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Dr Pepper Snapple’s Carbonated Drink Volumes Grow by 2%

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Some fizz in 1Q16

Dr Pepper Snapple (DPS) experienced a 2% rise in its bottler case sales volumes, driven by a 2% rise in both carbonated soft drink category volumes and noncarbonated beverage volumes. Coca-Cola’s (KO) sparkling beverage volumes were flat in 1Q16, while the company’s still beverage volumes grew by an impressive 7%. Whereas PepsiCo’s (PEP) carbonated soft drink volumes fell by 2% in 1Q16, its noncarbonated beverages posted a strong volume growth of 7%.

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Carbonated soft drink volume growth

The growth in Dr Pepper Snapple’s carbonated soft drink volumes in 1Q16 was driven by a 4% volume growth in the company’s flagship Dr Pepper brand, mainly reflecting growth in the company’s fountain foodservice business. Other carbonated soft drink brands that experienced growth in the quarter include Crush, Schweppes, Squirt, and Peñafiel. However, the overall volume of the company’s “Core 4” brands (Canada Dry, 7UP, Sunkist soda and A&W) declined by 3% in 1Q16, with every brand but Canada Dry experiencing a decline in 1Q16 volumes.

Dr Pepper Snapple constitutes 0.1% of the iShares Dow Jones US ETF (IYY). Overall, the IYY ETF has a 9.1% exposure to consumer staples, including beverages. The IYY ETF has a 0.1% exposure to Monster Beverage (MNST), which posted a 10.5% sales growth in 2015.

Softness in the still beverage volume growth

As indicated in the above chart, the volume growth of Dr Pepper Snapple’s still beverages category was higher than that of the carbonated beverages category in all four quarters of 2015. This reflected a shift in consumer preferences from soda drinks to healthier beverage options.

The 2% volume growth in Dr Pepper Snapple’s still beverages category in 1Q16 was on par with the volume growth of the soda category. The softness in the still beverage volume growth in 1Q16 was a result of the company’s pricing actions.

In 1Q16, Dr Pepper Snapple’s Hawaiian Punch volumes declined by 7% due to higher pricing for single-serve packages. The 1Q16 volumes of the company’s Mott’s brand declined by 4% due to continued weakness in the juice category and lower promotional activity. The company’s still beverage volume growth in 1Q16 was driven by a 10% volume growth in Clamato and a 22% growth in the volumes of the water category. Dr Pepper Snapple’s Aguafiel brand, part of its water category, saw double-digit growth. Also, allied water brands, including Bai and FIJI Water, continued to perform well in the quarter. We’ll discuss the addition of two more allied brands in part five of this series.

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