27-Apr-2016 Dr Pepper Snapple Group, Inc.filecache.drivetheweb.com/mr5ir_drpeppersnapplegroup_ir/741/... · the summer and will drive incremental points of interruption with a new

Corrected Transcript

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27-Apr-2016

Dr Pepper Snapple Group, Inc. (DPS)

Q1 2016 Earnings Call

Dr Pepper Snapple Group, Inc. (DPS) Q1 2016 Earnings Call

Corrected Transcript 27-Apr-2016


2 Copyright © 2001-2016 FactSet CallStreet, LLC

CORPORATE PARTICIPANTS

Heather Catelotti Vice President-Investor Relations

Larry D. Young President, Chief Executive Officer & Director

Martin M. Ellen Chief Financial Officer

................................................................................................................................................................................................................................

OTHER PARTICIPANTS

Kevin Grundy Jefferies LLC

Amit Sharma BMO Capital Markets (United States)

William Marshall Barclays Capital, Inc.

Judy E. Hong Goldman Sachs & Co.

Ali Dibadj Sanford C. Bernstein & Co. LLC

Bonnie L. Herzog Wells Fargo Securities LLC

Stephen R. Powers UBS Securities LLC

John A. Faucher JPMorgan Securities LLC

William Schmitz Deutsche Bank Securities, Inc.

................................................................................................................................................................................................................................

MANAGEMENT DISCUSSION SECTION

Operator: Good morning and welcome to Dr Pepper Snapple Group's First Quarter 2016 Earnings Conference

Call. Y our lines have been placed on listen-only until the question-and-answer session. Today's call is being

recorded and includes a slide presentation, which can be accessed at www.drpeppersnapple.com. The call and

slides will also be available for replay and download after the call has ended. [Operator Instructions] We

respectfully request a limit of one question per person.

It is now my pleasure to introduce Heather Catelotti, Vice President, Investor Relations. Heather, y ou may begin. ................................................................................................................................................................................................................................

Heather Catelotti Vice President-Investor Relations

Thank y ou, Jackie, and good morning, everyone. Before we begin, I would like to direct your attention to the Safe

Harbor statement and remind y ou that this conference call contains forward-looking statements, including

statements concerning our future financial and operational performance. These forward -looking statements

should also be considered in connection with cautionary statements and disclaimers contained in the Safe Harbo r

statement in this morning's earnings press release and our SEC filings. Our actual performance could differ

materially from these statements, and we undertake no duty to update these forward -looking statements.

During this call, we may reference certain non-GAAP financial measures that reflect the way we evaluate the

business and which we believe provide useful information for investors. Reconciliations of those non -GAAP





measures to GAAP can be found in our earnings press release and on the Investors page at

www.drpeppersnapple.com.

This morning's prepared remarks will be made by Larry Young, President and CEO; and Marty Ellen, our CFO.

Following our prepared remarks, we will open the call for y our questions.

With that, let me turn the call over to Larry. ................................................................................................................................................................................................................................


Thanks, Heather, and good morning, everyone. We had a solid start to the y ear and, as always, I'm proud of our

teams for delivering against our strategy and key priorities. Our brands are strong. And we're consistently focused

on driv ing improved execution in the marketplace. RCI continues to embed deeper into the organization and

deliver growth and productivity across the business.

For the quarter, bottler case sales increased 2% on four points of positive mix and price. We were able to achieve

growth across our portfolio in both CSDs and non-carbs, with both increasing by 2%. Brand Dr Pepper increased

4%, reflecting growth in our fountain foodservice business. Over half of this growth was due to timing of sales to a

large bottling customer that we had planned for in the second quarter.

Our Core 4 brands decreased 3%, as growth in Canada Dry was more than offset by declines in 7UP, Sunkist soda

and A&W. Crush and Schweppes grew 6% and 10%, respectively, on increased promotional activity at a large

retailer. Squirt grew by 3%. And Peñafiel increased 5% in the quarter while lapping 20% growth a y ear ago. All

other CSDs decreased 1% in the quarter.

In non-carbs, Snapple increased 4% in the quarter. Hawaiian Punch decreased 7%, as planned, driven by price

increases on single serve packages. And Mott's decreased 4%, again, as planned, on lower promotional activity and

continued declines in the juice category. Clamato grew 10% in the quarter, primarily on increased promotional

activ ity. And our water category grew by 22%. Aguafiel grew double digits and strong contribution to growth were

also driven by a number of our allied brands, including Bai and FIJI. All other non-carb brands decreased 2% in

the quarter.

Our allied brand strategy is enabling us to quickly capture growth in emerging categories. I am pleased to

announce two new recent partnerships: CORE Hy dration, a purified water, rich with electrolytes and minerals;

and High Brew, a cold-brewed ready-to-drink coffee. We believe both products have strong market potential.

Building our brands is a key component of our strategy, and our calendar for the summer is packed with programs

that will engage and connect with our consumers as well as drive excitement with our retail and bottling partners.

First, I hope y ou all saw recently that Beverage Digest reported that regular Dr Pepper is now the fourth -largest

CSD brand in the category, surpassing a large competitive flavor brand. It's a good reminder that we compete in

flavored CSDs, not colas. And Nielsen data shows that flavors over the [ph] past two (5:04) are up in retail dollars

by almost 4%. That is an exciting win for the Dr Pepper brand and our summer lineup of activity will keep the

momentum going.

Our Pick Y our Pepper program will offer Millennial consumers 150 one -of-a-kind labels on 20-ounce single serve

bottles that will allow them to express their individuality. We know that our Li l' Sweet campaign was a huge





success for Diet Dr Pepper last y ear, so we brought it back for an encore performance, highlighting the great,

sweet taste of Diet Dr Pepper.

We are also driv ing a big push behind Cherry Dr Pepper, with a new media campaign in clusive of both traditional

and digital media and activation elements at retail. We know that this product is an entry point into the brand,

specifically with Hispanic consumers, so we're leveraging to bring new consumers into the franchise.

We're rolling out 7 .5 ounce slim cans across our key CSD brands and our DSD network. As we know, this is a

consumer-preferred package. We'll get Schweppes Sparkling Waters into more consumers' hands with

incremental trial activity. And we'll top off the summer with inc remental media and activity behind Cherry 7UP.

