This was a Capstone project in which I worked in a team and conducted a strategical analysis of a company. Our group chose to look at Dr. Pepper.

1. MGT 400 Strategic Management
(Capstone)
Instructor: Eric Drouart

2. COMPANY OVERVIEW
• Mission Statement
• Key Facts
• Company Highlights
• Company History
• Recent Products

3. MISSION STATEMENT
• “At Dr Pepper
Snapple Group, it is
our vision to be the
best beverage
business in the
Americas. Our
brands have been
synonymous with
refreshment, fun
and flavor for
generations, and
our sales are poised
to keep growing in
the future.”
http://www.drpeppersnapplegroup.com/company/mission/

4. 5 Strategic Principles
1. Building and enhancing our leading brands.
2. Pursuing profitable channels, packages and
categories.
3. Leveraging our integrated business models.
4. Strengthening our route to market.
5. Improving operating efficiency.
http://www.drpeppersnapplegroup.com/company/mission/
http://investor.drpeppersnapple.com/strategy.cfm

5. CORE VALUES
1. Accountable.
2. Customer-Centric.
3. Transparent and
Honest.
4. Inspect What We
Expect.
5. Our Own Decisions.
6. No Blame-Fixing.
http://www.drpeppersnapplegroup.com/values/call-to-action/

6. CORE VALUES
http://www.drpeppersnapplegroup.com/values/call-to-action/

7. KEY FACTS
• Ranked #404 on the
Fortune 500 in 2011.
• Revenue was $5.6 billion
in 2010.
• 200 Warehouses &
Distribution centers.
• 19,000 Employees.
• Over 50 Brands today.
• Own Bottling and
distribution network in
2006.
http://news.drpeppersnapple.com/fact-sheet/corporate-fact-sheet

8. KEY FACTS (CONT.)
• Located in the United
States, Mexico, Canada, and the Caribbean.
• Headquarters are in Plano, TX.
• 21 Manufacturing / Bottle facilities in North
America.
http://news.drpeppersnapple.com/fact-sheet/corporate-fact-sheet

9. COMPANY HIGHLIGHTS
• 2009: #1 in Product of
the year USA Awards.
• Snapple Green Tea wins
the North American Tea
Championship.
• 2010: Named Company of
the year by BMC and
BWM.
• 2010: Snapple
Compassionberry & Crush
Cherry are named
Retailer Choice Best New
Product Awards.
http://www.drpeppersnapplegroup.com/company/awards-recognition/

10. COMPANY HISTORY
• Public on May 7, 2008.
• Spin-off of Cadbury
Schweppes.
• 1783: Jean Jacob Schweppe invents soft drinks.
• 1885: Charles Alderton invents Dr. Pepper in
Waco, TX.
• 1970’s: Snapple Beverage Corp. established.
• 1995: Cadbury Schweppes purchases Dr.
Pepper/Seven Up, Inc.
http://www.drpeppersnapplegroup.com/company/history/

11. COMPANY HISTORY (CONT.)
• 2000: Cadbury Schweppes
acquires Snapple Beverage
Group.
• 2006: Own bottling and
distribution network
established.
• Present day:
– 50+ Brands =
Refreshment, fun, flavor.
– 6 of the top 10 non-cola soft
drinks.
– 9 of the 12 leading brands are
#1 in their flavor categories.
http://www.drpeppersnapplegroup.com/company/history/

12. RECENT PRODUCTS

13. EXTERNAL ENVIRONMENT
Technology
General
Societal Values
Economic
and Lifestyles
Conditions
Population Legislation and
Demographics Regulations

14. EXTERNAL ENVIRONMENT

15. TECHNOLOGY
• Technology is at the
forefront of the soft
drink industry.
• Example:
– Social Vending System
machines by PepsiCo
http://www.independent.co.uk/life-style/gadgets-and-tech/soft-
drink-maker-delivers-social-technology-with-drinks-from-vending-
machines-2276508.html

16. GENERAL ECONOMIC CONDITIONS
• Despite the struggles of
economies in recent
years, the soft drink
industry has remained
extremely successful.
– Overall worldwide
consumption increased
by 4.1% in 2011.
http://www.marketingweek.co.uk/soft-drinks-industry-thrives-
despite-tough-economy/3025395.article

