Strong at-home coffee sales, especially in the US pod category, and flattening of out-of-home demand reflect the impact of coronavirus on locked-down economies globally
Keurig-branded coffee pods on sale in the US, where 81% of single-serve coffee pods sold are manufactured by Keurig Dr Pepper | Photo: Mike Mozart
Announcing its first quarter results for 2020, the JAB Holdings-controlled
beverage group reported net sales increased 4.4% to $2.61bn, up from $2.5bn compared to the same period 12 months ago. Operating income, however, declined 7.2% during the period to US$272m, down from $293m a year ago.
Reflecting the global surge in at-home coffee consumption as consumers stay at home due to coronavirus, Keurig Dr Pepper (KDP) reported a 6% in increase in the retail consumption of its single-serve coffee pods during the first quarter.
The JAB Holdings-controlled company has sought to consolidate its dominance in the US pod market in recent months, with company documents showing KDP-manufactured single serve coffee pods currently represent 81% of US coffee pod sales.
In September 2019 KDP entered into a long-term master licencing agreement
with McDonald’s to manufacture and distribute McCafé-branded coffee pods. In February 2020 it signed a long-term partnership with Nestlé USA to manufacture and distribute Starbucks-branded K-Cup pods.
KDP’s commercial coffee systems business performed less favourably, with net sales growth of 0.5% to $973m, as the closure of US cafés, bars, and restaurant impacted demand in March.
Despite robust retail coffee sales, KDP CEO Bob Gamgort said his firm was operating in a “distinctly different environment” due to coronavirus, which had required the business to “pivot significantly.”
“The extraordinary steps we've taken to keep our teams safe and working, coupled with our broad portfolio and seven distinct routes to market, position us to continue to successfully navigate this unprecedented time,” Gamgort added.
Keurig Dr Pepper was formed in 2018
after JAB Holdings acquired US soft drinks manufacturer and distributor, Dr Pepper Snapple, and merged it with its Keurig Green Mountain coffee business in a deal worth $18.7bn. KDP currently has annual revenues of more than $11bn and employs nearly 26,000 staff.
In late-2019 JAB Holdings merged its Peet’s Coffee café brand and Jacobs Douwe Egberts (JDE) coffee retail business – a move anticipated to precede an IPO
offering in 2020 but now likely to be delayed in the wake of coronavirus disruption.