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7UP A&W AGUAFIEL BIG RED CANADA DRY CLAMATO COUNTRY TIME CRUSH DEJA BLUE DR PEPPER HAWAIIAN PUNCH IBC MISTIC MOTT’S MR AND MRS T NANTUCKET NECTARS PEÑAFIEL RC COLA REALEMON REALIME ROSE’S SCHWEPPES SN APPLE SQUIRT STEWART’S growingwithflavor DR PEPPER SNAPPLE GROUP 2009 ANNUAL REPORT SUNDROP SUNKIST SODA TAHITIAN TREAT VENOM ENERGY VERNORS WELCH’S YOO-HOO Our Leading Flavor Portfolio At Dr Pepper Snapple Group, we are growing with flavor — and what’s more, flavors are growing as a percentage of carbonated soft contents drinks (CSDs). Having gained steadily on colas over the past two decades, flavors took the letter to stockholders 1 lead in 2009 and now represent 50.4 percent leading with brands 5 of all CSD retail sales in measured channels. distribution and availability 8 FLAVORS AS % OF U.S. CSD SALES strengthening the foundation 11 commitment to csr 12 49.6% 54.0% stockholder information 139 54.6% 57.8% Colas 60.8% 50.4% 45.4% 46.0% Flavors 39.2% 42.2% On top of that, our CSDs outperformed the ’89 ’94 ’99 ’04 ’09 industry in both volume and dollar sales Source: Nielsen estimates in 2009, demonstrating the strength and resilience of our brands amid softness in the category. As the undisputed leader in flavors, Dr Pepper Snapple Group is capitalizing on this momentum. We now hold more % CHANGE VS. 2008 than a 40 percent dollar share of the flavor U.S. Volume Sales U.S. Dollar Sales category, up 1.7 percentage points in 2009. DPS +7.0% DPS 40.3% +4.2% 2009 Total CSDs 38.6% Total CSDs +0.8% 2008 -2.5% Source: The Nielsen Company +1.7% We invite you to experience a taste of our achievements and the ways in which DPS U.S. Market Share of Flavored CSDs (Retail Dollars). our powerful flavor portfolio is laying the Source: The Nielsen Company foundation for future growth. lettertostockholders TO OUR STOCKHOLDERS: At Dr Pepper Snapple Group, we are executing on the priorities we established more than two years ago to grow our vibrant business with flavor. “Dr Pepper Snapple was the Our strategy is working. In 2009, our first full year as a stand-alone company, we grew volume only major beverage company and dollar share in carbonated soft drinks (CSDs) and juices in the U.S., Canada and Mexico amid to increase its share of the a challenging economic environment. We also liquid refreshment beverages delivered solid top- and bottom-line results while strengthening our internal capabilities. This category in 2009.” is allowing us to take advantage of the growth prospects that exist for our flavor portfolio. – CHAIRMAN OF THE BOARD WAYNE SANDERS AND PRESIDENT & CEO LARRY YOUNG Our priorities are simple. 1) Build and enhance our leading brands. 2) Pursue profitable channels, packages and categories. 3) Leverage our integrated business model. 4) Strengthen our route to market. 5) Improve our operating efficiency. We made steady progress against these priorities in 2009 and achieved the following: • Outperformed the U.S. CSD category in volume growth by a margin of nearly 7 percentage points • Became the only major beverage company to grow U.S. CSD dollar share in each of the last five years • Declared our first-ever dividend and announced a share repurchase program • Reached an agreement to expand availability of Dr Pepper to all McDonald’s® restaurants in the U.S. • Completed the biggest makeover of Snapple in its 37-year history • Achieved national distribution for Crush in the U.S. • Added more than 200 new routes in Mexico • Increased volume and market share of Dr Pepper in Canada 2009 DPS SHAREHOLDER RETURN 80% DPS 60% S&P 40% 20% 0% letter to stockholders to letter -20% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Against a challenging economic backdrop, Dr Pepper Snapple continues to create shareholder value, as shown in our relative price performance vs. the S&P 500 Index in 2009. Our accomplishments in 2009 are just a A&W grew low single digits, while Sunkist taste of those to come, and we are energized soda declined high single digits. Crush by the knowledge that our journey is just volume more than doubled, adding 48 beginning. The actions we have taken this million cases in 2009 through expanded year will build a foundation for long-term third-party distribution in the U.S. and the growth that will sustain our company well launch of Crush value offerings in Mexico. into the future. Our leadership in the juice aisle continued The Flavor of Growth on the strength of Hawaiian Punch and Mott’s, with volume gains of 14 percent Macroeconomic conditions provided a and 8 percent, respectively. Our premium- challenging backdrop for the beverage priced products continued to be negatively industry in 2009. Sales of liquid refreshment impacted as consumers shifted to value beverages (LRBs) declined for the second offerings. Snapple volume was down consecutive year, while consumer spending 11 percent for the year, but sales trends remained weak and shoppers continued are strengthening and the brand improved to gravitate toward value. Despite these sequentially for the last three quarters challenges, Dr Pepper Snapple Group of 2009. focused on finding new ways to win, and the result was strong business performance, In Mexico, we grew our share of flavored as we were the only major beverage company CSDs. The restage of Peñafiel flavors and to increase our share of LRBs in 2009. expanded distribution for the brand resulted in a mid single-digit increase in Peñafiel Net sales increased 2 percent on a currency- volume, while Squirt declined high single neutral basis and excluding the loss of a digits. We also grew share of Clamato licensed brand that we no longer distribute. and flavored CSDs in Canada, particularly Driving the top-line improvement were price Dr Pepper, where expanded programming increases and 4 percent sales volume growth, and trial contributed to double-digit partially offset by negative mix from higher volume growth for the brand. sales of CSD concentrates and value juices. Segment operating profit on a comparable Strong performance across multiple brands basis increased 17 percent on the strength contributed to the volume growth, with of the sales gain and lower packaging, CSDs up 4 percent and our non-carbonated ingredient and transportation costs. beverages up 2 percent. Dr Pepper volume Excluding certain items, we earned $1.97 increased 2 percent, largely driven by Diet per diluted share, an increase of more than Dr Pepper and the launch of Dr Pepper 6 percent compared to 2008. Cherry. Among our Core 4 brands, Canada Dry was up mid single digits and 7UP and 2 DR PEPPER SNAPPLE GROUP 2009 ANNUAL REPORT The Flavor of Our Business In 2009 our solid top- and bottom-line results ... Segment Operating Profit* Diluted Earnings +17% Per Share* Volume* +6% Net +4% Sales* +2% *Adjusted volume, net sales and segment operating profit exclude the loss of Hansen product distribution and are on a currency-neutral basis. Adjusted diluted earnings per share exclude non-cash impairment charges, separation- related costs, restructuring charges, the net gain on the Hansen termination and the sale of certain intangible assets. See page 13 for a detailed reconciliation of the excluded items as well as the rationale for their exclusion. ... combined with our strong, consistent cash flow ... (in millions) $865 $709 $583 $581 $603 ’05 ’06 ’07 ’08 ’09 ... enabled us to accelerate our debt And while other companies pulled back repayment and begin to deploy excess on advertising and marketing expenses cash in shareholder-friendly ways, in 2009, we stepped up our spending to including the declaration of our first- position our brands for long-term growth. ever dividend and the announcement of a share repurchase program. ADVERTISING AND MARKETING EXPENSES DPS TOTAL DEBT SINCE SPINOFF (in millions) (in billions) $409 $3.90 ’09 $3.50 +15% $2.96 $2.55 $356 ’08 MAY 8 DEC 31 DEC 31 FEB 26 ’08 ’08 ’09 ’10 lettertostockholders 3 Creating Value for Stockholders Leadership Transition In 2009 we generated $865 million of cash As we announced last October, John Stewart, from operating activities. Our strong, stable our chief financial officer, will soon retire. cash flow allowed us to repay approximately Without question, Dr Pepper Snapple Group $550 million in long-term debt while would not be where it is today without John’s continuing to invest in growth opportunities. talent, dedication and exemplary work ethic. We also began deploying excess cash in He played a critical role in our successful shareholder-friendly ways, including declaring separation from Cadbury Schweppes and led our first-ever dividend of $0.15 per share on significant improvements in our systems and letter to stockholders to letter the company's common stock and announcing financial controls. He also built a talented and plans to repurchase up to $200 million of highly effective finance and IT organization. our outstanding common stock over the We’re grateful for John’s many contributions next three years. to our business. More recently, we completed the licensing Succeeding John as chief financial officer of certain brands to PepsiCo, Inc. following is Martin Ellen, who will join us from Snap-on its acquisitions of The Pepsi Bottling Group, Incorporated on April 1. Marty has a strong Inc. and PepsiAmericas, Inc. As part of the background in finance as well as expertise transaction, DPS received a one-time cash in strategy and operations and will play an payment of $900 million before taxes and important role in taking our business to the other related fees and expenses.