17. UNITED STATES

18. MEXICO

19. CANADA

20. DPSG Stock Price
http://investor.drpeppersnapple.com/stocklookup.cfm

21. LEGISLATION and REGULATIONS
• Soda Taxes
• FDA Guidelines
• School Beverage
Guidelines
• Energy Drink Guidelines
• Dietary Guidelines

22. POPULATION DEMOGRAPHICS
• U.S. children and
teenagers are seeing
heavy soda advertising
in recent years.
– Hispanics and African
Americans.
• 2008 to 2010:
– Advertising spending
increases for DPSG and
Coca Cola; drops 22% for
PepsiCo.
http://www.reuters.com/article/2011/11/01/us-soda-
idUSTRE79U62C20111101

23. U.S. Population
http://www.incontext.indiana.edu/2011/july-aug/article1.asp

24. SOCIETAL VALUES and LIFESTYLES
• Health conscious
individuals.
• Obesity and diabetes
awareness.
• Low calorie diets have
emerged in recent years.
– School guidelines and soda
taxes.
• At DPSG, we sell different
products in our different
countries.
– Mexico, Caribbean, Canada
.

25. INDUSTRY ANALYSIS
• Overview
• Market Definition
• Category Definition
• Industry Trends
• Future Growth Drivers
• Projected Growth Rates
• DPSG Performance
vs. Industry
• Risks

26. INDUSTRY OVERVIEW
• The U.S. beverage market
grew by 0.9 percent in 2011
• Advertising
• Bottle Distribution mergers
and acquisitions
– Coca-Cola Enterprises and
PepsiCo
• Energy drinks
• Bottled water- growth
continues to accelerate
http://www.cnbc.com/id/46796332

27. MARKET DEFINITION AS % OF SALES
• DPS total sales= $5,903
million

28. CATEGORY DEFINITION
Additional
Categories:
• Funcitonal
Drinks
– Engery Drinks=
57.6% Global
– Sports Drinks=
26.1% Global

29. INDUSTRY TRENDS
• Energy Drinks
• Bottled Water
• Distribution and
Bottling Center
Mergers/Acquisitions
• Costs of resources
increasing

30. FUTURE GROWTH DRIVERS
• Current Obesity epidemic
• Emerging diabetes epidemic (1 in
3 Americans will be obese by
2025)
• The Aging Population
• Energy Drinks

31. FUTURE GROWTH DRIVERS
Current Obesity Epidemic

32. FUTURE GROWTH DRIVERS
Emerging Diabetes
Epidemic
• Affects 25.8
million people in
the US alone
– 8.3% of US
population

33. PROJECTED GROWTH RATES (in sales)

34. DPSG YTD PERFORMANCE (relative to
industry)

35. RISKS
• We operate in highly competitive markets
• We may not effectively respond to changing
consumer preferences, trends, health concerns and
other factors
• We depend on a small number of large retailers for
a significant portion of our sales
• We depend on 3rd party bottling and distribution
companies for a portion of our business
• Our financial results may be negatively impacted by
recession, financial and credit market disruptions
and other economic conditions

36. RISKS
• Costs for commodities may increase substantially
• Weather and climate changes could adversely
affect our business
• Our products may not meet health and safety
standards or could be contaminated
• We depend on key information systems and third
party service providers
• Certain raw materials we use are available from a
limited number of suppliers and shortages could
occur

37. COMPETITIVE ANALYSIS
• Top Competition
• Primary Competitors
• Market Share
• Geographic Market
Share
• Competitor Comparisons
• Strategic Focus
and Growth Strategies
• New Product Activities
• Summary

38. Top Competition

39. PRIMARY COMPETITORS
• The Coca-Cola Company
– Over 139,600 employees worldwide
– Estensive product line with over 3,500 products
– Drew in $35.119 billion dollars in revenue at the
end of 2010
• PepsiCo Inc
– Over 285,000 employees worldwide
– Have been bringing in a gross revenue of over
$60 billion
– Increased revenue over 30% in 2010 and over
15% over in 2011
• Nestle S.A.
– They have a wide variety of products from
chocolate to soft drinks
– Made the most profit out of all competitors in
2011 with $10 million
– Biggest strenght is taking global products and
putting them in local markets.

