Plus: Dokmecioglu Assumes Control as CEO. Archambault Becomes Commercial Chief.
Cold Beverages Unit Seeks New Leader as Hopkins Plans Departure.
A day before transitioning to executive chairman on July 29, Keurig Dr Pepper Chairman and CEO Bob Gamgort updated investors on his upcoming M&A focus as he hands the CEO role to CFO Ozan Dokmecioglu. Gamgort pointed to equity investments
and partnerships with brands such as Core water, Polar seltzer, Vita Coco coconut water, and McCafe coffee K-cups as examples of the company’s ability to plug brands into what he called KDP’s “growth machine.” “Therefore, it’s logical for us to consider M&A as our leading opportunity in capital allocation,” he said, adding that KDP’s discretionary cash flow is expected to be $5 billion in aggregate during the next three years. In recent years, KDP has tended more toward strategic partnerships over acquisitions to fill product, geographic, and capability white spaces because “our disciplined approach has faced lofty valuation expectations from sellers,” Gamgort said. “We’re good with that, as we know that no deal
or an alternative partnership structure is far better than an overpriced acquisition.” While saying that discipline won’t be abandoned, Gamgort disclosed encouraging “conversations” with “several potential partners.” He said the company’s track record, “combined with
a more challenging investor environment” for entrepreneurs, has narrowed the spread between asking prices and what KDP is willing to pay. “Time will tell if that improves actionability.” During questioning by analysts, Gamgort said KDP’s approach to evaluating potential acquisitions and seed investments is based on “long-term profit and cash” rather than revenue multiples, which had kept KDP on the sidelines for some opportunities. High asking prices had been driven by the deal market for initial public offerings (IPOs) and special-purpose acquisition companies (SPACS), he added. Both markets have cooled amid rising economic and consumer uncertainty.
Q2 EARNINGS RESULTS. On July 28, KDP reported second-quarter adjusted net revenue growth (excluding currency fluctuation) of +13.5%, after net price realization that was up +10.4%. The company also raised its full-year 2022 adjusted net sales growth guidance to a low- double-digit percentage range, from a high-single-digit range. In the quarter, packaged beverage adjusted net sales grew +12.9%, helped in part by growth in carbonated soft drinks, Core Hydration, Snapple, and Polar, the company said. Beverage concentrates jumped +22.9%, with some benefit from timing. Latin America Beverages rose +26.5% on the strength of brands such as Peñafiel and Clamato, while coffee systems grew +9.1% as the company recovered from supply shortages.
MANAGEMENT CHANGES IN EFFECT. Yesterday, KDP Chief Customer Officer Andrew Archambault took over as president of commercial. He takes over those duties from Cold Beverages President Derek Hopkins, who oversaw the commercial function as well. On July 19, KDP announced Hopkins’ departure from the company at the end of this year. He will continue to advise CEO Dokmecioglu and Executive Chairman Gamgort through 2023, according to the company. Hopkins’ role managing cold beverages and commercial will be split between Archambault and a new cold beverages leader to be named by the end of the year after an external search. Archambault will lead sales planning and execution for national and regional accounts, while also taking responsibility for fountain foodservice and revenue growth management. In a statement, KDP said Hopkins decided to leave “to pursue family and personal interests he’s put on hold for some time.” Hopkins’ departure was not related to recent c-suite changes, according to knowledgeable BD sources. “With a foundation of strong performance since the merger, KDP leadership thoughtfully designed this transition to ensure personal and professional needs were met while driving the next chapter in the Company’s growth story,” a KDP spokeswoman told BD in an emailed statement. “Derek has delivered exceptional results for KDP with a strong team that is ready and able to continue the momentum. His dedication to the business is evident in this well-designed transition plan.” Separately, newly named Group President Mauricio Leyva, who runs KDP’s coffee business, adds responsibility for the company’s international business, which had been managed by Dokmecioglu in conjunction with his CFO duties. In addition, Chief R&D Officer David Thomas will retire from the company when a successor is named at a future date. And Cold Beverages Finance SVP George Lagoudakis has been named interim CFO during an external search for someone to succeed Dokmecioglu.
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