MILAN – Keurig Dr Pepper released on Thursday third-quarter 2023 results topping analysts’ estimates. Higher prices and steady demand for sodas and drinks helped limit the impact of a still slowing coffee business. Adjusted earnings of 48 cents per share grew 4.3% year over year and came above the Zacks Consensus Estimate of adjusted earnings of 47 cents per share.
Net sales reached $3,805 million, beating the consensus estimate of $3,776 million. This is also 5.1% up from the year-ago quarter on a reported basis and 4.1% up on a constant-currency (cc) basis.
Net price realization grew 5.5%, with a lower volume/mix of 1.4%. Continued strength in the company’s brand portfolio and in-market execution, along with elasticity across most categories, aided revenues.
Keurig Dr Pepper has been raising prices to counter higher commodity, freight and labour costs following the pandemic-induced supply chain snags that were exacerbated by Russia’s invasion of Ukraine.
U.S. Coffee
Net sales for the third quarter decreased 3.2% to $1.01 billion, compared to $1.05 billion in the year-ago period, driven by net price realization of 3.1% and a volume/mix decline of 6.3%.
Pod revenue decreased 4.8%, driven by a shipment decline of 8.1%. As expected, pod volume growth lagged gradually improving single serve category consumption, due to an unfavorable comparison to trade inventory builds in the year-ago period and the continued impact of exiting certain low-margin private label contracts.
Across IRi tracked channels, U.S. retail dollar consumption of KDP-Manufactured K-Cup® Pods decreased 7.0%, with significantly stronger performance registered in untracked channels. KDP Manufactured dollar share in the quarter was approximately 79%.
Brewer shipments totalled 10.2 million for the twelve months ending September 30, 2023, declining 4.5% year-over-year. In the quarter, brewer shipments grew year-over-year as KDP prepared for the upcoming holiday season, which is a key period for brewer demand.
GAAP operating income increased 7.7% to $293 million, compared to $272 million in the year-ago period, including a modest year-over-year benefit of items affecting comparability.
Adjusted operating income increased 5.7% to $333 million and totalled 32.9% as a percent of net sales. Adjusted operating income margin inflected strongly versus prior year, driven by higher net price realization and productivity, which more than offset the impacts of the volume/mix decline and inflation.
KDP reaffirmed its 2023 guidance for constant currency net sales growth of 5% to 6% and Adjusted diluted EPS growth of 6% to 7%.
“In the third quarter, we maintained healthy revenue momentum and delivered a significant gross margin inflection, helping to fund reinvestment in our brands and capabilities,” said the Chairman and CEO of Keurig Dr Pepper, Bob Gamgort
“In addition to continued strong results across our U.S. Refreshment Beverages and International segments, we also began to rebuild our margins in U.S. Coffee. We are reaffirming our full year outlook and remain committed to delivering a strong Q4 with an improved composition of earnings.”
Gamgort continued, “KDP continues to pair strong execution and financial delivery with building the foundation for the Company’s next phase of growth. Today we announced our expansion into sports hydration through a new and exciting partnership with Grupo PiSA for Electrolit. Over the past 12 months, we have established new growth platforms in sports hydration, energy and RTD coffee by partnering with compelling brands and leveraging our unique distribution assets across both cold and hot beverages to attract strong partnerships.”