40. Market Share
Market Share between beverage companies in 2011 and 2012

41. SALES BY GEOGRAPHIC REGION
-Americas accounts for 51.4% of
the global carbonated soft drinks
market value.
-Europe accounts for a further
35.2% of the global market.

42. SALES BY GEOGRAPHIC REGION Pt. 2

43. BENCHMARKING AND COMPARISONS
2010 Key Financials ($)
Revenues Net Income Total Assets Total Liabilities
Coca-Cola 35,119.0 11,809.0 48,671.0 23,325.0
Cott Corp. 1,803.3 59.8 1,529.2 994.0
PepsiCo 57,838.0 6,320.0 68,153.0 46,677.0
Dr. Pepper 5,636.0 528.0 8,859.0 6,400.0
Yahoo Finance

44. BENCHMARKING AND COMPARISONS
2010 Key Financials Ratios ($)
Profit Revenue Asset Liabilities Debt to Return on
Margin Growth Growth Growth Asset Assets
Ratio
Coca-Cola 33.6% 13.3% 20.1% 18.7% 47.9% 26.5%
Cott Corp. 5.4% 12.9% 75.0% 110.4% 65.0% 5.0%
PepsiCo 10.9% 33.8% 71% 108.3% 68.5% 11.7%
Dr. Pepper 9.4% 14.0% n/a n/a 65.2% 10.9%
Yahoo Finance

45. STRATEGIC FOCUS & GROWTH
STRATEGIES
• 6 business segments.
– North America
– Operates in over 200 – Eurasia and Africa
countries and employs – Europe
nearly 100,000 people.
– Latin America
– Most products are
manufactured and sold by – Pacific
bottling partners. – Bottling Investments
– Diverse products.
• Sparkling and still
beverages.
• Juice and juice-drink.
• Ready-to-drink tea.
- DataMonitor

46. STRATEGIC FOCUS & GROWTH
STRATEGIES (Cont.)
• These 3 units are
divided into six
– PepsiCo is a global snack additional segments:
and beverage company. – FLNA
– 3 Business Units: – QFNA
• PAF = PepsiCo Americas
Foods.
– LAF
• PAB = PepsiCo Americas – PAB
Beverages. – Europe
• PI = PepsiCo International. – Asia, Middle East, and
Africa (AMEA)
- DataMonitor

47. STRATEGIC FOCUS & GROWTH
STRATEGIES (Cont.)
• Nutrition Business has 4
sub-divisions:
– Largest food and beverage – Infant
company in the world. – Healthcare
– 6 divisions that are – Performance
organized along product
groups. – Weight management
• Beverage • 3 geographic zones:
• Milk products – Zone Europe
• Nutrition and ice cream – Zone Americas
• Prepared dishes and
cooking aids – Zone Asia, Oceania, and
• Pet care products.
Australia.
• Pharmaceutical products.
- DataMonitor

48. NEW PRODUCTS & ACTIVITIES
• Coca Cola
– New Minute Maid Light Packaging. (3/21/12)
– NCAA March Madness Campaign. (3/15/12)
– Arctic Home Campaign. (12/1/12)
– Coke Zero & Mission Impossible. (10/19/11)
• Pepsi
– New Mountain Dew flavors and Pepsi next released (1/12)
– New Starbucks drinks released in February. (2/12)
– Amp Energy drinks reformulated. (2/12)
• Nestle
– Boosts dairy industry in Sri Lanka. (4/2/12)
– Uses avalanche research to create better ice cream. (3/26/12)
– R&D efforts strengthened in Asia. (3/20/12)
– Nutrition guide launched for cancer patients in Spain. (3/19/12)
http://www.thecoca-colacompany.com/dynamic/press_center/global-
filter/products/globalIndex.html
http://www.gillettepepsicola.com/products/new_products.php
http://www.nestle.com/Media/NewsAndFeatures/Pages/NewsAndFeatures.aspx