Mott's will feature characters from Universal's The Secret Life of Pets movie on several key products throughout

the summer and will drive incremental points of interruption with a new patriotic Snapple LTO. We've also added

two new flavors to our Straight Up Tea lineup, Honey Green and Herbal Rooibos. And to spice up summer

gatherings, Clamato will partner with an authentic Mexican beer as the original Michelada mixer. I'm sure y ou'll

agree we've got a great lineup for this summer.

Now, let me turn the call over to Marty to walk y ou through our financial results and our 2016 guidance. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer

Thank y ou, Larry. Let me begin with a high-level financial summary of the quarter. Sales volume increased 1%,

with reported net sales up 2%. Currency neutral net sales were up 4%. Core operating income was up 13%. And

core operating margin was 20.6%, up 190 basis points. Core EPS was up 16% in the quarter. Excluding foreign

currency translation, core operating income was up 14%, and core EPS was up 17 %. All -in-all, some good results

for the quarter.

Now, let me provide some further detail. Reported net sales increased 2% in the first quarter on three points of

favorable product and package mix, one percentage point of price realization, and a 1% increase in sales volumes.

Reducing this net sales growth was just over 1.5 point of unfavorable foreign currency translation and almost one

point of unfavorable segment mix, as a result of our higher proportion this y ear of concentrate sales to finished

goods case sales. Net sales was further reduced by just over 0.5 point for higher discounts, driven by accrual

timing in our fountain foodservice business that will reverse in the third quarter of the y ear.

Reported gross margins increased 100 basis points in the quarter, increasing from 58.5% last y ear to 59.5% this

y ear, of which 30 basis points was driven by the favorable effect of unrealized mark-to-market commodity

changes. Lower commodity costs, primarily PET and aluminum, increased gross margins by 100 basis points in

the quarter. And continued productivity benefits, including those from RCI, increased gross margins by another

40 basis points. The impact of positive net pricing in the quarter also increased gross margins by 40 basis points.

The effect of mix, mostly product, reduced gross margins by 70 basis points. And finally, foreign currency reduced

gross margins in the quarter by 30 basis points, as Mexico sources certain inputs in U.S. dollars and finished

products sold in Canada are sourced from the U.S.

For the quarter, SG&A, excluding depreciation, decreased by $6 million on a planned marketing reduction of $12

million, driven by timing of media and programming, favorable foreign currency translation and a reduction in

transportation costs driven by lower fuel costs. These decreases were partially offset by inflationary and certain

other increases in operating expenses. Furthermore, included in our core SG&A is a $4 million arbitratio n award





associated with our Mexican joint venture. Specific to our LAB segment, this charge reduced the reported

operating income growth by 24 percentage points. Depreciation and amortization declined $1 million in the

quarter.

Below the operating line, net interest expense increased $6 million in the quarter, primarily reflecting higher rates

from our January debt refinancing and an overall higher debt balance. Our reported effective tax rate 35.2%

compared to 35.7% last y ear.

Moving on to cash flow, cash from operating activities was $177 million, up $76 million compared to last year,

primarily driven by timing of working capital and the increase in net income. Capital spending was $27 million

compared to $20 million last year. Total distributions to our shareholders were $269 million, with $179 million in

shares repurchased and $90 million in div idends paid.

Moving on to RCI, I'll give a brief update on the progress of a few of our Lean tracks, but first, I would like to

mention that last month, we were honored at the Lean & Six Sigma World Conference with its first -ever

Deploy ment of the Y ear Award, specifically recognizing the depth, breadth and scope for our RCI rollout across

the company. This is tremendous recognition for us, though we always remind ourselves that RCI is a journey that

never ends, and we continue to have a long runway of opportunity.

From a growth standpoint, the Dr Pepper smaller packages growth Lean track has closed over 1 ,100 distribution

voids in a large retailer. And in the Plains region, our allied brand distribution and availability track netted almost

a 9% increase in distribution of priority SKUs. These are great examples of engaging our partners in the value

chain and, together, using proven process improvement methods to d rive even better levels of retail execution.

Our 7 UP Lean track is underway. And the team has done extensive analytic rigor on the brand and they have gone

to Gemba in some of our larger markets. We've got multiple Kaizens in key markets scheduled over th e next

couple of months where we will identify and attack the root causes of the brand's recent performance in those

markets. And we're seeing early wins on our productivity tracks for reducing both DSD driver turnover and non -

working media spend; again, just a very few examples of the vast improvement initiatives taking place across our

business every single day.

Now, moving to 2016 guidance, we expect reported net sales to be up approximately 2%, inclusive of a foreign

currency translation headwind of about 1%, which is down from our prior guidance of a 2% headwind. We also

now expect EPS to be at the high end of our prev iously-communicated range of $4.20 to $4.30. This is inclusive of

about a 2.5 point headwind from both foreign currency translation and transaction combined versus the 4% that

we had originally expected.

We continue to expect total company sales volume to be about flat. Given the category headwinds in CSDs, we

expect CSDs to be about flat, while we expect non-carbs to be up slightly. Remember that our non-carb volume

performance is being tempered this y ear by pricing actions taken across several of our warehouse direct brands

and the possible termination of the Aguafiel 10-liter business in Mexico. We still expect continued growth from

our other non-carb brands, such as Snapple, Clamato and our allied brand portfolio.

On a total company basis, we expect combined price and mix to be over 2.5%. Our January 1 concentrate price

increase will drive about 40 basis points of this increase, and price increases on our warehouse direct brands will

drive an additional 20 basis points. The remainder will come from mix as a result of stronger growth from smaller

CSD packages and brands, such as Snapple, Clamato our allied brand portfolio.





Moving on to cost of goods, given our hedged positions and current market prices for our unhedged positions, we

now expect packaging and ingredients to be about 0.5% deflationary on a constant volume/mix basis. This

expectation still reflects deflation in commodities, such as PET and aluminum, but also now reflects less of a

headwind on corn than we originally expected, driven primarily by more favorable pricing of corn co -products,

from which we derive our net price for corn.

