Coca Cola 2003 Annual Report Download - page 26

help to enhance awareness of and increase consumer preference for our brands. Greater awareness and
preference promotes long-term growth in profitable volume, per capita consumption and our share of worldwide
nonalcoholic beverage sales.
Our Company articulates its mission as a promise: Our Company exists to benefit and refresh everyone it
touches. More specifically, through our actions we strive every day to provide quality in the marketplace, enrich
the workplace, preserve the environment and strengthen our communities. Building upon the foundation of our
promise, we focus on the six strategic priorities discussed in Item 1 of this report.
Value Drivers of Our Business
We believe that executing our six strategic priorities creates value. Consistent with a commitment to
effective execution, our Company focuses on three key value drivers:
• profitable growth;
• cost management; and
• efficient capital structure.
Profitable Growth. We believe healthy brands—properly supported by marketing and innovation, leveraged
across markets and targeted to a broad consumer base—drive profitable growth. Our Company continues to
broaden our family of brands. In particular, we are expanding and growing our noncarbonated offerings to
provide more alternatives to consumers. With this expansion and growth, our Company is focused on
maintaining or increasing profit margins. We further intend to focus on improving margins in faster growing but
lower-margin countries. To manage this expansion and growth, we are shifting from a volume focus to a ‘‘volume
and value’’ focus. The added emphasis on value focuses on gross profit and profit before taxes. To support this
shift, beginning in 2003 our compensation incentives emphasize gross profit, profit before income taxes and net
income instead of unit case volume. We believe that tailored brand, package, price and channel strategies help
achieve profitable growth. We are implementing these strategies and accelerating profitable growth through
close alignment with our bottling partners.
Cost Management. A principal focus of cost management will continue to be on supply chain initiatives. Over
the past year in North America, Japan and China, the Coca-Cola System established supply chain management
companies to help increase procurement efficiencies and to centralize production and logistics operations.
Lowering supply chain costs improves system economics. Alignment with all bottlers, including ways to achieve
additional joint savings, represents a critical area of focus.
Cost reduction is another key initiative. One key area of focus, for example, is to decrease over time general
and administrative costs as a percentage of net operating revenues. In 2003, we took steps to streamline and
simplify our operations. Refer to Note 17. As a result of these streamlining initiatives, apart from the charge to
2003 earnings of $561 million, we estimate that the Company’s financial results benefited by approximately
$50 million (pretax) in 2003 and will benefit by at least $100 million (pretax) on an annualized basis beginning
in 2004.
Efficient Capital Structure. Our capital structure is intended to optimize our cost of capital. We believe our
strong capital position, our access to key financial markets, our ability to raise funds at a low effective cost and
our overall low cost of borrowing provide a competitive advantage.
As our cash flows increase, we expect to increase our share repurchases. Furthermore, dividends increased
for the 42nd straight year in 2004, and we believe that for the foreseeable future, our Board of Directors intends
to increase our dividends. Refer to MD&A heading ‘‘Financial Strategies and Risk Management.’’
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