Breaking Away

Dr Pepper Snapple separates from Cadbury Schweppes

PLANO, Texas -- Dr Pepper Snapple Group Inc., one of the leading refreshment beverage companies in North America, will be listed on the New York Stock Exchange beginning today. Its listing marks the official separation of Cadbury Schweppes Americas Beverages (CSAB) from Cadbury Schweppes plc.

The DPS brand portfolio includes flavored carbonated soft drinks (CSD), ready-to-drink teas, juices, mixers, waters and other premium beverages. Three quarters of the company's volume comes from brands that are either No. 1 or No. 2 in their category, the company said. For each of the past four years, [image-nocss] DPS has been the only major beverage business with year-over-year market share growth in the carbonated soft drinks segment, it said. The company had 2007 full-year revenues of $5.7 billion.

"Today marks the beginning of a new era for our business. We have a strong and sustainable business model and can leverage our integrated system for future growth," said Larry Young, president and CEO of DPS, Plano, Texas. "We have confidence in the beverage industry and we are looking forward to seizing the opportunities as a standalone company."

In addition to its flagship Dr Pepper and Snapple brands, the DPS portfolio includes 7UP, Mott's, A&W, Sunkist Soda, Hawaiian Punch, Canada Dry, Schweppes, RC Cola, Diet Rite, Squirt, Penafiel, Yoo-hoo, Rose's, Clamato and Mr & Mrs T mixers among other consumer brands.

"Our CSD portfolio continues to grow, and our noncarbonated brands have regained momentum. We've also made strategic bottling and distributing acquisitions that are improving our capabilities and protecting the equity of our brands. The success we're realizing with today's listing has been a lengthy process and we're looking forward to solely focusing on the beverage business," said Young.

The DPS business was formed in 2003 by bringing together Cadbury Schweppes' four separate North American beverage business units: Dr Pepper/Seven Up, Mott's, Snapple Beverage Group and Bebidas Mexico. This move brought more than 50 brands under a common vision, business strategy and management structure.

In 2006, the company acquired and began integrating three major independent bottling companies (Dr Pepper/Seven Up Bottling Group, All-American Bottling Co. and Seven Up Bottling Co. of San Francisco). The following year, the company acquired Southeast-Atlantic Beverage Corp., then the second largest independent U.S. bottling company.

This integration, along with the other bottler and distributor acquisitions completed since 2006, established a broad-scale manufacturing and distribution footprint that reaches approximately two-thirds of the U.S. population, said the company.

DPS said it plans to expand operations, according to a report by The Dallas Morning News. The new entity plans to move its research and development team from Trumbull, Conn., to its Plano headquarters, Larry Young, president and chief executive, told analysts Thursday, according to the report.

"By having the core research and development capability at our headquarters, we expect to be able to move more rapidly and reliably from prototype to full commercialization," the company said in a filing with the Securities & Exchange Commission (SEC) cited by the newspaper.

A research facility is under construction at the Plano headquarters and is set to open this summer, company spokesperson Greg Artkop told the paper. The new company also plans to expand operations in Irving, Texas, already home to a multiproduct manufacturing plant that is one of the largest in the system. It will become a "pilot plant" to test concepts before deciding on a full rollout, said.

Meanwhile, Cadbury plc made its debut as an independent confectionery company on Friday after spinning off the U.S. drinks business. Cadbury's brands include Cadbury, Creme Egg, Flake, and Green and Black's in chocolate; Trident, Dentyne, Clorets, Stimorol, Hollywood and Bubbaloo in gum; and Halls, Cadbury Eclairs, Bassett's and the Natural Confectionery Co. in candy.

"The separation of beverages allows us to take the company back to the future," said Todd Stitzer, CEO of Cadbury, London. "The past few years have seen a transformation of the group's performance, and as a focused confectionery company we will be able to do better still."

The listing comes as Cadbury is set to be overtaken as the world's largest confectionary business by Mars Inc., said an Associated Press report. The U.S. candy maker earlier this week announced a $23 billion takeover of Wm. Wrigley Jr. Co., bringing together brands including Snickers, M&Ms, Juicy Fruit, Orbit, Extra and Big Red. Cadbury currently has 10.1% of the market. The combined Mars-Wrigley would have 14.1%, said AP.

Analysts have speculated that Cadbury will seek a deal with The Hershey Co. A matchup between the pair would be mutually beneficial—Cadbury lacks Hershey's U.S. presence, while Hershey lacks Cadbury's global reach. If that fails, Cadbury could be a takeover target itself with Kraft Foods Inc. named as a likely suitor, AP said.