Snapple 2009 Annual Report Download - page 28

In Mexico, we manufacture and distribute our products through our bottling operations and third party bottlers
and distributors. In the Caribbean, we distribute our products through third party bottlers and distributors. In
Mexico, we also participate in a joint venture to manufacture Aguafiel brand water with Acqua Minerale
San Benedetto. We provide expertise in the Mexican beverage market and Acqua Minerale San Benedetto provides
expertise in water production and new packaging technologies.
We sell our finished beverages through all major Mexican retail channels, including the “mom and pop” stores,
supermarkets, hypermarkets, and on premise channels.
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 or change in control 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.
Agreement with PepsiCo, Inc.
On December 8, 2009, DPS agreed to license certain brands to PepsiCo, Inc. (“PepsiCo”) on closing of
PepsiCo’s proposed acquisitions of PBG and PepsiAmericas, Inc. (“PAS”).
Under the new licensing agreements, PepsiCo will distribute Dr Pepper, Crush and Schweppes in the
U.S. territories where these brands are currently distributed by PBG and PAS. The same will apply for Dr Pepper,
Crush, Schweppes, Vernors and Sussex in Canada; and Squirt and Canada Dry in Mexico.
Under the agreements, DPS will receive a one-time cash payment of $900 million. The new agreement will
have an initial period of twenty years with automatic twenty year renewal periods, and will require PepsiCo to meet
certain performance conditions. The payment will be recorded as deferred revenue, which will be recognized as net
sales ratably over the estimated 25-year life of the customer relationship.
Additionally, in U.S. territories where it has a distribution footprint, DPS will begin distributing certain owned
and licensed brands, including Sunkist soda, Squirt, Vernors, Canada Dry and Hawaiian Punch, that were previously
distributed by PBG and PAS.
On February 26, 2010, the Company completed the licensing of those brands to PepsiCo following PepsiCo’s
acquisition of PBG and PAS.
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.
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