dr. pepper snapple group
DESCRIPTION
This was a Capstone project in which I worked in a team and conducted a strategical analysis of a company. Our group chose to look at Dr. Pepper.TRANSCRIPT
MGT 400 Strategic Management(Capstone)
Instructor: Eric Drouart
COMPANY OVERVIEW
• Mission Statement
• Key Facts
• Company Highlights
• Company History
• Recent Products
MISSION STATEMENT• “At Dr Pepper Snapple
Group, it is our vision to be the best beverage business in the Americas. Our brands have been synonymous with refreshment, fun and flavor for generations, and our sales are poised to keep growing in the future.”
http://www.drpeppersnapplegroup.com/company/mission/
5 Strategic Principles
1. Building and enhancing our leading brands.2. Pursuing profitable channels, packages and
categories.3. Leveraging our integrated business models.4. Strengthening our route to market.5. Improving operating efficiency.
http://www.drpeppersnapplegroup.com/company/mission/http://investor.drpeppersnapple.com/strategy.cfm
CORE VALUES
1. Accountable.2. Customer-Centric.3. Transparent and
Honest.4. Inspect What We
Expect.5. Our Own Decisions.6. No Blame-Fixing.
http://www.drpeppersnapplegroup.com/values/call-to-action/
CORE VALUES
http://www.drpeppersnapplegroup.com/values/call-to-action/
KEY FACTS
• Ranked #404 on the Fortune 500 in 2011.
• Revenue was $5.6 billion in 2010.
• 200 Warehouses & Distribution centers.
• 19,000 Employees.• Over 50 Brands today.• Own Bottling and
distribution network in 2006.
http://news.drpeppersnapple.com/fact-sheet/corporate-fact-sheet
KEY FACTS (CONT.)
• Located in the United States, Mexico, Canada, and the Caribbean.
• Headquarters are in Plano, TX.• 21 Manufacturing / Bottle facilities in North
America.
http://news.drpeppersnapple.com/fact-sheet/corporate-fact-sheet
COMPANY HIGHLIGHTS
• 2009: #1 in Product of the year USA Awards.
• Snapple Green Tea wins the North American Tea Championship.
• 2010: Named Company of the year by BMC and BWM.
• 2010: Snapple Compassionberry & Crush Cherry are named Retailer Choice Best New Product Awards.
http://www.drpeppersnapplegroup.com/company/awards-recognition/
COMPANY HISTORY
• Public on May 7, 2008.• Spin-off of Cadbury
Schweppes.• 1783: Jean Jacob Schweppe invents soft drinks.• 1885: Charles Alderton invents Dr. Pepper in
Waco, TX.• 1970’s: Snapple Beverage Corp. established.• 1995: Cadbury Schweppes purchases Dr.
Pepper/Seven Up, Inc.http://www.drpeppersnapplegroup.com/company/history/
COMPANY HISTORY (CONT.)• 2000: Cadbury Schweppes
acquires Snapple Beverage Group.
• 2006: Own bottling and distribution network established.
• Present day:– 50+ Brands = Refreshment,
fun, flavor.– 6 of the top 10 non-cola soft
drinks.– 9 of the 12 leading brands are
#1 in their flavor categories.http://www.drpeppersnapplegroup.com/company/history/
RECENT PRODUCTS
EXTERNAL ENVIRONMENT
Technology
General Economic Conditions
Legislation and Regulations
Population Demographics
Societal Values and Lifestyles
EXTERNAL ENVIRONMENT
TECHNOLOGY
• Technology is at the forefront of the soft drink industry.
