KDP - Earnings call transcript Q2 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 Second Quarter of 2022. All participants will be in listen-only mode. [Operator Instructions]. This conference call is being recorded and there will be a question-and-answer session at the end of the call. to Mr. Dr like of Vice now Relations, Investor would introduce Pepper's Keurig President I Alexander. Steve Mr. please Alexander, ahead. go

Steve Alexander

you! Thank And hello joining for us. everyone! Thanks

addition Director on of followed morning you Let He to our know of few Chethan past at who morning Barclays, Eagle is this six years may side us of years with his XXXX. believe Senior a Lazar Peloton. will for him. great our team roles working joined working over the Many of me release you our Outfitters Mallela sales American second IR, by May. we by we in IR from and with Chethan the start and new quarter press introducing the enjoy Andrew Earlier issued this

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

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

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

Bob Gamgort

the face of our it's in company new up was second during many periods. potential Broad Steve one it's everyone! good quarter elasticity worth to news for during portfolio across good impacts of moment concerns the our shifted recession, on With well spending have recessionary has quarter. held with strength our a pricing, brand having up previous how performed a is modest to the in Thanks categories to continues morning, based The macro progress to and not continues a environment industry increase, but pricing The a to margin challenging that fronts. impact inflation as on continues yet inflation. for caught significant be

consumption effect the with true consumption soft XXXX, occurs were trade benefit particularly These downturn to and recession. have lead our out-of-home and from During up that categories in-home carbonated behaviors substitutes, drinks during are the among consumption that staples, segment, significant the few the categories they held in XXXX, last regular direct economic best. frequently coffee CPG from down and

outcome year held a KDP and environment the for nearly total continue returns that transition Since and manage return a done shareholder as company formation broad created we were challenging to returns potential shareholders, above macro a all-weather market operate four and is indices well closely will XXX%. peers. significant in to the model past, great business Well delivered against range we of the delivered believe a have these we've KDP, successfully to that during all excess beverage notable our with food we with held continue uncertainty. in in positions from More of our widely one. As we’ve a us of

market $XX last XXX, the the inclusion month existing equivalent S&P we XXX the to to approximately along in million fall, public the with new our XXX, shares broaden continue our in cap. in absorbing our position With billion With into market NASDAQ appeal.

million the a take Ozan a KDP and by how then underpinned and attractive our attracting X to driven model to business organic our competitive let an shareholder results. minutes KDP algorithm, total me System. and value, few new that strategy is Keurig the year you apply QX remind by every framework creates Coffee on household flexible return into about scalable is focused strategy. Systems; Let

our and and also existing revenue beverage platforms to occasion. such new new and profit Keurig growth formats as households million While XX driving among connected brewers

made of in have household brand our renovation, focus core years. beyond brands growth we the effect well on the and and go-to-market strategies size system, new has Keurig remaining capability and internal our the marketing a selling of owned evidenced driving beverages, in next households by million, Given our in which The including space growth. In that our estimate multiplier effectiveness enhancing system. to line the at the than XX we on more through filling through omni-channel share external have innovation and white addressable XX growth our for consistent our cold direct selling sight stronger we store distribution and a distribution as brand investment portfolio of company distribution built system, partnership, investments have

elaborate on core Ozan, you. to this will algorithm, I flow shareholder later cash call. strategic to the addition extraordinary in capital for free incremental the In our KDP’s allocation. enables through return over potential

Ozan Dokmecioglu

overall successful company Bob provided our advanced quarter a our of strategy. in On I more net of volume four everyone! XX.X%. with growth timing sales moment sales profit increased basis, to highlight Good XX% up while gross all want strategy, that remains and declined the and overview net gross total XXX our pricing an a With gap than results more spend to context inflation. two posting X%, XX%, adjusted margin segments points, growth. the adjusted mix than and KDP strong reflecting basis between morning up

of inflation cost experienced we labor. including packaging quarter inputs, the and sold across all ingredient, goods manufacturing During

warehousing. in SG&A of In also we also much higher. and addition, At transportation robust was time higher rate significantly of demand inflation and the experienced inflation a consumer

inflation which XX%, than than one. more percentage our total for the experienced Taken the two we exceeded quarter quarter together, XX% in was higher points

slightly, increased higher earnings reflecting tax very cost lower to declined free per share as also in XXX%. a XX% for offset the net we cash approximately lower a adjusted much diluted expected. As increased be a of a adjusted out half X% cash conversion $XXX flow this result, and adjusted increase to to gross adjusted profit year rate in X%, closed the strong, Adjusted All-in, operating income the Free first significantly of serve continued million expense. ratio driving flow at $X.XX, quarter interest the income and quarter.

with recovery will System. segment restored performance ahead full report that discussion plan partners of Let's been schedule, manufacturing our to service shift to happy part completed Coffee starting Coffee a has that levels to and with to output of Supply retailors. provide I'm our

success discussed of second strong came the a we sets that half it at as up year. While cost, us quarter, last for a

sequential were improvement up net increased Systems sales the higher X%, Coffee sales. For in quarter, and pricing by reflecting both mix, strong driven volume

