The success of Dr Pepper TEN is prompting the maker of 7Up, Sunkist, Mott’s and other drinks to invest heavily behind the platform in 2013 as a way to deliver what it believes are healthier beverage options for consumers. Dr Pepper Snapple Group is in the midst of a national launch for the TEN versions of 7UP, Sunkist, A&W, Canada Dry and RC after the beverages performed successfully in select test markets in 2012, said Larry Young, president and chief executive officer, in a Feb. 13 conference call with financial analysts.
“We believe these great tasting products together with strong marketing and in-store activity will help reenergize the category,” Mr. Young said. “We will invest heavily behind this critical platform, which includes Dr Pepper TEN, with brand investments associated with TEN expected to exceed $30 million in 2013.”
Mr. Young said that in test markets, more than 7% of the volume from the 7UP, Sunkist, A&W, Canada Dry and RC trademarks came from TEN, and 40% of TEN’s dollar sales were incremental to the C.S.D. category.
“We know we have a winner here,” he said. “What is required is patience because changing consumption habits takes time.”
Martin Ellen, chief financial officer, stressed that bringing consumers back to C.S.D.s with healthier options “is not only critical to us, but also to the industry and our retailers.”
Against that backdrop, he noted the $30 million in investments associated with the TEN platform is above the expected contribution of the brands in 2013.
“The TEN platform may be our most strategically important innovation,” Mr. Ellen said. “So we are prepared to invest in it heavily, even though this will slow our earnings growth in 2013.”
Full-year and fourth-quarter earnings and sales increased at Dr Pepper Snapple Group Inc. driven by higher prices, but results still fell short of analysts’ estimates. As a result, the company’s share price fell nearly 8% on Feb. 13, the day results were released.
The company posted net income of $629 million in the year ended Dec. 31, 2012, equal to $2.99 per share on the common stock, up 4% from $606 million, or $2.77 per share, in fiscal 2011. Net sales for fiscal 2012 increased to $5,995 million from $5,903 million.
For the fourth quarter, net income totaled $170 million, or 82c per share, up from $166 million, or 78c per share, in the same period a year ago. Net sales increased to $1,484 million from $1,461 million.
