or concentrate sales volume, as appropriate), (2) structural changes, (3) changes in price,
product and geographic mix and (4) foreign currency fluctuations. Refer to the heading ‘‘Net Operating Revenues,’’
below.
‘‘Structural changes’’ generally refers to acquisitions or dispositions of bottling, distribution or canning operations and
consolidation or deconsolidation of bottling and distribution entities for accounting purposes. Typically, structural
changes do not impact the Company’s unit case volume on a consolidated basis or at the geographic operating segment
level. We recognize unit case volume for all sales of Company beverage products regardless of our ownership interest in
the bottling partner, if any. However, our Bottling Investments operating segment is generally impacted by structural
changes because it only includes the unit case volume of consolidated bottlers.
The Company sells concentrates and syrups to both consolidated and unconsolidated bottling partners. The ownership
structure of our bottling partners impacts the timing of recognizing concentrate revenue and concentrate sales volume.
When we sell concentrates or syrups to our consolidated bottling partners, we are not able to recognize the concentrate
revenue or concentrate sales volume until the bottling partner has sold finished products manufactured from the
concentrates or syrups to a customer. When we sell concentrates or syrups to our unconsolidated bottling partners, we
recognize the concentrate revenue and concentrate sales volume when the concentrates or syrups are sold to the
bottling partner. The subsequent sale of the finished products manufactured from the concentrates or syrups to a
customer does not impact the timing of recognizing the concentrate revenue or concentrate sales volume.
‘‘Acquired brands’’ refers to brands acquired during the current year. Typically, the Company has not reported unit case
volume or recognized concentrate sales volume related to acquired brands in periods prior to the closing of the
transaction. Therefore, the unit case volume and concentrate sales volume from the sale of these brands is incremental
to prior year volume. We do not generally consider acquired brands to be structural changes.
‘‘License agreements’’ refers to brands not owned by the Company, but for which we hold certain rights, generally
including, but not limited to, distribution rights, and we derive an economic benefit from the ultimate sale of these
brands. Typically, the Company has not reported unit case volume or recognized concentrate sales volume related to
these brands in periods prior to the beginning of the term of the license agreement. Therefore, the unit case volume
and concentrate sales volume from the sale of these brands is incremental to prior year volume. We do not generally
consider new license agreements to be structural changes.
The following significant transactions and agreements impacted the Company’s 2010 operating results:
• on October 2, 2010, in legally separate transactions, we acquired CCE’s North American business and entered
into a license agreement with DPS;
• on October 2, 2010, we sold all of our ownership interests in our Norwegian and Swedish bottling operations to
New CCE; and
• on January 1, 2010, we deconsolidated certain entities, primarily bottling operations, as a result of the Company’s
adoption of new accounting guidance issued by the FASB.
The impact that each of the aforementioned items had on the Company’s consolidated financial statements is discussed
throughout this report, as appropriate. The sections below are intended to provide an overview of the impact these
items had on our 2010 operating results and are expected to have on key metrics used by management.
Acquisition of CCE’s North American Business and the DPS License Agreements
Immediately prior to the October 2, 2010 completion of our acquisition of CCE’s North American business, the
Company owned 33 percent of CCE’s outstanding common stock. This ownership represented our indirect ownership
interest in both CCE’s North American business and its European operations. On October 2, 2010, the Company
acquired the remaining 67 percent of CCE’s North American business not already owned by the Company for
consideration that included the Company’s indirect ownership interest in CCE’s European operations. As a result of
this transaction, the Company now owns 100 percent of CCE’s North American business and does not own any interest
in New CCE’s European operations. Refer to the heading ‘‘Our Business — General,’’ above, and Note 2 of Notes to
Consolidated Financial Statements for additional details related to the acquisition.
51
The operating results of CCE’s North American business are included in our consolidated financial statements effective
October 2, 2010. The operating results of New CCE had no direct impact on the Company’s consolidated financial
statements, since we have no ownership interest in this entity. CCE’s North American business contributed net revenues
of approximately $3,637 million and net losses of approximately $122 million from October 2, 2010 through
December 31, 2010. Furthermore, the Company recorded total assets as a result of the acquisition of $22.2 billion.
Refer to the heading ‘‘Liquidity, Capital Resources and Financial Position,’’ below, for additional information related to
the impact the acquisition had on the Company’s consolidated balance sheet.
On October 2, 2010, the Company also entered into an agreement with DPS to distribute certain DPS brands in
territories where these brands were distributed by CCE prior to our acquisition of CCE’s North American business. The
license agreements replaced agreements between DPS and CCE existing immediately prior to the completion of our
acquisition of CCE’s North American business. Refer to the heading ‘‘Our Business — General,’’ above, and Note 2 of
Notes to Consolidated Financial Statements for additional details related to these new license agreements.
Prior to the acquisition of CCE’s North American business and entering into the DPS license agreements, the
Company’s North America operating segment was predominantly a concentrate operation. As a result of the acquisition
of CCE’s North American business and the DPS license agreements, the North America operating segment is now
predominantly a finished products operation. Generally, finished products operations produce higher net operating
revenues but lower gross profit margins and operating margins compared to concentrate operations. Refer to ‘‘Item 1.
Business — Products and Brands,’’ for additional discussion of the differences between the Company’s concentrate
operations and our finished products operations. These transactions resulted in higher net operating revenues, but lower
gross profit margins and operating margins for the North America operating segment and our consolidated operating
results.
Prior to the acquisition of CCE’s North American business, the Company reported unit case volume for the sale of
Company beverage products sold by CCE. After the transaction closing, we reported unit case volume of Company
beverage products just as we had prior to the transaction.
Prior to the acquisition of CCE’s North American business, the Company recognized concentrate sales volume at the
time we sold the concentrate to CCE. Upon the closing of the transaction, we do not recognize the concentrate sales
volume until CCR has sold finished products manufactured from concentrate to a customer.
The DPS license agreements impact both the Company’s unit case and concentrate sales volume. Sales made pursuant
to these license agreements represent acquired volume and are incremental unit case volume and concentrate sales
volume to the Company. Prior to entering into the license agreements, the Company did not include the DPS brands as
unit case volume or concentrate sales volume, as these brands were not Company beverage products. As mentioned
above, we do not normally consider new license agreements to be structural changes. However, in the case of the DPS
license agreements, given their correlation to our acquisition of CCE’s North American business, we have included the
impact of these license agreements as a structural change when explaining our 2010 financial results.
Since we have determined it is appropriate to include the impact of the DPS license agreements as a structural change,
the total revenues attributable to CCE’s North American business, including DPS, recognized by the Company since the
date of acquisition are considered a structural change.
Prior to the acquisition, we recognized the revenues and profits associated with concentrate sales when the concentrate
was sold to CCE, excluding the portion that was deemed to be intercompany due to our previous ownership interest in
CCE. However, subsequent to the acquisition, the Company will not recognize the revenues and profits associated with
concentrate sold to CCE’s North American business until the finished products manufactured from those concentrates
are sold. For example, in 2010, most of our pre-Easter concentrate sales to CCE impacted our first quarter operating
results. In 2011, we anticipate that most of our Easter-related finished product sales will likely impact our second
quarter operating results. Likewise, in 2010, most of our pre-July 4th concentrate sales to CCE impacted our second
quarter operating results. In 2011, the impact of the July 4th holiday-related finished product sales will likely impact our
third quarter operating results. As a result of this transaction, the Company does not have an indirect ownership
interest in New CCE’s European operations. Therefore, we are no longer required to defer the portion of revenues and
profits associated with concentrate sales to New CCE.
52
In 2010, the gross profit for our North America operating segment was negatively impacted by $235 million, primarily
due to the elimination of gross profit in inventory on intercompany sales and an inventory fair value adjustment as a
result of the acquisition. Refer to the headings ‘‘Gross Profit Margin’’ and ‘‘Operating Income and Operating Margin.’’
The acquisition of CCE’s North American business has resulted in a significant adjustment to our overall cost structure,
especially in North America. We estimate that approximately 35 percent of our total cost of goods in 2011 will be
comprised of both the raw material and conversion costs associated with the following inputs: (1) sweeteners,
(2) metals, (3) juices and (4) PET. The bulk of these costs will reside within our North America and Bottling
Investments operating segments. We anticipate the underlying commodities related to these inputs will continue to face
upward pressure; and therefore, we have increased our hedging activities related to certain commodities in order to
mitigate a portion of the price risk associated with forecasted purchases. Many of the derivative financial instruments
used by the Company to mitigate the risk associated with these commodity exposures do not qualify for hedge
accounting. As a result, the change in fair value of these derivative instruments will be included as a component of net
income each reporting period. Refer to the heading ‘‘Gross Profit Margin,’’ below, and Note 5 of Notes to Consolidated
Financial Statements for additional information regarding our commodity hedging activity.
The acquisition of CCE’s North American business increased the Company’s selling, general and administrative
expenses in 2010, primarily due to delivery-related expenses. Selling, general and administrative expenses are typically
higher, as a percentage of net operating revenues, for finished products operations compared to concentrate operations.
Selling, general and administrative expenses were also negatively impacted by the amortization of definite-lived
intangible assets acquired in the acquisition. The Company recorded $605 million of definite-lived acquired franchise
rights that are being amortized over a weighted-average life of approximately 8 years, which is equal to the weighted-
average remaining contractual term of the acquired franchise rights. In addition, the Company recorded $380 million of
customer rights that are being amortized over 20 years. We estimate the amortization expense related to these definite-
lived intangible assets to be approximately $100 million per year for the next several years, which will be recorded in
selling, general and administrative expenses.
Once fully integrated, we expect to generate operational synergies of at least $350 million per year. We anticipate
realizing approximately $140 million to $150 million of these synergies in 2011. Refer to the heading ‘‘Other Operating
Charges,’’ below, and Note 18 of Notes to Consolidated Financial Statements for additional information regarding this
integration initiative.
In connection with the Company’s acquisition of CCE’s North American business, we assumed $7,602 million of long-
term debt, which had an estimated fair value of $9,345 million as of the acquisition date. In accordance with accounting
principles generally accepted in the United States, we recorded the assumed debt at its fair value as of the acquisition
date. Refer to Note 2 of Notes to Consolidated Financial Statements.
On November 15, 2010, the Company issued $4,500 million of long-term notes and used some of the proceeds to
repurchase $2,910 million of long-term debt. The Company used the remaining cash from the issuance to reduce our
outstanding commercial paper balance. The repurchased debt consisted of $1,827 million of debt assumed in our
acquisition of CCE’s North American business and $1,083 million of the Company’s debt that was outstanding prior to
the acquisition. The Company recorded a charge of $342 million related to the premiums paid to repurchase the long-
term debt and the costs associated with the settlement of treasury rate locks issued in connection with the debt tender
offer. Refer to the heading ‘‘Interest Expense,’’ below, and Note 10 of Notes to Consolidated Financial Statements for
additional information.
In 2010, we recognized a gain of $4,978 million due to the remeasurement of our equity interest in CCE to fair value
upon the close of the transaction. This gain was classified in the line item other income (loss) — net in our
consolidated statement of income.
Although our 2010 operating results and certain key metrics were affected by these structural changes, we do not
believe it is indicative of the impact they will have on future operating periods. Our 2011 consolidated financial
statements will reflect twelve months of operating results of the acquired CCE North American business and DPS
license agreements compared to three months in 2010. Therefore, we expect these structural changes to have a
significant impact on our operating results and certain key metrics in 2011, when compared to 2010.
Prior to the closing of this acquisition, we had accounted for our investment in CCE under the equity method of
accounting. Under the equity method of accounting, we recorded our proportionate share of CCE’s net income or loss
53
in the line item equity income (loss) — net in our consolidated statements of income. However, as a result of this
transaction, beginning October 2, 2010, the Company no longer records equity income or loss related to CCE; and
therefore, we expect this transaction to negatively impact equity income in future periods. Refer to the heading ‘‘Equity
Income (Loss) — Net,’’ below.
Divestiture of Norwegian and Swedish Bottling Operations