49. COMPETITOR STRENGTHS &
WEAKNESSES
Strengths Weaknesses
Coca-Cola Company -Popularity. -Word of mouth
-Well known. -Lack of popularity of many Coca Cola’s
-Branding is obvious and easily brands.
recognized. -Most unknown and rarely seen.
-A lot of finance. -Result of low profile or non-existent
-Customer loyalty. advertising.
-International Trade. -Health issues.
Nestle -Ability to leverage strong brand name to -Increasing instances of product recalls
generate sales. hamper brand equality.
-Ability to customize products to the -Slow recovery of product volume from
local market conditions. economic downturn in 2009.
-Strong focus on R&D. -Relative less sales exposure in emerging
markets.
PepsiCo, Inc. -Branding -Overdependence on Wal-Mart.
-Diversification -Overdependence on US Markets.
-Distribution -Low Productivity.
-Leadership in the snack business -Image Damage Due to Product Recall.
segment. -Health Issues
- Data Monitor

50. SUMMARY OF THE COMPETITION
• Coca-Cola
– The Coca-Cola Company (Coca-Cola) is the #1 leading manufacturer,
distributor and marketer of non-alcoholic beverages.
– Owns or licenses more than 500 brands.
• PepsiCo
– PepsiCo is one of the largest food and beverages companies in the
world.
– 18 brands generate over $1,000m in annual sales.
• Nestle
– Nestle is the largest food and beverage company in the world.
– Diverse range of products.
• Anheuser-Busch
– ABInBev is one of the world's largest brewers based in Belgium.
– Portfolio of over 200 Brands.
- DataMonitor

51. DPSG INTERNAL ANALYSIS
• Organization Structure
• Financial Summary
• Primary Product
Segments
• Product Segments
Revenues
• Net Sales per Region
• Company Performance
• Projected Performance
Trend
• Core Competency
• Products Statistics
• Current Growth
Strategies

52. ORGANIZATION STRUCTURE
Larry
Young CEO & President
Martin
M. Ellen
CFO Human
Resources R&D Marketing
Supply
Chain
Concentrated
Beverages
Packaged
Beverages
IT Finance
http://www.drpeppersnapplegroup.com/company/leadership/

53. FINANCIAL SUMMARY Source: Yahoo! Finance
(in thousands) 2011 2010 2009
Profit & Loss
Revenue 5,903 5,636 5,531
EBIT 1,039 1,049 1,111
Operating Margin 4,864 4,587 4,420
Balance Sheet
Asset 1,757 1,309 1,279
Liabilities 7,020 6,400 1,279
Equity 2,263 2,459 3,187
Cash Flow
Operating Cash Flow 760 2,535 865

54. PRIMARY PRODUCT SEGMENTS
• Beverage Concentrates
– Dr. Pepper, Canada
Dry, Sunkist, Schweppes, 7UP, A&W, R
C Cola, and Sun Drop
• Packaged Beverages
– NCB= Hawaiian
Punch, Snapple, Mott’s, Yoo-Hoo, and
Nantucket Nectars
– CSB= 7UP, Dr.
Pepper, A&W, Sunkist, and Canada
Dry
• Latin America Beverages
– Squirt, Penafiel, Aguafiel, Crush, and
Clamato
DPSG Annual Report 2011

55. PRODUCTS SEGMENTS REVENUES
Market Share
Beverage Concentrates:
40% (US)
Packaged Beverages:
49.2% (US)
Latin America Beverages:
6.07%
DPSG Annual Report 2011 and Global Soft Drink Industry Report

56. NET SALES PER REGION
International for DPS is Mexico, The Caribbean, and Canada
$5.9 billion of net sales in 2011 from the U.S. (89%), Canada (4%) and Mexico and the
Caribbean (7%)
DPSG Annual Report 2011 and Global Soft Drink Industry Report

57. COMPANY PERFORMANCE
Yahoo.Finance.com

58. COMPANY PERFORMANCE
Yahoo.Finance.com

59. PROJECTED PERFORMANCE TREND
• DPS expects sales to grow
modestly over the next 3 years
with expectations on the low
end
• Also Muted core growth is
expected
– Volumes are expected to remain
soft along with increased
marketing spend and competition
from Coca-Cola and PepsiCo
http://www.bevnet.com/news/2012/dr-pepper-beats-forecasts-though-
muted-growth-expected-for-2012

