KDP - Earnings call transcript Q3 2020

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Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Keurig Dr Pepper’s Earnings Call for the Third Quarter of 2020. This conference call is being recorded and there will be a question-and-answer session at the end of the call. I would now like to introduce Keurig Dr Pepper's Vice President of Investor Relations, Mr. Tyson Seely. Mr. ahead. go please Seely,

Tyson Seely

hello, issued for the our of And this third us. morning, XXXX. we press everyone. you. joining Thanks Earlier quarter Thank release for

into website can need The with Consistent company business affecting performance adjusted an today our discussing the one copy, adjusted you be quarters, in basis you believes trends. will with performance If on Investors that a previous additional our operating provides comparability. our at we section. basis keurigdrpepper.com the items insight get and investors on excluding

included are While impacts the and the an the company’s of affecting forma comparability the be in the discussion the not in included basis which will we is Due items release performance. certain basis later pro appropriate predict GAAP, believe control, inability in do to exclusion reconcile of our our adjusted of and items accordance XX-Q, outside of of press with filed comparisons for timing provides our our meaningful today. guidance. Details to that excluded not the we and reconciliation amount tables

Act based Ozan With events. contained company’s that detailed cause And Joining materially, provisions the hand obligation and Affairs risks with morning and me in the discuss are our these these CFO, KDP over to Chairman XXXX. no Harbor to of I’ll subject statements, to Chief number differ it third of is our upon the to filings uncertainties to Reform A statements actual company Bob. may results finally, These Sceppaguercio. and Private subsequent a which SEC. and our CEO, forward-looking virtually discussion the of risks Officer, statements could that, Safe to Gamgort; discussion and include of our undertakes XXXX uncertainties Maria update results Corporate Bob Securities subject the quarter today are Dokmecioglu; this Litigation are

Bob Gamgort

call the volatile, everyone. continues In I -- on few extremely hope last to crisis. few last good everyone this the given well. the COVID participating been And Tyson. morning, Thanks, be have months

has consumer be up of remain increased opened the has North appear to unpredictable, rise. the mobility months economy likely While coming and to as America rates on infection are the in somewhat,

continues order As discuss and through areas to to and well other KDP in challenged. today, driving categories with by to consumer the offset navigate growth we'll adjusting pandemic behavior, in potential channels that trends brands, are anticipating

you business near We the focus does products, across Instead, and model, a As for over basis pandemic executional capabilities flexibility which trends of not we our production of and daily and windfall months, is said past on both enabled a this channels mobility our consumer is through by back the effort continue organization a to management few specifics the product our mixed as us. our we seven metric our mix, all, in leading continue for driven a we to are Ozan take and a have the business. view of when team thankful indicator they need. done members this our work who reliable the in results Most team. short-term adjust the the and represent today give running to day-to-day to outstanding of will channel planning, be quarter monitor our has reported third to communities to results minutes. our

which CSD number brands, delivered the compete, growth in a growth, over highlights of majority over share gained retail Snapple quarter. revenue category of the majority brand, in the refreshment great diluted in a We deleveraging. increase ready-to-drink summary, nearly point XX% CORE which growth, with XX% of in the growth mentioning, as drinks. in X in of share beverages that you driven tell EPS will they in share juice CSDs, share by XX% of point and outstanding, a tea, X.X income And adjusted with driven I adjusted by X.X gains being worth our operating base, in increase our were in total the brand However, nearly market such the we water X% fastest segments increase premium liquid and point strength growing continued

during strength, at-home by substantial Our elevated continues in to growth we large away-from-home coffee by expect as be Beverage and coffee our an delivered the household to channel partially of and low business, quarter-over-quarter our traffic. impacted expectations shipments Concentrates which total weakness we the rates growth segment increases offices, our in attachment restaurants will in some is which despite saw away-from-home to mid persistently shipments. to their experienced was of XX% both to normalized improved improvement In penetration high single-serve the driven pod offset quarter which negatively more work timing by area the partner In in rate, single-digit return trends quarter, consumption that fourth continue. return

of sales fourth retailers in the holiday speaks advance exceptional the upcoming. brewer is Keurig the in enthusiasm quarter for growth which Finally, to the have in season,

guidance to for remains So intact. this go, our year one with quarter

the which ago. means would what we in two over the at to accomplish high end that communicated merger XXXX, continue we Now exceed of years we we targets long-term meet said or

it's a That focused profitable that the minutes focuses results content We to expanding the well company. our on renovation going week M&A. critical in it we broad household past cold of we to we as brands, during our penetration few our Before stick brands strong and conversation which driven on which brands. how of news But existing beverage in brand earnings to brands are been important share by like point much and marketing upon over the KDP that typically a before will reach has this strategic add and call of very to evolution new all existing portfolio, is several foundation is I turn consumers provides result both new the Growth new consumer long-term as modern attracting innovation growth. expect programming pieces a driver out put we've ones. of of take on a forward. pandemic, the to that's to supporting experienced of longer-term into the into communicated our This growth context, portfolios, and quarterly hot Ozan, and both increased which our impactful I'd