For modeling purposes, remember that gro wth from some of our non-carb portfolio and allied brands will also

increase the dollar value of cost of goods. And also remember that cost of goods is negatively impacted by foreign

currency transaction, as I mentioned a moment ago. Collectively, all of t he factors I mentioned above should result

in roughly similar gross margins in 2016.

Moving to SG&A, we continue to expect an increase of approximately $20 million in health and welfare and other

insurance costs compared to the more favorable trends we ex perienced in 2015. We also still expect general

inflation and our field labor costs to increase operating expenses by approximately $20 million. And while we still

expect favorability from lower fuel costs in 2016, we will experience rate increases from ou r third-party carriers.

That said, we still believe we will be able to achieve productivity benefits from RCI that will help offset a portion of

these increases.

Based on some recent favorable marketing return on investment results and incremental opportunities across our

ales, sparkling waters and juice brands, we're spending about $5 million more in marketing than we initially

expected. And, as I mentioned a few moments ago, we recorded an unplanned arbitration award of $4 million

related to our Mexican joint venture and the possible termination of the Aguafiel 10-liter business. As I also

mentioned earlier, this charge is included in core results.

Now, moving below segment operating profit, our net interest expense will be around 4.5% on our $2.9 billio n of

debt, which implies an increase of approximately $14 million, driven primarily by our recent debt issuances and

refinancing.

Our full y ear core tax rate is still expected to be approximately 35.5%, and we continue to expect capital spending

to be approximately 3% of net sales. We also continue to expect to repurchase approximately $650 million to

$7 00 million of our common stock in 2016, subject to market conditions.

Now, let me highlight a couple of phasing items that will help y ou update y our model s. First, given the

strengthening of the U.S. dollar over the course of 2015, our foreign currency headwind will be more pronounced

in the first half of the y ear. Second, as Larry mentioned earlier in his prepared remarks, over half of our growth in

brand Dr Pepper in the first quarter was driven by timing of sales that were planned for in the second quarter.

Third, we will be potentially terminating a distribution agreement on our 10-liter Aguafiel business in Mexico,

which we had planned for in the second quarter. Fourth, while we expect commodities to be about a 0.5 point

deflationary on a constant volume/mix basis for the full y ear, the deflation will be more pronounced in the first

half of the y ear.

Fifth, based on timing of prior y ear true-ups, the $20 million increase in health and welfare and other insurance

costs will be heavily weighted in both the second and third quarters. And finally, while we expected a reduction in

marketing investment in the first quarter driven by media and programming shifts, we are expecting increased

investment in both the second and third quarters.

With that, let me turn the call back over to Larry. ................................................................................................................................................................................................................................






Thanks, Marty . Before we open the lines for questions, let me leave y ou with a few brief, though consistent,

thoughts. Our core business remains strong and it's off to a good start. We're continuing to focus on unlocking

growth in our priority brands through integrated communication and execution, consumer-driven innovation,

while also selectively adding to our allied brand portfolio to capture fast -moving consumer trends.

We're continuing to embed RCI further into our culture, and we're seeing meaningful improvements in growth

and productivity across the company. And it also serves as a meaningful contribution to the successful execution

of our strategy.

And, importantly, we remain committed to returning excess free cash to our shareholders over time.

Operator, we're ready for our first question. ................................................................................................................................................................................................................................

QUESTION AND ANSWER SECTION

Operator: Thank y ou. [Operator Instructions] Our first question comes from the line of Kevin Grundy with

Jefferies. ................................................................................................................................................................................................................................

Kevin Grundy Jefferies LLC Q Good morning, guy s. ................................................................................................................................................................................................................................

Larry D. Young President, Chief Executive Officer & Director A Good morning. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Morning, Kevin. ................................................................................................................................................................................................................................

Kevin Grundy Jefferies LLC Q First one for Marty on the guidance; I just want to make sure I'm clear with the moving parts. So y ou moved to the

higher end of the $4.20 to $4.30. That seems like it can be explained really by some weakness in the U.S. dollar.

So, Marty , is it just basically commodities a bit better offset by the arbitration and higher levels of investment? ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Y eah, Kevin, just to ground everybody, I would say that the new news relative to guidance today would be

commodities and foreign exchange both positive in the $0.10 range combined. The arbitration award, of course, is

new news. That's in our core results. That's going to cost us a little over a penny . We are going to spend a little

more on marketing. We would've done this any way based on some findings we had in those product categories; a





couple cents. So y ou could take away from this call there's some upside of $0.07 for the y ear. We're not changing

our guidance. We like the performance in the first quarter. We like the execution. We like where our strategy is

taking us, and so we're very pleased. And, quite frankly, it's just too early in the y ear to think about changes, at this

point. ................................................................................................................................................................................................................................

Kevin Grundy Jefferies LLC Q Okay , that's helpful. Just one more, if I may , for Larry on the topic of excise tax risk here in the U.S.; so, Larry , the

proposal in Philadelphia has gotten quite a bit of attention, and one of the leading Presidential candidates has

publicly supported it. So I know that Rodger runs Packaged Beverages for y ou guys, is the current chair in the

ABA. I was hoping to get some updated thoughts on this topic. And specifically, should investors be any more

concerned about the potential for excise tax risk here at the Federal level in the U.S.? Thanks. ................................................................................................................................................................................................................................

Larry D. Young President, Chief Executive Officer & Director A Y eah, no, I don't. These things go on and on. As y ou said, Rodger, he's Chair of the ABA board, and J im Johnston

also sits on the board in Executive Committee. I think we've got a great plan out there across, you know, for

Federal and our states and cities. There's one coming up all the time. And the team's got good handle on it and it

doesn't concern me that much. ................................................................................................................................................................................................................................

Kevin Grundy Jefferies LLC Q Very good. Thank y ou. Good luck, guys. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Thank y ou, Kevin. ................................................................................................................................................................................................................................

Operator: Our next question comes from the line of Amit Sharma with BMO Capital Markets. ................................................................................................................................................................................................................................

Amit Sharma BMO Capital Markets (United States) Q Hi. Good morning, everyone. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Morning. ................................................................................................................................................................................................................................

