PLANO, TEXAS — Diet has become a four-letter word for the beverage industry, as consumers increasingly avoid artificially sweetened soft drinks in favor of alternatives perceived as natural. While Diet Dr Pepper has been a drag on Dr Pepper Snapple Group’s performance, trends improved in the recent quarter on increased marketing and distribution.
“We’re very excited about seeing our diets kind of bucking the trend out there,” said Larry Young, president and chief executive officer, during a July 23 earnings call with financial analysts. “You’ve heard us talk about it in the first quarter that we were putting some media and marketing against Diet Dr Pepper, and everything is showing us it’s working.”
For the second quarter ended June 30, Dr Pepper Snapple had net income of $220 million, equal to $1.15 per share on the common stock, up 5% from $210 million, or $1.07 per share, for the prior-year period. Net sales for the quarter rose 1.5% to $1,655 million from $1,631 million the year before, reflecting a 1% increase in sales volume and favorable product, package and segment mix that partly offset unfavorable foreign currency translation.
Dr Pepper Snapple is testing a 60-calorie carbonated soft drink sweetened with stevia and sugar in three markets in response to growing demand for natural sweeteners. However, the company has no plans to copy rival PepsiCo in removing aspartame from its diet brand.
“We’re very satisfied with our Diet Dr Pepper and with the aspartame, the taste, I mean, that’s the profile,” Mr. Young said. “Our consumers love it. We have a lot of products out there… our Diet Rite is sweetened with Splenda. We have different sweeteners across the portfolio. But as far as our core four and our Dr Pepper, our base business, we’ll be watching everything, but we’re very pleased with where we’re at right now.”
Net income for the six months increased 3% to $377 million, or $1.96 per share, from $365 million, or $1.85 per share, for the first half of fiscal 2014. Net sales were $3,106 million, up 2.5% from $3,029 million.
For fiscal 2015, the company expects full-year reported net sales to increase just over 1% and core earnings per share in the $3.85 to $3.93 range. Foreign currency translation is expected to have a negative impact on net sales and core earnings per share growth of approximately 2% and 4%, respectively.
“We will continue to execute our strategy in a competitive environment, ensuring that we build awareness and relevance of our brands while executing with excellence in the marketplace,” Mr. Young said. “We’re committed to providing consumers with options to address their evolving needs and lifestyle.”