For was year. that actions. by coffee higher while the last sales up coffee new volume comparison was quarter retailers in based nearly higher by partially offset coffee during grew quarter Marketing lower Single-serve pricing due quarter as price inflation, sales grew the pod pricing pricing to led was on of by X%, brewer two IRi volume XX%, almost and up X% with mitigate slightly. particularly the in the higher brands quarter impact led both investment category XX% volume growth and in mix,

industry a deceleration linking actions IRi pricing to on noted draw category conclusions in direct have We and elasticity. attempting reports few volume with

pod reflects noise total the the also marketing In support. quarter there significant and impact category, in of two. syndicated are to XX% that supply There out-of-home chain the issues, reduced including about out impacts some addition promotional me is of to and caution from Due coffee data during stocks quarter. timing in with you our also numbers typical of caviar significantly category regard only consumption let sales, to that mobility consumer

expectations all-forms the and to As eventually volume second the pressure in continuing prior At the This consumer same time, some return we increase mobility the continue house, with we a our we coffee occur. consistent have that other category are pre-COVID this single-serve prior environment compared single-served this to of as at-home to increased forms coffee, levels in related dollar in time. to of expect rates we move dynamic is we relationship to improvement we track remained increased to ongoing pricing with out-of-home growth in attachment into continue office-coffee, the year. would consumption In strong have including see expect Despite to the coffee gradually gaps seeing and consistent improve are months which between coffee. the price. over between pricing, core

a which will over connected quarter nationally located other temperature system to including yet. wider coffees, that pod by new recipe It machine, one recognizes Brew brewers a multi-screen our the of new incorporates five launch Keurig Let the have highlights Ice a and of new cumulative in of technology, features is enable specialty K-Cafe also The Technology smart growth three, an brewer past guided brew consumers the me smart our the delivery by coffee shift speed Over enhancements perfect ever App. the in K-Cafe interactive coffee ID curate enables to to our for the adjusts strength, Cup. to capuchins, brewer, multi and made lattes experience, This some we product create and Brewer years. In enabled we best representation drivers. which also range

in Smart pods. our the innovation new million industry households. households for technology Super and X create Auto-Delivery of new the to key brands the on K-Café addition as we shop we are to BLK roster enables the Keurig fraction and few to Keurig into & pleased cost, to Intelligentsia Quality unlock reach of SMART to coffee experience continues greater next joining connected to remain with System players continue together, by a and track enhancement The Premium which our be system Bold in Coffee such partners. recognized Taken two and the With with platforms younger announce development, at of years, consumers smart home, to appeal a continued

of The as available participation nationwide that year. these Coffee Keurig addition provides endorsement joining will at pods In price we new points consumers, brand. pod coffee this enabling the by to the a began shared will system reach Community strong around Community events of a system premium production quality the or delivered K-Cup of month quarter with later per also be $X the to Last of and for be our brewers. and our license this keurig.com on retail partner pod,

In in consumption soft in which addition McCafé cold brands. carbonated grew or represented success on recall Single-Served by have again past majority carbonated the brands, achieved fastest quarter. great we July X are beverages, Keurig this vast holiday the existing In the share. the driving the to gain market new had Shifting market past portfolio. This we drinks, was XX% XXrd years held substantial share we past growing dollar share adding in brand in ago which as expanding and consecutive we holding two-plus across brand a grew joined you the the over a our years. slightly grew KDP to period few quarter licensed drinks will soft Coffee System holiday of growth in

as our has We examples fastest well X% the brand, for as the this Refresh dropped of the Snapple quarter Category which Number Pepper as backed which ranked in the to consumers and held, is Cream Unflavored strength build food been Premium dollar the market is year brand with leveraging Water Brand continues Soda chain market portfolio, by Dr by effective and such by our X Snapple of CORE consumption share execution are attract XXXX, portfolio. the Snapple doing launched in in Hydration supply the disruptions which IRi year. two. two and for successful as recently of Both in innovations differentiation off non-carbonated CORE strength Pacesetter benefiting and last beverage last this investment marketing. and exceptional are for dollar from year-to-date. and younger year, momentum was in driving growth growing

in share a continuing in share brands fastest great sparkling our and also growing Polar in in the market water and the for XX.X% the to have partner becoming two quarter driving had brand Seltzer with full category, growth to We grow. success suite advancing points

by by higher XX%, In than Coco over mix, XX% addition, penetration in Increased cold dollar and both the with driven XX%. elasticity share X remaining continued points net market beverages up X% grew investment impact to and in more volume execution Household were packaged increased and Vita quarter, share marketing advancing strong quarter. by pricing in-market sales Within supported the growth modest. beverages,

accruals the higher favorable For XX%, volume Beverage pricing, up and related benefit Concentrates, higher reflecting net sales including to were mix. of trade timing

beverages strong performance, strong led On marketing balanced supported XX%, two by Peñafiel, Latin America with segment in as Finally, than net Squirt increased more basis between the were mix, Elasticity America brands for portfolio by modest. Beverages and increased an a year pricing higher impressive sales and a sales a increase XX%. volume been for investment. in quarter Mott's. the consistent such significant remained Clamato, a with Latin has net net up

Atypique, signed coffee to the sales During We offering growing the ready-to-drink segment an exciting with unique strong investment agreement foodservice the This non-alcohol, announced non-alcohol rights in fast Canada. brand global the completed and our opportunities and food to leveraging portfolio channel, and our highly Tractor in of KDP emerging in to service acquire fountain new growth sales alcohol in and Beverage an the ready-to-drink strength provides is innovation in quarter Canada new agreement in complements exclusive a successful minority our platform cocktail we incremental category. expand an team. which

tailored we organic, first specifically operators. offers Tractor food solutions service As non-GMO certified and announced last only beverage the quarter, to

and examples investments, the great of for will turn capital the as Executive key be the areas me which KDP, his are Chairman. to over let M&A strategic on Bob broader but provide these allocation commentary While to small it some of one opportunity focus

