KDP - Earnings call transcript Q1 2022

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Operator

Good morning, ladies and gentlemen and thank you for standing by. Welcome to the Keurig Dr Pepper’s Earnings Call for the First Quarter of 2022. This conference call is being recorded. [Operator Instructions] I would like to introduce Keurig Dr Pepper's; Vice President of Investor Relations, Mr. Steve Alexander. Mr. ahead. go please Alexander

Steve Alexander

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

website can need quarters, basis previous with excluding believes from be on one copy, items also investors you performance we'll adjusted Investors you this our adjusted If impact translation on results. the Consistent insight a today our an will in discussing with additional affecting the performance section. Beginning our get provides basis, currency exclude and our quarter that The into company we foreign of adjusted operating the with business trends. comparability.

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

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

Bob Gamgort

Steve Thanks everyone. morning, good and

story achieved Our different continued portfolio. QX brands reflect One common results expansion. stories strong progress and however fuel as for to continued of supply strong demonstrated recovery Coffee growth the the in accelerated Systems growth two challenges six Keurig households thread to consumer demand years. our System, addition In our us of enable one faced is across our the and consumption the by the million share of new past of following is,

when supply Omicron December-January outages a record in the at widespread wave consumer demand in resulted coffee that previously discussed a high. at As shortfalls labor was time caused pods,

our first goods manufacturing efforts the quarter progressed, service As we accelerated to levels. improve finished and pod capacity, rebuild inventories increase

pricing to in still actions America Our pressure lagging of leads first inflation the Beverages. the mitigate curve pricing is the the coffee Even in timing peak which intended inflation Latin margin. on though of portion inflation we’re

to time Looking year-over-year point which year current which the high recovery. have At costs expect forward same begin comparison. lower we to inflation lead will elevated there will believe we lap margin costs, in leading be ago pricing up an will caught to actions inflection

single QX. to forward, production guidance mid-single-digit coffee sales confident from will As of and look that we have end XXXX EPS and digits perform at our levels while portfolio output net the we our inventory full mid-single we our by recovered digits, year are our the year for beverage cold will fully growth. the throughout of high guidance Therefore, we maintaining continue increased balance believe have well to

the pricing in we've the of Ozan will EPS, business, the and made investments and between coffee. results relationship particularly quarter. earnings are in discuss QX in at key biggest the the and But Looking drivers headlines inflation the

growth a year Taken ago. earnings in-line EPS adjusted together net and we delivered with modest

coffee, as across year. Within significant was inputs the Beverages than and such sweeteners, as entering aluminum labor expected resins, approached reported our During which the Packaged for higher which as posting to quarter we XX% juice inflation quarter board availability is and Core and XX% of from segments, CSDs, X% issues the growth and transportation issues of marketing material from waters, faced pricing, well last Snapple and up our both pricing teas, progress. for share apple again in particularly supply in the XX% strength remained upcoming with growth with Bai four innovation ongoing beverage impacted outpaced were the results with In-market as registered to and coconut performance strong market by with plans to also net share this volume this escalating consecutive on quarter and in very for led Packaged continued of summer X%. standout growth which timing sales consumption of portfolio by year, seltzers, as advancing fruit brands past almost cold along of challenges. improve well Beverages expected Performance improved labor posting continues transportation continued the market XXXX the accelerate recover and inflation Margins drinks. another quarters. for

in we We to negative the to consumption the by market, undershipped expect be already announced second with in growth consumption as measured KDP IRI. sales X.X% net quarter. pod comparing pricing the new In late quarter, K-Cup trade for actions to Coffee Systems,

prioritized consumer discussion issues of by our rebuild start-up labor with for You'll production that manufacturing pods and at partners service Spartanburg quarter from combined challenged availability demand of customers facility owned delayed K-Cup expense the recovery the our to internal and inventory recall Omicron-related to shortfalls, pressured our our brands new the capacity. levels. as quarter licensed fourth our was during our We record

decision While goods the levels by normal perspective, terms inventory in manufacturing in demand We We recovery inventory during the quarter as is of now that the pod a in made we second improving expect to second ensure significant XXXX. progress meet online a enabling in coffee at by year our progresses, production, K-Cup equipment to chain in KDP come service the to this from supply both supply full revenue the significant and Supporting half finished expect it came Coffee to new cost the year. double-digits. service and this profit. of and return year end all half restoring a with which strong will Systems Keurig of ecosystem customer right of this recovery was QX, consumer to

in outpacing the we to and us and to X.X% reverse is promotion a for continue quarter, to partner work has That bottom on As the improved our the improved driving shipments consumption, and Coffee in second result This trend this marketing in top programs. coffee the inventory licensed rebuild internal KDP-manufactured will return of through in through refill and increased coffee and brands year. below enable positions category advanced impact brands Pricing inflation. Systems pricing year and much X.X% at mitigate owned goods actions customer second the of to pricing recovery quarter. to half in half inventory to also shipments line as increased will of flow with coffee finished as inventories consumption. expected expect retail. to in second the the pod Single-serve our performance quarter, continued we remain in pricing

quarter. inflationary be in another escalating we will round late second pricing that Given the market in announced the of recently pressures,

the through also sustainable our the years, innovation, KDP navigating we driving maintained long-term on over focus partnerships full past have through portfolio. well-discussed renovation While the macro across growth two challenges and

