Snapple 2012 Annual Report Download - page 42

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• Volatility in the costs of raw materials. The costs of a substantial portion of the raw materials used in the beverage industry
are dependent on commodity prices for aluminum, resin, corn, diesel, natural gas, pulp and other commodities. Commodity
price volatility has exerted pressure on industry margins and operating results.
SEASONALITY
The beverage market is subject to some seasonal variations. Our beverage sales are generally higher during the warmer months
and also can be influenced by the timing of holidays as well as weather fluctuations.
SEGMENTS
We report our business in three operating segments:
• The Beverage Concentrates segment reflects sales of our branded concentrates and syrup to third party bottlers primarily
in the U.S. and Canada. Most of the brands in this segment are CSD brands.
• The Packaged Beverages segment reflects sales in the U.S. and Canada from the manufacture and distribution of finished
beverages and other products, including sales of our own brands and third party brands, through both DSD and WD.
• The Latin America Beverages segment reflects sales in the Mexico and Caribbean markets from the manufacture and
distribution of concentrates, syrup and finished beverages.
Segment results are based on management reports. Net sales and segment operating profit ("SOP") are the significant financial
measures used to assess the operating performance of our operating segments.
VOLUME
In evaluating our performance, we consider different volume measures depending on whether we sell beverage concentrates
or finished beverages.
Beverage Concentrates Sales Volume
In our Beverage Concentrates segment, we measure our sales volume in two ways: (1) "concentrate case sales" and (2) "bottler
case sales." The unit of measurement for both concentrate case sales and bottler case sales equals 288 fluid ounces of finished
beverage, the equivalent of 24 twelve ounce servings.
Concentrate case sales represent units of measurement for concentrates sold by us to our bottlers and distributors. A concentrate
case is the amount of concentrate needed to make one case of 288 fluid ounces of finished beverage. It does not include any other
component of the finished beverage other than concentrate. Our net sales in our concentrate businesses are based on our sales of
concentrate cases.
Although net sales in our concentrate businesses are based on concentrate case sales, we believe that bottler case sales are
also a significant measure of our performance because they measure sales of packaged beverages into retail channels.
Packaged Beverages Sales Volume
In our Packaged Beverages segment, we measure volume as case sales to customers. A case sale represents a unit of
measurement equal to 288 fluid ounces of packaged beverage sold by us. Case sales include both our owned brands and certain
brands licensed to and/or distributed by us.
Volume in Bottler Case Sales
In addition to sales volume, we measure volume in bottler case sales ("volume (BCS)") as sales of packaged beverages, in
equivalent 288 fluid ounce cases, sold by us and our bottling partners to retailers and independent distributors. Our contract
manufacturing sales are not included or reported as part of volume (BCS).
Bottler case sales and concentrates and packaged beverage sales volumes are not equal during any given period due to changes
in bottler concentrates inventory levels, which can be affected by seasonality, bottler inventory and manufacturing practices, and
the timing of price increases and new product introductions.