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Varchild2008 (84.50)

More people pile on the Anti-DPS Bandwagon

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June 13, 2008 – Comments (9) | RELATED TICKERS: DPS

Yet more people are piling on the Anti-DPS Bandwagon.

Well.... Guess what happened today?  

DPS up 49 cents.

Warren Buffet's  Coca Cola  fell $1.72.
Pepsi fell 41 cents.

http://www.fool.com/investing/value/2008/06/13/sharing-a-coke-with-warren-buffett.aspx

Ryan Freund writes,  "I want you to close your eyes and picture yourself relaxing on the beach with an ice cold Coca-Cola in your hand. How does that image make you feel? Now picture yourself holding a Pepsi or Dr Pepper, made by PepsiCo (NYSE: PEP) and Dr Pepper Snapple Group (NYSE: DPS), respectively."

I close my eyes and imagine myself drinking an ice cold SNAPPLE Pink Lemonade!

Who in their right minds in this Century thinks Coca Cola beats a SNAPPLE when you are sitting out in 90 degree heat, at a beach?   Juice  is what sells.... Carbonated Beverages don't sell as well as they used to.

So it is without NO SURPRISE as to why DPS released 2 products in which neither of them were carbonated beverages.   Snapple Antioxidant Water +  Venom Energy Drink.

Ryan Freund continues to write,

"Coca-Cola currently sports a 21 P/E ttm and a forward P/E of slightly above 16. From a historical perspective, the stock is pretty cheap. In the past 10 years, the company has maintained a trailing average P/E ratio of around 35. That's significantly higher than today's P/E of 21."

From a historical perspective.... When a company has expanded pretty much as far as it can... Suffers a massive sell off rally lasting not days... not weeks.....but months.... lowering the company's P/E Ratio and Forward P/E expectations....  That speaks volumes about Coca Cola as a legitamit investment.

Now I can understand passing up the #4 Beverage company:  COTT CORP    or passing up on JONES Beverage.

But to place DR PEPPER SNAPPLE GROUP  (#3 largest beverage company) in the same category as COTT CORP?   JONES???     When you make such a broad based statement like that it's amazing your article got recommended by anyone at all.

DR. PEPPER SNAPPLE GROUP  has perhaps the:

#1:   Juice Drinks in  Snapple and Schweppes.
#1:  Ale Drink in VERNORS
#3: Carbonated Beverage in Dr. Pepper / 7UP

Not too bad for a company everyone is supposed to ignore in favor of an over extended, over expanded, yesterday's news Coca Cola company.

9 Comments – Post Your Own

#1) On June 14, 2008 at 1:25 PM, kristm (99.73) wrote:

They need better marketing, updated product packaging, and wider distribution of some brands. Dr. Pepper still looks like it did, more or less, in 1992. Snapple is hard to find anymore (did better when Pepsico owned it), and Vernors isn't available outside of the northern states where it used to be made.

7Up was murdered when they decided to change its formula to taste more like Sprite. It used to have a sharper fresher taste that I preferred to Sprite but now it's the same, almost identical. Too sweet and goes flat faster, just like Sprite (which was originally created to compete with 7Up).

Coke and Pepsi and their bottlers squeeze their competitors by locking restaurants into contracts that restrict what can be served. Know why you never see Pepsi and Coke served side-by-side? Because Coke contracts forbid them from doing that, and vice-versa. An employee drinking a Pepsi in front of customers in a Coke-contract restaurant could get his employer sued for millions.

Coke gives away soda equipment or leases it for next-to-nothing in order to get restaurants tied into those exclusive contracts. They also give marketing money back to the stores for promoting Coke products in their commercials. It's not like you can't go to certain stores and buy soda syrup without a contract, but it costs twice as much because Coke subsidizes the costs to contracted vendors and practically gives its products away to restaurants in order to get them into those contracts. 

That's one of the reasons Pepsi started its own restaurant group back in the day. Tricor (now Yum Brands) was a Pepsi company, and all their stores served Pepsi products. To this day their stores are about the only ones that do - KFC, Pizza Hut, Taco Bell, plus now Long John Silvers and A&W. Without that restaurant group Pepsi would have almost no presence in the drink syrup / fountain drink marketplace.

But Dr. Pepper is sometimes served along with the Coke or Pepsi products. It confuses many people into thinking Dr. Pepper actually IS a Coke or Pepsi product. How is that possible? Because some of Coke and Pepsi's bottlers also bottle for DPS. The ones that do will generally sell DPS products to their Coke or Pepsi contract stores when asked.

In areas where DPS has its own bottlers you won't see that happening as much because the Coke or Pepsi bottlers don't make DPS products. That's where you generally see stores selling Pibb Xtra, Coke's sorry competitor for Dr. Pepper. National chains also tend to go that route because they want their menu to be the same across the country and that's not possible when Dr. Pepper isn't universally available from the same company's bottlers.

