Dr Pepper Snapple Group, Inc. Reports 7 Percent Net Sales Gain In First Quarter

Dr Pepper Snapple Group, Inc. reported first quarter 2011 diluted earnings of $0.50 per share compared to $0.35 per share in the prior year period. Excluding a separation-related foreign deferred tax charge, diluted earnings per share in the prior year period were $0.40.

For the quarter, reported net sales increased 7 percent, reflecting solid volume growth and low-single digit price increases. Revenue recognized under the PepsiCo, Inc. (PepsiCo) and The Coca-Cola Co. (Coca-Cola) licensing agreements and the favorable impact of repatriated brands added 3 percentage points to net sales growth. Reported segment operating profit (SOP) increased 1 percent reflecting net sales growth and ongoing supply chain productivity benefits partially offset by higher packaging, ingredient and transportation costs and a $14 million increase in marketing. Foreign currency added one percentage point to net sales and SOP growth. Reported income from operations for the quarter was $202 million compared to $187 million in the prior year period.

DPS President and CEO Larry Young said in a prepared statement, "We're off to a solid start in 2011. The foundational investments we've made to strengthen this business are paying off. Through rapid continuous improvement, or RCI, we're finding even more opportunities to free up resources to support growth. For the period, we increased distribution and availability, introduced exciting new products and expanded Sun Drop nationally. Despite a significant escalation in commodity and fuel costs, we continue to manage this business for the long term, balancing brand growth with pricing, mix and productivity. With solid plans in place and with continued wins in RCI, I am confident we'll deliver our commitments for the year."

For the quarter, BCS volume increased 1 percent with carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) both growing 1 percent.

In CSDs, Dr Pepper volume increased 1 percent. Canada Dry volume grew double digits and Sun Drop doubled, adding 3 million cases, following its national launch. 7UP declined mid-single digits. Crush declined high-single digits, cycling 22 percent growth in the prior year period. A&W declined mid-single digits and Sunkist soda declined double digits. Fountain foodservice volume grew 7 percent on increased Dr Pepper availability.

In NCBs, Hawaiian Punch volume grew 7 percent and Snapple grew 10 percent. Mott's volume declined 8 percent, cycling 14 percent growth in the prior year period.

By geography, U.S. and Canada volume was flat while volume grew 5 percent in Mexico and the Caribbean.

Year-to-date through March and across all measured channels, as reported by The Nielsen Company, U.S. CSD dollar share declined 0.1 percentage points.

Sales volume

For the quarter, sales volume increased 2 percent. Branded sales volume grew 2 percent and contract manufacturing increased 12 percent to support inventory build for a customer.

Net sales for the quarter increased 6 percent reflecting 2 percent comparable volume growth and a low-single digit concentrate price increase partially offset by unfavorable discount timing. Revenue recognized under the PepsiCo and Coca-Cola licensing agreements added 5 percentage points to net sales growth while the impact of repatriated brands reduced net sales growth by 3 percentage points. SOP increased 5 percent reflecting net sales growth partially offset by higher marketing investments.

Net sales for the quarter were up 6 percent reflecting volume growth and low-single digit price increases. Brands repatriated under the PepsiCo and Coca-Cola licensing agreements added 3 percentage points to net sales growth. SOP decreased 6 percent as net sales growth and ongoing supply chain productivity benefits were more than offset by higher packaging, ingredient and transportation costs and higher marketing investments.