- Dr Pepper Snapple Group announced Wednesday that its third-quarter sales jumped 3.6% to $1.74 billion, compared to $1.68 billion for the same period last year. Profit came in at $201 million, or $1.10 per share, dropping 7.4% from $217 million, or $1.17 per share, from the third quarter of 2016.
- The company saw overall volumes increase by 1% — in part from its recent acquisition of Bai Brands — but blamed recent natural disasters for an approximately 0.5% decline in volume and net sales.
- "We continue to make progress in the execution of our priority brand strategy, including our brand building platform and channel strategies for Bai, even though we had markets that were significantly disrupted by hurricanes and earthquakes in the U.S. and Mexico," President and CEO Larry Young said in a statement. "Our CSD [carbonated soft drink] portfolio continued to perform well in the quarter, growing both dollar and volume share in the category, and our allied portfolio continues to drive strong growth across the business."
Like the top two U.S. soda companies — Coca-Cola and PepsiCo — Dr Pepper Snapple is feeling the pinch as consumers' taste turn from sugary carbonated beverages to non-carbonated juices, waters and ready-to-drink teas. Anticipating this trend, Dr Pepper Snapple bought Bai Brands last year.
Since then, the Bai acquisition has been adding to the company's volumes while its sales of carbonated soft drinks continue to remain flat or decline. The report states Bai increased 108% through the acquisition and growth in existing distribution. Other non-carbonated beverages targeted as brands primed for growth increased 40%, benefiting from more distribution for BodyArmor — which saw new innovations in the last quarter — Fiji and Core. Clamato and Mott's brands also saw increases, while the Snapple brand dropped 5% in the third quarter.
Soda volumes fell slightly, with a 1% drop. As is the case with many carbonated soft drinks, it is apparent consumers are becoming less interested in these sugary beverages. The largest drops were in 7UP, which fell 8% due to less retail activity, and Dr Pepper with a 2% drop. However, Canada Dry saw a modest 2% increase from growth in the ginger ale category, and Mexican mineral water brand Peñafiel saw a 5% increase.
Bonnie Herzog, a Wells Fargo Securities analyst, expressed concerns Wednesday about soft volume growth in the company's packaged beverages and about the lowered sales contribution of Bai Brands despite solid results in the second and third quarters of this year.
"Following our meetings with management, our improving outlook for Bai clearly overestimated the near-term reality and we were caught off-guard by [carbonated soft drink] results, which diverged from scanner data. That said, we still think the outlook for [Dr Pepper Snapple] looking out to FY18 remains favorable, and encourage investors to take advantage of any weakness in the stock today," she said.
Dr Pepper Snapple will have to continue to shift its operations and focus on the products that add to the bottom line, such as Bai and other non-carbonated beverages. The company should also find a way to bolster its iconic Dr Pepper and Snapple brands. Selling them off is always an option, but since they make up the company's name, that probably isn't likely. Steering a judicious middle course may result in more solid results for the next quarter, barring more negative impact from weather events.