Snapple 2011 Annual Report Download - page 27

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Our Packaged Beverages’ products are manufactured in multiple facilities across the U.S. and are sold or distributed to retailers
and their warehouses by our own distribution network or by third party distributors. The raw materials used to manufacture our
products include aluminum cans and ends, glass bottles, PET bottles and caps, paper products, sweeteners, juices, water and other
ingredients.
We sell our Packaged Beverages’ products both through our Direct Store Delivery system ("DSD"), supported by a fleet of
approximately 6,000 vehicles and 12,000 employees, including sales representatives, merchandisers, drivers and warehouse
workers, as well as through our Warehouse Direct delivery system ("WD"), both of which include the sales to all major retail
channels, including supermarkets, fountain channel, mass merchandisers, club stores, vending machines, convenience stores, gas
stations, small groceries, drug chains and dollar stores.
In 2011, Wal-Mart, the largest customer of our Packaged Beverages segment, accounted for approximately 18% of our net
sales in this segment.
Latin America Beverages
Our Latin America Beverages segment is a brand ownership, manufacturing and distribution business. This segment
participates mainly in the carbonated mineral water, flavored CSD, bottled water and vegetable juice categories, with particular
strength in carbonated mineral water, vegetable juice categories and grapefruit flavored CSDs. In 2011, our Latin America Beverages
segment had net sales of $418 million with our operations in Mexico representing approximately 89% of the net sales of this
segment. Key brands include Squirt, Peñafiel, Aguafiel, Crush and Clamato.
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 "mom and pop" stores, supermarkets,
hypermarkets, and on premise channels.
Bottler and Distributor Agreements
In the U.S. 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
On February 26, 2010, we completed the licensing of certain brands to PepsiCo following PepsiCo’s acquisition of Pepsi
Bottling Group ("PBG") and PepsiAmericas, Inc. ("PAS").
Under the licensing agreements, PepsiCo began distributing Dr Pepper, Crush and Schweppes in the U.S. territories where
these brands were previously being distributed by PBG and PAS. The same applies to Dr Pepper, Crush, Schweppes, Vernors and
Sussex in Canada; and Squirt and Canada Dry in Mexico.
Additionally, in U.S. territories where it has a distribution footprint, we distribute certain owned and licensed brands, including
Sunkist soda, Squirt, Vernors, Canada Dry and Hawaiian Punch, that were previously distributed by PBG and PAS.
Under the agreements, we received a one-time nonrefundable cash payment of $900 million. The new agreements have an
initial period of 20 years with automatic 20-year renewal periods, and requires PepsiCo to meet certain performance conditions.
The payment was recorded as deferred revenue and is recognized as net sales ratably over the estimated 25-year life of the customer
relationship.