In Larry Young’s 30-plus year career, he has produced and sold virtually every type of beverage. In terms of his history in the beverage industry and the scope of the businesses that he has worked in over the years, by all measures Beverage Industry’s 2010 Executive of the Year is an exceptional individual who is well liked by many.
His accomplishments in the past three years as the president, chief executive officer and director of the Dr Pepper Snapple Group (DPS), Plano, Texas, are the final qualitative plus that are nothing short of extraordinary.
Through all his leadership roles though, Young has chosen to lead by example.
“I’m not asking anybody to do anything that I haven’t done and would not do, and I manage by walking around,” he says. “I found out years ago that I learn a lot more by listening than I do talking.”
Young was appointed DPS’s president and chief executive officer in October 2007 after serving as president and chief operating officer for the company’s bottling group division. He then led the spinoff of DPS from Cadbury Schweppes PLC in May 2008. In 2008, Young also was appointed chairman of the board of the American Beverage Association for a two-year term that ended last month.
By integrating the bottling group and several other independent bottling businesses into DPS, the company now operates with a more reliable, sustainable and secure route to market, it says. This has allowed the company to protect its brand equity and improve customer relations through better control of its products from innovation to the retailer. DPS now has direct access to more than 230 million customers in 34 states.
In 2009, DPS’s first full year as a stand-alone company, it grew volume and dollar share in carbonated soft drinks (CSDs) and juices in the United States, Canada and Mexico amid a challenging economic environment. Last year, the company generated more than $5.5 billion in net beverage sales.
Developing his career by coming up through the distributor system, Young has been called a “bottler’s bottler.” This year, his good customer and personal relationships with both the Coca-Cola and Pepsi systems aided DPS in a financially beneficial way. This spring, DPS completed the licensing of certain brands to PepsiCo Inc. following its acquisitions of The Pepsi Bottling Group Inc. and PepsiAmericas Inc. As part of the transaction, DPS received a one-time cash payment of $900 million before other related fees and expenses.
In June, DPS announced the licensing of certain brands to The Coca-Cola Co. on completion of Coca-Cola’s acquisition of Coca-Cola Enterprises’ (CCE) North American Bottling Business. In addition, Coca-Cola will offer Dr Pepper and Diet Dr Pepper in local fountain accounts currently serviced by CCE, and Coca-Cola also will include the beverages on its Freestyle fountain dispenser. As part of the transaction, DPS will receive a one-time cash payment of $715 million before taxes, fees and other related expenses. The upfront payment is net of the investment in the Freestyle fountain program, which is estimated at $115 million to $135 million. The transactions are subject to Coca-Cola completing its planned acquisition of CCE’s North American bottling business.
These agreements have made great partners even stronger, Young says. “We plan together how to win together,” he says. “We are very lucky to have great operators like that.”
Two years ago during DPS’s spinoff, Young says he could not have imagined PepsiCo and Coca-Cola acquiring their largest bottlers, but he is thrilled that the companies did it.
“I applaud both Pepsi and Coke for buying their bottlers,” Young says. “It’s just more proof of the upside that there is in the U.S. beverage business, because they wouldn’t have done it if there wasn’t an upside there.”
The competitive nature of the beverage business is what has kept Young enthralled with the industry over the years. A number of people have inspired the leader during his career, and Young doesn’t have one mentor—he has three. The first is his father for his “unbelievable work ethic.” Young started working with his father, who was a route salesman, at a very young age and eventually got his own route with Pepsi-Cola General Bottlers Inc., Springfield, Mo.
Another person Young tremendously admired during his years at Pepsi is Donald Kendall, former PepsiCo chairman and chief executive officer.
“Donald does not listen to naysayers,” Young says. “You make a decision and get something done and move.”
Young’s third mentor would be W.W. “Foots” Clements, former chief executive officer and president of the Dr Pepper Co. “He taught me how to treat people—customers especially—how to grow a brand and how to smoke a good cigar,” Young says.
Starting as a route salesman, Young has done about every job in the soft drink business. At Pepsi-Cola General Bottlers he worked his way from the route truck to president and chief operating officer. Young then moved on to PepsiAmericas leading parts of the company in Europe and Russia, culminating in a 25 year career in the Pepsi system.
Young joined Cadbury Schweppes in 2006 through its full acquisition of Dr Pepper/Seven Up Bottling Group, where he had been president and chief executive officer since 2005. As its leader, Young played a central role in helping to create a new business model for a fully integrated beverage company that would become DPS.