Amit Sharma BMO Capital Markets (United States) Q Marty , can y ou give us Dr Pepper volume, excluding the foodservice impact in the quarter, just the bottles and

cans volume, if y ou have that? ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A





Well, all we said on the call was about half of the 4% BCS growth came from this timing of this large balance shift.

So the brand was still up. On BCS, again, bottler case sales, as we look at it, which is the reporting through all of

our bottling partners in terms of real throughput, actually, regular was up 5.9%. Now, again, that's going to be,

y ou know, to include the fountain. And on a BCS basis, diet was only down 2.1%. I think it was down. It's going to

show down, I think, further in the Nielsen that y ou all see, but on a bottler case sales basis, it was down 2%, which

is a step improvement. ................................................................................................................................................................................................................................

Amit Sharma BMO Capital Markets (United States) Q Got it. And then two quick ones for Larry; Larry, the first thing is y ou've talked about this in the past, but are y ou

surprised by how sustainable the pricing environment has been in North America? And as y ou look next 12 to 18

months, given your experience on the bottling side, do you feel like the change in the [indiscernible] (24:00)

channel will have any impact on this environment? ................................................................................................................................................................................................................................

Larry D. Young President, Chief Executive Officer & Director A No, I don't, and I'm very pleased with how the pricing is. I'm not surprised over it, because, I mean, we've been

able to go out and execute. We're doing much more, not just Dr Pepper Snapple, but the industry, with different

packages. I think we're looking more at what the consumer is wanting. I think our retail partners have looked at it

and decided that it's not alway s just the price off. There's a lot of other way s to deliver value to a customer. So I

don't see any changes in the current pricing environment. ................................................................................................................................................................................................................................

Amit Sharma BMO Capital Markets (United States) Q And then, last one from me, Larry, if y ou look at y our non-carbonated portfolio, and there's some bright spots, but

then y ou have a [indiscernible] (24:44) probably a little bit weaker than we would like it to be. We've seen some of

y our competitors clean up their ingredients a little bit and that has helped. Have you considered cleaning up the

ingredients in some of [ph] those portfolio to see if that gets y ou some more traction (24:55)? ................................................................................................................................................................................................................................

Larry D. Young President, Chief Executive Officer & Director A We've been doing that through the y ears with our Mott's. I mean, bringing the sugar down. We've probably taken

Hawaiian Punch down several times. We've got the Hawaiian Punch for breakfast. So we've got a lot of different

things we alway s work on out there with it. And the biggest thing when y ou look at our volume, it was pricing that

we planned on. I mean, we looked at it and we knew that we were going to have the volume down, but I think y ou

can tell by our results, it's been a pretty good trade-off. ................................................................................................................................................................................................................................

Amit Sharma BMO Capital Markets (United States) Q Got it. Thank y ou very much. ................................................................................................................................................................................................................................

Operator: And our next question comes from the line of Bill Marshall with Barclay s. ................................................................................................................................................................................................................................

William Marshall Barclays Capital, Inc. Q Thank y ou. Good morning.





Martin M. Ellen Chief Financial Officer A Hi, Bill. ................................................................................................................................................................................................................................

William Marshall Barclays Capital, Inc. Q Just kind of looking at the fountain foodservice question from another angle, there's been a little bit of volatility

obviously in there. How should we think about the run rate on this business, the growth rate going forward? And

is there any other watch-outs as far as volatility as we work through 2016? ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Bill, it's Marty . Good morning. ................................................................................................................................................................................................................................

William Marshall Barclays Capital, Inc. Q Good morning. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A As we've talked previously about fountain, we've done a pretty good job of growing our fountain penetration. I

think y ou know where we are in terms of our national account presence in fountain, which is n't alway s where you

make y our money in fountain. Just like in bottle and can, we make money up and down the street. We make

money in small local accounts. We've talked in the past, we've been running – I'm not forecasting for this y ear, but

I'm telling y ou our past history, as a result of that, has been sort of low single digit growth in fountain case sales,

and so we've done pretty well, actually. ................................................................................................................................................................................................................................

William Marshall Barclays Capital, Inc. Q Okay , great. And then, just one quick housekeeping follow-up; I know y ou mentioned the possible change in

Aguafiel. I think in the past, y ou've called this as a 0.5 point impact on your consolidated volume for the full y ear.

And I think y ou just repeated it starting in the second quarter. Is that still a good number to think about? ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Bill, it is, but I want to clarify what I said in my prepared remarks. We have not terminated the distribution y et,

because it is sort of related to and tied up in the ultimate resolution of what h appens to our joint venture in

Mexico, which produces this 10-liter water product. I'm telling y ou it's not a very profitable product at all, but we

can't stop distributing until we settle some other issues with the other party. ................................................................................................................................................................................................................................

William Marshall Barclays Capital, Inc. Q Okay , fair enough. Thank y ou very much. I appreciate it. ................................................................................................................................................................................................................................

Operator: Our next question comes from the line of Judy Hong with Goldman Sachs.





Judy E. Hong Goldman Sachs & Co. Q Thank y ou. Good morning. ................................................................................................................................................................................................................................

Larry D. Young President, Chief Executive Officer & Director A Morning, Judy . ................................................................................................................................................................................................................................

Judy E. Hong Goldman Sachs & Co. Q So, first, just in terms of y our decision to spend a little bit more marketing, and I think y ou've talked about

fountain a little bit, but some of the discounting actions in that channel, can you just broadly talk to us about sort

of y our decision, seems like maybe a little bit more focused on volume and really trying to take opportunity of

some of the growth opportunities out there? So is this a little bit of a change in s trategy or more kind of tactical

move on y our part? And then, the other question just on concentrate segment and the price/mix impact from the

fountain volatility, can you just clarify that as well? ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Okay , Judy . Y eah, it's Marty . Let me just get rid of the concentrate question. As we said in our annual January 1

concentrate price increase, on concentrate, and sy rup prices go up as well, we said it was about 40 basis points in

pricing spread over all of our $6 billion-plus in sales. So there's nothing new there. I mean, the timing issue in the

first quarter with the shipment had no impact on pricing, per se. It's simply with the quantity of sy rup. And the

accrual, it's a timing effect. As I said in my prepared remarks, we accrued a little more in the first quarter. It's

going to come back in the third quarter.

