In an agreement announced last Monday, The Coca-Cola Company will pay $715 million to continue distributing Dr Pepper Snapple Group (DPSG) brands.
DPSG brands are largely distributed through Coca-Cola and Pepsi, and the one-time cash payments are part of a termination agreement that was triggered when the two companies purchased their distribution subsidiaries this year. These deals appear to be really beneficial to DPSG, as they are one of the few beverage companies to see growth this past year in the carbonated soda drink category. As a result of these deals, they save on infrastructure costs by having their products distributed from other companies’ trucks instead of their own. This will allow them to spend more to market their beverages and hopefully gain more market share.
One interesting piece of information to note is that Snapple will now be distributed by Coca-Cola as part of the agreement. It may not have mattered too much before when Snapple was a suffering beverage brand, one that was losing customers and market share to competitors. However, the Snapple brand’s recent revival puts the tea back on customers’ radar with their recent marketing efforts (ie. The Apprentice’s flavor creations, increased distributive reach, new packaging). At this time, it still stands to be determined where Snapple fits in with Coca-Cola’s other tea drinks – namely Nestea and AriZona – but it shouldn’t be taken lightly by any means.