• Example:– Social Vending System
machines by PepsiCo
http://www.independent.co.uk/life-style/gadgets-and-tech/soft-drink-maker-delivers-social-technology-with-drinks-from-vending-machines-2276508.html
GENERAL ECONOMIC CONDITIONS
• Despite the struggles of economies in recent years, the soft drink industry has remained extremely successful.– Overall worldwide
consumption increased by 4.1% in 2011.
http://www.marketingweek.co.uk/soft-drinks-industry-thrives-despite-tough-economy/3025395.article
UNITED STATES
MEXICO
CANADA
DPSG Stock Price
http://investor.drpeppersnapple.com/stocklookup.cfm
LEGISLATION and REGULATIONS
• Soda Taxes• FDA Guidelines• School Beverage
Guidelines• Energy Drink Guidelines• Dietary Guidelines
POPULATION DEMOGRAPHICS
• U.S. children and teenagers are seeing heavy soda advertising in recent years.– Hispanics and African
Americans.
• 2008 to 2010:– Advertising spending
increases for DPSG and Coca Cola; drops 22% for PepsiCo.
http://www.reuters.com/article/2011/11/01/us-soda-idUSTRE79U62C20111101
U.S. Population
http://www.incontext.indiana.edu/2011/july-aug/article1.asp
SOCIETAL VALUES and LIFESTYLES
• Health conscious individuals.
• Obesity and diabetes awareness.
• Low calorie diets have emerged in recent years.– School guidelines and soda
taxes.
• At DPSG, we sell different products in our different countries.– Mexico, Caribbean, Canada.
INDUSTRY ANALYSIS
• Overview• Market Definition• Category Definition• Industry Trends• Future Growth Drivers• Projected Growth Rates• DPSG Performance
vs. Industry• Risks
INDUSTRY OVERVIEW• The U.S. beverage market
grew by 0.9 percent in 2011• Advertising • Bottle Distribution mergers
and acquisitions– Coca-Cola Enterprises and
PepsiCo• Energy drinks • Bottled water- growth
continues to accelerate
http://www.cnbc.com/id/46796332
MARKET DEFINITION AS % OF SALES
• DPS total sales= $5,903 million
CATEGORY DEFINITION
Additional Categories:• Funcitonal
Drinks– Engery Drinks=
57.6% Global– Sports Drinks=
26.1% Global
INDUSTRY TRENDS
• Energy Drinks• Bottled Water• Distribution and
Bottling Center Mergers/Acquisitions
• Costs of resources increasing
FUTURE GROWTH DRIVERS
• Current Obesity epidemic • Emerging diabetes epidemic (1 in
3 Americans will be obese by 2025)
• The Aging Population• Energy Drinks
FUTURE GROWTH DRIVERS
Current Obesity Epidemic
FUTURE GROWTH DRIVERS
Emerging Diabetes Epidemic • Affects 25.8
million people in the US alone– 8.3% of US
population
PROJECTED GROWTH RATES (in sales)
DPSG YTD PERFORMANCE (relative to industry)
RISKS• We operate in highly competitive markets• We may not effectively respond to changing
consumer preferences, trends, health concerns and other factors
• We depend on a small number of large retailers for a significant portion of our sales
• We depend on 3rd party bottling and distribution companies for a portion of our business
• Our financial results may be negatively impacted by recession, financial and credit market disruptions and other economic conditions
RISKS• Costs for commodities may increase substantially• Weather and climate changes could adversely affect
our business • Our products may not meet health and safety
standards or could be contaminated • We depend on key information systems and third
party service providers• Certain raw materials we use are available from a
limited number of suppliers and shortages could occur
COMPETITIVE ANALYSIS
• Top Competition• Primary Competitors• Market Share• Geographic Market
Share• Competitor Comparisons• Strategic Focus
and Growth Strategies• New Product Activities• Summary
Top Competition
PRIMARY COMPETITORS • The Coca-Cola Company
– Over 139,600 employees worldwide– Estensive product line with over 3,500 products– Drew in $35.119 billion dollars in revenue at the end
of 2010
• PepsiCo Inc– Over 285,000 employees worldwide– Have been bringing in a gross revenue of over $60
billion– Increased revenue over 30% in 2010 and over 15%
over in 2011
• Nestle S.A.– They have a wide variety of products from chocolate
to soft drinks– Made the most profit out of all competitors in 2011
with $10 million– Biggest strenght is taking global products and putting
them in local markets.
