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Analysing the Global Soft Drinks Market

Analysing the Global Soft Drinks Market

Published on: 1/02/2018

It has been announced that Keurig Green Mountain is to merge with Dr Pepper Snapple in what’s been described as the biggest acquisition involving a soft drinks company.

As a result of this merger, JAB Holding – the owner of Keurig Green Mountain – will consolidate its position as one of the world’s leading beverage companies as well as enhancing its distribution channels and diversifying its product range.

Despite this, analysts quoted in the Financial Times this week have questioned the rationale of the deal as to why Keurig would move away from a fast-growing coffee market and move towards a slow-growth sector such as soft drinks. 

Industry performance

Yet findings in Plimsoll’s latest global Soft Drink Producers Analysis suggests that the market is improving. An analysis into the world’s largest 643 companies indicates, on average, each company is making pre-tax profit margins of 5.6% while each producer contained in the report is showing modest sales increases of 3%.

Indeed, the financial performances of both Dr Pepper and Keurig make this deal particularly interesting. 

Based on the latest accounts contained in the Plimsoll Analysis, it appears Dr Pepper Snapple is very profitable.  Having said that, the company has high debt and is generating a sales per employee of $322,000 – which is some way below Keurig’s sales per employee of $753,000.

So, what will happen next?

Both companies have seen modest growth and the Trading Stability chart on Dr Pepper Snapple’s Plimsoll Analysis suggests the company’s assets are not generating enough of a return.

The newly-formed company will therefore have a challenge to ensure the business accelerates its sales performance whilst at the same time maximising the return on investment.

To monitor the impact of this ground-breaking deal, take a look at Plimsoll’s latest Global Soft Drinks Analysis which will keep you updated of all the latest changes occurring in the industry.

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