Dr Pepper Snapple Group, Inc
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A NEW COMPANY with a heritage spanning centuries… Our brands have been synonymous with refreshment, revitalization, fun and fl avor for generations. In 2008, those 50-plus brands became Dr Pepper Snapple Group, the oldest new company traded on the New York Stock Exchange. We may be a new player in the equity markets, but the equity of our brands is unmistakably strong and growing. Th is report illustrates the power and potential of great brands and great people to produce great results. EXPERIENCED LEADERSHIP Dr Pepper Snapple Group is an integrated refreshment beverage business serving consumers across the U.S., Canada, Mexico and the Caribbean. Our business is led by an experienced management team that is focused on building capabilities to support growth and create shareholder value. With 200 years of collective food and beverage industry experience, this team has worked with top consumer brands, managed complex supply chains and developed strong relationships with key players in the industry. From left to right: Larry D. Young, President & Chief Executive Offi cer; Tina S. Barry, Senior Vice President, Corporate Affairs; John O. Stewart, Executive Vice President & Chief Financial Offi cer; James L. Baldwin, Jr., Executive Vice President, General Counsel; Rodger L. Collins, President, Packaged Beverages; Pedro Herrán Gacha, Executive Vice President, Strategy & President, Mexico & Caribbean; Derry L. Hobson, Executive Vice President, Supply Chain; James J. Johnston, Jr., President, Beverage Concentrates; Lawrence N. Solomon, Executive Vice President, Human Resources; David J. Thomas, Ph.D., Senior Vice President, Research & Development; Jim R. Trebilcock, Executive Vice President, Marketing Dr Pepper is served for Jean Jacob Schweppe Mott’s brand starts as the fi rst time at the Charles Grigg invents 7UP Peñafi el, Mexico’s oldest perfects a process for a line of apple cider and Old Corner Drug Store mineral water, is founded making carbonated water vinegar offerings in Waco, Texas in Puebla 1783 1842 1885 1929 1948 DPS at-a- GLANCE • No. 1 fl avored carbonated soft drink (CSD) company in the U.S., with six of the top 10 non-colas • More than 75 percent of sales driven by brands that are No. 1 or No. 2 in their fl avor categories • Added to the S&P 500 on Oct. 6, 2008 • Consumers enjoy 150 million 8 oz. servings of our brands each day, adding up to nearly 55 billion servings a year • Approximately 20,000 employees across North America and the Caribbean • Broad and fl exible route to market with company- owned direct store delivery (DSD) and warehouse delivery operations supported by 24 manufacturing facilities and more than 200 distribution centers, as well as third-party DSD • About 11 percent of DPS sales come from operations in Mexico, Canada and the Caribbean Our top 12 brands annually generate more than $10 billion in estimated retail sales throughout North America and the Caribbean. *Adjusted income from operations and earnings per share (EPS) fi gures for 2008 exclude restructuring, impairment charges and other one-time items, which totaled $1.13 billion and $3.08 per share, respectively. 2008 revenue had no adjustments. See page 13 for a detailed reconciliation of the excluded items, as well as the rationale for the exclusion. Cadbury Schweppes Snapple is invented acquires Duffy-Mott Co., Cadbury Schweppes in Brooklyn Canada Dry and the acquires Dr Pepper/Seven Up Dr Pepper/Seven Up, Inc., Sunkist soda license Companies, Inc. Mott’s LLP, Snapple Beverage Cadbury and Schweppes Corp. and Bebidas Mexico form merge, forming Cadbury Snapple Beverage Cadbury Schweppes Americas Schweppes, plc. Corp. acquired Beverages 1969 1972 1980-1989 1995 2000 2003 EVOLUTION of FLAVOR At Dr Pepper Snapple Group, CONTENTS everything we do is fueled by fl avor. It’s what sets us apart, energizes our business and drives our success. Letter to Stockholders 2 Our portfolio reads like a who’s who of fl avor, Growing Great Brands 6 with such iconic brands as Dr Pepper, Snapple, 7UP, Mott ’s, A&W, Sunkist soda and Canada Dry. Empowering Execution 10 Flavor not only defi nes our brands, it is what peppers our ideas, att itudes and passion for winning. Company Highlights 12 And it’s the foundation upon which we are staking our future growth and success as an independent Form 10-K 15 beverage business. Stockholder Information 125 We’re energizing our fl avor portfolio with new & Board of Directors products that pop with consumers and off er great taste and distinct functional benefi ts. We’re bringing those fl avors to our customers faster and bett er than ever, through a broad and fl exible route to market anchored by the leading bott lers in the business as well as our own robust manufacturing and distribution footprint. And we’re gett ing our fl avors in front of consumers through innovative strategies that