Impact of Dr Pepper Value Chain

Research by Ema Montfajon, Filippo Trifone, Greta Zocchi, Jula Gekle and Maya Ben Abdelkader | Bachelor Students from ESCP Business School | Edited by Komoneed

Dr Pepper Value Chain

This part aims to analyse the different steps of Dr Pepper’s value chain in Germany, as the main user of Dr Pepper products in the DACH market.

1. Infrastructure: Keurig and Dr Pepper, as most large companies, is represented by a board elected by shareholders. They take company decisions; however, shareholders’ opinions are valued. Dr Pepper is distributed in Germany through a network of distributors and wholesalers. It has a strong supply chain management system in place to ensure timely delivery of products to its customers. The company has in-house manufacturing plants to ensure control and further, sells products via licensing and partnership agreements
2. HR: Dr Pepper employs a team of dedicated and experienced professionals in Germany to manage its operations. There is a strict recruitment process to ensure that it hires the best talent in the industry. The company provides its employees with a competitive salary package and benefits to attract and retain the best talent. They have regular training sessions and workshops to help employees stay up to date with the latest industry trends and best practices. The company also follows a strict code of conduct and ethics to ensure that all employees adhere to the highest standards of professionalism and integrity
3. Technology Development: The company’s manufacturing facility in Germany is equipped with state-of-the-art technology and equipment to ensure high-quality production. The facility adheres to strict quality control standards and follows all regulations and guidelines set by the German government
4. Procurement: The company sources raw materials and ingredients from local and international suppliers and has established a manufacturing facility in Germany to produce its products. Dr Pepper sources its ingredients, such as high-fructose corn syrup, caramel colour, phosphoric acid, natural and artificial flavours, and caffeine, from suppliers
5. Logistics -Outbound and Inbound): The company manages the transportation of its products from its production facilities to retail outlets. Dr Pepper in Germany has a strong distribution network that consists of third-party logistics providers and wholesalers. The company has partnered with several logistics providers that help it with the delivery of products to different retail channels. The company uses various modes of transportation, including road, rail, and sea to transport its products from its manufacturing facility to different retail channels. Dr Pepper also uses temperature-controlled transportation to ensure that its products reach customers in the best possible condition. In addition, the company has established a presence in the food service industry by partnering with several restaurants, cafes, and fast food chains. While bottles and cans are currently made up from plastics and aluminium, the company has plans to package using paper bottles
6. Operations: The ingredients are blended and packaged at one of Dr Pepper’s production facilities. The company’s operations in Germany are focused on the production, distribution, and marketing of its products in the local market. Dr Pepper has a manufacturing facility in Germany that produces its products for the local market. Dr Pepper does not operate on a franchise model in Germany. Instead, the company licenses its brand to local bottlers and distributors. These bottlers and distributors are responsible for the production, distribution, and marketing of Dr Pepper products in their respective regions
7. Marketing and Sales: Dr Pepper invests in advertising and promotion to build brand awareness and drive consumer demand. The company also manages its distribution network to ensure that its products are widely available in stores and vending machines. Dr Pepper in Germany promotes its products through various marketing channels, including social media, print, and television advertisements. The company also sponsors several events and activities to increase brand visibility and awareness
8. Customer Service: Dr Pepper in Germany offers several customer service channels, including a customer service hotline, email support, and social media. Customers can contact the company’s customer service team via phone or email to inquire about product availability, place orders, or report any issues

Each stage in the value chain contributes to the creation of value for Dr Pepper, and the company strives to optimize its operations in each stage to maximize efficiency and profitability. However, as with many large companies, there are many environmental issues.

While all large companies maintain a green image online and to consumers, in our opinion the environmental issues outweigh the environmental initiatives. To examine this further the next part explores both environmental issues and initiatives.

