Keurig Dr Pepper (KDP) 22 Feb 242023 Q4 Earnings call transcript

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Keurig Dr Pepper's earnings call for the fourth quarter of 2023.

[Operator Instructions] This conference call is being recorded.

[Operator Instructions] I would now like to introduce the company's Vice President of Investor Relations and Strategic Initiatives, Jane Gelfand. Ms. begin. may you Gelfand,

our hello, call. you appreciate industry are we discuss release this and results, full that we which conference. attention, many morning, will detailing press a of also this issued quarter everyone. you, and your year conference We during recognizing Earlier fourth Thank attending an

and will statements which reflect Before we to like forward-looking I'd as remind you today. judgments, include assumptions analysis get started, that only of our remarks KDP's

current expectations required actual on may do results today. materially from KDP's update as Our of number Except not to affecting discussed by based factors forward-looking obligation differ a we statements any undertake business. any law,

XX-K, later earnings more and our factors the which please this filed risk Form in will the with morning. to For be information, SEC our release discussed recent refer most

non-GAAP earnings to reconciliations are We of will the included GAAP also release. in comparable most discuss Definitions our metrics performance. and our measures directly

speak the change These which will accounting lawsuit, items We years. related armor leaseback policy underlying on items impact include prior interruption resolution of business compensation. transactions, recovery performance, the insurance gains removes successful stock litigation our asset of about the and to expenses the of nonoperational a body sale also in current reimbursement and concept the for of in

I'll Chief Priyadarshi. Officer; Cofer; Sudanshu and Tim today Here Officer turn and CEO, President, with discuss to to Bob. International, our Operating us Bob Chief results Chairman it are Gamgort; KDP and over Financial now

our of in entered $X.X high-growth outlook, as composition and while delivered reinvestment, the opportunistic X% capital-efficient and year in strengthening balance sheet. simultaneously financial the EPS eliminated and an our grew constant as our the nearly X.X% doubling we to in through the year-over-year actions EPS contribution . Full and and X%. billion repurchase share for sport even Pricing our digits while productivity increase marketing. supporting driving dividend began benefited savings, as earnings such that of than the nonoperational significantly double high-quality partnerships, XX shareholders, shares a of offset and continued pressure, including to On near good grew million year year. business, ready-to-drink of was morning, a more more and largely multiple prior rebuild sales we a returned earnings funded as stronger was even majority margins significant gains increase double-digit improving the basis, hydration than of Jane, everyone. progress spaces, advanced from coffee growth currency highly a Thanks, XXXX inflationary net white across KDP we growth our underlying

our performance with portfolio demonstrated the momentum beverages in in international offsetting coffee. resilience U.S. XXXX short-term Our pressures broad refreshment U.S. in inherent continued and

perspectives Tim initiated continuity building and company's leaders. across senior our new also succession have most add balances refreshed that confidence and and my a process KDP's seamlessly future executive are momentum in success. to team We thoughtful the merged

and capabilities over providing term. in XXXX financial for growth XXXX value creation a strategic sharpened map and platform Our the and our hard bolstered and work profile in road our long

segments our focus improvement impact last the driving headwinds. above Moving the despite rate shared last multiple in the each and now EPS was quarterly us we rebuilding broad-based years. us This structure. some transitory A margin year outlook of operating to deliver strongest margin results. improvement margin our gross to across been gains QX, made our fastest top enabled primary in expansion our fourth impressive and We quarter for in the of of have line history quarter

that factors representative result weighed in in offsetting not a and by business price our down net expect was, we volume/mix decline. sales part, constant is not net currency coffee momentum realization to QX do grew of short-term than This with ongoing our X.X%, persist. U.S. more

good which XXXX, few Sudhanshu have address will mid-single-digit consolidated in minutes. visibility a in We growth sales net to

points, translating at investments. for XXX a digits. in rate profit and double increased high EPS items expanded single-digit dollar nonoperational QX growth increased the was teens. to margin gross to EPS XXXX, QX in of gross high basis grew helping income our underlying XX% Notably, growth the rate Operating and normalizing in fund

volume We net momentum Net only in single-digit modestly at mix in focus to U.S. the period, price refreshment elasticities topline by healthy redouble this continue realization translated strong strong on execution, partnership grew to productivity enjoy CX operating energy double-digit very and beverages. still with along cost high rate in sales led QX, manageable a with growth. and discipline declining income

meaningfully expanded grow. as continued margins segment marketing to QX even

a As making back is we observed value stretch are decisions Many household consumers consideration. key resilient, remain consumers though largely trade-off budgets. to shopping in manage October,

channels, club a As as more shop deal result, during and as value-oriented continue to holiday to outperform inclined consumers such weeks. stores such are periods

we on dynamic occasions Our trends beverage and depth well and spot is of to expansion regardless space The our our share of macro consumer operating U.S. the We the environment. refreshment us breadth of distribution white deliver flex our with business allow growth, growth environment. a beverages gains tenets then suited market strategy, the serve key plans to to speed. driving of model changing category the