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again endures and represents another While of down attachment rates a into converting move well Keurig wave households pandemic, may stream long-term the system and during that potentially back annuity the the new into up future. up

the York moves Jersey, California, owns our drive every brands XUP we and with including New clear, to assets million discussed rather broader operations, company-owned stage into Direct to e-commerce call, efficiency. the not jointly control center a Yesterday, we invested for market string also we to overlap across than we last for also years, total brands, competitive is New network. system acquisitions of in follows a provides territories and be This merger, expansion to sales the them building that strategic our recently. taken how where and is improve important XX our context. scale ensure unique has to sell territory platforms, York, distribution and and DSD of sales. has earnings order worth of our we that KDP XX has agreement Sunkist, The We've distribution Companies our announced representing our technology placing systems coffee two but us, announced Dry, objective trucks, we've sales key portion including effectiveness consolidating Delivery key DSD distributor Honickman Canada country merger, route which counties and past with our of reaching our and XX% until over have valuable focused quantified been who we To across with the since people, Midwest. portfolio in on of a haven't A&W become long-term and the that Store news New a independent regardless an Since the KDP On While more consumers. market Yesterday each our and regarding market, into DSD although territory. in in larger

we a For distributor these independent partnered In improve to partner brands across late brand to to in with subscale in to we our in player in portfolio, trucks for platform partner or which our better and one drop moves every of stocks, size reach, long-term our for Rock, of truck Honickman brands order ride and agreed Whether Virginia. ensures allow example, on their operate growth. we market, with Buffalo Alabama, with of in system. our XXXX, our local same the the scale, with we a competitive builds their facilitate acquisition frequency merchandising

our CORE system this improvements opportunity goals. in-market recycled and bottles we we rPET is as we strong forward strong aspirational year Our new of or the culture, to and and sustainability to to that believe remaining. transition meet announced pushing called. and these a we commonly is Earlier week, Snapple modern more value Important XXX% have significant of a the PET begun this performance beverage company have demonstrates continuously

to across continue will portfolio our We rPET going expand forward.

this designed improve to from announced to place with and build and our decision long-term, strength. to our And senior increased this our and further consumers assume with we're our into what customers. consistent learning we years market team the merger talent also KDP levels of is goal responsibility. to worked week leadership our made benefit decision-making with during well operating has a earlier the closer to to leadership changes on X.X pandemic, the so our team for have roles to broader Finally, fortunate speed the of

over hand on now for more quarter. the it me Ozan Let details to

Ozan Dokmecioglu

our our on performance Thanks, quarter, the significant Bob, will review for release third briefly I which adjusted everyone. press discusses morning, detail. Continuing and in good basis, an

The was for one third another us. quarter good

the innovation, four believe inflation strong costs revenue expenses consisted constant improvement and of pre-tax Coffee Bob segments, quarter, continuously well operating in of tax drivers million, result growth expenses, balance our third sequential Beverage frontline safety the reduction were increased with a temporary of deliver our income quarter, led three XX% the On adjusted associated Packaged diluted the and Concentrates. in as in unusual for across operating as well our in higher consistent totaled right in commitments. of operating currency compensation business. while to that and expenses by These productivity, fueled sanitation increased as with the employees, products marketing. areas such partially were in invest overhead effective to financial in increases income, continuing by provides growth Constant items that with merger growth, As to by strikes combined leveraging quarter, and X.X% COVID-XX affecting lower logistics. our lower $XX discussed, expense interest continuing increased we for In adjusted consumer offset technology advantage, Systems, rate. and sustainability Beverages and this by net the in operating recognized EPS discretionary sales a previous incentives and basis, related expenses a incremental as and driven as with XX.X% These demand as quarters, and directly as comparability. synergies, advanced currency including Adjusted competitive

constant were quarter. volume Systems, partially of the of by strong mix Turning Significantly the offsetting X.X% growth of X% net X.X%. sales volume and currency our shipments, driven for higher in of brewer office pods from performance sales growth for McCafé mix drivers continued lower The at-home a coffee performance in growth businesses. drop offset was off the to segment these by In pricing incremental increase consumption. K-Cup and Coffee reflected hospitality net XX% net shipments

constant While brewer the to declined in million. the $XXX quarter margin income includes performance, X.X% due operating operating adjusted to which primarily the slightly segment’s stronger increased mix, currency to

Connected mentioned Brewer. call, we the launch season, Keurig As brewers heading excited our into driven first of platform. about are quarter in the our for second holiday part extremely strong new our on upcoming K-Supreme Demand by remains

marketing we we continued efforts partially K-Supreme existing of growth the Brewer Connected as until us mobility compared operating demand and $XXX line, quarter the to discretionary the to mix and improved. XX.X% this focus pricing unprecedented the in-market adjusted This grew to sales and market our growth businesses. due from our brand moderated new a currency offset XX.X% execution. given and In to primarily We decline balance This income consumer DSD the by behind quarter have decided year the partially offset in Constant to quarter, consumption are both experiencing. strong the to direct of reductions. strong wait spending growth due Packaged Beverages, resulting year non-carbonated channels. XX.X%, to launch increased as convenience the in brewer of XXXX strong at-home our the carbonated our enable gas was in net share slightly growth, both grew the net in decline and reflected X.X%. warehouse constant to second growth In lower But reflecting company-owned sales million, by increased and portfolios volume of performance currency