The divestiture of our Norwegian and Swedish bottling operations had no impact on our consolidated unit case volume
and consolidated concentrate sales volume, for the same reasons discussed above in relation to our acquisition of CCE’s
North American business. The divestiture of these bottling operations reduced unit case volume for the Bottling
Investments operating segment. In addition, the divestiture reduced net operating revenues and net income for our
consolidated operating results and the Bottling Investments operating segment. However, since we divested a finished
goods business, it had a positive impact on our gross profit margins and operating margins. Furthermore, the impact
these divestitures had on the Company’s net operating revenues was partially offset by the concentrate revenues that
were recognized on sales to these bottling operations. These concentrate sales had previously been eliminated because
they were intercompany transactions. The net impact to net operating revenues was included as a structural change in
our analysis of changes to net operating revenues. Refer to the heading ‘‘Net Operating Revenues,’’ below.
This divestiture resulted in a gain of $597 million, which was classified in the line item other income (loss) — net in
our consolidated statement of income.
Impact of New Accounting Guidance

Beginning January 1, 2010, we deconsolidated certain entities as a result of the Company’s adoption of new accounting
guidance issued by the FASB. These entities are primarily bottling operations and have been accounted for under the
equity method of accounting since they were deconsolidated. Refer to the heading ‘‘Critical Accounting Policies and
Estimates — Principles of Consolidation,’’ above. The entities that have been deconsolidated as a result of this change
in accounting guidance accounted for approximately 3 percent of the Company’s consolidated net operating revenues
and less than 1 percent of net income attributable to shareowners of The Coca-Cola Company in 2009. Refer to the
heading ‘‘Critical Accounting Policies and Estimates — Principles of Consolidation,’’ above. These entities accounted
for approximately 4 percent of the Company’s equity income in 2010. Refer to the heading ‘‘Equity Income (Loss) —
Net,’’ below. The impact that the deconsolidation of these entities had on net operating revenues was included as a
structural change. Refer to the heading ‘‘Net Operating Revenues,’’ below.
Beverage Volume
We measure the volume of Company beverage products sold in two ways: (1) unit cases of finished products and
(2) concentrate sales. As used in this report, ‘‘unit case’’ means a unit of measurement equal to 192 U.S. fluid ounces
of finished beverage (24 eight-ounce servings); and ‘‘unit case volume’’ means the number of unit cases (or unit case
equivalents) of Company beverage products directly or indirectly sold by the Company and its bottling partners to
customers. Unit case volume primarily consists of beverage products bearing Company trademarks. Also included in
unit case volume are certain products licensed to, or distributed by, our Company, and brands owned by Coca-Cola
system bottlers for which our Company provides marketing support and from the sale of which we derive economic
benefit. In addition, unit case volume includes sales by joint ventures in which the Company has an equity interest. We
believe unit case volume is one of the measures of the underlying strength of the Coca-Cola system because it measures
trends at the consumer level. The unit case volume numbers used in this report are derived based on estimates received
by the Company from its bottling partners and distributors. Concentrate sales volume represents the amount of
concentrates and syrups (in all cases expressed in equivalent unit cases) sold by, or used in finished beverages sold by,
the Company to its bottling partners or other customers. Unit case volume and concentrate sales volume growth rates
are not necessarily equal during any given period. Factors such as seasonality, bottlers’ inventory practices, supply point
changes, timing of price increases, new product introductions and changes in product mix can impact unit case volume
and concentrate sales volume and can create differences between unit case volume and concentrate sales volume growth
rates. In addition to the items mentioned above, the impact of unit case volume from certain joint ventures, in which
the Company has an equity interest, but to which the Company does not sell concentrates or syrups, may give rise to
differences between unit case volume and concentrate sales volume growth rates.
54
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(In millions except per share data)
NET OPERATING REVENUES $ 35,119 $ 30,990 $ 31,944
Cost of goods sold 12,693 11,088 11,374
GROSS PROFIT 22,426 19,902 20,570
Selling, general and administrative expenses 13,158 11,358 11,774
Other operating charges 819 313 350
OPERATING INCOME 8,449 8,231 8,446
Interest income 317 249 333
Interest expense 733 355 438
Equity income (loss) — net 1,025 781 (874)
Other income (loss) — net 5,185 40 39
INCOME BEFORE INCOME TAXES 14,243 8,946 7,506
Income taxes 2,384 2,040 1,632
CONSOLIDATED NET INCOME 11,859 6,906 5,874
Less: Net income attributable to noncontrolling interests 50 82 67
NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY $ 11,809 $ 6,824 $ 5,807
BASIC NET INCOME PER SHARE1 $ 5.12 $ 2.95 $ 2.51
DILUTED NET INCOME PER SHARE1 $ 5.06 $ 2.93 $ 2.49
AVERAGE SHARES OUTSTANDING 2,308 2,314 2,315
Effect of dilutive securities 25 15 21
AVERAGE SHARES OUTSTANDING ASSUMING DILUTION 2,333 2,329 2,336
1
Basic net income per share and diluted net income per share are calculated based on net income attributable to shareowners of
The Coca-Cola Company.
Refer to Notes to Consolidated Financial Statements.
88
CONSOLIDATED BALANCE SHEETS
December 31, 2010 2009

(In millions except par value)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,517 $ 7,021
Short-term investments 2,682 2,130
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 11,199 9,151
Marketable securities 138 62
Trade accounts receivable, less allowances of $48 and $55, respectively 4,430 3,758
Inventories 2,650 2,354
Prepaid expenses and other assets 3,162 2,226
TOTAL CURRENT ASSETS 21,579 17,551
EQUITY METHOD INVESTMENTS 6,954 6,217
OTHER INVESTMENTS, PRINCIPALLY BOTTLING COMPANIES 631 538
OTHER ASSETS 2,121 1,976
PROPERTY, PLANT AND EQUIPMENT — net 14,727 9,561
TRADEMARKS WITH INDEFINITE LIVES 6,356 6,183
BOTTLERS’ FRANCHISE RIGHTS WITH INDEFINITE LIVES 7,511 1,953
GOODWILL 11,665 4,224
OTHER INTANGIBLE ASSETS 1,377 468
TOTAL ASSETS $ 72,921 $ 48,671
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 8,859 $ 6,657
Loans and notes payable 8,100 6,749
Current maturities of long-term debt 1,276 51
Accrued income taxes 273 264
TOTAL CURRENT LIABILITIES 18,508 13,721
LONG-TERM DEBT 14,041 5,059
OTHER LIABILITIES 4,794 2,965
DEFERRED INCOME TAXES 4,261 1,580
THE COCA-COLA COMPANY SHAREOWNERS’ EQUITY
Common stock, $0.25 par value; Authorized — 5,600 shares;
Issued — 3,520 and 3,520 shares, respectively 880 880
Capital surplus 10,057 8,537
Reinvested earnings 49,278 41,537
Accumulated other comprehensive income (loss) (1,450) (757)
Treasury stock, at cost — 1,228 and 1,217 shares, respectively (27,762) (25,398)
EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY 31,003 24,799
EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS 314 547
TOTAL EQUITY 31,317 25,346
TOTAL LIABILITIES AND EQUITY $ 72,921 $ 48,671
89
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)
OPERATING ACTIVITIES
Consolidated net income $ 11,859 $ 6,906 $ 5,874
Depreciation and amortization 1,443 1,236 1,228
Stock-based compensation expense 380 241 266
Deferred income taxes 617 353 (360)
Equity (income) loss — net of dividends (671) (359) 1,128
Foreign currency adjustments 151 61 (42)
Significant (gains) losses on sales of assets — net (645) (43) (130)
Other significant (gains) losses — net (4,713) — —
Other operating charges 264 134 209
Other items 477 221 153
Net change in operating assets and liabilities 370 (564) (755)
Net cash provided by operating activities 9,532 8,186 7,571
INVESTING ACTIVITIES
Purchases of short-term investments (4,579) (2,130) —
Proceeds from disposals of short-term investments 4,032 — —
Acquisitions and investments (2,511) (300) (759)
Purchases of other investments (132) (22) (240)
Proceeds from disposals of bottling companies and other investments 972 240 479
Purchases of property, plant and equipment (2,215) (1,993) (1,968)
Proceeds from disposals of property, plant and equipment 134 104 129
Other investing activities (106) (48) (4)
Net cash provided by (used in) investing activities (4,405) (4,149) (2,363)
FINANCING ACTIVITIES
Issuances of debt 15,251 14,689 4,337
Payments of debt (13,403) (12,326) (4,308)
Issuances of stock 1,666 664 595
Purchases of stock for treasury (2,961) (1,518) (1,079)
Dividends (4,068) (3,800) (3,521)
Other financing activities 50 (2) (9)
Net cash provided by (used in) financing activities (3,465) (2,293) (3,985)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (166) 576 (615)
CASH AND CASH EQUIVALENTS
Net increase (decrease) during the year 1,496 2,320 608
Balance at beginning of year 7,021 4,701 4,093
Balance at end of year $ 8,517 $ 7,021 $ 4,701
90
NOTE 2: ACQUISITIONS AND DIVESTITURES
Acquisitions
During 2010, cash payments related to the Company’s acquisition and investment activities totaled $2,511 million. These
payments were primarily related to the Company’s acquisition of CCE’s North American business and the acquisition of
certain distribution rights from Dr Pepper Snapple Group, Inc. (‘‘DPS’’). See the relevant sections below for further
discussion of these transactions.
In addition to the transactions listed in the preceding paragraph, our acquisition and investment activities also included
the acquisition of OAO Nidan Juices (‘‘Nidan’’), a Russian juice company, and an additional investment in Fresh
Trading Ltd. (‘‘innocent’’). Total consideration for the Nidan acquisition was approximately $276 million, which was
primarily allocated to property, plant and equipment, identifiable intangible assets and goodwill. We anticipate finalizing
the purchase accounting for Nidan no later than the end of the third quarter of 2011. Under the terms of the
agreement for our additional investment in innocent, innocent’s founders retain operational control of the business, and
we will continue to account for our investment under the equity method of accounting. Additionally, we have a series of
outstanding put and call options with the existing shareowners of innocent for the Company to potentially acquire the
remaining shares not already owned by the Company. The put and call options are exercisable in stages between 2013
and 2014.
In 2009, our Company’s acquisition and investment activities totaled $300 million. None of the acquisitions or
investments was individually significant. Included in these investment activities was the acquisition of a minority interest
in innocent.
During 2008, our Company’s acquisition and investment activities totaled $759 million, primarily related to the purchase
of trademarks, brands and licenses. Included in these investment activities was the acquisition of brands and licenses in
Denmark and Finland from Carlsberg Group Beverages for approximately $225 million. None of the other acquisitions
or investments was individually significant.
Acquisition of Coca-Cola Enterprises Inc.’s North American Business

