Snapple 2008 Annual Report Download - page 32

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Bottler and Distributor Agreements
In the United States and Canada, we generally grant perpetual, exclusive license agreements for CSD brands
and packages to bottlers for specific geographic areas. These agreements prohibit bottlers from selling the licensed
products outside their exclusive territory and selling any imitative products in that territory. Generally, we may
terminate bottling agreements only for cause and the bottler may terminate without cause upon giving certain
specified notice and complying with other applicable conditions. Fountain agreements for bottlers generally are not
exclusive for a territory, but do restrict bottlers from carrying imitative product in the territory. Many of our brands
such as Snapple, Mistic, Stewart’s, Nantucket Nectars, Yoo-Hoo and Orangina, are licensed for distribution in
various territories to bottlers and a number of smaller distributors such as beer wholesalers, wine and spirit
distributors, independent distributors and retail brokers. We may terminate some of these distribution agreements
only for cause and the distributor may terminate without cause upon certain notice and other conditions. Either party
may terminate some of the other distribution agreements without cause upon giving certain specified notice and
complying with other applicable conditions.
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 has enabled us to maintain strong relationships with major retailers in the
United States, Canada and Mexico. In 2008, our largest retailer was Wal-Mart Stores, Inc., representing approx-
imately 11% of our 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 liquid refreshment beverage 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 liquid refreshment beverage market are Coca-Cola and PepsiCo, each
representing more than 30% of the U.S. liquid refreshment beverage market by volume, according to Beverage
Digest. We also compete against other large companies, including Nestlé, S.A. and Kraft Foods, Inc. As a bottler,
we compete with bottlers such as Coca-Cola Enterprises, Pepsi Bottling Group and PepsiAmericas and a number of
smaller bottlers and distributors. We also compete with a variety of smaller, regional and private label manufac-
turers, such as Cott Corp. We have lower exposure to some of the faster growing non-carbonated and bottled water
segments in the overall liquid refreshment beverage market and as a result, although we have increased our market
share in the overall United States CSD market, we have lost share in the overall United States liquid refreshment
beverage market over the past several years. In Canada and Mexico, we compete with many of these same
international companies as well as a number of regional competitors.
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.
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