Dr. business. across dollar category year. XX led exception share market beverages quarter brands for the growth of CSDs Fourth the quarter nicely, was which U.S. with the no refreshment and XX% top sales the gains both by Pepper, gainer and grew share largest among our was

again existing grew sizes. our varieties and campaign, marketing key and pack Dr display During Fansville QX, we for ACV fuel demand. we awareness drive once the incremental Pepper's and despite activated scale, And

launch growth consumers highly as formats. our across continued CSD and of finishing we Dr. in the other strawberries In revenue all are value ensure resonant, parts XXXX remained category. the also channels offering compelling we cream to #X portfolio, leverage and Pepper, innovation management

and we For and QX, merchandising and core channel strategies deployed Avion. more instance, for in multipacks promotional tailored by hydration

down grew premium and gains, some portfolio water our to result, consumer share water. retail market notched a mainstream dollars As trade overcoming

CX opportunities a commands and space our we first white wrapping QX, the up X% momentum. CX of further share scale for partnership add to and Energy XXXX. commercial of plans in with today pursuit active have strong in meaningful ahead, continued than energy with upside We very distribution significant year. exited in Our a sales less year

also for launch multicultural just rollout XXXX Wonder powerhouse Creamy of adds started include fast-growing our shipping innovation system, with mineral USA water We the Teen our slate exposure electrically just Apple KDP A national will Fruit/CSD, summer Dry build Dr. through our and restage the full Mini These Pepper the and to season. hydration excitement. from the of the to category which sports Penafiel, X brand U.S. hydration in Coconut, Water, Buy partnering time Canada of Mexico. the bottles, Symnastics consumers.

top growth to beverages bottom reinvestment balance refreshment line U.S. continued leverage to and drive delivery in XXXX. of intend line a We

increasingly Over have efficiencies. the past supply yielding chain year, grown integrated, our significant teams commercial and

rate P&L a and projects savings run step in productivity flow-through. a began carryover our pipeline changed healthy of we to As XXXX additional with result, and support XXXX, robust savings

U.S. control the in we the coffee, continue category. sluggish In context controllables to still of at-home a coffee

another shipment and and pod segment growth. we delivered operating margin quarter underlying trends strong QX of improved income to recovery relative QX, Our

QX target. to households with this declined year-over-year added sales ended performance. some our That XX% short-term X also Keurig said, segment new year million in as ecosystem weighed net the having We approximately on line dynamics

transient decline, the detail, Sudhanshu factors accounted in in will a line dissipate top half we to expect of for combination As XXXX. roughly of and describe these

to the as quarter grow total full In trends QX continued Bigger And at-home coffee mid-single-digit a category the tracked gained declined decline Keuring picture, X% at-home IRi and XXXX. share. a the about in coffee XXXX from volume in compatible meaningful of channels consistent consumption were percent with year. year, recovering category in in gradually single-serve coffee largely brewers servings. also both the

appeal were of XXXX, XX%. to are And sold of in households. ratio QX, X Keuring ecosystem's that out XX coffee our drinking indications brewers These clear compatible. approached ongoing

is consumption and than to was we anticipated longer expect the gradual to the the we first, category coffee to at-home to growth of 'XX back return continue. stronger than While half recovery clearly taking

macro actions that balance address current initiatives XXXX strategy Our long-term growth between a U.S. and incorporates coffee realities. short-term

existing revenue time, such continue important growth to At and the with relative management drive the in high-quality ready-to-drink household coffee growth entry brand highlighting will pod increased value accelerate building affordability and through shops. new and initiatives hit activities usage same to coffee. and We incremental as among ecosystem penetration, price of we in versus engineering brewers points. emphasize will coffee-at-home consuming households

penetration. coffee significant single-serve, yet we help return to higher more XX financial support recovery build XXXX income our single-serve continue assumptions. actions runway to out Even growth For households its than building more category are a to we plans drinking ultimately trend. These prudent With is category there and consumers, long-term at-home to million steadily premium in to the grow U.S. growth broader convert should around so, the solutions. coffee super

to about We before starting publicly Keuring At making we a and ambitious be of we future, innovation shortly public share this exciting of in weeks, begin of some an will these pipeline Houseware spring. will have of few the Show an vision preview innovation disruptive Keuring annual that brewers, we which will plans a announcement event.