I've never seen a restaurant serving anything on their fountain from DPS besides Dr. Pepper. If you know of one that has 7Up or RC Cola on tap, let me know.

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#2) On June 14, 2008 at 1:57 PM, Varchild2008 (84.50) wrote:

Snapple is easy to find.  Wallmart regularly stocks up on it.

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#3) On June 14, 2008 at 2:01 PM, Varchild2008 (84.50) wrote:

"I've never seen a restaurant serving anything on their fountain from DPS besides Dr. Pepper. If you know of one that has 7Up or RC Cola on tap, let me know."

*Shrug*  I've seen plenty of Mall Restaurants selling jars of Snapple.... or Selling VERNORS through the fountain.

No.. I haven't seen 7UP.  7UP seems like a dying breed except you do get it served on board airlines as part of the ticket price sometimes. 

*shrug*  DPS has tons of brands and they keep making new ones to try and find what works.   DPS is a profiting, robust, company that has a bright future.

I still see bottles of 7UP and RC COLA on grocery store shelves, albeit, DPS's RC COLA isn't selling at all.

I caught word recently of Diet 7UP being sold now at my place of work.  Big advertisement on it as well.  Not sure how that drink is selling there as I don't drink Diet Pop.

Anyhow...  I have no worries..   Some drinks/products in DPS's lineup aren't very good.... Some are....  But the same thing can be said about PEPSI and COKE who have in the past released drinks that totally bombed...

Remember "SURGE?"   How long did SURGE last before that died?  That was heavily marketed too.

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#4) On June 14, 2008 at 2:32 PM, Varchild2008 (84.50) wrote:

DPS regularly available Fountain Drinks:

1:  A&W Root Beer    (A&W Restaurant)
2:  Dr. Pepper
3:  Vernors
4:  Hawaiian Punch
5:  Sunkist
6:  Country Time (lemonade)
7:  Crush
8:  Mott's

These are all drinks I regularly see especially at Buffet Restaurants like Old Country Buffet.

Tell ya what.... I'm about to go to Texas Road House tomorrow so I'll count how many drinks that restaurant sells in the DPS category.

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#5) On June 14, 2008 at 2:36 PM, Varchild2008 (84.50) wrote:

Another thing.. My last trip to Walmart... I saw hardly any jars of Snapple on the shelf in spite of the large shelf space assigned to Snapple.... 

At least in Michigan, where I live, Snapple drinks get bought out.  They sell big.

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#6) On June 15, 2008 at 1:14 PM, kristm (99.73) wrote:

Well some of it could be because I live in Georgia, deep Coke country. But my comments on the fountain sodas are generally true, Coke's contracts with restaurants are the way I said (I had to battle their idiots on a weekly basis for 18 months to order BiB syrup). Vernors is so totally unknown outside of the upper midwest - I had never even heard of it until the first time I went to Michigan.

I love Dr. Pepper, just not too sure about the parent company. Their deals to give all International rights to their beverages to another company aren't going to help things very much, that's for sure.

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#7) On June 16, 2008 at 7:50 PM, Varchild2008 (84.50) wrote:

Welp.. Texas Road House =  Coke products...

But, I constantly see people buying up DPS products. 
DPS's 1st quarter earnings report moved year guidance EPS up 4 cents.

The problem is that investors didn't like HOW the earnings were made.  An understandable concern but one that is made out of fear and fear alone.

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#8) On June 17, 2008 at 2:01 AM, kristm (99.73) wrote:

BTW, Surge was pulled because of a trademark issue, not sales. Apparently a chemical company had an airline deicer named Surge, and it was the same color as Surge soda. Coke lost the lawsuit, or settled, I forget. Surge had to leave the market after that. When I worked in food we had some old material with a Surge logo on it (among other Coke brands) and had customers asking for it all the time.

Have you tried Vault? It's basically Surge all over again and it's selling well.

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#9) On July 23, 2008 at 2:57 PM, FreundInvesting (29.53) wrote:

Varchile2008:

"Well.... Guess what happened today?  
DPS up 49 cents.
Warren Buffet's  Coca Cola  fell $1.72.
Pepsi fell 41 cents."

What does that have to do with anything? Short term movements mean nothing and add nothing to the argument.

Secondly, I don't have anything against DPS. There may be an "Anti-DPS Bandwagon," but I know nothing of it.

The purpose of this article was to demonstrate why Coca Cola has the most recognizable brand in the world. Can DPS do the same in the future? Sure, it's possible, but as of right now, Coca Cola reigns supreme.

I appreciate the thoughtful discussions/comments about my article.

Fool on!

Ryan Freund

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