Let me shift over to marketing. And, again, it was really about specific opportunities in ale, sparkling waters and

juices. There's going to be some specific emphasis on Mott's, but let me pull back and just sort of deal with this

timing issue in the first quarter as well. We'll get that off the table.

We talked last y ear and we'll continue to talk about some of the updated strategy work we've been doing for o ur

key brands. And I would tell you through that process, which took us all of last y ear, we came up with some

different conclusions about communications and messaging for some of our brands, that I would tell y ou were

different from some of our prior points of v iew.

So we took the input from initially what was 35,000 consumer surveys, that I think got culled down to roughly

25,000 good surveys, about how they felt about our brands on a number of dimensions. And, as a result, we're

changing our communication messaging. And, quite frankly, because we've decided to make some changes, it's

taking a little more time than we originally – not more time than we thought because we planned for this, but the

lighter spend in the first quarter was really a function of that new timeline for us to create the new creative. And so

we planned for that. We're going to still spend 7 .5% of sales this y ear, like we always have. And, as I said, on the

incremental $5 million, these opportunities came up.

Schweppes, that category is growing double digits; some insights on Mott's. And so I would call that sort of

evolution, evolution of our return on investment insights and process to tell us where best to spend some money.

In this case, we didn't just shift, we added $5 million. ................................................................................................................................................................................................................................





Judy E. Hong Goldman Sachs & Co. Q Got it, okay . And then, just a final clarification question, so the increased investments that you've taken in

BODY ARMOR, it sounds like may be y ou're getting more territories from a distribution standpoint. So may be is

there a way to quantify how much that's adding to y our allied brands' growth? And are there other allied brands

that this y ear y ou're getting more distribution that could be more meaningful in terms of the growth outlook? ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Okay . Well, in terms of the additional investment in BODY ARMOR, there's no more distribution. We had an

opportunity to acquire some more equity. We've looked at how the brand is performing and it's performing quite

well. And we thought it was an opportunity to, again, expand our position, even though we're still, on a relative

basis, a small shareholder. But we just thought it was, y ou know, these small investments solidify our partnership

with these entrepreneurs, and it's important. And so we decided to do it.

Judy , since you asked, in terms of expanded opportunities, as Larry said, the pipeline is full of opportunities. As I

said last time, we'll be entering a new category for us on the distribution side, ready -to-drink coffee. It's a $2

billion category. There's a lot happening in that category. Y ou'll see the High Brew brand. That's going to phase in.

They have some existing distributors, some we can take over immediately, some over time, but we've begun the

process. And, of course, CORE Hy dration is getting traction; a lot happening, of course, in that category. It's a

somewhat crowded category, but some would say y ou can't have too few waters, given the growth in that category.

And it should remind everybody here that this strategy enables u s to move with the consumer quickly, quicker

than we believe we could do on our own. And we think we're taking advantage of that. ................................................................................................................................................................................................................................

Judy E. Hong Goldman Sachs & Co. Q Got it. Thank y ou very much. ................................................................................................................................................................................................................................

Operator: Our next question comes from the line of Ali Dibadj with Bernstein. ................................................................................................................................................................................................................................

Ali Dibadj Sanford C. Bernstein & Co. LLC Q Hey , guy s. Just a couple questions, but really both around trying to disaggregate some of the drivers of y our top

line growth to get a better sense of sustainability, which is all we're thinking about. The first one is ty ing a few of

the earlier questions together, if y ou exclude fountain, which y ou've given us some idea about, but if y ou exclude

fountain, what percentage of y our top-line growth this quarter was allied brands? I remember the past couple of

quarters, it's been kind of half or more of y our growth coming from allied brands.

Because what I'm just try ing to get to is what y our top-line growth would have been this quarter kind of, I don't

know how to call it, but core bottle and can, or true bottle and can, excluding fountain foodservice, excluding

allied brands. Do y ou have a sense of that? ................................................................................................................................................................................................................................






Y eah, well, if y ou look at volume on the allied brands, y ou're probably just under half, okay, in the 40% range in

terms of contributed volume growth. And, of course, in dollars, they're going to be even higher, because on a rate

per case basis, they're higher than our core brand with lots of good profitability. The... ................................................................................................................................................................................................................................

Ali Dibadj Sanford C. Bernstein & Co. LLC Q Sorry , Marty, that includes the foodservice piece? Or that... ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A No. That's just... ................................................................................................................................................................................................................................

Ali Dibadj Sanford C. Bernstein & Co. LLC Q Okay . Okay . Okay . ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A It's just the portfolio of allied brand. ................................................................................................................................................................................................................................

Ali Dibadj Sanford C. Bernstein & Co. LLC Q Y ep. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A And may be before I go on to Clamato, that shouldn't be a surprise, right? I mean, the whole reason we embark on

this strategy is to capture growth. So and given the fact that we are still sort of 80% CSDs and everybody knows

what's happening in that category, even though we've outperformed it, it should be no surprise that in that non -

carb portfolio, the allied brands are contributing. And when we grow Clamato and Snapple alongside, which are

two of our highest profitable cased products, should be also no surprise why we're getting the margin performance

that we're getting. Ali, the fountain order timing was probably worth $4 million or something in terms of revenue. ................................................................................................................................................................................................................................

Ali Dibadj Sanford C. Bernstein & Co. LLC Q Okay . Okay . And I mean, y ou understand the background of the question, as y ou guys know and I know y ou've

kind of talked about this at least offline, is a lo t of investors are asking, well, if more than half the growth top -line-

wise is allied brands, how much do I pay for a distribution model or a distributor as opposed to a brand owner? I

think that's the underly ing question.

Do y ou have any v iews on that, obviously, to allay peoples' fears or is it just, look, this is something we should be

doing, right? We should be pivoting with the consumer a lot more? Because that's the question we get, all right, is

how much to pay for a distributor. ................................................................................................................................................................................................................................






