KDP - Earnings call transcript Q3 2018

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Operator

Good evening ladies and gentlemen and thank you for standing by. Welcome to Keurig Dr Pepper’s Earning Call for the Third Quarter Ended September 30, 2018. This conference call is being recorded. And there’ll be a question-and-answer session at the end of the call. I would now like to introduce your host for today’s conference, Keurig Dr Pepper Chief Corporate Affairs, Ms. Sceppaguercio. Maria Ms. ahead. go please Sceppaguercio,

Maria Sceppaguercio

website. afternoon, you. both previously Hello for slightly joining today historically forma of you. thanks start for pro press the adjusted third which an everyone first earnings X-K are and quarter available This for KDP’s convenient this and is for issued call. on our time release of we’ve us our XXXX, more Thank results, we filed I later our quarterly hope containing

you quarter of for made As past KDP with across one this a busy know, was a progress lot business.

today our Ozan outlook CFO, CEO, Here to with and are Gamgort, quarter Bob of Dokmecioglu. our me the KDP’s year discuss results our the and for

a forma provide adjusted performance moment on the Before of upon discussion basis context to I the turning over take to some pro call much be based. financial Bob, today of which will our to would like

two start the comparisons adjustments GAAP impacts know, reported financials. you with into we prepared any to date differences helpful, include These to our costs required that pro transaction if normalizing it expenses, on account. forma Due companies. merger-related takes As basis the December XX, and one-time unique resetting these results make and consummated were the merger year-over-year XXXX, adjustments between eliminating and as accounting

performance refinancing with to operating business and accounted basis provides merger, expenses, such forma then these into for typical additional trends. that among adjusted related impacts, the we insight our comparability Company for, believes restructuring not the pro With items as differences this others. investors pro and affecting adjusted forma mark-to-market The the costs

are GAAP will comparison our are not that appropriate is for and which in and we items of believe XX-Quarter, included meaningful of is the While it in filed the of in tables exclusion items be our release our Details excluded reconciliation in shortly. discussion in press basis discussed the an detail a performance. accordance these with

these may Reform include of which a are results could evening Litigation to Harbor statements to this undertakes subsequent discussion the of and SEC. it of number forward these differ are the that is the detailed over contained to upon statements uncertainties Act These subject to our Finally, hand A events. risks update Securities materially. the Company's provisions of based filings discussion cause Bob. actual and no I’ll Safe statements XXXX. Private obligation With Company uncertainties risks looking And to in that, the with subject

Bob Gamgort

and thanks Thanks, everyone in. dialing to Maria, for

companies me a share established Before team jumping the we have has was into new the and let organization. take The July. how governance quarter, June, to two after in and my January, one. shortly team We few merger perspective new successfully merger moments structure decision announced the the integration into leadership implemented closed management new on our results cascaded in the the thereafter, soon integration processes the combined of since announced the in transitioned throughout progressed

of us, no or in none to are in ever is organization an We businesses who momentum the take of learning for have legacy work continued disruptions accomplishment importantly, both integrations, customer the granted. and experienced together. acquisition service systems, Most had KDP that strong

on we into momentum. unique has the XXXX in energy look excitement entering opportunity and and with strong and KDP strong represents. financial and that in-market, to a by both continued forward energized are That translated QX, XXXX note We performance closing

the quarter. quarter, some remained strong with highlights to market results, in-market on Turning of starting in Retail IRI. based performance the

market share both portfolio units Dry. CSD strong by driven and registered Pepper gains and Canada in dollars, performance Dr Our of

manufactured growth of combined increase market and by by category portfolio in unit the in of with a driven single-serve pods, share unit coffee In addition, we grew X%, dollar KDP. substantial approximately our quarter,

still held flavored enhanced drinks. We share tea also juice both shelf-stable in and we share and continue juice gain and water, and to

to lower and in productivity, On in along diluted with to costs net XXX year, with in and growth up which the solid rate adjusted year, were benefiting the timing-related strong business overall to income sales logistics. sales, BODYARMOR the XX.X% registered effective mix. distribution compared received X.X% financials. in reflecting points X.X% by a prior Operating marketing expense, $X.XX as advanced inflation unitholders. lower volume of collectively Turning this forma a the we segments, $X.XX growth quarter and Adjusted advanced basis to with basis, and in or sales, pro the increase the input driven offset significantly XX.X% cash from an comparison, a tax primarily now EPS all four net continued

increase start Beverage segments. the with Pepper, represent was reflecting in X%, with A&W Operating bottlers results growth of primarily mix. driven which which Net sales and inflation compensation and performance-based in quarter. of Turning strong Concentrates higher Crush, driven logistics. to offset volume The concentrates to third growth Sunkist. sales Dr for by and Concentrates, by in sales net was sales, well growth pricing the Beverage costs offset the to serves even year-ago, our as solid partially posted and both increased I’ll net by for as in income input by our fountain advanced and customers, in sales, net