hot is and marketing pod high-profile refreshers will Costner's benefit our marketing set and while bolster brand and brews Innovation blends Costner brands. shared will collaboration Kevin incremental integrated and the indulgent will This owned a is span Along first to directly sustainability. and brand, XXXX our promotional donut cold quality of campaign of in products Products of Green and spectrum support, for and highlight our feature new passion program years and will Mountain. occasions coffee elevate equally co-creation shop licensed a unique XX with flavors. Our robust. with will these like our events

premiumization the Keurig's We quality reputation super reinforces remain focused in on for which of the out tier category. and premium pods, supports building

Our the latest licensed in alone a lock XXXX which to pods activities efficiencies continue early will the of conversion began growth and of brand. the with licensed and unlock introduction relationship, more for Lavazza in with QX

commenced on our performance, Our satisfied and support momentum. U.S. are coffee, sales lock-on our steps ready-to-drink ready-to-drink stronger efforts distribution products also not renovated up while are we Wrapping a XXXX. with gaining now for to In we partnership and we packaging. coffee QX, coffee taking with XXXX are

willingness positioning and open-minded to future We a XXXX planning at-home in capabilities ambitious growth coffee other measured for KDP behalf long-term being category leader the category category partners. while and are to words, are in of we the and also way. ourselves growth, vision, rebound, revive an In invest a from benefit and our opportunities acting to as expansively on disruptively and with thinking

rate Moving grew now currency to volume and single-digit our reported a a with mix. pricing at segment. and constant high between in continued on balance basis International Revenue double-digit rate

segments, than significant expansion. faster other with income grew net As margin our operating in resulting sales,

country growth healthy across reflected performance markets. Our

America, Canada by primarily Our and CSDs driven portfolio, products. alcohol cold Penafiel expansion strong continued our Clamato Dr. were Latin Pepper beverages Dry our our and results of alternatives led trends in Canada, by alcohol and in ready-to-drink and across

this growth our coffee strong business, and XXXX household In international in penetration will priority. a remain we delivered XXXX

we inked make coffee aim, the NFL an maker popularity. growing For agreement that on recently official sure to the sports of in Canada, capitalizing the

by areas consumer investments, capability Our including supported international broad-based momentum in distribution insights. as and is such

U.S., in America in system As competitive our Latin a advantage. the DSD represents

dedicated we expanding reach and by and bolstered our XXXX. do retail coolers at to XXXX, plan our During more again in routes building so out

Meanwhile, pipeline expertise local insights. and our enterprise-wide innovation marries

of ready-to-drink Canada. mocktails no low For products build in will Schweppes launch our in in alcohol instance, the LatAm experience on and

U.S. grown Pepper Since a While have leverage an in Mexico, X the double-digit from Dr. $X Canada, billion. upcoming CSDs Berry successful the in introductions billion sales business to over expansion in at strong $X CAGR of slightly international out playbooks annual merger, our we Dark of almost of

segment, to to this in KDP's results outsized potential it continue in see contributor and remain We meaningful will XXXX a and total beyond. growth

delivering energized represented and up, business the Wrapping priorities. while key teams up all-weather ever on another advancing is year as operating but The demanding to are environment commitments also challenge. XXXX our of strategic our model

algorithm a while Our beverage position to focus and in thoughtfully long-term consistently financial leadership outcomes, strong the sustainably on our in return predictable including XXXX. delivering extending remains our industry and

strategy our hosting creation We XX, we event tune hope the will business. multiple the and in. you dive deeper to of March webcasted be value investor On join opportunities or across we will see into a many

will Sudhanshu and will I the after us financial detailed the results turn call over through which now briefly to Tim, outlook. walk

as good past business Officer, months broader KDP in DSD the all, onboarding in has My Board I've for most its the forged front Bob, our aspect later feedback the this every spring. our KDP, from top team, Bob, our Thanks, succession of KDP immersing plants. spent partnerships. strong to nearly Directors in whom preparation At fully I've me and people. and the Dallas lines and as to leadership our partners executive to of time the the I've of importantly, of that exposed the locations Sudhanshu, and coffee of listen list, with and manufacturing and retail After joining cold multiple customers everyone. and with X myself valuable Boston headquarters Operating in November, Chief collaborative spent morning, CEO I've to in employees. many well as met and from and above already our

that active I confidence also leader investor a a event and in hand in share forward to to few deeper plan you extend our more in continue view we're that deliver opportunity on and I echo of years kicking time. had shareholders. to look to the create comprehensive an developing off discussion a our for at I ahead. market first sharing as XXXX value in beverage weeks my the my leadership The strategy with observations the KDP KDP's be industry, Bob's and that ability a will today, to

