Coca Cola 2007 Annual Report Download - page 18

Unfavorable general economic conditions in the United States or in other major markets could negatively impact
our financial performance.
Unfavorable general economic conditions, such as a recession or economic slowdown in the United States or in
one or more of our other major markets, could negatively affect the affordability of and consumer demand for some of
our beverages. Under difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing
purchases of our products or by shifting away from our beverages to lower-priced products offered by other companies.
Softer consumer demand for our beverages in the United States or in other major markets could reduce the Coca-Cola
system’s profitability and could negatively affect our financial performance.
Unfavorable economic and political conditions in international markets could hurt our business.
We derive a significant portion of our net operating revenues from sales of our products in international markets.
In 2007, our operations outside of the United States accounted for approximately 74 percent of our net operating
revenues. Unfavorable economic and political conditions in certain of our international markets, including civil unrest
and governmental changes, could undermine consumer confidence and reduce the consumers’ purchasing power,
thereby reducing demand for our products. In addition, product boycotts resulting from political activism could reduce
demand for our products, while restrictions on our ability to transfer earnings or capital across borders that may be
imposed or expanded as a result of political and economic instability could impact our profitability. Without limiting
the generality of the preceding sentence, the current unstable economic and political conditions and civil unrest and
political activism in the Middle East, India or the Philippines, the unstable situation in Iraq, or the continuation or
escalation of terrorist activities could adversely impact our international business.
Changes in commercial and market practices within the European Economic Area may affect the sales of our
products.
We and our bottlers are subject to an Undertaking, rendered legally binding in June 2005 by a decision of the
European Commission, pursuant to which we committed to make certain changes in our commercial and market
practices in the European Economic Area Member States. The Undertaking potentially applies in 27 countries and in
all channels of distribution where certain of our sparkling beverages account for over 40 percent of national sales and
twice the nearest competitor’s share. The commitments we and our bottlers made in the Undertaking relate broadly to
exclusivity, percentage-based purchasing commitments, transparency, target rebates, tying, assortment or range
commitments, and agreements concerning products of other suppliers. The Undertaking also applies to shelf space
commitments in agreements with take-home customers and to financing and availability agreements in the on-premise
channel. In addition, the Undertaking includes commitments that are applicable to commercial arrangements
concerning the installation and use of technical equipment (such as coolers, fountain equipment and vending
machines). Adjustments to our business model in the European Economic Area Member States as a result of these
commitments or of future interpretations of European Union competition laws and regulations could adversely affect
our sales in the European Economic Area markets.
Litigation or legal proceedings could expose us to significant liabilities and damage our reputation.
We are party to various litigation claims and legal proceedings. We evaluate these litigation claims and legal
proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential
losses. Based on these assessments and estimates, we establish reserves and/or disclose the relevant litigation claims or
legal proceedings, as appropriate. These assessments and estimates are based on the information available to
management at the time and involve a significant amount of management judgment. We caution you that actual
outcomes or losses may differ materially from those envisioned by our current assessments and estimates. In addition,
we have bottling and other business operations in emerging or developing markets with high-risk legal compliance
environments. Our policies and procedures require strict compliance by our associates and agents with all United States
and local laws and regulations applicable to our business operations, including those prohibiting improper payments to
government officials. Nonetheless, we cannot assure you that our policies, procedures and related training programs
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