growth to and in and price partially behind net with income Beverages. volume in in by was we front-line the workforce. our in X%, by successful innovation impacting and to also the pricing net actions. year's and the reflecting highly shipment ginger and and logistics, strong sales quarter championship. higher Bai the not yet successful approximately Dry, as during BODYARMOR, Increases actions contributing topline a Pepper This called costs of manufacturing Canada result growth Bai in our pricing quarterly on contract month, has offset new Dr a mix course realize, comparison had declined continued football a the decline the Pepper. advertising continued quarter. Dr growth. XX% of impact positive partially due both modestly A&W of of decline CSD support. Fansville season growth in merchandising Also the was driven by input that segment. The the over ale volume pricing inflation Turning campaign fully realization. marketing net double-digit Also the to XUP, offset pricing by started our college momentum we Last and to in up a were lower and covered offset college football significant Packaged began was Packaged Driving modest significantly were of Core very the which by culminating Beverages delivered we net the season, quarter sales growth initiated evolves Operating the storyline BODYARMOR, a investment

includes the Conference will digital of over the Dr Pepper print be TV, Giveaway, social will and to students and games. this support, $XX which to given addition presented advertising has has and which media, Championship in-store be awarded complemented Tuition million In at XXth anniversary the campaign -- year's and with college

the we display [ph] across Canada will the Squirt. For the will specific our launch by holiday Green again supermarkets behind holidays, packaging. have fund country Holiday Bottle of and Dry, familiar Thousands XUP punctuated program

with supported digital accentuated Additionally, Bai, this is will social by be and caps. Full the media. displays program distinctive and year red its

to the with higher and to doubling. than operating net offset reflected foreign of $XX drivers the were the of unfavorable and income X%. the net sales write-off Operating quarter, of of third logistics. sales for and Mott's resin America mix growth These volume translation primarily in were in by Peñafiel than million third Latin comparison America X% the year-ago prepaid primary Latin the Beverages. favorable less Beverages inventory. pricing of more sales Now, growth of reflecting net the currency advancing X%, turning X% more and posted costs by the quarter. Latin both doubled America inflation net impact input performance in and The net a quarter partially than in factors offset income Beverages strong lower to sales

any segment. growth growth lower for as brewers the well continued pod with sales K-Cup translation performance. driven sales to K-Latte offset higher for namely which quarterly net We a investment. quarter, pricing volume moderate our modest X% that reported pricing was impacted brewers, at X.X%, partially the volume the X% basis. The strong of brewer lattes innovation, partially by foreign home net Coffee very to Coffee a fueled Systems pods offset launched turning approximately aforementioned sequential to to enable unfavorable growth coffeehouse on currency pod. make Now, strategic due pricing, and of cappuccinos mix using new and as Modest by the net and Systems significantly growth also consumers by K-Café the by

a drive to features reflection our and penetration Keurig In K-Mini to household brewer program of addition, Each design. platform we by sleek is adoption. updated our of consumer-centric modern designed robust these barriers addressing a system with innovations new launched of the new innovation

market performing is reviews. well very consumer each Importantly, the in strong with

Coffee net will for brewer quarter year James energetic sales running to and due was strong of investment as consumer a strong and reflecting logistics. timing, up ability Operating brand the marketing our highlights behind make to the We income very the ambassador. K-Café and the a input The Love for drive talented a performance, despite productivity its XX% coffeehouse. Systems every second inflation innovation in and and house demand quarter, lower featuring strong Brew costs campaign with Corden campaign, a the our brewer our this

Before important partner Ozan, the brands of bringing like these acquired I Red partnerships I’d over Since part merger, the acquire into owned to to agreed portfolio. our our an we turn talk to how the of and call two CORE strategy. remain about Hydration, closing Big

as Forto with also ready espresso. and relationship to partner for We our iced expanded drink new added a Shots Peet's distribution Coffee

a last evian long-term the brand to entered just across iconic distribute In week, addition, the into U.S. sell, merchandise we and partnership

allied Coffee in the coffee portfolio, Keurig the core Tim have and the Partnerships Fiji added the than brand the more Horton’s, iconic of as at the exited now in new system partner portfolio. Canada We well-regarded the Panera, we of bakery-café and partners. part U.S. and licensed XX and are brand As the BODYARMOR in reset system. Keurig brand owned, Systems brands

both can we in order in actions, a future a you that value. equitably with by benefit creating enable have these As reshaped win-win our to parties focus long-term short portfolio significantly see partnerships ally on

by owned innovating beverage partnerships portfolio Ozan. and renovating to excited We’re combination With and to our other about it hand of over drive growth leading that, brands. through continuing I’ll of brands, a with

