Keurig Dr Pepper (KDP) today posted a 1.7% rise in net sales to $3.9 billion in Q4, driven by segment growth in U.S. refreshment beverages and international markets that was offset by a continued decline in U.S. coffee sales. Meanwhile, the company’s FY 2023 report reflected a year of rising prices and falling volumes.
Here’s the overview:
- On a constant currency basis, Q4 net sales advanced 1.1%, driven by net price realization of 4.8% and partly offset by lower volume/mix of 3.7%.
- Net sales for FY 2023 increased 5.4% to $14.8 billion.
- On a constant currency basis, FY 2023 net sales grew 4.9%, driven by net price realization of 7% partially offset by lower volume/mix of 2.1%.
“2023 was a year of significant progress for KDP. Broad-based market share gains across our portfolio and entries into attractive white spaces supported our revenue momentum. Gross margin expansion resumed as the relationship between inflation, pricing and our redoubled productivity efforts improved throughout the year,” said chairman and CEO Bob Gamgort in a prepared statement.
Quarterly net sales for U.S. refreshment beverages were up 6.8% to $2.2 billion, driven by net price realization of 7.5% and partly offset by a modest 0.7% decline in volume/mix. The performance reflected “manageable” elasticities, continued market share gains and the contribution from KDP’s sales and distribution partnership with Nutrabolt for C4 Energy.
Retail dollar consumption was up 3.9% and KDP grew market share in categories representing roughly 85% of its cold beverage retail sales base.
According to the company, brands like Dr Pepper, Evian and Hawaiian Punch lead the pack in terms of dollar sales growth, as did independent brands with which KDP is aligned for distribution partnerships such as Vita Coco, Polar, and C4. In the near future, KDP expects to start seeing benefits from its latest long-term partnership deal with Grupo PiSA, distributing Electrolit.
During today’s earnings call with investors, Gamgort said establishing relationships with partner brands creates deals that are “win-win” in the long term.
“Our longest partner is Vita Coco and the fact that they continue to grow has created a great sense of attraction for other brands who are outside of the system trying to get in,” he said. “We think the hallmark is that we’re able to leverage the strength of the business improvement that we can offer partners to construct deals that are highly attractive to us and very capital efficient.”
Meanwhile, the company’s U.S. dry coffee business limited overall quarterly growth, with net sales dropping 9.9% to $1.2 billion and K-Cup pod revenue falling 6.9% as shipments declined 2.7%. Gamgort told investors KDP will work to rebuild the coffee segment with “high-quality brand and ecosystem-building activities” to drive incremental household penetration while also “emphasizing affordability through revenue growth management initiatives” like engineering brewers to hit important entry price points.
The company is slated to preview a pipeline of “disruptive innovations” in Keurig Brewers at the Inspired Home Show next month. Additionally, KDP will continue focusing on its “super-premium” tier of pods, which grew in Q4 with the introduction of La Colombe-licensed pods.
“With more than 50 million coffee drinking households in the U.S. yet to convert to single serve, there is a significant runway to steadily grow penetration,” Gamgort told investors.
Elsewhere, International net sales for KDP grew 11.5% in Q4 to $495 million, led by strong trends across its cold beverages portfolio including Peñafiel and Clamato in Latin America and Canada Dry and Dr. Pepper CSDs in Canada.
Looking ahead to FY 2024, the company expects constant currency net sales growth in a mid-single-digit range and adjusted diluted EPS growth in a high-single-digit range.