Strong Points for DPSG: Canada Dry, Snapple & Mott’s

Earnings report bemoans tough environment, struggling CSDs

Published in CSP Daily News

Dr Pepper Snapple Group earnings report bemoans tough environment, struggling CSDs

PLANO, Texas -- Noting “an extremely challenging environment” in the United States, Dr Pepper Snapple Group heralded its small growth in the third quarter as a show of strength while also reiterating its commitment to the TEN lineup of low-calorie line extensions.

“We continue to operate in an extremely challenging environment, with significant pressures in the CSD category now impacting both regular and diet products,” said Larry Young, president and CEO of the Plano, Texas-based company. “Against this backdrop, our teams remained committed to executing our strategy, and we continued to gain volume share while holding value share in the CSD category.”

For the quarter, reported net sales increased 1%, reflecting 3 percentage points of positive mix and pricing, partially offset by a 1% sales volume decline and higher discounts.

Reported income from operations for the quarter was $300 million, including a $1 million unrealized commodity mark-to-market gain. Reported income from operations was $308 million in the prior year period, including $18 million of unrealized commodity mark-to-market gains.

Year-to-date, reported net sales increased 1% and reported income from operations was $782 million, including $13 million of unrealized commodity mark-to-market losses. Reported income from operations was $800 million in the prior year period, including $18 million of unrealized commodity mark-to-market gains.

“We’ve continued to invest in our brands for their long-term success, and I’m encouraged at this early date with the performance of our Core 4 TEN platform as research tells us that it is bringing consumers back to the category,” Young said. “With our portfolio of consumer-loved brands, our strong execution focus and our continuous improvement mindset, I am confident we can deliver our profit goals for 2013.”

In CSDs, Dr Pepper volume decreased 1%, as the CSD category continued to face significant headwinds. The company’s Core 4 brands, which include TEN, were flat as a high-single digit increase in Canada Dry was offset by mid-single digit declines in 7UP and Sunkist soda and a low-single digit decrease in A&W. Peñafiel increased double-digits, and Crush and Sun Drop both experienced high-single digit declines. Fountain foodservice volume was flat, cycling 2% volume growth in the prior year period.

In noncarbonated beverages, Hawaiian Punch volume declined 6%. This decline was partially offset by a 4% increase in Snapple and a 1% increase in Mott’s.