Pursuant to the terms of the business separation and merger agreement entered into on February 25, 2010, as amended
(the ‘‘merger agreement’’), on October 2, 2010 (the ‘‘acquisition date’’), we acquired CCE’s North American business.
We believe this acquisition will result in an evolved franchise system that will enable us to better serve the unique needs
of the North American market. The creation of a unified operating system will strategically position us to better market
and distribute our nonalcoholic beverage brands in North America. Refer to Note 18 for information related to the
Company’s integration initiative associated with this acquisition.
Under the terms of the merger agreement, the Company acquired the 67 percent of CCE’s North American business
that was not already owned by the Company for consideration that included: (1) the Company’s 33 percent indirect
ownership interest in CCE’s European operations; (2) cash consideration; and (3) replacement awards issued to certain
current and former employees of CCE’s North American and corporate operations. At closing, CCE shareowners other
than the Company exchanged their CCE common stock for common stock in a new entity, which was renamed
Coca-Cola Enterprises, Inc. (which is referred to herein as ‘‘New CCE’’) and which continues to hold the European
operations held by CCE prior to the acquisition. At closing, New CCE became 100 percent owned by shareowners that
held shares of common stock of CCE immediately prior to the closing, other than the Company. As a result of this
transaction, the Company does not own any interest in New CCE.
As of October 1, 2010, our Company owned approximately 33 percent of the outstanding common stock of CCE. Based
on the closing price of CCE’s common stock on the last day of trading prior to the acquisition date, the fair value of
our investment in CCE was approximately $5,373 million, which reflected the fair value of our ownership in both CCE’s
North American business and European operations. We remeasured our equity interest in CCE to fair value upon the
close of the transaction. As a result, we recognized a gain of approximately $4,978 million, which was classified in the
line item other income (loss) — net in our consolidated statement of income. The gain included a $137 million
reclassification adjustment related to foreign currency translation gains recognized upon the disposal of our indirect
investment in CCE’s European operations. The Company relinquished its indirect ownership interest in CCE’s
European operations to New CCE as part of the consideration to acquire the 67 percent of CCE’s North American
business that was not already owned by the Company.
102
Although the CCE transaction was structured to be primarily cashless, under the terms of the merger agreement, we
agreed to assume approximately $8.9 billion of CCE debt. In the event that the actual CCE debt on the acquisition date
was less than the agreed amount, we agreed to make a cash payment to New CCE for the difference. As of the
acquisition date, the debt assumed by the Company was approximately $7.9 billion. The total cash consideration paid to
New CCE as part of the transaction was approximately $1.3 billion, which included approximately $1.0 billion related to
the debt shortfall. In addition, the cash consideration paid to New CCE included estimated amounts related to working
capital. We are currently working with New CCE to finalize amounts due to or from New CCE related to working
capital adjustments. These adjustments are expected to be finalized in the first quarter of 2011 and will impact the total
purchase price. However, any adjustments resulting from the finalization of working capital amounts are not expected to
be significant.
Under the terms of the merger agreement, the Company replaced share-based payment awards for certain current and
former employees of CCE’s North American and corporate operations. The following table provides a list of all
replacement awards and the estimated fair value of those awards issued in conjunction with our acquisition of CCE’s
North American business (in millions):
Number of
Shares, Options Estimated
and Units Issued Fair Value
Performance share units 1.6 $ 192

Stock options 4.8 109
Restricted share units 0.8 50
Restricted stock 0.2 12
Total 7.4 $ 363
The portion of the fair value of the replacement awards related to services provided prior to the business combination
was included in the total purchase price. The portion of the fair value associated with future service is recognized as
expense over the future service period, which varies by award. The Company determined that approximately
$237 million ($154 million net of tax) of the replacement awards was related to services rendered prior to the business
combination.
Each CCE performance share unit (‘‘PSU’’) replaced by the Company was converted at 100 percent of target into an
adjusted PSU of The Coca-Cola Company, determined by multiplying the number of shares of each PSU by an
exchange ratio (the ‘‘closing exchange ratio’’) equal to the closing price of a share of CCE common stock on the last
day of trading prior to the acquisition date divided by the closing price of the Company’s common stock on the same
day. At the time we issued these replacement PSUs, they were subject to the same vesting conditions and other terms
applicable to the CCE PSUs immediately prior to the closing date. However, in the fourth quarter of 2010, the
Company modified primarily all of these PSUs to eliminate the remaining holding period, which resulted in
approximately $74 million of accelerated expense. Refer to Note 12 for additional information.
Each CCE stock option replaced by the Company was converted into an adjusted stock option of The Coca-Cola
Company to acquire a number of shares of Coca-Cola common stock, determined by multiplying the number of shares
of CCE common stock subject to the CCE stock option by the closing exchange ratio. The exercise price per share of
the replacement awards was equal to the per share exercise price of the CCE stock option divided by the closing
exchange ratio. All of the replacement stock options are subject to the same vesting conditions and other terms
applicable to the CCE stock options immediately prior to the closing date. Refer to Note 12 for additional information.
Each CCE restricted share unit (‘‘RSU’’) replaced by the Company was converted into an adjusted RSU of The
Coca-Cola Company, determined by multiplying the number of shares of each RSU by the closing exchange ratio. All
of the replacement RSUs are subject to the same vesting conditions and other terms applicable to the CCE RSUs
immediately prior to the closing date. Refer to Note 12 for additional information.
Each share of CCE restricted stock replaced by the Company was converted into an adjusted share of restricted stock
of The Coca-Cola Company, determined by multiplying the number of shares of CCE restricted stock by the closing
exchange ratio. All of the replacement shares of restricted stock are subject to the same vesting conditions and other
terms applicable to the CCE shares of restricted stock immediately prior to the closing date. Refer to Note 12 for
additional information.
103
The following table reconciles the total purchase price of the Company’s acquisition of CCE’s North American business
(in millions):
October 2,
2010
Fair value of our equity investment in CCE1 $ 5,373

Cash consideration2 1,321
Fair value of share-based payment awards3 154
Total purchase price $ 6,848
1
Represents the fair value of our 33 percent ownership interest in the outstanding common stock of CCE based on the closing price
of CCE’s common stock on the last day the New York Stock Exchange was open prior to the acquisition date. The fair value
reflects our indirect ownership interest in both CCE’s North American business and European operations.
2
Primarily related to the debt shortfall and working capital adjustments.
3
Represents the portion of the total fair value of the replacement awards associated with services rendered prior to the business
combination, net of tax.
The following table presents the preliminary allocation of the purchase price by major class of assets and liabilities as of
October 2, 2010 (in millions):
Cash and cash equivalents $ 49

Marketable securities 7
Trade accounts receivable1 1,194
Inventories 696
Other current assets 744
Property, plant and equipment 5,385
Bottlers’ franchise rights with indefinite lives2 5,100
Other intangible assets3 1,032
Other noncurrent assets 261
Total identifiable assets acquired 14,468
Accounts payable and accrued expenses 1,826
Loans and notes payable4 266
Long-term debt4 9,345
Pension and other postretirement liabilities5 1,313
Other noncurrent liabilities6 2,603
Total liabilities assumed 15,353
Net liabilities assumed (885)
Goodwill7 7,746
6,861
Less: Noncontrolling interests 13
Net assets acquired $ 6,848
1
The gross amount due under receivables we acquired was $1,226 million, of which $32 million is expected to be uncollectible.
2
Represents reacquired franchise rights that had previously provided CCE with exclusive and perpetual rights to manufacture and/or
distribute certain beverages in specified territories. These rights have been determined to have indefinite lives; and therefore, are
not amortized.
3
Other intangible assets primarily relate to franchise rights that had previously provided CCE with exclusive rights to manufacture
and/or distribute certain beverages in specified territories for a finite period of time; and therefore, have been classified as definite-
lived intangible assets. The estimated fair value of franchise rights with definite lives was $605 million as of the acquisition date.
These franchise rights will be amortized over a weighted-average life of approximately 8 years, which is equal to the weighted-
average remaining contractual term of the franchise rights. Other intangible assets also include $380 million of customer
relationships, which will be amortized over approximately 20 years.
4
Refer to Note 10 for additional information.
5
The assumed pension and other postretirement liabilities consisted of benefit obligations of $3,544 million and plan assets of
$2,231 million. Refer to Note 13 for additional information related to pension and other postretirement plans assumed from CCE.
6
Primarily relates to deferred tax liabilities recorded on franchise rights. Refer to Note 14.
7
The goodwill recognized as part of this acquisition is not tax deductible and has been assigned to the North America operating
segment. The goodwill recognized in conjunction with our acquisition of CCE’s North American business is primarily related to
synergistic value created from having a unified operating system that will strategically position us to better market and distribute
our nonalcoholic beverage brands in North America. It also includes certain other intangible assets that do not qualify for separate
recognition, such as an assembled workforce.
104
The preliminary allocation of the purchase price presented above is subject to refinement when appraisals are finalized.
As of December 31, 2010, the appraisals that have not been finalized primarily relate to intangible assets and certain
fixed assets. The final purchase price allocation will be completed as soon as possible, but no later than the end of the
third quarter of 2011.
In a concurrent transaction, we agreed to sell all of our ownership interests in Coca-Cola Drikker AS (the ‘‘Norwegian
bottling operation’’) and Coca-Cola Drycker Sverige AB (the ‘‘Swedish bottling operation’’) to New CCE at fair value.
The divestiture of our Norwegian and Swedish bottling operations also closed on October 2, 2010. See further
discussion of this divestiture below. In addition, we granted New CCE the right to acquire our majority interest in our
German bottling operation, Coca-Cola Erfrischungsgetraenke AG (‘‘CCEAG’’), 18 to 39 months after the date of the
merger agreement, at the then current fair value and subject to terms and conditions as mutually agreed.
In 2010, the Company incurred $81 million of transaction costs in connection with our acquisition of CCE’s North
American business and the sale of our ownership interests in our Norwegian and Swedish bottling operations to New
CCE. These costs were included in the line item other operating charges in our consolidated statement of income.
Refer to Note 17 for additional information. In addition, the Company recognized $265 million of charges related to
preexisting relationships. These charges were also included in the line item other income (loss) — net in our
consolidated statement of income. Refer to Note 6 for additional information.
The CCE North American business contributed net revenues of approximately $3,637 million and net losses of
approximately $122 million from October 2, 2010 through December 31, 2010. The following table presents unaudited
consolidated pro forma information as if our acquisition of CCE’s North American business and the divestiture of our
Norwegian and Swedish bottling operations had occurred on January 1, 2009 (in millions):
Unaudited
Year Ended December 31, 2010 2009
1
Net operating revenues $ 43,106 $ 41,635
Net income attributable to shareowners of The Coca-Cola Company2 6,839 11,7673
1
The deconsolidation of our Norwegian and Swedish bottling operations resulted in a decrease to net operating revenues of
approximately $433 million and $542 million in 2010 and 2009, respectively.
2
The deconsolidation of our Norwegian and Swedish bottling operations resulted in a decrease to net income attributable to
shareowners of The Coca-Cola Company of approximately $387 million in 2010 and an increase of $294 million in 2009.
3
Includes the gain related to the remeasurement of our equity interest in CCE to fair value upon the close of the transaction, the
gain on the sale of our Norwegian and Swedish bottling operations, transaction costs and charges related to preexisting
relationships. The 2010 pro forma information has been adjusted to exclude the impact of these items in order to present the pro
forma information as if the transactions had occurred on January 1, 2009.
The unaudited pro forma financial information presented above does not purport to represent what the actual results of
our operations would have been if our acquisition of CCE’s North American business and the divestiture of our
Norwegian and Swedish bottling operations had occurred on January 1, 2009, nor is it indicative of the future operating
results of The Coca-Cola Company. The unaudited pro forma financial information does not reflect the impact of
future events that may occur after the acquisition, including, but not limited to, anticipated cost savings from operating
synergies.
The unaudited pro forma financial information presented in the table above has been adjusted to give effect to
adjustments that are (1) directly related to the business combination; (2) factually supportable; and (3) expected to have
a continuing impact. These adjustments include, but are not limited to, the application of our accounting policies;
elimination of related party transactions and equity income; and depreciation and amortization related to fair value
adjustments to property, plant and equipment and intangible assets.
Dr Pepper Snapple Group, Inc. Agreements

