The CEO of Dr Pepper Snapple Group has said that he remains “cautiously optimistic” on the outlook for the US soft drinks market, despite cutting the firm’s sales guidance for 2010.
Larry Young said today (27 October) that he has continued to see improvements in the US soft drinks market. “I remain cautiously optimistic, we’re seeing an uptick,” he told analysts on the firm’s third quarter results conference call.
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Dr Pepper Snapple today reduced its net sales guidance for 2010 to a rise of between 1% and 2%, compared to a previously forecast increase of between 3% and 5%. Net sales edged up by 2% to $1.46bn in the three months to the end of September, but heavy discounting by US retailers during the quarter meant that consumers were still not spending as much as the group originally predicted.
Latin America, particularly Mexico, also proved to be a drag on sales, largely due to poor weather and “fierce competition” in the market, the firm said. Its net sales in the region fell by 3% for the quarter.
“I’m feeling better than how I was a few months ago,” said Young, despite the lower guidance. He said that he saw improvements in the group’s fountain food service channel, which it sees as a barometer of consumer sentiment.
There was also a robust performance from key brands, such as higher-end Snapple drinks and Diet Dr Pepper. Consumers, said Young, have understood that “Diet Dr Pepper doesn’t taste like a diet”. He added: “We’re happy there, that’s driving strong growth.”
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By GlobalDataHe also highlighted the firm’s licence deal with the The Coca-Cola Co. Following Coca-Cola’s acquisition of Coca-Cola Enterprises in North America, Coca-Cola will produce and sell key Dr Pepper Snapple drinks under licence in several states and will put the brands in its new freestyle fountain machine.
Young said that the deal’s 20-year life span, plus the option of a 20-year renewal, means that “both sides are committed to invest and grow the business”.
Investors were less confident than Young in the firm’s prospects. Dr Pepper Snapple’s share price fell by 1% on the New York Stock Exchange following its results statement.
