Coffee Service

Keurig Dr Pepper posts sales gains for Q4 and FY 2020

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February 25, 2021

Keurig Dr Pepper posted healthy sales gains for both Q4 2020 and the full year, according to an earnings report.

Keurig Dr Pepper's net sales in the fourth quarter of 2020 grew at an accelerated rate of 6.4% from $2.93 billion in the 2019 fourth quarter to $3.12 billion for the quarter ending Dec. 31, 2020. On a constant currency basis, net sales advanced 6.6%, reflecting higher volume/mix of 6.3% and favorable net price realization of 0.3%.

KDP in-market performance remained strong in the quarter, with dollar market share continuing to advance in more than 90% of KDP's cold beverage retail base. This performance reflected particular strength in CSDs, premium unflavored water, teas and fruit drinks, vegetable juice, apple juice and apple sauce.

In coffee, retail consumption of single-serve pods manufactured by KDP grew more than 7% in IRI tracked channels, with accelerated growth in e-commerce, partially offset by significant declines in away from home, office and hospitality businesses. In the U.S. tracked channels, dollar market share of KDP manufactured pods remained strong at 83%.

Adjusted operating income in the quarter increased 5.5% from $813 million in 2019's fourth quarter to $858 million in 2020, while adjusted operating margin declined 20 basis points to 27.5%. On a constant currency basis, adjusted operating income grew 5.7%.

GAAP net income in the fourth quarter of 2020 increased 5.4% to $428 million, or 30 cents per diluted share, compared to GAAP net income of $406 million, or 29 cents per diluted share in the year-ago period. This performance reflected the strong growth in net sales, higher operating income driven by lower discretionary expenses, productivity and merger synergies, as well as lower interest expense and a lower effective tax rate resulting from favorable valuation adjustments and discrete tax items.

These drivers were partially offset by the unfavorable year-over-year impact of items affecting comparability, including the $67 million non-cash impairment charge on the Bai brand and $11 million of COVID-19 related operating costs.

Excluding items affecting comparability, adjusted net income advanced nearly 13% to $554 million in the fourth quarter of 2020, compared to $491 million in the year-ago period. Adjusted diluted EPS increased 11.4% to 39 cents, compared to 35 cents in the year-ago period.

The $3.12 billion in revenue beat analyst expectations by $90 million while Non-GAAP EPS of 39 cents missed expectations by one cent and GAAP EPS of 30 cents missed expectations by 6 cents, according to Seeking Alpha.

Shares traded today at $30.85 against a 52-week range of $18.47-$33.69.

Net sales for the full year of 2020 increased 4.5% to $11.62 billion, compared to $11.12 billion a year-ago. On a constant currency basis, net sales increased 5%, driven by higher volume/mix of 5.6%, partially offset by lower net price realization of 0.6%.

KDP in-market performance remained strong for the year, with dollar market share advancing in more than 90% of KDP's cold beverage retail base, including CSDs, premium unflavored still water, teas and fruit drinks, vegetable juice, apple juice and apple sauce.

GAAP net income for the full year advanced 5.7% to $1.33 billion, or 93 cents per diluted share, compared to $1.25 billion, or 88 cents per diluted share in the year-ago period.

Packaged beverages net sales in 2020 increased 8.5% to $5.36 billion, compared to $4.95 billion in the year-ago period, reflecting favorable volume/mix of 8.2% and higher net price realization of 0.3%. This strong performance reflected market share growth across the portfolio, with particular strength in CSDs, premium unflavored water, juice, apple sauce and mixers, partially offset by softness in enhanced flavored water due to a slowdown in the convenience and gas channels for most of the year.

Brands driving the strong net sales performance were Dr Pepper, A&W, Canada Dry, 7UP, Squirt and Sunkist CSDs, Core Hydration and evian premium water, Motts juices, Snapple teas and juice drinks, A Shoc energy, Clamato, Real Lemon and mixers, partially offset by a decline in Bai.

"While we expect 2021 to be another challenging and unpredictable year, we're confident in our ability to deliver the final year of the merger commitments communicated in 2018," Chairman and CEO Bob Gamgort said in the press release. "We are also confident in our ongoing strong free cash flow generation, which will enable us to return incremental value to our shareholders, while continuing to deliver to our targeted level by year-end."

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