Snapple 2013 Annual Report Download - page 23

13
We depend on a small number of large retailers for a significant portion of our sales.
Food and beverage retailers in the U.S. have been consolidating, resulting in large, sophisticated retailers with increased
buying power. They are in a better position to resist our price increases and demand lower prices. They also have leverage to
require us to provide larger, more tailored promotional and product delivery programs. If we and our bottlers and distributors do
not successfully provide appropriate marketing, product, packaging, pricing and service to these retailers, our product availability,
sales and margins could suffer. Certain retailers make up a significant percentage of our products' retail volume, including volume
sold by our bottlers and distributors. Some retailers also offer their own private label products that compete with some of our
brands. The loss of sales of any of our products by a major retailer could have a material adverse effect on our business and financial
performance.
We depend on third party bottling and distribution companies for a portion of our business.
Net sales from our Beverage Concentrates segment represent sales of beverage concentrates to third party bottling companies
that we do not own. The Beverage Concentrates segment's operations generate a significant portion of our overall segment operating
profit. Some of these bottlers, such as PepsiCo and Coca-Cola, are also our competitors. The majority of these bottlers' business
comes from selling either their own products or our competitors' products. In addition, some of the products we manufacture are
distributed by third parties. As independent companies, these bottlers and distributors make their own business decisions. They
may have the right to determine whether, and to what extent, they produce and distribute our products, our competitors' products
and their own products. They may devote more resources to other products or take other actions detrimental to our brands. In most
cases, they are able to terminate their bottling and distribution arrangements with us without cause. We may need to increase
support for our brands in their territories and may not be able to pass on price increases to them. Their financial condition could
also be adversely affected by conditions beyond our control, and our business could suffer as a result. Deteriorating economic
conditions could negatively impact the financial viability of third party bottlers. Any of these factors could negatively affect our
business and financial performance.
Our financial results may be negatively impacted by recession, financial and credit market disruptions and other economic
conditions.
Changes in economic and financial conditions in the U.S., Canada, Mexico or the Caribbean may negatively impact consumer
confidence and consumer spending, which could result in a reduction in our sales volume and/or switching to lower price offerings.
Similarly, disruptions in financial and credit markets worldwide may impact our ability to manage normal commercial relationships
with our customers, suppliers and creditors. These disruptions could have a negative impact on the ability of our customers to
timely pay their obligations to us, thus reducing our cash flow, or the ability of our vendors to timely supply materials. Additionally,
these disruptions could have a negative effect on our ability to raise capital through the issuance of unsecured commercial paper
or senior notes.
We could also face increased counterparty risk for our cash investments and our hedging arrangements. Declines in the
securities and credit markets could also affect our marketable securities and pension fund, which in turn could increase funding
requirements.
Costs for raw materials and energy costs may increase substantially.
The principal raw materials we use in our products are aluminum cans and ends, glass bottles, PET bottles and caps, paperboard
packaging, sweeteners, juice, fruit, water and other ingredients. The cost of such raw materials can fluctuate substantially. Under
many of our supply arrangements, the price we pay for raw materials fluctuates along with certain changes in underlying
commodities costs, such as aluminum in the case of cans, natural gas in the case of glass bottles, resin in the case of PET bottles
and caps, corn in the case of sweeteners and pulp in the case of paperboard packaging.
In addition, we use a significant amount of energy in our business. We are significantly impacted by increases in fuel costs
due to the large truck fleet we operate in our distribution businesses and our use of third party carriers. Additionally, conversion
of raw materials into our products for sale uses electricity and natural gas.
Continued price increases could exert pressure on our costs and we may not be able to effectively hedge or pass along any
such increases to our customers or consumers. Price increases we pass along to our customers or consumers could reduce demand
for our products. Such increases could negatively affect our business and financial performance.