Dr. Pepper Snapple Group

MGT 400 Strategic Management(Capstone)

Instructor: Eric Drouart

COMPANY OVERVIEW

• Mission Statement

• Key Facts

• Company Highlights

• Company History

• Recent Products

MISSION STATEMENT• “At Dr Pepper Snapple

Group, it is our vision to be the best beverage business in the Americas. Our brands have been synonymous with refreshment, fun and flavor for generations, and our sales are poised to keep growing in the future.”

http://www.drpeppersnapplegroup.com/company/mission/

5 Strategic Principles

1. Building and enhancing our leading brands.2. Pursuing profitable channels, packages and

categories.3. Leveraging our integrated business models.4. Strengthening our route to market.5. Improving operating efficiency.

http://www.drpeppersnapplegroup.com/company/mission/http://investor.drpeppersnapple.com/strategy.cfm

CORE VALUES

1. Accountable.2. Customer-Centric.3. Transparent and

Honest.4. Inspect What We

Expect.5. Our Own Decisions.6. No Blame-Fixing.

http://www.drpeppersnapplegroup.com/values/call-to-action/

CORE VALUES

http://www.drpeppersnapplegroup.com/values/call-to-action/

KEY FACTS

• Ranked #404 on the Fortune 500 in 2011.

• Revenue was $5.6 billion in 2010.

• 200 Warehouses & Distribution centers.

• 19,000 Employees.• Over 50 Brands today.• Own Bottling and

distribution network in 2006.

http://news.drpeppersnapple.com/fact-sheet/corporate-fact-sheet

KEY FACTS (CONT.)

• Located in the United States, Mexico, Canada, and the Caribbean.

• Headquarters are in Plano, TX.• 21 Manufacturing / Bottle facilities in North

America.

http://news.drpeppersnapple.com/fact-sheet/corporate-fact-sheet

COMPANY HIGHLIGHTS

• 2009: #1 in Product of the year USA Awards.

• Snapple Green Tea wins the North American Tea Championship.

• 2010: Named Company of the year by BMC and BWM.

• 2010: Snapple Compassionberry & Crush Cherry are named Retailer Choice Best New Product Awards.

http://www.drpeppersnapplegroup.com/company/awards-recognition/

COMPANY HISTORY

• Public on May 7, 2008.• Spin-off of Cadbury

Schweppes.• 1783: Jean Jacob Schweppe invents soft drinks.• 1885: Charles Alderton invents Dr. Pepper in

Waco, TX.• 1970’s: Snapple Beverage Corp. established.• 1995: Cadbury Schweppes purchases Dr.

Pepper/Seven Up, Inc.http://www.drpeppersnapplegroup.com/company/history/

COMPANY HISTORY (CONT.)• 2000: Cadbury Schweppes

acquires Snapple Beverage Group.

• 2006: Own bottling and distribution network established.

• Present day:– 50+ Brands = Refreshment,

fun, flavor.– 6 of the top 10 non-cola soft

drinks.– 9 of the 12 leading brands are

#1 in their flavor categories.http://www.drpeppersnapplegroup.com/company/history/

RECENT PRODUCTS

EXTERNAL ENVIRONMENT

Technology

General Economic Conditions

Legislation and Regulations

Population Demographics

Societal Values and Lifestyles

EXTERNAL ENVIRONMENT

TECHNOLOGY

• Technology is at the forefront of the soft drink industry.

• Example:– Social Vending System

machines by PepsiCo

http://www.independent.co.uk/life-style/gadgets-and-tech/soft-drink-maker-delivers-social-technology-with-drinks-from-vending-machines-2276508.html

GENERAL ECONOMIC CONDITIONS

• Despite the struggles of economies in recent years, the soft drink industry has remained extremely successful.– Overall worldwide

consumption increased by 4.1% in 2011.

http://www.marketingweek.co.uk/soft-drinks-industry-thrives-despite-tough-economy/3025395.article

UNITED STATES

MEXICO

CANADA

DPSG Stock Price

http://investor.drpeppersnapple.com/stocklookup.cfm

LEGISLATION and REGULATIONS

• Soda Taxes• FDA Guidelines• School Beverage

Guidelines• Energy Drink Guidelines• Dietary Guidelines

POPULATION DEMOGRAPHICS

• U.S. children and teenagers are seeing heavy soda advertising in recent years.– Hispanics and African

Americans.

• 2008 to 2010:– Advertising spending

increases for DPSG and Coca Cola; drops 22% for PepsiCo.

http://www.reuters.com/article/2011/11/01/us-soda-idUSTRE79U62C20111101

U.S. Population

http://www.incontext.indiana.edu/2011/july-aug/article1.asp

SOCIETAL VALUES and LIFESTYLES

• Health conscious individuals.