DPS to distribute certain DPS brands in territories where DPS brands had been distributed by CCE prior to the CCE
transaction. Under the terms of our agreement with DPS, and concurrently with the closing of the CCE transaction, we
105
entered into license agreements with DPS to distribute Dr Pepper trademark brands in the U.S., Canada Dry in the
Northeast U.S., and Canada Dry and C’ Plus in Canada, and we made a net one-time cash payment of $715 million to
DPS. Under the license agreements, the Company agreed to meet certain performance obligations in order to distribute
DPS products in retail and foodservice accounts and vending machines. The license agreements have initial terms of
20 years, with automatic 20-year renewal periods unless otherwise terminated under the terms of the agreements. The
license agreements replaced agreements between DPS and CCE existing immediately prior to the completion of the
CCE transaction. In addition, we entered into an agreement with DPS to include Dr Pepper and Diet Dr Pepper in our
Coca-Cola Freestyle fountain dispensers in certain outlets throughout the United States. The Coca-Cola Freestyle
agreement has a term of 20 years.
Although these transactions were negotiated concurrently, they are legally separable and have distinct termination
provisions and penalties, if applicable. As a result, the Company recorded an asset of $865 million related to the DPS
license agreements and recorded deferred revenue of $150 million related to the Freestyle agreement. The DPS license
agreements were determined to be indefinite-lived intangible assets and classified in the line item bottlers’ franchise
rights with indefinite lives in our consolidated balance sheet. The Company reached the conclusion that these
distribution rights had an indefinite life based on several key factors, including, but not limited to, (1) our license
agreements with DPS shall remain in effect for 20 years and shall automatically renew for additional 20 year successive
periods thereafter unless terminated pursuant to the provisions of the agreements; (2) no additional payments shall be
due for the renewal periods; (3) we anticipate using the assets indefinitely; (4) there are no known legal, regulatory or
contractual provisions that are likely to limit the useful life of these assets; and (5) the classification of these assets as
indefinite-lived assets is consistent with similar market transactions. The Company will amortize the deferred revenue
related to the Freestyle agreement on a straight-line basis over 20 years, which is the length of the agreement. The
amortization will be included as a component of the Company’s net revenues.
Divestitures
In 2010, proceeds from the disposal of bottling companies and other investments totaled $972 million, primarily related
to the sale of all of our ownership interests in our Norwegian and Swedish bottling operations to New CCE for
approximately $0.9 billion in cash on October 2, 2010. In addition to the proceeds related to the disposal of our
Norwegian and Swedish bottling operations, our Company sold 50 percent of our investment in Leão Junior, S.A.
(‘‘Leão Junior’’), a Brazilian tea company, for approximately $83 million. Refer to Note 17 for information related to
the gain on these divestitures.
Our Norwegian and Swedish bottling operations (the disposal group) met the criteria to be classified as held for sale
prior to their disposal. The following table presents information related to the major classes of assets and liabilities of
the disposal group as of October 1, 2010 (in millions):
Trade receivables, less allowances for doubtful accounts $ 67

Inventories 42
Prepaid expenses and other current assets 17
Property, plant and equipment — net 315
Intangible assets 172
Total assets1 $ 613
Accounts payable and accrued expenses $ 159
Accrued income taxes 10
Deferred income taxes 45
Total liabilities1 $ 214
1
Prior to the divestiture of our Norwegian and Swedish bottling operations, the assets and liabilities of these entities were included
in our Bottling Investments operating segment. Refer to Note 19.
We determined that our Norwegian and Swedish bottling operations did not meet the criteria to be classified as
discontinued operations, primarily due to our continuing significant involvement with these entities. Although we do not
have an ownership interest in New CCE, we have concluded that our ongoing contractual relationship, governed by the
Bottler’s Agreements, constitutes a continuing significant involvement.
106
NOTE 19: OPERATING SEGMENTS
As of December 31, 2010, our organizational structure consisted of the following operating segments: Eurasia and
Africa; Europe; Latin America; North America; Pacific; Bottling Investments; and Corporate.
Segment Products and Services

The business of our Company is nonalcoholic beverages. In 2010, 2009 and 2008 our geographic operating segments
(Eurasia and Africa; Europe; Latin America; North America and Pacific) derived a majority of their revenues from the
manufacture and sale of beverage concentrates and syrups and, in some cases, the sale of finished beverages. Our
Bottling Investments operating segment is comprised of our Company-owned or consolidated bottling operations,
regardless of the geographic location of the bottler, except for bottling operations managed by CCR, which are included
in our North America operating segment, and equity income from the majority of our equity method investments.
Company-owned or consolidated bottling operations derive the majority of their revenues from the sale of finished
beverages. Subsequent to our acquisition of CCE’s North American business on October 2, 2010, our North America
operating segment began to derive the majority of its net operating revenues from the sale of finished beverages. Refer
to Note 2. Generally, bottling and finished products operations produce higher net revenues but lower gross profit
margins compared to concentrate and syrup operations.
The following table sets forth the percentage of total net operating revenues related to concentrate operations and

1
Concentrate operations 51% 54% 54%
Net operating revenues 100% 100% 100%
1
Includes concentrates sold by the Company to authorized bottling partners for the manufacture of fountain syrups. The bottlers
then typically sell the fountain syrups to wholesalers or directly to fountain retailers.
2
Includes fountain syrups manufactured by the Company, including consolidated bottling operations, and sold to fountain retailers or
to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers.
3
Includes net operating revenues related to the acquired CCE North American business from October 2, 2010.
Method of Determining Segment Income or Loss

Management evaluates the performance of our operating segments separately to individually monitor the different
factors affecting financial performance. Our Company manages income taxes and financial costs, such as interest
income and expense, on a global basis within the Corporate operating segment. We evaluate segment performance
based on income or loss before income taxes.
Geographic Data
The following table provides information related to our net operating revenues (in millions):
United States $ 10,629 $ 8,011 $ 8,014

International 24,490 22,979 23,930
Net operating revenues $ 35,119 $ 30,990 $ 31,944
The following table provides information related to our property, plant and equipment — net (in millions):
December 31, 2010 2009 2008
United States $ 8,251 $ 3,115 $ 3,161

