PURCHASE, N.Y. — PepsiCo has inked a deal to manufacture and distribute certain Dr. Pepper Snapple Group Inc. products.
Under the new agreement, announced Tuesday, PepsiCo will distribute Dr. Pepper, Crush and Schweppes brands in the United States; Dr. Pepper, Crush, Schweppes, Vernors and Sussex brands in Canada; and Squirt and Canada Dry brands in Mexico.
The deal calls for PepsiCo to license the Dr. Pepper Snapple brands after the beverage giant wraps up the acquisition of its two anchor bottlers, The Pepsi Bottling Group Inc. (PBG) and PepsiAmericas Inc. (PAS).
With the agreement, Plano, Texas-based Dr. Pepper Snapple will receive an upfront payment of $900 million, payable on closing of the PepsiCo acquisitions. In exchange, PepsiCo will be entitled to manufacture and distribute Dr. Pepper and the other specified products in territories where they are currently distributed by PBG and PAS.
The deal, which will replace existing agreements that PBG and PAS have with Dr. Pepper Snapple, will have an initial term of 20 years, with automatic 20-year renewals thereafter, according to the companies.
"We are delighted that we have reached a mutually beneficial agreement with Dr. Pepper Snapple Group to continue to distribute their products," PepsiCo chairman and chief executive officer Indra Nooyi said in a statement. "PepsiCo is fully committed to vigorously expand, flawlessly distribute and grow Dr. Pepper Snapple’s brands in its appointed territories."
PepsiCo noted that it’s on track to complete the PBG and PAS acquisitions, pending regulatory and shareholder approvals. The company expects to close the proposed transactions by the end of the first quarter of 2010.
Dr. Pepper Snapple added that in U.S. territories where it has a distribution footprint, it plans to start selling certain owned and licensed brands, including Sunkist soda, Squirt, Vernors and Hawaiian Punch, that were previously sold by PBG and PAS.
"We’re confident that this new arrangement, which maintains our balanced and flexible routes to market, is in the best interests of our brands and our shareholders," stated Larry Young, president and CEO of Dr. Pepper Snapple Group. "It demonstrates the value and growth potential of these great brands and strengthens our third-party route to market while benefiting our own packaged beverages business. We’re excited to be working with PepsiCo and are confident in the continued long-term growth of our business."