Snapple 2012 Annual Report Download - page 24

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Increase presence in high margin channels and packages. We are focused on improving our product presence in high margin
channels, such as convenience stores, vending machines and small independent retail outlets, through increased selling activity
and significant investments in coolers and other cold drink equipment. We have continued the expanded placement program for
our branded coolers and other cold drink equipment and intend to selectively increase the number of those types of equipment
where we believe we can achieve an attractive return on investment. We also intend to increase demand for high margin products
like single-serve packages for many of our key brands through increased in-store activity.
Leverage our integrated business model. We believe our integrated brand ownership, manufacturing and distribution business
model provides us opportunities for net sales and profit growth through the alignment of the economic interests of our brand
ownership and our manufacturing and distribution businesses. We intend to continue leveraging our integrated business model to
reduce costs by creating greater geographic manufacturing and distribution coverage and to be more flexible and responsive to
the changing needs of our large retail customers by coordinating sales, service, distribution, promotions and product launches.
Strengthen our route-to-market. Strengthening our route-to-market will ensure the ongoing health of our brands. We have
rolled out handheld technology and are upgrading our information technology ("IT") infrastructure to improve route productivity
and data integrity and standards. With third party bottlers, we continue to deliver programs that maintain priority for our brands
in their systems.
Improve operating efficiency. We have been able to create multi-product manufacturing facilities which provide a region with
a wide variety of our products at reduced transportation and co-packing costs. In 2011, we launched our Rapid Continuous
Improvement ("RCI") initiative, which uses Lean and Six Sigma methods to deliver customer value and improve productivity.
We believe RCI should enable us to leverage top line growth to accelerate net income growth and improve free cash flow.
OUR BUSINESS OPERATIONS
As of December 31, 2012, our operating structure consists of three business segments: Beverage Concentrates, Packaged
Beverages and Latin America Beverages. Segment financial data for 2012, 2011 and 2010, including financial information about
foreign and domestic operations, is included in Note 19 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 2012, our Beverage
Concentrates segment had net sales of approximately $1,221 million. Key brands include Dr Pepper, Crush, Canada Dry, Sunkist
soda, Schweppes, 7UP, A&W, RC Cola, Squirt, Sun Drop, Diet Rite, Country Time, Vernors and the concentrate form of Hawaiian
Punch.
We are the industry leader in flavored CSDs with a 39.8% market share in the U.S. for 2012 as measured by retail sales
according to Nielsen. We are also the third largest CSD brand owner as measured by 2012 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.
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
them 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, 67% 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 18%, respectively, of the segment's net sales during 2012.