For as now, excited I let that am potential. me current equally I'm the future just impressed company's about strength by say KDP's

a leader consumers We attractive iconic in steward We brands industry. very are that many love. a

are commercial and distribution differentiated. capabilities Our

are portfolio it accomplishes preferred an and demonstrated have capital ability and our with evolve partner responsibility. growth a broadens a that way We to exposure in

strengths challenger going that of one me KDP build is that act with our we a which important is one cultural greatest upon to an mindset. we to Finally, and plan forward. element attracted This

of consistent forward the honored next and to with delivery testament Board on a formidable drive I'm record and financial a young chapter our our dynamic historically is Although potential. to track KDP's Keurig success. look build company, my past still X a over colleagues of strong years is partnering Pepper Dr. resilience the foundation to and such and to

since shareholders. fortunate and delivering look merger, to of alignment have value ahead. you We're to to all for years all long-term strong have KDP stakeholders, the have to our investors and who we We many commitment deliver our including supported the in forward

Sudhanshu. And to with that, I'll turn over it

and good will morning, morning results Tim, primarily remarks outlook. quarter I our XXXX Thanks, X on and this everyone. the focus my

top execution margin growth slightly further which X.X%, increased X.X% a of pressured U.S. structure, net mix. net quarter a approximately by record delivered outlook. favorable points pricing, offset Our X.X% by future our revenue expanded environment. Gross was dynamic to decline QX moderating performance in demonstrated strong in EPS growth. XXX We enjoyed coffee. and savings margin Net . Fourth strong that and and operating volume headwinds across beverages ahead by but was momentum productivity a refreshment rebuilt invested XX% advanced constant in was inflation. growth year-over-year, a our our basis with We opportunities X.X%, our of growth driven a in business temporary international, partially impact line U.S. realization strong seed of currency price namely

which partnership, of strong gross CX the points margin. approximately We our also execution relative to performance contributed basis incentives to earned commercial XXX

in double-digit Total grew EPS reflecting company drove income XXX modest deleveraged points, a XX% part basis leverage marketing. with along increase X.X%, in operating which, growth. below-the-line SG&A

in gains, Excluding have essentially XXXX, the eliminated would move solid we build this nonoperational into EPS year-over-year reduction benefits. XXXX, the We looking base. teens. earnings high nonoperational on to now in grown In

gains a declined net elasticities, segments. pricing. a contribution Beverages from grew by and market Energy. percentage the U.S. X.X broad points growth modest to Volume/mix of Moving manageable with sales CX X.X%, Refreshment led healthy X.X% share

cadence slightly we commercial As though of of last Bob from launches with robust momentum discussed, innovation build on in XXXX, will differ a slate our our year.

X very Pepper launch into successful and opposed in Dr in coconut of increased the XXXX. steam gain X, quarter begin the as quarter our rollout to strawberries instance, summer For Creamy will

of a productivity in incentives comparison calendar the and temporarily Beverages performance. XXXX, our the is expanded This substation higher favorable XX.X% on great partially in performance made points. inflation grew quarter While market confident margins CX year another offset remain weigh impact by and sales reflected difference momentum, share early relative U.S. net the basis operating income XXX net the marketing. in of Segment we growth market for

multiple end we highest view with sales by We down the coffee, the holiday margins markers at Keuring million XX were the in made we volume level for good progress decrease not just approval in do the the a a executed successful continued. These came and segment and survive, year segment in U.S. XX XX.X% quarters. households Share gains Keuring overly to a single X.X% net-well X%, subsegment, for indicative. In decline across dimensions. shy headline With X of in program contributor, as pricing, mix. pulled quarter positive

we give in half decline steadier normal decline a to a as of transient. XX%, primarily Let against decreased and drivers shipment seasonal me shipments XX% deconstruct of why a the you Brewer return reflecting sales roughly of to revenue a of patterns sense see brewer due point trends.

shipments total back in the more at half with Looking telling in with point-of-sale is purchases. line brewer

As unfavorably higher a context, XXXX, from declined the year in discussed impact private representing with Pod X% exits, shipments shipment approval even than X% in pre-pandemic in trends improved quarter X down lower CAGR. were given expected, brand previously last on period, in XXXX a label last versus in-licensed the XX% full Pod year. percentage shipments X% revenue from continued pod the of sequentially was X% by quarter. as sales relative revenue impacted mix, to period also in

private X still will year. quarter week in next the modest discrete label brewer be quarter. beginning these and impactful reflect headwinds to to Though factors exits extra less dynamics, continue of expect an quarter impact temporary last we do X decline, category a included The lapping sluggish

Moving to segment operating margins. profit and

of income relative coffee this underlying XXX points in cost of million between inflation, prior was operating On margin and the year-over-year, overall in to entirely an U.S. continuous the benefits. our more income quarter operating this grew Although operating basis the an expanded X.X% due digits. impact improving relationship benefits $XX expansion nonoperational discipline. basis, X than included declined lapping dollars productivity year. and Drivers pricing double to