Ozan Dokmecioglu

everyone. Bob, and Thanks, evening, good

of to Also partially the contributing strength and Pepper. increased outlook results for innovation the growth X.X%. Let modest X.X%. X.X% was net KDP, of Net year. factors quarter me Canada third start continued driven Continuing positive an and reflecting pro Net our quarter, billion ginger segments. growth remainder mix of Crush currency sales of with Concentrates very the Partially offset on by four $XXX of of was good growth adjusted net Dr X.X% one million, price all $X.XX Beverage across strong for a to X.X% realization Punch, a compared for for business segment. modestly by driven to our which net X.X%. translation Sunkist was these the were of segment Concentrates price X.X% sales billion X.X%, for $X.XX and then sales increased by to the Shipment partially mix unfavorable the in Beverage the higher and our volume lower X.X% growth volume transition was the offset the and volume by volume year, foreign Hawaiian increased higher reflecting Dry, and offsetting forma basis. realization of for of unfavorable to of decline of currency translation previous ale Driving

as X.X% quarter translation billion partially currency which bottlers the X.X%. billion Beverage growth compared prior to and sales fueled $X.XX bottler Concentrates offset case sales. their fountain In in X.X% in for foreign reflect lower from the in mix terms growth primarily quarter customers, to retailers of Net fountain Packaged the of by price was strong increased our growth Beverages realization higher unfavorable year. sales, third of segment sales $X.XX and This approximately reduced by of X.X%, of fueled X% of case volume net to

Latin innovation fueled X.X% category. BODYARMOR, growth serving net to As significant BODYARMOR and due pricing of driving growth by in grew Also positive Dr our to as the America XUP modest and we sales Beverages manufacturing largely the portfolio Canada the $XXX a pricing CSD of volume $XXX unfavorable higher in the of Pepper. had contract the double-digit net lower offset in Core, was initiated realization with led continued growth foreign and This growth was on quarter, X.X%, were the volume lower Net offset decline increased million X.X%. Shipment Increased for compared Bai on with actions year and ginger quarter. strong a Bob mentioned, offset. impact also significant million X.X% the driven currency the our price portfolio the by to translation prior Bai quarter. year. in ale partially and the partially mix by performance in Dry volume during X.X%

in expected. net segment led of Systems the Unfavorable growth which sales also partially billion to X.X% lower X.X%, This $X.XX the volume continued higher Finally, of was our by currency translation moderate to grew Coffee foreign mix of X.X% price performance. realization net significantly, as X.X%, quarter. offset by of impacted

lower a The income income the in of the by for to third and to and reflected sales in logistics. quarter, advanced million offset bringing XXX by costs through basis operating income. performance expense in months XX.X% In operating the XX.X% slightly performance six significant to $XXX inflation strong partially the increased to the in operating year, million to On growth, Turning quarter first prior $XXX the the performance year. marketing pro agreement. it productivity This $XXX strong expense income timing, million our calculated driven months adjusted This through operating interest Interest income interest an points margin negative compared basis, preparation was due the statements. operating a net of meaning January to basis, input these assumptions are improvement growth from XX.X%, interest X.X%. on full related credit a on would pro totaled financial the expense amount is as Clearly, only load, starting totaled million. basis, in and expense reflects six $XXX accordance metric. XXXX. a expense this includes few minutes third quarter a months positive important merger repayments mandatory our assumes of forma under treatment forma U.S. for like debt in a GAAP spend of Xst year-to-date to of required with and forma our On pro the I on quarter.

since the close, Taking approximately expense repaid year. merger Net EPS cash distribution in However, operating with BODYARMOR increased we $XXX year as lower for $X.XX driven in growth together, diluted rate days and first and remains XX% by a gain income share debt, interest pro from to XX resulting diluted original at tax in all factors already due income in adjusted increased we U.S. $XXX combined XX% one. $XXX to received the reform in effective quarter, our our million from share the significantly full-year per million million to unitholders. the compared of these per prior forma diluted to tax $X.XX

will significant previously, in results both $XXX mentioned performance million effective we our management, to strong our working to debt continue. off of got expect This improvement. very Bob capital an of start with profit As quarter a operating area of we repayment, which enabled strong by the and

the our creation finally, framework shared outlook is repayment deleveraging terms debt the And outlook the and the consistent the year. the in time we of at with merger. of quarter fact, In for in value

the range For of $X.XX forma $X.XX to expect price preliminary which share. accounting $X.XX adjusted diluted we pro after continue diluted the of the adjustments full impact to are EPS per per at estimated share, year, in purchase