Ali, if y ou guy s can answer that question, the pipeline is full. We announced two more this morning. There's

probably more than two dozen opportunities. So when I pull back, my answer to y our question is, y ou said it, pivot

with the consumer. We're not fighting the consumer. We're not try ing to push back on the consumer and throw

our money and resources as an effort to try to do that. We're not going to try to make brands that consumers have

said serve a certain purpose for them, and under the names of those brands and try to change them and change

the perception of them in the marketplace.

So, of course, this is about innovating, with a very, very fast-changing consumer. And while we're getting growth

in some of these categories today and it's really good, we'll see where the growth curves go. Some may fade over

time, just because consumers change over time, and they're changing quickly. So we play this without capital at

risk, and we get to capture the growth quickly. And we've got a lot of people lined up to talk to us, because they see

that we can create for them alongside us and both win. And we think it's a very good strategy.

Y ou can put y our own numbers on it, but what we see is a great opportunity to leverage something tha t is not so

easily replicatable, which is: 170 warehouses; 8,000 trucks; and a massively -powerful distribution sy stem. ................................................................................................................................................................................................................................

Ali Dibadj Sanford C. Bernstein & Co. LLC Q And so on that, my last question is, with may be 170 warehouses, 8,000 trucks, one of the s tories always for your

core brands has been distribution gains, right? So y our frontier is in the U.S. or in Canada. It's not going to rural

India, right? So there's distribution potential gain. Can y ou give us an update on that? So just from an ACV

perspective, excluding kind of the newer allied brands, but just from an ACV perspective, where you are today on

average for the core brands, as I call them? Not the Core 4, but just y our core brands and where you were, say, five

y ears ago or three years ago? Just some metric to see the distribution gain story has happened for y our legacy

brands. Thanks. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Ali, y ou're talking in the U.S., correct? ................................................................................................................................................................................................................................

Ali Dibadj Sanford C. Bernstein & Co. LLC Q Y eah, y eah, sorry. Yes, I mean in the U.S. I mean, y our opportunity is distribution gains in the U.S. still, y es. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Y eah, it's a great question, too. So y ou look at the Core 4, we may have been in the mid -60%s. We're well to the

sort of 7 0% or north range in distribution. I want to go back and remind everybody that there is still a lot of

opportunity that we are capturing at the core. We recognize 7UP. 7UP is a challenge for us, but we're going to fix

it. But whether it was last y ear closing Snapple voids, and we talked about the growth in closing Snapple voids,

and just some of the RCI growth tracks that we've done, which allows us to improve what some would say is the

blocking and tackling of the business, but do it better than any body, sh ows that we can continue to grow our core

brands. I think another one was Canada Dry , again, closing voids. We had a Lean track on Canada Dry .

So there's a piece here that we think is very positive for us in terms of our improving executional capabilities that

are helping our core brands. I think everybody sometimes takes for granted that everybody's execution is at the





same level. We may not be the best. We're not declaring we're the best, but we are pleased with the improvements

we're making, and that does help grow our core. ................................................................................................................................................................................................................................

Ali Dibadj Sanford C. Bernstein & Co. LLC Q Okay . Thanks for the time. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Y eah. ................................................................................................................................................................................................................................

Operator: Our next question comes from the line of Bonnie Herzog with Wells Fargo. ................................................................................................................................................................................................................................

Bonnie L. Herzog Wells Fargo Securities LLC Q Good morning. ................................................................................................................................................................................................................................

Larry D. Young President, Chief Executive Officer & Director A Hi, Bonnie. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Morning. ................................................................................................................................................................................................................................

Bonnie L. Herzog Wells Fargo Securities LLC Q I have a question on y our 7 .5 [ounce] slim cans. Could y ou guys give us a little more color on what the real

opportunity could be here, and then what y ou think a realistic penetration of small cans could be as a percentage

of y our total mix? ................................................................................................................................................................................................................................

Larry D. Young President, Chief Executive Officer & Director A Right now, Bonnie, it's very small, and we're just getting them kind of rolled out. I was in the trade last week down

in Florida, lots of great response back from not only customers, but consumers. It could be maybe 5%. ................................................................................................................................................................................................................................

Bonnie L. Herzog Wells Fargo Securities LLC Q Eventually. And then, how long do think it will take to get to 5%, Larry ? ................................................................................................................................................................................................................................

Larry D. Young President, Chief Executive Officer & Director A Oh, as we're just rolling it out, it's probably an 18 month to two years to hit that number. ................................................................................................................................................................................................................................





Bonnie L. Herzog Wells Fargo Securities LLC Q Okay . Thanks for that. And then, I have a question for Marty. In the past, you've talked about the opportunity in

Mexico to significantly expand distribution beyond, excuse me, the concentrated pockets you're currently in. So

could y ou discuss a little bit about the progress of that initiative? And then, are there opportunities beyond the

Peñafiel brand? ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Y eah, and so, Bonnie, y eah, we do have sort of distribution white space. We have closed some of it. As y ou

probably know, we do use a lot of third-party distributors in what we otherwise do call a DSD model. So there's

still opportunity there. We're try ing to stay focused where we have strength and wher e our brands have done

really well. [ph] Those were either around (42:00) a number of y ears ago, probably four or five y ears ago, we were

probably more aggressively expanding and probably spending more money than we should have. And I wouldn't

say the strategy was working so well. So we reined it in a little bit. It's a little more targeted now. It's a little more

strategic now. We're not in a rush. We want to capture market opportunities well, not hurriedly.

As y ou know, the business there is doing real well. The Peñafiel business has continued to do well. Some say why

did the brand only grow 5%. Well, it grew 20% last y ear. At 5%, when we look around, looks still pretty good

relative to the market down there. As you know, we're building a new water plant. We announced that I think at

the beginning of the y ear, end of last y ear, because we are simply out of capacity and that's outside Mexico City .

So all-in-all, our team in Mexico is doing really well. The business is performing extraordinarily well. As I said this

morning, absent the JV settlement charge, their 6% top line would've driven 24% operating profit growth. We like

that model a lot. ................................................................................................................................................................................................................................

Bonnie L. Herzog Wells Fargo Securities LLC Q Okay . It makes a lot of sense. Thank y ou. ................................................................................................................................................................................................................................

Operator: Our next question comes from the line of Steve Powers with UBS. ................................................................................................................................................................................................................................

