Dr Pepper Snapple Group Q1 2010 Earnings Call Transcript

May. 7.10 | About: Dr Pepper (DPS)

Dr Pepper Snapple Group (NYSE:DPS)

Q1 2010 Earnings Call

May 06, 2010 11:00 am ET

Executives

Aly Noormohamed - Senior Vice President of Investor Relations

Larry Young - Chief Executive Officer, President, Director, Member of Special Award Committee and Member of Capital Transaction Committee

Martin Ellen - Chief Financial Officer and Executive Vice President

Analysts

John Faucher - JP Morgan Chase & Co

Damian Witkowski - Gabelli & Company

Judy Hong - Goldman Sachs Group Inc.

Christine Farkas - BofA Merrill Lynch

Mark Swartzberg - Stifel, Nicolaus & Co., Inc.

Bill Leach - Neuberger Berman

Wendy Nicholson - Citigroup Inc

Andrew Kieley - Deutsche Bank AG

Caroline Levy - Calyon Securities (NYSE:USA)

Operator

Good morning, and welcome to Dr Pepper Snapple Group's First Quarter 2010 Earnings Conference Call. [Operator Instructions] Today's call is being recorded and includes a slide presentation, which can be accessed at www.drpeppersnapple.com. [Operator Instructions] It is now my pleasure to introduce Mr. Aly Noormohamed, Senior Vice President, Finance. Sir, you may begin.

Aly Noormohamed

Thank you, operator, and good morning, everyone.

Before we begin, I would like to direct your attention to the Safe Harbor statement and remind you 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 Harbor statement in this morning 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 reference the way we evaluate the business, and which we believe provide useful information for our investors. Reconciliations of those non-GAAP measures to GAAP can be found in our earnings press release and on the Investor Relations page at www.drpeppersnapple.com.

This morning's prepared remarks will be made by Larry Young, Dr Pepper Snapple Group's President and CEO; and Marty Ellen, our new CFO. Following our prepared remarks, we will open the call for your questions.

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

Larry Young

Thanks, Aly, and good morning, everyone. Let me start with a quick update on where we are with both the completed PepsiCo bottler transaction and the pending Coca-Cola deal. We completed the license agreement with PepsiCo on February 26, 2010. Extensive planning on both sides resulted in a seamless transfer of DPS brands across the system, and I am thrilled to report that the brands continue to post industry-leading growth. Investments and decisions we have made had resulted in a flexible, balanced and cost-effective manufacturing and distribution footprint that gives us a solid foundation for growth. Our brands continue to gain relevance and are growing.

With regards to the Coca-Cola transaction, when in the very early stages of the process, our guiding principles here is unchanged. Do what's best for our brands, our customers, our consumers and ultimately you, our stockholders. As I've said before, discussions of this nature are best handled in private. We'll come back to you with more news when we have something to share.

Now turning to our first quarter results. Despite unseasonably cold weather in January and February, our business delivered another quarter of solid results with BCS [bottler case sales] volume growing 3% and dollar share up almost a full point. CSDs [carbonated soft drinks] were up 2%, led by 3% growth in Dr Pepper on the continued success of Dr Pepper Cherry and Dr Pepper Heritage in the Pepsi system. Crush was up 22%. And we continue to expand distribution and bring in new users with innovation like Cherry Crush in the U.S. and the 2.3 liter value line in Mexico.

Canada Dry grew 10%, supported by TV advertising and targeted marketing programs. Our Fountain volume was up 2% with trends improving sequentially through the quarter. During the quarter, we installed over 5,000 incremental valves and our McDonald's rollout is on track.

In Non-carbs, Snapple grew 17% as we continue to gain distribution in 16-ounce premium glass, 16.9 value PET and $0.79 value cans. We're seeing these gains in both measured and in particular, non-measured channels.

Mott's grew 14% on expanded distribution and strong brand support, while Hawaiian Punch was up 7%. These results demonstrate our ability to grow shares through innovation and pull marketing campaigns, and we will continue to drive these investments.

As we highlighted during our fourth quarter call, Q1 was our toughest quarter from a comp perspective. Sales volume lagged BCS by 600 basis points, of that amount, bottlers working to a concentrate inventory build into the first quarter of 2010 were about 200 basis points. A decline in contract manufacturing, as we continue to deemphasize the slow margin business accounted for another 200 basis points. And the unfavorable comparison related to the successful Crush launch was another 100 basis points. As a result of these factors, net sales on a currency-neutral basis were down 2% for the quarter. Our U.S. and Canada business posted solid price and mix growth, while product and channel mix in Mexico resulted in negative price and mix there.

