New Credit Rating: Coca-Cola Company

Morningstar is initiating credit coverage of The Coca-Cola Company with an issuer rating of AA-, in line with our rating for Cola War foe PepsiCo . Coke's control over syrup prices (and in some cases retail prices) means that it holds the aces in its bottler relationships and is able to keep the lion's share of economic rents generated by the Coke system as a whole. PepsiCo's much-ballyhooed bottler consolidation is changing the competitive landscape in North America. If Pepsi can demonstrate a competitive advantage in its route to market, Coke may be forced to follow suit. That said, we believe such an undertaking would diminish Coke's creditworthiness only marginally.

Indeed, we expect to Coke to generate strong operating margins and enviable free cash flow regardless of its downstream ambitions. On a stand-alone basis, we expect cash plus cash generation to cover cash commitments 3.9 times over the next five years (Morningstar's Cash Flow Cushion ratio), and to cover total debt (including maturities beyond 2013) 3.1 times. Adding Coca-Cola Enterprises' cash flows to the picture diminishes our coverage estimates to 2.5 times and 1.3 times respectively, in effect, making Coca-Cola look a whole lot more like PepsiCo. A quick glance at traditional credit relevant ratios suggests a similar picture: Debt-to-book capital swells from 0.39 to 0.62 and pro forma 2009 EBTIDA-to-interest coverage diminishes from 25.9 to 9.7 (all ratios adjusted for debt-like commitments such as pensions).

Notably, Coke's cash flow cushion under either scenario is somewhat thinner than that projected for our typical AA minus-rated issuer. However, given the company's incredibly low cash flow variability (EBITDA margin has averaged 30% for a decade, varying by no more than a percentage point from year-to-year), these seemingly modest ratios are much more robust than they might otherwise appear and, in our view, afford debt investors a sufficient margin of safety. From a methodological perspective, we capture Coke's low cash flow variability in the more qualitative Business Risk component of our credit rating. Here, Coke scores extremely well, owing to a demonstrable economic moat and very low sensitivity to the economic cycle.

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The Coca-Cola Company, TechnoServe and the Gates Foundation Partner to Boost Incomes of 50,000 Small-Scale Fruit Farmers in East

The Coca-Cola Company, nonprofit TechnoServe, and the Bill & Melinda Gates Foundation today launched a partnership to enable over 50,000 small fruit farmers in Uganda and Kenya to increase their productivity and double their incomes by 2014.

This four-year, $11.5 million partnership will enable mango and passion fruit farmers to participate in the Company's supply chain for the first time. With a $7.5 million grant provided by the Gates Foundation to TechnoServe, $3 million provided by The Coca-Cola Company, and $1 million by bottling partner Coca-Cola Sabco, the project aims to create new market opportunities for local farmers whose fruit will be used for Coca-Cola's locally-produced and sold fruit juices. As the implementing partner, TechnoServe will train participating farmers in improving quality, increasing production, getting organized into farmer groups, and will facilitate access to credit.

"This partnership is a great example of sustainability. By partnering with tens of thousands of local farmers, we can help increase their incomes while meeting our needs for locally sourced fruit, benefiting both the community and our business," says Nathan Kalumbu, Coca Cola's East & Central Africa business unit president.

As global and local demand for fruit juice grows, there is a critical need to increase production. Small farmers can benefit from this increased demand by supplying fruit that meets the needs of local buyers such as Coca-Cola. Through this partnership, farmers who were previously unable to access this market opportunity will be provided with the tools to do so. This partnership will also serve as a model for Coca-Cola as it grows its juice business in other markets and has been designed to be easily replicated.

"This partnership is the type of innovative approach needed to foster economic empowerment across the globe and we are proud to be a part of this effort in East Africa," says Muhtar Kent, Chairman and CEO of The Coca-Cola Company. "We and our partners the Gates Foundation and TechnoServe believe that investing in farmers is a proven strategy to reduce poverty and build sustainable communities."