International 6,476 6,446 5,165
Property, plant and equipment — net $ 14,727 $ 9,561 $ 8,326
150
Information about our Company’s operations by operating segment for the years ended December 31, 2010, 2009 and
2008, is as follows (in millions):
Eurasia & Latin North Bottling
Africa Europe America America Pacific Investments Corporate Eliminations Consolidated
2010
Net operating revenues:
Third party $ 2,426 $ 4,424 $ 3,880 $ 11,140 $ 4,9411 $ 8,216 $ 92 $ — $ 35,119
Intersegment 130 825 241 65 330 97 — (1,688) —
Total net revenues 2,556 5,249 4,121 11,205 5,271 8,313 92 (1,688) 35,119
Operating income (loss) 980 2,976 2,405 1,520 2,048 227 (1,707) — 8,449
Interest income — — — — — — 317 — 317
Interest expense — — — — — — 733 — 733
Depreciation and amortization 31 106 54 575 101 430 146 — 1,443
Equity income (loss) — net 18 33 24 (4) 1 971 (18) — 1,025
Income (loss) before income taxes 1,000 3,020 2,426 1,523 2,049 1,205 3,020 — 14,243
Identifiable operating assets2 1,278 2,7243 2,298 32,793 1,827 8,3983 16,018 — 65,336
Investments4 291 243 379 57 123 6,426 66 — 7,585
Capital expenditures 59 33 94 711 101 942 275 — 2,215
2009
Third party $ 1,977 $ 4,308 $ 3,700 $ 8,191 $ 4,5331 $ 8,193 $ 88 $ — $ 30,990
Intersegment 220 895 182 80 342 127 — (1,846) —
Interest income — — — — — — 249 — 249
Equity income (loss) — net (1) 20 (4) (1) (23) 785 5 — 781
Income (loss) before income taxes 810 2,976 2,039 1,701 1,866 980 (1,426) — 8,946
Identifiable operating assets2 1,155 3,0473 2,480 10,941 1,929 9,1403 13,224 — 41,916
Investments4 331 214 248 8 82 5,809 63 — 6,755
2008
Third party $ 2,135 $ 4,785 $ 3,623 $ 8,205 $ 4,3581 $ 8,731 $ 107 $ — $ 31,944
Intersegment 192 1,016 212 75 337 200 — (2,032) —
Interest income — — — — — — 333 — 333
Equity income (loss) — net (14) (4) 6 (2) (19) (844) 3 — (874)
Income (loss) before income taxes 823 3,182 2,098 1,579 1,841 (582) (1,435) — 7,506
Identifiable operating assets2 956 3,0123 1,849 10,845 1,444 7,9353 8,699 — 34,740
Investments4 395 179 199 4 72 4,873 57 — 5,779
1
Net operating revenues in Japan represented approximately 9 percent of total consolidated net operating revenues in 2010,
10 percent in 2009 and 9 percent in 2008.
2
Principally cash and cash equivalents, trade accounts receivable, inventories, goodwill, trademarks and other intangible assets and
property, plant and equipment — net.
3
Property, plant and equipment — net in Germany represented approximately 10 percent of total consolidated property, plant and
equipment — net in 2010, 18 percent in 2009 and 18 percent in 2008.
4
Principally equity method investments, available-for-sale securities and nonmarketable investments in bottling companies.
151
In 2010, the results of our operating segments were impacted by the following items:
• Operating income (loss) and income (loss) before income taxes were reduced by $7 million for Eurasia and
Africa, $50 million for Europe, $133 million for North America, $22 million for Pacific, $122 million for Bottling
Investments and $485 million for Corporate, primarily due to the Company’s productivity, integration and
restructuring initiatives, charitable donations, transaction costs incurred in connection with our acquisition of
CCE’s North American business and the sale of our Norwegian and Swedish bottling operations to New CCE
and other charges related to bottling activities in Eurasia. Refer to Note 17.
• Operating income (loss) and income (loss) before income taxes were reduced by $74 million for North America
due to the acceleration of expense associated with certain share-based replacement awards issued in connection
with our acquisition of CCE’s North American business. Refer to Note 12.
• Equity income (loss) — net and income (loss) before income taxes were reduced by $66 million for Bottling
Investments. This net charge was primarily attributable to the Company’s proportionate share of unusual tax
charges, asset impairments, restructuring charges and transaction costs recorded by equity method investees,
which were partially offset by our proportionate share of a foreign currency remeasurement gain recorded by an
equity method investee. The components of the net charge were individually insignificant. Refer to Note 17.
• Income (loss) before income taxes was increased by $4,978 million for Corporate due to the remeasurement of
our equity investment in CCE to fair value upon the close of the transaction. Refer to Note 2.
• Income (loss) before income taxes was reduced by $265 million for Corporate due to charges related to
preexisting relationships with CCE. These charges primarily related to the write-off of our investment in
infrastructure programs with CCE. Refer to Note 2.
• Income (loss) before income taxes was increased by $597 million for Corporate due to the gain on the sale of
our Norwegian and Swedish bottling operations to New CCE. Refer to Note 2.
• Income (loss) before income taxes was reduced by $342 million for Corporate related to the premiums paid to
repurchase the long-term debt and the costs associated with the settlement of treasury rate locks issued in
connection with the debt tender offer. Refer to Note 10.
• Income (loss) before income taxes was reduced by $103 million for Corporate due to the remeasurement of our
Venezuelan subsidiary’s net assets. Refer to Note 1.
• Income (loss) before income taxes was increased by $23 million for Corporate due to the gain on the sale of
50 percent of our investment in Leão Junior. Refer to Note 17.
• Income (loss) before income taxes was reduced by $23 million for Bottling Investments and $25 million for
Corporate due to other-than-temporary impairments and a donation of preferred shares in one of our equity
method investees. Refer to Note 17.
In 2009, the results of our operating segments were impacted by the following items:
• Operating income (loss) and income (loss) before income taxes were reduced by approximately $4 million for
Eurasia and Africa, $7 million for Europe, $31 million for North America, $1 million for Pacific, $141 million for
Bottling Investments and $129 million for Corporate, primarily as a result of the Company’s productivity,
integration and restructuring initiatives and asset impairments. Refer to Note 17.
• Equity income (loss) — net and income (loss) before income taxes were reduced by approximately $84 million
for Bottling Investments and $2 million for Corporate, primarily attributable to the Company’s proportionate
share of asset impairment and restructuring charges recorded by certain of our equity method investees. Refer to
Note 17.
• Income (loss) before income taxes was reduced by approximately $27 million for Corporate due to an
other-than-temporary impairment of a cost method investment. Refer to Note 17.
• Income (loss) before income taxes was increased by approximately $44 million for Corporate due to realized
gains on the sale of equity securities that were classified as available-for-sale. In 2008, the Company recognized
an other-than-temporary impairment related to these securities. Refer to Note 17.
152
Press Articles Covering the Bottler Acquisitions
• The Wall Street Journal, “Pepsi Bids $6 Billion for Largest Bottlers, Posts Flat Profit,”
April 20, 2009.
• Dow Jones Newswires, “Why Pepsi Wants to Buy Its Bottlers,” April 20, 2009.
• The Wall Street Journal, “PepsiCo Nabs Bottlers After Months at Table,” August 5,
2009.
• The Wall Street Journal, “Coke Near Deal for Bottler,” February 25, 2010.
• The Atlanta Journal Constitution, “Bottler Buy Took Months to Cap: Coke, CCE Began
Talks about Idea in 2008. Filings Show Proposal Didn’t Always Go Down Smoothly in
Board’s Talks,” May 28, 2010.
• The Wall Street Journal, “FTC Approves Coke’s Deal With Big Bottler,” September 28,
2010.
• The Atlanta Journal Constitution, “Coke’s New Chapter Puts Light on Bottlers: Smaller
Group’s Fate at Hand as Beverage Giant Buys Largest Member. Deal Opens New Door
After Years of Wrestling,” October 10, 2010.
Markets
Pepsi Bids $6 Billion for Largest Bottlers, Posts Flat Profit
By Betsy McKay, Dennis K. Berman and Valerie Bauerlein

1,378 words
20 April 2009
17:39
The Wall Street Journal (Online and Print)
WSJO
Deals
English
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved.
PepsiCo Inc. launched a $6 billion takeover bid for its two largest independent bottlers late Sunday, a
major strategy shift that signals the company's intention to overhaul how it makes and distributes its
products to consumers.
The simultaneous offers for Pepsi Bottling Group Inc. and PepsiAmericas Inc. value each company's
shares at about 17% above their trading price Friday. PepsiCo is offering $29.50 in cash and stock for
each share of Pepsi Bottling, valuing the company at about $6.4 billion. It is making a separate offer for
PepsiAmericas, at $23.27 per share, that values that bottler at about $2.9 billion.
Meanwhile, Pepsi posted first-quarter net income of $1.14 billion, or 72 cents a share, compared with
$1.15 billion, or 70 cents a share, a year earlier. There were 3.8% fewer shares outstanding in the most
recent period. The latest results also included a $25 million charge related to its restructuring plan.
Revenue slipped 0.8% to $8.26 billion.
Analysts polled by Thomson Reuters expected earnings of 67 cents on revenue of $8.28 billion. Gross
margin rose to 54.7% from 54%. North American beverage volume fell 6%, hurt by a mid-single-digit
decline in carbonated soft drinks and a double-digit decline in sports drinks. The company said it faced a
challenging comparison because of the launch of G2 and Gatorade Tiger in the prior year. International
revenue increased 2.6% as profits fell 4.5%
Friendly Offers
Pepsi already owns one-third of Somers, N.Y.-based Pepsi Bottling and over two-fifths of Minneapolis-
based PepsiAmericas. Pepsi said it intended its offers to be friendly, and had to reveal them publicly
because of Securities and Exchange Commission rules. The bottlers will likely convene independent
committees that do not include PepsiCo's board representatives to evaluate the bids.
The offers show that even during a global recession, the world's best-capitalized corporations still have
the wherewithal to pursue mergers. Shareholders of the two bottlers will have to decide how hard to
press for higher prices in the midst of a shaky stock market.
A decade ago, Pepsi sought to separate itself from its bottlers, figuring it would help the company focus
on soft-drink growth while keeping bottling assets off its balance sheet. In an interview, Pepsi Chairman
and Chief Executive Indra Nooyi said business conditions had changed significantly since then.
Consumers are abandoning soft drinks for water, juice and other noncarbonated beverages.
Owning the two big bottlers would give Pepsi control over how it distributes its beverages, allowing it to
revamp production and distribution and squeeze out costs. "We can accelerate revenue growth and be
more agile and flexible," she said of the offer. "When you have a flat-to-shrinking profit pool, slicing it 20
ways to Sunday is not the answer."
Page 1 of 3 2010 Factiva, Inc. All rights reserved.

Combining Pepsi with its two main bottlers would give Pepsi control of about 80% of its North America
beverage distribution volume. The company also said it expects to save $200 million through synergies,
and expects to boost annual earnings by 15 cents a share once those synergies are fully realized.
The offers are the most aggressive moves by Ms. Nooyi since she became head of the drinks and snack-
food giant in 2006. She has become increasingly convinced that a major revamp of the distribution
system was needed, saying in a published interview last October that it needed to be
"reconceptualized."
Pepsi is being squeezed by broader changes in consumer habits. U.S. soft-drink sales slid 3% last year,
the fourth annual decline in a row and the steepest on record, according to industry publication
Beverage Digest. At the same time, the recession led to the first annual decline in decades in sales of
nonalcoholic beverages overall, including water, juice, and other drinks.
These changes have put pressure on bottlers. Their manufacturing assets are geared mostly toward
producing soda rather than the types of drinks that are growing now, such as "enhanced water," which is
bottled water with vitamins and flavors.
Pepsi owns and markets its brands. Its bottlers manufacture, distribute and sell them. Pepsi and its
bottlers have had their share of disagreements. Its bottlers have long sought greater access to
Gatorade, one of the crown jewels of Pepsi's beverage business. But the drink is manufactured using a
different process than the one bottlers use to make soda, and it is distributed through warehouses, as it
was before Pepsi acquired it.
Late last year, to the dismay of PepsiCo, Pepsi Bottling began distribution of Crush sodas, made by rival
Dr Pepper Snapple Group Inc. and a stronger brand than Pepsi's fruit-soda offerings.
The concept of the big publicly traded bottler was forged by Coca-Cola Co. in the late 1980s. Worried
about losing control over its bottlers, the company's chief financial officer at the time, M. Douglas Ivester,
devised a plan to create "anchor bottlers" in which it would own a large stake -- up to 49% -- while
keeping the bottlers' assets off its books.
The new system worked wonders for Coke, which used it to build a network of powerful anchor bottlers
around the world, and to generate an additional profit stream by buying up small bottlers and then selling
them to the new anchor bottlers. But by the late 1990s, the big bottlers were also causing problems for
Coke, as they became saddled with debt from acquiring new territories and equipment.
PepsiCo spun off its bottling division in 1999, under pressure from investors. The initial public offering of
Pepsi Bottling, or PBG, was one of the largest in the history of the New York Stock Exchange. Today
PBG is the world's largest bottler of Pepsi beverages, accounting for about 40% of Pepsi's global
volume and more than 50% of Pepsi beverages sold in North America.
Pepsi and PBG have remained closely intertwined. PepsiCo owned 33.1% of PBG stock as of Feb. 13,
according to PBG's proxy filing with the SEC. PBG Chief Executive Officer Eric J. Foss worked for
Pepsi's bottling arm before the spinoff. He has been with Pepsi Bottling Group since its formation, and
took over as CEO in July 2006. Two PepsiCo executives sit on PBG's board -- John C. Compton, head
of PepsiCo Americas Foods, and Cynthia M. Trudell, chief personnel officer and a former director of
PepsiCo.
Pepsi's second-largest bottler, PepsiAmericas Inc. became a major player in 2000, when Whitman Corp.
agreed to buy the smaller PepsiAmericas Inc. Chief Executive Robert C. Pohlad has led the company
since the merger. PepsiAmericas has $4.9 billion in annual revenue and accounts for about 19% of
Pepsi products sold in the U.S.
PepsiCo's move is likely to put pressure on Coke, which is grappling with its own decline in U.S. soda
sales and has had a fractious relationship with its biggest bottler, Coca-Cola Enterprises Inc. Coke too is
aggressively developing its presence in noncarbonated beverages, which don't always fit well with a
bottling business.
PepsiAmericas, which has a history as an independent company, operates under a shareholder