XXXX, For $X.XX. the EPS first months totaled adjusted of diluted nine

with as the period $XXX savings We XXXX ongoing $XXX totaling as to XXXX business. million continue the expect to synergies expected over merger each year well across in million productivity

the tax of XX% estimated Our XXXX the to is effective for year. XX.X% for rate in range

EPS For to expect approximate our the fourth quarter, XX%. we

time X some back generation of of a drive merger turn will remarks. from with the to rapid I committed remain below three enable cash for two we years With times Bob in flow leverage targeted the to the that, to closing. to call significant addition, ratio In deleveraging concluding

Bob Gamgort

quarter very Thanks, Ozan. company. strong represented to short we combined as third first business a organization time, start a made To of quarter for across delivering strong progress summarize, planning a a integration the the to period KDP. In from structure

now During stage lines finish for the both questions. also open businesses, strong XXXX. and partnerships and and across for the our this our cold hot strengthened time, a to We’ll your we set reshaped

Operator

[Operator Our Lieberman is line from first the Instructions] of Barclays. from Lauren question

Lauren Lieberman

you if you a portfolio. that to bit me of in brand about guys curious could kind see is It there of like was strikes talk there, role latent little distribution. the it playing equity I just bit in evian, maybe little under-representative bit of terms

talk you a right water going brand or So, higher the for about end didn’t was you -- it you, why Thanks. talk that as of some of category? that kind it’s opportunities for after specifically, about answer value-add

Bob Gamgort

trend as growing. total, very in category you and know is on much Water

bottled look segment in both attractive into It very X You demand its can and the the depending X evian premium water, of of it, terms at growth. a and you really does water original is between with power look size different premium show the it of Stillwater somewhere that sub-segments how and on was the of at segment, though water. distribution. met power brand source

previous that water So that actually distribution And was see reversal there's complete DPS they sourced brand in at could with lock legacy at PG the and agreement, they a point the time. largest business time. Keurig were much their and you trends smaller premium when the that brand

that up be base their it that of brand distribution and innovation portfolio this to in back excited where merchandising able will This is in back brand a partner. the So distribution brand to Danone world. is really premium bring to water this to a we flagship confidence they excited stature. needs now is evian. are brand. they're have a full the They the terrific marketing to for very and It in and be to largest invest love be

back our wanted the water fill as was the the prospects a So excited to that growth it once country. we premium perfect for and are brand in where leading a about we of it's it getting It's up portfolio. gap complement to

Lauren Lieberman

And X% through creating sales how Brands you you you went recap partners, avoiding you better if total it Bob changes could profit. a capture only your I are company second reminded if you it the in but or in Allied the there is of might question, yourself position portfolio, a just helpful hits you've instead down put the [progen] of are updating and I be how that room value know saw to in made for more road. for are the everybody form But the

Bob Gamgort

months think, the I Forto now; a acquired Allied are and are BodyArmor on we and we and on a Peet's continued we So few which Neuro. we short Iced exited the shipping only business added those; the Coco, High Core, Espresso Red for combined portfolio; where with change it's into in on we excited just recap have Coffee evian, Brew Fiji then portfolio. Big no are Vita agreements And distribution about and Shots,

of And the a nicely out really time. has so period fairly settled portfolio Allied short in

we net the our minuses on said of with EPS change when As earnings all and those no is out. that, all or pluses there you

XXXX, I big some a but you growth, talk businesses. faster there growing because may headwinds some which with reset out taking onetime to be in about, businesses them you're are think actually And very weren’t about smaller some you much. we'll when CG growing slight replacing think that like

long for, to are because we are has do gap have like in zero term investment an go component volume sure more. looking Allied partnerships And want targeting And situation in to at our So onetime nature. that we that we make And its that's being and to where help that alluding success that which great really it just brands good path We again. generator success. that cases, at that want forward have adjustment, you in versus forward doesn't we the both really our business, once would it. that a proven we’re sense, incremental most And is as they contributed very given any on point, the has starting have all position a it's were is on by to the impact but see to and drive feel really in profitability they we that point, And ownership nature, owning equity value all. that. path its those to going in you in think advantage a on we're company that portfolio, evian make an other creation hit the create. no brands' we have, don’t seen time a you that as have you're the brand time you in then successful assuming which milestones the avoids, And value

the evolution of brand really So portfolio. allied that's the

Operator

next line from our And the is of of Spillane Bank from Bryan America. question

Bryan Spillane

I right? of the the in expense Just $XXX a of one quarters. terms on clarification 'XX, 'XX first one two just guess half the million guess quick year of first for ones me. that's through half of I in second interest four So

Bob Gamgort

Right.