Market ShareMarket Share between beverage companies in 2011 and 2012
SALES BY GEOGRAPHIC REGION
-Americas accounts for 51.4% of the global carbonated soft drinks market value. -Europe accounts for a further 35.2% of the global market.
SALES BY GEOGRAPHIC REGION Pt. 2
BENCHMARKING AND COMPARISONS
Revenues Net Income Total Assets Total Liabilities
Coca-Cola 35,119.0 11,809.0 48,671.0 23,325.0
Cott Corp. 1,803.3 59.8 1,529.2 994.0
PepsiCo 57,838.0 6,320.0 68,153.0 46,677.0
Dr. Pepper 5,636.0 528.0 8,859.0 6,400.0
2010 Key Financials ($)
Yahoo Finance
BENCHMARKING AND COMPARISONS
Profit Margin
Revenue Growth
Asset Growth
Liabilities Growth
Debt to Asset Ratio
Return on Assets
Coca-Cola 33.6% 13.3% 20.1% 18.7% 47.9% 26.5%
Cott Corp. 5.4% 12.9% 75.0% 110.4% 65.0% 5.0%
PepsiCo 10.9% 33.8% 71% 108.3% 68.5% 11.7%
Dr. Pepper 9.4% 14.0% n/a n/a 65.2% 10.9%
2010 Key Financials Ratios ($)
Yahoo Finance
STRATEGIC FOCUS & GROWTH STRATEGIES
– Operates in over 200 countries and employs nearly 100,000 people.
– Most products are manufactured and sold by bottling partners.
– Diverse products.• Sparkling and still
beverages.• Juice and juice-drink.• Ready-to-drink tea.
• 6 business segments.– North America– Eurasia and Africa– Europe– Latin America– Pacific– Bottling Investments
- DataMonitor
STRATEGIC FOCUS & GROWTH STRATEGIES (Cont.)
– PepsiCo is a global snack and beverage company.
– 3 Business Units:• PAF = PepsiCo Americas
Foods.• PAB = PepsiCo Americas Beverages.• PI = PepsiCo International.
• These 3 units are divided into six additional segments:– FLNA– QFNA– LAF– PAB– Europe– Asia, Middle East, and
Africa (AMEA)
- DataMonitor
STRATEGIC FOCUS & GROWTH STRATEGIES (Cont.)
– Largest food and beverage company in the world.
– 6 divisions that are organized along product groups.
• Beverage• Milk products• Nutrition and ice cream• Prepared dishes and cooking
aids• Pet care products.• Pharmaceutical products.
• Nutrition Business has 4 sub-divisions:– Infant– Healthcare– Performance– Weight management
• 3 geographic zones:– Zone Europe– Zone Americas– Zone Asia, Oceania, and
Australia.- DataMonitor
NEW PRODUCTS & ACTIVITIES• Coca Cola
– New Minute Maid Light Packaging. (3/21/12)– NCAA March Madness Campaign. (3/15/12)– Arctic Home Campaign. (12/1/12)– Coke Zero & Mission Impossible. (10/19/11)
• Pepsi– New Mountain Dew flavors and Pepsi next released (1/12)– New Starbucks drinks released in February. (2/12)– Amp Energy drinks reformulated. (2/12)
• Nestle– Boosts dairy industry in Sri Lanka. (4/2/12)– Uses avalanche research to create better ice cream. (3/26/12)– R&D efforts strengthened in Asia. (3/20/12)– Nutrition guide launched for cancer patients in Spain. (3/19/12)http://www.thecoca-colacompany.com/dynamic/press_center/global- filter/products/
globalIndex.htmlhttp://www.gillettepepsicola.com/products/new_products.phphttp://www.nestle.com/Media/NewsAndFeatures/Pages/NewsAndFeatures.aspx
COMPETITOR STRENGTHS & WEAKNESSES
Strengths Weaknesses
Coca-Cola Company -Popularity.-Well known.-Branding is obvious and easily recognized.-A lot of finance.-Customer loyalty.-International Trade.
