|Keurig 2.0 was successfully launched during the fourth quarter.|
WATERBURY, VT. — Keurig Green Mountain capped a strong fiscal year with higher revenue and earnings and the successful debut of a new brewer. The company said the launch of Keurig 2.0 during the fourth quarter was the largest and most significant product introduction in its history.
For the fiscal year ended Sept. 27, Keurig’s net income rose 23% to $596.5 million, equal to $3.74 per diluted share on the common stock, up from $483.2 million, or $3.16 per share, in fiscal 2013. Net sales for the year totaled $4,707.7 million, which compared with $4,358.1 million the year before.
“In addition to our financial performance, we delivered on each of our 2014 strategic priorities and we successfully executed across our three major initiatives,” said Brian Kelley, president and chief executive officer, during a Nov. 19 call with financial analysts to discuss fiscal-year performance. “First, Keurig 2.0 was launched on time and with widespread retailer and partner support.
"Second, we successfully welcomed several new and previously unlicensed brands into the Keurig system and we have now signed a large majority of previously unlicensed volume. And third, we are well on track with our Keurig Cold platform and launch plans.”
Robust sales of portion packs drove an 8% increase in net sales during the year and a 14% increase in net sales for the fourth quarter, as Keurig converted more formerly unlicensed brands into the system. Because K-Cups must be licensed to work in the Keurig 2.0 machine, which brews both single-serve cups and full pots of coffee, the company has added a number of new partnerships to its portfolio.
“We have now signed the large majority of previously unlicensed portion pack volume to our system and we are in the process of transitioning these brands,” Mr. Kelley said. “Since last quarter, we announced new relationships with Kraft, Meijer, WB Mason and SuperValu, and began shipping Keurig-manufactured store brands to several new customers, including Wal-Mart and Sam’s Club.”
Fourth-quarter income advanced 11% to $141.1 million, or 86c per share, which compared with $127 million, or 83c per share, in the comparable period. Net sales were $1,195.6 million, up from $1,047.2 million in the prior-year quarter.
Full steam ahead
Looking ahead, Keurig is focused on several key objectives, which include the continued roll-out of Keurig 2.0 and conversion of newly signed partner brands, ongoing investment in innovation and pursuit of additional high-potential home beverage systems, and the globalization of the Keurig system.
Also on tap for the coming year is the launch of Keurig Cold, a home beverage platform developed with the Coca-Cola Co. that will dispense cold, carbonated beverages.
“We are well on target to launch in the fall of 2015, well in time for the holiday season,” Mr. Kelley said. “We are on track with our product development efforts, including brewer technology, the manufacturing of pods and appliances, and all of the brand development required, including our own brands and partner brands. We also continue to work very closely with our partner Coca-Cola in virtually all aspects of the Keurig Cold system in preparation for launch.”
Keurig expects the cold beverage platform to grow faster than its hot brewers, supported by increased awareness of the brand and the scale of the cold beverage category.
“Given our confidence in the long-term growth potential of our Keurig Cold system, we are very comfortable investing to scale this business, which you saw us begin in 2014,” Mr. Kelley said.
For fiscal 2015, the company projects revenue growth in the high-single to low-double digit range with earnings per diluted share growth in the mid-single to high-single digits.
“As we enter 2015, I remain very confident in the power of the Keurig system to further premiumize hot and cold beverages across North America, and over the longer term, around the world,” Mr. Kelley said. “The Keurig system has proven to be a growth vehicle and brand builder for all participants, and 2014 was no exception.
"We saw growth in our company-owned brands; in well-established partner brands, such as Starbucks, Folgers, Eight O’Clock, Lavazza, and Caribou; in non-coffee brands, such as Lipton, Snapple, Twinings, Tetley, Bigelow, and Swiss Miss; and we saw new entrants like Peets, Honest Tea, Coffee Bean & Tea Leaf, and Cafe Bustelo all accelerate their growth throughout the year.”Keurig also announced the departure of its chief financial officer and treasurer, Frances Rothke, who will continue to serve in her current role until a replacement is named. Keurig is working with an executive search firm to fill the position.