1. Coca-Cola Case Competition Group B5: Terry Austin, Grant Bettinger, Soyoto Kiuchi, Hubert Paul, Betsy-Shane Rosenblum

2. Agenda  Key Area of Growth  Internal Analysis  External Analysis  Valuation  Implications of Recommendation  Conclusion

3. Internal Analysis: Coca-Cola Strengths The world most valuable brand Global distribution network A lot of Finance Customer loyalty Effective advertising campaign Weaknesses Health issues Weak market share in energy shot sector Focused mainly young and overlooked the market of elderly Opportunities Buy out competitors Diversified into the non-carbonated beverages Expand its business to more than beverage business Partnership with food chains Expand its business in developing countries Threats Healthier eating habits A lot of substitutes and competitors Increasing costs of raw materials Different policies and regulations in different countries Poor economic situations SWOT

4. Strengths Estimated 90% share in energy shot market (closest competitor NVE Pharmaceutical’s Stacker has just 3%) Product placement near cash register increases visibility (Walmart check-out aisle accounts for 15% of sales) First mover advantage in brand awareness, reputation effects and positioning preemption Devoted and enthusiastic consumer base fueled by contests and giveaways Weaknesses Unpleasant taste Some social stigma attached—not widely accepted across all classes and cultures Unpolished commercials lend to low-end feel of product Opportunities Expansion to international markets Line extensions on existing product Threats FDA investigation of safety implies pending regulation and possible restrictions placed on product and advertising SWOT Internal Analysis: 5-hour Energy

5. 1.Threat of New Entrants: LOW 5-hour Energy has 90% of market Needs access to distribution channels Needs high level of marketing Brand driven market 2. Power of Suppliers: LOW Commodity raw ingredients Fragmented suppliers Low switching costs No forward integration from suppliers 5. Threat of Substitutes: HIGH Coffee, tea, energy drinks, soda, pills Commodity product Low switching costs 4. Power of Buyers: HIGH Commodity product – price sensitive Low switching costs Ease of substitution 3. Industry Rivalry: HIGH Reliant on first-mover advantage, brand Small shelf space in retail stores High level of advertising/marketing External Analysis: Energy Shot Industry

6. Valuation

7. Cannibalization Effects  NOS Powershot is only product in direct competition  Other products are marketing to different demo’s -Extreme -Racing -NASCAR -International  5-hour Energy is positioned for students trying to stay up late and laborers with physically demanding jobs (ie Truckers)

8. Customer: overworked/tired people Not taste senstive/health conscious Looking for a “quick fix” Young ppl trying to stay up late/laborers with physically demanding jobs Enthusiastic about product Company: dominates market (90% share) Competition: negligible Marketing Strategy Overview

9. Product Place PromotionPrice  Taste should be considered in future line extensions  Possible reformulation to make product more palatable.  Line extensions for caffeine-free and "natural" versions to cater to health conscious consumers.  Placement by register should be maintained.  Consider placement in vending machines, late night or quick service restaurants (to cater to college/youth segment)  Company prides itself on its poor quality television commercials.  Doing much better job on user engagement in social media.  Consider relying almost fully on product placement in stores, word of mouth and online advertising.  Price is adequate Marketing Strategy Specifics

10. Marketing Strategy Risks 1. Market strategy highly dependent on FDA decision 2. New campaign should stress safety following recent negative PR. 3. Product may face reformulation or restrictions pursuant to FDA decision. 4. Advertising and placement may face limitations pursuant to FDA decision.

11. Operations Implications Raw Materials Operations DistributionCusomter  Leverage existing relationships  Leverage 5- hour Energy relationships  Leverage strength in brand and market share  Use existing NOS Powershot infrastructure  Use existing 5- hour Energy infrastructure  Leverage strong brand distribution channels  Leverage strong 5-hour Energy distribution channels  Leverage strength in brand and market share to distribute globally  Continue momentum of 5-hour Energy to retain customers  Leverage strong financial position to grow marketing to acquire new customers

12. Conclusion  Acquire 5-hour Energy for $X  Acquisition, along with Coca-Cola strengths, will help grow weak presence in energy shot/drink sector  Attractive industry, high growth  Coca-Cola marketing and operations will support acquisition

13. Appendix: Comparable Acquisition May 2007: Coca-Cola acquired 100% stake in Energy Brands, Inc for $3.8B - Coca-Cola paid cash - Contingency payment set up for $423M, making valuation with contingency $4.23B Breakdown Energy Brands, Inc Revenues: - 2007: $355M - 2006: $106M 2006 Valuation: Tata Sons, Ltd acquired 30% stake for $677M, valuing the company at $2.2B