• Obesity and diabetes awareness.

• Low calorie diets have emerged in recent years.– School guidelines and soda

taxes.

• At DPSG, we sell different products in our different countries.– Mexico, Caribbean, Canada.

INDUSTRY ANALYSIS

• Overview• Market Definition• Category Definition• Industry Trends• Future Growth Drivers• Projected Growth Rates• DPSG Performance

vs. Industry• Risks

INDUSTRY OVERVIEW• The U.S. beverage market

grew by 0.9 percent in 2011• Advertising • Bottle Distribution mergers

and acquisitions– Coca-Cola Enterprises and

PepsiCo• Energy drinks • Bottled water- growth

continues to accelerate

http://www.cnbc.com/id/46796332

MARKET DEFINITION AS % OF SALES

• DPS total sales= $5,903 million

CATEGORY DEFINITION

Additional Categories:• Funcitonal

Drinks– Engery Drinks=

57.6% Global– Sports Drinks=

26.1% Global

INDUSTRY TRENDS

• Energy Drinks• Bottled Water• Distribution and

Bottling Center Mergers/Acquisitions

• Costs of resources increasing

FUTURE GROWTH DRIVERS

• Current Obesity epidemic • Emerging diabetes epidemic (1 in

3 Americans will be obese by 2025)

• The Aging Population• Energy Drinks


Current Obesity Epidemic


Emerging Diabetes Epidemic • Affects 25.8

million people in the US alone– 8.3% of US

population

PROJECTED GROWTH RATES (in sales)

DPSG YTD PERFORMANCE (relative to industry)

RISKS• We operate in highly competitive markets• We may not effectively respond to changing

consumer preferences, trends, health concerns and other factors

• We depend on a small number of large retailers for a significant portion of our sales

• We depend on 3rd party bottling and distribution companies for a portion of our business

• Our financial results may be negatively impacted by recession, financial and credit market disruptions and other economic conditions

RISKS• Costs for commodities may increase substantially• Weather and climate changes could adversely affect

our business • Our products may not meet health and safety

standards or could be contaminated • We depend on key information systems and third

party service providers• Certain raw materials we use are available from a

limited number of suppliers and shortages could occur

COMPETITIVE ANALYSIS

• Top Competition• Primary Competitors• Market Share• Geographic Market

Share• Competitor Comparisons• Strategic Focus

and Growth Strategies• New Product Activities• Summary

Top Competition

PRIMARY COMPETITORS • The Coca-Cola Company

– Over 139,600 employees worldwide– Estensive product line with over 3,500 products– Drew in $35.119 billion dollars in revenue at the end

of 2010

• PepsiCo Inc– Over 285,000 employees worldwide– Have been bringing in a gross revenue of over $60

billion– Increased revenue over 30% in 2010 and over 15%

over in 2011

• Nestle S.A.– They have a wide variety of products from chocolate

to soft drinks– Made the most profit out of all competitors in 2011

with $10 million– Biggest strenght is taking global products and putting

them in local markets.

Market ShareMarket Share between beverage companies in 2011 and 2012

SALES BY GEOGRAPHIC REGION

-Americas accounts for 51.4% of the global carbonated soft drinks market value. -Europe accounts for a further 35.2% of the global market.

SALES BY GEOGRAPHIC REGION Pt. 2

BENCHMARKING AND COMPARISONS

Revenues Net Income Total Assets Total Liabilities

Coca-Cola 35,119.0 11,809.0 48,671.0 23,325.0

Cott Corp. 1,803.3 59.8 1,529.2 994.0

PepsiCo 57,838.0 6,320.0 68,153.0 46,677.0

Dr. Pepper 5,636.0 528.0 8,859.0 6,400.0

2010 Key Financials ($)

Yahoo Finance

BENCHMARKING AND COMPARISONS

Profit Margin

Revenue Growth

Asset Growth

Liabilities Growth

Debt to Asset Ratio

Return on Assets

Coca-Cola 33.6% 13.3% 20.1% 18.7% 47.9% 26.5%

Cott Corp. 5.4% 12.9% 75.0% 110.4% 65.0% 5.0%

PepsiCo 10.9% 33.8% 71% 108.3% 68.5% 11.7%

Dr. Pepper 9.4% 14.0% n/a n/a 65.2% 10.9%

2010 Key Financials Ratios ($)

Yahoo Finance

STRATEGIC FOCUS & GROWTH STRATEGIES

– Operates in over 200 countries and employs nearly 100,000 people.

– Most products are manufactured and sold by bottling partners.