our do take few received conversations, Although recent I'd like to Systems. minutes have now Coffee starting less in to a these airtime so topics in

debuted XXXX, also Ice in the connected launched feature our households to the our that to keurig.com + our than of new to is we years. exclusive. More This later recall Consumer come few our first we You'll system. a K-Supreme as with the to new that we year. a and than XXXX, response one of Target brewers more for K-Slim smallest brewer Keurig In platform + one in SMART new have ICED footprint many million the on purchasers positive debuted popular Over we next Plus Keurig the of coffeemaker, half connected ICED launch smart including brewers, continues were completely K-Slim be of K-Cafe households and connected connected the Brew will believe brewer. this which

will be this availability expanding this model retail summer. We of late

than new and brewer scored lattes and K-Cafe has This of Next average as we built-in stars debut in to programs frother. look milk are exclusive. out Walmart Essentials forward influencer less brewer coffee an offers model, a X.X that launching week, through five the review our $XXX its and we cappuccinos our first consumer a

under of our year. distributed coffee of Original terms This with innovation, Shop later new platform. as top-selling already K-Cup for planned product flavored In a where a January, expansion in is national Donut an launched rollout this a Snickers-flavored variety brand we pod The

brand partner quality, in The across brands. line distribution innovation, and foodservice our the food teas operators. the brand a brands, the Lastly agreement be the ecosystem artificial at fire, family-owned will forward Elements, with this working and we air. a innovation and Tractor in enable the velocity. pleased to channels, Tractor rain a similar can Snapple be of hiatus and multiple resulting of have returning announce Community end a after foodservice coffee we or also robust is We a zero are relaunch insights Snapple, sugar Coffee five as to to is to Keurig leverages zero consumer with Keurig testament CSD largest elements Snapple that done sugar to we provide in the US tailored year to of launched coffee the specifically sweeteners of of Snapple is partnership what innovation beverage service solution, flavors line beverages. XXXX, that and and continues offers cold with Shifting make accelerate to agreed service ingredients organic an in have beverage certified to investment team. channels. to growth. and year. the the Beverage inspired several and made our cold excited Tractor sugar; foodservice fountain look Tractor enter a brand no less drinks from Community Chipotle sales in and to achieve the recently than Snapple Diet we've widespread juice key we only increased to their by KDP traditional together restaurants Elements team to the beverages. new to Snapple fountain expand renovation rebranding -- To have to exclusive with Community sales minority first into nationally announce non-GMO help We're strength Available agreed since retail all-natural equity

we CSDs, a and simple as our well fast-growing with the lineup. new launched XUP new to expand orange mango ingredients as two Sunkist sugar; Simple XUP, brand clean line quarter, reduced During Sunkist

of Finally, offer Dr to I'll the Dominion. quarter. World fan to now is will highlights launch zero Pepper favorite Dark this Ozan to packaging The returning of it promotional summer turn feature a Berry, Jurassic you variety. a tied including this sugar release as limited-time through summer's take more over

Ozan Dokmecioglu

I our Thanks, Bob everyone. first brief business a turn to and quarter outlook XXXX. financial and morning review good then of start will for our and with highlights

will we of an this performance exclude adjusted beginning usual, as be the And translation. currency mentioned, on basis. adjusted Steve results As discussing impact quarter, now our our foreign

Packaged again as earlier, along significant our Beverage quite mentioned for growth Beverages top and As very quarter, Beverages. advanced the strong for a strong Concentrates Latin line was with America XX%,

Systems to in As expected, X.X% branded slightly. label $X.X to shipments mix quarter. price All volume and net declined sequentially with in to sales up and realization net prioritized and quarter, the inventory, sales net partners X.X% segment in, down Coffee advanced which private improved rebuilding billion, as the the

for a growing. advanced combined two-year disruption place profit X% chain in ongoing and was productivity pricing Excluding versus On in Adjusted impacts first put the significant with pricing we X.X%. up net quarter gross all Escalating of offsets, the the and the from lag Systems, pressures, increased savings. four inflationary with inflation. sales Coffee timing and sales labor segments of volume continues XX.X% were basis, to constraints XX.X% supply was quarter, net benefiting significant mix XXXX the actions up as

versus investment asset the On partially X.X% result, continued operating significant our Adjusted including marketing. business. a adjusted margin Adjusted the in XXX in gross of brand challenges, pressures, other strategic ongoing XXX XXXX. investment inflation, supply by operating impacts that points the impact maintained the labor investment the points to As two-year, chain increased declined inflationary ago and reflecting Despite adjusted a XX.X%. basis basis and year in income basis operating benefits our margin versus offset declined of we XX.X%. X.X% enabled quarter, to macro declined income

due fact, to the In increased we reduced Systems beverage while our marketing in Coffee we cold in spending brands X%. by limitations, supply spending

potential service During levels investments normalized additional investments of in the also and quarter, full the recovery labor, and XXXX. capacity. significant to us transportation coffee to focused we warehousing and our made second accelerate growth Those positions realize back inventory get were on to half

in legal and As investments of $XX $XX in flow for customer a in XXX%. short-term These million over the diluted fees. ago. paid licensed tax revenue partially to $X.XX the incremental with million investment X%, be even the was in asset for profit our cash we driving million per conversion of Adjusted adjusted compensation over long-term quarter increased brands strategic Bob free non-cash ratio benefit along share to primarily part the benefit continued were earnings quarter. by $XX and and million Free lower our prioritized higher strong, owned year a in program, a offset interest benefit for us but cash the $XXX and mentioned, the the at with net approximately in with from quarter, rate. benefit essentially flow a partner stock in Adjusted a reflecting quarter quarter ecosystem, income brands hit by a expense expense,

