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Beverage company, Dr Pepper Snapple Group (DPS - Analyst Report) recently announced that five of its soda brands – 7UP, A&W Root Beer, Sunkist Orange Soda, Canada Dry Ginger Ale and RC Cola – will now be available in 10-calorie versions. The new versions of the popular soda use both caloric and non caloric sweeteners and contain only 10 calories per 12 oz servings.
A peer of The Coco –Cola Company (KO - Analyst Report), Dr Pepper Snapple Group already offers several options in low calorie drinks, like Diet Dr Pepper and Diet Snapple brands. Its previous “only 10 calories per serving” product innovation, Dr Pepper TEN, has been extremely successful among consumers.
Low calorie products have a huge demand in the market with the growing number of health conscious consumers. Given the rise in lifestyle diseases, people are more concerned about the nutritional value of packaged food. Introduction of low calorie drinks will allow consumers to make a conscious dietary choice, where they can enjoy the beverages and at the same time be aware of the number of calories consumed.
Most food and beverage companies acknowledge that they need to increase the health quotient of their products in order to accommodate the consumer shift toward healthier lifestyle.
Overall, we are encouraged by Dr Pepper’s strong position in the flavored carbonated soft drinks market and wide range of products. However, the company’s weak volume growth and lack of exposure outside the US keep us on the sidelines.
We currently have a ‘Neutral’ recommendation on Dr Pepper for the long term. The stock carries a Zacks #3 Rank (a short-term ‘Hold’ rating).