No bad stock

Keurig Dr Pepper Inc.
CEO : Mr. Robert J. Gamgort

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2023 Q2	6.6% YoY	34.4%	140.0%	2023-07-27

Robert Gamgort says,

Strong Q2 Performance and Outlook

• Consolidated Q2 results showed strong revenue momentum and accelerating operating income and EPS growth.
• Net sales advanced more than 6% supported by net price realization, modest category elasticities, and good share performance.
• Gross margins expanded for the first time since Q3 2021.
• 2023 net sales growth outlook raised to 5% to 6%.
• EPS outlook remains unchanged but represents greater than originally anticipated underlying growth.

U.S. Refreshment Beverages

• Outstanding double-digit revenue growth and strong operating margin expansion in Q2.
• Market share gains in CSDs, sparkling water, coconut water, and juice portfolios.
• Focus on driving growth in core brands through marketing and brand renovation.
• Partnerships with Polar and La Colombe contributing to share gains and growth potential.
• Driving growth through innovation, filling portfolio white spaces, and enhancing omnichannel selling and distribution.

U.S. Coffee

• Expectation of at-home coffee category momentum recovery in the back half.
• Adding approximately two million new households to Keurig’s ecosystem in 2023.
• Segment operating margins expected to improve in the back half.
• Pricing catch-up to inflation and exit of low-margin private-label contracts impacting results.
• Growth strategy includes expanding presence in cold coffee, partnering with La Colombe, and driving incremental household penetration.

International Segment

• Strong performance in Canada with volume momentum in non-alcoholic and low alcohol beverages.
• Canadian coffee business gaining market share.
• Mexican DSD network strengthening and partnership with Red Bull rolling out.
• Pen UCL and CSD brands performing well.

Overall Business Development

• Continued focus on long-term investments in innovation, partnerships, and capabilities.
• Deploying cash to create value for shareholders.
• Margin recovery expected to become more visible in the back half.
• Positive category trends and market share momentum driving confidence in future growth.

Robert Gamgort says,

Impact of Mobility Changes and Supply Chain Recovery

• The decline in at-home coffee category and profitability was primarily due to mobility changes post-COVID.
• The negative impact of mobility changes is expected to be largely played out by the end of the third quarter.
• Supply chain recovery after COVID also contributed to the challenges faced by the coffee business.
• Issues such as a service-at-all-cost mindset and lack of focus on productivity added to the challenges.
• Inflation and the lag in pricing realization further impacted the coffee business.

Rebound in Category and Pricing Recovery

• The category is rebounding, driven by normalized mobility and changes in coffee consumption at home.
• Pricing, which was lagged, is now flowing through the Profit and Loss (P&L) statement.
• Inflation is moderating, which is a positive factor going forward.
• Single-serve coffee has gained share of all coffee forms during this period.

Shipments and Category Consumption

• The focus is on category growth, with shipments aiming to approximate category consumption over time.
• The company has an approximate 80% share of all Pods that go through the system.
• The mix of shipments can change over time, but the emphasis remains on category growth.

Short-term Factors Affecting Shipments

• Shipments may not fully align with consumption due to factors such as supply chain disruptions and the exit of low-margin private-label contracts.
• Pricing adjustments on owned and licensed products have been made to prioritize margin recovery in a recovering category.
• This temporary separation between consumption and shipments is not expected to persist in the long term.

Q & A sessions,

Coffee Category Trends

• The coffee category has shown long-term growth, with mid-single-digit CAGR for both pods and brewers.
• The category is driven by the shift from brewing by the pot to brewing by the cup, a trend led by Keurig.
• Keurig participates in 80% of the transactions in this growing category.

Visibility and Predictions

• Consumer mobility has been challenging to predict, but this issue is largely behind Keurig.
• Normalization in category growth and consumer behavior is expected in the back half of the year.
• Keurig has good visibility to margin improvement and expects a slow and gradual recovery in the category.

Refreshment Beverages

• Keurig has been gaining share in the growing refreshment beverages category through marketing, innovation, and retail execution.
• Pricing and productivity have caught up with inflation, and consumer resilience has supported the category.
• There are some greater elasticities in certain segments of the category that Keurig is monitoring and adjusting to.

Shipment and Consumption Trends

• Keurig expects a slow and gradual recovery in the total at-home coffee category and continued single-serve share growth.
• Factors impacting shipments include recovery timing, license pricing, private-label contracts, and intentional strategies to rebuild margin.
• Margins are expected to improve in the second half due to pricing, inflation, productivity, and mix.

Pricing Strategy and Ecosystem Management

• Keurig focuses on managing its own brands separately from partner brands and private-label brands.
• The company sees opportunities for more pricing within its brands to drive category growth.
• Keurig aims to improve margins in a growing category and is not overly concerned about share differences.
• No destocking of pods is expected at retail.