Snapple 2009 Annual Report Download - page 43

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our audited financial statements and the related
notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking
statements that are based on management’s current expectations, estimates and projections about our business and
operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-
looking statements as a result of various factors including the factors we describe under “Special Note Regarding
Forward-Looking Statements”, “Risk Factors,” and elsewhere in this Annual Report on Form 10-K.
References in this Annual Report on Form 10-K to “we”, “our”, “us”, “DPS” or “the Company” refer to Dr
Pepper Snapple Group, Inc. and all entities included in our Audited Consolidated Financial Statements. Cadbury
plc and Cadbury Schweppes plc are hereafter collectively referred to as “Cadbury” unless otherwise indicated.
Kraft Foods Inc., which acquired Cadbury on February 2, 2010, is hereafter referred to as “Kraft”.
The periods presented in this section are the years ended December 31, 2009, 2008 and 2007, which we refer to
as “2009,” “2008” and “2007”, respectively.
Business Overview
We are a leading integrated brand owner, manufacturer and distributor of non-alcoholic beverages in the
United States, Canada and Mexico with a diverse portfolio of flavored carbonated soft drinks (“CSDs”) and non-
carbonated beverages (“NCBs”), including ready-to-drink teas, juices, juice drinks and mixers. Our brand portfolio
includes popular CSD brands such as Dr Pepper, Sunkist soda, 7UP, A&W, Canada Dry, Crush, Squirt, Peñafiel,
Schweppes and Venom Energy, and NCB brands such as Snapple, Mott’s, Hawaiian Punch, Clamato, Rose’s and
Mr & Mrs T mixers. Our largest brand, Dr Pepper, is a leading flavored CSD in the United States according to The
Nielsen Company. We have some of the most recognized beverage brands in North America, with significant
consumer awareness levels and long histories that evoke strong emotional connections with consumers.
We operate primarily in the United States, Mexico and Canada and we also distribute our products in the
Caribbean. In 2009, 90% of our net sales were generated in the United States, 4% in Canada and 6% in Mexico and
the Caribbean.
Our Business Model
We operate as a brand owner, a manufacturer and a distributor.
Our Brand Ownership Businesses. As a brand owner, we build our brands by promoting brand awareness
through marketing, advertising and promotion and by developing new and innovative products and product line
extensions that address consumer preferences and needs. As the owner of the formulas and proprietary know-how
required for the preparation of beverages, we manufacture, sell and distribute beverage concentrates and syrups
used primarily to produce CSDs and we manufacture, sell and distribute primarily finished NCBs. Most of our sales
of beverage concentrates are to bottlers who manufacture, bottle, sell and distribute our branded products into retail
channels. We also manufacture, sell and distribute syrups for use in beverage fountain dispensers to restaurants and
retailers, as well as to fountain wholesalers, who resell it to restaurants and retailers. In addition, we distribute
finished NCBs through ourselves and through third party distributors.
Our beverage concentrates and brand ownership businesses are characterized by relatively low capital
investment, raw materials and employee costs. Although the cost of building or acquiring an established brand
can be significant, established brands typically do not require significant ongoing expenditures, other than
marketing, and therefore generate relatively high margins. Our packaged beverages brand ownership businesses
have characteristics of both of our beverage concentrates and brand ownership businesses as well as our
manufacturing and distribution businesses discussed below.
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