Economic Impact

Estimates of Marketing, Economic and Population Impact on TCCC Sales

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Economic Impact on TCCC Volume

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

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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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%Change over Year Ago

+10.0% -10.0% +0.0% +5.0% -5.0%
United States Mexico Brazil Japan Germany Philippines China Spain Argentina Great Britain South Africa Canada Italy France Australia Venezuela Turkey Chile Colombia Thailand Nigeria India Russia Korea Belgium

Top 25 TCCC Countries Real RGDP Change

2d Quarter 1999 vs 2d Quarter 1998

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%Change over Year Ago

+10.0% -10.0% +0.0% +5.0% -5.0%
United States Mexico Brazil Japan Germany Philippines China Spain Argentina Great Britain South Africa Canada Italy France Australia Venezuela Turkey Chile Colombia Thailand Nigeria India Russia Korea Belgium
September 1999 IMF Forecast

Top 25 TCCC Countries Real RGDP Change

Full Year 1999

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World Economic Scenarios

WEAK Rest of World STRONG US Recession early 2000 leads to: Soft Landing for US Economy Lower US Demand for imports Improving foreign economies:
Relapse in Emerging Markets Lower world commodity prices
Increased demand for US Exports Lower US Current Account Deficit

WEAK

US

Intensifies Recession in Latin America, hinders recovery in Africa

US Bubble continues to build:
Higher Stock Prices Low Savings Rate High Current Account Deficit Increasing inflationary threat

Leads to sustainable growth beyond 2001

US Bubble Intensifies
Rising Commodity and Bond Prices Sharp increase in inflation Dramatic increase in US interest rates Lower capital flows into emerging markets

STRONG

US Downturn late 2000/early 2001

Latin America especially vulnerable

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Economics:
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

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World Economic Forecast

Real GDP Growth Rates Per DRI Forecast
+7.0%

+6.0%

+5.0%

+4.0% MAFE +3.0% . +2.0% L. America N. America Africa Europe +1.0%

+0.0%

-1.0%

-2.0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

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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 overall economic 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 12 3 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 38 20 Thailand 29 21 Nigeria 60 22 India 15 23 Russia 11 24 Korea 13 25 Belgium 20

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Index USA=100
100.0 120.0 20.0 40.0 60.0 80.0 0.0

Japan United States Germany France Belgium Great Britain Australia Canada Italy Spain Argentina Korea Chile Brazil Mexico Venezuela South Africa Russia Turkey Colombia Thailand Philippines China India Nigeria
Per Capita GDP Per Cap

Real GDP per Capita vs TCCC 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 than would be expected based on GDP.

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TCCC Unit Cases vs Real GDP

500 450 400
Mexico
Size of Circle Indicates Relative Size of TCCC Unit Case Volume
Income Adjusted Per Cap Cons > 2x US Income Adjusted Per Caps > 70%<2x US Income Adjusted Per Cap Con LT 70% of US

USA

Per Capita Consumption

350 300 250

Venezuela Chile Australia Argentina Spain Belgium

200 150 100 50 (50) -5

Germany Canada GB Japan

S. Africa Philippines

Brazil
Colombia Thailand Nigeria India China Turkey Russia Korea Italy France

15

25

35

45

Real GDP per Capital - Thousand 1997 US$

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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

12% 10% 8% 6% 4% 2% 0%
1991 1992 1993 1994 1995 1996 1997 1998
Case % Growth Real GDP %

4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0%

TCCC Worldwide Case Growth Worldwide GDP % Real Growth

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Historical and DRI Estimated Real GDP Growth Rates

Worldwide Growth % Real GDP

4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0%

1991 1992 1993 1994 1995 1996 1997 1998 1999F 2000F 2001F
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3.6% 3.1% 2.7%

3.5% 3.2% 2.8% 2.1% 2.2%

1.9% 1.5% 1.1%

Cross Division Case Impact of +1.0% Change in Real GDP

Col Nor dic Ind ia Mid B ra eas zi l t No rt Phi h Afr lipp ine s CA Car ib Ib Riv erian er P late Me xic And o e S ou th A an fric S EW a As i a Chi n S a Cen Euras ia tral E Nor urope th A fr Ger ica NW many Eur ope SP acif J ap an NA mer i ca Ven e

