Dr Pepper Snapple Group, Inc (DPS)

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Dr. Pepper Snapple Group, Inc. (DPS)

Q4 2009 Earnings Call Transcript

February 25, 2010 11:00 am ET


Aly Noormohamed – SVP, Finance and IR

Larry Young – President and CEO

John Stewart – EVP and CFO


Bill Heckloriello – Consumer Edge

Judy Hong – Goldman Sachs

Mark Swartzberg – Stifel Nicolaus

Andrew Keeley – Deutsche Bank

Caroline Levy – CLSA

Kaumil Gajrawala – UBS

Damian Witkowski – Gabelli & Company



Good morning, and welcome to Dr. Pepper Snapple Group's fourth quarter and full-year 2009 earnings conference call. Your lines have been placed on a listen-only mode until the question-and-answer session. Today's call is being recorded and includes a slide presentation, which can be accessed at www.drpeppersnapple.com. The call and slides will also be available for replay and download after the call has ended. (Operator instructions)

It is now my pleasure to introduce Mr. Aly Noormohamed, Senior Vice President, Finance and Investor Relations. Sir, you may begin.

Aly Noormohamed

Thank you, Melissa, and good morning, everyone. Before we begin, I would like to direct your attention to the Safe Harbor statement and remind you that this conference call contains forward-looking statements, including statements concerning our future financial and operational performance. These forward-looking statements should also be considered in connection with cautionary statements and disclaimers contained in the Safe Harbor statements in this morning's earnings press release and our SEC filings.

Our actual performance could differ materially from these statements, and we undertake no duty to update these forward-looking statements. During this call, we may reference certain non-GAAP financial restaurant measures that reflect the way we evaluate the business, and in which we believe provide useful information for investors. Reconciliations of those non-GAAP measures to GAAP can be found in our earnings press release and on the Investor Relations page at www.drpeppersnapple.com.

This morning's prepared remarks will be made by Larry Young, Dr. Pepper Snapple Group's President and CEO; and John Stewart, our CFO. Following our prepared remarks, we'll open the call for your questions. With that, let me turn the call over to Larry.

Larry Young

Thanks, Aly, and good morning, everyone. It was great to see a lot of you at CAGNY last week. We certainly covered a lot of material there. So beyond our Q4 results, the majority of our comments will focus on our outlook for 2010. I'm sure many of you have questions regarding what impact the acquisition of Coca-Cola Enterprises North America may or may not have for our business. This potential transaction is yet another great example of the strategic importance and growth potential of the North American beverage market.

As I've said before, our guiding principal is to always do what's best for our brands, our customers, our consumers, and ultimately you, our stockholders. As I'm sure you'll appreciate, discussions with customers or potential customers are something best handled in private. Therefore, it would be premature and certainly inappropriate for us to comment on this transaction for the time being. We'll come back to you with more news when we have something to share.

Now, turning to our fourth quarter and full-year results. Despite a tough economy, I'm proud of our accomplishments in our first full year as a stand-alone company. We executed against our focus strategy, and as a result, we've delivered solid results. We've expanded consumption and availability of our products with wins in key fountain accounts like McDonald's and Jack in the Box.

And we exceeded our year one cold drink equipment program goals with placements of almost 36,000 incremental coolers, including wins in Dollar General, Hess, and Wal-Mart. Leveraging our broad and flexible route to markets, we teamed up with the Pepsi bottlers to significantly expand Crush distribution across the US. Flawless execution catapulted this brand to the number two position in fruit-flavored CSD space.

Additionally, we were very happy with the license agreement we reached with PepsiCo, pending their acquisition of the Pepsi Bottling Group and PepsiAmericas. We're the only major beverage company in North America to grow CSD and LRB volume and volume share in 2009. Our CSD share grew 1.2 points, and our LRB share was up 0.7 of a point. During the year, we invested in our infrastructure, our brands, and our people to realize the full potential of the business. Our fifth regional center in Victorville, California is on track and on budget. The first phase of our SAP upgrades covering our DSD business, and the roll out of our handhelds are almost complete.

We further engaged our employees through call to action workshops and by tying their incentive plans to key operational metrics. While we've made great progress and established a solid base, we still have more to do.

Moving on to Q4 and full-year results, the business delivered another quarter of solid results, and we delivered on our full-year commitments. North American beverages remain challenging and consumer spending remained weak. Pricing remains rational, and we're continuing to see a bias toward promotional activity versus price off. Excluding the loss of Hansen's product distribution in the prior year, volume grew 4% for both the quarter and the full year.

For the quarter, CSD volume was up 4%, with Crush adding a 12 million incremental cases. Canada Dry and 7UP grew high single digits as we stepped up our marketing investments behind them. Dr. Pepper declined less than 1%, driven by our fountain business with QSR traffic down 3%. Excluding fountain, Dr. Pepper grew 3%.

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