In this article, I will be focusing on how the all mighty 2008-2009 recession affected the corporations in our industry. For this subject, it would be impossible to look at the financial information for every single corporation but instead I will focus on the company that have appeared in out write ups many times, Coke, and hopefully it will accurately represent the industry or at least similar companies. First is good old Coca-Cola. In 2007, net operating revenues were $28,857 million with profits of $18,451 million. In 2008, the year the recession first hit, the total net revenue was $31,944 million with profits of $20,570 million. As we can see the recession did not stop Coca-cola from making a huge profit, although the growth may have decreased in rate. In 2009, net revenues were $30,990 and increased to $35,119 in 2010. As we can see, revenues did indeed drop in 2009, which some consider the worst of the recession, from their 2008 numbers. However, revenue increased by about 16 percent between 2009 and 2010, signaling that whatever the management did put them back on the right track. Overall, in terms of revenues alone, the recession did hinder the company at one point, but the company bounced back, which is exactly what is expected of a 125 year old company that was in business before during and after the Great Depression. In terms of stock market numbers, in 2007, Coca-Cola was traded for $61.37* a share. In 2008 it was $45.27, showing not only a huge decline in prices but also a noticeable difference between stock prices and revenues which did not fall between 2007 and 2008. In 2009, prices were $57.00 per share, showing that stock prices actually increased in this period while revenue fell. In 2010, prices were $65.77 per share, showing an increase in price to go along with a large increase in revenue that year. From this information, we can see that the recession did hurt Coca-Cola in the stock market but just as they did with revenue, prices eventually got back on the right track.
*Stock prices recorded on closing on December 31st of each year
http://www.thecoca-colacompany.com/investors/form_10K_2008.html
http://ir.thecoca-colacompany.com/phoenix.zhtml?c=94566&p=irol-stocklookup&t=HistQuote&control_firstdatereturned=,
In terms of revenue and profit, it looks like the recession made a dint in Cocola's profit. Do you know if the huge top companies in this industry (Kraft, Nestle, Unilever, Pepsi)was always not severely affected? What did Cocola did that it survived the recession with such success?
ReplyDeleteCoca-Cola survived the recession because of the fact that it's Coca-Cola. As you stated in your post, it should be expected of a company that survived The Great Depression. Coca-Cola was merely established enough to continue to produce and innovate even though growth slowed, and with such an established name it's amount of brand loyalty will prove to be quite steadfast. The smaller companies that didn't have such a large financial worth going into the recession were the ones that felt the sting, and were then unable to continue to compete with Coke's low prices due to the fact that they were already so profitable going into the recession. I am impressed that the drop from 2008 to 2009 was so low though, it goes to show that Coke is a very resourceful player in the industry.
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