Keurig Dr Pepper (KDP) has raised its full-year sales guidance to low double-digits after reporting encouraging growth across its business divisions in the second quarter.
In a statement this morning, the company cited “balanced growth in all segments” during Q2 thanks to strong sales performances from packaged beverages, concentrates and coffee systems, all of which helped boost quarterly revenue +13.2% to $3.55 billion. Increases in net pricing (+10.4%) and volumes (+3.1%) also helped to drive top line growth.
“Our strong results reflect the flexibility and resilience of our business and the capability of our team to execute with excellence,” said Chairman and CEO Bob Gamgort in a press release. “We successfully recovered from supply chain disruptions in coffee and non-carbonated beverages, implemented additional pricing to offset inflation and continued to accelerate growth across our broad portfolio, leading to another quarter of strong market share performance. We remain confident that our ‘all-weather’ business model will enable us to deliver in the ongoing volatile macro environment.”
Retail dollar consumption for liquid refreshment beverages increased 9.9% and market share grew or held across 92% of the KDP’s cold beverage portfolio, buoyed by categories including CSDs, premium unflavored water (CORE), coconut water (Vita Coco), seltzers (Polar), teas (Snapple), apple juice, vegetable juice and fruit drinks (Hawaiian Punch, Mott’s).
Speaking on the earnings call, Ozan Dokmecioglu, who will succeed Gamgort as CEO effective today, cited CORE Hydration and Snapple as exemplifying the strength of KDP’s non-carbonated portfolio.
Within Packaged Beverages, sales were up 12.8% overall while net price realization climbed +11.0%.
Concentrate sales increased 22.7% (+19.2% net price realization) during the quarter, with volume rising 3.7%. Total shipment volume was up 3.5% year-over-year, driven by increases in Canada Dry and Dr Pepper.
In Coffee Systems, brewer volumes declined year-over-year from the soaring demand (+29% in Q2 2021) seen last year, falling 4.2% during the quarter. However, the company stated that it has stabilized its coffee pod supply chain, indicating that pod volumes (+4.2% in Q1 2022) are positioned to continue growing in the second half of the year, during which new brewer innovations will be introduced. Net pricing for coffee pods increased 5.8%.
Rising transportation, warehousing and labor costs (+17%) contributed to contracting gross margins and operating margins. Adjusted operating income fell to $832 million, or 23.4% as a percent of net sales. Total inflation increased 2% sequentially, rising to 17%.
KDP’s quarterly net sales increased 13.2% to $3.55 billion during Q2; on a constant currency basis, net sales increased 13.5%.
“We have the opportunity to leverage all the progress we’ve made since the merger to further strengthen our brands, enhance our go-to-market capabilities, and build our world class team,” said Dokmecioglu. “Doing this will enable us flawlessly to executive our strategic plan, while standing ready to proactively capitalize on new opportunities that come our way and face whatever macro challenges arise, just as we did in our last chapter.”