Dr Pepper profit up 4 pct despite lower volumes

Dr Pepper's profit climbs on higher prices as sales volume declines

Associated Press

NEW YORK (AP) -- Higher prices helped Dr Pepper lift its net income by 4 percent in the first quarter, even though the company sold less of its drinks.

The results beat Wall Street expectations and the company's shares jumped in morning trading.

Dr Pepper Snapple Group Inc., based in Plano, Texas, makes 7Up, Sunkist, Canada Dry and Mott's juices, in addition to its namesake drinks. The company said Wednesday that productivity improvements and a lower charge on inventory during the quarter helped offset higher costs for ingredients, such as apples.

But sales volume declined 2 percent, reflecting the industry's struggles to grow in developed markets where people are shying away from sugary drinks. Unlike its much bigger rivals Coca-Cola Co. and PepsiCo Inc., Dr Pepper relies far more heavily dependent on North America for sales.

That's because Dr. Pepper doesn't own its biggest soda brands in many international markets. For example, Coca-Cola owns Dr Pepper and PepsiCo owns 7Up in many parts of the world.

Given the sluggish growth in the U.S., the three companies have all been tightening costs to improve profitability. They've also been working on new, better-tasting diet sodas intended to win back people who've quit soda. In late 2011, Dr. Pepper introduced a 10-calorie version of its namesake soda that it said uses just enough sugar to give the fuller "mouth feel" that people like. The drink showed early success and the company has since rolled out 10-calorie versions of other sodas, including 7Up and Sunkist.

But in the latest quarter, sales volume for Dr Pepper fell 3 percent, reflecting declines in the core brand as well as Dr Pepper Ten.

Volume for 7Up and Sunkist also declined, while Canada Dry and A&W saw increases.

The new 10-calorie sodas, introduced in the first quarter, already account for about 10 percent of their respective brand sales, the company said.

In noncarbonated beverages, Hawaiian Punch volumes dropped 14 percent and Snapple fell 2 percent, while Mott's rose 11 percent.

For the three months ended March 31, Dr Pepper Snapple Group Inc. earned $106 million, or 51 cents per share. That's compared with $102 million, or 48 cents per share, a year ago.

Not including one-time items, the company said it earned 53 cents per share. That's above the 46 cents per share Wall Street expected, according to FactSet.

Revenue rose 1 percent, to $1.38 billion from $1.36 billion, in line with analyst estimates.

Shares of Dr Pepper gained 81 cents, or 1.7 percent, to $48.59 in afternoon trading.

The Plano, Texas, company stood by its full-year guidance for sales growth of about 3 percent and adjusted earnings of $3.04 to $3.12 per share.

10 sales have been "Highly incremental"

We'll continue to be patient with this launch because we know consumption habits take time to change and we've proven that ten can bring consumers back to the category.

View Comments (9)