Bob Gamgort

our merger, algorithm. had operators, a by and years emerged and built with team forward-looking running solely leading the Value our has our that business volatility TSR industry attractive the business nimbler of than the four have ever. we on We distinguished reflected past with of great majority since been excellence. members that focused tested and is stronger and ourselves In strong in pressure macro organic approach prices, has as

We of also returns an have organic know enhance free we opportunity shareholder flow. discretionary our to through the deployment cash strategic

capability of value evaluation, disciplined to new CORE, the as any no our for We new us allocation. machine. during logical brands our growth discussed consider leading value in proven the M&A risk it’s process examples capital by opportunity underlying as us. Polar, and create deal employ further Therefore We and a to than have today's in to and understands which true reward adding rigorous new and and versus our brands into balances a business McCafé. KDP build for Vita exceptional partners Look such call Coco our

strategic range partnership We the lofty but outcome a brand us also expand to secret from historically only the It's faced white acquisitions more has space. valuation for sellers, our of fewer the being portfolio our approach and filling with enable to consider one, no past been M&A that KDP. not when disciplined expectations has structures

a compete for to entrepreneurs partners, action our improves of will best, the deal if we're partners. we combined with equities. which these We in is with for investments ask than We success begun months far with this several knows that the proven an know the the growth has in overpriced has alternative creating for asset acquisition. The are ability. potential challenging All recent environment with high as our investor own conversations companies narrow for spread. more value Time bid value tell against are having potential an that that believe better team our is structure good encouraged that we environment and that no partnership shifted M&A

$XX.XX repurchased noted in price attractive in share. capital. projects as opportunistic shares approximately the and growth release, As share buybacks at our We our average of press our quarter uses we internal during per an investment million of X.X see

moved the as size $X to billion distinguishes unique over before be flow, investment opportunity. Finally, the years, is of discretionary believe expected provide our a to next X we of the our cash now will on which us commentary Ozan year we outlook for some the Q&A. balance

Ozan Dokmecioglu

our digit press full reaffirming currency in adjusted digit are mid-single share growth low our we year the diluted constant guidance release, including net for while the double range. growth earnings in sales range, indicated to per As

earnings We the to single continue unchanged tax continue approximate to second assuming following in XX.X% reach range, driven outstanding the billion, buybacks. Adjusted for the in assumptions. guidance, expect per meet share be digit estimated quarter, adjusted the is single this fourth expect XX% diluted leading growth performance we half to X.XX share Supporting growth shares digit are year. strong expected rate the to to and range high expected by weighted in Adjusted additional interest the is to $XXX expense million. no approximately to effective

The timing to strongest share second of is and the pricing driver like the two. inflation. expected primary our phasing three look the the much sight the expected on the I current the have given expectations input second covered half. to costs point some on for year to lastly we price share detailed results half this quarter of per At good Quarter in delivery, between be are perspective environment, of realization. terms year relationship while in line Finally, earnings of to four quarter want is and our of is

in to than was will two. more which in XX% quarter recall advanced You one that XX%, quarter inflation

our to driven to expect positions. in this of rate of three EPS be three. Coffee roughly the quarter offset getting Because versus inflation we growth to We benefit more inflation even pricing three, the we In quarter we the incremental half the quarter quarter. quarter by rate four year of be to higher the are our in inflation largely Green deliver expect for P&L, prior expect

As spike margin quarter quarter. benefits realize enable inflation deliver and in taken, us we a the will already to which full four be reminder, in last pricing we significant and fourth will the we inflation year in lapping of offset improvement the experience

will this assume that greatly XX,XXX on KDP. of leadership Finally, and support the I our and our to company, including great I Bob, Directors want of dedicated of role employees Board to acknowledge the our CEO I'm the take and tomorrow endorsement Team. appreciate honored Leadership I Executive of

Looking more excited KDP for I see ahead, be in potential I the chapter. this new about couldn't growth

have arise, the while class We The itself leverage will enabled that further way these Doing opportunities team did our to it nimble the capabilities, the face as to key fast our KDP your since all last to that flawlessly strategic just differentiate new and team. executive on capitalize distinguished whatever in merger made is moving to our for as back standing build to opportunity brands, we've it go-to-market again has our plan, come attributes chapter. macro hand challenges proactively questions. the world our this ready will operator we enhance progress I forward. us strength and and will flexible, now our us

Operator

of comes America. Please with ahead. Bryan [Operator first Spillane go Instructions] Bank The from question

Bryan Spillane

everyone. morning, Good operator. Thanks

Bob Gamgort

morning, Bryan. Good

Maria Sceppaguercio

Bryan. morning, Good

Bryan Spillane

[Technical I that then you the back or cold we’re just and a to me. in all half for price put inflation, of about One, up. as the price inflation, for are the need kind increases half thinking follow much year have the and into Difficulty] of beverages pricing have of there you Difficulty] questions or plans pretty in the year looking Two further [Technical Ozan back cover

