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23
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 Consolidated 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 the following discussion 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. acquired Cadbury on February 2, 2010.
On October 1, 2012, Kraft Foods, Inc. spun-off its North American grocery business to its shareholders and changed its name
to International, Inc.
The periods presented in this section are the years ended December 31, 2013, 2012 and 2011, which we refer to as "2013",
"2012" and "2011", respectively.
OVERVIEW
We are a leading integrated brand owner, manufacturer and distributor of non-alcoholic beverages in the United States ("U.S."),
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 and Schweppes, 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 U.S. 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 as an integrated brand owner, manufacturer and distributor through our three segments. We believe our integrated
business model strengthens our route-to-market and provides opportunities for net sales and profit growth through the alignment
of the economic interests of our brand ownership and our manufacturing and distribution businesses through both our Direct Store
Delivery ("DSD") system and our Warehouse Direct ("WD") delivery system. Our integrated business model enables us to be
more flexible and responsive to the changing needs of our large retail customers and allows us to more fully leverage our scale
and reduce costs by creating greater geographic manufacturing and distribution coverage.
We operate primarily in the U.S., Mexico and Canada and we also distribute our products in the Caribbean. In 2013, 88% of
our net sales were generated in the U.S., 4% in Canada and 8% in Mexico and the Caribbean.
UNCERTAINTIES AND TRENDS AFFECTING OUR BUSINESS
We believe the North American Liquid Refreshment Beverage ("LRB") market is influenced by certain key trends and
uncertainties. Some of these items, such as increased health consciousness and changes in economic factors, have created continued
category headwinds for our CSDs during the year ended December 31, 2013 and have unfavorably impacted our sales volumes
compared to the prior year. The key trends and uncertainties that could affect our business include:
• Increased health consciousness. Consumers are increasingly becoming more concerned about health and wellness,
focusing on caloric intake and sugar content in both regular CSDs and juices and the use of artificial sweeteners in diet
CSDs. We believe the main beneficiaries of this trend include naturally sweetened, low calorie drinks, all natural and
organic beverages, ready-to-drink teas and bottled waters.
• Increased government regulation. Government agencies, as a result of concerns about the public health consequences
and health care costs associated with obesity, have been proposing and, in some cases, enacting new taxes or regulations
on sugar-sweetened beverages. Any changes of regulations or imposed taxes could reduce demand and/or cause us to
raise our prices.
• Changes in economic factors. We believe changes in economic factors, including forms of government assistance such
as the Supplemental Nutrition Assistance Program, could impact consumers' purchasing power which may result in a
decrease in purchases of our products.