During the from the resolution million. was reduce the At the we used obligations. unrestricted of our $XXX hand successful BodyArmor, end position, quarter, quarter, settlement million our against cash further on to received litigation which of a strengthening $XXX financial totaled cash

maturities balance profile As strengthens time completed flow four This liquidity favorable given strategic of announced more a expense. earlier lower extended the the current and with $X this have cash Since further nearly years rapidly generated will refinancing rate interest rates interest and that merger our we significant month, ago, and environment. the billion delevered. strategic our we sheet refinancing

the net net combined and in impact do and increased with posted program partners in benefit our segment net macro reflecting operating net inflation private strong consumer sales and driven to driven of reflects prioritizing price the internal growth an sales Coffee our XXXX. XX% by quarter per and than basis escalating sales quarter XXXX. that which shipments in posted drove in a and basis, inflation a strong costs and XX% the we operating the significantly labor Concentrates volume this latter double-digit supply hospitality reflecting first income were to market and chain partially restaurant the significant On delivered Beverages disruption higher of strong versus finally, receive now a quarter. unfavorable constraints of offset and productivity growth in-market Beverages growth with impressive Systems X.X% volume XX% an mix, but basis broad-based versus This impressive combined escalating investment. the impacts growth realization fountain mobility recognition again by continued rebuilding performance pod of price realization Turning XX.X% double-digit XX% Adjusted balanced net sales and X.X%. foodservice Adjusted with revenue to marketing was licensed the with net in higher growth sales sales volume net strong increased for advanced performance the net approximating inventory XX% in led volume increased $XX we expansion in two-year million. mix. Adjusted segment. channels. more in offset the label driven demand asset On benefits and operating by America marketing year the reflecting Packaged two the due the The price also higher almost the increase improving, portfolio. increased And realization increase consumer in income and mix. increased net the On Latin branded across the than still quarter favorable offset net brands. our lower inflation investment in by double-digit growth strong net meaningfully share higher-than-anticipated execution owned strategic net quarter investment. positions XX% higher a impacts and by These sales sales to income Latin essentially, approximating America also two-year net between serve mix Beverages by significant we increased favorable a experienced. XX%, sales, sales declined continued recovering by volume up

Systems X.X% quarter net the higher Systems year XXXX of where In comparison price We versus addition, strong in shipment operating first a first Consequently, year reflected brewer basis, volume and XX%, year mix net On fines of first ago net program. XX% the sales realization sequentially in Coffee comparison recovery in actions growth Coffee X.X% X.X% lower significant the last Systems of the pod a respectively and in which and our achieved of volume quarter, by income and ago the in Coffee the comping sales retailer incurred of the XX% increased taken increased quarter faced XX% with two licensed period impact a combined in the Lower year the the our XXXX. strong late ago growth XXXX year coffee was quarter. primarily declined to XX%. pricing on driven XX.X% in quarter. versus and pods Adjusted period. decreased quarter owned the to

recovery performance this realization quickly. we higher continue which the service continued accelerated and will partners achieved customer the lag and through net quarter the While of it This to retail reflected customers second recovery inflation plan. plan to cost our price

the it However, as moment a like expectations first the quarter. costs quarter. significant in our added unfolds year of the I discussing during the spend would to context

heavily our most pricing and inflation between to coffee in to period comparison coupled one year expected challenging last year this and due invest our the in quarter spiked, before We to need dynamic quarter inflation first be timing to with supply. the

behind believe toughest year. this the will first be it we prove quarter to us continue to the now With

pricing service customer implemented production, significant actions, we improvements delivered coffee During strong in levels, delivered the brand and quarter, and inventory. new growth,

we pleased continued As rebuilt. in are to coffee we growth, driven strong ahead, marketing restore are innovation, the second business by to in position half and that to inventories we partnerships look as revenue invest expect our demand be will in renovation, the full

beverage our accelerating this in discussed and in morning, one. cold marketing As investing a coffee recovery cost at came quarter

have the accelerated in one-time us to investment position growth our unconstrained including we growth these strategic half, benefits This investments. and cover leverage program in for second flexibility revenue to puts asset However, coffee. in other

difficult the the ahead for to inflation proven even Looking looms has and greatest forecast as still challenge experts.

continue We ready additional all more to if are possible items and coverage in add to pricing lock where implemented pricing have on required.

