Coca-Cola Equity Research: Competitive Structure and Valuation

Keshav was assigned Coca-Cola as one of his first independent equity research projects at his current role. The brief was to build a quarterly financial model, conduct economy, industry, and company analysis, and issue a buy, sell, or hold rating.

He started with the standard research process: company website, investor relations filings, and then several years of 10-Ks and multiple quarters of 10-Qs. Within the 10-K, he focused on the financial statements, the MD&A section, and the risk disclosures, reading across multiple years to track whether management's stated plans matched their actual execution.

The most substantive finding came from the competitive structure analysis. Coca-Cola and Pepsi are commonly treated as direct proxies, but Keshav identified a meaningful structural difference: Coca-Cola holds major stakes in its bottling operations, while Pepsi does not. This distinction had direct implications for fixed capital formation, supply chain control, and cost economics. Coca-Cola's higher fixed capital base translated into greater supply chain defensibility and better cost economics over the long run.

For valuation, he ran both DCF and relative valuation, comparing Coca-Cola against peer companies selected on leverage and cash flow ratios. The derived price target was compared against the current trading price to determine the rating.

The project was completed independently, with the final output covering economy, industry, and company layers alongside the quarterly model and rating.