60. CORE COMPETENCY
• R&D
– 2008: Invested $17 million
– 2009: Invested $16 million
– 2010: Invested $15 million
• Manufacturing
– 18 Manufacturing Facilities in the U.S.
– 174 Distribution Centers in the U.S.
– Along with 3 manufacturing facilities and 23 distribution centers
in Mexico
• DPSG also has their own fleet of over 5,000
delivery trucks that provide product
transportation across the nation

61. CORE COMPETENCY CONTINUED
• R&D Areas of Investigation:
– Product Development
– Microbiology
– Analytical Chemistry
– Process Engineering
– Sensory Science
– Nutrion
– Knowledge Management
– Regulatory Compliance
• DPSG has a high level of
expertise in flavors and
sweeteners as well.

62. PRODUCTS STATISTICS

63. CURRENT GROWTH STRATEGIES
Building
Shareholder
Value Over Time
INVEST FOR OPTIMIZE RETURN
ON CAPITAL
GROWTH (2015+)
Build Our Brands
Grow Per Caps
BUILD THE
FOUNDATION Rapid Continuous
(2007-2010) Improvement
(2011-2015)

64. DPSG SWOT ANALYSIS
Strengths: Weaknesses:
• Strong portfolio of brands. • Minor compared to larger peers.
• Integrated business model. • Rely on 3rd-party bottlers for
• Strong customer relations. packaging and distribution.
• Differentiation Strategies. • Continued focus on carbonated
– unique taste. soft drinks rather than alternative
– Snapple Facts and functional beverages.
• Lack of international exposure.
Opportunities: Threats:
• Growth to international markets. • Loss of partner bottlers.
• New product launches or line • Socio-cultural trends towards
extensions.
healthier lifestyles
• Growth into functional (energy
drink) market. - sugar tax
• People have more discretionary
income.

65. KEY ISSUE #1
• Growing health consciousness in the United States.
– U.S. consumption of soft drinks in 2011 fizzled to its lowest
level since 1996.
• Customers are opting for bottled waters, juice, teas, and energy
drinks.
• Energy drink market grew 16% in 2011.
– Dr. Pepper Snapple (along with Coke and Pepsico) lost
volume in 2011.
– The average U.S. customer drank 714 8-ounce servings of
soft drinks in 2011, down from 728 8-ounce servings in
2010.
– Total soft drink consumption was 9.274 billion cases in
2011, down 1% from the year before, and the seventh
straight year of decline.
http://www.foodproductdesign.com/news/2012/04/u-s-soda-
consumption-fizzles.aspx

66. KEY ISSUE #1
• Growing health consciousness in the United
States.
– In the United States, a 2005 survey reported:
• 74% of consumers claimed to have changed their eating
habits due to health and nutrition concerns.
• 87% considered nutrition an important factor in
purchasing groceries.
• 64% stated a willingness to pay more for healthier
versions of food items.
– Health-conscious households make up 18% of the
U.S. market overall.
http://tippie.uiowa.edu/marketing/research_papers/grocery%20
basket%20data.pdf

67. KEY ISSUE #1
• Growing health
consciousness in the
United States.
• Over the past 5
years, the CSD industry
has declined 7.1%.
• It is expected to
decrease by 2% a year
over the next five years.

68. RECOMMENDATION for KEY ISSUE #1
• What we are doing
now:
– Launched a new line of
10-calorie drinks
– Dr. Pepper Ten
– Plans for 7 Up
Ten, Sunkist Ten, A&W
Ten, RC Ten, and Canada
Dry Ten

69. RECOMMENDATION for KEY ISSUE #1
• What we could
be doing:
• Health and
Wellness Market
– Water
– New age
beverages
• Teas and Juices
www.jdford.com/pdfs/JDF_Comp_Health_Wellness_09.pdf

70. KEY ISSUE #2
• Lack of focus on alternative and functional
beverage markets.
– These markets have seen strong growth as
consumer preferences have shifted away from
CSD products to healthier options.
– DPSG focuses the majority of their resources and
efforts on existing and new CSD’s.
– By DPSG ignoring emerging product categories
such as energy drinks, this could be a missed
growth opportunity going forward.