Segment operating profit on a currency-neutral basis declined 1% in the quarter. The business benefited from lower packaging ingredient cost, as well as a relentless focus on cost controls and productivity initiatives. Our supply chain team once again raised the bar, driving almost three points of improvement in overall equipment effectiveness. We continue to invest in our brands and in the startup of our Victorville facility.

Our critical cold drink expansion program continues to gain momentum. And despite a challenging economic environment, we placed almost 4,500 incremental coolers and vendors. Looking ahead, we are encouraged by the trends we saw in late March and through April, especially in the critical immediate consumption and fountain foodservice channels. We're also very pleased with the overall pricing environment. It remains rational and we believe this will continue.

I am thrilled to share with you that our fifth regional center located in Victorville, California is officially open for business, on time and on budget. Victorville will also be the first of our facilities to be LEED [Leadership in Energy and Environmental Design] certified. Four of our five lines are now up and running with the fifth line coming onstream within the next few weeks. The old Memphis [ph] facility marks another key milestone in the DPS journey as it enables our win the west [ph] Strategy. Our plan to make Mott's and Hawaiian Punch the share leader in their respective categories while extending share leadership held by Mr & Mrs Ts.

Providing cost advantage products is only part of the equation. We're also stepping up our marketplace investments in-store, print and on air. We're targeting the Mott's moms and Hispanic moms with strong local media programs tied to retail execution as well as co-branded activities including the 7UP sponsorship of the Latin Grammy Awards. Mott's recent WIC [Women, Infants & Children] certification in California also expands the brand to more than 1.4 million new users.

As brand owners, we know that increasing the relevance and awareness of our brands and investing incrementally are key to our long-term success.

Our first quarter media investment was up 25% over the prior year period and contributed to strong sales growth for Snapple, Dr Pepper and Canada Dry. To continue this momentum and to support new products and retailer tie-ins, we'll spend an additional $25 million in marketing in the second quarter compared to the same period a year ago.

With the great taste of Mott's juice, our new Mott's Medleys will help mom provide more convenient nutrition to her family with two fruit and vegetable servings in each eight-ounce portion. We're supporting this launch with new TV, print and online advertising featuring Marcia Cross. We're bringing powerful energy at the price of a CSD to Sunkist soda with the launch of Sunkist Solar Fusion, combining a delicious mandarin flavor with caffeine and B vitamins. We'll engage our target consumer with new advertising, airing June through August on shows like The Hills, Laguna Beach and MTV.

The Mr & Mrs T's refresh is going extremely well, with volume up 10% in Q1. And in Mexico, we've launched a lightly-carbonated Snapple natural tea, targeting the health-conscious female consumer. Snapple was up almost 30% in Mexico for the quarter.

Dr Pepper sponsorship of ACMAs on April 18 combined TV advertising with online social media, generating over $200 million impressions. And national TV advertising has already started for Dr Pepper's partnership with the biggest movie release of 2010, Iron Man 2, which premieres in the U.S. tomorrow. This integrated marketing campaign offers fans a chance to win an unrivaled collection of multimedia equipment. And building on the success of its relaunch, Snapple has embarked on its biggest ever merchandising event, joining forces with Donald Trump on one of NBC's most highly-rated shows, The Celebrity Apprentice. This fully integrated event features media, product integration, merchandising, consumer promotions and two Celebrity Apprentice-inspired products. And these are just a sample of the exciting things we're doing to engage the consumer and drive traffic for our retail customers.

Healthcare reform and beverage tax legislation continue to be significant concerns at the national and state level. As an industry, we're coming together to help consumers understand the role of our products in their lives. While we're assessing the impact the proposed healthcare legislation may have on our business, let me take a moment to tell you how DPS is taking action to encourage an active and balanced lifestyle.

In February, we joined with other leading beverage companies to support First Lady Michelle Obama's Let's Move campaign by adopting U.S. product labeling that will list calories more prominently on containers, vending machines and fountain equipment. We've extended our partnership with the non-profit KaBOOM!. We'll turn 10 vacant lots into playgrounds in underserved communities this year. Mott's will be the lead sponsor of the Play Day program, an initiative to design and to inspire communities across the U.S. to lead local events that promote and celebrate the importance of playing. Consumers want choices, and our portfolio of diets, juices and waters drive 26% of our sales. And we continue to roll out new products like Mott's Medleys that meet consumer needs.

