Coffee Service

Keurig Dr Pepper Q4, FY 2022 sales rise on price hikes, earnings suffer

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February 23, 2023

Keurig Dr Pepper Inc. lifted its Q4 and FY 2022 sales, boosted by pricing, while earnings took a hit, according to a press release.

Highlights include:

Net sales rose from $3.38 billion in Q4 2021 to $3.8 billion in the quarter ending Dec. 31, 2022.
Net income fell from $854 million to $453 million in the comparative quarters.
EPS on both a basic and diluted basis fell 45.8%, from 59 cents to 32 cents.
Adjusted diluted EPS rose 11.1% to 50 cents.
KDP in-market performance in the liquid refreshment beverages category remained strong for the year, with retail dollar consumption advancing 11% and KDP growing market share of the category, largely reflecting strength in premium unflavored waters, seltzers, coconut waters, apple juice, tea and fruit drinks, and solid performance in CSDs. This performance was driven by Core Hydration, Polar seltzers, Vita Coco, Mott's, Snapple, Hawaiian Punch and Dr Pepper, Canada Dry, A&W, Sunkist and Squirt CSDs.
In coffee, retail dollar consumption of single-serve pods manufactured by KDP increased 4.9% in IRi tracked channels, led by higher pricing.
GAAP net income for the year decreased 33.1%, from $2.15 billion to $1.44 billion in the comparative quarters.
Coffee systems net sales increased 12.7%, from $1.32 billion to $1.49 billion in the comparative quarters, driven by a 10.6% increase in net price realization and a 3.2% increase in volume/mix, including a modest benefit of the 53rd week in 2022.
Package beverage Q4 net sales increased 9.9%, from $1.53 billion to $1.68 billion, driven by higher net price realization of 14.9%, partially offset by a 4.8% decrease in volume/mix, as the segment lapped volume/mix growth of 10.3% in the year-ago period. Broad-based net sales growth across the portfolio was led by CSDs, Mott's, Snapple, Hawaiian Punch, Evian and Polar seltzers.
Beverage concentrates net sales increased 14.3%, from $391 million to $447 million in the comparative quarters, driven by higher net price realization of 14.3% and favorable volume/mix of 0.5%.
Latin America Q4 net sales increased 24.3%, from $152 million to $189 million, driven by higher net price realization of 13.2% and increased volume/mix of 4.6%. Leading the net sales growth were Peñafiel and Clamato.
Full-year net sales rose 10.8%, from $12.68 billion to $14.06 billion and, on a constant currency basis, net sales advanced 11.1%.
Full-year net income fell from $2.146 billion to $1.436 billion.
Full-year earnings per diluted share fell 32.7%, from $1.50 to $1.01 in the comparative quarters.
Full-year adjusted diluted EPS rose 5% to $1.68.
Coffee system net sales increased 5.6%, from $4.72 billion to $4.98 billion in the comparative years. The higher net price realization of 7% for the year primarily reflected pricing actions taken in late 2021 and the second quarter of 2022, while the volume/mix decrease of 0.8% was due to pod shipment growth of 1.4%, more than offset by an expected brewer shipment decline of 5.2%, due to lapping a COVID-related brewer sales acceleration in the prior year.
Packaged beverage net sales for the year increased 12.3%, from $5.88 billion to $6.61 billion. This continued strong performance was driven by higher net price realization of 12.1% and increased volume/mix of 0.3%, the latter reflecting continued strength of the portfolio and strong in-market execution. Broad-based strength was led by CSDs, Mott's, Snapple, Core Hydration, Hawaiian Punch, Polar seltzers and Evian. KDP's Zero Sugar launch across much of the CSD portfolio, the Snapple refresh, as well as the Snapple Elements and Mott's Mighty launches, proved incremental.
Beverage concentrates net sales for the year increased 16.1%, from $1.49 billion to $1.73 billion, driven by higher net price realization of 14.7% and favorable volume/mix of 1.7%, as elasticities remained modest.
Latin America net sales for the year increased 24%, from $599 million to $743 million, driven by higher net price realization of 13.9% and increased volume/mix of 9.1%, reflecting the strength of the portfolio and continued strong in-market execution. Leading the net sales growth were Peñafiel, Clamato, Mott's and Squirt.

Shares traded today at $35.94 against a 52-week range of $33.35-$41.31.

The $3.8 billion in quarterly revenue beat analyst expectations by $20 million, while the Q4 non-GAAP EPS of 50 cents missed expectations by 1 cent, according to Seeking Alpha.

"We accelerated our revenue growth for the fifth consecutive year, delivering 12% growth in the fourth quarter and 11% growth for the full year," Bob Gamgort, CEO and chairman, said in the press release. "As we look to 2023, we expect mid-single-digit revenue growth, as the rate of pricing moderates, and enhanced gross margins, as the relationship between inflation and pricing improves."

The company expects net sales growth of 5% and adjusted diluted EPS growth of 6% to 7% in 2023, primarily reflecting an improved relationship between pricing and inflation.