Keurig Dr Pepper Stock

Keurig Dr Pepper Inc. (KDP) operates as a beverage company in North America that manufactures, markets, distributes and sells hot and cold beverages and single serve brewing systems.

KDP has a broad portfolio of iconic beverage brands, including Dr Pepper, Canada Dry, Green Mountain Coffee Roasters, Snapple, Mott's, The Original Donut Shop, Clamato, and Core Hydration, as well as the Keurig brewing system. The company has some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers. The company offers more than 125 owned, licensed, and partner brands, available nearly everywhere people shop and consume beverages through the company’s sales and distribution network.

The company is a leading integrated brand owner, manufacturer, and distributor of beverages in the U.S., Canada, Mexico and the Caribbean. The company has a portfolio of brands with the ability to satisfy every consumer need, anytime and anywhere – hot or cold, at home or on-the-go, at work, or at play.

Segments

As of December 31, 2023, the company’s operating structure consists of three operating and reportable segments: U.S. Refreshment Beverages, U.S. Coffee, and International.

U.S. Refreshment Beverages

The company’s U.S. Refreshment Beverages segment is a brand owner, manufacturer, and distributor of liquid refreshment beverages, or LRBs, in the U.S. In this segment, the company manufactures and distributes beverage concentrates, syrups, and finished beverages of the company’s brands to third-party bottlers, distributors, retailers, and, ultimately, the end consumer.

The company manufactures beverage concentrates and syrups, which the company then sells throughout the U.S. to third party bottlers or use them in the company’s own manufacturing systems. Beverage concentrates, which are highly concentrated proprietary flavors, are combined with carbonation, water, sweeteners, and other ingredients, packaged in aluminum cans, PET bottles, and glass bottles, and sold as a packaged beverage to retailers and, ultimately, the end consumer. Beverage concentrates are also manufactured into syrup, which is shipped to fountain customers, such as fast food restaurants, who mix the syrup with water and carbonation to create a finished beverage at the point of sale to consumers. Dr Pepper represents most of the company’s fountain channel volume.

The company manufactures and distributes finished beverages of its own beverage brands. Additionally, in order to maximize the size and scale of the company’s manufacturing and distribution operations, the company also distributes finished beverages for its partner brands and manufacture finished beverages for other third parties, including partners and private labels. The company partners with other brands seeking effective route-to-market capabilities, including national selling and distribution scale. The company sells finished beverages through its DSD and the company’s WD systems, both of which include sales to all major retail channels.

Key brands in this segment include Dr Pepper, Canada Dry, Mott’s, Snapple, A&W, 7UP, Sunkist soda, Squirt, Hawaiian Punch, Core Hydration, Bai, C4 Energy, Clamato, Evian, Yoo-Hoo, Big Red, and Vita Coco.

U.S. Coffee

The company’s U.S. Coffee segment is primarily a brand owner, manufacturer, and distributor of innovative single serve brewers, specialty coffee (including hot and iced varieties), and RTD coffee in the U.S. The company’s Keurig single serve brewers are aimed at changing the way consumers prepare and enjoy coffee and other beverages both at home and away from home in places, such as offices, hotels, restaurants, cafeterias, and convenience stores. The company creates value by developing and selling its Keurig single serve brewers and by expanding Keurig brewer household adoption, which enables sales of specialty coffee and a variety of other specialty beverages in K-Cup pods (including hot and iced teas, hot cocoa, and other beverages) for use with Keurig brewers. The company, together with its partners, is able to bring consumers high-quality coffee and other beverage experiences from the brands they love, all through the one-touch simplicity and convenience of Keurig brewers. The company manufactures approximately 80% of the pods in the single serve format in the U.S. on a dollar share basis.