-Word of mouth-Lack of popularity of many Coca Cola’s brands.-Most unknown and rarely seen.-Result of low profile or non-existent advertising.-Health issues.
Nestle -Ability to leverage strong brand name to generate sales.-Ability to customize products to the local market conditions.-Strong focus on R&D.
-Increasing instances of product recalls hamper brand equality.-Slow recovery of product volume from economic downturn in 2009.-Relative less sales exposure in emerging markets.
PepsiCo, Inc. -Branding-Diversification-Distribution-Leadership in the snack business segment.
-Overdependence on Wal-Mart.-Overdependence on US Markets.-Low Productivity.-Image Damage Due to Product Recall.-Health Issues
- Data Monitor
SUMMARY OF THE COMPETITION• Coca-Cola
– The Coca-Cola Company (Coca-Cola) is the #1 leading manufacturer, distributor and marketer of non-alcoholic beverages.
– Owns or licenses more than 500 brands.• PepsiCo
– PepsiCo is one of the largest food and beverages companies in the world. – 18 brands generate over $1,000m in annual sales.
• Nestle– Nestle is the largest food and beverage company in the world.– Diverse range of products.
• Anheuser-Busch– ABInBev is one of the world's largest brewers based in Belgium.– Portfolio of over 200 Brands.
- DataMonitor
DPSG INTERNAL ANALYSIS• Organization Structure• Financial Summary• Primary Product
Segments• Product Segments
Revenues• Net Sales per Region• Company Performance• Projected Performance
Trend• Core Competency• Products Statistics• Current Growth
Strategies
ORGANIZATION STRUCTURE
CEO & President
CFO
IT Finance
Human Resources R&D Marketing Supply
ChainConcentrated
BeveragesPackaged Beverages
Larry Young
Martin M. Ellen
http://www.drpeppersnapplegroup.com/company/leadership/
(in thousands) 2011 2010 2009Profit & Loss Revenue 5,903 5,636 5,531 EBIT 1,039 1,049 1,111
Operating Margin 4,864 4,587 4,420Balance Sheet Asset 1,757 1,309 1,279 Liabilities 7,020 6,400 1,279 Equity 2,263 2,459 3,187Cash Flow
Operating Cash Flow 760 2,535 865
FINANCIAL SUMMARY Source: Yahoo! Finance
PRIMARY PRODUCT SEGMENTS
• Beverage Concentrates– Dr. Pepper, Canada Dry, Sunkist,
Schweppes, 7UP, A&W, RC Cola, and Sun Drop
• Packaged Beverages– NCB= Hawaiian Punch, Snapple,
Mott’s, Yoo-Hoo, and Nantucket Nectars
– CSB= 7UP, Dr. Pepper, A&W, Sunkist, and Canada Dry
• Latin America Beverages– Squirt, Penafiel, Aguafiel, Crush, and
Clamato
DPSG Annual Report 2011
PRODUCTS SEGMENTS REVENUES
Market Share
Beverage Concentrates: 40% (US)Packaged Beverages: 49.2% (US)Latin America Beverages: 6.07%
DPSG Annual Report 2011 and Global Soft Drink Industry Report
NET SALES PER REGION
International for DPS is Mexico, The Caribbean, and Canada
$5.9 billion of net sales in 2011 from the U.S. (89%), Canada (4%) and Mexico and the Caribbean (7%)
DPSG Annual Report 2011 and Global Soft Drink Industry Report
COMPANY PERFORMANCE
Yahoo.Finance.com
COMPANY PERFORMANCE
Yahoo.Finance.com
PROJECTED PERFORMANCE TREND
• DPS expects sales to grow modestly over the next 3 years with expectations on the low end
• Also Muted core growth is expected – Volumes are expected to remain
soft along with increased marketing spend and competition from Coca-Cola and PepsiCo
http://www.bevnet.com/news/2012/dr-pepper-beats-forecasts-though-muted-growth-expected-for-2012
CORE COMPETENCY
• R&D– 2008: Invested $17 million – 2009: Invested $16 million– 2010: Invested $15 million
• Manufacturing– 18 Manufacturing Facilities in the U.S.– 174 Distribution Centers in the U.S.– Along with 3 manufacturing facilities and 23 distribution centers in
Mexico
• DPSG also has their own fleet of over 5,000 delivery trucks that provide product transportation across the nation
CORE COMPETENCY CONTINUED• R&D Areas of Investigation:
– Product Development– Microbiology– Analytical Chemistry– Process Engineering– Sensory Science– Nutrion– Knowledge Management– Regulatory Compliance
• DPSG has a high level of expertise in flavors and sweeteners as well.
