The Coca-Cola Company (NYSE: KO) was purchased for $25 million in 1919 by a team of businessmen led by Ernest Woodruff. Later that year, Coca-Cola made its initial public offering (IPO) for $40 per share. If you had invested $40 into a single share of Coca-Cola in 1919 during the IPO, your investment would be worth $394,352 today. According to a 2012 proxy statement from Coca-Cola, if you had reinvested dividends, your investment would be worth $9.8 million. This represents a compound annual growth rate (CAGR) of 14.27% from 1919 to 2012. Without dividend reinvestment, your CAGR would be 10.05% from 1919 to 2015.
The Coca-Cola Story
Long before its IPO, Coca-Cola was created in 1886 by an Atlanta pharmacist, Dr. John S. Pemberton. Pemberton's idea would lead to the creation of one of the most iconic brands in American history. Selling for 5 cents per glass, Coca-Cola averaged nine sales per day during its first year. Today, Coca-Cola estimates it delivers 1.9 billion servings per day.
In 1894, the first bottling machinery was installed in Mississippi, which enabled the portability of Coca-Cola. The mass production of Coca-Cola bottling was achieved five years later in Chattanooga, Tennessee. Coca-Cola bottling and the Coca-Cola Company are separate entities. The Coca-Cola Company sells concentrated syrup to bottlers, which produce and distribute the products to consumers. Before its IPO, Coca-Cola had over 1,000 bottling plants. These plants used a variety of bottles and lacked the consistency and uniformity for a large brand. In 1916, bottlers approved the well-known contour glass bottle, which remains a trademarked symbol of the brand today.
Through the years, Coca-Cola has grown into a beverage conglomerate and doesn't just offer carbonated soft drinks these days. Carbonated soft drink sales have declined in the United States over the past 10 years as consumers have turned to healthier options, such as water, teas, juices and energy drinks. Coca-Cola has created, acquired or licensed brands such as Powerade, Minute Maid, Monster, Fuze and Dasani. By diversifying its product selection, the company has continued to provide consumers with options that meet their tastes and desires.
Stock Splits and Dividends
Coca-Cola's stock has split 11 times since its IPO. By splitting the stock, Coca-Cola has consistently kept its share price low enough to attract all levels of investors. An investor who purchased a single share of Coca-Cola in 1919 would now hold 9,216 shares.
Coca-Cola has paid a quarterly dividend since 1920. It is one of only 16 companies in the U.S. that have increased their dividend payments every year for the past 50 years.
Coca-Cola has continued to diversify and expand into emerging markets. As consumer tastes shift, Coca-Cola has proven it can respond to grow and maintain market share. The company has four key global well-being commitments that it has set out to reach by 2020. The first goal is to provide low- to zero-calorie options in each market that it serves. Out of the 400 new beverage options released last year, over 100 were low- to zero-calorie choices. The second goal was to adjust portion sizes, allowing consumers to enjoy high-sugar beverages in moderation. Smaller package sizes are now available in over 200 countries. The third goal includes supporting wellness programs and providing transparent nutritional information on the front of all packages in each market it serves.
Coca-Cola’s final goal is responsible marketing with zero direct advertisements to children under 12 worldwide. Coca-Cola has moved towards direct personal marketing through the use of social media, personalized campaigns and innovation. With a $3 billion annual marketing budget, Coca-Cola can keep growing its share price and provide dividend increases for many years to come.