Long-term Bob and gaining brands earlier, will agreement over As for mentioned the value this drive transaction time. key distribution KDP through sales done are creation structure. our unique is which Honickman, thrilled through access a we we significant asset-light yesterday for announced that being are with with

a KDP small to company-owned the Capital transaction Specifically, assets third-party and area fee we with given with arrangement provides could our to network a we in sequential entered long-term pay straight-up The to distributed dedicated a we from of structured scale have Instead, various distribution currently Honickman brands our third-party to a and presence by that simultaneous the and use we the economics DSD operators. the rights the a this Concentrates, sales experienced a it area meaningful to Prudential There and ways which annual us need maximize already the other can didn't in of and our these deal, rights. any for In quarterly that transaction. were a have provides gain the is selling funded Beverage including access improvement. third-party brands into independent also being existing through we acquisition. and chose control

fountain versus lower to X.X%. This by a quarter mobility the net offset sales three operating X.X% moderating discretionary year the during currency decline in quarter decline income business limited declined increased On of Beverages, Latin offset constant Operating of reflecting currency net Mexico. grew productivity partially to XX% the the lower volume due was growth, flat foreign lower drivers of transaction by sales constant to X.X% And the of price mix improvement versus up. foodservice traffic Specifically, This in lower realization were of the ago and as net quarter constant offset million, as unfavorable was and America continued income sales consumer of directives to strong X.X% double-digit pricing increased net expense. due reflected strong mix due million well decline adjusted shelter-in-place the primarily X.X% ago increased in in partially to finally, a in picked modest to operating sequential income volume The period. basis, X.X% reflecting as impact restaurant two. $XX height X.X% $XXX a expense. partially by modest Constant year quarter, mobility in spending. the higher currency in marketing currency the currency consumer

performed and and our evident current our brands, of the it While focus we we on the highest process, To deliver we needs, ensuring meet has heightened in continued focus has customers' our the the also to review success. and system priority ours a the This simplification. we while power importance be have products ensure efficiency, detailed of forward. environment great drive our are to going made delivery proven demand on brands this of to production continue offerings with will efficient. have Through also of a

of these end and expect to and opportunities. In to both fully the productivity capture synergies, execute through our $XXX terms focus productivity to and million committed delivering deliver on our merger commitments merger current and XXXX. ongoing of merger by synergies, continue synergies we of value We remain our

the cash our moving hand. Now year-to-date In cash we the flow And and at $XXX the cash in approximately over Free again was on flow XXX%. ended with quarter $XXX free flow quarter and payables and million million conversion bank reduced unrestricted rate structured quarter, liquidity. strong debt cash to was million, by million. $XX by we of $XXX

which debt compared to EBITDA times terms at driven over continued by adjusted was continued to X.X refer EBITDA. In Since debt we have of of close, ratio, terms. to our bank third improvement XXXX. full ratio the This outstanding end as leverage in by adjusted times X.X our the quarter management and leverage, ratio, of growth to our merger the in reductions leverage balances, we improved X reduced

CapEx. to now Turning

We continue to to growth investment support necessary efficiency. CapEx with the drive business future and

last Spartanburg and equipment months delayed months reasons. for we production our in As cold our X resulting pod approximately been facility discussed delayed delays, quarter, is three new production facility supplier from has similar about new also beverages Allentown

have delays always Which And contributors brings business of to regarding facilities not XXXX. primarily minor our most our in guidance. expected our We to us these changed. to have expectations these be

to done to-date. confidence balance to to likely manage a of much is through ability in the have what we bumpy be our as the We road continue year, in have

relative adjusted to in to higher guidance for we adjusted innovation, which remains reinvest in our while the the quarter, incremental expectation delivering net reflects this investment of currency return diluted the to likely to while at the to management investment brand environment technology we the quarter Our given It note of the costs outlook continues discretionary order strong in for: and an to continued marketing range growth investments fourth the at improve. may is unchanged end and still of delivery of marketing generate the growth marketing outlook high investment important year, EPS top-line expected constant this for delivery consumer receptivity X% any sustainability; that X%; high range, quarter the maintaining third the sales business, across on to growth, end With into plan XXXX. XX% of at to further year for EPS full fourth XX%. expectation drive in our

ratio to we leverage With the expect targets. the X.X confidence have the turn let now for at your of times range X.X to call operator in times end And also of to We our management back middle the our be now our in me that, deleveraging year. questions. the

Operator

[Operator Instructions].