71. KEY ISSUE #2
• Lack of focus on
alternative and functional
beverage markets.
– President and CEO Larry
Young:
• “No, we’re still very happy with our
portfolio… we stay focused on the
total portfolio, but we are putting a
lot of emphasis right now on our
carbonated soft drinks. As I
mentioned a moment ago, I think
with the tough economic times
we’re going to see people come
back in and recognize that value.
That’s where we’re putting a strong
focus.”

72. KEY ISSUE #2
• Lack of focus on alternative and functional
beverage markets.
– Example – Bottled Water
http://www.accuval.net/insights/industryinsights/detail.php?ID=142

73. RECOMMENDATIONS for ISSUE #2
Diet Drink Promotion
• A more health conscious
world is looking for an
alternative drink for a fit
lifestyle.
• Products such as
Snapple, Hawaiian
Punch, and Mott’s have
show no more than 0.5%
growth.
• Increase our promotion of
non-soda diet drinks such as
Snapple and Hawaiian
punch.

74. RECOMMENDATIONS for ISSUE #2
– Market for Bottled Water
• Dasani’s bottled water
volume rose 11%
in 2011.
• Implemenation of our
new bottled water
product into the market.
• Multiple advertising and
promotional campaigns
for “Dr. Aqua.”
http://www.beveragemarketing.com/reportcat
alog4a.html

75. RECOMMENDATIONS for ISSUE #2
• Market for Energy Drinks
– Energy Drink Sales grew
14.4 percent by voulme in
2011.
– Boost and relaunch the
Venom product.
• Generate
growth and sales through
new sponsorships and
promotion.
http://www.cnbc.com/id/46796
332

76. KEY ISSUE #3
• Low international presence.
• DPSG only has a presence in the United
States, Canada, Mexico, and Latin America.
• Coca-Cola and PepsiCo are both in over 100
countries worldwide.
• International segment has been a primary driver
for these companies as health consciousness has
increased in North America.
• Low exposure presents a significant growth
opportunity to DPSG, but they have not indicated
they want to expand.

77. RECOMMENDATION for ISSUE #3
• Strategic Thrust:
– Compete against Coca
Cola, PepsiCo, Nestle.
– Potential for large increases in
revenues.
– Less over-reliance on one
particular country.
• Short-Term (5-10 years)
– Expand international presence into
Europe and South America.
• Europe represents 35.2% of the soft
drink industry. (2011)
• Long-Term (10-20 years)
– Expand into Asia-Pacific.
• Represents 11.4% of soft drink
industry. (2011)
• Length of time will vary based on
whether this percentage increases or
decreases.

78. WHY THESE REGIONS WORK
http://mapsofworld.com/world-top-ten/maps/world-top-ten-carbonated-
soft-drink-consumer-countries.jpg

79. OVERVIEW of EUROPE
2002 Data
Measurement = Liters per Person
Average Consumption per Country = 89.8 liters
http://www.nationmaster.com/graph/foo_sof_dri_con-food-soft-drink-consumption

80. KEY ISSUE #4
• Loss of partner bottlers.
– DPSG’s distribution
network is heavily reliant
on Coca Cola and PepsiCo.
– If Coke and Pepsi make
their bottling partners
wholly owned
subsidiaries, DPSG will see
amplified costs.
– This will lead to
unfavorable positions with
retailers and consumers.

81. RECOMMENDATION for ISSUE # 4
• Become less dependent on 3rd
party bottlers by improving and
expanding upon the DPSG owned
bottling system
• Activities that support this
recommendation:
– Recently resolved an issue with our
oldest bottler of Dr. Pepper, the
Dublin Dr. Pepper Bottling
Company
– Sued the bottler because they
– Sold the soft drink beyond the six
county territory designated in its
licensing agreement
– To end the bottlers unauthorized
use of the label “Dublin Dr.
Pepper”

82. THANK YOU!
Questions?