DPSG says its portfolio has bucked slowing market trends

DPSG says its portfolio has bucked slowing market trends

Dr Pepper Snapple Group (DPSG) remains on an even keel as rivals feel the pinch of a weakening consumer market, according to the company's CEO.

First-half results released yesterday (26 July) showed that net profits at the group fell 2.1% as sales rose by 2.4%. While other soft drinks makers show concern over a narrowing market, DPSG is “cautiously optimistic”, the company's CEO Larry Young told investors.

“A lot of the things we're hearing from others is that they're seeing it slowdown,” Young said. “None of our trends are showing that. We're staying pretty steady in large format. We're seeing continued growth in small format, especially convenient and gas.”

The Coca-Cola Co recently announced it saw a weakening in convenience-store sales, though PepsiCo said it had outperformed overall trends. However, earlier this week, PepsiCo posted a 14% net profit drop coupled with flat sales figures.

Young said the group was right behind its low-calorie Dr Pepper Ten, which, following its launch in October last year, is still hitting expectations.

It helped drive trademark Dr Pepper's 1% growth, adding about 1m cases, Young said, adding that the group has other TEN products in the pipeline.

“It's something that we look at long-term, that we're going to stay behind, build it,” he said.

Young also said DPSG's sweetner costs should not be affected in the short term by recent droughts affecting US corn crops as the group has hedged its prices for the year. However, a spring freeze on its apple supplies in the north west of the country will hurt commodity costs as far as the third quarter of next year. 

Most of DPSG's US-sourced apples are used in its Mott's applesauce brand. Mott's apple juice brand uses a concentrate bought from China.

Earlier this month, the US government lowered its forecast for domestic corn production, confirming fears the country's worst drought in almost 25 years has hit yields.

Drinks companies tend to forward-buy corn to mitigate against price shocks. PepsiCo CFO Hugh Johnston said earlier this week corn prices are “not an issue in 2012”.

Both PepsiCo and DPSG declined to speculate on next year's prices.