agreement that restricts the amount of shares PepsiCo can own. According to PepsiAmericas' proxy
filing, any acquisition by PepsiCo that would put the company over a threshold of 49% of the outstanding
common stock must have the approval of a majority of directors not affiliated with PepsiCo, the approval
of shareholders not affiliated with PepsiCo, or meet criteria setting a minimum price.
PepsiAmericas's Mr. Pohlad is the second-largest shareholder after PepsiCo, with 10.4% of the
company's common stock. The shareholder agreement specifies that PepsiCo may not enter an
agreement with Mr. Pohlad that would enable the company to surpass the threshold.
Centerview Partners, Banc of America Securities and Merrill Lynch are financial adviser to PepsiCo.
Davis Polk &Wardwell is legal counsel.
Write to Betsy McKay at betsy.mckay@wsj.com , Dennis K. Berman at dennis.berman@wsj.com and

Valerie Bauerlein at valerie.bauerlein@wsj.com and Valerie Bauerlein at
Indra Nooyi
Document WSJO000020091007e54k0066m

WSJ BLOG/Deal Journal: Why Pepsi Wants To Buy Its Bottlers
621 words
20 April 2009
08:38
Dow Jones News Service
DJ
English
(c) 2009 Dow Jones & Company, Inc.
(This story has been posted on The Wall Street Journal Online's Deal Journal blog at
blogs.wsj.com/deals.)
Posted by Betsy McKay and Valerie Bauerlein
When Indra Nooyi helped craft the spinoff of Pepsi Bottling Group in 1999, PepsiCo Inc.'s (PEP)
beverage business was dominated by soft drinks. Now, noncarbonated drinks account for about 60% of
Pepsi's North American volume. But most of those drinks aren't made by the bottlers, whose plants are
geared toward producing large volume of soft drinks.
Having control of the majority of its manufacturing and distribution system would enable Pepsi to move
products more easily from one distribution system to another, giving it a cost and competitive advantage,
Nooyi, a veteran deal maker who is now PepsiCo's chairman and chief executive, said in an interview
Sunday evening. "This will allow us to really strategically transform the supply chain."
The company no longer would have to persuade its big bottlers to take on each new product, a time-
consuming process involving frequent negotiations at a time when new drinks are proliferating and Pepsi
is trying to keep up - and overcome - small, niche players.
Pepsi could nurture new, small drinks through a warehouse distribution channel, which can be better
suited to niche products produced in small volumes, she said. If the drink took off, it then could be
handed over to the bottling network for mass distribution, she said. "If we have to incubate a product we
can," she said. "When you have big bottling systems and new products, if the new products don't make
it big time, bottling systems tend to kill it."
Nooyi said she isn't concerned that the deal would put bottling assets on PepsiCo's balance sheet.
"Even when these assets come on the balance sheet, our growth rate looks good," she said. The deal
also would enable Pepsi to eliminate costs by reducing redundancies, generating synergies of more
than $200 million before taxes, she noted.
Nooyi said she and her executive team, including international chief Michael D. White and finance chief
Richard Goodman, considered more than a dozen options for making the relationship between PepsiCo
and the bottling system more efficient. "There was no one way except this one, to address most of the
issues we're trying to address," she said.
Though Nooyi has been talking publicly about wanting to improve the relationship for months, she said
the plan to buy the bottlers themselves only gelled over the weekend.
Nooyi, who was still in the office late Sunday, said she placed separate calls to Pepsi Bottling Group
CEO Eric Foss and PepsiAmericas CEO Robert Pohlad shortly after 6:30 p.m. to let them know the
company would be sending an offer letter. She said that before the calls, she hadn't talked with the
executives about taking over the bottlers.
As for whether her plan will succeed, Nooyi said it is too early to tell. She hopes shareholders will
consider that PepsiCo is offering an attractive premium to a share price that is relatively high, compared
to its recent performance. "We feel like we are entering into this transaction to create a positive feeling
between us and our bottlers," she said. "This is not a strike-while-the-iron-is-hot transaction."
She wouldn't say whether PepsiCo would attempt to buy its remaining domestic bottlers. "Our plan is to
work constructively with them," she said. "And if our independent bottlers want to do something else,
we'll talk to them, too."
-For continuously updated news from The Wall Street Journal, see WSJ.com at http://wsj.com. [ 04-20-
09 0938ET ]
Document DJ00000020090420e54k0007h

PepsiCo Nabs Bottlers After Months at Table
By Valerie Bauerlein and Dennis K. Berman

596 words
5 August 2009
The Wall Street Journal
J
B1
English
(Copyright (c) 2009, Dow Jones & Company, Inc.)
PepsiCo Inc. reached a sweetened $7.8 billion deal to buy its two biggest independent bottlers, a
breakthrough for the food-and-beverage giant after more than three months of testy negotiations.
The agreement sets up a crucial front in Pepsi's battle with Coca-Cola Co., which relies on independent,
large publicly traded bottlers to distribute the bulk of its drinks in the U.S. Both companies are out to
prove their model for bottling and distributing drinks works better as consumers shift from soft drinks to
juices, enhanced waters and teas.
By taking its big U.S. bottlers in house, PepsiCo said it will be able to deal more directly with the stores,
helping to strengthen its dominance over Coke in noncarbonated drinks.
Mike White, the head of PepsiCo's international business, said an independent bottling system geared
toward producing soda made sense a decade ago when carbonated soft drinks made up more than
70% of PepsiCo's North American beverage portfolio. Sodas now make up about 45% of that portfolio,
he said.
PepsiCo agreed to pay $36.50 a share in cash and stock for the each share of Pepsi Bottling Group Inc.
it doesn't already own, 24% above its original April bid. The cash and stock price for PepsiAmericas Inc.
was raised about 23% to $28.50 a share.
Investors cheered the deal, sending PepsiCo shares up 5.1%. Shares of Pepsi Bottling and
PepsiAmericas rose 8.5% and 9%, respectively, to right around the deal price.
Pepsi BottlingChief Executive Eric Foss said he was convinced a tie-up was the right move. "In a rapidly
changing, more complicated global market, a leaner, more agile business model is pretty important," he
said in an interview.
A PepsiAmericas spokeswoman said the company is committed to a smooth transition but declined to
comment on CEO Robert Pohlad's plans.
Coke declined to comment but has said it is satisfied with its arrangement with bottlers.
Coke and Pepsi spun off their big bottlers years ago, to focus on soft-drink growth while keeping bottling
assets off their balance sheets. The 1999 public offering of Pepsi Bottling was one of the largest for the
Big Board.
Investors questioned whether PepsiCo Chairman and Chief Executive Indra Nooyi could complete the
deal to buy the bottlers, which she said was crucial to reinventing the North American beverage
business. Pepsi Bottling conducted a roadshow to fight for a higher price and approved a poison-pill
takeover defense.
PepsiCo and Pepsi Bottling representatives met face-to-face on July 15 and 16 at PepsiCo's
Westchester, N.Y., airplane hangar, close to each company's suburban headquarters, according to a
person familiar with the situation. PepsiCo said it would pay $34.50 a share, then $35.50 a share. Pepsi
Bottling held out for more than $37 a share, this person said, but the two couldn't reach a final price.
Then, last Friday, Ms. Nooyi invited Pepsi Bottling Group director Ira D. Hall to her home and negotiated
a final deal: $36.50 a share, half in cash and half in stock. The two executives essentially split the
difference in their positions, the person said. Pepsi Bottling largely took the lead in negotiations for the
smaller PepsiAmericas.
PepsiCo said it hopes to have regulatory approval by early next year.
Ms. Nooyi declined to say what role the bottlers' CEOs might play on an ongoing basis.
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BUSINESS FEBRUARY 25, 2010
Coke Near Deal for Bottler