Ozan Dokmecioglu

inflation I thanks good on Yeah, for going mean, all note first know obviously question. also and hand-in-hand environment. and because is in of it with morning as important pricing the – what's you to the macroeconomic Bryan that goes

for and realization the price into have a we a of the largely are clear cost the it's on covered the input year, good very of remainder also us. So line for side so we sight

there So early we same year, as have time, as at times, early is well as well starting too. as XXXX quarter announced the throughout as several this

taken well have the in portfolio, We Systems, several the as actions Beverages. as pricing Coffee both Cold across our

to the we going but activities managing other been of depending we as pricing detailed went is have along those regards inflation, how trend, action we So that business. as to terms the on the plans situation through have you several talk take we necessarily and in are previously, further macroeconomic well as future plans, ready plans activate our don't with to done as know, levers pricing action with action

As you or focus don’t know, just fixate on lever. we necessarily one

mix volume, We our our the relation management have in multiple levers combined business with the obviously delivery productivity pricing and in starting investment. with the business to and

available in for four us to macroeconomic the So the to changes to we take the situation been that continue years. doing we storm order have several will along expectations the we weather Therefore put order pricing. pool necessary levers last have, have the as and further we measures if in with

Bryan Spillane

just Bob, Thanks a then question for And you. Ozan.

up the at a when ago, multiples, and companies of you you environment, you two to I were question had. or or M&A cash you're flow think TAMs lot about looking backseat of thinking on my the is, year of years know profit discussions Just model, being a revenue there’s I in about revenue sort ago and that know know terms like focus guess made pick comments you were valuation on a growth a high and taking lot of the

trying profitability value has expectations be and also? businesses growth terms to Like of before. cash companies, a more looking than maybe the those seller's is changed flow So may of how they now that and consideration at you're high were were if where there in

Bob Gamgort

Bryan in investment of or put resources any what term where the and potential to it synergies model, and that focused looked there’s and companies. of long we've the access seed always kind a cash could we respective what we mean on what's in once of business, our and acquisition our of the an profiting those place generate and partnership I growth in from is off business profit Yeah. have then that we cash at

cash. the sellers multiples, on getting term us, they and you as are we or are looking from just Having what has in the people who against out talking different long as IPO were ago who that, recent were and know said we valuation For at profit theory revenue always competing a been year based were go valuations looking stats market. about fact they valuation potential at. we're had in very conversations that the could with Those models to

So but and done – in as and our overpay Coco well McCafé. caught valuing disciplined, always partnership up we not to have those going remain done we’ve an and we've which said, we sales. Polar have some we've on we in we’re as have anything structure multiple We're acquisitions alternative of performed we'd and for been rather a never with Vita business, up

Bryan Spillane

Bob! thanks Thanks Alright, Ozan!

Bob Gamgort

Okay, thank you.

Operator

The Herzog next go question comes Please with from Bonnie ahead. Sachs. Goldman

Bonnie Herzog

Thank Good morning, everyone. you.

Bob Gamgort

Good morning!

Bonnie Herzog

and you're I'd know to you color more attach business. trading any question coffee a hear whether home curious be your going forward. affect guess I the have the actually rates within down some seeing consumer could pod that I your on on of signs

quarter the think decelerated attach during bit. rate your know You I a pod

brewing see that that the slowdown know offset in for switching be they thinking know if Do their a consumers expect with of economic big me. risk it possibility homes, That’s coffee coffee thinking start for than consumers wondering consumption in you lower Bob your know about in do Thanks. comments. home. about pod their like even incremental by owned one to more of you how So you you something back an ground or consuming know you brewers, to coffee you know you your

Bob Gamgort

growth penetration system household attachment in part the first the so more than driver coffee rate. Yeah, of is our is biggest

as increase forms growth that's our We're different done. in coffee to to so of the ways us during trend term. year X re-opening just office about has So – from past in long and front noise referenced that’s the attachment weighing in offices, Coffee even number across regard still growth most not prepared the only our in are per of more COVID the be of opportunity and our that and recession has we two business. our open. about, to us fully for if bigger X X saw the opinion households reasons strong million and in as the above of and million our continues have coffee home. consistent that's years. been little The in households With negative a that expectation so any million the an about, and – peak of coffee, CSDs just rate against as and household out is I been we’ve in we are had rate resilient is homes, in recapture bit most term levels, last We all of been people over went you difference looked we've remarkably been that all talked resilient working I tradeoffs, for penetration. pre-COVID area CPG back actually we studied strong is this at the between we gradually long Attachment tradeoff know a of where categories. a has we on see within for our growth even right back among reopened don't and remarks to fully of our and the that actually that as had to talked are business a that been been, hasn’t quarter factor that going down this about Interestingly that's CPG rate almost there's that's saw one that the

a in premium pods. in increase slight over label the pods, some see private quarter, reduction You and

COVID during the recall true. you If reverse is

for business and a reversion if So private back within in-home us. does it's and honestly, we consumption other to well tradeoffs happen, that is recessionary single-serve out-of-home which label to so go forms great see all real forms would know not remember, pods, almost this we be make And the between a people the we that’s even impact, term coffee. positive against of a majority consumption, is that protected from do net of trends, if a long there

Bonnie Herzog

much. Thank sense. so makes it Alright, you

Bob Gamgort

Okay, thanks Bonnie.

