PLANO, Texas -- With its core brands flat but its overall net sales up 2% so far in 2015, where is Dr Pepper Snapple Group finding its growth?
Turns out the company's unique business model of partnering with "allied brands"—that is, smaller, independent beverages that DPSG distributes but does not own—is paying off and opening the door to future growth.
"With a lot of these new allied brands, we've got a lot of runway left for distribution availability," Larry Young, president and CEO, said during an earnings conference call on Oct. 22. "We've got parts of the country that we're still just rolling out into right now, ... so we feel very bullish."
In the first nine months of 2015, DPSG saw case sales increase 2% on 3 percentage points of positive mix and price. Carbonated soft drinks grew 2%, while noncarbonated drinks increased 4%.
However, its Dr Pepper brand was flat year-to-date, and its Core 4 brands—Canada Dry, 7UP, A&W and Sunkist—increased just 1% as a 9% increase in Canada Dry was mostly offset by declines in the other three.
Noncarbonated drinks performed better, with Snapple sales up 7% and Hawaiian Punch increasing 2%.
But an increase in the sale of allied brands—brands like Bai5, Fiji, Big Red and Vita Coco—is what really greased the financial wheels.
"The allied brands ... are becoming an important part" of our business, said chief financial officer Marty Ellen. "We look to these kinds of companies to actually contribute very much to our innovation.
"We sort of take the view that probably the next level of breakthrough innovation may not come from inside the company, but it will come from passionate entrepreneurs who see the opportunities ... in terms of where the consumer is going but can have an environment that can nurture and breed these kinds of brands from really nothing into something over time."
DPSG's water category grew 11% in the first nine months of 2015 and 16% in the third quarter on strong growth in Bai5 and Fiji, according to the company.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.