and We protect as KDP. our investment we lessen to pricing strength a have will to elasticity is stability marketing continue and believe advantage key competitive brand for

strategic marked As the program cost the by ongoing environment discussed last call, pressures. also drive an as in tool investment to see an asset on we investment marketing effective significant

year to X.XX in confidence year. guidance benefit this XX% XX.X%. was interest our we for expense range in mid-single-digit million refinancing, range. this following approximately effective to Adjusted the outstanding to reaffirming our estimated planned expected our early $XXX continue the billion. Supporting topline approximate led to the is high expect for to which growth diluted Diluted is share per be Our strategic to Adjusted earnings unchanged full our of the increase sales year recent expected shares adjusted in guidance assumptions. of full including net us are weighted tax single-digit growth range rate the guidance while

adjusted want environment, expect in share with second quarterly we don't that the improvement half. improvement modest show to second we quarter current earnings provide meaningful given to Finally, I the the more per sequential versus the first while guidance, share quarter

year it the on the period that, us strengthen earnings continue share which mid-single-digit full the for for long-term to Specifically, single-digit in some the put for remarks. expect let half adjusted algorithm the hand our range to to With me Bob we back second translating year. closing reaching to growth during high per would

Bob Gamgort

KDP month, work had of want during this of and Before the opportunity to Many CEO end KDP of will this This role his designed I and in by opportunity to the the from side And moving and strategic to to on about the as announced the of dedicated front as years. recent I'll based we his Dr President for with us. I benefited confidence Steve the earlier KDP at years. the Steve past Chairman call Executive KDP transitioning over focus years with inorganic my for him, with to have opportunity Ozan working will beverage ensure to to with of Alexander Q&A enable turn continuity and him on With leadership to value-creation and very continue industry. that excited the Snapple transition executive strong Ozan XX well have his of for I was finally, we I Pepper few following for significant new to side the years of six recognize Board back to Q&A. have understanding you Relations. direction remain in I'm the and the Vice Directors be that, it two team, have over on partner promotion next and Investor operator July tremendous

Operator

line of first Your question comes from the Instructions] Bryan with Bank of America. Spillane [Operator

open. line is Your

Bryan Spillane

operator. and Ozan all Hi, Bob to to to roles. new congratulations thanks Steve you morning and everyone your on Good

Bob Gamgort

Thanks Bryan.

Ozan Dokmecioglu

you. Thank

Bryan Spillane

of question capacity just new online. So couple Systems. you guess One talked coming is the around a have I questions just -- I Coffee about -- my

clear service about And you a levels point what levels do out? Are we're at point think sure be. year make be we to optimized, will want will right? think out that do months still at when six will that the just what we be So service normal? year in Just

Ozan Dokmecioglu

Again, good for the Bryan. Thanks morning, question.

question regards the capacity start coffee with your me production with Let availability. and first the to

slowing down. expecting last during on in also actually Spartanburg were that mid XXXX. K-Cups will be call, some in last during we year, state-of-the-art As But our turned manufacturing announced of slowdown up ramping we announced in we -- our facility Spartanburg the primarily starting

our in year part gone them utilizing we technology onward, the And of plans. we as upcoming stance. feeling our online we feel also managing good spoke we That to production capacity and restoring all we capacity will went that be when of quarters to to spaces prepared that And and actually actually to That our be coffee from add going in the terms and consumers. monthly were requiring seen significant commissioning the our those is partners, restoring already inventory. new you And So that And capacity starting that last go as back regards demand asked a the the during consumption coming we of acquired remarks, Therefore, Therefore, sequential Therefore, where levels meantime, quarter have. have took licensed. as improvements our of also requiring In needing. as production that feel the we we will through our two. lines to we question very we our sometime owned few fully are it also we we've service And one-third and expect capacity. as we with also our includes are existing capacity. ramp-up we to overall well in was in a to our are we do good to our for. to quarters. two-third retailers restore always our includes coming levels including production good just where

Bryan Spillane

especially maybe just demand down And of talk questions just fielded We've home pretty coffee the coffee and And lot maybe and that from a could sort more how home? is pricing. pods potentially But elasticity. with about really see meaningful. bit comp prices consumers the coffee Ozan. away there away staying the tangible inflation you trading little relative follow-up Thanks, a a has as one and since, to been Bob you about from of value

than elasticities should So and trading at home from down really the cross-elasticities it aisle? within up we're so people just we away trying to looking maybe understand is coffee when if more and

Bob Gamgort

as I'll over from we investment lot Well a put about and Bryan a this of number talk had which very we've can this a years with about questions relevant is But home. in-home, little start in of investor Yes. think strategic we away bit well. we and pricing

bag XXXX, the example cost $X.XX before go $X.XX is pods response. -- you to measure the that it, to we was which the back lowered that premium. cup cup during of saw a for tremendous during cup versus So if implemented we per We K-Cup consumer relevant per per and investment coffee

is still up we're if today $X.XX. between point it's game the Now as pods at look in now the and moving a out you really K-Cup game. but you price, And relative bags difference

our we're differential of relevant for the we're number to maintaining which against we're taking able that an back to price think up or talking comparison. per to So about most regard with we an home, away that come pricing be pod but we while $X.XX it's With to versus per price is average hard know exact measure that cup $X.XX for coffee. K-Cup $X.XX bag from

continues somewhere what between wider wider. about to talking and multiple and depending gap of You're out XXx that five a that on you buy at get and retail

XXXX. same people trade-off home have in-home get roast XXXX which we other guided a ground pricing clearly, level from at to coffee in gaps away price concerned as entire category. the But from that and benefits versus And we there's to lower see about the that forms of so our stayed

Bryan Spillane

you. Thank Great.

Bob Gamgort

Okay.