Divisions more sensitive to economic changes

% impact case sales

0.0

0.5

1.0

1.5

2.0

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2.5

TCCC Annual Case Growth Contributions

12% 9% 6% 3% 0% -3% +2.3%
Marketing Effects Economic Effects Population Effects
Annual % Case Growth Contribution

19 99 E

19 91

19 92

19 93

19 94

19 95

19 96

19 97

19 98

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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
60% 50% 40% 30% 20% 10% 0%
Marketing Effects Economic Effects Population Effects
Cum. % Case Growth Contribution

19 99 E

19 91

19 92

19 93

19 94

19 95

19 96

19 97

19 98

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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
TCCC total case contributions and variances - B

500 400 300 200 100 0 -100 -200 -300 -400 Population Economic Marketing 1998 1999 Variance

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Estimated Average Contribution to Growth 1999 by TCCC Division

200 150 100 50 0 -50 -100
Am er ica Ja pa n S P N W acif Eu N or rop e th Af G er r m ica a Ce n nt y D ra l E iv ur S. ope Eu ra Ch s ia in a SE Div W So As ut h ia Af ric a An M de a ex n ico D R i iv er v Pl at e Ib er C ian Ph A C ili pp arib in e M sD id e a iv st /N A Br az il In di a N or d Ve ic ne Co l
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+/- B Cases Divisions to the right tend to be more sensitive to economic changes

Marketing Effects Economic Effects Population Effects

Over time, there is a relationship between our derived marketing contribution and CSD share trends
6% 5% 4% 1.5% 3% 1.0% 2% 1% 0% 0.5%
% Marketing Contribution Worldwide TCCC CSD Share Variance

2.5%

Corr. = 71%

2.0%

TCCC Marketing Contribution % TCCC Share Var CSD

0.0%

1991 1992 1993 1994 1995 1996 1997 1998

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Variance in Derived Marketing Contribution v. CSD Share by Division, 1998: negative marketing contributions generally translate to a reduction in category share of sales.

10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -6%

Pt. Chg. Marketing Contribution

-4%

-2%

0%

2%

4%

6%
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Pt. Chg CSD Share (Industry Estimates)

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
3.00% 2.60% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 200F 2001F 2.10% 1.80% 1.20% 0.80% 0.60% 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 ~ 32 B Cases
12% 9% 6% 3% 0% -3%
Annual % Case Growth Contribution

+9.3% +8.0% +7.1% Marketing Economic Population

20 01 F

20 03 F

20 05 F

19 99 E

20 07 F

19 91

19 93

19 95

19 97

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TCCC Cumulative Growth Projections: to reach 32 B cases by 2007, marketing contributions must increase
~ 32 B Cases

140% 120% 100% 80% 60% 40% 20% 0%

Cum. % Case Growth Contribution

Assuming historical marketing contribution ~ 27 B Cases

Marketing Economic Population

20 01 F

20 03 F

20 05 F

19 99 E

20 07 F

19 91

19 93

19 95

19 97

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IX. Summary and Implications: Looking to 2007 and 32 B Cases

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
World Average /Year 1991-98 +2.4% 21% 35% 44% 1999 to 2007 Economic Growth Assumptions/Yr. Best Case Most Likely Worst Case +3.5% +2.4% +1.6% 15% 15% 15% 38% 30% 26% 47% 55% 59%

Annual Economic Growth -> Share of Population Contribution Share of Economic Contribution Share of Marketing Contribution

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
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IX. Summary and Implications: Looking to 2007 and 32 B Cases

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:
1988 to 98 1998 to 2007 TCCC Average Industry Share Increase per Year

+ 0.2%

+ 0.4%

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
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Worldwide Non-Alcoholic RTD Beverages Historical and Forecast Volume

250,000 200,000 150,000 100,000 50,000

1987

1989

1991

1993

1995

1997

1999F

2001F

2003F

2005F

2007F
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TCCC Worldwide Share of Non-Alcoholic RTD Beverages

14% 12% 10% 8% 6% 4% 2%

6.8% 9.2%

13.5%

1987

1989

1991

1993

1995

1997

1999F

2001F

2003F

2005F

2007F
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0%

IX. Summary and Implications: Looking to 2007 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 takeaways 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 23% 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 to have 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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