PRODUCTS STATISTICS
CURRENT GROWTH STRATEGIES
BUILD THE FOUNDATION(2007-2010)
INVEST FORGROWTH
Build Our BrandsGrow Per Caps
Rapid Continuous Improvement(2011-2015)
OPTIMIZE RETURN ON CAPITAL
(2015+)
Building Shareholder Value Over Time
Strengths: Weaknesses:
Opportunities: Threats:
DPSG SWOT ANALYSIS• Strong portfolio of brands.• Integrated business model.• Strong customer relations.• Differentiation Strategies.
– unique taste.– Snapple Facts
• Growth to international markets.• New product launches or line
extensions.• Growth into functional (energy drink)
market.• People have more discretionary
income.
• Minor compared to larger peers.• Rely on 3rd-party bottlers for packaging and distribution.• Continued focus on carbonated soft drinks rather than alternative and functional beverages.• Lack of international exposure.
• Loss of partner bottlers.• Socio-cultural trends towards healthier lifestyles
- sugar tax
KEY ISSUE #1
• Growing health consciousness in the United States.– U.S. consumption of soft drinks in 2011 fizzled to its lowest
level since 1996.• Customers are opting for bottled waters, juice, teas, and energy drinks.• Energy drink market grew 16% in 2011.
– Dr. Pepper Snapple (along with Coke and Pepsico) lost volume in 2011.
– The average U.S. customer drank 714 8-ounce servings of soft drinks in 2011, down from 728 8-ounce servings in 2010.
– Total soft drink consumption was 9.274 billion cases in 2011, down 1% from the year before, and the seventh straight year of decline.
http://www.foodproductdesign.com/news/2012/04/u-s-soda-consumption-fizzles.aspx
KEY ISSUE #1
• Growing health consciousness in the United States.– In the United States, a 2005 survey reported:
• 74% of consumers claimed to have changed their eating habits due to health and nutrition concerns.
• 87% considered nutrition an important factor in purchasing groceries.
• 64% stated a willingness to pay more for healthier versions of food items.
– Health-conscious households make up 18% of the U.S. market overall.
http://tippie.uiowa.edu/marketing/research_papers/grocery%20basket%20data.pdf
KEY ISSUE #1
• Growing health consciousness in the United States.
• Over the past 5 years, the CSD industry has declined 7.1%.
• It is expected to decrease by 2% a year over the next five years.
RECOMMENDATION for KEY ISSUE #1
• What we are doing now:– Launched a new line of
10-calorie drinks– Dr. Pepper Ten – Plans for 7 Up Ten,
Sunkist Ten, A&W Ten, RC Ten, and Canada Dry Ten
RECOMMENDATION for KEY ISSUE #1
• What we could be doing:
• Health and Wellness Market– Water – New age
beverages• Teas and Juices
www.jdford.com/pdfs/JDF_Comp_Health_Wellness_09.pdf
KEY ISSUE #2
• Lack of focus on alternative and functional beverage markets.– These markets have seen strong growth as
consumer preferences have shifted away from CSD products to healthier options.