Your first question from from Goldman comes Sachs. Bonnie Herzog

line open. Your is

Bonnie Herzog

guess much question wanted My anyone bit better obviously have is, down I the to quarter. in would brewer little on which a volumes, your expected this were I drill morning shipment more than

in was brewer there could brewer reflected period? demand QX? step from ago year how are and for to And So wanted to innovation, year. be more already next that in of trying you then you essentially, just innovation now of out this instance, are shifting the in much of I no pull next your terms how Thank you. in plans verify QX brewer volumes XXXX. that any versus some down orders to maybe in much But Bob, during October really you're touch call did seeing for I But forward this. understand, will on that of quarter, a reversed really a you

Bob Gamgort

Bonnie. morning, Good

First shipments. is on brewer

the built But expect up The being we in seeing shipments X really said quarter-to-quarter the but brewer X stays into to in that of year gone ahead be haul. is else is also end a And It's meaning we've that are into in for and kind of about third have As the of Plus over with and today the really over guidance rate they're in of seeing November really the part fourth are million balance move that this for additional clear we a the some a The innovation. to we've of that marketing a on the high featured at typical period the going for so all is the high are the has most metric move the guidance can you're pandemic important What we that, been because our and away back this a take confidence quarter K-Supreme by longer single out. brewers a we measurement of that think holiday that holiday support has the feedback what and we're penetration. the into system that are every interesting penetration. question position that forward that innovation somewhat it introduced important bit would our especially about those great the attachment useful really or have we've year, strong penetration. on you you retailers I going shipments of past and into getting this would and a an in holiday of said the latest most quarter shipments at metric as important the households push is mean the we've believe which to gifting, system year our we little now the and visibility are trying to from on is everything. in that though, third but the thing to pull the for is outlook that of October, Because in holiday gave we're the call, K-Supreme what's years, Keurig that get leaning item especially of talked place retailers a as past forward and have suggest for is shipments what couple on household season. over be that about Keurig holidays. driven where everything million fact year before, in household smoothing long rates of down, time. Keurig X been and the quarter, We shows run an pod or before, households doesn't that reinvest for down marketing quarter-to-quarter. I now estimates quarter, most of The to on our the And which quarter, time. end given instead going in was gave very we've look the added quarter, we're household during of And we the that indication much talked the volume it how something up we're But delivering the is growth long position from see million. we shipments of now in our in here,

new that that so, our quarter. well we goes there's side XXXX because think are total return as the And in side target three the I the would remember, of -- to the start now we've investments year in on a no fourth the have innovation a thing quarter, huge XXXX start to to in being a head as to to fourth a we to make get get committed shareholder implementing good are line-up ensure that back well. and on that as right hot all But just off we do ends cold launched next can our year we're way And XXXX.

to as And we shifting well. are year to XXXX finishing our so, confident strong, XXXX a that's sure we're make our in as good sights

So, thanks for those questions.

Operator

Grundy you from from And come Kevin Jefferies. next you. Thank will question

open. Your line is

Kevin Grundy

drill could we hoping for Beverages, Concentrate was I on a little bit both Beverage highs. margins, down good and remarkably So multi-year Packaged

drivers talk the complete of contributed a a terms end And new kind Street? productivity key levels kind Can drove and bit done of term for appropriate you'll you synergies other you the that at And stood program you something little a and touched this there. longer out the of then the formalize that little term. year-over-year, bit, that for realization, which strong in year. thanks will how talk longer in Maybe the So, the job that's fantastic Of that. time The about synergy by marketing margin quarter, next has but put if of a company on course performance? about understand I

Ozan Dokmecioglu

Kevin. morning, Good

me to that margin. let One First of all, two is margin have. the lines touch we gross

XXX was XXX As margin, the bps expanded we on time same have just gross has bps. OI our call, while in decline there our spoken the small at a margin of

So, results while required growth constant on growth. crisis. in the X.X% spoke, these gross margin, a means the sales and midst the extraordinary for us. was net XX% was EPS as windfall of effort currency strong third it's to It It by the no we deliver quarter

a a was So margin, long of them, small takes. to gross much was that high. the puts decline one picks, due complex yet volume But unfavorable brewers, money, brewers list mix the included is given of the challenge and make don’t bigger clearly, the which and or extraordinarily

have marketing In investments. of also helped in programs and categorize our So base synergies overall we that with came via a that series advertisement to also we very structure. base in a to in order inflation higher overhead substantial and our meet merger cost the substantial in administrative overall some that us increased expenses. experienced SG&A reduce had includes our consumer reduction we we that a overheads and and little general sales, promotion -- the productivity consumer a that number, bit operating increased logistics costs the our include demand Yet, and also delivered manner

also on advertisement in whenever So investment sense, spend environment. and return didn't promotion reduced to the the make we due COVID-XX that

that you things and margin positive us points, helped of and to drive OI is by basis combination our it's quite the expand the substantial. factors So which and XXX see side a on mostly the further

as just of we of million be XXXX, to synergy our affirmed well, So are delivered spoke target merger we on that and productivities, $XXX the we by trajectory. end as exactly on

running we that base and productivity our successfully. executing have have also We been very programs

changed, base our merger not focus quarter synergies strong well. as the has delivery as productivity our benefits as XXXX. we improving quite and continue third programs our productivity seeing And will margins and the into So programs the in previously, and profitability laser spoke we and as are well of

