When Dr Pepper Snapple Group officially marked its separation from Cadbury Schweppes and its emergence as an independent beverage company May 7, it was not only a significant milestone for a company that has had a long and adventurous evolution, but in many respects it brings the Plano, Texas, USA-based company right back to its entrepreneurial roots. (And geographically speaking, not far from namesake brand Dr Pepper’s Waco, Texas roots).

Dr Pepper Snapple Group, formerly known as Cadbury Schweppes Americas Beverages (CSAB), a division of London-based confectionary company Cadbury, can trace its legacy in the carbonated soft drink business back more than 200 years to 1783 when Swiss jeweler Jean Jacob Schweppe created the first carbonated mineral water.

Photography By Jesse Hornbuckle

Yet in some ways, Dr Pepper Snapple Group seems to be the largest beverage company that many people have never heard of.

 “One of the things that we found out when we went out and started telling our story after the spin off was that we were the best kept secret in the beverage business,” says Larry Young, Dr Pepper Snapple Group president, CEO and director. “In the US, people didn’t understand who we were because we were part of a confectionary company.”

This might sound like an enormous hurdle, but the Dr Pepper Snapple team sees it as an opportunity to share its story—a story of innovation and discovery that has just entered a new chapter. According to Young, it’s a story of 58 strong, iconic brands and a collaboration of dedicated people, including a team of directors with 200 combined years of experience, 100 of those at Dr Pepper Snapple.

“People are starting to see who we are—that we’re not the No. 3 CSD company. We’re the No. 1 flavored CSD company and six of the top 10 flavored CSDs are in our portfolio,” Young says. “It’s all tied into everything that I’ve believed in for 30-plus years—to be successful, you’ve got to have great brands along with great people delivering great results. So I think the future is very bright for this company.”

On the Move
Many of the brands in Dr Pepper Snapple’s portfolio have roots stretching back to the 19th century, yet the corporate evolution of the company as it is today began in 1969 with the formation of Cadbury Schweppes plc. Over the ensuing three decades, Cadbury Schweppes made many strategic beverage acquisitions, including the Mott’s juice brand, Canada Dry, Sunkist Soda, Crush, Sun Drop, A&W, Squirt, Vernors and Hawaiian Punch. Cadbury purchased Dr Pepper/Seven Up, Inc. in 1995 along with IBC Root Beer and Welch’s, making it the No. 3 soft drink company in the US. The acquisition of pioneering New Age brand Snapple from Triarc in 2000 also added the RC Cola, Diet Rite and Stewart’s brands to its portfolio.

Last year, Cadbury announced plans to separate CSAB and its confectionary business, which allowed the beverage division to become an independent company. Dr Pepper Snapple is now fully in control of its own destiny and Young and his team have wasted no time in taking advantage of their new-found independence.

“For years, the (Dr Pepper Snapple) team had been a subsidiary, for years they had to compete for resources and for years it took a tremendous amount of time to get decisions made. So now, as a stand-alone company, we don’t compete for resources. We like to say around here ‘We say what we’re going to do and then we do what we said.’ And we do it quickly. We don’t overanalyze; we just go and get it done,” Young remarks.

The company is now strategically focused on its growth strategy, which includes expanding distribution and penetration of its brands throughout North America. While the overall CSD market is declining in the US—what Young refers to as “cola fatigue”—the flavored segment continues to grow, which puts Dr Pepper Snapple in an enviable position in the ever-challenging soft drink market.

“I sold colas for years and while it’s still a massive amount of business, there’s just so much choice out there today,” attests Young, whose experience in the soft drink business spans more than 30 years, including heading Dr Pepper/Seven Up Bottling Group and 25 years at Pepsi-Cola. “As people experiment, what you’ll see is a lot of times they’ll go to flavored CSDs. And especially when you look at the switch from sugar to diets, if you look at our diet line-up—diet A&W, diet Sunkist, diet 7UP, diet Canada Dry—we’ve got a great selection for people to get into other diet soft drinks besides just cola.”

At the same time, the company has a broad portfolio of non-carbonated beverages in the water, juice and tea categories, including many with a strong health and wellness positioning, such as Snapple Premium Green and White teas, Penafiel mineral water and Mott’s. The company also invests in fast-growing categories through partnerships, such as an equity stake in Hydrive, an enhanced water energy drink.

However, Dr Pepper Snapple considers itself, first and foremost, a flavored CSD company, as 80 percent of its sales come from its flavored CSD brands. Or, as Young likes to explain, “I’ve gotta keep the focus there ’cause if you cut me, my blood’s carbonated.”

More than 75 percent of the company’s overall volume is from brands that are No. 1 or No. 2 in their flavor categories, demonstrating the strength of its brands in the flavored segment. Yet Young believes that there are still tremendous opportunities for growth, including establishing a national footprint for what have largely been regional brands. The Snapple brand, for instance, is strong in the Northeast, where it got its start, and the West Coast, and now the company is focused on filling in the gaps across the rest of the country, Young says.