XXXX, source a net X.X%, sales grew growing X.X% In an volume margin from segment reinvestment XX.X% increased and X.X%. the segment the will currency in pricing priority up with sales fourth be these and tailwinds. International mix basis, constant important On in will quarter.

reported strong thanks strong a tough against from and We World continue the despite leverage mating income currency year. XX.X% to to on in and XX.X% across a operating lapping Mexico in markets, operating constant very terms, results pricing, year-over-year Cup productivity last deliver Segment comparisons iteration. increased basis favorably

of a see segment, President growth As line opportunities our in I International across this business, bottom XXXX. multiyear tremendous and top including

Moving flow. cash to balance sheet and

ongoing cash generation remains Our strong.

a optically component XXXX However, our supplier our weighed strengthen that cash we program, as deploy free it even of strategically to significant chose a to cash flow reduce decision flow our balance to our financing sheet. on

million, $XXX another way, for north the the decision year a $X.X just Put to free cash of included from program. use million but accounts primarily payable, financing around our of measured cash discretionary due flow supplier our

highly expect an leading beverage other on business players. and basis, commensurate conversion remains continue with cash ongoing we generative Our to

this our intact. be remains financing. more very level How a However, we supplier a below much in capital allocate long-term from will bit reducing XXXX to due intend continued impact we modest to

investments returning to through cash dividend balance X.Xx buybacks. and strengthening growth priorities and sheet, Our include organic and leverage inorganic a with to opportunistic target steadily long-term growing shareholders support X net further to of our our consistent making our share

more take X based over-index to may any priorities approach. will of year, time, on we given balanced over our opportunities, In but a short-term or we

deployment our quarter million value more $X.X XX representing focus shareholder during were million X, including in during will stock authorization, For billion. continue saw over repurchased be year, billion our returns the cash on shares We a example, over XXXX, we remaining of buyback in than with to direct opportunistic. X shares a $X.X area and

raised our dividend We third our marking during XXXX, also X.X% annual consecutive increase.

XXXX guidance. to now our Moving

line reported XXXX, algorithm. on and our single-digit with currency headwind XX growth basis XXXX. We expect Based in expect bottom incorporate net our consistent long-term also results currency growth to roughly and sales outlook, current deliver mid-single-digit points, top constant FX in we to high EPS

our plans Refreshment U.S. contribution Our U.S. and segments, international from contemplating while relatively a strong reflect in Beverages continued momentum muted coffee.

will of partnerships pricing normalized will to new environment. inflationary the points basis and strategic combination with a also New actions approximately from top contribute XXX price carryover more benefit growth overall consistent which line selected

year of in normal of We level are operating productivity expect brand inflation. expansion. healthy planned growth reflecting another profit offset savings and reinvestments more Even growth, robust net capabilities, margin full operating projecting year help with our sales to we this and

also retain operating primarily below-the-line high good we EPS, we range However, visibility headwinds some to target through flow our constrain line in expense. though will growth to in profit bottom This the interest some of anticipate XXXX. within single-digit

of and XX% line the includes we outlook $XXX Interest the an shares in below-the-line approximately outstanding. $XXX following diluted weighted expect approximately $X.X a year assumptions. tax average expense bottom phasing a million to our full billion Our momentum From throughout and range, million perspective, top build year. effective rate to

lacalome This us our flow and half. in from accounts and and building for back as innovation is well electrolyte as quarterly the investment for EPS calendar contributions typical

to growth increased through meaningful strengthen and these start net balance efficient profile growth U.S. forecast earnings for slower key our year We single spaces in We productivity, to the XXXX Reflecting we shareholders. our year improved coffee, into was and most margin record invested share our quarter capital-efficient expanded partnerships in portfolio, across closing, low KDP. pricing amount a gross composition strategic factors, in sheet. In of sales of through and digits. attractive dynamics and cash significant the return grew first EPS bite of to a the and a

financial outcomes work our achieve original performance product execution of with and operating line were of hard XXXX Our that in whole projections. strong good us across enabled was organization, our which set a and to the

also predictively operating our environment. to dynamic ability and proven deliver results underscore consistently a Our in

in will confidence strong we that do We XXXX. again so have

close. turn that, now Bob back to the will to With call I

my KDP, Five continues Sudhanshu. in Thanks, key out its years having excitement from future creating build. about to played part a

net sales X% have XX% a since In an itself. and for speaks record EPS track CAGR grown the merger, X performance CAGR. at at years Our

roughly redeployed which investments have and profile. in M&A cumulative with free almost to our growth the business capital the $XX KDP's disciplined through generated other We bolster enhance shareholders, half TSR cash returned billion transformational further and to . We half partnership enhancing delivery. deals,

lend many priorities clear. to looking forward KDP's reinforce to road are role very map. growth the you the a and visibility to and the within into strategic are made its in My stronger, refreshed delivery confidence disruptive We in long-term next continued of taking beverage attractive and against our algorithm. team now KDP force seeing They all management our more given sharing our vision and and energy is propelling about mid-March as already place root with industry go-forward dynamic chapter. Tim's

are during for we you Thank now take to in cagny, day your questions. busy a happy dialing of