Spartanburg, programs several operational volume have still pleased us Carolina well further we example, in have XXXX, and several reductions. manufacturing pod footprint, that including building, productivity our Packaged in have are in Concentrate including be end will have in all footprint the facilities the nicely. We merger and the in the we that the either we the as Ireland. productivity facility base it been give cost that improvement coffee. programs, South the state-of-the-art K-Cup synergy focusing will been are we overall Beverage mostly our And as on facility, our at that logistics for continued very year, Beverage Allentown Therefore, building in or our we facility plants the contribute of to the of And that have working very been our building will productivity with programs

Bob Gamgort

that to mean, of tell just that that, a lot we are I programming highly run have that. efficient you Kevin, Ozan's here could and on making we going for a sure very focused on we answer from add business, to

your program, guys because time will you terms that have with for clearly crisis, part through to XXXX. at want don't you does focus about about strong delivering of talk KDP and first the far post-XXXX been, it time. conversation has it's take this for be setting in continues. a productivity of the and At world what we will ever it's through beyond XXXX, about all, navigating our In question that; up ourselves over which as if efficiency like I which XXXX, right will look that XXXX, of from

Operator

your Modi next Nik from come And question Capital Markets. RBC will from

is open. line Your

Nik Modi

questions, quick could. I X Just if

we becoming clear certainly seen in right, the environment, they're was into or suspect people it's I decision trend move longer. the and home, mean of And the stuff even not as year, I'm spent it at I home I more least increasing even the kind staying whether but at traditional asking what you a e-commerce that you how this Bob, you've is increasingly guess COVID question, before year spend understand course, you, on the of the this think is Just -- expect of this to XXXX for permanent? first anything, think to will I'm what costs. be -- just question. for guidance on do going at and to be because home That's second -- to the purchase much -- wanted COVID-related and away that starting Ozan, or just maybe brick-and-mortar bringing forward migrate start. from we've kind

your at a very with KDP business you created advantaged portfolio. model have go-to-market So

as trying to characterize on as thinking I forward a move of competitive environment? and that more of so as you're stay-at-home a sense And I'm would -- how just advantage get you we what building

Bob Gamgort

want you off? kick to Ozan, Sure. this

Ozan Dokmecioglu

Yes, Nik, will. thanks the question. morning, Yes. and Good for I

give of been adding with have further all, context a let First me to back. expenses the little we COVID-XX bit that regards

as fact, In been consistent QX, we have X well as quarter quarter in X.

unique the the excluded adjusted results crisis. and impacts from we from temporary are resulting costs So

long-term our are the business. XX% only are So employees, more costs And treatment provide our and and normal adding financial -- of been enhanced employee balance which the for to here. extraordinary back. we than not represented consistent have with temporary measures safety, through including frontline them for incentives families. undertook of protect the that these the cost and benefits they costs health costs defined significant And we their is and longstanding to ongoing extraordinary clearly the of expenses one-time This as not

have never our was quarter X or profit And substantially as you number. loss see trend our again, So run we are noted, in to our run rate in Therefore, to expect than lower rate lower base this, a substantially these lower be nature increased by than well. quarterly expect do X quarter and is QX, and think proving. of statement, QX, we QX our cost Nik, the sustained we I said it's contrary. And in costs as

Bob Gamgort

the our about with that and we at something down mobility and strategy referenced level, portfolio we get home, can people But it people other we And at get on and level. your think time other. it's and go-to-market here, time and spending about that. and then work is Nik, carefully, to can details at recreation look granular a highest at our host to on mean, cetera, activities, thinking point very at-home we're spending about et we whole we’ve more I very regard a how data, of

that drive really not far that a It's to we are the business, optionality business. from at-home at-home like it. XXX% have built We portfolio has

business, on away-from-home negative You impacts you fountain see on our our negative see the foodservice impacts business. the

is get pivot focus our significant the I before. pivot take-home have still the portfolio seeing portfolio, our which is saying And it a like what on keep selling. focus pack to behavior. we on that do us, cold point obvious versus our a before more we while stock shifts, And larger Impulse, effort example. if it ups would And towards packs, selling we answer. have where of sizes, cold we efforts where changing And and down improving you're we shifts coffee, an back. was lot So was what we're it's large Even but for to not planned of our in side consumer on and options purchase out, made on I windfall for outlets, are continuing this sequentially multi-pack, grow. to to is

business. that you're Keurig obviously, our focused over our we've the multi-packs, for from months designed penetration. on that coffee in in system that single about And more rate, worry and of out year bottles mean, focused don't seeing attachment able at-home year of some helping said I side, consumption. all in the outside household growth the been is over was couple to into growth CSD is shift and on drive the when because business And shift businesses heavily to were we're and of it's I we past

