Dr Pepper's Lonely Hearts Club Stock

Shares of Dr Pepper Snapple Group, the soda and beverage spinoff of Cadbury Schweppes, began trading today on the New York Stock Exchange, and, so far, they are lacking in fizz.

At midday, the stock, with the ticker symbol of DPS, is down 4 cents, at $25.01

The spinoff came after activist investor Nelson Peltz argued that Cadbury's two businesses, candy and beverages, would operate better as separate companies. Dr Pepper, based in Plano, Texas, owns a number of well-known beverages, including Snapple, 7Up, Mott's, A&W, Sunkist Soda, Hawaiian Punch, Canada Dry, Schweppes, RC Cola, and Yoo-hoo. It has a market value of more than $6 billion.

But Dr Pepper's public debut comes at time when soft drinks are facing many challenges.

The company does nearly all of its business in the United States, where consumer spending is weakening. Even its two much larger rivals are struggling with slower growth at home: PepsiCo recently reported that beverage sales in North America were down 2 percent in the first quarter, while Coca-Cola said that U.S. volume sales were flat for the quarter.

Over the last four years, Dr Pepper had been steadily gaining share against the two soda giants and now has 15 percent of the U.S. soft drink market. But recently its hold has been slipping.

Punishing commodity price increases are mostly to blame. Dr. Pepper has struggled to maintain margins as oil trades over $120 a barrel and corn syrup prices have gone up so sharply that beverage companies are considering switching to sugar. Dr Pepper has had to raise prices at twice the rate of Coke and Pepsi to cover its costs, and is likely to have to continue the price increases in 2008.

And while Dr Pepper is about to introduce an energy drink called Venom, what's noticeably absent from its portfolio is energy drinks and sports drinks. As consumers continue to turn away from soda, that's where the industry's growth is concentrated.

Dr Pepper shares may also suffer from some short-term turbulence associated with the spinoff from Cadbury Schweppes.

Under the split, Cadbury Schweppes shareholders get 64 shares of the candy business, Cadbury PLC, and 12 Dr Pepper shares for every 100 of their shares.

European investors who owned Cadbury Schweppes whose primary listing was on the London exchange may not be interested in owning an American stock and could dump their shares back into the market.

Liz Gunnison