“With Dr Pepper, you take the heartland, such as down here in Texas, Oklahoma, Louisiana, Arkansas and Missouri, some of these locations have per caps of over 400 [8-ounce servings per capita per year], but then we get up into the Northeast and West Coast and per caps are down around 9. So we’ve just got to go in and start putting a strong focus in those areas to increase distribution and per caps and get more awareness,” Young says.

The company also recently signed an agreement with Pepsi Bottling Group to expand distribution of its Crush flavored CSD brand, which will nearly double the brand’s market penetration.

Strength in the Market
Dr Pepper Snapple’s unique vertically integrated business model gives it a distinct advantage in the competitive beverage business as it operates 24 manufacturing and bottling facilities in North America and more than 200 warehouse and distribution centers. Along with greater scale and distribution muscle, the bottling operation strengthens the company’s route to market, allowing it to control nearly half of its overall volume. Cadbury acquired Dr Pepper/Seven Up Bottling Group, the largest independent bottler in the country, in 2006. Young, who served as president of DPSUBG from 2005 until its acquisition by CSAB, also led the bottling operation under Cadbury.

“With the consolidation of the trade today, customers want one voice and they want that voice to get to them quick. So we looked at it and said, “No. 1, we don’t want to be a bottler. We’re a brand company, that’s what we do. But we want to make sure we protect our brands, enhance our brands and grow them. And the way you do that is being able to get to market quickly,” Young says.

Dr Pepper Snapple strengthened its network by purchasing other major independent bottlers, including All-American Bottling Co., Seven Up Bottling of San Francisco and Southeast-Atlantic Beverage Corp. With 40 percent of the company’s volume going through its own bottlers, 40 percent through third-party bottlers (Coke or Pepsi-affiliated bottlers or independents), 10 percent through warehouse and 10 percent through foodservice, Dr Pepper Snapple can be more nimble and versatile in how it goes to market, Young asserts.

The bottler acquisitions also have given Dr Pepper Snapple a national footprint for sales and manufacturing as it now operates large manufacturing and distribution facilities in four key regions in the US. The company plans to build a US$120 million world-class facility in Victorville, Calif., USA to serve as its fifth Western hub, servicing California and part of the desert Southwest.

Legacy of Innovation
With a history that’s built on beverage milestones, such as the oldest soft drink in the US (Dr Pepper) and the original un-cola (7UP), it comes as no surprise that innovation plays a strategic role in the company’s growth platform. From new packages like single-serve Mott’s juices to new flavor extensions, such as Cherry Chocolate Diet Dr Pepper, to new functional benefits, Dr Pepper Snapple utilizes its consumer insights expertise to bring excitement to the market.

“It’s one of the toughest times in years for the beverage industry,” Young remarks. “We have unprecedented commodities cost. You have to work a lot smarter. You can’t just take price. You still have to give your customer and your consumer value, and we do that through innovation.”

The company relocated its R&D facility from Connecticut to its Plano headquarters to improve collaboration and so far this year the company already has launched Venom energy drink, Snapple Antioxidant Water and Canada Dry Green Tea Ginger Ale. Young says the company’s new R&D center combined with its integrated model allows for faster decision-making and commercial alignment, ultimately speeding time to market. “The consumer insights people can take their ideas right to R&D, which can take it to marketing, which then gives it to sales and it goes from concept to commercialization in a very fast time,” Young attests. “Our Snapple Antioxidant Water went from conception to commercialization in 16 weeks and that’s almost unheard of in this business. Had we not been integrated, we couldn’t have done that.”

Young also is quick to credit the passion of the Dr Pepper Snapple team for having the drive to win in the market.
“Sometimes people just want to survive a tough year. We’ve got a team here that says, ‘It’s rough out there, but how can we thrive instead of just survive,’” he says.

That passion translates into how the company communicates with consumers. Unable to outspend the folks down in Atlanta or up in Purchase, the Dr Pepper Snapple team ultimately realized it would need to spend smarter in order to break through the clutter. To this end, the company has invested in some unique, guerilla-type marketing tactics, including a public offer to give everyone in America a free soda if Guns N’ Roses front man Axl Rose finishes his new album, only 17 years in the making. And Stephen Colbert generated some buzz about Dr Pepper’s new ad campaign, called “Trust Me, I’m a Doctor,” during a tongue-in-cheek promo while discussing obsessive branding on The Colbert Report. This all goes to show that while the company’s roots are deeply entrenched in CSD history, the Dr Pepper Snapple team, with new-found freedom and an entrepreneurial spirit, seems ready to shake the beverage business up a bit. Or as Young puts it, armed with the right brands and the right people, “you can just go out and set the world on its ear.”

From Beverage World September 15, 2008