"Empowering small farmers to increase productivity, improve crop quality and access reliable markets is critical to addressing global hunger and poverty," says Sylvia Mathews Burwell, president of the Global Development Program of the Bill & Melinda Gates Foundation. The foundation has committed more than $1.4 billion, focused on Sub-Saharan Africa and South Asia, to strengthen the entire agricultural value chain--from seeds and soil to farm management and market access--so that progress against hunger and poverty is sustainable over the long term. "Partnerships like this provide farmers with the tools and resources that can help revitalize African agriculture and increase opportunities for small farmers so they build better lives for themselves and their families."

TechnoServe's implementation of this partnership will build on a track record of similar partnerships underway across Africa including banana, cashews, cocoa and coffee. They will ensure that sustainable environmental and social standards are embedded into the program at the farm level.

"We are honored to be a part of this innovative collaboration as it represents a significant step forward for private sector development in Africa," says TechnoServe President and CEO Bruce McNamer. "This investment will drive momentum toward reducing poverty across Africa by helping entrepreneurial farmers connect to markets and get the support they need."

This project will be implemented in close collaboration with the governments of Kenya and Uganda, given its significance in the context of their poverty reduction strategies. It is intended to produce lasting benefits for participating farm communities, enabling them to benefit from improved livelihoods for many years to come.

About The Coca-Cola Company

The Coca-Cola Company is the world's largest beverage company, refreshing consumers with nearly 500 sparkling and still brands. Along with Coca-Cola, recognized as the world's most valuable brand, the Company's portfolio includes 12 other billion dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid and Georgia Coffee. Globally, we are the No. 1 provider of sparkling beverages, juices and juice drinks and ready-to-drink teas and coffees. Through the world's largest beverage distribution system, consumers in more than 200 countries enjoy the Company's beverages at a rate of nearly 1.6 billion servings a day. With an enduring commitment to building sustainable communities, our Company is focused on initiatives that protect the environment, conserve resources and enhance the economic development of the communities where we operate. For more information about our Company, please visit our website at www.thecocacolacompany.com.

About TechnoServe

TechnoServe is a leader in a movement that empowers people in the developing world to build businesses that break the cycle of poverty. Growing enterprises generate jobs and other income opportunities for poor people, enabling them to improve their lives and secure a better future for their families. Since its founding in 1968, the U.S.-based nonprofit has helped to create or expand thousands of businesses, benefiting millions of people in more than 30 countries. The Financial Times has rated TechnoServe one of the top five NGOs for corporate partnerships. TechnoServe's corporate partners include Cargill, Kraft, Nestle-Nespresso, Olam International, Peet's Coffee & Tea and Unilever, among others. Charity Navigator has also awarded its highest Four Star ranking to TechnoServe. For more information about our organization, please visit our website at www.technoserve.org.

About the Bill & Melinda Gates Foundation

Guided by the belief that every life has equal value, the Bill & Melinda Gates Foundation works to help all people lead healthy, productive lives. In developing countries, it focuses on improving people's health and giving them the chance to lift themselves out of hunger and extreme poverty. In the United States, it seeks to ensure that all people -- especially those with the fewest resources -- have access to the opportunities they need to succeed in school and life. Based in Seattle, Washington, the foundation is led by CEO Jeff Raikes and Co-chair William H. Gates Sr., under the direction of Bill and Melinda Gates and Warren Buffett.

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China Education Resources Partners With the Coca-Cola Company

China Education Resources Inc. announced that it has launched a joint promotional campaign in China with Coca-Cola Company ("Coke") promoting Qoo, a non-carbonated beverage developed by Coke targeted at the youth market.

Coke has distributed 100,000 promotional packages in the Beijing area each consisting of a large bottle of Qoo and a CD from CER which contains 10 short English courses developed by CER and a link to CER's education services portal ("ESP"), through which the user will have access to a number of online tutoring courses and a memory game to help students learn English, both of which will be free initially but will require the user to pay after a certain period. The CD also contains an invitation to visit the CER offices in Beijing to take an English language assessment examination.