Stephen R. Powers UBS Securities LLC Q Great. Hey , thanks. Good morning. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Morning, Steve. ................................................................................................................................................................................................................................

Stephen R. Powers UBS Securities LLC Q Could y ou just clarify one more time on the volume? You guy s under-shipped BCS volume in terms of sales

volume, even with the fountain pull-forward. And so, if that's right, could you just talk about how much y ou

under-shipped BCS volume excluding the fountain pull-forward, and does that reverse in Q2? ................................................................................................................................................................................................................................





Martin M. Ellen Chief Financial Officer A So I think, Steve, the fountain pull-forward, as y ou call it, the timing issue, was probably the biggest factor that

accounted for the difference between BCS being up 2% and shipment volume being up 1%, so we were more or less

in line absent that – well, that was in both. That was in both. ................................................................................................................................................................................................................................

Stephen R. Powers UBS Securities LLC Q Right. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A I'm sorry. That was in both. So BCS simply outperformed. ................................................................................................................................................................................................................................

Stephen R. Powers UBS Securities LLC Q Okay . So it was another point. Okay , that's fine. That's fair. And then, in Packaged Beverage, is there a way to

break apart that 5% realized price/mix between what's sort of the CSD pricing run rate is versus any kind of CSD

mix benefits versus the category mix attributable to non-carbs? ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A What I'll tell y ou in Packaged Beverages in pricing, they got a little over 1% in actual pricing. ................................................................................................................................................................................................................................

Stephen R. Powers UBS Securities LLC Q Y ou mean, like rate? ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Y eah. ................................................................................................................................................................................................................................

Stephen R. Powers UBS Securities LLC Q Y eah, okay. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A I'm talking about pricing, not mix. ................................................................................................................................................................................................................................

Stephen R. Powers UBS Securities LLC Q Y eah. ................................................................................................................................................................................................................................





Martin M. Ellen Chief Financial Officer A Okay . And mix, which, for them, was a lot driven by allied, it looks like it's probably almost four points for them. ................................................................................................................................................................................................................................

Stephen R. Powers UBS Securities LLC Q Okay . Okay . And then, lastly , not to harp on 7 UP, but y ou focused a good deal of energy and brand support on that

last y ear. [ph] And as a few of the clients there accelerating isn't ideal, so (45:10-45:16) could you just update us as

to y our thoughts there, maybe it ties into the RCI initiative you have underway, but is that still a brand y ou think

y ou can re-energize or are the category challenges in lemon-lime just too significant? Thanks. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Well, Stephen, I'll respond and Larry may add something. So, y eah, the RCI track is just getting going. We think

we've got a really good team of people on this. And there are some very early, early observations, but too early to

share. Y ou make a good point. We have spent a considerable sum on that brand. And we're here to tell y ou that the

messaging and communication and target for some past advertising, we now know was not on point with the 7 UP

consumer. And, as I said, I think to Judy 's comment earlier, when I alluded to sort of now having to change the

messaging, which is impacting, had impacted at least the timing of spend into the early part of this y ear. There's a

brand that's a big part of it. ................................................................................................................................................................................................................................

Larry D. Young President, Chief Executive Officer & Director A The only thing I would add to that, as Marty said, it's v ery early days. The lead we have for this RCI project is a 40 -

plus y ear veteran that has sold 7UP his entire career. And I think I get the most excited when I see the findings

they 're starting to collect, again very early, the team is excited. It is a grea t team of people. We've alway s told

everybody that our change and everything that happens with RCI, comes from our people. And we've got some

things going out there that really encourage me on the brand. ................................................................................................................................................................................................................................

Stephen R. Powers UBS Securities LLC Q Okay . Thanks very much. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Thanks. ................................................................................................................................................................................................................................

Operator: Our next question comes from the line of John Faucher with JPMorgan. ................................................................................................................................................................................................................................

John A. Faucher JPMorgan Securities LLC Q Good morning, everyone, wanted to just talk a little bit about the Packaged Beverages margins and sort of

understanding maybe some of the mix pieces and spending movement that's going through their. Because if we

look at the margin for Packaged Beverages, historically, Q1 has been a dramatically lower – not dramatically, but,

let's say , 150, 200 basis points lower than the full y ear margin. If we look at it this y ear, you've obviously got a big

bump up there. If we see even remotely close similar sequential improvement in the margin over the balance of





the y ear, as we've seen in past y ears, that would imply just tremendous margin upside here. So can y ou talk a little

bit about specifically the drivers there, maybe some mix impacts, raw materials and how we s hould see that going

through the y ear? Thanks. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A John, good morning. It's Marty . So let me help y ou, guide you guys here. So when y ou look at the absolute level of

first quarter margins for Packaged Beverages, I think the one call-out I would give you that's worth about, and

y ou're talking of course about operating margins, probably their piece of the $12 million marketing benefit,

because we know that's timing, probably helped their operating margins by about 50 basis points, okay? So given

their current mix, given current levels of input costs, even given current levels of foreign exchange, because we

have our WD Canada business is part of the segment, so taking current levels in the first quarter, y ou sort of ge t to

margins y ou'd get less, I would say, 50 basis points for the marketing shift.

What we like about Packaged Beverages and the reason their margins have ticked up the way they have is that

they 're getting this extraordinary benefit from really, first and foremost, mix. And as I said earlier, they're

benefiting from the allied brands. This is good business for us and it's good business for our brand owners. And in

our WD portfolio, the products that are growing are some of our best margin products, as y ou know.

And, oh, by the way, I would say we will take growth in all of those brands and trade them all day long for whether

it's a decline in Hawaiian Punch, or for that matter a decline in 7 UP, so enormous beneficial mix. And then, of

course, as I said earlier, they got 1 point of pricing. Net, pricing environment seems to be pretty good. Year -over-

y ear, commodities and fuel were pretty important to them, okay, and drove probably about $18 million or so of

y ear-over-year improvement. But nevertheless, those are the prices of commodities today. That is the price of fuel

today , absent the fact that oil is going up a little bit. And so, therefore, the current margin structure, I'd say , looks

to be where it is, in Q1, absent one item that I call out as timing. ................................................................................................................................................................................................................................

