Keurig Dr Pepper (KDP) welcomed incoming CEO Tim Cofer with positive sales growth despite a slight dip in net income during its Q1 earnings call on Thursday morning.
Outgoing KDP CEO Bob Gamgort introduced Cofer, the company’s current COO, as his replacement at the top of the call, before the new chief executive revealed Black Rifle Coffee as its newest single-serve coffee partner.
Net sales for the quarter increased to $3.5 billion, 3.4% gain over $3.4 billion in Q1 2023. Net income decreased 2.8% year-over-year to $454 million. KDP reported adjusted operating margin was 23.8% versus 20.8% in the same period last year.
“Momentum in our U.S. Refreshment Beverages and International segments remain healthy and U.S. Coffee results showed meaningful sequential recovery,” Gamgort said before he turned the call over to Cofer. “The strong start to the year enhances our visibility to an unchanged, on-algorithm 2024 growth outlook.”
KDP’s leadership transition plan has been through some changes in the last two years. Initially announced in April 2022, former CFO Ozan Dokmecioglu took over the chief executive role over the summer but later resigned over “company conduct violations” in November 2022. Gamgort stepped back into the role and announced his successor in September 2023 when Cofer was brought on as COO and incoming CEO.
Leading the earnings call, Cofer pointed to a five pillar strategic framework that he has laid out as his roadmap for sustainable growth moving forward. The plan includes broad categories that focus on brand-building, portfolio expansion, strengthening its distribution network, cost optimization and investment.
KDP announced it had returned about $1.1 billion in value to investors in the share buyback equating to about 38 million shares marking the largest quarterly repurchase in company history.
Leadership noted that with a focus on productivity the company expanded its gross margin by 350 basis points in Q1 as gross profit dollars grew about 10%. KDP U.S. Refreshment Beverages segment sales rose 4.3% while International was up 11.8% year-over-year. Its U.S. Coffee segment declined -2.1%.
Cofer was confident in the recovery of KDP’s coffee segment which “strengthened considerably relative to the fourth quarter and expressed only a “modest” decline comparatively in the quarter, notably driven by a flat volume mix, he said.
The Keurig brand is looking ahead towards its new K-Brew+Chill machine that it will be rolling out in the fall. The new appliance leans into the increase in consumer demand for cold coffee options in the at-home occasion. It will be beta-testing the product throughout the year but the company expects it to “redefine how consumers brew coffee for decades,” Gamgort said at the top of the call.
Adding to its coffee business, the beverage company announced that Black Rifle Coffee had signed on as a single-serve coffee partner adding to KDP’s existing portfolio of partners like Brooklyn Roasting Company and Kahawa 1893, among others.
The company also highlighted the strengthening of its K-cup distribution partnership with Italian coffee maker Lavazza and La Colombe’s ready-to-drink offerings. KDP had previously hinted it would be launching a La Colombe K-cup in 2024 as well.
Addressing the elevated green coffee prices in the market, KDP leadership said that did adjust pricing in the back-half of 2023 to maintain its “competitive positioning” as the biggest single-serve coffee company in the world.In terms of the company’s minority stake and distribution of Nutrabolt’s C4, KDP has seen sales up 65% since it locked in its partnership with the energy brand. KDP continues to see “growth potential” in its alignment with C4 as the energy drink prepares to announce new innovation in sizing and packaging later in the year.