A lot continues to ride on DPSGs Ten portfolio

A lot continues to ride on DPSG's Ten portfolio

Dr Pepper Snapple Group's Ten brands can boost the group, but an all-natural sweetener that “tastes good” remains the “holy grail” for CSD producers, according to an analyst.

Earlier this week, the company reported a  6.8% drop in first-half net profits, as sales were flat. The group flagged poor weather in its North American markets and “cautious” consumer sentiment.  

In a note to clients earlier today (26 July), CLSA analyst Caroline Levy noted that the company's low-calorie Ten brands now account for around 7% to 10% of its “trademark” volumes and “may be able to play an enduring role in DPSG’s portfolio over time”. However, Levy added that “an all-natural sweetener that tastes good remains the ‘holy grail’ for CSDs. 

“DPSG is dependent on continued strength in its core volumes and could see better-than-expected results if US consumer sentiment materially improved,” she added.

But, Bernstein analyst Steve Powers said: “We are expecting CSD volumes in North America to continue to be weak as a result of a tepid macroeconomic environment, a weak consumer base with less discretionary income, increased awareness about health and wellness, and enhanced anti-obesity regulation."

He added: “In this context, we believe that DPSG will continue to be the price taker in the North American CSDs industry, as its market position is dominated by competitors Coca-Cola and Pepsi, and will therefore be at elevated risk.”