Legislation: whats the worst that could happen?

Legislation: what's the worst that could happen?

Pressure for legislation against soft drinks that have been blamed for adding to obesity problems in the US remains a major concern for Dr Pepper Snapple Group.

Fresh legislation is a "significant concern at national and state level", DPSG's president and CEO, Larry Young, said today (6 May).

Senators in many US states, including California, Washington and New York City, have proposed sales taxes on full sugar soft drinks this year. Although proposals in several states have either failed or are waivering, the moves have sparked concern in an industry already under pressure from health lobby groups.

The US Food and Drug Administration has been more proactive in developing a uniform nutrition labelling scheme under the Obama Administration.

DPSG, alongside other soft drinks producers, has backed a campaign for clearer nutrition labelling launched by Michelle Obama, the wife of US president Barack Obama.

Young told analysts at DPSG's first quarter results conference call today that the group needs to work harder to make consumers "understand our beverages". Diet soft drinks, water and juice account for 26% of the firm's annual sales by value.

Despite the threat of tougher legislation, Young was upbeat about prospects for the US soft drinks category in 2010.

"I'm cautiously optimistic," he told analysts. "I'm very encouraged by what I'm seeing. We're not where we want it at yet, but (we're) going in the right direction."

Dr Pepper Snapple today reported a slip in net sales and a steeper fall in net profits in the first quarter of 2010, but the firm raised its full-year guidance range for diluted earnings per share to $2.29 to $2.37, ahead of the previously forecast $2.27-$2.35.

Newly-appointed group CFO, Martin Ellen, told analysts that the firm sees "enormous potential to grow the value of this enterprise".