Keurig Dr Pepper (KDP) raised its full year net sales outlook from 5% to 6% growth following a strong Q2 performance in its quarterly earnings report this morning.
Net sales in Q2 grew 6.6% to $3.79 billion and year-to-date sales were up 7.7% to $7.14 billion, with U.S. RTD beverages helping to fuel the performance. Net sales of ready-to-drink products were up 11.8% and the company made market share gains across multiple categories, including CSDs, seltzer, coconut water, energy drinks, apple juice and fruit drinks.
According to the company, brands like Dr Pepper, Squirt, Evian, Mott’s and Hawaiian Punch lead the pack in terms of sales growth, as did independent brands with which KDP is aligned for distribution partnerships like Polar, C4 and Vita Coco.
“Our second quarter results demonstrated the strength of KDP’s brand portfolio and our high-quality retail execution,” said CEO Bob Gamgort in a statement. “We saw continued momentum in the U.S. Refreshment Beverages and International segments, as well as encouraging intraquarter developments in U.S. Coffee, where we expect a sequential recovery in revenue and a meaningful inflection in margins in the back half.”
In its Keurig business, K-Cup Pods fell -2.3% in the quarter while total at-home coffee trends were “impacted by greater consumer mobility versus the prior year,” as the cultural impacts of the pandemic subside and shoppers make a return to on-premise buying habits.
Speaking to investors and analysts during an earnings call this morning, Gamgort highlighted that, for the first time since Q3 2021, KDP reported gross margins expansions as part of an “improving balance between pricing, inflation and productivity,” while gross profit increases help to support additional marketing and offset cost pressures in transportation, warehousing and labor.
Gamgort said the Dr Pepper brand benefited in the quarter from sales of it’s Strawberries and Cream flavor, as well as Dr Pepper Zero Sugar, while the company’s partnership with C4 is “proceeding well” as the energy drink brand transitions into KDP’s distribution network.
“Though it is still early days in our distribution rollout we are driving gains across multiple metrics and remain confident in the growth potential of C4,” he said. “In KDP-distributed geographies, total points of distribution increased nearly 60% versus prior year and weighted weeks on display across large format food outlets are up nearly 50% relative to the beginning of 2023.”
Gamgort pointed to the early performance of the C4 partnership as a positive sign for its freshly signed partnership with coffee maker La Colombe.
“The partnership – which includes an equity investment, a sales and distribution agreement for RTD Coffee and a K-Cup pod licensing agreement – is a compelling example of our ability to add value to a single partner across both hot and cold beverages, which KDP is uniquely positioned to deliver,” he said. “Our collaboration with La Colombe will encompass several exciting strategic avenues. We will leverage our sales and distribution capabilities to scale La Colombe across major retail classes of trade. Along with the Peet’s brand, we’re creating a ready-to-drink coffee platform, which will enable us to better serve the needs of our consumers and retail customers in this important category.”