Bryan Spillane

to Bob And very the a of then is reductions ability lot guess have And can margin think people in pricing just second bit think just, the in margins and you question quarter, I come had coffee been expansion -- I you down. in focus have good I price about you little and for systems. pods been the concerned grow a there's on

if through guess, that you coffee us the process systems expansion, could look in as I in walk drivers stand forward? we you and where margin of So

Bob Gamgort

little side. talk during guys that represent for and We you execution in that bit were Let stand while performance side very we the the growth about a it a and about coffee then to first with I'll the on very margin the we quarter. talked talk the we much me that, strategy the put where about And systems happy of now.

by the the category, its IRI take is And of of a we some our category pods in KDP. look channels. We Pod you even consumption see on quarter the in X%. grew good was pods pod what If X%. grew manufacture therefore, for proxy but unmeasured at share this and

the little look a a shipments. take there's Now, you discrepancy at when

we to during up It's you quarter, there year pods, we're bumping that advanced of quarter ago that and But the that’s speaks really were a X% see there timing shipment were robust consumption again. growth for year simple. third was a ago, total comparison were so the quarter the seeing X% the implementing the During really in to plus system. shipments just a where in growth that fact the SAP

business attracted is come now away, know been to system, to largely price from attract Canada. into ago, couple Tim coffee years of a we've and pricing that is address brand number productivity generate evidence very to We've clearly is Horton's one that We two supply the barrier taking the standpoint, that further been the brewer by to robust side which That’s really have offset we the reasons. our entry concessions that's you on logistics. in done down. We've for productivity conversion on As done strategic a been price procurement it consumer of And the able And able pricing. the pricing leading that. of And pod we across level was side system the the and on a and which about business. service. the right entire very talked chain compete want gone have also productivity, we those to on quality we to into and and we also partners the on different based

moving it's the And lot a if on look a to XX it look work of take average and week basis, sure look on a them lot that. is price in cost you make to a covered at yet everything was week it parts significantly is at category, week XX really at expand that $X.XX. pricing. point pod I of still but that basis, delivery so or the was Last you If wanted. I able last think of is reduce And I four But When basis in in price it $X.XX. one then we're proof productivity. fact there that, behind I hard margin,

the said the it's there research is right $X.XX. you really from see. to about you it more going $X.XX it's $X.XX will KDP you on because change from we've that's see to That's our brands on manufactured, manufactured, history, about for that business, And slope. the at to we And the not that going we're exactly $X.XX moderation if we're moderation point, category, a look compare we done. that the have And premium to in pleased $X.XX. that see So based significant that price about if other you

So we about track in the much guys the with and thrilled absolutely talked with you on the months, strategy the quarter. to that over past very six performance

Operator

Judy is from Hong our Goldman Sachs. next And of line question from the

Judy Hong

in these the through leading first like around the players delay. pricing I of just how taking cost a some maybe the seems a obviously. guess were inflation given there’s of margins on in XXXX? the are just delayed I But it under am you’re some pricing know of inflation CSD marketplace, is quarter maybe lot of division. So I side, of how players of wondering fourth bit the the choppiness have much a of packaged DPS I the But beverage input guess there pricing. recoup lot of costs just that to little industry bit question and little that some expecting the input facing, little and And been with a pressure, went a then been bit a

about you think you’re dynamics do the more pricing in taking So that category? as how competitive

Bob Gamgort

time. go of pricing at calendar to in inflationary place fact we And were, need we were in which were point, in were facing and you the quarter we second running allude did putting the to fact release business everyone of if in put is at and KGM the really that now. But for right the that going pressures, separately, point the what industry back clear we that that’s the So results do. because did seeing year, weren’t that especially we that we that DPS the out we we for to

still X.X%. about latest and CSDs at That just side the it’s but look is And a IRI the category margin close take example. gap what’s In as use of up to lags our XX basis, an now catching on what's we’re of up. up really [PB] the weeks, that's that across business. for you us portfolio On happened year-to-date required X.X%. I’ll the price our the marketplace, If in

during And lot so not quarter. of hit if implemented that a being the

QX will roll the to then your really in So into question over hit us XXXX. benefit and

Judy Hong

a at just I marketing then And you think follow-up process or called improvement margin lower also on out KGM the side, so the expenses.

So operating that quarter. marketing? of more was the XX% And fourth the should is increase profit, this we How hit timing lower much in think about the that? how

Bob Gamgort

just quarter. related, spend to and improvement the profit It’s nuances it there’s timing the that we consumer nothing now with smaller signal want getting to it. and you a great looks it’s contributor It holiday some the the to featuring to on great, significant the do the around have we driver happy year to holiday. it around growers; versus right when because Corden, want when response was James of season really air ago, And we’re in not other really advertising was the around in with new one time than

that to the in quarter. So happy invest fourth in we’re

Operator

our Research. question from Edge line And is next Consumer Brett of Cooper from the