Operator

next your with Herzog the And line of Goldman comes from Sachs. Bonnie question

open. Your line is

Bonnie Herzog

you a Thank few have range line for this for congratulations questions me some. your from high guide the plus the on year and quarters line everyone. implies remaining updated well I Hi. guidance. the growth your morning this single-digit as top first I in on top guess,

bit QX which I'm the on I'm just items benefits and your EPS elasticities. I it factoring help that in in leasebacks. on seems as line understand the little pressures -- such your of as like price how the driven thinking it So out guess, since trying I consumers by slight realization, to what touched from guess the then asking in accelerate? litigation so to of And guess a you're you drive I and settlement about gain bottom these context called I'm results, guess of gives top quarter. one-time can increasing some did the beat of the were sales entirely relates the to you Especially on your line, that on kind continued I confidence what this you guys about

So these rest of expect one-time how how should Thank the about do many year? points of you growth think we from you. the items for And your in EPS guide? items

Bob Gamgort

all Ozan start I'll pick the the there. were pull -- and so businesses part Packaged the I'll with question also results the of outside all of in up then With and to to And terms volume. second your pricing, line, coffee, you line up all quarterly ask of BC top other. apart LAB, and were coffee up regard the Okay. up And to Beverages, they digits. other by that's have but top double

In was up substantially across fact volume those. fairly

confidence really our our expectation more We strong it's talked pricing is that that as seeing And all So continues. pricing growth being driven, about not in implemented. both. just is that we're

and kind and Of forward. elasticities expect we built going course, our we've model elasticities around the of we've seen

levels used that's substantially the half we we a get on will in the in of those year, coffee to those back where the accelerate business, as made second quarter, of a advertising the customer unconstrained can And by second investments said, we second quarter. a the couple and shape, and in in one-time on We've on first investment substantial -- our year. that means been have to recovery. of in We've talked for sales be that also know, which that which talk quarter, significant normal us confidence we back the the because puts about shipments. acceleration we recover the part been will pulling us the half side the So the our of side. Ozan puts is, growth that coffee reasons. of in promotion about, pulling cold just the benefits of were The in on service you One end back quarter believe was fund drag great will to first Ozan minute. But

is, the able can be the coffee demand and restock That on the partners for undershipping the the And have the around we turn point of So promotion the again year. for back internal second flips other the to year. and second in then in opportunity year. go inventories And to we we're unconstrained half first increased half marketing. the customers, to of the with half on then coffee of consumption

So year to guided. Ozan, that of the in be that benefits? you second we single-digit of discrete off some that the confidence of talk us leads those the all investment about of do the range half the made of want will combination we to those high

Ozan Dokmecioglu

Absolutely, absolutely. And as Bonnie. wishes for thanks your best well,

start asset benefits strategic the incurred. investment we have with So also define that one-time me program which we as let

we as you remember, have implementing initiatives since all, of XXXX. been these First would

that. to initiative no So news there no regards with new implementation is or new or

as over leveraged, the strategic we and program to investment So the challenges. was inflationary cover have I time, saying, significant asset macro investment and

to to this elasticities growth held this have reasons occasional that of utilize Then is can us brands, and allow this super important us, of sources have understand very our investment our that So can innovate our like, the cases. benefits which and to exceptional we business, we the also continue important up is continue protect point the the why we is to support to use to nicely. in times, so which in one

program timing annual to required. to holistic investment and on predictable, arise, transactions these as of basis. use expect the is because not the investments overall tool effective marketing we Going an single asset an take forward, perspective we other as when factor Exact or strategic and opportunities drive an

was one-times a important one which to opportunity comp to benefit. the the on the take five for for mentioned, And like them part. you little -- I'd expand that that's seconds the other have stock of So two

Now estimating have raised, opposed public to company, to industry with of for as that stock a have futures which history line years actual practice. events, our as transited is in we almost we restricted four

will how with are years, US GAAP, type line the ongoing expense this against practices litigation we as in treating the past peer agreement and in group is of return our be well legal Thank you. And as both we settlement the favor, on to related the fees, it. that XXX% to as And our BODYARMOR. fees few over recognize our So recognize legal ongoing expenses. our simply costs with the results of

Bonnie Herzog

Thank All you. right.

Operator

question your Lieberman Barclays. Lauren comes line from the And of next with

Your line is open.

Lauren Lieberman

so Thanks much. Thanks. Great.

mean, the bit Executive So in little I you'll I be little go-forward bit hear talk as to curious I'd you into a terms Chairman about move about management Bob, announced to the changes. was role, an love how a of where M&A, areas kind company, release but you, talked spending your just a your about in checkbook you We've time. was as I big talked that the discretion. focus know be. your it about will at the have of will

curious Bob curious the you you been since thinking add start. been Thanks. And position. a partners focusing Ozan, that different But path can also you than then can bit you already current as value about a things have efforts where those more. add your you're So way be about in you I the think in how you'll forward, and little mean, have