John A. Faucher JPMorgan Securities LLC Q Got it. And then, sort of thinking about it, do we see a similar sequential improvement as we go through the y ear

or has that mix shifted, let's say , seasonality of some of these things? Is the seasonality of ma rgins similar from

that standpoint as been in the past? ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Well, John, of course, seasonality in the business in terms of the impact of volume in the summer would make the

summer selling season better. We don't give specific, of course, guidance on margins by segment, by quarter, of

course, but the normal sequential trends would hold. ................................................................................................................................................................................................................................

John A. Faucher JPMorgan Securities LLC Q Okay , great. I apologize. Jut last question on this; do y ou expect some of those lowe r margin items, Hawaiian

Punch, what have y ou, as assuming their relative growth rates normalize a little bit here, that would be on top of

the 50 basis points of timing may be an additional drag as we look out sequentially? ................................................................................................................................................................................................................................






Y eah, it could. And don't forget in y our sequential thinking there was a few things I called out, for example,

commodities, for example, in terms of first half timing. But when y ou sort of take those outside factors away, just

look at the business model, the mix of the brands and the impact that volumes have on leverage in season versus

out of season, I think y ou have it right. ................................................................................................................................................................................................................................

John A. Faucher JPMorgan Securities LLC Q Okay , awesome. Thanks so much. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Thanks. ................................................................................................................................................................................................................................

Operator: Our next question comes from the line of Bill Schmitz with Deutsche Bank. ................................................................................................................................................................................................................................

William Schmitz Deutsche Bank Securities, Inc. Q Hey , guy s. Good morning. Can we just talk a little bit strategically about the allied brands? So like a c ouple

questions; when y ou make an equity investment, do you typically get a board seat and do y ou have any sort of say

in distribution and M&A as those brands evolve? And then, maybe a broader question, but y ou see the valuations

that some of these early fast-growing brands get. I mean, how difficult would it be for y ou guys to actually create

some of these brands y ourself and then get all the economics? Like I understand that if y ou make the investments,

y ou deal with the balance sheets rather than the P&L. And obviously, investors probably wouldn't like y ou funding

these like money -losers for a bunch of y ears, but I'd just love some broader insights on both those two topics. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A All right, Bill. Look, so, first of all, the small equity positions we take carry no real governance rights, whether they

be board seats, managerial strategy, what have y ou. That's why we spend a lot of time with these management

teams understanding their strategy, the opportunity that they see, does it square up with the opportunity we see,

are they credible? What have they done in the past? There's a whole checklist we go through. And at some level,

we want them to be able to fund the costs that they need to fund as the brand owner, and not come from us.

For one reason, that if we had to fund these businesses early stage, we would therefore have to buy them or

acquire a majority position, which would cause the spirit of the company to go away. The ownership would leave.

It would just become a nascent brand inside Dr Pepper that we would have to, in essence, grow from a very, very

low base. That's why we're not doing these, because there's no proven model. Y ou may have one, but across this

space with our key competitors that demonstrates any body's ability to really create a breakthrough brand,

however y ou want to define that, a breakthrough brand, de novo.

And so the whole strategy is about capturing the passion and spirit of these people and bring something to the

party that they absolutely need and we need. And like I said, the pipeline is full of opportunities. I don't know how

we could ever have had an innovation pipeline like we're seeing through the allied brands. Would we have ever

invented coconut water, for example, and had the success in Vita Coco? Would we ever have created [ph] a Bai

have the success of a Bai? (54:24)





If Larry and I'd come to y ou, and here as the example is BODY ARMOR, and said we are now going to compete in

sports drinks. You know that category. And y ou know it's a highly competitive category. Anybody would've said

y ou're crazy. And they would have the right to say that, but here we come with a brand that we don't have capital

at risk in any meaningful way . And yet, we have a chance with that management team, which is a very credible

management team, as we think they 're got a point of difference. We think they 've got a great strategy. They've got

a great approach from the product, to the pricing, to the positioning, to how they're going to approach the

channels, this is the opportunity. And some may go over time and, I'm telling y ou, we are just sort of full.

We almost get to the point we decide how many of these things we can handle. And using RCI, we're deploying a

lot of RCI to this to help us create certain onboarding processes, if y ou will, or as I mentioned one here, a

distribution availability to help us even execute on these better. ................................................................................................................................................................................................................................

William Schmitz Deutsche Bank Securities, Inc. Q Okay , no, that's really helpful. And then, do y ou guys take a stab at how much weather impacted both the category

and y our results this quarter? I mean, it only stands out because I saw water was up 22%, and it seems like there

were fairly similar trends across some of y our competitors. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Well, again, the big part of our water category up is many of these allied brands are in that category. And, of

course, [ph] we don't want to let y ou forget, we've had FIJI. We've had (56:05) for a long time. ................................................................................................................................................................................................................................

Larry D. Young President, Chief Executive Officer & Director A Long time. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A That brand just continues, even at its premium positioning, just continues to do extraordinarily well. ................................................................................................................................................................................................................................

William Schmitz Deutsche Bank Securities, Inc. Q Okay . So y ou don't think there was much of a goose from the favorable weather in the quarter? ................................................................................................................................................................................................................................

Larry D. Young President, Chief Executive Officer & Director A No. ................................................................................................................................................................................................................................

Martin M. Ellen Chief Financial Officer A Not at all. ................................................................................................................................................................................................................................

Larry D. Young President, Chief Executive Officer & Director A We haven't seen too much favorable weather here in Texas. We're flooded.





William Schmitz Deutsche Bank Securities, Inc. Q All right. Well, thank y ou, guy s. Have a good day. ................................................................................................................................................................................................................................

Operator: Ladies and gentlemen, we have reached our allotted time for questions and answers. I would now like

to turn the floor back over to Larry Young for any additional or closing remarks. ................................................................................................................................................................................................................................


All right. I'd like to thank everybody for joining the call today and for y our continued interest and investment in

the Dr Pepper Snapple Group. Thank y ou. ................................................................................................................................................................................................................................

Operator: Thank y ou. This concludes today's conference call. Y ou may now disconnect.

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