The company manufactures and sells 100% of the K-Cup pods of certain brands, including Green Mountain Coffee Roasters, The Original Donut Shop, and McCafe, to retailers, away from home channel participants, and end-use consumers. The company also manufactures K-Cup pods for the company’s partner brands, who in turn sell them to retailers and consumers. The company’s partner brands include Starbucks, Dunkin', Folgers, Peet's, Newman’s Own Organics, Caribou Coffee, and Community Coffee, among others. The company also participates in private label manufacturing arrangements. Generally, the company is able to sell these brands to its away from home channel participants and directly to consumers through the company’s website at www.keurig.com. The company also has agreements for manufacturing, distributing, and selling K-Cup pods for tea under brands such as Celestial Seasonings and Bigelow. The company also produces and sells K-Cup pods for cocoa, including through a licensing agreement for the Swiss Miss brand, and hot apple cider, including under the company’s own brand, Mott's.

The company’s U.S. Coffee segment manufactures K-Cup pods using freshly roasted and ground coffee, as well as tea, cocoa, and other products. The company offers high-quality, responsibly sourced coffee, including certified single-origin, organic, flavored, limited edition, and proprietary blends. The company carefully selects its coffee beans and roast them to optimize their taste and flavor differences. The company engineers and designs most of its single serve brewers and utilizes third-party contract manufacturers located in various countries in Asia for brewer appliance manufacturing. The company distributes its brewers using third-party distributors, retail partners and directly to consumers through the company’s website at www.keurig.com.

International

The company’s International segment includes:

Sales in Canada, Mexico, and other international markets from the manufacture and distribution of branded concentrates, syrup, and finished beverages, including sales of the company's own brands and third-party brands, to third-party bottlers, distributors, and retailers. Key beverage brands include Peñafiel, Clamato, Squirt, Canada Dry, Dr Pepper, Mott’s, and Crush.

Sales in Canada from the manufacture and distribution of finished goods relating to the company's single serve brewers, K-Cup pods, and other coffee products to partners and retailers. Key K-Cup pod brands include Van Houtte, Tim Hortons, and McCafe, as well as other partner and private label brands.

Product Innovation and New Partnerships

During 2023, the company launched its Keurig K-Iced family of brewers, featuring an innovative brew over ice process that allows consumers to brew both hot and iced beverages with a single coffeemaker. In addition, the company expanded its ICED K-Cup pod offerings to include a variety of options that can be brewed over ice and are compatible with all Keurig models. The company launched a limited edition ‘Start Me Up’ iced coffee kit in collaboration with The Rolling Stones, which featured a custom-designed K-Iced brewer and a customized coffee blend.

The company launched Dr Pepper Strawberries & Cream and Dr Pepper Strawberries & Cream Zero Sugar. The company also expanded its Core Hydration enhanced water portfolio with Core Hydration+, a nutrient enhanced water with real fruit extracts and essences, in Vibrance (grapefruit), Immunity (lemon), and Calm (cucumber). In Mexico, the company elevated its mineral water portfolio with Peñafiel Soft, which has no calories or sugar. Finally, the company joined forces with Blue Bell Creameries to create Dr Pepper Float ice cream, which provides the company a royalty from these sales.

The company entered into a new partnership with Philz Coffee to provide two unique coffee blends in K-Cup pod format. The company invested in, and simultaneously entered into a long-term strategic partnership with, La Colombe, which enables the company to sell and distribute La Colombe shelf-stable varieties of RTD coffee and to license, manufacture, and distribute La Colombe branded K-Cup pods, both of which began in the fourth quarter of 2023. The company also entered into a long-term agreement with Grupo PiSA to sell, distribute and merchandise Electrolit, a premium hydration beverage, across the U.S, beginning in early 2024.

Customers

The company primarily serves the following types of customers:

Retailers

Retailers include supermarkets, hypermarkets, mass merchandisers, club stores, e-commerce retailers, office superstores, vending machines, fountains, grocery and drug stores, convenience stores, and other small outlets. Retailers purchase finished beverages, K-Cup pods, appliances, and accessories directly from the company. The company’s portfolio of strong brands, operational scale and experience in the beverage industry has enabled the company to maintain strong relationships with major retailers throughout the U.S., Canada, and Mexico. The company’s largest retailer, Walmart, represented approximately 17% of the company’s consolidated net sales in 2023. Net sales to Walmart are included in all reportable segments.

