Net sales in Keurig Dr. Pepper’s US Coffee segment fell nearly 6% in the second quarter ended June 30, but Robert J. Gamgort, chief executive officer, said he sees several factors pointing to a rebound in the segment.
Companywide, net income more than doubled to $503 million, equal to 36¢ per share on the common stock, when compared with $218 million, or 15¢ per share, in the previous year’s second quarter. Net sales increased 7% to $3.79 billion from $3.55 billion. Keurig Dr Pepper now expects fiscal-year net sales growth of 5% to 6%, up from a previous guidance of 5%.
“Our solid performance was driven by strength in US Refreshment Beverages, encouraging developments in US Coffee and continued momentum in International,” Mr. Gamgort said in a July 27 earnings call.
In US Coffee, net sales decreased to $970 million from $1.03 billion, which reflected a net price realization of 1.6% and a volume/mix decline of 7.3%. Greater consumer mobility when compared to the previous year’s second quarter affected the total at-home coffee category negatively, according to Keurig Dr Pepper. At-home coffee category momentum should begin to recover in the back half of the fiscal year as mobility comparisons ease, Mr. Gamgort said.
“In Q1, Keurig compatible pod volumes, a good proxy for the total single-serve category, declined nearly 4% across measured channels,” he said. “Q2, these declines moderated to less than 2%, with improvement particularly notable toward the end of the quarter. For the last four weeks, category volumes are flat to up slightly.”
Keurig Dr Pepper still expects to add about 2 million US households to the Keurig system this fiscal year. Thirty-eight million households are in the system now.
US retail dollar consumption of K-Cup pods manufactured by Keurig Dr. Pepper fell 2.3% in channels tracked by Circana. Brewer shipments of 9.9 million for the 12-month period ended June 30 marked an 11% decline year-over-year. Compared to pre-pandemic levels, 9.9 million was an increase of 18% from the 12-month period ended June 30, 2019.
On July 20, Keurig Dr. Pepper and La Colombe announced a partnership that included a sales and distribution agreement for La Colombe ready-to-drink coffee and a licensing, manufacturing, and distribution agreement for La Colombe branded K-Cup coffee pads.
“Our collaboration with La Colombe will encompass several exciting strategic avenues,” Mr. Gamgort said in the July 27 earnings call. “We will leverage our sales and distribution capability to scale La Colombe across major retail classes of trade. Along with the Philz brand, we are creating a ready-to-drink coffee platform, which will enable us to better serve the needs of our consumers and retail customers in this important category.”
Besides US Coffee, other business segments experienced sales growth in the quarter.
In US Refreshment Beverages, net sales increased 12% to $2.33 billion from $2.08 billion in the previous year’s second quarter, which reflected a net price realization of 12% and a decrease in volume/mix of 0.2%. The brands Dr. Pepper, Squirt, Polar, Evian, Vita Coco, C4 Energy, Mott’s, and Hawaiian Punch drove the growth.
In International, net sales increased 11% to $489 million from $441 million.
Over the first six months of the fiscal year, Keurig Dr. Pepper had a net income of $970 million, or 69¢ per share on the common stock, up 21% from $803 million, or 57¢ per share, in the same time of the previous year. Six-month net sales of $7.14 billion were up 8% from $6.63 billion. — Source: Food Business News.