in as seeing While time at importantly, people penetration. home, more attachment we're improvement in seeing but acceleration more household rate we're spend an

our as a but for recommitment away-from-home brewers And they're about board, across and may homes X want been in times, lasting upgrades as As upgrading system their people existing short-term, and system drive home of is long-term. seeing also as business, negative, working that we're I rate. a reconfirmation new the of home, has in to The at of people I points the of offer higher growth that a not at it's consumers, perspective. in a offices, or coming think the we're a And which couple into combination a the from benefit. both a they're really well said differently, living and seeing it's

at look you If traffic XX%. in large offices, it's down

the of very has us. if negative size quantified never modest a major trend we've XX% it business. But business our even impact on away-from-home a was on a even So small,

That only through, a impact and really headwind. call February, news. instead then becomes actually tailwind us can it good the of now Here's it, a

Keurig apply focused on, which talked skeptical it look business portfolio, that's commitment can make are you and is e-com week, we're most So the about given the us an that pretty the up that, already in about also really the really beverage and this across we about in in And e-com then you that, point consumers because the which capabilities that visibility off When really of and it's future. our like. think at investment is is we below people to level your risk we've and focus we area and legacy our fourth know are we some conclusion, about e-com well. And right e-com strong and it launched think is e-com well I the capped, were what in at saw quarter skeptical Nobody where and people sets company some that embedded focused. and an for paying last anymore, a going management changes are if made anyway. that I at-home. really XXX% this in would best I new on is, increased overall how we the And XXXX, would

Operator

Peter question JPMorgan. from Grom from next will Our come

open. Your line is

Peter Grom

this the organic an view -- look to you in households February. year-to-date kind mentioned in of result the cycle of at drive pretty step a the of kind be growth. then investment business a acceleration that coffee, disconnect up there's away-from-home of in it's mentioned. to I was going between seems And think penetration when performance lot year, revenue to I being similar that will a last that And community in is you I there been that and a you and in and know just this is quickly

grow So right does term? think should stronger penetration frame the in view where timeframe organic we your what growth then And is in revenue that kind of of households driving can up about the longer the coffee? step business higher how this

Bob Gamgort

Yes.

there's and the year about the I household lot of lot in longer-term penetration always view system debate a the the and business. analysis been best think seen, talked of to quarter-by-quarter. and a view out We is year way increases this has

today that this an made step And fairly we sometimes when doesn't the that some really base you do data have the quantified and to give of in on IRi penetration and recently see we XX look always and you one at expect that's you was, you households you of million households of back why and that But when it And attended month-by-month, steady that increase. installed X million household already off comments you for remember accelerate, investor well. in serve we But perspective. U.S. we nice, to anybody an it, look to Canada. operating we're at conference the

additional for installed them top XX you're profit an X putting base and is even households, the of So generator on significant long-term, an million. growth million which of

as it's we time. any relevant we combined by quickly that XX% speaks the And a today it's potential. we is over information to the it of business just household action, for on right then, we're some that a that type solid beyond XXXX, not out longer business company Keurig of that's it what would is, believe and When put in Investor the moved such even the that now so before XX XXX% down one or of go our system Day the can launched that that At we penetration rate but conversation was up be happens term growing, XX%. years have or north

tells can you proves the or that years was about all it And next have plus their that period, you out that over my as home, see in XX in-home. that, Keurig at system, past instant dividends And they the it's penetration. this then growing of And increased is, point is looking think plays at the up boost you north that latest on so. the growth we you you're the solid the the of an IRi growth. or and just of of see. going step look last at people data what's XX%. spending XX% interest couple by been at-home that So And time And over consumption that X household years, on not months get

to down [XX%]. driven number where you're an on we've compare totally shipment is transparent, look offices, better by away-from-home what the the large large that might So as if at which XXX% then word that is you traffic offices, attendance seeing it of some be primarily you in seeing, business, and numbers been we're

as again, really we soon versus So that. and into a becomes what on total. between drain April, explain it's disconnect start risk, what we in seeing go the there's a as and been that's that limit opportunity and you're at-home to Because simple all to of significant that month but seeing not us, the March hitting you're

Operator

Your next come question will Galbo. from Peter

Your line is open.

