Reading an Annual Report - Part 1

The annual report. The 10-K. Where the juicy bits - good and bad - about a company are divulged. In the last post, I mentioned that the best place to find these reports is EDGAR.

For the purpose of this exercise, I'm going to review the Coca-Cola annual report, but because they all have more or less the same structure, you can pick a company that you like.

Like any good document, the first thing that you see is a table of contents. You'll note that the document is broken up in to 4-parts. Part 1 should be the most important if you are in sales, marketing, customer success, or any position where you need to engage with the client.

Part 1 is made up of a description of the business, risk factors that the company might face moving forward, competition, what makes the business unique, and the key executives in the company.

It is simple to think about Coca-Cola as just a company in Atlanta that makes some sugar water, but let's take a look at the General description of the business and what might be important there. First, Coca-Cola sells a ton of drinks, but it only amounts to 3% of the total global beverage market. There is a lot of upside. Just getting a 0.5% increase in marketshare is billions of dollars. What can you do to help there?

Second, in the third paragraph, you get a view of how they believe that they are going to sell more:

We believe our success depends on our ability to connect with consumers by providing them with a wide variety of beverage options to meet their desires, needs and lifestyles. Our success further depends on the ability of our people to execute effectively, every day.

I love beliefs because they are very difficult to change. Right on the first page, from the CEO & Chairman, here is what the company believes what they need to be successful. Quite simply, people need to buy our stuff and our employees need to be effective. This is kind of the mantra of every company, but that message is passed down to every employee. If you're talking to someone that doesn't have these beliefs, you're talking to the wrong person.

Every account plan, conversation, QBR, outreach, that you have with Coca-Cola needs to tie in to one of these two things. They even follow up with:

Our objective is to use our Company’s assets — our brands, financial strength, unrivaled distribution system, global reach, and the talent and strong commitment of our management and associates — to become more competitive and to accelerate growth in a manner that creates value for our shareowners.

Coca-Cola comes right out and says that they will spend money (financial strength) to be more competitive and grow the business.

The second part of the Coca-Cola 10-K provides a high level overview of the operating segments of the company. Coca-Cola is a global business. This becomes apparent not only annually when Forbes releases their 'Most Popular Brands' list, but if you ever travel anywhere on the planet, Coca-Cola and Pringles seem to be ubiquitous.

If you are having conversations with Coca-Cola, you have to think about what the global impact is going to be. Is whatever you're selling relevant to these other regions? Will it work in languages? Is it a competitive advantage for you if you're international? What influence do these regions have in making the decision? What is the bottling investments group (Hint: CTRL-F)?

Okay, we are only one the first page and already there are a ton of talking points. If you're following along with Coca-Cola or some other public company, pick up the phone and call them and have a conversation about some of these things. Ask them about how they are capturing more market share? Ask them about what the company is doing to 'execute effectively, every day'. Ask them about international expansion and how, after 9-months is the Costa Coffee integration going.

These are real conversations. I bet if you had this conversation with 5 - 6 people inside of your account, you'd start to come away with a much different lens on the business and you'd have a foundation for a much stronger relationship.

Go ahead, I'll wait until tomorrow to go over the Product & Brands section. In the meantime, let me know your experience in reading annual reports to become better educated about your customers.