Bob Gamgort

One we me, to somewhat widely continuing that areas for being [ph], of lead will Board, as first, really forward. closely the Bonnie three evolved held the is Board Sure. time. to there's over we've held overtime as go from continue to also evolve and focus

role. that's so And important an my part of

very working to is a with building work to confidence opportunities crisis it much transition able one require on properly. give that's important have so time we of Ozan that relationship time think priority in delivery to part me have have business managing seamless, of critically business of the our a is, for it organic industry patience focused, we on that to the a that M&A. amount of investment, aspects the doesn't the and operationally the continue that from right sure while And the everybody Wouldn't team intensely the that third last space of very and even is to and particular X.X been like a some or is inorganic and then make part on be Second seems the it about that years do on to the to leave strategic the of And time, significant next. lot to great be executive I that. work the anyone the surprise and in ton in momentum

that, being the I'm looking and help next couple always to available certainly forward And team so, years. while in of to able to the to needed being and against as over have jump Ozan more space

Ozan Dokmecioglu

Lauren. as Yeah. Also to well thanks you

the side. beverages opportunities we business via Coffee to households with as us in by when effective spaces that, behind it as of have have along the still with And I'm When we as along can obviously that would the sure overtime Systems, leadership white some doubling do a in And Day in growth fill well great team distribution growth the of I plan as executive Board recruiting be tapping as you our Bob, our back that new more of as taken brewers that, -- important you through strategic we all see have as a have well both coffee know to robust And I'm Xst you beverages plan in. that double well have well during our trajectory innovation we we XXX% our October you architects front click So, as impactful have we cold one great our look we making distribution as more all been making and Investor again, last efficient. strategic it so year. stance. the

includes obviously select you quite a brand And us to we is saying we consumption white and continue of that put this as very of the was excited planning it's goals will That front us successfully deliver new groups against see, perhaps still geographical on in strategic to which spaces M&A. very And full saying, us. also in Bob some job have growth Bob have occasions. in to a business that terms get we our us that of trajectory execute and Therefore bit As was the dimensions. stance motivated. package makes

Lauren Lieberman

much. so Thanks Okay.

Operator

of comes Your Kevin Grundy line next the from question with Jefferies.

open. Your line is

Kevin Grundy

my wanted well. and everyone to morning Good extend Thanks. as congratulations I Great.

CFO on looking sort candidate are housekeeping replacement on both. what I just levels. you think externally for that? Maybe Ozan's timing. that around I attributes it But just Are Maybe I looking question at for broader suspect that? investment the position. really for First maybe is of maybe you're internally have you looking is comment just the

that needed for know around what's target? balance. little the Because deliver brand EPS how that some seriously to the against really needed around the you been EPS brand with take EPS help But your items what outlook just a hit think commitment now? before onetime a and in bit question this what's to at the was number just is there in about really excuse back Bonnie growth. up And those you're been element kind me And for I there's the willingness is on Bob, EPS and the if commit support your guidance the is to to what's growth pull pick clear willing very, providing delivery of the now very volatile has or Thanks the sort growth you've balancing So a how willingness really merger question balance of the with I what's like, you're in to growth really if getting good pull some to there. to targets all that. environment. since to been your is levels, target. possibly one back lot

Bob Gamgort

second start pick All off? I'll right. you And up part. Ozan, why the don't

Ozan Dokmecioglu

Yeah, well absolutely, and as again, thank Kevin. you very much

company. world-class go a also future decision to previously what in existing will company, to growth CFO lines the to being recruit looking to but have the able more our publicly the for. communicated time as CFO. on are announced we of the order that -- with of the that to navigate we recruit. that started. manage through be able believe So, And the we the fact our outside for was CFO has terms bring the plus we in And And already deal and search importantly and complexity a complexity will we that's search And that of

Bob Gamgort

commitments all think our there we commitments out manner. On Yeah. simple question, put balanced your a of is in take the answer second And we seriously. I

the place we on household that's think So a public the we penetration over across as share Keurig more as growth and accelerated first the into about three we well that accelerated in a move company. We the board as as a what competitive CAGR, system future. years we while growth delivered as our beat were all same in evidenced At the the put foundation time targets. we marketplace scalable gains delivered had XX% the we now by so EPS we

delivered. were those of all So

those put past there years, over looked the imagine, the exactly optimizing in without all way deliver to that of across could three able and yet were at one the we look We going balance of you it at performance world when As been has the that's different able commitment than we out to XXXX expense forward. we've balanced the it very other. metric

make that, a mid-single-digit would is in environment in macro October now that the in point EPS we then. saw up. it's see I this and can balancing be growth we volume did mode we our of out that, materialized and back we're we've challenges XXXX. that And investments XXXX. And said We're driven in you would in on growth therefore, growth. has thing, we of pricing. early given just And since And one lot X, So in pleased we expectations what pricing taken It's investment brands. not

though we up challenging we one-timers would the it As quarter. business you're investment the incredibly not quarter was on more. And one in our I call was suggest during about spent marketing any QX quarter. talking on focus we mentioned, cold Even our

over never we in to talk don't mostly about them quarter ago. any it's they're comparison And You transparent especially just any those a the put one look in those tend a And you questions at incredibly get versus they type those. have year an as unfavorable on I when over about or We about those. time. to those. focus then hit group we it time look And business of when at normal of we're category – not

coffee these balanced to have as year. the of look The that, to. just a in items period us fact the our our the on recovery, confidence over investments committed as have some double it at of to brands, allows down that in in we we accelerating delivery So well

Kevin Grundy

you, good. Thank Very both. Good luck.

Bob Gamgort

All Thank Okay. you. right.

