In a recent deal between the soda giants Coca-Cola and the Dr Pepper Snapple Group Inc., reportedly at the sum of $715 million dollars, the two agreed
that Coca-Cola would be allowed to distribute some soda brands offered by the Dr Pepper Snapple Group.
Of all the soda brands you could stock in a soda vending machine, the ones offered
by Dr Pepper could be great sellers. With this newly crafted distribution deal, both Coca-Cola and Dr Pepper are seeing the value of their brands and
want to make an effort to improve the market dispersion of their products.
The cash payment by Coca-Cola will allow them to sell brands, which include the famed Dr Pepper and Canada Dry in some regions of the United States and
Canada, for 20 years. For Dr Pepper, they get back the right to distribute brands like Squirt, Canada Dry, Schweppes and Cactus Cooler, which are sold
by Coca-Cola Enterprises in certain areas of the United States.
In a recent soda report, the
executive vice president of marketing for the Dr Pepper Snapple Group announced new campaigns to spearhead sales for this year. Is it a coincidence
that Coca-Cola now desires some or more distribution rights? It's unlikely.
This deal could be partially related to the earlier inclination of the soda industry; the volume of soda sales had been falling since last year 2009,
and something needed to be done to try to improve the overall sales. Earlier this year, the volume decline for soda was easing, and starting to make
its way back up to better results.
The Dr Pepper Snapple Group however showed a bit of an increase, which made it even more attractive. Overall, the first of this year showed that
some soda companies felt a bit of a drop, and some had a little growth. One of the main factors of the sales volume drop was the economic downturn of 2009.
Speaking of this year's focus on soda, the evolution of soda had
been seen in a few emerging markets. Both Coca-Cola and PepsiCo had commented earlier in this year that they wanted to refine their distribution
methods and systems - this now speaks to the fact that both have worked to refine their bottling plants, and potentially purchase additional
distribution rights, like Coca-Cola has just done.
The deal with Dr Pepper, by Coca-Cola, highlights the motivation for the company to improve its market saturation, by focusing on important
distribution rights and market expansion. We have noted previously that the company had enjoyed a near 20% increase in
1Q soda revenue results this year. This was mostly due to Coca-Cola's strength in international markets.
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