And internally, we're leading by example, encouraging our employees to take action for their health through annual check-ups and other health and wellness programs.

Now let me introduce our new CFO, Marty Ellen, to walk you through some of the below-the-line items in our 2010 guidance. Marty, I am thrilled to have you on the team.

Martin Ellen

Thanks, Larry. It's great to be on this team and back in the industry. I know many of you on this call and look forward to meeting all of you in person soon. Before I cover first quarter items as well as our 2010 guidance, I want to take a moment to share with you some of my observations during my first month here.

First, and without a doubt, we have a terrific portfolio of powerful, well-loved brands. The teams have put together a roadmap that is robust and ensures that we exploit the full potential of this business. I wouldn't be here if I didn't believe this potential was achievable.

Second, Larry has assembled one of the finest collections of leaders I have seen in my many years, both in the beverage industry and in other successful businesses. And what differentiates them is a true sense of entrepreneurship together with demonstrated execution. The industry is further consolidating and integrating, but we've already done much of the heavy lifting. Now that we are a stand-alone company, we have undistracted focus on our objectives.

Third, I have a great team of finance and IT professionals with enormous capability to drive improvements throughout the business. As we speak, we are embarking on a number of continuous improvement initiatives to do so. I know firsthand the power of a lean, continuous improvement culture, and we're building it here. All of this capability, coupled with rigor around the financial management of shareholder capital, leads me to the unequivocal conclusion that we have enormous potential to grow the value of this enterprise.

Now, turning to our results for the quarter. We had a number of items that impacted us below the segment operating profit line. First, stock-based compensation costs were $3 million higher year-over-year. As a reminder, 2010 is the third and final year of our step-up in stock-based compensation costs. For the full year, these costs will be $12 million higher. Second, we have spent $8 million in the quarter for cost related to the PepsiCo licensing agreement. Third, we invested $9 million in productivity office initiatives, impacting both our segment operating profit and corporate expenses. You should recall almost all of our 2009 productivity office investments were incurred in the second half of last year. Fourth, we recorded unrealized commodity-related mark-to-market losses of $1 million in the quarter, compared to a $1 million gain a year ago.

Our reported tax rate for the quarter was 43.3%. It was increased by a $13 million revaluation of certain deferred tax assets established in Canada at the time of our separation. Continued great execution by our tax team resulted in better-than-expected tax benefits in other areas, which will benefit the full year. Cash provided by operating activities totaled $987 million. This includes the one-time payment from PepsiCo of $900 million.

Our cash flow was also impacted by the timing of our annual incentive payments. We paid these in the first quarter of 2010 versus the second quarter last year. Net capital spending of $55 million is tracking in line with full year guidance of approximately 5% of net sales.

And finally in the quarter, we repaid $405 million of debt, achieving our target capital structure. We returned $240 million to shareholders, comprising $38 million in dividends and $202 million in the form of share repurchases.

As Larry mentioned, we're still dealing with a fairly fragile consumer and macroeconomic backdrop. At the same time, we're encouraged by the sequential improvements we're seeing, particularly toward the end of March and through April. And we've now lapped those items already mentioned, which adversely affected first quarter sales comparisons. As a result, we expect to achieve 3% to 5% net sales growth in 2010, driven by continued investments and strong trends in flavored CSDs, Snapple, Hawaiian Punch and Mott's. Also, as immediate consumption and premium-priced beverages rebound, we expect to benefit from the improvement associated with this positive price mix. As a reminder, the repatriation of certain brands from the Pepsi system, as well as the amortization of the $900 million of deferred revenue will add about a point of reported net sales growth for the year.

On the contract manufacturing side, we continue to deemphasize this non-core business, consciously trading off those sales for higher margins. And finally, the weaker dollar is giving us some benefit in reported sales comparisons.

As you saw in this morning's press release, our reported full year tax rate is still expected to be approximately 38%. Essentially, certain favorable tax opportunities of around $0.02 to $0.03 per share are partially offsetting the foreign tax item we recorded in the first quarter, and the result is a reported tax rate that is still about 38%.