– Diverse products.• Sparkling and still

beverages.• Juice and juice-drink.• Ready-to-drink tea.

• 6 business segments.– North America– Eurasia and Africa– Europe– Latin America– Pacific– Bottling Investments

- DataMonitor

STRATEGIC FOCUS & GROWTH STRATEGIES (Cont.)

– PepsiCo is a global snack and beverage company.

– 3 Business Units:• PAF = PepsiCo Americas

Foods.• PAB = PepsiCo Americas Beverages.• PI = PepsiCo International.

• These 3 units are divided into six additional segments:– FLNA– QFNA– LAF– PAB– Europe– Asia, Middle East, and

Africa (AMEA)

- DataMonitor

STRATEGIC FOCUS & GROWTH STRATEGIES (Cont.)

– Largest food and beverage company in the world.

– 6 divisions that are organized along product groups.

• Beverage• Milk products• Nutrition and ice cream• Prepared dishes and cooking

aids• Pet care products.• Pharmaceutical products.

• Nutrition Business has 4 sub-divisions:– Infant– Healthcare– Performance– Weight management

• 3 geographic zones:– Zone Europe– Zone Americas– Zone Asia, Oceania, and

Australia.- DataMonitor

NEW PRODUCTS & ACTIVITIES• Coca Cola

– New Minute Maid Light Packaging. (3/21/12)– NCAA March Madness Campaign. (3/15/12)– Arctic Home Campaign. (12/1/12)– Coke Zero & Mission Impossible. (10/19/11)

• Pepsi– New Mountain Dew flavors and Pepsi next released (1/12)– New Starbucks drinks released in February. (2/12)– Amp Energy drinks reformulated. (2/12)

• Nestle– Boosts dairy industry in Sri Lanka. (4/2/12)– Uses avalanche research to create better ice cream. (3/26/12)– R&D efforts strengthened in Asia. (3/20/12)– Nutrition guide launched for cancer patients in Spain. (3/19/12)http://www.thecoca-colacompany.com/dynamic/press_center/global- filter/products/

globalIndex.htmlhttp://www.gillettepepsicola.com/products/new_products.phphttp://www.nestle.com/Media/NewsAndFeatures/Pages/NewsAndFeatures.aspx

COMPETITOR STRENGTHS & WEAKNESSES

Strengths Weaknesses

Coca-Cola Company -Popularity.-Well known.-Branding is obvious and easily recognized.-A lot of finance.-Customer loyalty.-International Trade.

-Word of mouth-Lack of popularity of many Coca Cola’s brands.-Most unknown and rarely seen.-Result of low profile or non-existent advertising.-Health issues.

Nestle -Ability to leverage strong brand name to generate sales.-Ability to customize products to the local market conditions.-Strong focus on R&D.

-Increasing instances of product recalls hamper brand equality.-Slow recovery of product volume from economic downturn in 2009.-Relative less sales exposure in emerging markets.

PepsiCo, Inc. -Branding-Diversification-Distribution-Leadership in the snack business segment.

-Overdependence on Wal-Mart.-Overdependence on US Markets.-Low Productivity.-Image Damage Due to Product Recall.-Health Issues

- Data Monitor

SUMMARY OF THE COMPETITION• Coca-Cola

– The Coca-Cola Company (Coca-Cola) is the #1 leading manufacturer, distributor and marketer of non-alcoholic beverages.

– Owns or licenses more than 500 brands.• PepsiCo

– PepsiCo is one of the largest food and beverages companies in the world. – 18 brands generate over $1,000m in annual sales.

• Nestle– Nestle is the largest food and beverage company in the world.– Diverse range of products.

• Anheuser-Busch– ABInBev is one of the world's largest brewers based in Belgium.– Portfolio of over 200 Brands.

- DataMonitor

DPSG INTERNAL ANALYSIS• Organization Structure• Financial Summary• Primary Product

Segments• Product Segments

Revenues• Net Sales per Region• Company Performance• Projected Performance

Trend• Core Competency• Products Statistics• Current Growth

Strategies

ORGANIZATION STRUCTURE

CEO & President

CFO

IT Finance

Human Resources R&D Marketing Supply

ChainConcentrated

BeveragesPackaged Beverages

Larry Young

Martin M. Ellen

http://www.drpeppersnapplegroup.com/company/leadership/

(in thousands) 2011 2010 2009Profit & Loss Revenue 5,903 5,636 5,531 EBIT 1,039 1,049 1,111

Operating Margin 4,864 4,587 4,420Balance Sheet Asset 1,757 1,309 1,279 Liabilities 7,020 6,400 1,279 Equity 2,263 2,459 3,187Cash Flow

