Inflationary pressures continue to dent KDP’s at-home coffee sales in the US, but the category is still trading above pre-pandemic levels
KDP saw coffee sales fall 5.7% year-on-year during its second quarter | Photo credit: via Shutterstock
Keurig Dr Pepper (KDP) has raised its full-year outlook after posting a 6.6% increase in total second quarter sales to $3.79bn. The strong performance was driven by the beverage giant’s soft drinks category, which achieved 11.8% second quarter sales growth to reach $2.3bn – an 11.8% year-on-year rise.
Coffee sales continued a downward trajectory from the start of the year, falling 5.7% over the period to $970m compared to $1.03bn a year ago amid ongoing amid inflationary pressures
and reduced consumer spending.
The K-Cup maker attributed the broad decline in at-home coffee sales to higher retail prices, up 1.6% on last year, increased consumer mobility post-pandemic and higher marketing costs. Rebuilding inventories during supply chain constraints over the last year also negatively impacted category performance, KDP added.
Retail coffee sales in KDP’s core US market decreased 5.7% year-on-year to $970m as total volumes fell 7.3%. Coffee pod revenues declined 4.6% with 7.7% fewer shipments and US retail dollar consumption of KDP Manufactured K-Cup Pods decreased 2.3% in IRi tracked channels during the quarter.
Brewer shipments also fell 11% year-on-year to 9.9 million for the 12 months to 30 June 2023, which KDP partly attributed to ‘slower discretionary spending for small appliances’. Reduced sales and volumes contributed to 15.3% decline in GAAP operating income to $250m compared to $295m a year ago.
However, KDP noted pod and brewer shipment sales grew 16.9% and 17.8% respectively on a trailing 12-month basis versus the second quarter of 2019, demonstrating that while at-home coffee volume growth has slowed, it remains above pre-pandemic levels.
KDP’s international coffee segment fared better, with second quarter sales growing 10.9% to reach $489m. The stronger performance was driven by a 6.1% average price increase, 0.9% volume growth and ‘broad-based momentum’ in Mexico and Canada.
“Our second quarter results demonstrated the strength of KDP’s brand portfolio and our high-quality retail execution. We saw continued momentum in the US Refreshment Beverages and International segments, as well as encouraging intraquarter developments in US coffee, where we expect a sequential recovery in revenue and a meaningful inflection in margins in the back half,” said KDP Chairman and CEO Bob Gamgort.
Raising its guidance for 2023, KDP said was anticipating 5-6% net sales growth for 2023.
Amid slowing sales of premium home coffee sales in the US, KDP will be seeking growth in the specialty segment after taking a minority stake coffee roaster and café group La Colombe, which will see the brands collaborate on a ready-to-drink (RTD) range and K-Cup pods.