Dr Pepper Snapple Group reported Wednesday sales of $1.64 billion during the fourth quarter of 2017, up from $1.58 billion in the same quarter in 2016, missing an estimate of $1.7 billion expected by analysts. Net income for the quarter was $508 million versus $165 million in the year-ago period.
For the year ending December 31, the Texas-based company's net sales were up nearly 4% to about $6.69 billion, compared to about $6.44 billion for 2016. Net income for 2017 jumped 27% to $1.08 billion, versus $847 million for 2016. Corporate tax law changes that went into effect recently contributed $297 million to the 2017 results, the company said in the filing.
In a break from its usual practice, the company reported its fourth-quarter and yearly results for 2017 through a 10-K filing with the U.S. Securities and Exchange Commission. Dr Pepper Snapple also canceled its earnings call and slide presentation scheduled for Wednesday, citing a proxy filing process related to its merger with Keurig Green Mountain.
Dr Pepper Snapple is in the middle of big changes after its $19-billion merger with Keurig Green Mountain was announced January 29.
The deal was likely brought on as Dr Pepper Snapple faces the same challenges as other beverage companies — consumers trending away from sodas and flocking to healthier and less-sugary drinks. Just this week, PepsiCo posted flat earnings and a drop in beverage sales for the fourth quarter as the soda giant continued to rely on its snacks segment to help improve its bottom line. Coca-Cola reports earnings on Friday.
For 2017, Dr Pepper Snapple said volume of its branded carbonated soft drinks rose 1%, while non-carbonated beverages — such as Snapple, Hawaiian Punch and Mott's — increased 4% from a year earlier as the company digested its acquisition of Bai Brands that closed in January 2017.
The company's upcoming merger with Keurig Green Mountain is not without its critics who express some uncertainties around the deal. Some assert that Dr Pepper Snapple has less to gain than the coffee giant, which is owned by JAB Holdings. The Luxembourg-based investment firm also controls Krispy Kreme, Caribou Coffee, Peet's and Panera Bread.
Bonnie Herzog, an analyst with Wells Fargo, said in a note that while the merger was viewed as positive for Dr Pepper Snapple shareholders, "... we continue to struggle to see significant strategic rationale for the deal. For JAB (who is to own 87% of [Keurig Dr Pepper]), we continue to view the deal as less a strategic business combination, and more the creation of a platform company to pursue additional M&A down the road."
However, the combined companies will likely benefit from Dr Pepper's direct-to-store delivery system and Keurig's existing relationships with online markets, large supermarkets and grocery retailers. Dr Pepper Snapple also could find ways to get more of its beverages into the Keurig platform. In addition, the new business will have the ability to sell beverages in both hot and cold products that people can consume throughout the day — from morning coffee, an afternoon tea to a late-night soda.
As FoodBev pointed out, the merged companies will be in a position to square off with Coca-Cola and PepsiCo in the soda wars, which could eventually lead to the purchase of one or both of those beverage giants. The merged company also presents serious competition to Nestle and J.M. Smucker in the global coffee market. It would not be surprising to see other beverage companies respond to the Dr Pepper Snapple-Keurig transaction with a deal of their own.