[Operator Peter Instructions] The comes with from today Grom first UBS. question

your it your are you're category would more of what expectations maybe also curious And based just mentioned XQ U.S. are organic prudent. still 'XX Bob, growth unpack growth outlook. operating that like So assumptions on business improve I that coffee expectations the particularly order to you Can you a does sluggish, that you sounds be kind category but bit on sales building to that for going hit more? the your seem is be to in need

any helpful? inflection thoughts think happen when you will specifically just would So on that be

in have XXXX very the the All call Sure. been involved development plan. on us the X of today of

the we've in about said really in talked there's think expectations coffee no being XXXX. as muted We I think we right talked control quite about as change macro the And expectations we about what significant environment. upfront, around our which number focused any have we on times. a of plan our energies our we in of

in given much conviction Tim over helpful think will taking been AOP, provided with and we from very you may be we it Tim hear involved the why the for guys that outlook team he's be on today. QX to that in I developing about have

Bob. Yes. Thanks, Peter.

I 'XX. momentum net start As good with we've it expect and had with sales primary said, have Refreshment 'XX I'll you 'XX and and do the elements, reflects strong X really continue visibility growth, We to think Bob shared mid-single-digit a we positive outlook today, Beverages. that into into

strong it That and innovation environment both by will again, got of hydration, will from . We've vol our actions. the growth of digital and partnership. mix think a initiatives prepared by white remarks, earlier drive I pricing Bob and CX benefit all electrolyte marketing carryover in more be and into a more some and which in recent a targeted spaces, sports those higher strong platform space characterized the referenced normalized incremental, including includes price our that fully in-store activation, equation. is some continued balanced of and new will expansion in supported lineup scaling select energy we and

Second, we in since have And think we continued we've CAGR double-digit a international. demonstrated significant runway merger. the

brings momentum XXst doubled bigger U.S. line. to coffee time give at earlier, recover 'XX. As of nearly since it's The coffee. that us elements the business that Bob mentioned the us billion. continue in We've mix. for top part solid a And the to to much merger almost $X really on And expect we

coffee so expectations U.S. And reflects from vol/mix contribution expect relatively muted guidance overall the mid-single-digit sales coffee recovery. we

La We side, shop the including got Shop, innovation, in while partnerships, importantly, on premium Colombe, year. the new and and strong Green some Original We've the on all Mountain programming coffee refresher ICE economic new quality, alternatives. our expect good relative Luvata ideas, to good some campaigns value and and sequential variety extension our conversions Donut our marketing a improvement strong in platforms, proposition environment, this reinforcing throughout

Chris The with Wells question from is next Fargo. Carey

you has the maybe assume expectations, and operating it that's but operating that on visibility if last you coffee. that and years. the Just would just help several quite a your the as expect, profit Can frame you on following profit vision over experience the margins in volatile remains have up line muted top with line been

while even enough the things improvement able your to any XXXX, in So you would for still behind what there the maintaining to get your worse, be be expectations do helpful? invest sequential if if so buffer maintaining profit have muted year, context

about the of you top and the let I'll margins. all me context umbrella ask to you and just then just a under Chris, bigger on the controllables. that it's Sudhanshu line, controlling to Yes. picture give talk

good We on visibility margins. the have

trends at went If in down long-term home single-serve the and at-home the from peak. it category you where coffee talked to volatility. about up on then situation look and spent was is a It you straight very moved particular, that at COVID due time during

been talked recovery that any It's about slow it been us volatile. actually moving. quarter-to-quarter. been We just hasn't of in it's expected. It slower So than

is that Just the of the trend up outperforms consistently nearly of comments not seeing to pace We're developed rebound, the is that of every this globally we're to with happy the it a other segment seems sequentially couple about any other market, hold category. is all but that reiterate forms trend single-serve interesting It getting coffee. the in better.

seeing channels than why that forward, while channels. given better we this has improvement, quite pace reasonable that, gradual, we're untracked our so think that's the been the are And sequential And track going of prudent. and the perform planning gradual expectations

control, the Now influence that's lot it margins. of through don't an fully visibility and and area we innovation of We we have our do a marketing. control

talk about the want of that side equation? So . you Sudhanshu, to

margin I rely We expect to year, margin, multiple did renegotiating on first We basis, need annual XX% half, us took structural One proof pull saw priorities. factor talked this XXXX, But in XX%, that Bob. it X line on support And And margin coffee. as margin, coffee we full the Spartenburg. point to took to . made the multiple progress margin supporting our QX, said prior the in get for an but at we peak of take in down half, from margin same at for XXXX, were coffee XX%. and on margin. that And years we gives how between recovery, back. we action it about come in progress margin ongoing balancing top we we operating we but second to Thanks, income partners for half we to years time, we us wouldn't good And the an also expansion margin is the did about category will U.S. as second Chris, have in coffee in you QX, rebuilt XXXX. contract. feel you a