Operator

next The Jeffries. Grundy from ahead. with comes question Kevin Please go

Kevin Grundy

Good Thanks. everyone. morning Great!

Bob Gamgort

Good morning, Kevin.

Kevin Grundy

bit touched Bob. SG&A in – a came have on must higher. good You SG&A morning

was right line to sort coping I in what in think there many And I within a levels. that. some that and At to sales. industry the you, within SG&A of I think for mention of and point and coffee, lesser the one of during term investment marketing near others mean well, you're then marketing. of dynamic level both with higher X% percent Ozan that then advertising was in as PB it talk you as Maybe Bob spending a as about did so extent a item [ph], reduced for what's COVID. guys

still back kind stacking area. level just X% longer you and right is the low comment expect the term what to when to Thank in get Maybe of on We’re you. that?

Ozan Dokmecioglu

Kevin. thanks Yeah,

line, will consolidate. a with it's When of part a get or line lot So to fact there a together your question. and cost and first the of minuses, that start of we elements SG&A you in pluses actually our quite I look are bit

for little let a further or a try bit little shedding expand light. to me So bit, provide

that production been also year on one at. cost especially second our of for employees Warehouse line, are SG&A are That big pressurized white last collar, been sold. most and biggest the see, bucket included that the included our the line. and goods pluses factor. increase of us behind think are labor factors as of as line left also increase Bob, and the line including and and our explain onto item but minuses have And across elements said, and the increase in the most of have, line that items TNW, company you. frontline in the in that or good labor many of line in are in are that in levels there with manufacturing line. four And we with looking so inflationary which investments DSD, or that have related, advertisement line whatever in year, some the had frontline you that And transportation volatile whole of we warehousing majority of And of has increase is and you that do exception First remainder factor know we I our throughout having the that expenses that of also the promotion, brands, merchandizing, the included. all included you starting all, tended spending the all which that that line, our core in as so almost has any the overheads, so is SG&A the inflationary that Transportation leaves us, represents one our we is obviously including you the the including that these

Bob Gamgort

business Yeah, piece, know obviously talking recap going number about the not marketing the you wide forced I’m a those. of do way and we changes in COVID all to

that those want good experiences the of the back things we of in okay, learnings were. to were to saying, to Some way go continue them are we future, some want

that's the the perspective, think precision work We with brand all us sensitive mean So strength were more marketing a our caused it's forced I that the to on portfolio. understanding up and return much terms that’s of spend. to end. dial I It think marketing I evidence that we the level able lower marketing proof really is the best about spend investment be in of is and to our required. were really do where of in successfully reset

and at do use use, a then tactics support and worked more how pretty us be much the correct well. precisely focus So it's and brands available, which target we able to for became now want course what we that’s to we levels, data do to all want it critical in the of to more on portfolio

to as plan we of that past supporting in the of if and the you strength whether our plan we long Day, any increase for this our that's all think minuses about took is navigate three the recession you Investor But ability – than to more time. pluses our continue nothing know like us now and over marketing inflation is our sit strat we to so all great you that, we in, will and and increase As we through growth right the brands here think term as because and volatility be careers, say is reason position ideas speaks of the a experienced we spend over The marketing our of today, overtime. years really to the have we're continue over and I to environment.

Kevin Grundy

both. you Thank good. Very

Bob Gamgort

Okay.

Operator

with The from Lieberman Lauren next comes question ahead. Barclays. Please go

Lauren Lieberman

Great! Thanks! everyone. Good morning,

Bob Gamgort

morning. Good

Lauren Lieberman

extent I comparison, know but much brewer you have to appliances, versus been XX% the so talk challenges the I expected, household as some that, was a called discretionary you of wanted X% retailers with course it to of bit were sort. know about small sales out brewer down items very and think volumes signalling you

got Is from about to comparisons. brewer perspective terms big on for just does seeing again feel million you've run over So in What an year, rate X retailers the – if it feasible the some thanks know the addition feasible? rate pretty traditional of of that inventory and year anything environment, on this – you per get that of but for in back this know still year, Is wanted on time. push households knowing balance referenced economic in again your average you're you particular. I really sales a

Bob Gamgort

why let million feels every we part, penetration, important because X part, and year last me questions that like asked most we the is household start is the can't get it with year about this which the do Yeah, is households.

that X to inflationary that no confidence COVID ability strong the year so market, we're to so in available and the area penetration that, a indication, years is recession, on. households add it's I leads of of per its that good at very COVID, And shape more XX in our ton say would we think of household I have there's size and us growth environment whether steady, than recovery, million

would replacements The it's correlation. when The we basis out a household think, clearly There's quarters. we there's what this quarter quarter-to- loose. and is make point not correlation sales just point more are new XX X certainly upgrade with people brewers. we and reason features of and last you to zero been That correlation and sold even addition households sales have second strong over penetration added to some the million giving might of and or say the new that year, I the system on time; and brewer sold you between have incredibly brewer million than And did we upgrades we design. tells brewers and majority new benefits we

X a our with said we’re X%, approximately sales period XX% the a year are up that So year-to-date range. million this ago, we the when in X and ago, context, or same at million year XX basis million down in year, two XX% on brewer brewers a household year time to

I as else. like with. some we're know pricing expect not we’re on impacting But cycles, Would elasticity it see I which You brewers, taking some it upgrade everything penetration. effect? of the inflation I see but Definitely! perfectly see we there impacting fine household

money As make so service know brewers. really household very we and don't and much It's penetration coffee in core you are our consumption, all of on assumptions really intact.