In terms of our input cost outlook, we are experiencing slightly better trends compared to our beginning-of-the-year expectations. At current prices, packaging and ingredients will increase total COGS by less than 1% for the full year on a constant product mix basis. We continue to aggressively manage our total cost basket and look for ways to drive additional supply-chain efficiencies.

Our current expectations include certain planned investments in our brands. We would also expect to invest any additional upsides from top line performance and cost improvements in our brands, just as we did in 2009. For the year, we now expect diluted earnings per share, excluding the separation-related foreign deferred tax charge, to be in the range of $2.34 to $2.42. This represents a $0.07 increase from our beginning-of-the-year guidance, driven by greater below-the-line leverage from higher share repurchases and the favorable tax opportunities I mentioned earlier.

As we said on our previous earnings call, we expect to see a much stronger second half compared to the first half. In particular, as it relates to modeling SG&A, I would highlight that marketplace investments in the second quarter will be $25 million higher compared to the same period a year ago to support an extremely strong innovation and marketing calendar.

Moving on to cash flow, we continue to expect net capital spending to be approximately 5% of net sales. With our target debt capital structure achieved and with a strong cash position, we continue to execute our previously announced plan to purchase $1 billion of our common stock in 2010. However, as referenced in our March 16 8-K filing, our purchases are subject to market conditions and certain other repurchase parameters.

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

Larry Young

Thanks, Marty. Before we open the lines for questions, let me leave you with a few thoughts. Our results for the quarter and our outlook for the year demonstrate the progress we're making against the priorities I outlined for you at the beginning of the year, with our plans squarely focused on organic growth only. We're growing per capita consumption, while expanding distribution and availability.

We're increasing our single-serve mix through continued incremental cold drink asset placements and fountain installs. We're meeting consumer needs with innovation that is both relevant and delivers value. We're strengthening our infrastructure with Victorville and key IT investments. We're investing in the marketplace and driving relevance and awareness. At the same time, we're relentlessly and optimizing our processes to enhance customer value, eliminate waste and reduce cost. And finally, having achieved our targeted capital structure, we expect to return excess cash to our shareholders. It is these things that give me confidence in our guidance for the year and the growth in the years ahead.

Operator, we're ready for our first question.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is coming from Wendy Nicholson with Citi Investment Research.

Wendy Nicholson - Citigroup Inc

My first question has to do with the spending, the $25 million of incremental advertising that you're spending in the second quarter. Why is that not going to run through the back half? Were advertising levels inflated in the back half of last year? Or is this just a particular ad campaign that's relatively short-lived?

Larry Young

When you look at our Dr Pepper or Snapple line innovation, we've built heavy towards the end of last year to get started this year. And you could see the results we had from Q1 tell us that these investments are giving us some great returns, driving volume. And so as we drive the Snapple piece that continue with the Dr Pepper and more innovation along the lines of Mott's and some of our other brands, it's critical to get it into Q2 to get the results in the second half.

Wendy Nicholson - Citigroup Inc

But it's also clearly a situation of easy comps on the outstanding side, if you will, relative to the back half of last year?

Larry Young

It's incremental.

Wendy Nicholson - Citigroup Inc

But in the second half, you spent more so that year-over-year third quarter 2010, fourth quarter 2010, you got easier comps in terms of the rate of your spending? Is that fair?

Larry Young

It'll be flat.

Wendy Nicholson - Citigroup Inc

My last question is just on the share repurchase. Obviously, you bought back a lot of stock, but your average number of shares outstanding didn't go down. Is that because the share repurchases were weighted towards the end of the first quarter?

Larry Young

Wendy, it's more a yes.

Operator

Your next question comes from the line of Judy Hong with Goldman Sachs.

Judy Hong - Goldman Sachs Group Inc.

Larry, just your comment about the improvement that you're seeing in late March and into April, can you just elaborate that and talk about whether it's really more of a category-wise trend? Are you seeing trends between sparkling versus still? And do you think that's weather-driven or are you really are starting to see a real underlying improvement in terms of the category?