Edge Research. Consumer with . Cooper Brett from comes question next The

you evolution onboard environment tangible to bring you know, A I for partnerships. I to that on? that evidence of And using with own your started could hoping brand just to versus LRB in question additions you brands. have maybe stick to the the recent capability don't respect on on those any you benefits partnership then get sit for earlier those those today? we additions brands you was your

Sure.

good of onboarding which X ones happened the X had to in that now. the a brands. right of onboarded recent course, experience in of But past additions, So And Colombe I'm we've CX recite Electrolit. over or and ready-to-drink being have going got number most or process of all the now, not coffee years. we've La

a at merchandising we've how we've a learned brands and quickly their we've As then national account the -- out quite on delivery system all current distribution and developed planning of and to both exit efficiently, about them our and way board, level. bit inventory as process onboard down planning store-by-store brought to into them how through our

we use. It's of So we've that has brands. all playbook who onboarded team the developed these same a

the distribution soon it improved performance performance of we both availability. you're increased as its that our availability, and an And when was we picked science. of depth a only which point a can is have a in terms really see onboarding, the during we you we an together. agreement another, where commercial breadth in not as bring X I And partner, we terms where to would The could days system. in position where situations to couple see a a fear came to this that, system of of with and CX teams slippage all up down have We of transitioning you tangible from are evidence into spent most and in one immediately there

can You gain. And obviously, it in that's leading see can indicators, the it and the those in the merchandising all are see you critically important the lagging share the is indicator activity. promotional display and quality, also

as in right So shipping I La remarks, Electrolit mentioned we my prepared now. now. speed And Colombe same through the incredibly going is up have we're bullishness system well as our just started bringing right to

we've examples many of that. So -- better better a example I great got how and get think at good we

partner partners we that period to improvement and a very to system disciplined is of hallmark strength fact or deals the as construct been into we able well. environment the investment performance to able of try the the results capital to that grow I the that are to win-win from for the brand of for think are and in track our give and brand this. in about. marked and an get of exposure in be us the our over brand we created is attractive and That perspective growth leverage also the time, to terms and in puts terms that want a in position has where our growth longest thoughtful proof can record to to we're have even long be of partner highly outside Coco attraction to continue deals term. a has Vita this partner that the has now what sense have of is very they like. just of every a system offer construct efficient, and seen benefits the that does And who about business great long other us improvement do growth in. look The to are the very us, segments to to brands come talked system truly brands that that we of that higher that In

with Mohsenian comes Morgan Dara Stanley. The from next question

category return I in the top Bob, the in at-home So coffee single-serve wanted just line to to segment.

drove you that just that just recovery expected? drop-off being but the you more of and covered Is just some term. it or long some XXXX, take are COVID than a You weaker look turning the at of there then And referenced softness? to can other obviously the of backwards factors earlier XXXX

if structurally growth the post-XXXX? anything you perspective opportunity on any party about So segment? How changed the in here think single-serve

then lot the coffee the We've the peak time COVID recovery since of felt segment anticipated studying since then. and a

the question, line. this thinking was of about and that rebound Chris not I in volatility expectations a was our driven there by I mentioned top are think before some happening. the volatility really was

actual trends at originally look steady, you much it, the underneath upside, had If been than they've anticipated. unfortunately, we on slower pretty the

just coffee except than total with start total it because always performs I better category at-home coffee. that, the mirrors single-serve at-home

of minus an consumer to changes This really So high volume And impact single-serve. similar XX%, is a there's of career. on worked product. the we're interesting It's that in much in frequency behavior can we're situations needle. can to given nothing us. about XX%, many And a that, context the consumption plus very within has not talking talking in fundamental coffee. again, that my move really It's like minor business And it ranges you an I total pattern. about on But changes of size have see category. a there. It's in smaller the us, universal

was that's not debatable. if seen we that. was factor mobility, would a But have a Mobility clearly faster rebound it all than

coffee we little their done us single best coffee of It's And attractiveness go ever our to and generation that's no so as in it. understanding the to I'm peers of in good of younger a beliefs it's and well, the have is things there significant that have listen consumer as calls no, and same is structurally the behavior that think as tell industry that is to there as a is their change? coffee insights see diagnostics Is issue. even news something you you been. can understand, deep-dive as And this answer lot the contributed the happy do around process the can it changed? through or and the really the globally perceptual that to to all of I that there's from equity

