
Dr Pepper Snapple Group
Consumer Goods | United States

Target Price
Equity Value (Δ)
Source: Bloomberg end of day market data; not adjusted for dividends (July 9, 2018).
Summary
Dr Pepper Snapple Group (“Dr Pepper Snapple”) is a leading producer of flavored beverages in North America and the Caribbean. In addition to its flagship Dr Pepper and Snapple brands, the company’s portfolio includes 7UP, A&W, Canada Dry, Clamato, Crush, Hawaiian Punch, Mott's, Mr & Mrs T mixers, Peñafiel, Rose's, Schweppes, Squirt and Sunkist soda.
WSD Capital Management announced its short position in Dr Pepper Snapple on October 4, 2016. While the company has been successful in mitigating the challenges of the ongoing decline in carbonated soda consumption, we believe market forces have caught up with the company in pressuring management to execute initiatives that will result in the destruction of significant shareholder value.
Dr Pepper Snapple CFO Marty Ellen noted in 2015 that the company was comfortable partnering with other beverage makers, but "to acquire them would be just too expensive." In November 2016, the company agreed to acquire Bai Brands, a maker of fruit-flavored and antioxidant-infused beverages, for $1.7 billion in a bid to decrease its heavy dependence on low-growth carbonates.
This appears to have been an exceedingly defensive transaction at a rich multiple since any potential Bai Brands sale to a competitor posed a strong risk of material negative impact on Dr Pepper Snapple's top line in the event that a sale would trigger a loss of distribution of Bai Brands products for Dr Pepper Snapple. We expect the Bai Brands acquisition to fall short of management’s projections and seriously impair shareholder value going forward.
On July 9, 2018, Keurig Green Mountain completed a merger with Dr Pepper Snapple to create Keurig Dr Pepper.