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Beverages: Soft– Drinks Industry

Beverages: Soft– Drinks Industry. Katherine Bass, Aaron Contreras, Megan Morava, Alysha Zimmerman. Agenda. Industry Overview. The Actual Industry Overview. Largest group in the beverage industry 42.5% of the market $20.4 billion in revenue in 2013 -0.7% annual growth

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Beverages: Soft– Drinks Industry

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  1. Beverages: Soft–Drinks Industry Katherine Bass, Aaron Contreras, Megan Morava, Alysha Zimmerman

  2. Agenda

  3. Industry Overview

  4. The Actual Industry Overview • Largest group in the beverage industry • 42.5% of the market • $20.4 billion in revenue in 2013 • -0.7% annual growth • Top 3 competitors control 88% of the market

  5. Market Share

  6. Porter’s Five Forces Supplier Power -Companies can switch suppliers easily Threats of Entry -Well established co. -High start up capital -economies of scale Buyer Power -Price-sensitive -Companies compete on price and marketing Threat of Rivalry Threats of Substitutes -Many other options -Competing on price

  7. Industry Trends

  8. Declining CSD Sales • Declining carbonated soft drink sales in North America • Signs of slowing growth in emerging markets • Increasing health consciousness • Focus shifting to low calorie beverages • New innovations insweeteners Gallons Year

  9. Decline in Industry Profitability • Cost of inputs (corn, sugar, plastic) continue to rise, while demand for CSD decreases • Despite this, major companies have managed to maintain their earnings • Increasing prices • Vertical integration of independent bottlers • Decreasing other SG&A expenses

  10. Cost Cutting • Major companies will likely implement more cost cutting strategies in the future • Consolidations • Acquisition of smaller brands to expand market reach • Anticipated savings will go towards marketing directly to consumers

  11. Forecast Assumptions

  12. Sales Growth

  13. Profitability

  14. WACC

  15. Valuation Method • Residual Enterprise Income Model • Greatest % of value captured with no forecast necessary • Least % captured based on forecasts within horizon • Great deal of uncertainty with these forecasts

  16. Valuations

  17. PepsiCo Valuation

  18. Coca-ColaValuation

  19. Dr. Pepper Snapple Group Valuation

  20. PepsiCo Sensitivity Analysis

  21. Coca-Cola Sensitivity Analysis

  22. Dr. Pepper Snapple Sensitivity Analysis

  23. Recommendations

  24. Questions? • Did you hear about the man who got hit in the head with a can of soda?

  25. He was lucky it was a SOFT DRINK

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