estimates of marketing,economic, and population impact on tcccc sales

8/12/2019 Estimates of Marketing,Economic, And Population Impact on TCCCC Sales

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Economic Impact

Estimates of Marketing, Economic and

Population Impact on TCCC Sales

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Deliverables:

World Economic Forecast by TCCC Region and Key Country

Historical Tables of Real GDP performance by TCCC Region

TCCC Momentum Analysis Analysis of Pooled Data and Assessment of Growth Scenarios

Economic Impact on TCCC Volume


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Economics:

Created a Coke World GDP which used TCCC shipments to

establish a weight for each country

Examined Top 25 Countries which represent nearly 90% of sales

Through 2d Quarter 1999, TCCC World GDP is +2.2% over 1998

IMF Forecast is that TCCC World GDP for 1999 will be +2.3% - vs +3.0

for total world GDP (difference is due mix of LDCs in TCCC world).


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Top 25 TCCC Countries Real RGDP Change

-10.0%

-5.0%

+0.0%

+5.0%

+10.0%

UnitedStates

Mexico

Brazil

Japan

Germany

Philippines

China

Spain

Argentina

GreatBritain

SouthAfrica

Canada

Italy

France

Australia

Venezuela

Turkey

Chile

Colombia

Thailand

Nigeria

India

Russia

Korea

Belgium

%ChangeoverYe

arAgo

2d Quarter 1999 vs 2d Quarter 1998


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Top 25 TCCC Countries Real RGDP Change

-10.0%

-5.0%

+0.0%

+5.0%

+10.0%

UnitedStates

Mexico

Brazil

Japan

Germany

Philippines

China

Spain

Argentina

GreatBritain

SouthAfrica

Canada

Italy

France

Australia

Venezuela

Turkey

Chile

Colombia

Thailand

Nigeria

India

Russia

Korea

Belgium

%ChangeoverYe

arAgo

Full Year 1999September 1999 IMF Forecast


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US Recession early 2000 leads to:Lower US Demand for imports

Relapse in Emerging Markets

Lower world commodity prices

Intensifies Recession in LatinAmerica, hinders recovery in Africa

US Bubble continues to build: Higher Stock Prices

Low Savings Rate

High Current Account Deficit

Increasing inflationary threat

US Downturn late 2000/early 2001

Soft Landing for US Economy

Improving foreign economies: Increased demand for US Exports

Lower US Current Account Deficit

Leads to sustainable growthbeyond 2001

World Economic Scenarios

US Bubble Intensifies Rising Commodity and Bond Prices

Sharp increase in inflation Dramatic increase in US interest rates

Lower capital flows into emerging markets

Latin America especially vulnerable

WEAK Rest of World STRONG

STRONG

US

WEAK


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For Year 2000, Developed 3 world economic forecasts:

High Growth - calls for total real GDP to grow about 4%

Based on a strong US economy and strengthening economies in rest of

world

Significant risk of serious US recession starting in 2001

Middle Growth - Real GDP grows 2.7%

US Economy slows from near 4% to about 2% growth

Europe and Asia economies recover enough to offset slump in US

Allows overheated bubble aspect of US economy to dissipate

Low Growth - Real GDP grows 1.8%

US Economy slides into a growth recession

Europe and Japan not strong enough to make up loss in US demand

Developing Asia does not slide back into recession

Economics:


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Real GDP Growth Rates Per DRI Forecast

-2.0%

-1.0%

+0.0%

+1.0%

+2.0%

+3.0%

+4.0%

+5.0%

+6.0%

+7.0%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

MAFE

L. America

N. America

Africa

Europe

.

World Economic Forecast


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Economic Impact on TCCC Volume


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Three Primary Findings

Over time a higher proportion of TCCC sales are occurring in

countries where consumption is more sensitive to the overalleconomic climate

There is only a weak relationship between economic activity and

TCCC sales on a cross country basis

There is a stronger relationship between economic activity and

TCCC sales across time


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There is a significant mismatch

between the largest TCCC countries

and the largest economies.

10 Largest Economies account for

about 72% of world economic activity

but only 60% of TCCC shipments. TCCC 25 largest countries account for

only 61% of world Real GDP, almost

90% of TCCC Shipments

14 of the TCCC top 25 countries are

classified as Developing Economies

vs. 9 of the top 25 economies.

The result is a more volatile economic

situation.

