Diet Dr Pepper
Diet Dr Pepper is outperforming the category.

PLANO, TEXAS — It’s no secret diet soda sales have been in decline over the past couple of years, but somehow Dr Pepper Snapple Group, Inc. has bucked the trend with its namesake zero-calorie beverage. In the recent quarter, Diet Dr Pepper sales increased by nearly 1%, driven by marketing and execution efforts, said Larry Young, president and chief executive officer.

“I think that diet drinker has many, many more choices than they used to have,” Mr. Young said during an Oct. 27 earnings call. “I think we're keeping ours top-of-mind, so that we're trying to keep them in there. We all know that the consumer is looking at a lot of different products right now, but I think as they switch around, they still want that great taste. Taste is still everything.”

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

Net income in the third quarter ended Sept. 30 was $240 million, equal to $1.30 per share on the common stock, up from $202 million, or $1.06 per share, in the prior-year period. Net sales rose 3% to $1,680 million from $1,630 million.

For the quarter, bottler case sales volume increased 2%, with carbonated soft drinks up 2% and non-carbonated beverages flat.

“Brand Dr Pepper increased 1% in the quarter, as we experienced continued strong growth in our fountain food service business as well as growth in our bottled can business,” Mr. Young said. “Regular Dr Pepper continued to perform well, and Diet Dr Pepper continued to significantly outperform the diet category, growing by almost 1% in the quarter. Our Core 4 brands increased 2%, as 7% growth in Canada Dry and 1% growth in Sunkist were partially offset by a 2% decline in A&W and a 1% decline in 7UP.”

Among non-carbonated beverages, Snapple was flat, cycling 5% growth a year ago, and Hawaiian Punch and Mott’s each posted 6% declines.

“Clamato grew 5% in the quarter, and our water category grew 16% on growth in our allied brand portfolio, particularly Bai and FIJI, and continued growth in Aguafiel,” Mr. Young said. “We chose to acquire our Aguafiel partnership interest in Mexico, rather than liquidate the venture, because we believe that on our own we can further improve the performance of the brand.

“All other non-carb brands decreased 9% in the quarter, almost entirely due to our exit of the Country Time business. This decline was partially offset by strong growth in BodyArmor, another allied brand which is continuing to grow share in the sports drink category.”

For the full year, the company continues to expect reported net sales to increase approximately 2% and now expects core earnings per share to be in the $4.32 to $4.40 range, up from a previously stated range of $4.27 to $4.35.

“We continue to drive strong results across the business,” Mr. Young said. “We're focused on driving aligned communication and execution across our priority brands, while also selectively adding to our allied brands portfolio in an effort to compete in fast-growing categories. We're continuing to embed (Rapid Continuous Improvement) R.C.I. further into our culture. And, importantly, we remain committed to returning excess free cash to our shareholders over time.”