Larry Young

Yes, absolute, Judy. No, I am -- as I've said before, I'm cautiously optimistic. I mean, this one we've seen now, we've seen a couple of upticks at the end of last year, in the first quarter. But this one, Judy, has been a little more consistent. We've seen six weeks of it. I'm seeing it across CSDs. I'm seeing it at non-carbs. And as you know, maybe the biggest thing I watch is the immediate consumption, watch the traffic, see what the 20-ounce is doing and of course, the quick-serve restaurants. I mean, that's quite a great indicator, I think for everybody in this industry, because it's one of the last to go down and the first to come back. And then we're seeing a little more traffic there, a little more uplift in sales. As you could see by our number, being up 2%. But this is very encouraged by what I'm seeing. It's not where we wanted at yet, but it's going in the right direction.

Judy Hong - Goldman Sachs Group Inc.

And just in terms of your net price realization, it looks like in the first quarter it was negative. So can you just elaborate on the mix versus rate? And then just as the year progresses, are you just expecting pricing to be more positive than kind of what you saw in the first quarter?

Martin Ellen

Judy, it's Marty. Actually, we had about a point in the quarter of positive price and actually a small amount, 20 basis points or so, of improvement in mix in terms of our overall numbers.

Judy Hong - Goldman Sachs Group Inc.

And does that become more positive as the year progresses in terms of the mix component?

Martin Ellen

Well, as I've said in my remarks, I mean to an extent, we get the improvement in the non-carb categories and I talked about that, for us it drives positive price mix.

Judy Hong - Goldman Sachs Group Inc.

And then just finally in terms of your guidance increase, so that assumes that you do the billion-dollar buyback this year?

Martin Ellen

Yes, it does.

Operator

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

John Faucher - JP Morgan Chase & Co

In terms of looking at your outlook for improvement in the category, can you talk a little bit about sort of how we should think about your share trends versus the overall improvement in the category? And then can you talk a little bit about -- Coke and Pepsi seem to make some comments about some higher levels of promotional spending, maybe some lower price points, some more discounting in the first quarter? Is that something you see going through? Or do you feel like the pricing environment now that we're going to have integrated bottlers with both of your major competitors that, that will remain relatively rational going forward?

Larry Young

Absolutely, yes. John, I'll start with your last one there. I mean, we feel very good about the pricing right now. I heard some of the other comments, haven't really seen it. It doesn't really show on Nielsen, but I see more promotional activity. As you know, I like the promotional activity more than just price off. I mean, that's where we really do our battle. So I feel good about the pricing out there. I think it will continue. As far as share and looking at what we're seeing across the channels, I think you could expect to see what we've been doing to continue to grow. We're looking at -- we expect to see a one point growth year-to-date. There's nothing showing us that what we've been able to do the last 20-plus months wouldn't continue, especially with the flavor growth that we're seeing out there, John.

John Faucher - JP Morgan Chase & Co

Okay, so nothing that you've seen from Coke and Pepsi -- well, obviously, Coke hasn't emerged yet. But nothing there where you say, "Okay, they're going to take a different view," in terms of trying to get more of the volume leverage, do you think it's just more the same at that point?

Larry Young

Not. I've seen some great execution out there. Retail execution, display programs, some promotional activity, which is very healthy for the marketplace. It helps everybody.

Operator

The next question comes from the line of Christine Farkas with BofA Merrill Lynch.

Christine Farkas - BofA Merrill Lynch

Just a follow-up on the pricing environment. Can we assume that you already know what plans might be in place for Memorial Day? And your comments about the rational environment is including the landscape over the next few weeks? Is that fair?

Larry Young

I know what mine are. We've not -- it's quite away [ph] not yet -- we've not heard a lot about it, but we're not hearing any negative noise. That's always good.

Christine Farkas - BofA Merrill Lynch

Secondly, moving to the Victorville plant. Was there a boost in your Mott's volumes or other products because of these lines running? Or would you say the takeaway is more normal and a reflection of the marketplace and the demand on the marketplace?

Larry Young

No, I think it was too early for the Victorville plant to have that kind of an impact. We were just commissioning the line. So let's say we'll see more of the Victorville plant volume coming on board the second half.

Christine Farkas - BofA Merrill Lynch

And that's largely Mott's, then?

Larry Young

Mott's and Hawaiian Punch.

Christine Farkas - BofA Merrill Lynch

And then lastly, on your buyback program, you've indicated your commitment to the billion dollars this year. You also talked about reaching your capital structure targets, and then the excess cash would go back to shareholders. Could that imply then that your buyback could be in fact larger than what's in place right now?

Larry Young

That's the authorized repurchase program right now.