TCCC Rank Country RGDP Rank

1 USA 1

2 Mexico 123 Brazil 8

4 Japan 2

5 Germany 3

6 Philippines 45

7 China 7

8 Spain 10

9 Argentina 17

10 Great Britain 5

11 South Africa 30

12 Canada 9

13 Italy 6

14 France 4

15 Australia 14

16 Venezuela 40

17 Turkey 23

18 Chile 41

19 Colombia 3820 Thailand 29

21 Nigeria 60

22 India 15

23 Russia 11

24 Korea 13

25 Belgium 20


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Real GDP per Capita vs TCCC Per Capita

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Japan

UnitedStates

Germany

France

Belgium

GreatBritain

Australia

Canada

Italy

Spain

Argentina

Korea

Chile

Brazil

Mexico

Venezuela

SouthAfrica

Russia

Turkey

Colombia

Thailand

Philippines

China

India

Nigeria

IndexUSA=10

0

GDP Per Cap

Per Capita


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A pattern of 3 Bands or Clusters of consumption

emerged:

Countries that consume more than 2x as much

TCCC as would be expected based on GDP alone.

Countries that consume roughly in the same

proportion to GDP as the US.

Countries that consume significantly less thanwould be expected based on GDP.


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TCCC Unit Cases vs Real GDP

(50)

-

50

100

150

200

250

300

350

400

450

500

-5 5 15 25 35 45

Real GDP per Capital - Thousand 1997 US$

PerCapitaConsumption

USAMexico

BrazilPhilippines

S. Africa

Venezuela

Chile

Japan

Germany

Nigeria

ThailandTurkey

ColombiaFrance

GB

Italy

Korea

Russia

IndiaChina

Argentina Spain

Canada

AustraliaBelgium

Size of Circle IndicatesRelative Size of TCCC

Unit Case Volume

Income Adjusted

Per Cap Cons >

2x US

Income Adjusted

Per Cap Con LT

70% of US

Income Adjusted

Per Caps >

70%


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Stronger Relationship Over Time

Developed simple time series model

Allocated growth to:

Population Economy

Marketing - All TCCC Activities

Clear correlation between economic growth and TCCC case sales growth


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TCCC Worldwide Case Growth and Growth

in Real GDP

0%

2%

4%

6%

8%

10%

12%

1991 1992 1993 1994 1995 1996 1997 1998

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

TCCC

Worldwide Case

Growth

Worldwide GDP

% Real Growth

Case % Growth Real GDP %


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Historical and DRI Estimated Real GDP

Growth Rates

1.1%

1.9%

1.5%

3.1%

2.7%

3.6%3.5%

2.1% 2.2%

2.8%

3.2%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

1991 1992 1993 1994 1995 1996 1997 1998 1999F 2000F 2001F

Worldwide Growth % Real GDP


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Cross Division Case Impact of +1.0% Change in

Real GDP

0.0 0.5 1.0 1.5 2.0 2.5

NAmerica

Japan

SPacif

NWEurope

Germany

NorthAfrica

CentralEurope

SEurasia

China

SEWAsia

SouthAfrica

Andean

Mexico

RiverPlate

Iberian

CACarib

Philippines

MideastNorthAfr

Brazil

India

Nordic

VeneCol

% impact case sales

Divisions

more

sensitive to

economic

changes


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TCCC Annual Case Growth

Contributions

+2.3%

-3%

0%

3%

6%

9%

12%

1991

1992

1993

1994

1995

1996

1997

1998

1999

E

Marketing Effects

Economic Effects

Population Effects

Annual % Case Growth Contribution


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TCCC Cumulative Case Growth Contributions: marketing

accounts for 44%. Economy is 35% and population effects

21% of the net growth since 1991

0%

10%

20%

30%

40%

50%

60%

1991

1992

1993

1994

1995

1996

1997

1998

1999

E

Marketing Effects

Economic Effects

Population Effects

Cum. % Case Growth Contribution


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TCCC estimated variances in economic, population and

marketing effects, 1998-99: marketing accounts for about 2/3

of the lost momentum and the economy about 1/3

-400

-300-200

-100

0

100

200

300

400

500

Population Economic Marketing

1998

1999

Variance

TCCC total case contributions and variances - B


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Over time, there is a relationship between ourderivedmarketing contribution and CSD share trends