Environmental Issues

Dr Pepper, like many other beverage companies, faces several environmental concerns due to its operations and the production of its products. Some of these include:

1. Packaging Waste: The production and disposal of Dr Pepper’s packaging materials, such as aluminium cans and plastic bottles, can contribute to waste and litter in the environment. In 2021, Keurig Dr Pepper produced 124,859 tons of waste, indicating a 9.3% rise from the previous year. Keurig Dr Pepper generated a total of 243,000 units of plastic packaging in 2021, however, the majority in the USA
2. Recycling: While the company portrays a good image online, there are few indicators there are still problems. In 2023, there was a $10m lawsuit against Keurig Dr Pepper for falsely conveying the idea that coffee pods were widely recyclable to consumers
3. Carbon Emissions: The production and transportation of Dr Pepper’s products result in greenhouse gas emissions, which contribute to climate change. In 2022, Dr Pepper in Switzerland led to 1.1 metric tons of CO₂ emissions, a low value in comparison to countries outside of the DACH market
4. Water Use: The production of Dr Pepper requires water, and in some regions, the extraction of water for industrial purposes can put stress on local water resources. In 2021, Keurig Dr Pepper consumed a total of 7.46m cubic meters of water, which represents an increase of almost 1% from the previous year. Municipal sources provided 79% of the total water withdrawal, while groundwater sources provided the remaining 21%
5. Agriculture Impacts: The production of the ingredients used in Dr Pepper, such as sugar and corn, can result in land-use changes, deforestation, and the use of pesticides and fertilizers, which can impact the environment and wildlife
6. Energy Use: The production and transportation of Dr Pepper’s products consume energy, which can result in greenhouse gas emissions and contribute to climate change

These environmental concerns highlight the need for Dr Pepper and other beverage companies to take steps to minimize their impact on the environment and promote sustainability in their operations. The green trend of the recent years, highlighting the importance of eco-friendliness, has increased pressure on large corporations.

Hence, many of the large multinational corporations have realized CSR importance and have begun incorporating that online to demonstrate their effort to consumers.

Environmental Initiatives

Keurig Dr Pepper has set a goal to reduce its carbon emissions by 50% by 2030 and has implemented programs and initiatives to help achieve this target.

As these are implemented companywide this section does not only consider the DACH market. Dr Pepper, as a part of Keurig Dr Pepper, has several environmental policies and initiatives in place to reduce its impact on the environment and promote sustainability. Some of these include:

1. Energy Efficiency: The company has implemented several energy-saving measures, such as installing energy-efficient equipment and lighting, to reduce its energy consumption. Throughout 2021, Keurig Dr Pepper sourced 61% of its total electricity from renewable energy sources
2. Recycling: Dr Pepper encourages the recycling of its packaging materials, such as aluminium cans and plastic bottles, through partnerships with recycling organizations and by providing information to consumers on the benefits of recycling. In 2022 Keurig Dr Pepper and PAPACKS, a sustainable packaging manufacturer from Germany, have signed a partnership to develop compostable and recyclable bottles. It is progressing towards its targets of incorporating 30% post-consumer recycled -PCR- material in its packaging range and making 100% of its packaging compostable or recyclable by 2025. By utilizing recycled plastic in its beverage bottles, the company has effectively eliminated the use of roughly 57M pounds of virgin plastic in 2021. This initiative resulted in an 11% increase in the use of PCR content across the company’s packaging portfolio from the previous year’s 2%. Furthermore, 92% of the company’s packaging is now either recyclable or compostable
3. Water Conservation: The company is committed to reducing its water usage and promoting sustainable water management practices in its operations. In 2022, Keurig Dr Pepper unveiled their goal of achieving a net positive water impact by 2050. The company has entered a partnership with the Water Resilience Coalition, which is a group affiliated with the UN Global Compact CEO Water Mandate. The coalition is focused on tackling global water stress through collaborative action
4. Sustainable Agriculture: Dr Pepper works with its suppliers to promote sustainable agriculture practices, such as reducing pesticide use and conserving water, to help protect the environment and support the livelihoods of farmers. The company launched initiatives to promote regenerative agriculture and conservation on 250,000 acres of land by 2030. Keurig Dr Pepper demonstrated responsible sourcing practices by ethically sourcing all its coffee and cocoa. The company also attained its 2017 objective of responsibly sourcing its brewers in 2021. Furthermore, Keurig Dr Pepper established the foundation for expanding sustainable sourcing programs to other agricultural ingredients and manufacturing supply chains, including apples and corn

These policies, partnerships, and initiatives demonstrate Dr Pepper’s commitment to sustainability and its efforts to reduce its environmental impact. However, many promises and goals are worded rather vaguely and due to companies wanting to seem ‘green’, it raises the question of how serious the companies are to contribute to a sustainable future.

Trying to look green and really taking initiative are two different things and in our opinion, the larger and more powerful a company is the more they care about their image and profit.

The above doesn’t mean that the company is really living up to its potential to contribute to the fight against climate change.

Sources Link

Picture

• Brandon Richardson on Pexels