Says Keurig Dr Pepper CEO Says U.S. Alcohol Sector Is ‘On Our Radar.’
On Oct. 27, Coca-Cola raised full-year 2021 revenue guidance to a range of +13% to +14% after reporting 14% higher third-quarter organic revenue. The sales gain came on volume and pricing that each grew +6% in the quarter. Coke’s North America Operating Unit (US/Canada) posted a +13% gain in organic revenue, helped by +4% volume growth and +5% higher pricing. The next day, Keurig Dr Pepper also raised 2021 guidance for the second straight quarter as the company reported third quarter net sales growth of +6.8% (excluding currency fluctuation). The company now expects full-year 2021 net sales growth in the range of +7% to 8%. Third-quarter organic net sales for Keurig Dr Pepper’s packaged beverage business rose +6.8%. The segment was helped by +5.3% pricing growth, as volume rose +1.5%. Organic net sales for Keurig’s coffee pod and brewer business grew +4.6%. Sales of beverage concentrates to bottlers and syrup to fountain customers grew +10.8% as a segment, according to the company. Net sales for the Latin America Beverages segment grew +14.5%. Here’s what else we learned:
ON-PREMISE CONSTRAINTS. During an investor call, Chairman and CEO James Quincey said an accelerated growth early in the quarter in Coke’s away-from- home business in North America has been tempered by labor shortages that have “constrained some on-premise customers.” Looking ahead, Quincey said he does expect a tailwind as consumers become more mobile after the pandemic and Coke’s away-from-home business rebounds. Prior to the pandemic, away-from-home sales ranging from fountain drinks to immediate consumption bottles and cans in various channels generated about half of Coke’s global sales. Quincey estimated that roughly half of Coke’s away-from-home mix has seen a “snapback,” while the rest will take time to return on a smoother curve. Reasons include the permanent closing of some on-premise outlets amid the pandemic, a change in some consumer habits, and operations in subchannels such as hospitality and travel that “are still running far below their 2019 levels,” Quincey said. In an interview, CFO John Murphy said progress in recovering Coke’s away-from-home business in North America “is a little better than we had expected but we still have some ways to go to get it back to where it was pre- Covid.”
PRICING STRENGTH. Similar to recent commentary by PepsiCo CEO Ramon Laguarta, Quincey said pricing actions in the US (to offset higher input costs) “have been effective, with lower-than-expected price elasticities to date.” He added that “promotional levels remain below 2019.”(See Pricing Surge for more pricing analysis.) He added that the pricing environment in the US beverage market is “rational,” based on actions seen by competitors and private label retailers.
SUPPLY PRESSURES. During the investor call, executives cited aluminum cans, hot-fill resin in the US, and C02 as inputs that remained in short supply.
AD AGENCY REVIEW. Quincey said he expects a “structural amount of change” next year in the company’s marketing operations after it decides the outcome this year of a global marketing and agency review.
ALCOHOL ASPIRATIONS – PART II. During Keurig Dr Pepper’s Oct. 1 investor day webcast, the company touted its evolving alcohol portfolio in Canada on the heels of PepsiCo’s recent decision to self-distribute Hard Mtn Dew when the alcohol product launches next year. Last week, an analyst followed up during KDP’s third-quarter investor call with a more specific question about KDP’s own strategic thinking around alcohol beverages in the US given PepsiCo’s move. Chairman and CEO Bob Gamgort noted PepsiCo’s “creative” approach to the complexity of US alcohol distribution, which sits at the intersection of two opportunities important to KDP: 1) portfolio expansion to new territories, and 2) the consolidation of distribution assets to ensure efficiencies of scale. “It’s interesting to see how others are looking at it,” Gamgort said of the alcohol category. “We look at beverages holistically, so it’s certainly on our radar screen. It will be something in the broadest sense that we will be talking about in the future.”
© 2022 Beverage Digest.
Design, CMS, Hosting & Web Development :: ePublishing