This paper is about a merger involving two companies: Dr Pepper Snapple Group, a soda-making company, and Keurig Green Mountain, a coffee-making company. It was announced in 2018 that the two companies wanted to come together to have combined efforts that would enable them to make new attractive beverages to gain a competitive edge. The deal was completed in January 2018 and cost $26.6 billion, making it one of the largest mergers in the US that year (Hirsch, 2018). The study will evaluate the reasons the merger happened, the size of each company before merging, the challenges faced success of the merger, and assess five cultural elements resulting from the acquisition.
Dr Pepper Snapple Group has been one of the main players selling alcoholic and non-alcoholic beverages in the USA, Canada, Mexico, and Caribbean. It realized net sales of $1.08 billion and had 21,000 employees by December 31, 2017 (McGrath, 2018). Keurig generated a net profit of $4.135 billion in 2017, a slight decline from 2016 when it had $4.392 billion in sales (Keurig DrPepper, 2018). The company had 21,000 employees in 2017; however, after the merger, it increased to 25,500 (Keurig DrPepper, 2018). This increase resulted from upgrading its workforce to meet the new organizational goals.
This acquisition did not come without its share of challenges. One of the organizational challenges resulting from the merger is disrupting the distribution channel of other affiliated products (Keurig DrPepper, 2022a). The two companies focused more on the merger, which affected the original elite brand’s distribution. It led to a decline in the sales of other brands, such as Fiji, which had contracted Keurig Green Mountain to distribute its water (Keurig DrPepper, 2022a). Additionally, Keurig DrPapper reported that they experienced challenges in integrating the activities and operations of the two companies. There was some resistance as some employees felt that the merger acquisition would disrupt the business operations.
The other organizational challenge was that the companies could not realize their saving goals. In a merger, high costs were incurred in bringing the two companies together, including training costs, rebranding, advertising, and creating new products. Keurig Dr Pepper set aside $11 billion to be used to produce the new brand, which was a significant share of their savings (Keurig DrPepper, 2022a). This made the companies restructure their organizational goals because it would take some time before they regained profits.
Keurig and Dr Pepper Snapple’s merger was a successful deal, despite the few setbacks that came with the deal. The company has been registering year-to-year sales growth of 9.6%, which is a positive sign of the merger (Keurig DrPepper, 2022a). Keurig Dr Pepper sold $21.68 billion in 2021, which increased from 2020 sales that accumulated to $11.62 billion (Keurig DrPepper, 2022b). In addition, the company has achieved a market growth of 75% in the cold beverage retail base (Keurig DrPepper, 2022a). They have added over three million households to the Keurig system, making the company to have 36 million Keurig households (Keurig DrPepper, 2022a). However, some minor brands have defected from the company because the company concentrated on trendy drinks. All in all, the merger has proved to be successful and has helped the company to grow significantly.
Keurig Dr Pepper merger has become more stable with the three years in operation. According to the company’s annual report, the merger has met all its expectations of the merger. It has generated $8billion in operating cash, which has given it more leverage to compete with other established brands like Pepsi and Coca-Cola (Keurig DrPepper, 2022a). In addition, the company is boasting of making more quality products and increasing market share. The cold beverage market has specifically seen significant improvement, and the company has pursued a corporate responsibility agenda to ensure its sustainability.
Comparison of Cultural Elements
Leadership
Dr Pepper Snapple Inc. had a centralized communication system whereby the top management made all decisions. Managers at lower levels did not have any major decisions to make and had to consult with their seniors before deciding (Keurig DrPepper, 2018). Keurig Green Mountain Inc., on the other hand, was using a decentralized leadership style whereby managers at lower levels could make significant decisions. Due to its many alliances, the company has to rely on decentralized system to save time and ensure that each segment flows smoothly. Under the new merger, the company has adopted a hybrid centralized and decentralized system (Keurig DrPepper, 2022b). The company supports decentralization by allowing employees to set mutual goals with their supervisors and work towards them. However, it uses a centralized system by ensuring that managers have to approve and supervise employee goals to match the organizational goals.
Communication
Dr Pepper Snapple employees lived as a family, and the company prioritized their welfare. Therefore, there was a good rapport between the employees, which allowed the employees to use informal communication. Keurig Green Mountain Inc. is a large company and includes various brands, making it effective for the company to rely on official communication (Keurig DrPepper, 2022b). However, the company has had to adopt a formal communication style under the new merger because of many employees.
Dress code
The dress code at Dr Pepper Snapple is casual because employees used to wear company-branded clothes while at work. While this may be for easy identification, it helped ensure that employees represent the brand they sell. Keurig Green Mountain Inc. employees were allowed to wear branded clothes depending on the different products. Each has its brand for those that sell water, alcoholic drinks, and non-alcoholic beverages (Keurig DrPepper, 2018). Following the merger, much has not changed in the dress code as employees still wear the company branded clothes. This has helped the employees to feel equal in the workplace. However, employees in executive positions must be officially dressed during workdays with a shirt and tie.
Technology
Dr Pepper’s Snapple Company did not use the latest technology in its operations. While they embraced technology, they did not support elements such as e-payments (Keurig DrPepper, 2018). The company had a preservative culture and did not embrace the latest technologies. Additionally, the company did not have the financial liberation of acquiring the latest technologies to produce its products. Keurig Green Mountain Inc. used the latest technology; the company has large financial leverage, which has enabled it to acquire the latest technologies. In addition, competing with other giants like Coca-Cola and Pepsi, Keurig had to ensure that they produce high-quality products which are attractive to the consumers hence requiring the adoption of the latest technology.
Expenditure
Dr Pepper Snapple Company is tight with its finances and uses most of their finance as savings. However, Keurig Green Mountain Inc. is a spendthrift whose finances are mostly used in acquiring other smaller companies. They have acquired many small companies in the beverage industry in deals that have cost them billions (Keurig DrPepper, 2022b). After the merger, the new company is saving its profits; however, since Keurig is the bigger player in the merger, it is expected to spend the earnings on enlarging the company or acquiring other smaller companies.
References
Hirsch, L. (2018). K-Cup maker Keurig bets big on beverages, buying Dr Pepper Snapple. CNBC.
Keurig DrPepper. (2018). Keurig DrPepper: Annual report. Keurig DrPepper.
Keurig DrPepper. (2022a). Keurig Dr Pepper reports full year 2021 results and successful delivery of three-year merger commitments. Keurig Dr Pepper.
Keurig DrPepper. (2022b). Keurig DrPepper: 2021 Annual Report. Keurig DrPepper.
McGrath, M. (2018). Coffee meets soda: Keurig and Dr Pepper Snapple merge to create beverage behemoth. Forbes.