Dr Pepper sets sights on delivering 'a balanced lifestyle'

by Eric Schroeder
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PLANO, TEXAS – The ability to deliver innovation that gives consumers options to help them live a balanced lifestyle led to strong fiscal 2014 performance at Dr Pepper Snapple Group, Inc. Net income in the year ended Dec. 31, 2014, totaled $703 million, equal to $3.59 per share on the common stock, up 13% from $624 million, or $3.08 per share in fiscal 2013.

Net revenues for the full year also improved, rising 2% to $6,121 million from $5,997 million.

“I am proud of our strong performance in 2014,” Larry Young, president and chief executive officer, said during a Feb. 12 conference call with analysts. “We continued to operate in a competitive environment with continuing headwinds against C.S.D.s (carbonated soft drinks), particularly diets. And yet our teams remained focused on our strategy and delivered solid results against our key priorities.”

Mr. Young said Dr Pepper was able to connect and engage with consumers through its football and 7UP electronic dance music (EDM) programs, and also delivered innovation with the national launches of Canada Dry and Schweppes sparkling waters, and test-market introduction of naturally sweetened C.S.D.s.

“This year we’re expanding the test of naturally sweetened C.S.D.s to three key regional markets and launching Snapple Straight Up Tea, a new line of unsweetened and slightly sweetened teas in 18.5-oz PET bottles,” he said. “We are also expanding distribution on our glass bottle C.S.D.s and launching Hawaiian Punch in a pouch format, giving mom an on-the-go option for the fruit drink her kids love.”

He said the company also benefited from the ability of the TEN platform to bring lapsed occasions back into C.S.D.s.

“Whenever I talk about bringing lapsed users back, not only bringing them that have left C.S.D.s, and let’s say from our research we are showing a lot of them went to fruit juices, to sports drinks,” he said. “Now with the TEN, they’re coming back to C.S.D.s. And so, we still remain very, very committed to the TEN platform. Our guys are doing some great execution out there.

“You know, it helps us also on diets, because it doesn’t mention diet on there, and so it doesn’t seem to be affected as much. But, you’ve heard me say before, it takes a long time to build a brand. We told everybody in the beginning, whenever we first came out with Dr Pepper TEN three years ago, that we were going to stay committed to it and continue to build it. All the results we’re looking at tell us we’re still on the right track.”

Also in 2015, Dr Pepper plans to bring Peñafiel, the top selling mineral water brand in Mexico, to the United States, Mr. Young said.

“Like we’ve told you before with our Hispanic strategy, we have found, as we go out in the market, a lot of us think we have packages and brands they want,” he said. “But the Hispanic consumer is very savvy, and they want to see something from Mexico. Marty (Ellen, chief financial officer) and I were in the trade a while back where we had some of our products in our regular U.S. packaging, and the owner of the chain of Hispanic supermarkets told us they were fakes and that the consumer knew it.

“Where we’ve brought the Peñafiel from Mexico in, the success has been tremendous. We’re looking forward to bringing this in, especially into our Hispanic markets where we have our focus points. And it’s still early, but I think you’re going to see some great results from these.”

Mr. Young also touched briefly on the recently signed partnership with Keurig Green Mountain. He acknowledged that while Dr Pepper Snapple does not know how big the Keurig “cold” launch is going to be, “we know that it could be a very, very important channel, so we want to make sure we are there.”

“I think it could be a big piece into another one that we’re all watching close on ecommerce,” Mr. Young said. “But those two could tie very closely together, so we all want to understand that, and know where it’s going to go, but most importantly, make sure that our brands are there.”
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