BURLINGTON, MASS. — A 6% decline in at-home coffee consumption in 2022 is not a cause for concern, according to the leaders of Keurig Dr Pepper Inc. Even as consumer mobility rose during the year, the company’s coffee systems and pods gained share in the at-home occasion and the company met its goal of selling 2 million Keurig systems during the year.
“There has been significant noise between 2019 and 2022 in both the at-home and away-from-home coffee categories, primarily due to shifting consumer mobility and we acknowledge that it has been a challenge for investors to separate the signal from that noise,” said Sudhanshu Shekhar Priyadarshi, chief financial officer, during a Feb. 23 conference call with securities analysts to discuss fiscal 2022 results. “After significant at-home coffee volume growth in 2020 and 2021, due to increased consumer time spent at home, we began to see a deceleration in 2022. This occurred globally in all parts of at-home coffee, which is quite unprecedented.”
Mr. Priyadarshi attributed the shift in consumption to people getting out more in the wake of the COVID-19 pandemic and “significant pricing actions taken in 2022.”
“However, single-serve coffee outperformed, enabling it to gain share of total at-home coffee consumption,” he said. “KDP's owned and licensed brands demonstrated relative strength in 2022 despite having among the highest price increases in the single subsegment with the fourth quarter representing its highest share position since before COVID, driving the strength by the strong innovation that's resonated with consumers and reinstated promotions in the second half as part supply was restored.”
In response to a question from an analyst about the decline in at-home consumption, Robert J. Gamgort, chairman and chief executive officer, said the Keurig system continues to outperform annually.
“None of us believe that at-home coffee is a long-term problem,” he said. “In fact, it has significant tailwinds. This is just an adjustment as people are spending less time at home, more time out of home. We know that the No. 1 driver of at-home coffee consumption is time spent at home. And it’s as straightforward as that, and we expect to see the recovery in the category of at-home coffee to occur as mobility improves throughout the year.”
Coffee Systems business unit sales in 2022 rose 6% to $5 billion. On a constant currency basis, net sales rose 6.2%, with the increase driven by a 7% increase in net price realization and offset by a 0.8% decrease in volume/mix.
For the year ended Dec. 31, Keurig Dr Pepper recorded net income of $1.4 billion, equal to $1.01 on the common stock, and down significantly from the previous year when the company earned $2.2 billion, equal to $1.52 per share.
Profitability primarily was impacted by an unfavorable impact of non-operating items affecting comparability, according to the company.
Sales rose to $14 billion in 2022 from $12.7 billion in 2021. In constant currency, net sales advanced 11.1%, with pricing contributing 10.6% and 0.5% volume mix.
In Packaged Beverages, the company’s largest business unit, sales increased 12% to $6.6 billion.
“In 2022, we continued to build upon or hold the significant share gains we achieved over the past few years in total liquid refreshment beverages in key segments such as CSDs (carbonated soft drinks) and premium water,” Mr. Gamgort said. “Second, by filling white space in our portfolio through innovation and partnerships, such as our strategic relationship with Nutrabolt for C4 Energy and our Red Bull agreement in Mexico, as well as our expansion into new platforms such as nonalcohol beer with our investment in Athletic Brewing and better-for-you drinks in foodservice through our partnership with Tractor Beverage.”
Beverage Concentrates sales rose 16% to $1.7 billion. In constant currency, net sales rose 16.4%, with pricing contributing 14.7% and volume/mix contributing 1.7%.In 2023, KDP is guiding sales growth of 5% and adjusted earnings per share growth of 6% to 7%, reflecting an improved relationship between pricing and inflation, according to the company.