Dr Pepper: 'Diet is taking us down'

by Monica Watrous    View Me on Google+
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Dr Pepper's TEN platform is part of the beverage maker's efforts to overcome steep declines in diet drinks.

 

PLANO, TEXAS — As the joke goes, “diet” is a four-letter word — and one that has particularly plagued soft drink makers over the past year as consumers shift away from sugar-free sodas. For Dr Pepper Snapple Group, Inc., diet drinks dragged down sales volume during the company’s second quarter.

“Diet is taking us down,” said Larry Young, president and chief executive officer, during a July 24 call with financial analysts to discuss earnings. “We're all over it, we're really digging deep into it, and we have programs for the second half that we think are really going to take this on. We have some specific programming we're doing, but also tying our diets into our (college football promotional) program. The team is very confident, our bottling partners are very confident that Dr Pepper, the brand strengths are good, the fountain food service numbers are good, and as we address this diet situation, we'll be able to get Dr Pepper volumes back up where they're used to.”

The company has experimented with alternative sweeteners and mid-calorie beverages, such as TEN, which contains 10 calories per can and is sweetened with a combination of high-fructose corn syrup and aspartame.

“Our TEN platform continues to drive incremental consumer occasions, bringing lapsed users back into the category with its great taste and full mouth feel, for only 10 calories per can,” Mr. Young said. “And we're currently testing naturally sweetened C.S.D.s, for consumers who are looking for a lower-calorie option without artificial sweeteners. Our naturally sweetened C.S.D.s contain real sugar and stevia, and are 60 calories per 12-ounce can.”

Smaller formats are another option Dr Pepper is exploring. Both the Coca-Cola Co. and PepsiCo, Inc. recently reported double-digit growth in scaled-down soft drink sizes, which offer a solution for consumers looking for lower-calorie options while avoiding artificial sweeteners.

“I think the biggest thing is giving our consumer choice,” Mr. Young said. “They have a broad choice of the packages, and it also helps in the calorie intake.”

Net income for the second quarter ended June 30 increased to $210 million, equal to $1.07 per share on the common stock, up 35% from $155 million, or 76c per share, in the prior-year period.

Net sales rose 1% to $1,631 million from $1,611 million, driven by a lift in sales volume, favorable product and package mix and pricing that were offset partly by higher discounts and unfavorable foreign currency.

“As consumers’ needs and preferences continue to evolve, we're ensuring that we're meeting their needs with a portfolio of products,” Mr. Young said. “Our R.&D. team continues to make progress in the sweetener development area, though we've said before that there is no magic bullet, and this will be an evolution that occurs over time.”
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