Total Value May Exceed $12 Billion; Strategic Shift Driven by New Consumer Tastes
By DANA CIMILLUCA, BETSY MCKAY and JEFFREY MCCRACKEN
In a strategic about-face driven by big changes in consumer tastes, Coca-Cola Co. was nearing a deal late
Wednesday to buy the bulk of its largest bottler, according to people familiar with the matter.
As part of the deal, Coke would buy Coca-Cola Enterprises Inc.'s North American operations, the people said. The
rest of the bottler, which consists of operations in several European countries, would remain independent and
acquire Coke bottling operations in Scandinavia and Germany.
While exact terms of the transaction could not be learned late Wednesday, the deal's value could be
approximately $12 billion to $13 billion, including equity and assumed debt, said one person familiar with the
matter.
A Coke deal would mark a major change in the strategy the company has pursued for decades—setting up large,
independent bottlers run separately from Atlanta-based Coke itself. It would also come as PepsiCo is about to
close acquisitions of its two largest independent bottlers, putting pressure on Coke to make a similar move to gain
the same competitive advantages PepsiCo stands to reap. The anchor bottler strategy worked well for Coke in the
1980s and 1990s when consumers were drinking increasingly more soda that was shipped in high volumes.
But since then, the interests of Coke and its bottlers have diverged, as the drinks giant seeks to adapt to
consumers moving away from soft drinks to more niche, noncarbonated offerings. Owning a bottler would give
Coke flexibility. It could decide to distribute through its bottling system, through which products are delivered
directly to stores. Or it could deliver drinks through warehouses, which is cheaper and preferable for products too
small or not profitable enough to distribute cost effectively through the more expensive "direct store delivery"
system.
For Coke's everyday consumers, the deal potentially could mean lower prices, with some costs of distribution
eliminated, and a wider variety of drinks, including niche products, in stores as the company gains greater
distribution flexibility, according to industry experts.
Any deal could prove risky. A marketing and branding company, Coke could be distracted by taking on bottling
drinks in a huge market. The net effect on its balance sheet is unclear: It would not only absorb bottling assets,
but also potentially spin off others that it currently owns in Scandinavia and Germany as part of the deal. Coke
owns several of its bottlers around the world, also including bottlers in Brazil, India and China.
PepsiCo announced last April that it aimed to subsume Pepsi Bottling Group Inc. and PepsiAmericas Inc. Pepsi
said the $7.8 billion deal will allow it to have greater control over development, distribution and marketing of
new products with the acquisitions, which are expected to close Friday.
http://online.wsj.com/article/SB10001424052748704240004575085871950146304.html 7/9/2010
Owning its bottlers allows PepsiCo to negotiate alone with retailers, rather than sharing that task with
representatives of separately publicly traded bottlers.
The boards of both Coke and CCE were expected to meet Wednesday evening to approve the transaction. It is still
possible the deal could be revised or fall apart at the last moment, said the people familiar with the matter. A
Coke spokesman declined to comment. A CCE representative did not immediately respond to requests for
comment.
CCE represents 16% of Coke's volume world-wide and is the primary bottler for the U.S. and Canada. Last year,
the North American operations accounted for 70% of CCE's net operating revenues, with the remainder coming
from Europe.
In Europe, the company's territories include Belgium, continental France, the U.K., Luxembourg, Monaco and
the Netherlands. The deal under consideration would likely keep these operations inside a publicly traded CCE,
with Coke swapping some of its own European bottlers into the company.
Shares of Coke were little changed in 4 p.m. trading Wednesday on the New York Stock Exchange at $55.16. CCE
stock fell less than 1% to $19.18 on the Big Board, giving it a market value of $9.4 billion. In after-hours trading,
CCE shares jumped 25% on the news.
After setbacks earlier in the decade, Coke's sales have recovered globally in recent years under former Chairman
and CEO E. Neville Isdell, who retired last April, and current Chairman and CEO Muhtar Kent. Its stock is up
40% since sinking to $39.15 in October 2004. CCE's stock is about where it was in October 2004, though it has
recovered after hitting close to $8 in November 2008.
For Coke, the deal would represent a partial reversal of a strategy it pioneered in the mid-1980s. Worried about
losing control over its disparate bottlers, Coca-Cola's chief financial officer at the time, M. Douglas Ivester, forged
a plan to create big, publicly traded "anchor bottlers" such as CCE in which it would own a large stake—up to 49%
—while keeping the bottlers' assets off its books.
CCE went public in 1986. Coke remains its largest shareholder, with a 34% stake as of the end of last year.
That bottling system allowed Coke to build a network of anchor bottlers around the globe, maintain a powerful
influence with large stakes, and generate an additional profit stream by buying up small bottlers and then selling
them to the new anchor bottlers. But by the late 1990s, some of the big bottlers also became a problem for Coke,
saddled with debt from acquiring small bottlers and new equipment.
Broader changes in consumer habits have also put pressure on the bottling system in the U.S., which was
traditionally geared toward manufacturing and selling carbonated soft drinks rather than the types of drinks that
are growing faster these days, like "enhanced water," or bottled water with vitamins and flavors.
When PepsiCo Chairman and CEO Indra Nooyi launched that company's similar move in April, she said owning
the two bottlers would give it the flexibility to decide how its beverages should be distributed. As the industry
moves from a heavy reliance on carbonated soft drinks into water, juice, teas and other noncarbonated drinks,
some soft-drink bottlers don't have the equipment to manufacture the noncarbonated drinks and many are sold
in small volumes. "We can accelerate revenue growth and be more agile and flexible," Ms. Nooyi said at the time.
PepsiCo has said it expects to save $400 million by 2012 from the deals. But Bill Pecoriello, chief executive of
ConsumerEdge Research LLC, believes the company may actually reap more than $600 million.
PepsiCo hasn't yet laid out specific changes it plans to the way it delivers its drinks. But according to Mr.
Pecoriello, the company is likely to move some of the distribution of its Gatorade sports drink from an outside
operator to its bottling system, which will save it money.
Since PepsiCo announced its plan to acquire Pepsi Bottling Group Inc. and PepsiAmericas Inc., Mr. Kent, the
Coke CEO, has staunchly defended Coke's system of maintaining independent bottlers, calling it "still the best
way to win in the marketplace."
Write to Dana Cimilluca at dana.cimilluca@wsj.com, Betsy McKay at betsy.mckay@wsj.com and Jeffrey

McCracken at jeff.mccracken@wsj.com
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News
Bottler buy took months to cap: Coke, CCE began talks about idea in 2008. Filings show
proposals didn't always go down smoothly in board's talks.
Jeremiah McWilliams
Staff
699 words
28 May 2010
The Atlanta Journal - Constitution
ATJC
Main
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English
Copyright (c) 2010 The Atlanta Journal-Constitution, All Rights Reserved
Coca-Cola Enterprises had few attractive options as members of the board of directors last winter
pondered selling key parts of the soda-bottling business to Coca-Cola Co.
CCE, codenamed "Crystal" in secret presentations for a committee of directors, had a "limited ability" to
pursue alternatives such as diversifying its products, acquiring regional bottlers, merging with a peer
bottler or selling itself entirely, investment bank Greenhill &Co. told the board.
Meanwhile, Coca-Cola, codenamed "Cobalt" in the briefing materials, wasn't interested in buying CCE
as a whole, including its European operations. It only wanted the North American operations that are the
core of CCE's bottling empire.
And PepsiCo was already moving to buy its bottlers, raising the specter that doing nothing would give
the archrival important advantages in drink distribution and pricing.
Regulatory documents filed this week shed new light on how Coke's $12.4 billion deal for CCE's North
American operations took shape. The buyout, expected to close by year's end if shareholders and
regulators sign off, was announced in February.
Talks between Coca-Cola Co. and its main bottler stretched back to late 2008, when executives talked
in general terms about the possibility of Coca-Cola taking over bottling operations in North America, the
filings show.
Discussions proceeded haltingly, petering out in early 2009 before restarting over the summer.
They broke down in September over the purchase price, before CCE came up with a plan that formed
the basis for an eventual deal.
The final push began in December and involved a whirlwind series of meetings involving lawyers,
investment bankers, executives and board members.
The deal's goal is to give Coke more control over distribution and new drink rollouts in North America,
where soda sales are in decline. CCE, long joined at the hip with Coke as its biggest independent
bottler, will remain in business as a European bottler. CCE shareholders will get one share of the
Europe-focused company, plus a one-time, $10-a-share payout.
Just before the deal was announced, Greenhill warned CCE of the hazards of doing nothing. Softness in
North American threatened Coke and CCE's core market, it said. Taxes on sugared drinks that had
been threatened could become real. European growth might not last. PepsiCo's move to buy its bottlers
would give the rival a big head start on cutting costs and, possibly, prices.
In one document, CCE said its Affiliated Transaction Committee --- a group of independent directors that
oversees significant issues related to CCE's relationship with Coca-Cola --- believes the deal is fair for
shareholders because of promising trends in the Western Europe nonalcoholic beverage industry.
One key date was April 20, 2009, when PepsiCo announced it planned to acquire its two main bottlers.
That day and the next, CCE's board and its Affiliated Transaction Committee met in Atlanta for regularly-
scheduled meetings. Among other things, they discussed "new competitive pressures." At that time, the
Affiliated Transaction Committee also discussed whether CCE could restart stalled talks with Coca-Cola
about a possible large transaction.
Page 1 of 2 © 2011 Factiva, Inc. All rights reserved.

On Sept. 5, Coca-Cola CEO Muhtar Kent and John Brock, his counterpart at CCE, talked briefly over the
phone about their companies' different views on the financial value of a deal. The two CEOs agreed that
the companies needed to resolve the matter promptly or end the discussions.
Discussions broke down in the last days of September when CCE's board of directors unanimously
rejected Coca-Cola's proposal.
But by early December, executives from both companies were feeling each other out about resuming
talks. Three days before Christmas, CCE made a new proposal that got an interested reception from
Gary Fayard, Coca-Cola's chief financial officer. In early January, company representatives met to
hammer out a proposal that could be presented to each company's CEO.
Within weeks, the companies had their deal.
Document ATJC000020100528e65s00016

