Yahoo Finance Keurig Dr Pepper Inc (KDP) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and ...
Consolidated Sales Growth: Solid growth reported.
Earnings Per Share (EPS): Double-digit growth.
U.S. Refreshment Beverages: Continued momentum.
International Segments: Healthy momentum.
U.S. Coffee: Meaningful sequential recovery.
Net Sales Growth: Accelerated sequentially, nearly 3% growth.
Gross Margin: Expanded significantly.
Operating Income: Grew 17.5% year-over-year.
Share Repurchase: $1.1 billion buyback of 38 million shares.
Full Year Outlook: Mid-single-digit net sales and high single-digit EPS growth.
Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Tim, congratulations on the new role. And Bob, hopefully, it sticks this time, right? I don't want you to come back. A: Robert J. Gamgort (CEO, President & Chairman of Keurig Dr Pepper Inc.): I'm confident it will, Bryan.
Q: Sudhanshu, I just wanted to pick up on the comment you made about inflation and understand green coffee cost. If you could also give us a perspective on aluminum, just there's given the headlines about the sanctions and just the potential increases in aluminum cost, how we should be thinking about that? And Tim, maybe just on the coffee point, if we're going to see green coffee inflation, but we've also been discounting to get price points in line with where consumers see value, how do we just think about managing margins in coffee if we do see a sustained increase in green coffee costs? A: Sudhanshu Shekhar Priyadarshi (CFO & President of International): Let me take the first inflation question, and then Tim will take over -- take the next question. So our inflation, we continue to expect some inflation in 2024 overall, but at a more moderate level than in recent year. We talked about green coffee. We're also seeing inflation in aluminum, but as you know, we manage it within our guidance, within our range of outcomes, and we have factored all of these inflation and commodity. We also had some stuff for 6 to 9 months in our guidance. So our overall guidance for the year, which is mid-single-digit top line and high single-digit EPS factors in all of these scenarios.
Q: I wanted to talk a little bit about marketing in coffee because one of the things that I've been thinking about recently is that the messaging that you've shared with The Street, the messaging on affordability, some of the advertising you've shared, all feels very spot on. And yet, perhaps over the last 12 months, you haven't had the reach to consumers or the impact to consumers that you might have hoped on some -- communication of some of messages. And so as we're thinking about affordability still being very much a concern and I would think a selling point of single-serve Keurig Coffee and also the launch of iced -- sorry, the chill machine. A: Timothy P. Cofer (COO of Keurig Dr Pepper Inc.): Absolutely. So we are seeing and we saw it this quarter an increase in our total marketing investment on coffee. And I think as we've realigned back to the question that Brian asked making sure that from a price point standpoint, we feel good about our owned and licensed brand. It's an opportunity now for our marketing and innovation to work even harder. I think there's -- we're employing what we characterize as a bit of a barbell strategy, reflecting both the opportunity to reinforce value on our pod business as well as drive on the premium side.
Q: So 2 quick questions. First on the coffee business. So adding Black Rifle, very interesting development. Can you just talk about how that partnership came to be and whether this makes you more confident on your ability to continue to see sequential improvement in your coffee volumes into the back half of the year and perhaps into 2025, just given the momentum around that business? And then if I could, just on the cold side, Sudhanshu mentioned some of the innovation timing dynamics of the underlying cold business. Would you expect those to start looking better as innovation comes to market? And can you just remind us on timing of the innovation suite specifically with Creamy Coconut. A: Timothy P. Cofer (COO of Keurig Dr Pepper Inc.): Sure. So first on Black Rifle, as I mentioned in my prepared remarks, we are excited to welcome Black Rifle into the Keurig ecosystem. I think Black Rifle's coffee success, I'm sure you know what, Chris, is already well established in the coffee industry. And I think their decision to evolve to a Keurig system partner really reinforces our full value proposition and our stewardship as the single-serve category leader. So pleased with that development.
Q: So maybe building on the partner brands, I was hoping to get some color on C4. Maybe first, I would just love to get your perspective on kind of what you're seeing from the category more broadly. Trends have moderated quite a bit across the board. So just any thoughts on what you think could be driving that. And then just on C4 specifically, continued strong growth, some share gains here. You have visibility on where you're sourcing these share gains from? Do you think it's coming from kind of the legacy brands like a Monster or Redbull? Or do you really think it's coming at the expense of maybe some of the other performance energy drink brands? A: Timothy P. Cofer (COO of Keurig Dr Pepper Inc.): Yes. Yes, absolutely. Well, we continue to be really pleased with our partnership with C4. I think I shared at Investor Day as of that moment with since KDP took the distribution partnership with C4, and we made that minority investment stake. TDPs are up close to 60%. Sales are up 65%, and we continue to see growth potential for C4. C4 has got some exciting innovation this year around flavor extensions and around sizing and packaging configurations as well. Indeed, the Energy segment broadly, as you have mentioned, Peter, has seen some softening versus what was a multiyear run.
Q: Congrats, Tim and Bob as well, from me. Tim, I wanted to play back what you said just a couple of minutes ago on the cadence of sequential improvement in underlying refreshment beverage performance. It sounds like with the innovation you're launching now in CSDs and then the Bai relaunch, et cetera, it sounds like we should see sequential improvement in market share this quarter as we're looking at consumption data, but the full financial impact is going to be more skewed to the second half. I just want to make sure I got that right. A: Timothy P. Cofer (COO of Keurig Dr Pepper Inc.): That's correct.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
