PLANO, TEXAS — The weak performance of its diet carbonated soft drinks (C.S.D.s) has been a common theme for the Dr Pepper Snapple Group and it was no different during the first quarter of fiscal 2015. While the company’s other C.S.D.s showed improvement, Diet Dr Pepper continued to be a drag on performance.
“Diet is a challenge right now, but our diet was actually down less than the category diet, so we’ve got a solve for that,” said Larry Young, president and chief executive officer, in a conference call with financial analysts on April 23. “We’re thrilled with how our core four is doing, again a challenge on the diets there, but we’re getting great execution, we’re getting more availability and it’s doing very well in all formats of the business.”
The company’s net income for the first quarter of fiscal 2015, ended March 31, totaled $157 million, equal to 82c per share on the common stock, and flat compared with the same period of the previous year when earnings were $155 million, or 78c per share.
Sales for the quarter rose to $1,451 million compared with $1,398 million for the first quarter of the previous year.
In his opening remarks, Mr. Young said case sales of Dr Pepper fell 1%, with the decline attributable to Diet Dr Pepper.
“Our core four brands grew 4% in the quarter as a 13% increase in Canada Dry was partially offset by low single-digit declines in Sunkist soda and 7UP,” he said. “Schweppes increased 8% on growth in sparkling waters and ginger ale. And Squirt increased 15%. Penafiel grew 20% on distribution gains, while Crush declined 3%. All other C.S.D. bands were flat in the quarter.
“In non-carbs, Snapple increased 5% with high single-digit growth in premium, partially offset by continued declines in value as we have strategically deemphasized this line. Hawaiian Punch increased 7% with strong results on our recently launched pouch, and some promotional activity on our base business. Mott’s declined 1% in the quarter, while Clamato grew 20%. Our water category increased 9% on strong growth in Fiji, Bai5, and Vita Coco. All other non-carb brands were flat in the quarter.”
Dr Pepper Snapple is test marketing a C.S.D. sweetened with stevia and sugar that has 60 calories per 12-oz can, according to the company. Depending on how the tests go, the new line could have an impact on the company’s 10 calorie line of products.“We’re still very supportive of our TEN platform in the trade …,” Mr. Young said. “We’ve got our natural products out there so we’ll be watching what they do as they roll out and what type of an impact they’ll have on TEN. (We’ll see) which one the consumer really wants; where they want to play and then we’ll make our decisions on that going forward. So we’re probably looking at more of a better feel of that in the third trimester of this year.”