Dr Pepper braces for continued headwinds

by Monica Watrous
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Diet drinks continue to drag on Dr Pepper's performance.

PLANO, TEXAS — Executives of Dr Pepper Snapple Group, Inc. expect continued challenges in the carbonated soft drink category in the year ahead.

“That said, however, we have continued to outperform the C.S.D. category, and we expect that trend to continue this year as well,” said Marty Ellen, chief financial officer, during a Feb. 17 earnings call with financial analysts.

Marty Ellen, Dr Pepper Snapple
Marty Ellen, c.f.o.

For the fiscal year ended Dec. 31, 2015, Dr Pepper Snapple had net income of $764 million, equal to $4.00 per share on the common stock, up nearly 9% from $703 million, or $3.59, the year before. Net sales were $6,282 million, up 3% from year-ago sales of $6,121 million. On a constant currency basis, net sales advanced 5%, Mr. Ellen said.

Net income for the fourth quarter was $185 million, or 98c per share, up 23% from $150 million, or 77c, for the comparable quarter. The performance was driven by net sales growth, lower commodity costs and ongoing productivity improvements, which were offset partially by higher operating costs and marketing investments. Net sales were $1,546 million, up 2.5% from $1,509 million, as favorable product, package and segment mix, price increases and lower discounts offset the negative impact of foreign currency translation. Currency-neutral net sales increased 4%.

Sales volume was flat for the quarter and up 1% for the year.

“As we move into 2016, our strategy of building brands, executing with excellence, and continuing to embed (Rapid Continuous Improvement) and lean management across the organization remains the same,” said Larry Young, president and chief executive officer. “This year, we'll unlock growth in our portfolio through focused communications and relevant product and packaging innovation across our priority brands that consumers have told us we can win with. And we'll continue to use our improving marketing return-on-investment capabilities to provide better effectiveness on every dollar we spend.”

Larry Young, Dr Pepper Snapple
Larry Young, president and c.e.o.

For the year ahead, the company expects reported net sales to increase 1% and core earnings per share to be in the $4.20 to $4.30 range, inclusive of the negative impact of foreign currency translation. The company expects total sales volume to be about flat, with C.S.D.s up slightly and non-carbonated beverages down slightly, reflecting pricing actions as well as the decision to terminate a distribution agreement in Mexico.

“It's important to highlight that we still expect continued growth from other non-carb brands such as Snapple, Clamato and our allied brand portfolio,” Mr. Ellen said. “On a total company basis, we expect combined price and mix to be up about 2.5%.”
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