1. Dr. Pepper Snapple Group (DPS) Covering Analyst: Joshua Jordan jjordan3@uoregon.edu

2. DPS History ›Dr. Pepper brand since 1885 ›Series of Acquisitions ›Most recent: DPSU, DPSUBG ›Incorporated October 24, 2007

3. Business Overview ›Brand Owner ›Manufacturer ›Distributor ›United States (89%) ›Canada (4%) ›Latin America (7%) Dr. Pepper, 7-Up, A&W, Sunkist, Canada Dry, Snapple, Hawaiian Punch, Mott’s

4. Dr. Pepper Snapple’s Strategy ›Expand distribution channels ›Build and enhance existing brands ›Take advantage of high-margin channels ›Become more efficient through RCI

5. LRB Industry ›Highly Competitive ›Centralized ›15.2 Billion Cases

6. ›Dominated by Coca- Cola, PepsiCo, and Dr. Pepper Snapple ›9.3 Billion Cases CSD Industry

7. Risks and Drawbacks ›Consumer Health Preferences ›Commodity Prices ›Health Regulations ›Competition ›Retail Contracts

8. Positives ›Research and development is creating healthier beverages ›Penetrating distribution channels ›More efficient operations through RCI

9. Revenue ›Beverage Concentrates –Highest Margins ›Packaged Beverages –Lowest Margins ›Latin America Beverages

10. Customers ›Retailers –Wal-Mart (10% of total sales) –The Kroger Co. –Safeway ›Food Service –Mcdonald’s –Yum! –Burger King –Sonic –Wendy’s ›Convenience Stores –7-Eleven

11. DCF Expectations ›Increasing COGS as a percent of revenue ›SG&A decreasing slightly as a percent of revenue ›Tax rate increasing to 37% ›Gradual rates as opposed to straight-line rates ›Increasing capital expenditures

12. DCF Valuation ›Possible reasons for price differential –Beta –Cost of Debt

13. Comparables Screening ›Industry ›Licensing ›Size ›Beta ›Growth ›Margins

14. Comparables ›Coca-Cola (KO) – 30% –Coke, Fanta, Sprite, Barq’s ›PepsiCo (PEP) – 30% –Pepsi, Mountain Dew, Sierra Mist, Mug ›Monster (MNST) – 20% –Monster, Hansen’s ›Cott (Cot) – 10% –Cott, RC Cola ›National Beverage (FIZZ) – 10% –Shasta

15. Forward Comparables Valuation

16. Final Valuation

17. Profit Returns ›Dividends ›Stock Repurchases

18. Comparable Profit Returns

19. Recommendation: Hold for Tall Firs and Svigals ›Outperforming strong competitors in market share ›Increasing profit returns to shareholders through dividends ›Innovative product line and cost-cutting techniques ›Note: Future update is important to valuate success of ten- calorie soda lines

20. Questions