in to term. we in increasing as my to do of innovation we're also short And real the we're sure prepared able higher consumption I remarks, households doing U.S. the there's near going forward breakthrough category We households. we're which keep doing, be we bifurcation future. a So and to that making quite being that affordability some for are are is income products. targeting marketing. know debuting what in The innovation premium the look us, driving through And mentioned, that. in We their again,

want coffee to for us important it's brewers we attractive have super segment. that and line because so premium competitive be premium And with and to a

home income coffee pack But there. we in focus more also more and We cost always an mid- consumers on more benefit X brewer to therefore, have we that per know we versus and, course, from architecture. promotions out on entry-level seeking. And very have or focused ensuring price become selective that and we're that price overtly targeting the much lower point value the of about cup offer and comparison talking being price in away the

able the let we approach a the prudent We've taken the improvement does. to results deliver to in very XXXX good happen naturally be category, we're happy very that which faster. see assumptions to So prudent and our was for wish as to pace it

question next Andrea with JPMorgan. The from comes Teixeira

comment from you bad is or about appreciate as or just terms the much recovery for should you mix want perhaps Rob, pod parts? that And from volume you what effect the you shift explanation on coffee -- to the structural related becoming the have but So investors of And can more been perhaps to I as was to a price said, year? of the of life you on How of in that shift that more the brands? affordability? that mentioned, cadence on seeing in the what through that, progress of partner we expect focus

Yes, see right? but that I'll that cadence, of don't a answer happen, terms assumption. in you're the improvement continuation of is anything seeing first, the last part that We good have anything the it sequential on would there. the You indicate

factors remind quarter-by-quarter. at a analyze noisy mix, when think take There just mix. in very are gets we couple you, it look of mix, mix a you when I

does side On on revenue it you perspective, where impact mix business. sold a profit more a We're -- X household penetration as impact say had the have the brewer of the but we of scenario lower-priced we side, the side entry-level we on indifferent from . a brewers. an

category and the promotional. about that surprise take you last that call, had a X the Pod, revenue not sales our you within lower category a a total talked see look products of contribution. were bit when and licensed gotten a is we If a owned the as It's earnings during it that at licensed percent do soft. the In the have consumption more pods quarter higher

category. advantage. a about are XX% to gain to really individual expect the see we growth You to can category promote we Remember, on share of because players have more try focused

gaps that So portfolio. licensed that's big when to we were not price us. the But to become do focus a we And fourth in owned a and of said have address of the far our line, the them out we which going for on on marketing we've so in quarter, is that innovation bear activity fruit the for XXXX. and our place at done, will up. that what is time takes But that owned we catch in put activity to and that just license expectation promotional and it us for

comes Filippo with Falorni today last Our Citi. question from

us the what the Just partnerships? been for Maybe normalization wanted of category a a U.S. Clearly, year. we've on core the go start to have refreshment business, back assumptions seen little side. weaker growth, can to beverages excluding for but you're beverage assuming you and sense your in to give pricing for volumes bit refreshment

the of XXXX, long category take really we're years was off unprecedented levels pricing at we in a of expectation that growth that's couple that the coming for elasticities strong incredibly face healthy a and of of look by of When not Sure. driven term. pricing a good

bit between growth basis . Two U.S. I patterns we've that as about our coming fully things slightly brands, growth that partner able when the But an in partnerships then system. them been by to beverages, only you we an we to to business specific with the I individual is LRB And and second think work make be other LRB. that year. business the of which with would with are the timing phasing The And comment has engine. would to Pepper things. are back able a XXXX then a XXXX. to step is we've out steam into our impact -- driven refreshment XXXX, do on our went is more out seen expect And have through about price when you and to CX innovation that's So confidence other move about know Dr. up innovation ramp-up to with we growth and that performance happening other think focused, a the very we pick material that expect great our beverage we Tim for as the think as second that that guide, the even Pepper those our our will about substantial part and later and Electrolit, of year. but X and have mix. of more detail. why on segments. in builds, in our rate you we regard long-term Dr. And is right balance U.S. call as refresh call up a and much of means the the significant towards in the for half already is to And And contributed that the will can in growth points throughout important half so towards and be part, now, reverting volume higher level, too, impact regard we'll more it think XXX growth this of that's year.

think basis, about said, for inflationary to guide you category and the a the should towards pre I period we category. saw good But I as we pre-COVID on think start that time longer-term a trends thinking how be the

to I management our the over question-and-answer concludes This would closing like conference remarks. back to session. for turn

appreciate here answer everyone. time and great Betsy, Thank you have. a Investor questions Have Relations any is morning. as to team always, may and We And you, this follow-up day. the attention your thanks,

for Thank concluded. presentation. now today's is conference attending The you

You now disconnect. may