Brett Cooper

your as question side, where your you forward you legacy specifically prior or thoughts what in you Thanks. How a wondering get to you business is was for long on lead offer longer if relative A on can on, business. go the DPS. feel cycle you’ve to time take to perspective And just of innovation innovation that do to innovation forward? on innovation the I had DPS you you representative could taken then out. the where relative coffee going you

Bob Gamgort

expand both white sides into new a I within space and opportunities our lot business. the think of of on territory portfolio we to see

innovation renovation. it. is about there’s not the important of terms previous both Allied a think talked partnership opportunity, And the As strategy part the in occasions, brand but we of approach on it, exclusive and to big an it’s we or

take a of It's take dry, I business if introduction the business that great than Dry year. four this in a it, about that look a is behind and at a solid of good basis look up segment, think I That marketing Dry; is at Canada up latest stronger the year-to-date actually Canada then weeks. -- good on Canada lemonade with example this XX%, --

really can on really generate proof how strong top of growth. So, nice that a existing of an marketing good I is business some point think and renovation some

add will I as people the surprising profitable imagine, the all And very is is perspective up the side you balanced to a And that’s to try brand so our all growth one, talked be those to being we CSDs flat XX% outside last to on growth a Canada business. be we a to of approach one ramp most of it like able as to about CSD, growth think topspin in Dry, declining. across

can And gives so us up. ramp encouragement we that that really it

Operator

of Deutsche next from line Powers is our question And the Bank. Stephen from

Stephen Powers

just clarification I of clean couple start to a So up just guess. questions,

get I reiterated. the been guidance, has On EPS the

confirm reaffirming Just want to EBITDA growth. X% to you're also X% the that

I Second a think did the you of on A&P, the related. good job clarifying timing

net been in as has of any ago, pro about you weeks a in of the source Is executive benefits or not on A&P, the think any it is And synergies. year? year think And we're to we growth Plano. profit of couple done as forma. XXXX, a then restructuring in Are the the carrying at DPS investing down, there sizable a team Just management full because obviously pretty longer. I A&P is last

synergy to is So to there understand just 'XX? if benefit want

Bob Gamgort

down We the will one. divide I'll easiest this be will do and not the of us. marketing because on for not a it's profit source one. The it’s at concur year-over-year, marketing,

is we look want Pepper that going expect growing, -- talk the to piece? I have If Keurig talk productivity shy again, brands, talk to certainly we we something how to are do think growing fact, that on them. business which system on targets. invest any we see the ask and think you generate very invest gives Canada In about for us more forward. synergies then about that to evidence why don’t to the you Maria growing, Dry confidence our about the the And the XXXX to we not Dr business have are synergy Ozan, I'll and right we in about marketing if the us vehicles, and got behind impact

Ozan Dokmecioglu

new of and we synergy be to minutes a are for going three literally XXXX executives And bit That's severance, that related that the and ordered and to we the in handful had committed immaterial. it of to that, already with we did was why consequence we XXXX. say, synergies starting readout small fact, In And the over see million for million a XXXX nor to so planned, a we quite XX that quite synergy deliver regards would as we the not are change XXXX neither of our number. number outlook, $XXX during said our basically $XXX I years, the onwards.

Bob Gamgort

actually -- restructuring from not -- And of the about we late want puts And really pretty original 'XX. 'XX you was in that position question? Maria, almost the it's what Stephen, along the no our your by in read, people much on and et impact were. in but timing plans synergies talk pretty target announced, about with to schedule it question was for time other right cetera, that recent year good the us

Maria Sceppaguercio

since that’s year. I be We've talking in EBITDA it's far the easier disclosed gone We for for range. difference know X% Originally, about X% income, as range important folks growth think sales is plus is public because going to between just rates insignificant. in in start the X% at But operating track. EBITDA, you me we a more asked our EBITDA let about net to to the to company, much to the the were other sales. and X% EBIT, we

at income. was about still looking in which metric. we’re million So X% $XXX in to growth important another operating X% already Ozan talked And synergy,

changing. of and guidance that our we guidance all holding we’re elements think not important are I So the of

Stephen Powers

what legacy to down with over continuous and seven guess DPS. big I move from just a follow as a this, was think If more about you years synergies, in I last the ask There have referred been rapid RCI, one as could to we five, culturally six, implement question on just with as programs. think to guys just that you going the Do forward? a how playing that regard improvement. engaged any -- we on and I was role that and you've as live reactions have with What should about how to expect you curious encounter you've that team. to DPS

Bob Gamgort

Clearly, with and then both that different picture after of was cultures. approaches at a different companies' it, prior productivity, the the to before it it's DPS. when names driven. delivery amount public was saw been and a and to private again, productivity behind big very is the look we of you significant If productivity it saw There part merger

back goal. control productivity we it’s sure needed. that all think are into towards make and the great you've an the the that appreciation destiny is fact way are working These you CPG that your can to for same to I brands today in both So, got your where together the that robust in invest organizations that have organization

And seamless the been, terms so has in I that part of fairly would say, cultural fit.

