DPSG has high hopes for the US west coast

DPSG has high hopes for the US west coast

Dr Pepper Snapple Group (DPSG) has confirmed that its west coast production and distribution facility in the US is on schedule to begin operations by the end of this month.

Speaking at the CAGNY conference in Florida yesterday (17 February), company CEO Larry Young said that the west coast regional centre, located in Victorville near Los Angeles, will have two bottling lines up and running within the next ten days.

All five lines in the 850,000 square-foot facility will be in operation by the end of June.

Construction of the site began in 2008, and came about due to a recognised weakness in DPSG's route-to-market.

“Five years ago, our supply chain was often the reason why our sales fell short,” said Young yesterday. “We had quadrupled our manufacturing operations through acquisitions, and we frequently struggled to get the right product to the right customer or consumer at the right time.”

The new facility will give DPSG “much-needed capacity and cost advantage that will help us boost our west coast market share,” Young said, adding that construction remains on budget.

Also in the presentation, DPSG said it would use the US$900m proceeds from PepsiCo's rights acquisition, announced late last year, to pay off debt to a level of 2.25 times debt to EBITDA, rather than funding acquisitions. “Our focus is on build versus buy,” Young said.

Any free cash flow thereafter will be returned to shareholders.

The company is scheduled to report its fourth quarter results and issue its 2010 outlook for the first time next Thursday (25 February).