Dr Pepper Snapple Group, Earnings Call NUGGETS: Cautiously Optimistic with U.S. Consumers, Marketing Going Up
Cautiously Optimistic with U.S. Consumers
Judy Hong – Goldman Sachs: Larry, just in terms of the consumer environment you talked about the uncertain and unpredictable consumers, so maybe if you can just give us your assessment of what you’re seeing as you sit there today, some of the channel mix dynamics that you’re noticing? And then as you think about the volume outlook for the balance of the year, the sequential improvement, how much of that is really just the non-carbs improving as you’re lapping the pricing as opposed to sort CSD also getting better?
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Larry D. Young – President and CEO: First with the consumer, we continue to be cautiously optimistic as we watch the U.S., but we’re also – a lot of the things we’re hearing from others is that they are seeing it slow down. None of our trends are showing that. We’re staying pretty steady in large format. We’re seeing continued growth of small format, especially convenient and gas with our single-serve and our Fountain business. So I would say we’re staying cautiously optimistic on that. As you look kind of going forward on what we’re doing with our volumes and everything, you’re correct with lapping the large price increases, we’ll be seeing better volume coming in from the non-carbs, especially Mott’s that had the highest increase and then we’re seeing a lot more activity with Hawaiian Punch, but we continue to see our CSDs will continue to come in because we’ll be cycling Dr Pepper TEN. We’ve got a lot of good activity out there as we continue with our coastal and our center of the country Snapple programs. And the team just feels very, very enthusiastic about how we’ll be able to continue this current track.
Judy Hong – Goldman Sachs: And then Marty just in terms of guidance, so commodities coming down to the low end of your prior guidance, the earning guidance aren’t changing. So, is that just offset by marketing spending step-up? How are you sort of reconciling kind of the different components as you think about guidance?
Martin M. Ellen – CFO: Judy, I think – unfortunately as I said with respect to let’s take it piece-by-piece, no real change on the top line. Cost of goods actually would have been more favorable but, for the unfortunate situation we had in terms of an apple freeze and the run-up in apple prices which of course affects Mott’s Apple Juice. We have taken up our view a little bit on some expenses related to industry-related issues, because a lot of discussion, a lot of things happening and some of those costs that we share with the rest of the industry participants, we’ve taken up a little bit in our view in the balance of the year. Full year marketing, could be upwards of $15 million for the year and as I’ve said in my remarks with the phasing of that such that more so Q3 and then lapping Dr Pepper TEN last year with some favorability there. So, I don’t really think much has really changed. There’s nothing sort of in the results this quarter that tells us and in our view of the forecast that we ought to make any change to what is an $0.08 range.
Judy Hong – Goldman Sachs: Then just following up on commodities, so if you sort of think about maybe 2013, is the apple juice concentrate pricing issue sort of that flows into 2013 and how much are you covered on the other components for 2013 at this point?
Martin M. Ellen – CFO: So to be clear for everybody, the comment related to apples is not really a juice concentrate factor, it’s a whole apple factor as it relates to the manufacture of applesauce. I think most of you’d know actually, we procured most of our apple juice concentrate like many people do from other regions outside the U.S., mostly notably China. So, that’s not a juice issue, that’s an applesauce issue. In terms of, let me just talk a little bit about – commodities I covered off on where we were on corn this year, and so we’re in pretty good share this year. It’s a little early to talk about commodities for next year I would say. We have layered in already some hedging on some of the key items at – not huge numbers but reasonable numbers at this stage in 2012.
Marketing Going Up
Bryan Spillane – Bank of America: So, just a point of clarification. I might have missed this in response to Judy’s question, but your expectation for marketing and advertising for the year, is it going – because it was higher in the second quarter than we thought it would be. Is it going up for the year as well?
Martin M. Ellen – CFO: On a full-year basis?
Bryan Spillane – Bank of America: On a full year basis, yes.
Martin M. Ellen – CFO: Full year basis I had said marketing to be up $15 million.
Bryan Spillane – Bank of America: Okay $15 million, got it. And then second question, just I guess more specifically to the consumer environment, can you talk at all about how consumer behavior in the convenience store channel and how the convenience store channel has performed maybe more recently?
Larry D. Young – President and CEO: We’re still, as I have just mentioned a moment ago, we’re cautiously optimistic with the consumer. We’re still showing growth in our small format and convenience and gas. Our single-serve business is doing well in bottling, can and fountain. But our Snapple business is just really expanding. We’re getting a lot out with the Dr Pepper TEN and our 20-ounce programs that we have out there. So, we’re cautiously optimistic there, but we are also always aware of listening to other people talk about seeing weakness. We want to watch that closely and make sure that the consumer doesn’t start listening to it also and believe in it, but we feel we have the plans in place to continue our momentum, and so we feel very comfortable where we’re at right now.