Lauren Lieberman

that. your would then And you! to hear though love pushback retailers just levels, inventory get Thank on question and topical, Fantastic! perspective retail the from one just to on

Bob Gamgort

lead of that category we're incredibly with the is surprise are that shift caught have definitely overstocked sells a in as times an it Yeah, by are you issue, many goods that selling, them not so behavior they and in but long and know well. consumer

coffee know a drip household future the X% I is the to also about of – up of opportunity. the of in pods the for a sell brewers off XX good Again, trade that to pod purchases them. go and they brewers, brewers As single-serve, growth most volume of and from retailers units. we're who million profitability said, This sell over great still profit change they the sold convert majority that very talking and significant time those is retailer maker most every

inventory they best cut is looking in where profit So to area not – not store, one back drivers are this the This right they growth one on of and the this but now. entire their still is is the are focusing.

Lauren Lieberman

Okay, much! so fantastic! Thanks

Bob Gamgort

Sure.

Operator

with comes next ahead. Chris The question Securities. go Wells Carey Fargo Please from

Chris Carey

Hi! Good morning.

Bob Gamgort

Good morning.

Chris Carey

pricing. specifically coffee My on question is

remains though raising label more coffee on any minimal So the label we more within think bit just operators and private does looking look pricing to pricing Can quite that quick you commentary we're category, pricing which and at the with overall overall partner maybe quarter, when a like segment have you seeing can in it coffee just higher? follow segment and pricing KDP up. Then consistent these see partner much in in pretty a the track is the will give just be the pricing the I substantially even channels. private

Ozan Dokmecioglu

pricing and we the Chris. terms for Probably realization. question thanks and owned the products focus through in let’s our on would are much be the Sure, own, verified say it of how licensed seeing

and Bob pricing – couple actions portfolios articulating of was I we our a it, we pricing brewers taken for that. have licensed obviously control including and a brands As the that just is in as few of ago, full across the coffee, our and minutes the which owned economics

take licensed end either as for to most our said, actions which XXXX the for action actions, on that to the contribute several look is to look overall owned it label with achieved of with important, the the there towards the that label Therefore, single-sever, initially that time. of pricing look you at and coffee across taken industry we coffee are to price make ourselves data will sure successfully look other part, also we in early produce have private when was shown part pricing on, And see have you the the And benefits across brands happy have and consumption also the segments would up. what's actions. portfolio. pricing the or – X% example the see announced which a but label recent when the when quarter, few the with but pricing sub-segments two the – or and as IRi regards bean economic line place. of portfolio has you is to the also So was when you plans the that to going with that the the same let’s players we off realization slow we or the the the that path we Private data, very that coffee how resiliency that other take have remind decided still of Bod our private is you we the almost quarter a and also prices. one seen, especially last latest category, we in you regards we year to gone little to this the more year taken less in have that that numbers are besides have to well. quarter as And moving And of

Bob Gamgort

part that just our that gap part which that in the a you're is large add a we're as our complex, large concept that seeing seeing, for partners. what the P&L in – discussed understates between will the reason, admit Green but and not things of on me just responsible not I bit the a Coffee because in we're retail what at purchases our and pricing past to is we of fact only it, one Let reminder realization

right is impact biggest within now the Green inflationary the So coffee impact. Coffee

partners Our P&L. on take that their

relative just the through doing big because feels happens are what cost P&L. structure our our flow market, a is, the of it pricing so and understate does not part to like the We realization them for what conversion

Chris Carey

remain out quicker keeping in below of better a the were you back we That’s at you you should there quarter, very consumption. expectation shipment back well. follow-up mind as end coffee Are thought? catch a that like half than as was in dynamics up the as for we any the you into over into last position is on be Then well. thinking go to feel helpful. volumes going It had half just of came than quarter. quarter expectations this shipments Did in quick high The does pod last and

the supply just for So pipeline chain well. and as the contextualizing thanks

Bob Gamgort

catch recovery our good inventories, means news exited do an to the as markets do investment where service said be quarter do consumption is, made so, our we to is second in in and up we We in going us It that on enabled but the full that. the position accelerated. cost as some in we opportunity caught our result in a what to the P&L first below good so QX, we we was of were said retailors, it’s up to that so. largely then the consumption half, to in missed and on quarter first our above partners that is a We’ve half. and and to in have coffee the we're Yeah, as quarter, that of us the second second

So should balanced. largely and be going consumption forward our shipments

Chris Carey

lot. a thanks Okay

Operator

Consumer Edge Research. The question Please from next Cooper comes ahead. with Brett go

Brett Cooper

opens Thanks, comments, were just to much how new two Carolina, prior South questions from company ability on capacity update to up relative expansion which to into you Bob, focused can M&A fits me. that large. your coffee, question bring And is portfolio you you On then and us second customers? how primarily just that on

to an Thanks. relative just check how example? wanted [Audio Gap] in Just on to

Ozan Dokmecioglu

thanks for question Brett. the So,

part building. with the to me that South the been let first take have Carolina we plant regards So coffee

several now in right into line a we manufacturer into as in-line catching and starting speak to our make when which we our reminder, line up production discussed XXXX onwards, Therefore, lines the begun times due was due first let’s facility excuse we are to still is to said on the we XXXX. previously, will our COVID, being we for of primarily also we large that in lines that issues before, that now, before, As buy. spoke expectations. with XXXX June putting. XXX% as planned Europe service, me, And are – the lines, was But ramping we we is take in related in agreed to have some to lowest schedule are put ran up coffee that the that of fact as this sure Spartanburg multi-year cake-up startups as that a slow there some