Operator

from of question Kevin Grundy our And next is Jefferies. line

Kevin Grundy

working the a I KGM and on wanted question, and back come start with on and have then to build question Bryan's I business capital.

that or deliver looking can but that to question. X% things getting at X% certainly KGM to at So with the Have at back not you type year Bob, I'll comfortable other announced, that, better dynamic and on relatively you What's to your flattened then we to X% And deal growth working point? the gets to to And pricing least X%, So confidence beyond, was you words, this this follow-up sequentially the the with it out year? XX X% to flat not each level. or pricing the out pertains X% then out come back sound time in to quarter that capital at in just and looking 'XX. was that. expectation next comfortable certainly X% modeling are X% when to as the

Bob Gamgort

And margin I that I that competitive in still It we're about think use -- from puts prices well it planning it right the price system, have to lowering And us as said the wouldn’t approach satisfies that’s -- make the I now. attracts right as prudent before, decisions the from to word the perspective think, I consumers would talking us moderating, because partners. as we more as but to our forces position, of very I take. standpoint. a a productivity to cover into flat

we that client KGP the the before strategy coming I in are about as beginning and when very and of announced much nicely. the of all So talked targets the back deal the company put Maria KGM intact, elements are we year the as place together think in

Kevin Grundy

and So X% offset to volume then you that correct? X% that. lower price still guys with Is can that you’re but confident weighted the more

Bob Gamgort

from play standpoint. different think that We to ability that’s think think But we cover the with way pricing to levers I volume, play around around different we have fine this -- the about. and thing. I we’re

Kevin Grundy

not to for of that There level a achieve on working quick then Keurig follow-up capital the guidance working side. to healthy looking your but able the on And on degree improvement out, leverage you're clearly based Ozan capital. is

is bit and for with Now something that you a that of operations. the closed spent see that you've working quite now the you on? point capital deal is Do at potential upside time this can or comment

Ozan Dokmecioglu

why are And DPS the feel is said, generation that capital out so past larger even in in working far the this legacy. doing we’ve we as very about table, balance successfully the the basically And have KGM. in turned of levels, our sheet. to found terms we legacy good into cash And the working same into we we’ve capital developed applying using it's and healthy

it. we very about So feel good

Kevin Grundy

I’ll I then it more mean Yes, on. explicitly -- pass and

Keurig mistaking, attainable that of Is to the So XX% went that’s sales Pepper legacy the side? side. if negative on I not Dr am on you something

Ozan Dokmecioglu

XX% trajectory you deliver off XX Yes, we minus capital pretty to be already do that minus somewhere working said, will on to XX% that within we we to days. range. the managed to in have close number is as the around, past the And based improvements started

Operator

next is ISI. from And Ottenstein Robert Evercore line question of our from the

Robert Ottenstein

a on could strategy of background give I wondering First Bai, us more what of terms is little color you there. just bit if question, in was

on price of distribution, velocity, bit volume, little in please? going what’s to with What’s a a brand that terms of reductions. of anything on going sense there penetration, taking us You’re give

Bob Gamgort

a transition from to If rapidly you growing small take it's a a but brand. look sized made brand at Bai, good a

basis range in now right a $XXX on million year-to-date XX%. the it’s and growing at So

that reality So is -- is get know, it's news good you the over distribution the gained forever, $X.X see business of XX% long don’t once XX% the a outlets. it of tremendous is to at amount business, grow on that, a the lot on term; you billion that into in upside be as or near large, brands still range; small having that said particularly of we especially

some take continue gaps much the quite of a that to some of a the that numbers, particular, as can think smaller few of around you in there’s you that distribution will on forward. brand, going in as outlets at get, still If I look IRI there growth drive that

really of progresses. It's So it’s well. nice to -- we’re in and revenue, contributor delivering the both terms as brand a how happy and the nice we're meaningfully with a portfolio addition is profit

Robert Ottenstein

And the strategy? pricing what’s

Bob Gamgort

a impacted. that’s some taking for there was talked about of conscious a example, the This not just of it’s just -- you're promotions is It’s really pricing back promotion. strategy There's roll that as pricing. we no timing to is negative quarterly at pricing. say Well, look pods, to timing we’re going on

Robert Ottenstein

any or question then way? cans. hearing, Is that anything through that And affecting second seeing, I'm Grapevine are aluminum or some the been there's you supply for hearing issues you that in cans,

Bob Gamgort

noted across is some we can part industry, it driving the in There in actions of industry. as the of results, has pricing been aluminum the well, that which bumpiness what's nothing in our some where level up and the inflation reached would show supply has

