just On Call - Dr Pepper Snapple Group to focus on brand building
Dr Pepper Snapple Group said its focus is on building its brands
Dr Pepper Snapple Group (DPSG) has said that its focus remains on building its leading brands, despite pulling back on marketing spend in the quarter.
The US soft drinks firm recorded a 5.8% and 6.9% increase in nine-month and third-quarter net profits, respectively, this morning (26 October). Profits were boosted by the company's delayed planned increase in marketing spend, so it could focus on the launch of Dr Pepper Ten.
DPSG had projected marketing spending would be $10m higher from a year earlier in the third quarter, but the spending actually fell slightly in the period.
Speaking on the firm's earnings call today, DPSG's CFO, Marty Ellen, said that the marketing spend decline was down to ensuring timings were right with the "execution and activation" of its brands.
"We have pulled back a little bit," Ellen said. "Going into this year we increased marketing by $18m from two years ago when we began focusing on building our brands, and when you factor in this year's full-year increase, it's going to be over $100m which, for a company our size, is not such a small increase."
Company CEO Larry Young told analysts that the company is in the process of putting together marketing plans for next year.
"We will spend on our brands, we will build on and enhance our leading brands," Young said. "There is going to be more spend ... it's great for our category, we get more activity out there. As the tide rises all the ships rise with it, so [competition] is not something that really is a concern for us."
Young added that the company is focused on the roll out of its low-calorie Dr Pepper Ten drink and that there were no brand extensions currently in the pipeline.
Separately, the company said it was covered for commodity cost increases in 2012.
"Right now, our first quarter I would call reasonably covered," Ellen said. "You could interpret that as more than 15% of our key commodities. A little less in Q2 and lesser amounts in Q3 and Q4. I can tell you that much of that cover is for the important commodities."
Dr Pepper Snapple Group's share price was down 3.9% to $37.79 at 1228 ET today.
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