Bob Gamgort

we’re think say in we white had recent total what great to but very can with of a the is primarily into opportunity capability the through on and great correct, Day, our white can built strategic businesses and still Canadian expansion both it’s space, new is Canada that’s again new while business. with as M&A and your that I and that very new then fountain it’s these And that examples We’ve case. in but is is space I that that our add-ons space, platforms, got capabilities small, you consistent that filling the across Yeah, whole just landscape well, yeah, we've foodservice the on the geographic white point my example scale. new a got know out space, leverages portfolio M&A. portfolio peak would because really but Investor And talked capabilities strength conversation we Mexican was is it two most we looking our M&A question, Tractor add we about also

said across a that remarks think productive in look finding in and that few conversations. are as we I I So very quite you my are entire landscape know

Operator

there Was a Mr. Cooper? follow-up

Brett Cooper

you. Thank No.

Bob Gamgort

Alright, thanks Brett.

Ozan Dokmecioglu

Thank you.

Operator

comes question Andrea Teixeira Morgan. from with next The JP ahead. go Please

Andrea Teixeira

morning. Good I have two follow-ups you. and Thank question a please.

of the us. margins just provided, the of First focused for you now about I'll on likely for the QX quarter versus margin Bob, more reversal in this rates how work on scenario seeing the away can speak know perhaps growth on mix, but that EBITDA home flat the velocity. both exit environment you signs phasing. the home Ozan, consumer are to and in ahead the faster in Packaged you as any margin cautious And more And the of this running perhaps you phasing you the guidance will then, volume for increased Beverage obviously you put but pod a signs of implies I don't down out of than of math you break in but mix of any any so that volumes the volume year-over-year, And mass side, QX. business. gross the is and from understand guidance make and premium mix, it down there, signs water one Are in mean

you. it Just make right. sure want to that we Thank got

Bob Gamgort

into now. convenient more start and prices recession trade outlets, pressured, do packs if theoretically as not see you more any around we you the now. change terms that move right Yeah, of beverage, gas we with seeing sensitivity know anything being any its let you’d are any right or me small cold there's behavior, mean change in very channels right, always sizes. and see very, would small I down But in

that’s we our able it's that don't to the nothing as been heavy the concrete from but With specifically It's be away all on based happen in COVID. So we the break to home regard that coffee, side, drag things report would beginning business the a business data. may on our of out future. since

to about In how levels, back out-of-home, much versus total like COVID it's upside put fact on we’re expectations and drag but your a We recovering a to been talked pre-COVID how all on of before there. that us. our our represents still specific we is words everything other some guidance and of down I back. consuming that that below levels future gave much shop, and away-from-home The I very still the so was has about talking just to And the reflects it business, mobility gave that’s a quarter-by-quarter, on that numbers really incremental was our growth. people but recovery some In-Home about you built consuming in coffee into all well

Andrea Teixeira

piece? You about want to margin talk the

Ozan Dokmecioglu

exactly. Yes

And for to realization, So it's have the one, at and cost important are covered margins, which on so important is we look the these XX%. important three largely in to because of whole equation. and the a year, ago, of you are pricing question are do it, when just inflation minutes on points. we at the the regards productivity the reiterate what the back price with we In remainder good quarter that sight input few I in this step the a and came line size, inflation relation, said asked also the we

quarter two expect just to at quarter we be also than to a two. three higher came and spoke, be little the, XX% quarter As in inflation in we

we offset that benefit to would we successfully year be inflationary to of versus that quarter to in more year. board Why? seen help or we headwinds last are happen we us QX that we versus that actions we less in the what we – QX At significant getting in four costs the that XXXX across same expecting time, input our spike in half So inflation quarter in have have big number, are drove most Because be a in four, inflation also business. lapping a a implemented, have expect our against rate further these are to that last so due would one. seen pricing more the

very out that well. that’s as to figure So important

we margin growth quarter to will full and the in the they pricing deliver our So will and have realize split what that quarter four. up well quarter as This already this does be would enable the second leave benefits order in of the taken, sum four. by half, offset three the in it that inflation That us? we expectations leaves as us us which to

Andrea Teixeira

Super helpful.

back is said index COVID? Just Bob had still was one to that the rate just classification, that it what or XX% the away-from-home, of about prior

Bob Gamgort

specifically, about We so. that haven’t talked

Andrea Teixeira

I’ll you, pass Thank fare. on. it that’s Okay,

Operator

go from Steve Please Deutsche The ahead. next Bank. question with comes Powers

Steve Powers

Thanks, Hey! me. good Two morning. questions from

parse Beverage could trade in the hoping versus of the impacts run out more this accrual one, one rate I first The maybe of clarification. of bit the underlying little you pricing quarter. was a Concentrates, of first realized

know clarification quarter. we trade reverse You a will this something or should if accrual impacted discreet it's that expect if that

Ozan Dokmecioglu

unit question. the accrual Beverage No, hi trade take specific Concentrates Steve! me Let