Operating Cash Flow 760 2,535 865

FINANCIAL SUMMARY Source: Yahoo! Finance

PRIMARY PRODUCT SEGMENTS

• Beverage Concentrates– Dr. Pepper, Canada Dry, Sunkist,

Schweppes, 7UP, A&W, RC Cola, and Sun Drop

• Packaged Beverages– NCB= Hawaiian Punch, Snapple,

Mott’s, Yoo-Hoo, and Nantucket Nectars

– CSB= 7UP, Dr. Pepper, A&W, Sunkist, and Canada Dry

• Latin America Beverages– Squirt, Penafiel, Aguafiel, Crush, and

Clamato

DPSG Annual Report 2011

PRODUCTS SEGMENTS REVENUES

Market Share

Beverage Concentrates: 40% (US)Packaged Beverages: 49.2% (US)Latin America Beverages: 6.07%

DPSG Annual Report 2011 and Global Soft Drink Industry Report

NET SALES PER REGION

International for DPS is Mexico, The Caribbean, and Canada

$5.9 billion of net sales in 2011 from the U.S. (89%), Canada (4%) and Mexico and the Caribbean (7%)

DPSG Annual Report 2011 and Global Soft Drink Industry Report

COMPANY PERFORMANCE

Yahoo.Finance.com

COMPANY PERFORMANCE

Yahoo.Finance.com

PROJECTED PERFORMANCE TREND

• DPS expects sales to grow modestly over the next 3 years with expectations on the low end

• Also Muted core growth is expected – Volumes are expected to remain

soft along with increased marketing spend and competition from Coca-Cola and PepsiCo

http://www.bevnet.com/news/2012/dr-pepper-beats-forecasts-though-muted-growth-expected-for-2012

CORE COMPETENCY

• R&D– 2008: Invested $17 million – 2009: Invested $16 million– 2010: Invested $15 million

• Manufacturing– 18 Manufacturing Facilities in the U.S.– 174 Distribution Centers in the U.S.– Along with 3 manufacturing facilities and 23 distribution centers in

Mexico

• DPSG also has their own fleet of over 5,000 delivery trucks that provide product transportation across the nation

CORE COMPETENCY CONTINUED• R&D Areas of Investigation:

– Product Development– Microbiology– Analytical Chemistry– Process Engineering– Sensory Science– Nutrion– Knowledge Management– Regulatory Compliance

• DPSG has a high level of expertise in flavors and sweeteners as well.

PRODUCTS STATISTICS

CURRENT GROWTH STRATEGIES

BUILD THE FOUNDATION(2007-2010)

INVEST FORGROWTH

Build Our BrandsGrow Per Caps

Rapid Continuous Improvement(2011-2015)

OPTIMIZE RETURN ON CAPITAL

(2015+)

Building Shareholder Value Over Time

Strengths: Weaknesses:

Opportunities: Threats:

DPSG SWOT ANALYSIS• Strong portfolio of brands.• Integrated business model.• Strong customer relations.• Differentiation Strategies.

– unique taste.– Snapple Facts

• Growth to international markets.• New product launches or line

extensions.• Growth into functional (energy drink)

market.• People have more discretionary

income.

• Minor compared to larger peers.• Rely on 3rd-party bottlers for packaging and distribution.• Continued focus on carbonated soft drinks rather than alternative and functional beverages.• Lack of international exposure.

• Loss of partner bottlers.• Socio-cultural trends towards healthier lifestyles

- sugar tax

KEY ISSUE #1

• Growing health consciousness in the United States.– U.S. consumption of soft drinks in 2011 fizzled to its lowest

level since 1996.• Customers are opting for bottled waters, juice, teas, and energy drinks.• Energy drink market grew 16% in 2011.

– Dr. Pepper Snapple (along with Coke and Pepsico) lost volume in 2011.

– The average U.S. customer drank 714 8-ounce servings of soft drinks in 2011, down from 728 8-ounce servings in 2010.

– Total soft drink consumption was 9.274 billion cases in 2011, down 1% from the year before, and the seventh straight year of decline.

http://www.foodproductdesign.com/news/2012/04/u-s-soda-consumption-fizzles.aspx

KEY ISSUE #1

• Growing health consciousness in the United States.– In the United States, a 2005 survey reported:

• 74% of consumers claimed to have changed their eating habits due to health and nutrition concerns.

• 87% considered nutrition an important factor in purchasing groceries.

• 64% stated a willingness to pay more for healthier versions of food items.

– Health-conscious households make up 18% of the U.S. market overall.

http://tippie.uiowa.edu/marketing/research_papers/grocery%20basket%20data.pdf

KEY ISSUE #1

• Growing health consciousness in the United States.