Operator

question with Wells your from And line of Securities. comes Fargo next Carey Chris the

is open. line Your

Chris Carey

Hi. Good morning.

Bob Gamgort

morning, Good Chris.

Ozan Dokmecioglu

morning. Good

Chris Carey

quickly follow-up I'll with on on coffee. your the and question to Bob new wanted role commentary ask then just M&A a I

Tractor reticence clearly large-scale priorities and is you investment M&A interesting around but a talked about potentially M&A. for the over side, smaller period. Just long time Historically, on the

there price following of be of larger we there would and So open total prior quarter? just if perspective? on category any the geography an Really, Thank kind thinking the too I is impacted and what when rest Were types Systems the would expect deals of think these expand get the are the your X% in on much. of pricing side the the to coffee. charges expanding much. ahead then just so Coffee the I'm pricing And trying you the not to on you which of there said that, your the you if is and what category deals, with you up or range and radar, you're to that you're whether So expect from in at line partner you you're more following fits? is just business, doing in can service better to pricing of owned you coffee or approximate portfolio was gaps on quarter you owned brand what did pricing

Bob Gamgort

Sure.

you the is large First was large thing deals. deals think word is, used I not on reticence our on

overpaying is reticence on deals. Our for large

investors sales our in now multiple And And valuations earnings of so in it's shift. not It's – an earnings where multiple. cash for potential favor about them. and that, with of of I environment no about than we're flow we're in And seeing size. more the the just think paying all kinds people are

benefits Community, then huge means of to point out about across be to the win inorganic Tractor as which Community, in by for may channel fountain win with it's We small will in Beverage, us together certainly that, seed make a just but as like on we don't a are is is we huge that think today accelerate well. So deal it. partnering we also at which the opportunities. need larger-scale which like And foodservice, announced strong, is is what any we mid- that with announced that done they interesting channel and a likewise investments by And would the range And well. today is And win way I before. some in haven't can incredibly we us represent yet partnerships of working as to this again. we M&A business that own unique But and a for that. we're looking but have one

get little we I fact we details say, have number good a And can't that that, and potential position that like into we is but this the the businesses large when about I over of creative bit of partnerships. in in were and With any the overreact being pricing, more quarter. – coffee how of evidence a to talk X% move a up Community the think a dialogue I so we consistent up would with than regard that. Tractor X% in Again, is one we again, are little we our or about and proactive category have wouldn't partners. to

break Sometimes is it that's mix. late has the within that apart Actually moved if further label private pods. area you

a There brands in The licensed coffee we're substantially. have mainstream and up our where and brands price label. participant the with seeing a actually So of same that. was about they But moved can't you're all level. have coming late move avoid moved private now premium the heavy owned on pricing in

label distortion period. and sticking premium private any So and any in for gaps the we're time mainstream seeing between not pods

Chris Carey

Thanks, Bob.

Operator

of line the Teixeira comes with question from next Andrea Your JPMorgan.

line is open. Your

Andrea Teixeira

to everyone Ozan echo and all will the best morning, and and Hi. Bob, Good I congrats Steve. wishes

thinking ahead for given -- single that. puts you? the better in in that visibility little like given that, and to have the down the ready break we still high call guidance. far. beverages given bit be in you're -- the here point? or from now your will not bit Isn't from you volumes to it's then, on that potentially in terms call low-single costs the year recover X% a early the of that the with Appreciate should just upside in of accelerate at so takes for price/mix likely should perhaps there hot and conservative posted this an that EPS to on a isn't comments new And that you wanted I So, under-shipment too it And --

Ozan Dokmecioglu

Yeah.

line morning, well. good the all, your bottom very With much Andrea. thank to touched of First and regards you -- you top also to as and

So let try to me it up. break

explained proof as many especially on expectations, And our regards determinants important half are have kicking to top points will so we And are all there top we growth that. with had. high-single-digit increased to chain coffee feel guidance the line of, second the have with one right in You that that, from line the disruptions our of reinstate to the we basis be very reasons. put we regards supply after and of bullish and Bob mid

we to in of market or our early planning the line So which to of also the trade. -- and have with that in and take summer, more second portfolio group would peer most all a players announced less we by are pricing round be the

our price pricing line in Having factor do that, our in a come growth. and expectations those be the with to mean what but implementation, why and is we which Of to top very some inflation to course, higher everyone timing there the to good is taking reason said will came expectation. everyone's regards that different continuing all with and regards feel translate than there's

really also which QX and said XXXX industry And our we approximately true low-teens. in But in volumes Therefore, articulating we line execution now. sure back as XXXX coupled the and taking couple have in we the than around increase, previous stopping announced to when have you have around. our not strong proof we inflation all right trend in-market is other to of was all I'm continued players seeing share. came QX very pricing and market are saying, Therefore, we lag around have XX% which is For inflation in you that and I'm example, XX% our what inflation time are or And a heard expecting. we step XXXX and LRB But approximately our which during reality expect and was we pressure, our inflation. of is share, still to our higher point maintained market faced ago, either a inflationary been we can like at which in the strong delivery essentially what the continue were same look just relation with call, that around we see what pricing. to communications X%. months in with performance gain True remind of

