Coca-Cola and many other companies rely on the Federal Reserve to help get the economy moving. Federal Reserve and other countries have injected hundreds of billions of dollars into the banking system. The policy of the federal reserve impacts the Coca-Cola company by ensuring stable prices and employment. Like other companies, the monetary policy of the Federal Reserve is affected by federal funds. “The Federal Reserve Act mandates that the Federal Reserve conduct monetary policy so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates” (Board of Governors of the Federal Reserve System). “Any and all corporations operating within the US market must deal with their regulations of the monetary policy set forth by the United States Federal Reserve Bank, and the Coca-Cola Bottling Company is no exception. Donald Kohn stated that “The financial and economic crisis that started in 2007 tested central banks as they had not been tested for many decades” (Kohn, 2010). Coca-Cola’s economic growth remained steady during the 2008 financial crisis. “As the cola wars spread to other battlegrounds, Coca-Cola Co KO.N has come out ahead of PepsiCo Inc PEP.N, proving it can steal market share and grow even as a financial crisis threatens the global economy” (Geller, 2008). Donald Kohn stated that, “The financial and economic crisis that started in 2007 tested central banks as they had not been tested for many decades” (Kohn, 2010). Coca-Cola’s economic growth remained steady during the 2008 financial crisis.
Geller, M. (2008, October 15). Update 4 Coca-Cola may best Pepsi in weak economy, results
show. Reuters. Retrieved September 22, 2022, from https://www.reuters.com/article/cocacola/update-4-coca-cola-may-best-pepsi-in-weak-economy-results-show-idUSN1520152120081015
Kohn, D. (2010). The Federal Reserve's policy actions during the financial crisis and lessons for
the future. Board of Governors of the Federal Reserve System. Retrieved September 22, 2022, from https://www.federalreserve.gov/newsevents/speech/kohn20100513a.htm
Board of Governors of the Federal Reserve System. (n.d.). Retrieved September 22, 2022, from
Coca Cola is a multinational company (Coca Cola, 2022). It is guided by the policies of the Federal Reserve Bank because it conducts business in the US. The fiscal policy of America influences how Coca Cola conducts business in terms of monetary gains and losses. This is because the actions of Coca Cola that influence its market are affected by the policy.
Economic Growth
The fiscal policy affects Coca Cola both positively and negatively depending on the content of the policy. If the policy dictates more government spending, this results in either taxes being raised or more bonds being sold by the government (Cowen, 2021). Depending on which option is picked, Coca Cola may be forced to pay more for taxes which eventually leads to the final cost being catered for by the consumer. The economic growth of the company is thus negatively affected because that will follow the law of demand. The effect of crowding out is also an effect of increased spending by the government (Cowen, 2021) which negatively affects Coca Cola because of the decrease in consumption of their products.
Effects
The current fiscal policy of the Federal Reserve allows Coca Cola to buy bonds with low interest rates. Following this, the company has been able to increase its ability to pay off its current liabilities and grow their assets (Carmichael, 2021). For the company and its key market, this means that they can carry out business smoothly. The company engages in social projects that help the community (Coca Cola, 2021). By experiencing economic growth, the company is able to engage well with its projects and in turn increase demand from these audiences.
References
Carmichael C. (2021). Understanding Coca Cola’s Capital Structure (KO).
Coca Cola. (2022). 2021 Business & ESG Report. Retrieved from https://www.coca-colacompany.com/content/dam/journey/us/en/reports/coca-cola-business-environmental-social-governance-report-2021.pdf.
Coca Cola. 2022. The Coca Cola System. Retrieved from https://www.coca-colacompany.com/company/coca-cola-system.
Cowen P. (2021). Fiscal Policy.
Hello, I enjoyed ready about the past effects of Federal Reserve Acts. I also did Coca Cola, during my research I came across how taxes can affect Coca Cola. Fiscal policy also includes taxation. Tax rates can be raised or lowered by the government to restrict or stimulate economic activity. Increased taxes reduce people's disposable income, which means they have less money to spend (Heakal, 2016). Tax reductions, on the other hand, increase people's disposable income, increasing their spending power. Increased disposable incomes will positively affect Coca-Cola's sales. As part of his 2016 budget speech, British chancellor George Osborne announced the implementation of a two-tier levy on sugary drinks (Campbell, Smithers, & Butler, 2016). In April 2018, this levy went into effect. At the time, analysts predicted that the move would result in a price increase of six pence to eight pence for a can. As a result of the price increase, consumers will be more likely to purchase non-sugary drinks. The imposition of the tax was expected to have a significant impact on Coca-Cola's business. The tax was not supported by official Den Hollander. In his opinion, an increase in taxes cannot reduce the calorie intake of people (Butler, 2016). As a result of the sugar tax, Coca-Cola Classic volumes declined by 1% in Europe, while Coca-Cola Zero Sugar volumes increased by 18.5%. Because of the variety of products offered by the Coca-Cola Brand, it was able to capitalize on the situation (Arthur, 2018).
Reference
Heakal, R. (2016). What is fiscal policy? Retrieved from. http://investopedia.com/articles/04/051904.asp
Campbell, D., Smithers, R., & Butler, S. (2016). Sugar tax: Osborne’s two-tier levy brings mixed response. Retrieved from https://theguardian.com/uknews/2016/mar/16/budget-2016-george-osborne-sugar-tax-mixed-response
Arthur, Rachel, (2018). Portfolio shift: Sugar tax knocks Coca-Cola Classic: but Zero Sugar up 50% in Great Britain.
HTTPS://WWW.BEVERAGEDAILY.COM/ARTICLE/2018/10/29/SUGAR-TAX-KNOCK-FOR-COCA-COLA-CLASSIC-IN-GREAT-BRITAIN-BUT-ZERO-SUGAR-UP-50
Hey, thank you for your post I enjoyed reading it!! I also done Coca-Cola and I’m learning a lot of interesting things! one thing for sure I believe we can agree on is that Coca-cola can still keep the same price and still be able to come out on top of Pepsi!!! which is surprising to me because Pepsi is a big brand as well
I appreciate the thoughts you shared in your Milestone post for this week! There is no doubt that the actions of the Federal Reserve impact Coca-Cola just as they do every other company throughout the U.S. The purpose of the Federal Reserve Act, and by extension, the Federal Reserve, is to "provide the nation with a safer, more flexible, and more stable monetary and financial system" (Federal Reserve Act, n.d., para. 1). By working to achieve this goal the Federal Reserve provides companies such as Coca-Cola with a solid foundation to run their company without the worries that many companies in other countries have to face in regards to both monetary and financial instability. However, there are definitely some current issues surrounding inflation that are impacting companies such as Coca-Cola today.
Reference:
Federal Reserve Act (n.d.). Board of the Governors of the Federal Reserve System. Retrieved from https://www.federalreserve.gov/aboutthefed/fract.htm
Coca-Cola never continues to disappoint in the economic world. They have a name in the market space which many businesses would love. They hardly even have to push a ton of advertisements and can still come out ahead over Pepsi. Now that we are in post-pandemic recovery, I hope that they continue to thrive for the sake of their business and employees. In addition, although there's a rising cost in inflation, I would be surprised if people stopped purchasing their favorite carbonated drink. Coca-Cola is not just a product, but it is a part of culture. Hence, its economic success during past financial crises.