Dr Pepper Snapple Group Inc. (DPS, Financial), a major nonalcoholic beverage company, said first-quarter net sales increased 6% primarily due to higher sales volume and favorable product mix. The company also shared updates on its pending merger with Keurig Green Mountain Inc. (GMCR, Financial), a major coffee brewing company.
Brief summary of earnings
The Plano, Texas-based company reported net sales of $1.594 billion, outperforming analyst estimates by approximately $24 million. The increase in branded shipments and the shift of Easter activity into the first quarter boosted net sales by 2.5%, while favorable product and package mix added 2%.
Table 1 summarizes the net sales growth for each of Dr Pepper’s reporting segments:
| Beverage Concentrates | $9 million, or 3% increase |
| Packaged Beverages | $60 million, or 5% increase |
| Latin American Beverages | $15 million, or 15% increase |
Table 1
Packaged Beverages net sales increased 5% due to higher sales volumes and contract manufacturing. Strong product innovation and continued growth in ginger ale contributed to 16% growth in Canada Dry, one of the company’s major packaged beverage products.
Company discloses “Keurig Dr Pepper” vision
Dr Pepper reiterated its proposed merger with Keurig, a subsidiary of Maple Parent Holdings Corp., in its quarterly report filing with the Securities and Exchange Commission. The company mentioned several highlights of its “Keurig Dr Pepper” vision on March 20, including changes in consumer perspectives of the beverage industry, which is still dominated by Coca-Cola Co. (KO, Financial) and PepsiCo Inc. (PEP, Financial) as Figure 1 illustrates.
Figure 1
Dr Pepper noted that millennials are “thinking about beverages differently,” which led to the “fragmentation in broader beverage and the growth of coffee.” Additionally, changes in the retail landscape require manufacturers to establish “a new set of selling and distribution capabilities.” Dr Pepper CEO Larry Young and Keurig CEO Bob Gamgort mentioned strategic synergies in the merger announcement, including “the opportunity to combine hot and cold beverages” and create a “new scale beverage company” that addresses today’s customer needs with a powerful platform of consumer brands. Dr Pepper said the combined company expects to deliver the seventh-highest retail edibles sales in the upcoming years. Other companies ranking in the top 10 include Nestle (NSRGY, Financial)(XSWX:NESN, Financial) and Warren Buffett (Trades, Portfolio)’s The Kraft Heinz Co. (KHC, Financial).
Disclosure: No positions.
