Question

The Coca-Cola Company and PepsiCo, Inc.

The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies' complete annual reports, including the notes to the financial statements, are available online.

Instructions

Use the companies' financial information to answer the following questions.

a. What were Coca-Cola's and PepsiCo's net revenues (sales) for the year 2017? Which company increased its revenue more (dollars and percentage) from 2016 to 2017?

b. Are the revenue recognition policies of Coca-Cola and PepsiCo similar? Explain.

c. In which foreign countries (geographic areas) did Coca-Cola and PepsiCo experience significant revenues in 2017? Compare the amounts of foreign revenues to U.S. revenues for both Coca-Cola and PepsiCo.

Answer 1

(a): Coca Cola’s net revenue = $35,410 (in millions) and Pepsi’s = $63,525 (in millions)

Increase in revenue is shown in below table:

Revenue	2016	2017		$ change	% change
Coca Cola	41,863.00	35,410.00		- 6,453.00	-15.41%
Pepsi	62,799.00	63,525.00		726.00	1.16%

(b): Yes, revenue recognition policies of both companies are similar. Coca Cola recognizes revenue when it has persuasive evidence with regards to delivery of its products has occurred. Thus it recognizes revenue when title of its products is transferred to its bottling partners, reseller and other customers. Pepsi also recognizes revenue similarly upon shipment or delivery of products to its customers.

(c ): Coca Cola derived 20.7% of its revenues from Europe, Middle East and Africa; 11.2% from Latin America; 24.4% from North America; 13.5% from Asia Pacific; 29.8% from bottling investments and 0.4% from Corporate. On the other hand Pepsi’s break up is given below:

FLNA	15,798.00	25%
QFNA	2,503.00	4%
NAB	20,936.00	33%
Latin America	7,208.00	11%
ESSA	11,050.00	17%
AMENA	6,030.00	10%
Total	63,525.00	100%

Note that FLN = Frito Lay North America, QFNA = Quaker Foods North America, NAB = North America Beverages, ESSA = Europe Sub Sahara Africa. AMENA = Asia Middle East North Africa.

	Coca Cola	Pepsi
Foreign revenue %	86.50%	38%
US revenue %	13.50%	62%