Snapple 2010 Annual Report Download - page 26

Improve operating efficiency. The integration of acquisitions into our Direct Store Delivery system (“DSD”), a component
of our Packaged Beverages segment, has created the opportunity to improve our manufacturing, warehousing and distribution
operations. For example, we have been able to create multi-product manufacturing facilities (such as our Irving, Texas and
Victorville, California facilities) which provide a region with a wide variety of our products at reduced transportation and co-
packing costs. In 2010, we launched our Rapid Continuous Improvement initiative, which uses Lean and Six Sigma tools, to focus
on various projects throughout the Company.
Our Business Operations
As of December 31, 2010, our operating structure consists of three business segments: Beverage Concentrates, Packaged
Beverages and Latin America Beverages. Segment financial data for 2010, 2009 and 2008, including financial information about
foreign and domestic operations, is included in Note 21 of the Notes to our Audited Consolidated Financial Statements.
Beverage Concentrates
Our Beverage Concentrates segment is principally a brand ownership business. In this segment we manufacture and sell
beverage concentrates in the U.S. and Canada. Most of the brands in this segment are CSD brands. In 2010, our Beverage
Concentrates segment had net sales of approximately $1.2 billion. Key brands include Dr Pepper, Crush, Canada Dry, Sunkist
soda, Schweppes, 7UP, A&W, RC Cola, Squirt, Sun Drop, Diet Rite, Welch's, Country Time, Vernors and the concentrate form
of Hawaiian Punch.
We are the industry leader in flavored CSDs with a 40.4% market share in the U.S. for 2010, as measured by retail sales
according to The Nielsen Company. We are also the third largest CSD brand owner as measured by 2010 retail sales in the U.S.
and Canada and we own a leading brand in most of the CSD categories in which we compete.
Almost all of our beverage concentrates are manufactured at our plant in St. Louis, Missouri.
The beverage concentrates are shipped to third party bottlers, as well as to our own manufacturing systems, who combine
them with carbonation, water, sweeteners and other ingredients, package it in PET containers, glass bottles and aluminum cans,
and sell it as a finished beverage to retailers. Beverage concentrates are also manufactured into syrup, which is shipped to fountain
customers, such as fast food restaurants, who mix the syrup with water and carbonation to create a finished beverage at the point
of sale to consumers. Dr Pepper represents most of our fountain channel volume. Concentrate prices historically have been reviewed
and adjusted at least on an annual basis.
Our Beverage Concentrates brands are sold by our bottlers, including our own Packaged Beverages segment, through all
major retail channels including supermarkets, fountains, mass merchandisers, club stores, vending machines, convenience stores,
gas stations, small groceries, drug chains and dollar stores. Unlike the majority of our other CSD brands, 71% of Dr Pepper volumes
are distributed through the Coca-Cola affiliated and PepsiCo affiliated bottler systems.
PepsiCo and Coca-Cola are the two largest customers of the Beverage Concentrates segment, and constituted
approximately 30% and 21%, respectively, of the segment's net sales during 2010. In 2010, PepsiCo acquired The Pepsi
Bottling Group, Inc. ("PBG") and PepsiAmericas, Inc. ("PAS") and Coca-Cola acquired Coca-Cola Enterprises’ ("CCE") North
American Bottling Business. The percentages above reflect the net sales of the combined entities during 2010.
Packaged Beverages
Our Packaged Beverages segment is principally a brand ownership, manufacturing and distribution business. In this segment,
we primarily manufacture and distribute packaged beverages and other products, including our brands, third party owned brands
and certain private label beverages, in the U.S. and Canada. In 2010, our Packaged Beverages segment had net sales of approximately
$4.1 billion. Key NCB brands in this segment include Hawiian Punch, Snapple, Mott’s, Yoo-Hoo, Clamato, Deja Blue, AriZona,
FIJI, Mistic, Nantucket Nectars, ReaLemon, Mr and Mrs T, Rose’s and Country Time. Key CSD brands in this segment include
7UP, Dr Pepper, A&W, Sunkist soda, Canada Dry, RC Cola, Big Red, Squirt, Vernors, Welch’s, IBC, and Schweppes.
Approximately 87% of our 2010 Packaged Beverages net sales of branded products come from our own brands, with the
remaining from the distribution of third party brands such as FIJI mineral water and AriZona tea. Aportion of our sales also comes
from bottling beverages and other products for private label owners or others, which is also referred to as contract manufacturing,
for a fee. Although the majority of our Packaged Beverages’ net sales relate to our brands, we also provide a route-to-market for
third party brand owners seeking effective distribution for their new and emerging brands. These brands give us exposure in certain
markets to fast growing segments of the beverage industry with minimal capital investment.
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