Dr Pepper Snapple insists it can sustain TEN growth

26-Jul-2012 - Last updated on 31-Jul-2012 at 12:12 GMT

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Sunkist is one of the 'Core 5' brands that DPS is trialing under its TEN banner

Dr Pepper Snapple Group (DPS) insists that it can continue to grow Dr Pepper TEN volumes as it laps the low calorie soda’s launch, and is encouraged by 10-calorie test market results using other brands.

Texas-based DPS said would continue to focus on its ‘Core 5’ brands (Sunkist, 7UP, Dr Pepper, Sun Drop and Canada Dry) as its results for the three months ending June 30 showed Q2 turnover up slightly year-over year at $1.621bn.

Comparative net income in Q2 also rose from $172m to $178m, but H1 income fell against 2011, from $286m to $280m.

DPS President and CEO Larry Young said: “We once again outperformed the category in CSDs, growing both volume and dollar share, and made progress against our goals of increasing distribution and availability, with solid gains across both grocery and convenience in CSDs and tea.”

Mixed carbonate results

Dr Pepper volumes rose 1% in the quarter, driven primarily by Dr Pepper TEN and growth in fountain foodservice, while Canada Dry and A&K also rose mid-single digit, DPS reported yesterday.

But Sun Drop sales fell double digit, while 7UP suffered low single-digit declines and other CSD brands fell 2% driven primarily by a high single-digit decline for Crush.

Non-CSDs also suffered with Hawaiian Punch volumes declining 20% and Mott’s volumes down 2%.

CEO Larry Young told analysts that TEN accounted for 5-6% of the total Dr Pepper trademark sales, where this also includes Dr Pepper and Diet Dr Pepper.

He said: “As far as other TEN products [go], it’s still a little early to really go into a lot of detail.” Nonetheless, Young hinted at the success of such products on test markets.

This year DPS has tested 7UP TEN, A&W TEN, Canada Dry TEN and Sunkist TEN on markets in Columbus, Ohio, Des Moines, Iowa and Central Pennsylvania.

“Everything is very, very encouraging to us, that we definitely do have something here with a platform on this ten calorie product,” Young said.

Sustaining TEN volumes

John Faucher, an analyst from JP Morgan Chase, asked Young: “As you look at Dr Pepper TEN and lapping that launch period, what are the key things that you think you need to execute on to avoid having...volumes down in the second year?

“Because that’s, obviously, been a big drag on some of these growth brands that come in. You get some excitement, you get some decent volumes in the first year, but you probably had a little bit of a tougher time, I think, sustaining that volume growth going forward,” he added.

Young said: “I think our plans on Dr Pepper TEN are completely different that what we’ve done before. If you look at what we’ve been doing with TEN, we’ve told everybody you’ve got to be patient.

“It’s something that we look at long term, that we’re going to stay behind, build it.”

It was always tough to lap a launch because of the initial pipeline fill, but DPS was confident in its plans for TEN, Young added.