resonate with shoppers, create excitement with customers and maximize our marketing dollars. Flavor is at the heart of everything we do. It’s who we are and what consumers and customers want. And it fuels every one of us at Dr Pepper Snapple to be the best. Company strengthens its May 7, Dr Pepper Snapple own bottling and Group is listed on New distribution network with York Stock Exchange under acquisition of several the trading symbol “DPS” independent bottlers 2006 – 2007 2008 1 LETTER to STOCKHOLDERS To Our Stockholders: • Generated $709 million in cash from operations and Letter to Stockholders With a portfolio fueled by fl avor, Dr Pepper Snapple paid down $395 million in debt Group began a new life as an independent beverage • Relocated our Research & Development Center company in 2008. from Trumbull, Conn., to our headquarters in Plano, Texas, and opened a state-of-the-art pilot plant in Our spinoff from Cadbury and May 7 listing on the Irving, Texas New York Stock Exchange was the culmination of • Successfully launched innovations such as Canada a series of moves to create a company with the Dry Green Tea Ginger Ale and Venom Energy leading portfolio of fl avors and a broad and fl exible route to market. It was also one of many signifi cant • Signed major distribution agreements for the Crush accomplishments in a year of change. In the midst brand and secured equity positions in the companies of the most diffi cult economic environment in that own and market the Hydrive, Big Red and more than a generation, we: All Sport brands • Grew U.S. dollar share in carbonated soft drinks 2008 Results: Delivering Top-Line Growth (CSDs) for a fi fth straight year – the only major beverage business to achieve that feat in a Tumultuous Economic Climate • Raised nearly $4 billion in debt despite challenging Even under ideal marketplace conditions, spinning capital and liquidity markets off a major consumer packaged goods business is a daunting task. Our ability to manage a complex separation in such a challenging climate while focusing on our consumers and customers is a testament to both our dedicated employees and the support of our great retailers, bott ling partners and distributors. On the strength of price increases, comparable revenue rose 4 percent in 2008, excluding sales of licensed brands that we no longer distribute and a bott ling business acquired in mid-2007. Price increases, as well as savings from a 2007 restructuring program, helped off set a slight decline in sales volume and higher commodity and transportation costs. As a result, segment operating profi t on a comparable basis remained fl at. Due to deteriorating macroeconomic and market conditions late in the year, we recorded a non-cash, aft er-tax impairment charge of $2.74 per share related to goodwill and certain intangible assets. Excluding this charge and certain other items, the company earned $1.85 per share. If you’re not drinking a cola, chances are you’re enjoying one of our brands. President & CEO Larry Young and Chairman of the Board Wayne Sanders 2 We generated $709 million of cash from operations. Snapple premium teas and juices planned in 2009, Our strong, stable cash fl ow enabled us to pay down as well as the continued rollout of value teas, we are $395 million of our fl oating rate term loan in 2008, optimistic about the long-term potential of this putt ing us signifi cantly ahead of our repayment great brand. schedule and giving us the fl exibility to invest in growth opportunities. We are seeing greater effi ciency and eff ectiveness from our product innovation and commercialization Letter to Stockholders Defi ning and Delivering Against Our activities aft er relocating our R&D Center to our Plano headquarters. Th is best-in-class center has Strategic Priorities As an independent company, we have established a Once again, we strategy that refl ects and builds upon our position as the leading fl avored beverage business in the U.S. outperformed the Accordingly, we set fi ve key priorities: industry in dollar • Building and enhancing our leading brands share growth • Pursuing profi table channels, packages and formatsr in CSDs. • Leveraging our integrated business model • Strengthening our route to market brought R&D functions under the same roof as our sales and marketing teams. Th is means greater • Improving operating effi ciency alignment, faster decision-making and more nimble response to emerging consumer trends. Th is report highlights the progress we are making in advancing those strategies. Driving consumer preference for our core brands and their supporting innovation will be key to our success Building and Enhancing Our Leading Brands in 2009. In addition to major advertising eff orts for Dr Pepper and Diet Dr Pepper, we’re fueling up for Dr Pepper Snapple has an outstanding portfolio of a signifi cant push behind all of our biggest brands, well-loved, consumer-preferred brands.