– DPSG focuses the majority of their resources and efforts on existing and new CSD’s.
– By DPSG ignoring emerging product categories such as energy drinks, this could be a missed growth opportunity going forward.
KEY ISSUE #2
• Lack of focus on alternative and functional beverage markets.– President and CEO Larry
Young:• “No, we’re still very happy with our
portfolio… we stay focused on the total portfolio, but we are putting a lot of emphasis right now on our carbonated soft drinks. As I mentioned a moment ago, I think with the tough economic times we’re going to see people come back in and recognize that value. That’s where we’re putting a strong focus.”
KEY ISSUE #2
• Lack of focus on alternative and functional beverage markets.– Example – Bottled Water
http://www.accuval.net/insights/industryinsights/detail.php?ID=142
Diet Drink Promotion
RECOMMENDATIONS for ISSUE #2
• A more health conscious world is looking for an alternative drink for a fit lifestyle.
• Products such as Snapple, Hawaiian Punch, and Mott’s have show no more than 0.5% growth.
• Increase our promotion of non-soda diet drinks such as Snapple and Hawaiian punch.
RECOMMENDATIONS for ISSUE #2
– Market for Bottled Water• Dasani’s bottled water
volume rose 11%in 2011.
• Implemenation of ournew bottled waterproduct into the market.
• Multiple advertising and promotional campaigns for “Dr. Aqua.”
http://www.beveragemarketing.com/reportcatalog4a.html
RECOMMENDATIONS for ISSUE #2
• Market for Energy Drinks– Energy Drink Sales grew
14.4 percent by voulme in2011.
– Boost and relaunch theVenom product.
• Generategrowth and sales throughnew sponsorships andpromotion.
http://www.cnbc.com/id/46796332
KEY ISSUE #3
• Low international presence.• DPSG only has a presence in the United States, Canada,
Mexico, and Latin America.• Coca-Cola and PepsiCo are both in over 100 countries
worldwide.• International segment has been a primary driver for these
companies as health consciousness has increased in North America.
• Low exposure presents a significant growth opportunity to DPSG, but they have not indicated they want to expand.
RECOMMENDATION for ISSUE #3 • Strategic Thrust:
– Compete against Coca Cola, PepsiCo, Nestle.
– Potential for large increases in revenues.– Less over-reliance on one particular
country.
• Short-Term (5-10 years)– Expand international presence into
Europe and South America.• Europe represents 35.2% of the soft drink
industry. (2011)
• Long-Term (10-20 years)– Expand into Asia-Pacific.
• Represents 11.4% of soft drink industry. (2011)
• Length of time will vary based on whether this percentage increases or decreases.
WHY THESE REGIONS WORK
http://mapsofworld.com/world-top-ten/maps/world-top-ten-carbonated-soft-drink-consumer-countries.jpg
OVERVIEW of EUROPE
http://www.nationmaster.com/graph/foo_sof_dri_con-food-soft-drink-consumption
2002 DataMeasurement = Liters per Person Average Consumption per Country = 89.8 liters
KEY ISSUE #4
• Loss of partner bottlers.– DPSG’s distribution
network is heavily reliant on Coca Cola and PepsiCo.
– If Coke and Pepsi make their bottling partners wholly owned subsidiaries, DPSG will see amplified costs.
– This will lead to unfavorable positions with retailers and consumers.
RECOMMENDATION for ISSUE # 4
• Become less dependent on 3rd party bottlers by improving and expanding upon the DPSG owned bottling system
• Activities that support this recommendation: – Recently resolved an issue with our
oldest bottler of Dr. Pepper, the Dublin Dr. Pepper Bottling Company
– Sued the bottler because they– Sold the soft drink beyond the six
county territory designated in its licensing agreement
– To end the bottlers unauthorized use of the label “Dublin Dr. Pepper”
THANK YOU!
Questions?