“In 2007, when we started looking at whether it was going to be sold to a private equity or whether we were going to be spun off, we put the right team together, we shared the vision and we built a strategy that we have not deviated from,” Young says.
DPS’s ability to perform has improved since its formation as a stand-alone company, he says.
“The biggest piece of that is not being part of a large conglomerate anymore,” Young says. “We’re not having to compete for resources. Whenever you’re part of a large company, there is X amount of money, and you are constantly competing for it, and then another piece is just the decision process. We make decisions very quick â€” not a lot of hierarchy here in this business of ours.”
Similar to many beverage businesses, the economy has been the biggest challenge that DPS has faced since its spinoff.
“We could not have gone public at a worse time,” Young says. “Credit markets crashed. The economy went into the tank. People are waking up every morning and having fear for breakfast on TV news. It made it tough, but we got together as a team. Everybody back then was talking about how to survive, and we as a team said we are not going to survive, we are going to thrive through this and then when the economy comes back we are going to be positioned perfectly.”
Young is bullish about the current economic situation. “Maybe sometimes I’m overly optimistic, but it’s not where I’d like to see it, but I think we’re seeing some signs of it ticking back up,” he says. “We’ve just got to get some jobs going and a little bit more confidence in the consumer out there. Consumers right now are thinking with their pocket book.”
Brand steward Young has been a meticulous guardian of DPS’s brands. From 2008 to 2009, DPS stepped up its advertising and market spends 15 percent to $409 million to position its brands for long-term growth.
“Being stand alone, we were able to put great marketing plans in place and put spend in them that we committed to and that we said would be against those brands,” Young says. “Then again, I just go back to our bottling partners and even our company owned [bottlers]—it’s just great execution by our bottling partners out there.”
DPS’s marketing push this year has been no different. The company has said it plans to spend 10 to 15 percent more behind Dr Pepper this year compared to last year. This year marks the 125th anniversary of Dr Pepper, and the brand introduced Dr Pepper made with real sugar in six collectible cans honoring its heritage. One of Young’s most memorable events of the year is the DPS management team kicking off the anniversary by ringing the closing bell at the New York Stock Exchange with the band KISS.
Last year, the company began to further strengthen its flavored CSD portfolio with the national distribution of Crush. “We just made the orange category huge,” Young says. “We’ve got Orange Crush and Sunkist.”
Last month, DPS refreshed its 7UP brand by reformulating with a more “crisp, clean, 100 percent natural lemon lime flavor” along with a packaging update. The company also introduced new “Ridiculously Bubbly” TV spots, featuring actor and comedian David Spade.
“It’s what the consumer tells us that they love about 7UP and what they are looking for,” Young says. “We spend a tremendous amount of time on consumer insight so that we make sure that we have the right brands for our customers that the consumer will come in and buy.”
DPS’s CSD innovation plans don’t stop with Dr Pepper and 7UP.
“The innovation pipeline may be the strongest that I’ve seen in years, and it goes across our entire portfolio that covers the fun of carbonated soft drinks and flavor and functionality,” Young says.
In its non-sparkling portfolio, Hawaiian Punch is a brand that has performed well in a tough economy. “It’s a great drink that mom can buy and seize the value to take home to the kids, so it does very well,” Young says.
Snapple is another brand picking up momentum. “When we put the new team together, we did a deep dive into all of our brands. It’s kind of sad what happened to Snapple,” Young says. “It’s basically the original New Age beverage, but it had a lot of different owners, a lot of different management, not the right spin, not the right focus and nothing had really been changed. There had not been any innovation in the bottles or the packaging.
“So we put a complete strategy together for revamping it. We have new bottles. We have new labels. We bought better ingredients, and we have more convenient packaging where you could have a four-pack, six-pack or 12-pack. We came out with a value with pre-priced cans in a great 12-pack.
“I had consumers, customers, employees, everybody saying don’t waste your time on it. It’s too late. It’s too old. It’s too tired, but we brought Snapple back, and I’m just very happy with that.”
This summer, Snapple introduced two limited-time teas created by “Celebrity Apprentice” contestants and recently extended the availability of Diet Snapple Trop-A-Rocka Tea developed by musician Bret Michaels, the winner of the television show.
As one of the nation’s leading apple juice and sauce brands, the Mott’s line was extended this year with Mott’s Medleys Juice, featuring two fruit and vegetable servings in an 8-ounce serving.
“Whenever you look at our Mott’s brand, the biggest thing that we’ve done there is we really focused on mom,” Young says. “That’s our consumer, gatekeeper and shopper. We help her provide healthier, nutritious beverages.”