0%

1%

2%

3%

4%

5%

6%

1991 1992 1993 1994 1995 1996 1997 1998

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

TCCC Marketing

Contribution %

TCCC Share Var CSD

Corr. = 71%

% Marketing Contribution Worldwide TCCC CSD Share Variance


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Estimated incremental growth contributions to TCCC from DRI

economic growth forecasts: an improving world economy should

give TCCC a 2-3 percentage point growth dividend in 2000

1.80%2.10%

2.60%

0.60%0.80%

1.20%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

200F 2001F

Low

Median

High


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TCCC Growth Projections: the impact from the economy

and population alone will not be sufficient to deliver required

growth rates

+7.1%+8.0%

+9.3%

-3%

0%

3%

6%

9%

12%

1991

1993

1995

1997

1999

E20

01F

2003F

2005F

2007F

Marketing

Economic

Population

Annual % Case Growth Contribution

~ 32 B Cases


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TCCC Cumulative Growth Projections: to reach 32 B cases

by 2007, marketing contributions must increase

0%

20%

40%

60%

80%100%

120%

140%

1991

1993

1995

1997

1999

E20

01F

2003F

2005F

2007F

Marketing

Economic

Population

Cum. % Case Growth Contribution

~ 32 B Cases

Assuming historical

marketing contribution

~ 27 B Cases


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While marketing has contributed about 44% of the total TCCC growth over the

past 8 years, this contribution is likely to be insufficient if we are to attain the 32 B

case objective by the year 2007. With historical marketing contributions of about

3.3% per year, total cases will equal only 27 B in 2007, 5 billion short of our goal

If we consider alternative economic growth scenarios through the year 2007, and in

order to attain the TCCC goal of 32 B cases by that time, we have estimated the

contributions that both economics and population will likely contribute and, by

deduction, what marketing will be required to contribute in order to achieve that

objective

The implications of these scenarios is that, even under the most optimistic of

economic projections, marketing will be required to contribute more and, under the

most likely scenario, substantially more to TCCCs growth in order to achieve the

32 B case objective

IX. Summary and Implications: Looking to 2007

and 32 B Cases

1999 to 2007

World Average /Year Economic Growth Assumptions/Yr.

1991-98 Best Case Most Likely Worst Case

Annual Economic Growth -> +2.4% +3.5% +2.4% +1.6%

Share of Population Contribution 21% 15% 15% 15%

Share of Economic Contribution 35% 38% 30% 26%

Share of Marketing Contribution 44% 47% 55% 59%


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To better understand the issue and importance of the marketing factor, we have put

current TCCC volume estimates into an industry context through 2007.

Based upon a projection of total non-alcoholic RTD volume through 2007, as

shown on the first chart, we estimate the average growth to be about +3.8 percent

per year going forward, virtually identical to the growth rate of the past ten years

Based on the above industry definition and forecast assumptions, we then overlaid

TCCC worldwide volume to derive a share-of-industry sales series. The historical and

projected shares are illustrated on the second chart to follow.

Given these industry estimates, you see that TCCCs share is projected to increase from

9.2% in 98/99 to 13.5% in 2007, assuming 32 B cases. If you evaluate the average

rate-of-growth in share from 1988-98 and 1998 to 2007, you will see that the rate of

share increase is accelerating, as shown below:

Thus, the key takeaway here is that TCCCs industry share will likely be required to

increase at an accelerating rate to achieve 32B cases. Clearly, marketing is critical

and must work harder


and 32 B Cases

1988 to 98 1998 to 2007

TCCC Average

Industry Share

Increase er Year + 0.2% + 0.4%


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Worldwide Non-Alcoholic RTD Beverages Historical and

Forecast Volume

0

50,000

100,000

150,000

200,000

250,000

1987

1989

1991

1993

1995

1997

1999F

2001F

2003F

2005F

2007F


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TCCC Worldwide Share of Non-Alcoholic RTD Beverages

6.8%

9.2%

13.5%

0%

2%

4%

6%

8%

10%

12%

14%

1987

1989

1991

1993

1995

1997

1999F

2001F

2003F

2005F

2007F


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and 32 B Cases

While these scenarios and projections represent our best-estimates of

the future, one should weigh these portraits with caution. Forecasts are

based on assumptions of the future and the shifts portrayed by DRI

estimates are not guaranteed to materialize. Nevertheless, the key take-

aways from this analysis should be: The world economy is expected to improve over the next several years,

and this should provide TCCC with some residual growth dividend of 2-

3% next year and about 1% the following year

Due to forecasted economic recoveries, a higher share of this dividend

is expected to come out of regions that have been most impacted by

negative economies over the past several years. This includes SE Asia,

Latin America and some East Europe Divisions

That marketing, as broadly defined, has been the key pivotal factor

distinguishing TCCC growth in the past; and must play an even more

important role over the next several years and beyond


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Implications

TCCC has become more reliant on the volatility

factor over time

Since economic volatility will not go away we need tohave a better understanding of the impact of economic

conditions on both the upside and the downside

This is a call to action regarding TCCC investment in

marketing and productivity


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