FTC Approves Coke's Deal With Big Bottler
A Wall Street Journal Roundup

539 words
28 September 2010
The Wall Street Journal
J
English
(Copyright (c) 2010, Dow Jones & Company, Inc.)
Coca-Cola Co. moved closer to completing its acquisition of the North American operations of its biggest
bottler, a deal that is expected to drive cost savings for the soda giant.
The Federal Trade Commission and Canadian competition authorities gave the deal the go-ahead
Monday. Shareholders of Coca-Cola Enterprises Inc., whose North American operations Coke is buying,
are expected to sign off on the deal Friday, and Coke expects the acquisition to become effective in the
days after that.
As expected, competition authorities are requiring Coke to restrict its access to confidential competitive
business information of rival Dr Pepper Snapple Group Inc., whose drinks are distributed by Coke. In
June, Coca-Cola announced it would pay $715 million to Dr Pepper Snapple for the rights to distribute
Dr Pepper and Canada Dry in the U.S. after the bottler deal goes through.
The FTC said Atlanta-based Coca-Cola, the world's largest soft drink maker, and Dr Pepper, the No. 3
soft-drink maker in the U.S., are direct competitors in the market.
Coca-Cola will become Dr Pepper's largest distributor, with about 42% of its business. Rival PepsiCo
Inc. has 39%, and independent bottlers distribute the remaining 19%.
Coke's deal comes just months after PepsiCo bought its two largest bottlers. PepsiCo in the first quarter
closed its deals, valued at $7.8 billion, to buy Pepsi Bottling Group and PepsiAmericas.
At PepsiCo -- which is both a snack and drinks company -- the acquisitions have prompted severa
l changes. The company is launching more joint promotions of its snacks and drinks and has tweaked
the way it distributes its key Gatorade brand. In July, PepsiCo said it expects synergies from its deals to
be in the range of $125 million to $150 million in 2010.
A Coke spokesman said the company has been working on the integration and will be ready to go once
the deal closes. He didn't comment on other changes.
The company has already named Steve Cahillane, now president of the North American business
segment of Coca-Cola Enterprises, to head the bottler business under Coke after the acquisition.
The deal will also reshape Coca-Cola Enterprises into a company that will be focused on Europe.
Coke's announcement of the deal earlier this year set off speculation on its long-term plans for the North
American bottling operations it is acquiring, with analysts speculating that Coke would streamline those
North American operations but eventually could look to sell them or find a partner.
More immediately, however, Coke's deal could push some distribution changes as the company makes
an effort to be more efficient in its dealings with retailers and restaurants. Coke said in February that it
expects to generate immediate efficiencies with operational synergies of $350 million over four years.
Soft drink makers produce and sell their concentrate to bottlers, which then turn it into drinks sold at
retail. The FTC estimates the concentrate market is worth about $9 billion a year, and the total sales of
U.S. soft drinks sold by retailers is about $70 billion.
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Business
Coke's new chapter puts light on bottlers: Smaller groups' fate at hand as beverage giant buys
largest member. Deal opens new door after years of wrestling.
Jeremiah McWilliams
Staff
1,352 words
10 October 2010
The Atlanta Journal - Constitution
ATJC
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E1
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Copyright (c) 2010 The Atlanta Journal-Constitution, All Rights Reserved
For decades --- more than 100 years, in many cases --- they've managed shop in Small Town USA
, stocking the coolers of convenience stores and shelves of supermarkets with soft drinks. And now,
Coca-Cola's smaller bottlers face a new fact: Their fate is one of the most sensitive subjects in the
beverage industry.
Coca-Cola Co. and PepsiCo together spent $20 billion this year to buy their largest bottlers. Industry
insiders suspect they didn't do so to leave the others unchanged.
Coca-Cola last weekend took control over most of its soft-drink bottling in the U.S. The company will fill
its own bottles and cans of Coke and truck them to stores in the former territories of bottler Coca-Cola
Enterprises, which got new territories in Norway and Sweden.
After years of often stressful relations with CCE, a majority of Coca-Cola's other U.S. bottlers --- ranging
from the fairly large to the very small --- apparently supported the deal. Bottlers who met with Coca-Cola
in August generally gave "very positive" reviews of the management team Coca-Cola had assembled to
run North America and CCE's old bottling operations, according to trade journal Beverage Digest.
But Coca-Cola has not specifically mapped out its end game. Uncertainty remains among the
independents about what Coke has in mind. Will the company push hard for smaller bottlers to sell out?
Will it seek to change contracts?
"I think most of them are really waiting to see what Coke plans to do," said Marion Glover, a longtime
consultant to Coke bottlers.
In the near future, Coke will look to its independent bottlers for a new kind of collaborative relationship,
said John Sicher, editor of Beverage Digest. He predicted Coke will seek some changes in production,
in how the system deals with national customers and in how some products are distributed.
Some bottlers will agree to Coke's recommended changes and stay in the system for many years to
come, while others may choose to sell, Sicher said. He added that it will probably take about five years
to see how it all evolves.
In the past few weeks, Coca-Cola executives have said soothing things about the future of independent
U.S. bottlers. Chief executive Muhtar Kent said the deal with CCE will benefit them, and that they will
have a continued role in the U.S.
"The tide is going to rise, and it's going to help everyone," he told employees at a town hall meeting.
But Tom Pirko, president of California consulting firm Bevmark, said smaller bottlers are in a precarious
situation. Coca-Cola owns the brands, and its status as the only supplier of the concentrate that makes
soft drinks gives it a lot of leverage. Successful bottlers need to have critical mass, and also need to
invest a great deal of cash in new technology to keep up in an increasingly sophisticated business, he
said.
"The economics no longer allow you to be small. It just doesn't work," he said. "You need to be rich to
play this game. You need to be able to invest significant sums of money to play it well. The smaller you
are, the less power you have."
With PepsiCo trying to remake its own North American bottling system, Coca-Cola executives want to
use the freshly inked deal with CCE to make Coke the best beverage supplier to big retailers such as
Wal-Mart.
"They wish us the best," said Steve Cahillane, the new leader of Coke's bottling and sales group. But big
chains are waiting to see results, he said.
About half of Coca-Cola's 70 independent U.S. bottlers have been in business at least 100 years. A
quarter have lasted that long under the ownership of the same family. Their patchwork of territories
covers the United States, entrenched in perpetual agreements under franchise law.
The network started in 1899, when Coca-Cola executive Asa Candler signed over exclusive rights to
bottle Coca-Cola across most of the U.S. (except Vicksburg) for one dollar. The three Chattanooga
attorneys who got the rights sold territories to other entrepreneurs. The bottlers bought concentrate from
Coca-Cola and turned the stuff into soft drinks.
The system spread quickly throughout the country. Nearly 400 Coca-Cola bottling plants were operating
in 20 years. At the start of the 1920s, the U.S. held more than 1,000 Coke bottlers.
That number shrank dramatically in subsequent decades, as larger bottlers snapped up smaller ones.
But the pace of consolidation and buyouts in the Coke bottling system has slowed to a crawl, averaging
one deal per year for the past decade. Coca-Cola itself has bought only one U.S. bottler since the mid-
1980s: a company in Philadelphia.
In the early days of Coke's U.S. bottling system, it nicely suited an era when just about every store was
mom and pop. But slowly, economies of scale became more important and production became more
complex. While the bottling system was based on territories, growing big-box retailers wanted a single
point of contact.
At times, trying to orchestrate national beverage promotions caused headaches for national retailers,
who might have to work with dozens of bottlers who controlled the territories containing its stores. The
multitude of sales calls and meetings with Coca-Cola, CCE and various smaller bottlers frustrated the
big chains.
Coca-Cola says coordination has improved recently. Its U.S. bottlers agreed this year to provide a
consistent portfolio to customers.
For years, smaller bottlers have had to rub shoulders with CCE, buying beverages or working on
national promotions. The arrangement often bred frustration between the mega-bottler and its smaller
cousins.
"It became very hard to get some new products through the system; it became hard to customize
products for each customer," said Michael Bellas, CEO of Beverage Marketing Corp. "It became a
different marketplace."
With smaller bottlers now required to deal directly with Coca-Cola in the place of CCE, one longstanding
issue will remain difficult to fix: the proliferation of brands and packages. Handling the hundreds of items
Coca-Cola churns out can be a big challenge for small bottlers.
Coca-Cola's sales distribution is heavily concentrated in its largest bottlers. Including the CCE
operations that Coke just took over, about 94 percent of its U.S. sales of bottled and canned soft drinks
come from its top ten bottlers, including Coca-Cola Bottling Co. United in Birmingham and Coca-Cola
Bottling Co. Consolidated in Charlotte, the only publicly traded U.S. company in the bunch.
After the top 10, sales drop off precipitously.
Only about 20 Coke "bottlers" in the U.S. actually make bottles and cans of Coca-Cola and other soft
drinks. The rest buy drinks from others and sell them in their own territories.
Even the smallest companies can be highly profitable, said Glover. Their profits per case may actually
be higher than those of the big bottlers, because the small operations don't make their own drinks and
don't have as much capital tied up in production.
Since they pull in good cash flow, small bottlers are not quick to sell out, said Glover. "They ask, if I sell
my business, where am I going to get that rate of return?"
But small bottlers can't afford to be comfortable, Pirko said. Consumers and Coca-Cola will demand
more from them.
"They're going to have to respond, but I don't think they can," said Pirko, who argued that many bottlers
have been conditioned to sell carbonated soft drinks at a time that consumers are asking for more non-
carbonated and healthier drinks. "They have a tremendous challenge, and I don't think they can meet it."

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Business 30130 Michael Minnis

The Coca-Cola Company and PepsiCo

The purpose of this assignment is to:

1. Increase your familiarity with 10-K filings.

Consolidated Statement of Income

Consolidated Statement of Cash Flows

(Continued on following page)

Consolidated Statement of Cash Flows (continued)

2010 2009 2008

See accompanying notes to consolidated financial statements.

Consolidated Balance Sheet

See accompanying notes to consolidated financial statements.

2010 2009 2008 2010 2009 2008

2010 2009 2008 2010 2009 2008

2010 2009 2008

Year Ended December 31, 2010 2009 2008

Concentrate operations1 51% 54% 54%

Concentrate operations1 76% 78% 77%

Acquisition of CCE’s North American Business and Related Transactions

The Nonalcoholic Beverages Segment of the Commercial Beverages Industry

Divestiture of Norwegian and Swedish Bottling Operations

Impact of New Accounting Guidance

Year Ended December 31, 2010 2009 2008

Refer to Notes to Consolidated Financial Statements.

December 31, 2010 2009

Refer to Notes to Consolidated Financial Statements.

Year Ended December 31, 2010 2009 2008

Refer to Notes to Consolidated Financial Statements.

Acquisition of Coca-Cola Enterprises Inc.’s North American Business

Performance share units 1.6 $ 192

Fair value of our equity investment in CCE1 $ 5,373

Cash and cash equivalents $ 49

Dr Pepper Snapple Group, Inc. Agreements

Trade receivables, less allowances for doubtful accounts $ 67

Segment Products and Services

Year Ended December 31, 2010 2009 2008

Method of Determining Segment Income or Loss

Year Ended December 31, 2010 2009 2008

United States $ 10,629 $ 8,011 $ 8,014

December 31, 2010 2009 2008

United States $ 8,251 $ 3,115 $ 3,161

By Betsy McKay, Dennis K. Berman and Valerie Bauerlein

Page 1 of 3 2010 Factiva, Inc. All rights reserved.

PepsiAmericas, which has a history as an independent company, operates under a shareholder

Write to Betsy McKay at betsy.mckay@wsj.com , Dennis K. Berman at dennis.berman@wsj.com and

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Posted by Betsy McKay and Valerie Bauerlein

Page 2 of 2 2010 Factiva, Inc. All rights reserved.

By Valerie Bauerlein and Dennis K. Berman

PepsiCo said it hopes to have regulatory approval by early next year.

Page 2 of 2 2010 Factiva, Inc. All rights reserved.

BUSINESS FEBRUARY 25, 2010

Coke Near Deal for Bottler

By DANA CIMILLUCA, BETSY MCKAY and JEFFREY MCCRACKEN

Write to Dana Cimilluca at dana.cimilluca@wsj.com, Betsy McKay at betsy.mckay@wsj.com and Jeffrey

Page 1 of 2 © 2011 Factiva, Inc. All rights reserved.

Within weeks, the companies had their deal.

Page 2 of 2 © 2011 Factiva, Inc. All rights reserved.

A Wall Street Journal Roundup

License this article from Dow Jones Reprint Service

Page 1 of 1 © 2011 Factiva, Inc. All rights reserved.

After the top 10, sales drop off precipitously.

Page 2 of 3 © 2011 Factiva, Inc. All rights reserved.

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