Dr Pepper Snapple Group Inc. (DPS) recently entered into an agreement with Spirit Airlines (SAVE) to include Dr Pepper and Diet Dr Pepper to the airline’s in-flight beverage service from Jun 2013 through 2016.
The beverage service onboard Spirit Airlines already includes Dr. Pepper Snapple’s products such as Canada Dry Ginger Ale, Club Soda and Tonic Water and Mr and Mrs T Bloody Mary Mix. Following the recent deal, Spirit customers will get to enjoy 23 additional flavors.
Dr Pepper witnessed 2% decline in sales volume in the first quarter 2013. Dr Pepper’s sales volume is measured in two ways: 1) sales volume and 2) bottler case sales (BCS) volume. Sales volume represents sales of concentrates and finished beverages sold to bottlers, retailers and distributors. Bottler case sales include sales of packaged beverages by the company and its bottlers to retailers and independent distributors.
Weak sales volume in the quarter was due to declines in the Beverage Concentrates and Packaged Beverages segments. In the quarter, BCS volume declined 2% as both carbonated soft drinks (CSD) and non-carbonated soft drinks (NCB) volumes dipped 2% and 4% respectively. In CSD, Dr Pepper soft drink volume declined 3% due to weak performance of the base business and Dr Pepper TEN.
The latest agreement with Spirit Airlines is expected to contribute to volumes as it will help DPS to reach out to 12 million passengers. Also the agreement may also consider other advertising and marketing programs and the increased brand building is likely to contribute to volume growth in the upcoming quarters.
Dr Pepper carries a Zacks Rank #3 (Hold).
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