Dr Pepper Snapple bets on TEN

by Monica Watrous
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PLANO, TEXAS — In a challenged carbonated soft drink market, the Dr Pepper Snapple Group is counting on TEN.

The mid-calorie soft drink platform, which performed to expectations during the company’s third quarter, has become a strategic priority for 2014.

“We believe this platform is critical because it addresses the caloric intake concerns of consumers who prefer regular C.S.D.s but do not want the added calories,” said Larry Young, president and chief executive officer, during an Oct. 23 earnings call with analysts.

Lately, a steep decline in diet soft drinks has pressured Dr Pepper Snapple and its competitors.

“I think a lot of it is just a misperception of aspartame,” Mr. Young said. “Aspartame is one of the most tested sweeteners on the market, and there’s never been anything found on it. The F.D.A. has proven that there is nothing wrong. You have people talking about it causing Alzheimer’s, it makes you want to eat more, will increase obesity. Social media has stepped it up even more than what it was before. I think that’s a headwind we have to fight there. We’ve got to do a better job of educating people with the fact, with the science, instead of hearsay.”

He said soft drinks in the TEN line offer a similar mouthfeel and taste of a sugared beverage but with 10 calories per serving. Citing research from Nielsen Homescan, he said the product is attracting lapsed consumers and occasions back to the category.

“It takes a long time to change people’s consumption habits,” Mr. Young said. “We are going to stay behind it and see if we can’t kind of pickup some of this decline in diet.”

For the third quarter ended Sept. 30, net income climbed to $207 million, equal to $1.02 per share on the common stock, from $179 million, or 85c per share, during the same period in fiscal 2012. Net sales increased slightly to $1,543 million from $1,528 million last year, reflecting positive mix and pricing gains offset by a sales volume decline and higher discounts. Productivity improvements and lower costs associated with benefit programs offset commodity inflation, particularly for sweeteners.

“I can tell you this, on our R.&D. team and on the pipeline for innovation, the major focus there is how do we get into more non-carbs, how do we get into more better for you?” Mr. Young said. “For the C.S.D.s, the sweetener, how do we come up with the sweetener? I think the entire industry is working on to help us eliminate these diet declines. We’re very aware of that and will continue to look at it work. I believe you will see that we’ll be starting to drive most of our growth in that. We’ve got our sparkling C.S.D.s and carbonated waters coming out after the first of the year. We think that’s going to do a lot for us. We see that category doing well, but we’ll stay very focused on it.”
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