BURLINGTON, MASS. — Sales growth for Keurig coffee systems, impressive before COVID-19, accelerated in 2020 as more consumers brewed coffee at home during the pandemic.
About 3 million new US households became users of the Keurig coffee system in the year, which marked an increase of about 10% and put the total number at 33 million households. Retail consumption of single-serve pods manufactured by Keurig Dr Pepper grew nearly 10% in channels tracked by Information Resources, Inc., a Chicago-based market research firm.
“So if you take a look at the five years since Keurig was taken private and then merged with KDP — that's a good time frame — we've increased households from 21 million to 33 million,” said Robert J. Gamgort, chief executive officer, in a Feb. 25 earnings call. “That's an increase of about 9% per year. It's a compound growth of 9% per year. It's 12 million new households.”
Net sales in coffee systems increased by 4.7% to $4.43 billion from $4.23 billion in the fiscal year ended Dec. 31, 2020. Consumer purchases of Keurig-manufactured K-Cup pods registered double-digit growth while brewer shipments grew 21%, Mr. Gamgort said. The hospitality business and away-from-home business suffered significant declines.
“In addition to the strong household penetration growth, we saw a record number of upgrades,” Mr. Gamgort said. “People were investing in their work-from-home situation. We've got all these great brewers that were just introduced in the past couple of years, and so we saw people lean in and upgrade.”
He said Green Mountain Coffee Roasters brew over ice pods will launch in 2021 as will Original Donut Shop one-step cappuccinos.
Net income for Keurig Dr Pepper in the fiscal year increased 6% to $1.33 billion, or 94¢ per share on the common stock, from $1.25 billion, or 89¢ per share, in the previous fiscal year. Net sales increased 4.5% to $11.62 billion from $11.12 billion. Total operating costs related to COVID-19 were $150 million in 2020.
Keurig Dr Pepper in 2021 expects constant currency net sales growth in the range of 3% to 4% while adjusted diluted EPS is expected to grow by double-digit percentages.
In fiscal 2020, net sales in packaged beverages increased 9% to $5.36 billion from $4.95 billion. Dollar market share advanced in more than 90% of the Keurig Dr Pepper’s cold beverage retail base. Double-digit consumption growth came in Dr Pepper, Canada Dry, A&W, 7Up, Sunkist and Squirt.
Keurig Dr Pepper in 2021 will roll out zero-sugar varieties across its carbonated soft drink portfolio, Mr. Gamgort said.
“For most brands, the new zero offerings represent a rebranding of our existing diet SKUs to more clearly articulate the zero-sugar benefit to consumers,” he said. “For Dr Pepper, the introduction of a zero-sugar variety will be in addition to original Dr Pepper and Diet Dr Pepper.”
He said other planned product launches are Bai Boost, which will feature caffeine, and Mott’s Mighty, a line of juices and sauces fortified with vitamins and fiber.
In beverage concentrates, net sales decreased 6% to $1.33 billion from $1.41 billion as COVID-19 negatively impacted the fountain foodservice business. In Latin America beverages, net sales fell 6% to $497 million, primarily reflecting the negative impact of unfavorable foreign currency translation.
Companywide in the fourth quarter, net income increased 5% to $428 million, or 30¢ per share on the common stock, from $406 million, or 29¢ per share, in the previous year’s fourth quarter. Net sales in the quarter grew 6% to $3.12 billion from $2.93 billion.