Dr Pepper Snapple Profit Falls Short, Disappointing Guidance

716359ea-2180-4fef-a42d-e91cc5b7f90darticleimage.jpg

15 Feb 2017 --- Dr Pepper Snapple Group, Inc. (DPS) has reported fourth quarter 2016 net income of $1.65 million, or 90 cents a share, which included an $0.11 per diluted share loss on the early extinguishment of certain debt. Reported EPS were $0.97 in the prior year period. Core EPS were $1.04, up 4%, compared to $1.00 in the prior year period. For the year, the company reported earnings of $4.54 per diluted share compared to $3.97 per diluted share in the prior year. Core EPS were $4.39, up 9%, compared to $4.02 in the prior year.

DPS President and CEO Larry Young said, "I'm proud of our teams and the strong performance they delivered in 2016. In a continuously competitive environment, we remained focused on our integrated communication and execution strategies and unlocked growth across our priority brands. We recently completed our acquisition of Bai, which will strengthen our priority brand portfolio and bring exciting innovation opportunities to the company. We also remained relentlessly focused on driving growth and productivity across our business with Rapid Continuous Improvement."

For the quarter, reported net sales increased 2% on favorable product and package mix, a 1% increase in sales volumes and higher pricing. Net sales was partially offset by 1 percentage point of unfavorable foreign currency translation and unfavorable segment mix. Reported segment operating profit (SOP) increased 2% as net sales growth, lower logistics costs and ongoing productivity improvements were partially offset by increases in certain operating costs and an $8 million increase in planned marketing investments. Currency neutral segment operating profit was further reduced by 2 percentage points of foreign currency transaction.

Reported income from operations for the quarter was $335 million, which included $11 million in unrealized commodity mark-to-market gains and $3 million in expenses related to our acquisition of Bai. Reported income from operations was $322 million in the prior year period, which included a $7 million impairment charge on the Garden Cocktail brand. Currency neutral core income from operations for the quarter was $330 million compared to $329 million in the prior year. Currency neutral income from operations was further reduced by 3 percentage points of foreign currency transaction.

For the year, reported net sales increased by 3% to $6.44 billion. Foreign currency translation negatively impacted reported net sales by 1%. Reported income from operations was $1.43 billion, including $52 million in unrealized commodity mark-to-market gains and $3 million in acquisition expenses related to Bai. Reported income from operations in the prior year was $1.30 billion, which included a $7 million impairment charge and a $5 million unrealized commodity mark-to-market loss. Core income from operations was $1.38 billion, up 5%, representing 21.5% of net sales compared to 20.9% in the prior year. Currency neutral core income from operations was further reduced by 2 percentage points of foreign currency transaction.  

For the quarter, BCS volume was flat, with carbonated soft drinks (CSDs) increasing 1% and non-carbonated beverages (NCBs) decreasing 1%.

By geography, U.S. and Canada volume was flat, and Mexico and the Caribbean volume increased 5%.

In CSDs, Squirt grew 8% driven by strong performance in Mexico and the U.S. Schweppes grew 7% on distribution gains in sparkling waters and growth in the ginger ale category. Our Core 4 brands increased 3%, as a mid-single-digit increase in Canada Dry and a low-single-digit increase in 7UP were partially offset by a low-single-digit decrease in A&W. Sunkist was flat in the quarter. Peñafiel grew 1%, while Crush decreased 1%. Brand Dr Pepper decreased 1% in the quarter, primarily driven by timing in fountain foodservice performance. Fountain foodservice volume decreased 4% in the period.

In NCBs, Snapple decreased 3% and Hawaiian Punch declined 5% on category headwinds and higher pricing on single-serve packages. Mott's decreased 2% in the quarter as growth in sauce was more than offset by declines in juices. Our water category increased 8% on strong growth in Bai, Core Hydration and FIJI. Clamato increased 13% on distribution gains, increased promotional activity and product innovation. 

For the year, BCS volume increased 1% with both carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) increasing 1%.

By geography, U.S. and Canada volume increased 1%, and Mexico and the Caribbean volume increased 5%.

In CSDs, Squirt increased 6% driven by strong performance in Mexico and the U.S. Schweppes increased 8% on distribution gains in sparkling waters and growth in the ginger ale category. Peñafiel increased 3% primarily due to distribution gains, increased promotional activity and product innovation. Brand Dr Pepper increased 1% on growth in fountain foodservice. Crush increased 3% for the year, and our Core 4 brands were flat, as a mid-single-digit increase in Canada Dry was offset by a mid-single-digit decline in 7UP and low-single-digit declines in both A&W and Sunkist. Fountain foodservice volume increased 2% for the year.

In NCBs, our water category grew 18% primarily on growth in Bai, FIJI, Aguafiel and Core Hydration. Snapple was flat and Clamato increased 10% on distribution gains, increased promotional activity and product innovation. Hawaiian Punch decreased 6% due to category headwinds and higher pricing for our single-serve packages. Mott's decreased 3% for the year with declines in juice partially offset by growth in sauce.

Related Articles

Business News

Global Franchise Group takes a slice of Round Table Pizza brand

18 Sep 2017 --- Strategic brand management company Global Franchise Group (GFG) has acquired the Round Table Pizza brand and all of its affiliated concepts (Round Table Pizza, Round Table Clubhouse and Round Table Pizza Wings Brew). The acquisition of this leading US pizza franchise increases GFG's systemwide sales to close to US$1 billion and expands the brand building company's footprint to more than 1,500 stores – domestic and international. 

Food Ingredients News

Health risks of natural origin are frequently underestimated

18 Sep 2017 --- The findings of a representative study recently conducted by the German Federal Institute for Risk Assessment (BfR) on the risk perception of contaminants in food that was published in the public health journal Bundesgesundheitsblatt - Gesundheitsforschung – Gesundheitsschutz suggests that “people feel most at risk from synthetic substances and heavy metals.” BfR President Professor Dr. Andreas Hensel says: “Appropriate risk communication on contaminants should take this subjective risk perception into account.” 

Business News

Vanilla enjoys an innovation resurgence, but supply chain challenges mount

18 Sep 2017 --- The adjective “vanilla” may have unexciting connotations, but it could be argued that the world of products with vanilla flavoring is currently very exciting indeed. Even though supply challenges are being faced in sourcing natural vanilla, new and innovative products continue to be introduced to the market at an exhilarating pace.

Food Ingredients News

“Clean label” continues to dominate at TIC Gums

18 Sep 2017 --- Late last year, TIC Gums and Ingredion entered into an agreement to offer the widest range of texture capabilities, superior formulation expertise and rapid response to customer needs. For Ingredion and TIC Gums, the acquisition has expanded their higher-value specialty portfolio and customer base in the fast-growing segment of food and beverage companies that are driving industry innovation. Since then, TIC Gums has been on their own journey to diversify their range of ingredient profiles so that they can provide solutions that match up with customers concerns.

Food Ingredients News

GoodMills Innovation set to launch gut-friendly, ancient wheat for bakery produce

15 Sep 2017 --- GoodMills Innovation is set to introduce its new product 2ab Wheat, an ancient grain that is very well tolerated. This grain innovation is easy to process and allows both artisan and industrial bakers to produce wholesome bakery products with a convincing texture and taste. Therefore, 2ab Wheat is a real alternative to modern bread wheat as well as to well-known ancient grains such as einkorn or emmer, which score neither with their sensory properties nor technologically when processed on their own.

More Articles