Christine Farkas - BofA Merrill Lynch

But the intent is, of course, if things were to come in better than expected or you have excess cash like you indicated, the goal would be to return that to shareholders, correct?

Larry Young

That would be our expectation. We do subscribe to the view that cash is the lowest earning asset on the balance sheet. And I haven't seen any use for it and our plans are clear growth through organic means. We would expect to return excess cash to our shareholders. And we're clear about that.

Operator

Your next question comes from the line of Mark Swartzberg with Stifel, Nicolaus.

Mark Swartzberg - Stifel, Nicolaus & Co., Inc.

First in your guidance, it looks like your definition of comparable earnings includes the costs in the quarter of negotiating with Pepsi? So is it fair to assume that any Coke-related negotiating costs are included in your idea of earnings for the year?

Martin Ellen

Mark, I would say we've got enough coverage in that guidance to probably cover that.

Mark Swartzberg - Stifel, Nicolaus & Co., Inc.

And then secondly, Larry on Victorville, it sounds encouraging. As you look at the theoretical risk that it disappoints, at least initially, just getting a big plant up and running. Can you tell us a little bit about having these four or five lines on? Do you have enough visibility, now that you're up and running to kind of comment on how that risk, how effectively you're managing that risk heading into our peak season?

Larry Young

Yes. Basically, Mark, we don't have any. It's just been absolutely seamless. Our supply team chain has done a great job, as I said, on time, on budget. The lines are running great. It's also going to help us with some distribution out there. It's just not the line, but we put in quite a large distribution system that's going to save us about $10 million in transportation for the second half. We're going to be able to consolidate some of the distribution centers. We've not seen anything that would tell us that we had any risk at all.

Mark Swartzberg - Stifel, Nicolaus & Co., Inc.

Latin America, Larry, it's kind of a mixed signal these last two quarters. Profit's down this quarter, but volume's pretty healthy. Looks like you're investing there. Are we near an inflection in terms of profit performance for that market? Or is it just going to be a struggle for the rest of the year?

Larry Young

It's a tough market. But the one thing -- you're absolutely correct, Mark. We're going to continue to invest. And when it does turn around, we're going to be ready. I mean, we're getting a lot of white space covered right now. It's a market that's hard to say when is it kind of flatten out or get back to normal, where the growth will be there with the profitability. But as I've said before, I'm very bullish on Mexico. We'll continue to invest and we'll be ready when everything kind of gets back to we're to be a profitable business again.

Mark Swartzberg - Stifel, Nicolaus & Co., Inc.

And then lastly, on commodities, Marty. Can you share with us to what extent you're hedging and what your attitude is towards hedging looking at 2011?

Martin Ellen

Yes. We've got a fair degree of coverage for the balance of 2010. We are also already somewhat extended out into 2011. I think we've done a fairly good job. I think we have a good process internally here from what I can tell on my first month here. So we got good coverage for this year, fairly substantial for this year. And we've already extended out partially into 2011.

Mark Swartzberg - Stifel, Nicolaus & Co., Inc.

And can you give us any idea of what that coverage is for 2011?

Martin Ellen

No. I'd just tell you that probably 70% or so are covered in 2010, obviously, less so, so far for 2011.

Operator

Your next question comes from the line of Caroline Levy with CLSA.

Caroline Levy - Calyon Securities (USA)

Question on the percentage increase in marketing spending, the $25 million. How much is that up year-over-year or so? And what would the full year increase look like?

Larry Young

That's about 20%, Caroline.

Caroline Levy - Calyon Securities (USA)

And I'm also wondering your strategy was to drive per capita consumption on the coasts and in places where it isn't as robust as it is in Texas, say. And are you seeing a significant disconnect between the rate of growth in different regions around the country? Maybe you could talk to us a little bit about that.

Larry Young

Well, yes. We're seeing a nice balance growth for the course of those low per cap markets. We're seeing a lot more. But it's off of the small base. So we're very encouraged by the plans that we have in place. Whenever you see good growth coming off of the coast, the Northeast, the Northwest, we're just thrilled to death of what we're seeing how Dr Pepper Cherry do in Southern California, it's encouraging whenever you pull all the numbers together and say, "You know, we're growing everywhere across-the-board." So some are much higher, but we're very, very encouraged by our increasing per cap plan.

Caroline Levy - Calyon Securities (USA)

And what's your read, Larry, on the consumer's view of carbonated soft drinks? We've seen a sort of -- it's usually something of a migration back towards them where they declined less than non-carbs. What do you think is going to happen as we move forward?

