Snapple 2010 Annual Report Download - page 32

We use both The Nielsen Company and Beverage Digest to assess both our own and our competitors’ performance and market
share in the U.S. Different market share rankings can result for a specific beverage category depending on whether data from The
Nielsen Company or Beverage Digest is used, in part because of the differences in the sales channels reported by each source. For
example, because the fountain channel (where we have a relatively small business except for Dr Pepper) is not included in The
Nielsen Company data, our market share using The Nielsen Company data is generally higher for our CSD portfolio than the
Beverage Digest data, which does include the fountain channel.
In this Annual Report on Form 10-K, all information regarding the beverage market in the U.S. is from Beverage Digest, and,
except as otherwise indicated, is from 2009. All information regarding our brand market positions in the U.S. is from The Nielsen
Company and is based on retail dollar sales in 2010.
ITEM 1A. RISK FACTORS
Risks Related to Our Business
In addition to the other information set forth in this report, you should carefully consider the risks described below which
could materially affect our business, financial condition, or future results. Any of the following risks, as well as other risks and
uncertainties, could harm our business and financial condition.
We operate in highly competitive markets.
The LRB industry is highly competitive and continues to evolve in response to changing consumer preferences. Competition
is generally based upon brand recognition, taste, quality, price, availability, selection and convenience. We compete with
multinational corporations with significant financial resources. Our two largest competitors in the LRB market are Coca-Cola and
PepsiCo, which represent approximately 63% of the U.S. liquid refreshment beverage market by volume, according to Beverage
Digest. We also compete against other large companies, including Nestle and Kraft. These competitors can use their resources and
scale to rapidly respond to competitive pressures and changes in consumer preferences by introducing new products, reducing
prices or increasing promotional activities. As a bottler and manufacturer, we also compete with a number of smaller bottlers and
distributors and a variety of smaller, regional and private label manufacturers, such as Cott. Smaller companies may be more
innovative, better able to bring new products to market and better able to quickly exploit and serve niche markets. We have lower
exposure to some of the faster growing non-carbonated and the bottled water segments in the overall LRB market. In Canada,
Mexico and the Caribbean, we compete with many of these same international companies as well as a number of regional
competitors.
Our inability to compete effectively could result in a decline in our sales. As a result, we may have to reduce our prices or
increase our spending on marketing, advertising and product innovation. Any of these could negatively affect our business and
financial performance.
We may not effectively respond to changing consumer preferences, trends, health concerns and other factors.
Consumers’ preferences can change due to a variety of factors, including aging of the population, social trends, negative
publicity, economic downturn or other factors. For example, consumers are increasingly concerned about health and wellness,
and demand for regular CSDs has decreased as consumers have shifted towards low or no calorie soft drinks and, increasingly, to
NCBs, such as water, ready-to-drink teas and sports drinks. If we do not effectively anticipate these trends and changing consumer
preferences, then quickly develop new products in response, our sales could suffer. Developing and launching new products can
be risky and expensive. We may not be successful in responding to changing markets and consumer preferences, and some of our
competitors may be better able to respond to these changes, either of which could negatively affect our business and financial
performance.
We depend on a small number of large retailers for a significant portion of our sales.
Food and beverage retailers in the U.S. have been consolidating, resulting in large, sophisticated retailers with increased
buying power. They are in a better position to resist our price increases and demand lower prices. They also have leverage to
require us to provide larger, more tailored promotional and product delivery programs. If we and our bottlers and distributors do
not successfully provide appropriate marketing, product, packaging, pricing and service to these retailers, our product availability,
sales and margins could suffer. Certain retailers make up a significant percentage of our products’ retail volume, including volume
sold by our bottlers and distributors. Some retailers also offer their own private label products that compete with some of our
brands. The loss of sales of any of our products in a major retailer could have a material adverse effect on our business and financial
performance.
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