• Over the past 5 years, the CSD industry has declined 7.1%.

• It is expected to decrease by 2% a year over the next five years.

RECOMMENDATION for KEY ISSUE #1

• What we are doing now:– Launched a new line of

10-calorie drinks– Dr. Pepper Ten – Plans for 7 Up Ten,

Sunkist Ten, A&W Ten, RC Ten, and Canada Dry Ten

RECOMMENDATION for KEY ISSUE #1

• What we could be doing:

• Health and Wellness Market– Water – New age

beverages• Teas and Juices

www.jdford.com/pdfs/JDF_Comp_Health_Wellness_09.pdf

KEY ISSUE #2

• Lack of focus on alternative and functional beverage markets.– These markets have seen strong growth as

consumer preferences have shifted away from CSD products to healthier options.

– DPSG focuses the majority of their resources and efforts on existing and new CSD’s.

– By DPSG ignoring emerging product categories such as energy drinks, this could be a missed growth opportunity going forward.

KEY ISSUE #2

• Lack of focus on alternative and functional beverage markets.– President and CEO Larry

Young:• “No, we’re still very happy with our

portfolio… we stay focused on the total portfolio, but we are putting a lot of emphasis right now on our carbonated soft drinks. As I mentioned a moment ago, I think with the tough economic times we’re going to see people come back in and recognize that value. That’s where we’re putting a strong focus.”

KEY ISSUE #2

• Lack of focus on alternative and functional beverage markets.– Example – Bottled Water

http://www.accuval.net/insights/industryinsights/detail.php?ID=142

Diet Drink Promotion

RECOMMENDATIONS for ISSUE #2

• A more health conscious world is looking for an alternative drink for a fit lifestyle.

• Products such as Snapple, Hawaiian Punch, and Mott’s have show no more than 0.5% growth.

• Increase our promotion of non-soda diet drinks such as Snapple and Hawaiian punch.


– Market for Bottled Water• Dasani’s bottled water

volume rose 11%in 2011.

• Implemenation of ournew bottled waterproduct into the market.

• Multiple advertising and promotional campaigns for “Dr. Aqua.”

http://www.beveragemarketing.com/reportcatalog4a.html


• Market for Energy Drinks– Energy Drink Sales grew

14.4 percent by voulme in2011.

– Boost and relaunch theVenom product.

• Generategrowth and sales throughnew sponsorships andpromotion.

http://www.cnbc.com/id/46796332

KEY ISSUE #3

• Low international presence.• DPSG only has a presence in the United States, Canada,

Mexico, and Latin America.• Coca-Cola and PepsiCo are both in over 100 countries

worldwide.• International segment has been a primary driver for these

companies as health consciousness has increased in North America.

• Low exposure presents a significant growth opportunity to DPSG, but they have not indicated they want to expand.

RECOMMENDATION for ISSUE #3 • Strategic Thrust:

– Compete against Coca Cola, PepsiCo, Nestle.

– Potential for large increases in revenues.– Less over-reliance on one particular

country.

• Short-Term (5-10 years)– Expand international presence into

Europe and South America.• Europe represents 35.2% of the soft drink

industry. (2011)

• Long-Term (10-20 years)– Expand into Asia-Pacific.

• Represents 11.4% of soft drink industry. (2011)

• Length of time will vary based on whether this percentage increases or decreases.

WHY THESE REGIONS WORK

http://mapsofworld.com/world-top-ten/maps/world-top-ten-carbonated-soft-drink-consumer-countries.jpg

OVERVIEW of EUROPE

http://www.nationmaster.com/graph/foo_sof_dri_con-food-soft-drink-consumption

2002 DataMeasurement = Liters per Person Average Consumption per Country = 89.8 liters

KEY ISSUE #4

• Loss of partner bottlers.– DPSG’s distribution

network is heavily reliant on Coca Cola and PepsiCo.

– If Coke and Pepsi make their bottling partners wholly owned subsidiaries, DPSG will see amplified costs.

– This will lead to unfavorable positions with retailers and consumers.

RECOMMENDATION for ISSUE # 4

• Become less dependent on 3rd party bottlers by improving and expanding upon the DPSG owned bottling system

• Activities that support this recommendation: – Recently resolved an issue with our

oldest bottler of Dr. Pepper, the Dublin Dr. Pepper Bottling Company

– Sued the bottler because they– Sold the soft drink beyond the six

county territory designated in its licensing agreement

– To end the bottlers unauthorized use of the label “Dublin Dr. Pepper”

THANK YOU!

Questions?

Dr. Pepper Snapple Group

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