We'll forgive you for thinking that the world of soda only had Coke and Pepsi in it. They hold an overwhelming market share and have been dominant players for decades.
But it would be a mistake to forget about Dr Pepper Snapple .
For investors who might be thinking of investing in Dr. Pepper, there are four key points management covered in the company's latest conference call that are worth noting. Consider them all carefully before investing your own money.
No. 1: Soda isn't what it used to be
Between 1947 and 1998, popularity of carbonated soft drinks (CSDs) - soda, pop, or "coke", depending on where you live - grew by leaps and bounds. But a funny thing happened before the turn of the millennium: soda consumption by the average American began to fall.
That decline shows no sign of stopping. According to Beverage Digest, soda consumption has fallen by 20% since reaching its peak in 1998. And last year, that decline accelerated, with overall volume falling 3%.
Dr. Pepper CEO Larry Young said his company isn't immune: "[this] is the most challenging CSD environment I've ever seen." That means focusing on Dr. Pepper's non-soda brands - like Snapple, Motts and Clamato - will be even more important moving forward.
No.2: Hawaiian Punch is losing to the competition
Hawaiian Punch has seen better days. According to Young: "Hawaiian Punch declined 12% on category headwinds and increased competitive activity." And that follows first quarter results where Hawaiian Punch sales fell 8%.
During the first quarter's conference call, one analyst even suggested that, "it just seems like that business is sort of dying." Management claims that's not the case, and that it's committed to the brand.
Beyond a move away from super-sugary drinks, the competition taking away market share from Hawaiian Punch seems to be coming from Tang, Kool-Aid, and Tampico.
No. 3: The performance of Schweppes is picking up the slack
While overall soda sales may be falling, one of Dr. Pepper's brands is really picking up steam: Schweppes. Young said that, "Schweppes experienced strong double-digit growth, reflecting growth in our sparkling waters and positive ginger ale category trends."
Apparently, consumers don't view ginger ale, tonic, and soda water in quite the same way as they do other CSDs. Part of that may be due to the fact that, for years, people have viewed ginger ale as a remedy to an upset stomach.
No matter the reason, the strength of the Schweppes brand is picking up slack for the rest of the CSDs in Dr. Pepper's portfolio. For two consecutive quarters, management has called the brand out for "strong double-digit" growth.
No. 4: Partnership with college football is a big deal
The importance of advertising cannot be overlooked. Perhaps for no other product is brand recognition more important than CSDs. Entire museums are devoted to the history of Coke's brand and bottles - that's tough competition to be facing.
The most important initiative for Dr. Pepper in this realm is their partnership with college football. Says CEO Young: "Dr Pepper is the first official college football championship partner and presenting sponsor of the new National Championship trophy. We'll deliver over 2 billion media impressions across both traditional and digital media platforms, ensuring that we're always on."
Investors should be keeping their eyes open to make sure the money spent on such advertising is actually having an effect on the bottom line. If Dr. Pepper is even able to hold CSD sales steady over the next year, it would be a huge win for the company.
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The article 4 Things Dr. Pepper Snapple Group Inc.'s Management Wants You to Know originally appeared on Fool.com.
Brian Stoffel has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of PepsiCo and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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