use cost cover, parts input and pods cover that were real. some we probably more a in the and where But one well catching is assumptions our are will and inflation as believe whether this there. kick As one cannot of for rPET, transportation elements and material a our which can of or math algorithm we of we to basis continue an there the expect nothing will higher will point Inflation algorithm quarter some up year, that can quarter is this that in we cover, pure no -- will we expansion a on what basis good K-Cup be know, we pure no we the pressure you there that can not, with polypropylene three perspective. regards of actually example in because do take been anticipated Inflation four we the has math be as of and there Therefore, expecting. an believe under margins again pricing coverage we that's lag. towards example, robust accordingly pricing out than to also means margin it's terms with the be to And labor. the cost. And from on to a have inflection that put for

we algorithm. see, you we pull And hold we one algorithm keeps opportunity not we this to all to invest balanced right as continuous see not and think to course, back. our continue in or us that levers have a But good brands our now do Therefore of you against as is better going know a run if So it's like order two. to business. behind some our deliver business well that do to we are as one

Andrea Teixeira

Ozan. you, Thank That’s fair.

Operator

comes Consumer from with your Brett the question Cooper Edge. line And last of

open. is line Your

Brett Cooper

congratulations all. had Thank Good don't you I questions to morning you. two mind. and if

the third about allows And most hoping to important you to building the business one You've a on the is, that was place have be or you've second built that company. I direct have leverage. party. coffee, in spoken in expand and consumer both bigger pillars for a you can infrastructure scaled that e-commerce then

you what's outside going the to us on always provide and/or the see on. the the can't a can move for I customer in from Thanks. to update cold we one. business just progress beverage relationship e-commerce made evolving digital an was more in So preparing your hoping you've

Bob Gamgort

of Sure. A things, couple Brett.

that set business First up at scale. we've on talk of a you all, areas three think the about, I big there in piece scalability are which

is think structure. management I just one

of management my take yet a advantage one to focus more more So, an being a businesses consumers, white we've an Having I management in got expansion have to on team has gives bit to to continue today. amount region common focus customers, be able managed here. without common advantage than is have in on that be North distracted. significant they where think you And the global bandwidth America, past for our to us of take for able on to space a

I most talk in on is our we foodservice. a in an of Pepper wide think fountain the business. investment about you we calls, area expansion announced number our capabilities. in of about talked We second think where today, is significant in if made available foodservice the But a And we've fountain range distribution about CSD them. Dr

got a brands and businesses sell. strong small a set relatively but of we've to really they've had So team

get really unique to expand. to to organic where them territory some partnership able products with be equipping into brand a in Now able with and new Tractor, they're with we're GMO-free new

position. and partners, to very ourselves that But the system. we have we doing seem toolkit. a expands we to together we're in click the now the exactly the foundation it with share the we're that three now scale. partners across benefit about yet so capabilities. put you made XXXX to important distribution independent good over significant is the So a cold past and is When to two And of to in but And it up and on we didn't a years not COVID. increased our build partners. as a rapidly were that area. and significant interesting efficiency. able the and independent to of set really of and that go business, business improves scale will and over like over as successful your through required and that of drive in There's term. four regional it's e-comm. been your our the number agreements the us to in contemplated With distribution one our of are do been redefine their of XX it and great also to Part both area of has bringing we've that good e-comm touched example us. past our model we within of able by best back was boost DSD conversation as the terms acquiring companies liquids e-comm e-comm well a of coffee investment regard our side delivery. to over were a business our We've obviously then showed both years, can brands and business very our to We've the and was where renegotiate as very you're really environment FedEx see an one But beverage in is that be e-comm. a enabling very – well has area by e-comm. a and during XXX% build sold on can e-comm on UPS that big we consumer we've to And idea. business, Shipping time close Certainly breadth for and us great have evolving as a collect not idea a our be we DSD effectiveness how to depth right, us a long scaled anything in you agnostic tools DSD distributors But over win-win expanded

of So type of Amazon, them. better. retailer.com. them with of We to our supportive very on We walmart.com any we're make information share try

that competition them with So not it's in all. at we're

fact buy to go the consumers In they preferred to want we retailer. know it their but want from online

we we during small everything place keurig.com also it that's that small We'll have been find for of by to good group on or there. are find phase. Obviously, primary With a I And just focused normal recovery them regard enable auto doing that's that its favorites challenge a consumers can't so the what SKUs who said. on are being. reorder, reorder it's sell supply that retailers. at And and reason to of a

back again. We will that get to

consumption a And of have part I so about made go in think in next about one level you that based X replenishment the to adds because fact and and it. shipments big few we'll whole brewers that power for that the different replenishing on really auto the additional consumer. of that business believe from my an And convenience on brewers a you connected to we based that's years, comment remarks reorder million the as connected is

really on over term as the well. And business that why so long we're that's bullish

Brett Cooper

Thanks. Great.

Bob Gamgort

Thank you. Okay.

Operator

to back remarks. call Steve the hand any I'll And Alexander you. closing Thank for

Steve Alexander

Thank are for and Thanks today. you, day. all us around everyone operator. joining Maria Great. I

have questions so get to feel back much. out. free please Thank to any If you We'll you. you reach

Operator

Thank that concludes you. conference. And today's

may You disconnect. now

Keurig Dr Pepper (KDP) 28 Apr 222022 Q1 Earnings call transcript