KDP sees at-home coffee sales cool in the first quarter

KDP’s US coffee segment sales fell 1.3% in the first quarter | Photo credit: via Shutterstock

---

Keurig Dr Pepper (KDP) has reported reduced coffee revenues in its core US market as price rises prompted by inflationary pressures contributed to lower sales volumes.
 
The JAB Holding-backed beverage giant also indicated a cooling of the at-home coffee market following the pandemic, when many packaged coffee brands saw sales jump. 
 
KDP’s net sales for the first quarter ended 31 March 2023 increased 8.9% to $3.35bn, compared to $3.08bn in the same period last year.
 
Operating income fell 39.5% to $584m compared to $966m for the same period in 2022, which the company attributed to inflationary pressures and the ongoing impact of a litigation settlement with sports drink manufacturer BodyArmor.
 
In its core US market, KDP reported net sales grew 12.7% to $2.01bn compared to $1.78bn in the same period last year. The Texas-based beverages giant attributed the rise to the success of new product lines in its soft beverages category, notably Dr Pepper and C4 Energy.
 
US coffee segment sales experienced a 1.3% decline to $931m as a net 5.1% increase in product prices contributed to a 6.6% decline in sales volumes. KDP also noted a ‘normalisation’ of at-home coffee sales following the pandemic, with at-home coffee pod sales growing 2.9% in the first quarter.
 
However, KDP’s at-home coffee pod category still achieved 22.8% shipment growth on a 12-month basis versus the pre-pandemic first quarter of 2019, the company noted, with its K-Cup coffee pod business generating $771m in revenues.
 
KDP’s operating income for the US market decreased 30.4% to $490m during the period.
 
“The US Refreshment Beverages and International segments exhibited standout performance and, as expected, US Coffee had a slower start to the year. Though the at-home coffee category is still cycling through mobility-related changes relative to last year, single serve continues to gain volume share of the US category. On a consolidated basis and against the backdrop of persistent inflation, we are driving healthy bottom-line growth while reinvesting in our business, and we remain confident in our 2023 outlook, said KDP Chairman and CEO, Bob Gamgort.
 
KDP’s international business fared better with net sales increasing 17.2% to $415m compared to $354m a year ago. The rise was primarily attributed to a net 9% rise in product prices and volume growth of 7%, with KDP highlighting the strong performance of its Peñafiel water brand and K Cup pods in Canada.
 
KDP said it anticipated net sales growth of 5% for its full-year 2023.
 
Slower at-home coffee sales for KDP echo those of Swiss food and beverage giant Nestlé, which reported a ‘post-pandemic normalisation’ of Nespresso coffee pod sales in the first quarter of 2023 amid inflationary pressures and the subsequent impact of higher product prices for consumers.

However, the strong performance of soft beverages for KDP will be welcome news for JAB Holding Company, which in 2018 merged its Keurig Green Mountain and Dr Pepper coffee and soft drinks businesses to create KDP in deal then valued at $18.7bn.
 
The merger enables JAB to utilise the latter company’s extensive US distribution network, providing a strong foothold in both categories in the US market.