Bottlers and Distributors

In the U.S. and Canada, the company generally grants manufacturing and distribution licenses for its carbonated soft drinks to bottlers for specific geographic areas that are exclusive and long-term, and they have historically been perpetual in many cases. These bottlers may be affiliated with Coca-Cola or with PepsiCo, or they may be independent.

Certain other brands, such as Snapple, Bai, and Core, are licensed for distribution in various territories to bottlers and a number of smaller distributors, such as beer wholesalers, wine and spirit distributors, independent distributors, and retail brokers.

Partners

The company has differentiated itself and the Keurig brand through the company’s ability to create and sustain partnerships with other leading coffee, tea, and beverage brand companies through multi-year licensing and manufacturing agreements that best suit each brand's interests and strengths. Typically, the company manufactures K-Cup pods on behalf of its partners, who in turn sell them to retailers.

Away from Home Channel Participants

The company distributes brewers, accessories, and K-Cup pods (owned, licensed, and partner brands) to away from home channel participants, which include office coffee distributors and hotel chains.

End-use Consumers

The company has a robust e-commerce platform at www.keurig.com where end-use consumers can purchase brewers, accessories, K-Cup pods, and other coffee products, such as bagged traditional coffee and cold brew.

Intellectual Property

Trademarks and Patents

The company owns numerous trademarks in its portfolio within the U.S., Canada, Mexico, and other countries.

In many countries outside the U.S., Canada and Mexico, the manufacturing and distribution rights to many of the company’s CSD brands, including the company’s Dr Pepper trademark and formula, are owned by third parties, including, in certain cases, competitors, such as Coca-Cola.

The company holds the U.S. and international patents related to Keurig brewers and K-Cup pod technology. Of these, a majority are utility patents and the remainder are design patents. The company views these patents as valuable assets. The company also has pending patent applications associated with Keurig brewers and K-Cup pod technology.

Licensing Arrangements

The company licenses various trade names from its partners in order to manufacture K-Cup pods. Although these licenses vary in length and other terms, they generally are long-term, cover the entire U.S. and/or Canada, and may include royalty payments, upfront payments, or some combination of the two, to the partner in order to use their trade names to manufacture and/or distribute the K-Cup pods.

The company licenses various trademarks from third parties, which generally allow the company to manufacture and distribute certain products or brands throughout the U.S. and/or Canada and Mexico. For example, the company licenses trademarks for Sunkist soda, Rose's, and Margaritaville from third parties. Although these licenses vary in length and other terms, they generally are long-term, cover the entire U.S. and/or Canada and Mexico and generally include a royalty payment to the licensor.

As of December 31, 2023, the company’s portfolio of partner brands included, but was not limited to, C4 energy drinks, evian water, Vita Coco coconut water, Polar Beverages seltzer water, Accelerator energy drinks, La Colombe shelf-stable RTD coffee, and Peet's RTD coffee.

Seasonality

The company’s cold beverage sales are generally higher during the warmer months, while hot beverage sales are generally higher during the cooler months.

Competition

The company’s primary competitors include Coca-Cola, PepsiCo, Starbucks Corporation, The J.M. Smucker Company, The Kraft Heinz Company, and Nestle S.A.

Research and Development Costs

The company’s research and development costs are expensed when incurred and amounted to $66 million for the year ended December 31, 2023.

Governmental Regulations

The company’s products and their manufacturing, labeling, marketing and sale in the U.S. are subject to various aspects of the Federal Food, Drug, and Cosmetic Act, the Federal Trade Commission Act, the Robinson-Patman Act, the Clayton Act, the Sherman Act, the Lanham Act, state consumer protection laws, and state warning and labeling laws, such as the state of California’s Safe Drinking Water and Toxic Enforcement Act of 1986.

History

Keurig Dr Pepper Inc. was founded in 1981. The company was incorporated in 2007.