Peter Galbo

the into out XXX component that then have the Concentrate, case on into basis Beverage foodservice X U.S. fiscal running in there. some come couple think has Beverage shipment days? about of you then It quick looks it's the been And bottler of just of like, renewed been part, reported, for points cities the understanding -- and in the versus should a taken bottler obviously how clarifying 'XX? running points account questions XXX kind just that case guidance second of Concentrate. cadence kind lockdowns volume volume below of over correcting past your But volume the guys that kind the Just some has to of shipment basis time, volume there's we given maybe major just

Bob Gamgort

your your about really get is to they timing XXX% over of comment disconnect forecast and the statement it's correct. is right time But hard align Peter, that sometimes the Yes. when aligned. and they it,

we've the that align, And to services Concentrates, restaurants at but they in lot improvement that when our we heavily quick-serve so and foodservice, sequential time, that is Beverage nuances because segment we Beverage KDP that. towards energy fact it that's point Concentrates don't fountain predict takeaway spend seen on would difficult talked the we about you concentrated look restaurants. hospitality, business And in try is that we a of and that's over and that on The from of it's some get quarter-to-quarter the just out know, I the biggest restaurants. to businesses

available Dr done out. number is really the take and brand times, restaurants, a quick-serve As of towards good and of job most brand navigating a have they we've in drive-through talked about Pepper

could at hang but our do is a better look as drive-through. -- as that's become resurgence even takeaway we're if better although may the that restaurants more And happen so in may of really we will couple in not months, segment, only and there actually may there, traditional not more confident that, do particular, and next in what actually even people it sit but down challenged forecast, towards and shift in

that thinking partners those we're world. to an they're partnering their the were that's doing help watching so but And and to grow we business, the the to with -- we're and excellent about and them encouraged a it at new way try to business, forward, of see rebound job navigating restaurant going that least sequential in

Operator

Lauren next will from Your come Lieberman. question

Your open. is line

Lauren Lieberman

sticking. narrowing in I talk you've little also But bit about seen. in Packaged has of degree conviction the about that your to you want performance SKU was talked benefited these a which know competitors from to these brands I in of I particular, household and for some of share curious penetration gains, Beverages the about counts. some gains some the script the

While to core in crisis mode, other particularly the in flavors, flavors aren't really players.

does that what doing those situation what and to And be wondering degree ultimately to kind the gains try benefiting innovation on of may the guys? just normalize? you to I you're was when shortages hold beyond can So then think you to

Bob Gamgort

Lauren. morning. Thanks question, for your Good Yes. Sure.

brands channels. And have I marketing, there factors talked we've Pepper moving consumer, we’ve about a one item It we also our questions, pack right that with strength, of and it continue our on over earlier of the Canada for into is into not formats number and the the primarily items that's our of not and that innovation, that and the of that's Bold, we out we've driven in I across Snapple, earlier we'd buy -- understand make our of that by quickly shifted that we've right underperformance apart get example. just if we'd and a were into portfolio, towards Cream are sizes but whole to confidence Dry on new dug those sure well. pulled as to are They're and and board and by the driving think drive are working. playing And can consumer to performance, really host -- a things back that CSD again, else, ahead and I just the Dr across combination anyone introduced on which there. every an it brands shift us move

driven of seeing, shortages and execution So the thoughts and marketing about by executional driven by household missteps good innovation else. are the penetration gains that part, great can it's anyone our really majority the by not we're it or on

which And household believe it's stick. penetration, driving we so therefore, will

is, particular, peers. those end, our when getting and there dig other about it, we execution product shortages The those gaining get manufactured difficulty on actually distributed by number that that. I there. other of confusing our we end actually good out really well, as out when business brands, are into brands who just subtle on good some portion know a from or point understand independent that our -- other gets And as the of hurt other would performance we're can point I but the are brand, of Pepper by talk the the companies a Dr distributed in but and

results as cases positives negatives are in in strong being systems. there offset our other as so some actually by system our are, from And

keep you windfalls, are the really become not a it's then as so we've all year. to quickly, headwind -- And think seeing been net positive next the all move but through negatives, and saying, and I results it not you're that this able positives about it's is of

Lauren Lieberman

Right.

I distribution I Bob, like the understand feel do So network.

Bob Gamgort

No, about the I broader I'm audience. talking do. know you

Lauren Lieberman

Okay.

is just be also manufacturing that, needing there distribution be -- the through been contractually, And just it might operating is This to large and some already right? brand, not starting so that there's underway or needing that element some degree actually in Honickman with it's of scale thought when know Pepper because to prioritized I doesn't to time, had Dr when be to. shared parts I be The companies, Rock for great the show was lot leverage? announcements. so curious, up the what and of Buffalo we're that in terms detail the seeing on sort the start of that how separately, To But just yes, referring wondering guys now so -- the those it you're when you've I'm optimization of a assets? your many immediate script work benefits what -- was independent, better on I you But distribution right was can COVID. of terms of in moving that's

Bob Gamgort

Yes.

back answer, I go to contractual go back whatever. before point, pieces the I though, or about me Let want your -- to

if brands, of that you not need industry at that's you popping and If you to all at -- you about well look look from that been the And it from, social to in speaks of at coming up marketplace. look of is challenge stories a media some the were in where actually new the out shortages take the has documented. broader coming some know what's happening our that's that's