This summer, DPS entered into another beverage segment with an agreement to distribute all-natural coconut water brand, Vita Coco. DPS will distribute five Vita Coco flavors—100 percent pure, Pineapple, Acai and Pomegranate, Peach and Mango, and Tangerine—initially in Florida and Georgia with other states to follow.
DPS’s investment in these brands has led most of them to grow, and it anticipates extending its marketing push.
“I think the results speak for themselves,” Young says. “… The No. 1 point of our strategy is to build and enhance our leading brands, and the spin has been very responsive. We’re seeing uplift in gain and share, and we don’t really know where the top of that is yet, so we’re still kind of learning the last couple of years.”
Fountain sales in foodservice have been a focus for DPS for the past few years. By the end of the year, the company will be in 100 percent of McDonald’s U.S. restaurants with Dr Pepper and close to half of McDonald’s locations with Diet Dr Pepper. The company also is growing in restaurants like Jack in the Box and other local accounts.
DPS’s cold drink strategy ties in to what it does in fountain foodservice. “You know you spend a lot of money on marketing to get your brand top of mind, and you’ve got to have the equipment out there, because when you are top of mind, you want to be close at hand,” Young says.
Both growth strategies are about getting the brands in front of consumers so they can sample the brands.
“When we find areas that have low per [capita consumption], normally whenever you do your deep dive in the market, you’ll find out you’ll have light penetration on fountain, cooler and cold drink equipment,” Young says. “You’ve got to get that out there because when people are drinking your product while they work or play, when they go to the store that’s what they’ll buy and take home with them.”
The company’s long-term growth strategy is going after sales in its low per capita markets.
“We’ve got market share in the heartland that has per caps over 400, and then we have markets that it’s down as low as 20,” Young says. “So the opportunity is to get out there and find out what the consumer really needs, and do we have the product top of mind and close at hand? I’m very confident that we’re in a position to grow for several years with the per caps and then also just closing distribution voids with our products, making sure that all our products are out there and available, and then our innovation.”
While the consumer spending may still be a little weak this year, the company has made it a point to show consumers value, and that does not always translate to reduced prices. This year, DPS has conducted under-the-cap promotional giveaways tied to Electronic Arts (EA) gaming and the “Iron Man 2” movie.
“With price off, one of us drops the price,” Young explains. “Guess what? All of us drop the price, and what’s there? It doesn’t give you any uplift. Value to our customers is, for us, driving traffic, and you do that by giving consumers what they want. We listen to the consumer. We find out what they want, and we bring it in. … We tie in with movies and promotions, so people are looking at it and saying here’s a real opportunity to not only get a great tasting DPS product, but I can go to a movie or I have an EA gaming cap and that helps drive traffic.”
Young has great expectations for CSDs ahead.
“[Consumers] are coming back to CSDs,” he says. “They are coming to flavored CSDs, and they see the value, and we are going to keep our promotions going with that. … We’re really going to get back to more algorithms that we’re used to with top line growth, volume and sales. Our cogs are going to get more in line with inflation, and that’s the big thing—getting back to where we get some growth in there. Especially, I mean, we’re so well positioned with CSDs. Right now, flavored CSDs are larger than cola in the category—over 50 percent are flavors â€” and that just positions us for great growth in the future.”
In the past two years, DPS has become a fast-paced beverage company. “We don’t claim to always make the right decisions, but we learn from the ones that didn’t work, and we move again quickly,” Young says.
Over the years, Young has enjoyed building great brands and developing great people because he says with this “it will deliver great results.”
In August, DPS announced the launch of a new corporate philanthropy program called Action Nation. The program’s giving and volunteer efforts support DPS’s mission to foster physically active, engaged and sustainable communities. The program focuses on four key areas: fit and active lifestyles, environmental initiatives, community celebrations, and emergency relief. In addition, this year the company published its first corporate social responsibility report and released five-year goals for improved environmental and social performance across the company’s operations.
“I’m a firm believer that we have to be great corporate partners in all aspects of our business,” Young says. “We owe it to our shareholders, our consumers, our customers, our suppliers and most importantly to ourselves.”
And Young has only one aspiration for the company he currently leads: “To be the best beverage company in the Americas.” BI
Beverage Industry’s December issue highlights five beverages brands that are “shooting for the moon” in terms of innovation. Also in this issue, we spotlight the premiumization of the private-label beverage market, the latest trends impacting the use of tea ingredients in beverages, the growth of beverage sales in the eCommerce platform, and much more!