Dr Pepper Snapple Group Inc. (DPS), Plano, Texas, reported that its third quarter net sales increased 1 percent, reflecting 3 percentage points of positive mix and pricing partially offset by a 1 percent sales volume decline and higher discounts.
Reported segment operating profit (SOP) increased 5 percent, or $18 million, due to a year-over-year last in, first out (LIFO) benefit of $14 million, ongoing productivity improvements, a favorable adjustment to a previously disclosed legal provision, and lower people costs primarily driven by favorable costs associated with its insurance programs, the company says. These benefits were partially offset by commodity cost increases, principally in sweeteners, it adds.
Reported income from operations for the quarter was $300 million, including a $1 million unrealized commodity mark-to-market gain. Reported income from operations was $308 million in the prior-year period, including $18 million of unrealized commodity mark-to-market gains.
Year-to-date, reported net sales increased 1 percent, and reported income from operations was $782 million, including $13 million of unrealized commodity mark-to-market losses. Reported income from operations was $800 million in the prior-year period, including $18 million of unrealized commodity mark-to-market gains.
“We continue to operate in an extremely challenging environment with significant pressures in the [carbonated soft drink] (CSD) category now impacting both regular and diet products,” said DPS President and Chief Executive Officer Larry Young in a statement. “Against this backdrop, our teams remained committed to executing our strategy, and we continued to gain volume share while holding value share in the CSD category.
“We’ve continued to invest in our brands for their long-term success, and I’m encouraged at this early date with the performance of our Core 4 Ten platform as research tells us that it is bringing consumers back to the category,” he continued. “Rapid continuous improvement continues to drive meaningful results and is enabling us to build an improved operating platform. With our portfolio of consumer-loved brands, our strong execution focus, and our continuous improvement mindset, I am confident we can deliver our profit goals for 2013.”
For the quarter, bottler case sales volume was flat with CSDs, and non-carbonated beverages (NCBs) declined 1 percent.
In CSDs, Dr Pepper volume decreased 1 percent as the CSD category continued to face significant headwinds. The company’s Core 4 brands, which include its Ten platform, were flat as a high-single digit increase in Canada Dry was offset by mid-single digit declines in 7UP and Sunkist sodas and a low-single digit decrease in A&W. Peñafiel increased double-digits, but Crush and Sun Drop both experienced high-single digit declines. Fountain foodservice volume was flat, cycling 2 percent volume growth in the prior-year period.
In NCBs, Hawaiian Punch volume declined 6 percent. This decline was partially offset by a 4 percent increase in Snapple and a 1 percent increase in Mott’s.
By geography, volume in Canada and the United States declined 1 percent, and volume in Mexico and the Caribbean increased 6 percent.