Robert Ottenstein

lead final any sense in out guys going to trying I'm hearing XX-Ounce on Do then there there? Are second you Coca-Cola c-stores. is that also have The there following that? on a or color question, what's And is you increase my on PET, Company

Bob Gamgort

would something talk. us be would not we that that’s to could mean which be for future rumored comment, I pricing that’s appropriate

Operator

And question Azer from Vivien of is our and line Cowen next Company. the from

Gerald Pascarelli

question. Pascarelli much for Vivien is Azer. for This the Thanks taking on Gerald very

percentage to K-Café, question relative from did you how that first growth I the new K-Latte innovation volume systems. Brewers, guess. What do offerings? coffee much X% growth or your with my So The in more the to the delivered core drive has

Bob Gamgort

really look one. really the quarter. to top quarter. I during head. have shifting to in started hit off It's the fourth that just that have going the of It's I don’t my mostly

that’s see in much clearly next so and a big third really to driver will you the mini, the have will fourth And are answer But it's I Café the the our where as call. on on going more and that think quarter. we latte much not be quarter,

Gerald Pascarelli

Dry. Canada fit in Ale, my into that growth performance overall in prepared you. the know as profile to where these remarks. and you the But brand's into a call Ginger strong Ale And to continue I Sparkling Thank Water has deliver performance guess Ginger next do question out strong here the was does I with trends?

Bob Gamgort

numbers of up that’s broader be segment sparkling strategy are and played there way Canada and But under particularly leveraged there forward large. waters small nor both flavor with it's a have that Canada are about again a Dry I that about up been that and fairly a than relatively when Sparkling sells lot east something other of it haven’t enough. it. but driver. business now think country, we has where these on the shows Water, our part, pockets where It’s a we but the well Schweppes think Schweppes; Dry a We in that in really big something not growth portfolio would right we it's regions lot in addition north think you It's go country a talked that to good our the good a

Operator

And have of for line the time from question Modi last we from one Nik RBC.

Nik Modi

The M&A. question on really is

entire is beverage about on because to like acquiring think looking the You obviously to just have just to of more starting consumer. how focus get go-to-markets, But try the you some as curious a made moves different I'm closer distribution brands. companies does become seem across it landscape,

contest So, maybe just you around could that? provide some

Bob Gamgort

to distribution versus acquisitions to clarify, related brand? saying you Just are

Nik Modi

purchases brand purchases actual both, -- or is… Maybe Yes, asset there's right? just there exactly. Go-to-market, versus -- maybe go-to-market

Bob Gamgort

I'll question. the do

is anything fair game think think optimizing I business. as our about we

think about talked our innovation, strategy, best about before, as combination said in as that side, I've of and well a we a of class. is renovation, portfolio partnerships our and making and merchandising distribution our sure M&A. as it’s a As combination broadening We portfolio

but a nature now of place not and certainly distribution what we out have space amount side, market we in are number as also we in list that we're that in our strategic that right think the towards the what you’re think conversations thinking are wouldn’t talking right that things, can and could optimizing the we've got I now now. more relationships about, On optimization significant that I of we what partnerships have short-term distribution we we it more by about well. on the in that maximizing priorities system get right have rule improvement it's hit of think

Nik Modi

algorithm to just there. algorithm, -- about that Allied your you your brands I’m when is partnerships that, of out that existing how in or portfolio? a just you have is partnerships what much think just follow-on that put then part additional curious or And you

Bob Gamgort

knew that what But if a place our continue to all about about the well. guys place, of way portfolio, Allied the that well it us so make is January. we brand portfolio to think look of it a now today we’re the there as the point put we talked such impact do we the would and continue time you it the that’s to number where at where and that forward. we to that partnerships talked Allied all will those, I we land talked was said deliver will we we we as these and back stand very like before complexities change back conversation. to have times what addition business, we're which got We through we forced to have sure partnerships navigate And those a through with think against we brands add I have exactly that what feel exactly happened like about with And would of able merger position announcement we good that outlook, to in it the which in targets the as good to as we how we out before like. right to in targets, to on material going go the a acquisition

Operator

that further for I have no time, closing it questions. I any am to And showing Presenters, at we more remarks. this back time for you turn

Maria Sceppaguercio

getting late. I to us thank joining This is for Maria. it's tonight. want just know everyone I

around. be will We

reach So dialog. is him also free And care, participating the me, to certainly do out so thank you everyone. we for to so. continuing reach Steve feel here, to as if out to and to Take forward Alexander' look anyone well. wants

Operator

for and participation. Ladies your greatly conference this conclude gentlemen, our does you thank We call.

disconnect. now may You

Keurig Dr Pepper (KDP) 7 Nov 182018 Q3 Earnings call transcript