I not will it next positive but from is that flipping of more are this It's a there's this really year. But an mix. flip never anyone become my don't -- got in become have this that now to that think negative next challenging So There are will year away year, complaints. as not list a XXXX, be point things year, -- next we to if that is that year things a I want take positives negative you will we're lap is, about brought to no this it We some all again well. excuse. as the to negative long up

we're this it's -- a cases. between -- to this outcome report, actually isn't it's really we a just two. is control the so in weather And understand many not the important balance And

been pivot distribution and by so. pivot point a And things that to a the pieces, moves over are so in there move model, that But fact the about the about X we of with To the we can we've it's were we positives lot quickly, flexible but has able putting optimization. in driven script, your talked in about today next place the far business been Honickman about, do we to also as made single smaller got we by year. talked business that this is years. string past again our of partnership we of ahead that important biggest And very a this we've talked the

KDP upside. the to with our marketplace we'll mainly but a that and infrastructure like And of And the you beyond. is And in distribution is of lot so that the I clearly, suggest critical see beyond starting investments strong look of other we're part some XXXX the would believe like about our in as in one talked making the does asset big partnerships have we that can the deal, a see, distribution with XXXX. moves those conversation XXXX, effect about distributors that what you're well in as like we are performance independent just Polar today

Operator

And your next Bill from question comes Chappell.

is line open. Your

Bill Chappell

ever bought because the the -- getting brewer been on understand they've thought thought us help now considered home or brewer that X it, just they've of it. just from home if and or anybody the side, a from owns -- working who respond I guess even the Bob, they’ve staying to thought about

X be to a of it's -- people. you've forward it's that had while households, normal much and X and so a more less pull going less years from, and And future that's less jump big in million to great million a

grow understand that this and be household why help after a wouldn't penetration year So you case? the such jump how us big

Bob Gamgort

same XX%. point penetration XX% household the people at using household penetration, And private. that that good the We a talked were numbers, saturation. There at and over the talked XX%. about over point, that is this what good time talk we entry. and again. words And like to you Bill, smiling, knew the time actually we Sure. penetration hear in-person public business have north time what to And indication down we be of thinking some and and slowing about we from see doing time because sign investors be to just with or and can't dinners were saturation. took we at analysts we that would we And exact question, some had when morning. I'm that household of And no morning. some about KGM every we the meetings about were previous will because round KGM remember we at you got was was barriers

believe and sometimes, they takes just things we of list when on that working everybody and improving their a time. moves just takes long It's do why of sustainability. already, reason if So that benefit marketing, the number is to that of our then coffee replace every have breaks, point in we time. still to price really number features, it innovation, that work happening a machine day. why doesn't lot about and it Keurig points, single maker one know And somebody the was that big, now to have we And terms isn't of answer is a Keurig

if strong more just is our game. quarter that years to about so that time, to We this that and it, going on and of but get that that's that And XX% think we'll all to expect every growth, showed the quarter go, the our the forward. one be going I way concept. of continue right millions yet that and we many top question, that XX think I is we preceded latest north keep this get households But of I millions understand question got we'll business. That's on indication out again, of

Bill Chappell

Okay.

increase about, in-line year? household I a worry meaningful don't you penetration next So guess,

Bob Gamgort

don't the way know but at world that numbers year. this after time. business XXXX, is to know in we'll year you if absolute to yet XXXX, lengthen time And on time may what going the quarter trend to mean I same it the look a from in to going the it's look at over every I look because don't think I and we like -- compare best period how I is all that, exactly what There are months just But beyond fluctuations described. lots about sense, some month-to-month. of us, and business solid growth of X in in still the interest plans great we're does the the look we XXXX, business, the not system. it front in XXXX. lapping total of as this worried marketing is makes a at to year think long-term We quarter-to-quarter and just part innovation, we

Bill Chappell

Got the competitors? of then are current of side, quick you both kind the I kind from promotional And X And What's the expecting? environment, on And and pod would you it. what you're back some or I could that? discounting seeing but the with demand, expect couponing, to such that strong see if think of people know price didn't kind cuts and or dial of question.

Bob Gamgort

home brands Yes, retail, baked consumer not expect, would don't That's But we the plans. any there's have or see before strong reduction we going I be fourth tend at coffee they’ll will something towards board. behavior, promotion some what and I dynamics another the numbers lack supply you interestingly, our a of as promotional up, time, type higher. across IRi more promotions been their think price the going some stay-at-home stock in people there's talked as pull to happen. have in about and we what which depends promotion shop demand behaviors of it that's say to of the well a that the are. in as there's to the normal. priced levels if really in you favorite and the of if into it's more return average It think shift shift quarter. a premium But towards to be in -- with over I That's move combination take on and where brands are them, Hard issues home they potential and short-term, from coffee out see on back

Operator

of our brings to session closing us the to Q&A turn for call remarks. This the management end today. over back I'll

Tyson Seely

you. Bye. and dialing to myself The for know very so Thanks Thank it's Tyson. please you, Steve feel thank for everyone. or team day to a follow-ups. any for is today. Thanks, you, is out This in many free of I busy everyone. around, reach IR

Operator

Thank This conclude call. will conference today’s you, everyone.

may You now disconnect.

Keurig Dr Pepper (KDP) 29 Oct 202020 Q3 Earnings call transcript