Larry Young

Well, I think, people are always going to love the carbonated soft drinks. I saw our carbonated numbers were up 2%. Our share keeps looking good. We're also doing a lot of innovation there, trying to bring functionality to the fund of the carbonated soft drinks. So we feel very good about the CSDs, especially flavored CSDs continue to grow.

Caroline Levy - Calyon Securities (USA)

Do you have some labor issues at Mott's?

Larry Young

At Mott's? We have a contract up at Williamson, but it's just everyday business.

Caroline Levy - Calyon Securities (USA)

So you're not worrying about supply chain disruption or anything...

Larry Young

No, absolutely not. No, I mean these things are just part of the business we're in. We have 260 locations. There's always something going on with labor. I think sometimes, people got to remember me, if you look at the plant at pyramid [ph] , it's actually about 1% of our volume. I mean, we're in very good shape. There's going to be no disruptions to supply chain. Our consumers and customers will continue their delivery of their products. And hopefully, it all gets worked out.

Caroline Levy - Calyon Securities (USA)

Last one is on Mexico. If you could just review a little bit, the weakness you're seeing is self-inflicted or it's the general environment?

Larry Young

I think it's the general environment. It's the biggest piece of it, Caroline, unless Marty kind of touch on some of the macroeconomics and different things that have happened in there. We're continuing to expand because -- as you know, we didn't have a complete footprint across Mexico. So we want to get out there and get that white space covered. And Marty, you got any other things to add to that?

Martin Ellen

No, just to elaborate that again, we are investing in route expansion. That's part of our strategy. In the short run, we've got some IT investments. We need to get them on a better system platform. We spent some money to do that. Those I would say are the two biggest factors when you look at the level of profitability.

Caroline Levy - Calyon Securities (USA)

It's just that it's been a tale of two cities in cola where Coke's volume has been very strong and Pepsi's had a long-term problem in trying to make a go of it in Mexico. And I just wonder if Coke's scale is such that it's difficult for another CSD brand to really be built up.

Larry Young

Well, I think, if you look at -- I mean, again, you can look at Mexico, we have earned a lot of similarities to our U.S. business. We have a strong brand at Peñafiel, but this has a great demand. Our Clamato business. We don't play in the cola, so colas are very strong down there. But it's also a flavor market and there's a tremendous amount of demand for our products. And I think told [ph] by a little while back, we put the business under Jim Johnston. And the things that Jim's been able to do down there, the new plants and how they're doing the distribution, working with our bottlers, also working with our company on distribution. We're seeing some great things in our Peñafiel, our Crush brand, our Squirt brand and especially Clamato.

Operator

[Operator Instructions] Your next question comes from the line of Andrew Kiley with Deutsche Bank.

Andrew Kieley - Deutsche Bank AG

Larry, I was wondering if you could talk about -- I know it's early days, but could you talk about performance of your brands in the Pepsi territories since the new contract went into effect? Are you seeing any acceleration there or how you're performing in those territories?

Larry Young

We're doing very good. As I mentioned earlier, our Crush for the quarter was up 22% after a tremendous launch. Our Dr Pepper business was up mid-single digits. I'm very pleased with that. Some of the programs we've put together, we're just really working close. And the activation of our different marketing programs, we're very excited about the relationship, Andrew.

Andrew Kieley - Deutsche Bank AG

And then secondly, I wanted to ask in the Package segment, CSD volume down mid-single digits. Could you talk about that? Is there a timing issue there? Is it just Sunkist coming off a bit?

Larry Young

It is Sunkist. Yes, that's where I look at it.

Andrew Kieley - Deutsche Bank AG

Lastly Larry, as you negotiate distribution agreements with your external bottlers, is there a scenario under which you would ever consider giving up change of control rights in those contracts?

Larry Young

No, I couldn't imagine anybody in this business doing that.

Andrew Kieley - Deutsche Bank AG

In terms of the commodity cost coverage that you had this year, could you talk about where the variability would be or where you're not covered? Is it just PET at this point?

Martin Ellen

Well, I mean, our greatest input items at risk would be aluminum and PET. And we've got some fairly good coverage there. That's sort of the 80-20 when you worry about cost variability from commodity cost change. So I think we're fairly in good shape there.

