Coca-Cola's market share increased from 17.3 percent to 17.8 percent during the past decade. That might not seem like much, but one share point equals 1 percent of market sales, so half a share point represents $405 million. Pepsi's market share decreased from 10.3 percent to 8.4 percent during the same period, a loss of 1.9 share points or $1.5 billion. Many marketers budget an upcoming year's advertising expenditures using a percentage of sales method based on past or projected sales. The industry average advertising expenditure-to-sales ratio for beverages is 4.1 percent of sales. Here are the worldwide advertising expenditures and sales revenues for the two competitors. All numbers are in billions of dollars.

Calculate both companies’ advertising-to-sales ratios for the years. What is each company’s average ratio over the five-year period? Refer to the percentage-of sales method in the chapter to learn about this method.

Transcribed Image Text:

Year 2017 2018 2019 2020 2021 Coca-Cola Advertising $2.40 $2.90 $3.00 $3.00 $3.50 PepsiCo Sales Advertising $63.53 $3.96 $64.66 $4.00 $67.16 $4.25 $70.37 $2.78 $79.47 $4.10 Sales $35.41 $31.86 $37.26 $33.01 $38.66