Dr Pepper Snapple Group Inc DPS
Q2 2010 Earnings Call Transcript

Transcript Call Date 07/29/2010

We are already seeing the benefits from our new agreements with PepsiCo. In Q2, this business was up 6%, driven by increased distribution and flawless execution of both Dr Pepper and Crush.

Before I recap our second quarter results, let me share some of the great plans we've had in brand activation during the quarter. We invested an incremental $12 million or 11% over the prior year, with key activities such as Dr Pepper Iron Man promotion, new advertising supporting the launch of Sunkist Solar Fusion.

We continue to drive investments in media with GRPs up over 50%. It's worth noting that with noticeably higher levels of retailer-led price promotion, our teams aggressive shifted activities from the second quarter into the third quarter to maximize our marketing returns.

Snapple's integration into this season's final board challenge on the highly rated Celebrity Apprentice created more than 100 million impressions and drove strong retailer execution resulting in increased brand awareness and accelerated growth.

The two Celebrity Apprentice-inspired flavors were a hit. Bret Michaels Diet Trop-A-Rocka was our number three selling six pack followed by Holly Robinson Peete's all natural Compassionberry at number four. In fact, these two flavors are contributing almost 2 percentage points of Snapple's year-to-date growth and they are selling so well that we've just scheduled our third production run of Trop-A-Rocka.

Great activation drilled 53% ACV in grocery for each of the Celebrity Apprentice flavors. Household penetration also increased with 60% of the sales incremental to the trademark. Trop-A-Rocka also grew the tea category as 24% of the households buying it were new to the category. These great flavors are not only bringing excitement to the Snapple trademark, but they are driving awareness for each of the celebrities' charities, the American Diabetes Association and the HollyRod Foundation.

In the second half of 2009, we reinvented Canada Dry highlighting its better-for-you ingredients, natural flavors and the little known fact that Canada Dry is made with real ginger. For the first time in 10 years we saw began investing behind the brand with new consumer preferred graphics, national account activity, sampling, branded entertainment on Mad Men and TV advertising and we’re seeing the benefits from these investments in 2010.

Year-to-date, Canada Dry's share of Ginger Ale segment is up 3 points and our BCS volume is up 13% for the quarter and 12% year-to-date. Display activity has increased 15% while inventory on display is up 17% and household penetration grew 5 points.

This year we've stepped up the activity to include incremental investment in five key expansion markets. We’re targeting these low per cap areas with local radio, account-specific activity, sampling, displays and sales incentives to drive flavor and package expansion. Year-to-date these markets are driving 25% of Canada Dry’s national growth with strong ACV gains in grocery.

We’re not just wining with consumers. We’re also winning with our customers. Beverage Forum named us 2010 Company of the Year for outstanding performance, flavor leadership and innovation and Wal-Mart just named us Supplier of the Year for 2009. At Wal-Mart, we were recognized as an innovator for our focus on flavor expansion, improving our route to market, developing the Wal-Mart exclusive football bottle and our support of environmental sustainability and nutritional awareness.

Read our Earnings Call Transcript disclaimer.
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