Here’s What The Departure Of Bai Brands’ CEO Means For Dr Pepper Snapple

Recently, Dr Pepper Snapple (NYSE:DPS) announced that the founder of Bai Brands (the company it acquired in November last year) has left the business and Lain Hancock will replace him as the new CEO (chief executive officer) of Bai Brands. Previously the executive vice president of human resources in Dr Pepper Snapple (DPS), Hancock has been with the company since 2007. While the new CEO will work closely with Bai’s president to drive growth in the brand, aligning it closer to DPS, departure of the founder of Bai Brands is likely to impact DPS adversely in the short term. The acquisition of Bai Brands has boosted the company’s sales and in Q1 2017 the brand contributed to a 0.2% increase in sales. Through the acquisition of this brand, the company aims to be the leader in the healthy beverages segment. As millennials move away from carbonated soft drinks, demand for healthier options is increasing and Bai is likely to be the front runner for DPS in terms of healthy beverage options. According to our estimates, DPS’s business is still concentrated on carbonated drinks in North America and this segment accounts for nearly 70% of its valuation. The remaining 30% comes from non-carbonated beverages.

See Our Complete Analysis For Dr Pepper Snapple

With Bai Brands the company is looking to increase focus on the non-carbonated beverage segment which is likely to be the key growth driver in the long term. Bai is known for its disruption in the beverage industry and its entrepreneurial structure has allowed the company to innovate in the healthy beverage segment. Over the past two years the brand introduced fruit based carbonated beverages and a better-for-you soda called Bai Black. These efforts are aimed towards introducing beverages which are healthier and appeal to customer tastes.  With its founder leaving the business, it will be crucial for Dr Pepper Snapple to ensure that the innovations in Bai Brands continue. With a DPS veteran as the new head and closer alignment with DPS brands, the risk of the loss of Bai Brands’ unique identity is higher. Its innovative beverages with a focus on health are its key selling points and it is essential for DPS to retain this.

While the team at Bai Brands stays intact and is well positioned to drive growth for the brand, a new leader can impact continuity to some extent. However the company can ensure that the brands key focus areas remain intact and the new CEO continues to focus on these areas.

Bai is a key growth driver for Dr Pepper Snapple and is likely to drive sales for the company in the long term as consumers prefer healthier beverages. The departure of its founder might impact DPS in the short term, however if the company remains focused on Bai’s innovation, it should be able to build this brand into a strong pillar of growth for the long term.

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