Keurig Q3 Coffee Sales Stay Hot

Keurig Dr Pepper reported strong financial results for the third quarter ended September 30, 2020, and strengthened guidance for the full year, as its coffee systems division stayed hot.

Net sales for the third quarter of 2020 increased 5.2% to $3.02 billion, compared to $2.87 billion in the year-ago period.  On a constant currency basis, net sales advanced 5.8%, reflecting strong volume/mix growth of 6.6%, partially offset by lower net price realization of 0.8%.

Operating income increased 29.8% to $753 million in the third quarter of 2020, compared to $580 million in the year-ago period. Net income in the third quarter of 2020 increased 45.7% to $443 million, or $0.31 per diluted share, compared to GAAP net income of $304 million, or $0.21 per diluted share, in the year-ago period.

Bob Gamgort, chairman and CEO, Keurig Dr Pepper, said, “Since the beginning of the pandemic, our broad beverage portfolio, unique route to market capabilities and resilient and dedicated team members have enabled KDP to successfully navigate through the challenging and volatile operating environment.  In Q3, we delivered another strong quarter, marked by accelerated growth in net sales, adjusted operating income and EPS, while continuing to post strong market share growth across our portfolio and reducing our management leverage ratio.  As a result, we’re confident in our ability to deliver 2020 at the high-end of our guidance, while reinvesting any upside performance in brand marketing and innovation.”

The company noted that its coffee systems division reported double-digit dollar growth in K-Cup coffee pods for at-home consumption partially offset by weakness in the office coffee channel, as elevated work-from-home trends persisted throughout the quarter. Keurig said its brewers posted exceptional growth, driven by successful innovation and retailer inventory stocking ahead of the holiday season.

In the coffee systems segment, net sales for the third quarter of 2020 increased 3% to $1.10 billion, compared to $1.07 billion in the year-ago period, primarily reflecting higher volume/mix of 6%, partially offset by lower net price realization of 2.8%, primarily due to strategic pricing for pods. Also impacting the net sales performance was unfavorable foreign currency translation of 0.2%.  On a constant currency basis, net sales increased 3.2% in the quarter.

The volume/mix increase of 6% in the quarter reflected pod volume growth of 2.4%, driven by double-digit at-home consumption, significantly offset by continued softness in the away-from-home business, as return to offices and hospitality remained depressed.  Brewer volume was exceptionally strong, increasing 34% in the quarter. Driving this performance were successful innovation introduced over the past two years and continued marketing focused on growing household penetration, as well as increased brewer shipments to retailers for the upcoming holiday season.