Operator

Your next question comes from the line of Damian Witkowski with Gabelli & Company.

Damian Witkowski - Gabelli & Company

Larry, on your comment back to -- and it's not new, but returning the excess cash to shareholders. Any preference going forward in terms of doing it via more buybacks versus increasing of dividend?

Larry Young

Well, Damian, you always have to see what those market conditions are. We watch that very closely. It's one of those things that we laugh about. It's a problem our board loves, figuring a way to give it back to our shareholders and make sure we're shareholder friendly. So I wouldn't say we have anything in stone that we prefer.

Damian Witkowski - Gabelli & Company

And then not to continue, but just on Mexico, obviously, it is a tough environment currently. And weather didn't help during the first quarter. But you have some very nice, strong brands down there. But it's not really contributing much to your earnings, at least not yet. And I'm wondering if at some point, it becomes too much of a distraction, and you might look to perhaps do something more strategic with it?

Larry Young

No, we don't. That's one of the reasons, Damian, I've put Jim Johnston over that market-seasoned veteran that knows how to really manage a business and how to take a portfolio and drive a strong U.S., Canada, usually Mexico pesos, our investment for the future. So no plans like that at all.

Damian Witkowski - Gabelli & Company

Can you give us more color on Snapple? What packages were strong and maybe what channels? It's nice to see positive offer.

Larry Young

It's just a great story when you look at the 17% growth, Damian, we had. it was across all channels, across all of the -- the super premium was still weak because of the price points in the economy. But we actually are seeing super premium flat now. Our premium, our 16-ounce glass is what I am the most excited about. Our turnaround on that has just been phenomenal. The relaunch for the six-pack, we've got the customer excited. We've got the consumer excited. It got me excited. But it's -- very happy with it and a tremendous amount of room for distribution and more access with our value tea out there. And we're just starting there.

Damian Witkowski - Gabelli & Company

And are you not discounting your premium stuff at this point? Or are you still adjusting to the environment?

Larry Young

No, we haven't. Actually, right now, our prices are 48% higher on our volume than the 12-packs a year ago.

Damian Witkowski - Gabelli & Company

The whole legal and tax situation, you highlighted it, I think, for the first time in your prepared remarks. We've had the federal last year that seem to be defeated. And now we have some bigger states like New York trying to implement an excise tax on sugared beverages. And that seems to be dead as well. But is the environment now worse, about the same or better for an outlook for a new excise tax?

Larry Young

Well, Damian, I'd say it's about the same. I mean, we've got some questions in the last couple of calls, and so I thought I'd add that in there, that it's always something we stay on top of. Of course, the healthcare reform went through, and a lot of people have made statements and put releases out on that. And we're still looking at that. I mean, it's not much to us, but [indiscernible] of all the different states. I mean we won the federal piece of it. That pulled out. But we have to watch those states, and we have for years. It doesn't go away.

Damian Witkowski - Gabelli & Company

It doesn't go away, it just sort of an overhang. But the federal one is unlikely to come back, I would imagine?

Larry Young

I hope not. I think people have -- the consumer spoke up, and I think people heard of.

Operator

Your final question this morning comes from Bill Leach with TIAA-CREF.

Bill Leach - Neuberger Berman

I was just wondering where the share count stood at the end of the quarter? Your share authorization is roughly 12% of your market cap, so what are you assuming when you give EPS guidance for your share count for the year?

Martin Ellen

Actually, Bill, Marty on. I'll help you further along. As for share count probably as of yesterday or the day before, is about 245.7 million shares outstanding.

Bill Leach - Neuberger Berman

And what are you assuming for the full year guidance?

Martin Ellen

We would assume we're going to do the full repurchase in the guidance.

Bill Leach - Neuberger Berman

Just evenly dispersed over the year?

Martin Ellen

For the most part.

Bill Leach - Neuberger Berman

And do you have any guidance for interest expense? That was a big help in the first quarter.

Martin Ellen

About 5% in terms of the average outstanding debt.

Bill Leach - Neuberger Berman

And how much is the debt?

Martin Ellen

2.6 net, it could be about $130 million of interest expense for the year.

Larry Young

All right. Well, thanks for joining the call today and for your continued interest in Dr Pepper Snapple Group. We're hosting our first ever Investor Day at our Plano office on June 8, and we look forward to seeing you here. Thank you.

Operator

Thank you. This concludes today's conference call. You may now disconnect.

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