uploads///DPS Q Volume

Dr Pepper Snapple’s 2Q15 Volumes Driven by Noncarbonated Beverages

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Jul. 31 2015, Updated 11:05 a.m. ET

2Q15 overall volume growth

Dr Pepper Snapple (DPS) reported a 1% growth in its overall volumes in 2Q15, which ended June 30, 2015. The year-over-year growth in volumes in the United States and Canada came in at 1%. The growth in volumes in Mexico and the Caribbean was 7%.

Dr Pepper Snapple registered stronger growth in 1Q15 compared to 2Q15 on a year-over-year basis. In 1Q15, the company’s overall volumes increased by 3%, with carbonated soft drinks (or CSDs) rising 3% and noncarbonated beverages increasing by 5%.

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Noncarbonated beverage drinks dominate

Dr Pepper Snapple’s noncarbonated beverages like ready-to-drink tea continued to perform better than CSDs, reflecting the consumer shift towards healthier drinks. Noncarbonated beverage volumes grew 3% while CSD volumes were up 1% in 2Q15. Within the noncarbonated beverage category, the company’s tea and juice brand Snapple grew 11%, driven by product innovation. The company’s water category grew 6%, mainly due to growth in Bai 5, FIJI and, Vita Coca.

The Clamato and Hawaiian Punch brands also registered strong growth, driven by increased promotional activity. The company’s Mott’s brand delivered weak performance due to decline in juice products.

CSD performance

In CSDs, Penafiel, Dr Pepper Snapple’s popular carbonated mineral water brand, registered a strong growth of 12%, driven by increased promotional activity and distribution gains. Other CSD brands that performed well in 2Q15 include Squirt and Schweppes. Volumes of Dr Pepper grew 1%, primarily due to gains in the company’s fountain business.

However, the company’s Core 4 brands Canada Dry, 7UP, A&W, and Sunkist soda declined by 1% in 2Q15 in terms of volumes. Except for Canada Dry, all other core brands’ volumes declined in 2Q15.

Peers show a similar trend

Noncarbonated beverages of rivals Coca-Cola (KO) and PepsiCo (PEP) also outperformed CSDs in 2Q15. Coca-Cola’s still beverage volumes grew 5% in 2Q15. The company’s sparkling beverage volumes were up 1% in 2Q15. PepsiCo’s noncarbonated beverage volumes rose 4% in 2Q15 in the North America region while CSD volumes fell 3%.

These three beverage companies together account for over 14.4% and ~0.9% of the portfolio holdings in the Consumer Staples Select Sector SPDR Fund (XLP) and the iShares MSCI ACWI ETF (ACWI), respectively.

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