C.F. Zhou, Chairman and CEO, said, "We are very proud of our new association with Coke, one of the most recognized companies in the world. This gives us tremendous credibility and to the best of my knowledge, CER is the only online education company in China to be involved in any promotional efforts with Coke. Over the last several years, CER has developed a strong national reputation as a company which provides leading edge, high quality products in the K to 12 area. This is a win/win situation for both companies. Coke believes that an association with a well known education company will help promote the sales of Qoo. We believe that Coke's market penetration and distribution capabilities will open new doors for us, as evidenced by the fact that the Qoo promotional packages have now appeared in Wal-Mart stores around Beijing. While it is too early to gauge the commercial success of this new venture, I feel that an association with Coke will greatly increase our exposure in the marketplace and do nothing but benefit our shareholders. We will keep shareholders updated."

ABOUT CHINA EDUCATION RESOURCES INC.

In collaboration with China's various education authorities and experts, China Education Resources Inc. ("CER") is helping to transform the curriculum of the world's largest educational system. Recognizing the need for centralization and increased accessibility to address the Chinese Central government's 2000 education reform policy changes, CER has created educational tools and curricula for China's entire kindergarten through twelfth grade system. By implementing the government's goal of converting the existing educational system from memory-based learning to creative thinking and utilizing a more interactive approach to embrace a world-based economy, CER has played an integral part in positioning China's educational system to reach new heights.

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Coca-Cola 'Freestyles' A Smarter Soda Machine

The Coca-Cola Company has launched a Twitter and Facebook page to bring awareness to a new soft drink dispenser that relies on radio frequency identification (RFID) technology. It has begun to test in the southern California market at a variety of restaurants, such as Carl's Jr., El Pollo Loco, Jack in the Box, and Subway. The smart-machine collects extremely detailed information about drink choices (the dispenser can mix up to 100 different soft drinks) and continually relays it to the company -- the Terminator of vending machines.

The Facebook fan page has more than 1,000 members since the launch at the end of July. Social media will drive traffic to participating outlets.

Coca-Cola Freestyle, the brand name for the fountain dispenser, dispenses more than 100 beverage brands from one unit. While it took more than four years to plan, the platform's design taps RFID technology from Seattle, Wash.-based Impinj.

Monza tag chips and Indy reader chips provide the core RFID capability for the system. It uses RFID to monitor, track and maintain dispenser operations as well as to provide real-time business analytics about product consumption and preferences.

There are 15 dispensers on the market. The network will include 75 by the end of September. Each unit will connect to the Internet and talk back and forth to the main system.

Coke Smart, will let customers who use the machine in their store order from an e-commerce site on the Internet. Coca-Cola also can download new recipes direct to the machine.

Freestyle will let Coca-Cola test new drink flavors, such as adding various vitamin combinations to flavored waters and juices. The dispensers contain 30 flavor cartridges tagged with RFID that mix up 100 different drink combinations. Each dispenser unit contains an RFID reader. The dispensers collect data on customer choice. The systems will collect data on sales, which in turn will give marketers information on where to best market specific products.

Coca Cola's Bioplastic PlantBottle Coming Later this Year

The Coca-Cola Company recently took the first steps to eventually introduce bottles made with materials that are 100 percent recyclable and renewable. Company's new PlantBottle is due sometime later this year in select markets holding their Dasani brand bottled water and sparking brands.

Coke's Vitaminwater is expected to follow - being packaged in the PlantBottle sometime next year. The PlantBottle is currently made through an innovative process that turns sugar cane and molasses, a by-product of sugar production, into a key component for PET plastic. Manufacturing the new plastic bottle is more environmentally efficient as well. A life-cycle analysis conducted by Imperial College London indicates the PlantBottle with 30 percent plant-based material reduces carbon emissions by up to 25 percent, compared with petroleum-based PET. According to the company, another advantage to the PlantBottle is that, unlike other plant-based plastics, it can be processed through existing manufacturing and recycling facilities without contaminating traditional PET.

Consumers can identify the innovative bottles through on-package messages and in-store point of sale displays. Web-based communications will also highlight the bottles' environmental benefits.

Coca Cola faces a challenge with its new bottle concept from the recycling industry who have long been concerned about contamination from bio and other types of plastics. Industry groups are concerned the current recycling system in the US is not equipped to adequately handle bio plastics.