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8
Agreements with PepsiCo and Coca-Cola
On February 26, 2010, we completed the licensing of certain brands to PepsiCo following PepsiCo's acquisition of Pepsi
Bottling Group and PepsiAmericas, Inc. The agreements have an initial period of 20 years with automatic 20-year renewal periods
and require PepsiCo to meet certain performance conditions.
On October 4, 2010, we completed the licensing of certain brands to Coca-Cola following Coca-Cola's acquisition of Coca-
Cola Enterprises' North American Bottling Business and executed separate agreements pursuant to which Coca-Cola began offering
Dr Pepper and Diet Dr Pepper in local fountain accounts and its Freestyle fountain program. The agreements have an initial period
of 20 years with automatic 20-year renewal periods and require Coca-Cola to meet certain performance conditions.
Under a separate agreement, Coca-Cola has agreed to include Dr Pepper and Diet Dr Pepper brands in its Freestyle fountain
program. The Freestyle fountain program agreement has a period of 20 years.
CUSTOMERS
We primarily serve two groups of customers: 1) bottlers and distributors and 2) retailers.
Bottlers buy beverage concentrates from us and, in turn, they manufacture, bottle, sell and distribute finished beverages.
Bottlers also manufacture and distribute syrup for the fountain foodservice channel. In addition, bottlers and distributors purchase
finished beverages from us and sell them to retail and other customers. We have strong relationships with bottlers affiliated with
Coca-Cola and PepsiCo primarily because of the strength and market position of our key Dr Pepper brand.
Retailers also buy finished beverages directly from us. Our portfolio of strong brands, operational scale and experience in the
beverage industry have enabled us to maintain strong relationships with major retailers in the U.S., Canada and Mexico. In 2014,
our largest retailer was WalMart, representing approximately 12% of our consolidated net sales.
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.
COMPETITION
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 collectively represent approximately 60% of the U.S. LRB market by volume, according to Beverage Digest. We
also compete against other large companies, including Nestlé, S.A. ("Nestle"), Kraft Foods Group, Inc. ("Kraft Foods") and The
Campbell Soup Company ("Campbell Soup"). 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 The Cott Corporation ("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. Other bottlers and manufacturers could
also expand their contract manufacturing. We have lower exposure to some of the faster growing non-carbonated and 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.
Although these bottlers and distributors are our competitors, many of these companies are also our customers as they purchase
beverage concentrates from us.
INTELLECTUAL PROPERTY AND TRADEMARKS
Our Intellectual Property. We possess a variety of intellectual property rights that are important to our business. We rely on
a combination of trademarks, copyrights, patents and trade secrets to safeguard our proprietary rights, including our brands and
ingredient and production formulas for our products.