First that. to daily of all, be accruals part our helpful of lives. would basically The talk about trade it normal are

the accrual for obviously plus, difficult half Do is and that’s we have really And in of or the that to our let’s also come not all procession, negative that's And quarters? other know, as almost making have as timing the as we reason experienced trade happen. first expectation possible, of price absolutely in the you we Some more quarter a as it what's our macroeconomic say to some back in of XXX% negative. as the seen all going than because quarter numbers. of close expect situations, get ever to the No, this order we but around is do accrual. these to two best not trade of reality or trade, accounted, in realization that’s quarter to estimate the changing

Steve Powers

think I Lauren’s That's household you Bob perfect! comprehensively. XXXX then guess, Okay, think either to just one, I Ozan question helpful. penetration, build I And on on or addressed

Whether you about I'm is curious to acquisitions might in household or playbook that value more the however a spending As that to a continues I guess that just asked get comes under the changes every so different how you you just said truer year, a the ahead and in you extent recession looking come in terms a of on pressure. to just to messaging, different. that assortment recessionary market bring precise confidence consumer the think environment? discretionary on extent brewers playbook it of emphasis

Bob Gamgort

excellent Yes, question.

entry per talked Super the now Premium are wide is be a of a the about see price $XXX up have all per You $XX, on to we level price points we applied below range we on price way $XXX. and we due here, brewers the right, to entry dollar that the call, our to down used which up same now to capabilities price the where the range around they inflation And $XX $XX, to we that $X.XX but points brewers level on point coffee points wide cup. of brewers, around all way have way around as to have about to all pods cover and pod

take by So are the appropriate consumers target we have mix that price and to right and the with range able retailer points.

that these to capable producing of we're actually coffee coffee, that, comparison price about things, and and cups is introducing, a it's have valued are between is price ground new Xx you coffee that message deliver more if we brewers you think comparison and point to are cups messages other but them. the one specialty much out-of-home. The is able iced the go out-of-home XXx, dramatic; Because between the cost to that to

So messaging that’s us consumers our to experience shop communications the it we’re from the more away to allows that in-home, compelling. a able is coffee in-home actually very home replicate allow in dial up value to

a have the it's about kit way exactly our out. within we’re we number tool way laid and options thinking that So the it, of it you

Steve Powers

thank okay, Yeah, you helps. I that it. very appreciate much,

Bob Gamgort

Okay.

Operator

with Ottenstein will Robert The last go ahead. Evercore. from Please today question come

Robert Ottenstein

very you Thank much. Great!

wondering if for looking know and Just of also you. been of just of you perspective know you're search maybe management kind you team on and us of maybe update CFO you've changes in management give can a what And give that changes, what us skill today? looks going from you you made organization see the a there's kind The terms senior sense like Thank set. us and experience the an remind then other some forward? the how

Ozan Dokmecioglu

Yeah, good morning, Robert.

take CFO couple and questions that a of line. your me let the So part on to follow-up

but as wanted also said world for that to the are we the with complexity – be of forward will the manage the recruit CFO class search, only regards we are today’s all, are modern building, a for and aware, looking future and our business CFO we to that beverage the company. we of to before, not First we size the

and and and am bench fortunate experience going I happy time, a talent to very important the well. have deep it’s of to At executive. same are have say that’s a also skilled we So and

sitting next Lagoudakis publicly Interim announced as on stepping George on fact CFO. we have today as and In me is in call, this to George

that’s So note. very important to

be positions be looking have perform creating other carry the With as gap no position. took as we in for, well the to any any point necessary duties lets do may regards as open without knowledge on there time that So as place, experience, gap. the any we we not promotions and internal the clear that to well thing; one at this in the

took there either we in candidates place basis, jobs on for an a will promotions the be internal people or have We healthy have on the when be will we and the external handle looking external that that where place.

are a recruit someone to So positions we situation the it's not and that open left looking externally.

continuity that make So is sure that's important there. XXX% the to

Robert Ottenstein

financially oriented thoughts CFO, I then the mean of who those terms that are there’s in are CFO's other And operationally more ones lines? Any oriented. just more and along

Ozan Dokmecioglu

knowledge the find CFO the the CFO. but the serviced you. absolutely, on which When to we several, team – factor credentials back several experience, forget, supports also that and team is the focus by necessary all we be really is another should financing leadership look it with and occupied executives step and world mean being important that have I at and agree not the our and to today, I the have It us it are for we below and roles those is KDP to to finance there's overall we that class the finance not necessarily the would do expertise. the What looking team operate for of functional our and contribute of CFO able company on company, expertise. perform the opportunities a strong most or grab which are helpful one matters all Therefore be definitely very excited agenda we importantly specific ahead activities, lie the to the CFO, a to growth across that very cross to us. that given we basis

Robert Ottenstein

much. very you Thank Terrific!

Ozan Dokmecioglu

You’re welcome.

Operator

the like session. company remarks. conference question-and-answer I turn This our over to to the concludes for would back any closing

Bob Gamgort

this you thank for Thank you, and everyone operator, joining morning.

If and ups, I to Thank you questions. Chethan reach or all around and are follow to have very much. questions answer any talk you be we’ll out; you do any happy day. Please

Operator

concluded. now you Thank today's has for conference The presentation. attending

disconnect. now may You

Keurig Dr Pepper (KDP) 28 Jul 222022 Q2 Earnings call transcript