On May 9, Keurig Dr Pepper reported firstquarter underlying net sales growth of +1.4% for its packaged beverage unit, while pricing grew +2.3% and volume/mix fell -0.9%. In the beverage concentrate business, bottler case sales volume declined -1.9%, as foodservice sales fell -2.0%.

Perspective. Nearing its first year as a newlycombined company, Keurig Dr Pepper continues to transform the legacy DSD and ready-to-drink businesses acquired via Dr Pepper Snapple to a new paradigm as envisioned by CEO Bob Gamgort and majority shareholder JAB Holdings. The company’s earnings conference calls have offered a window into Gamgort’s thinking as he evolves the business. Below are a few comments worth noting.

White Space. Gamgort said KDP executives have “no desire to pay these pretty high multiples” for new up-andcoming brands,” adding, “We’d rather partner with people earlier in the process when things are more reasonable and grow the business together,” he said. Gamgort didn’t say whether he was referring to Bai. He said the recent deal with Core co-founder Lance Collins for his new Adrenaline Shoc energy drink is an example of white space deals KDP will develop through what he called “relationships.” KDP purchased Core last year. “The fact that after we closed that deal, we were able to sit down and partner on an opportunity in an area where we have white space, is a competitive advantage,” Gamgort said, adding that the company is getting a “steady flow of ideas” to address other white space opportunities.

Energy. Gamgort was asked about the prospects for KDP’s energy portfolio given a wave of new entrants in the category, such as Bang and Coca-Cola Energy (launched in Europe). Last month, KDP signed a new allied brand distribution deal with Runa, owned by Vita Coco parent All Market, and a separate investment and distribution agreement with Lance Collins for his Adrenaline Shoc. “The energy segment is attractive, both in terms of its absolute size as well as its growth rate,” Gamgort said. “And as the case in every consumer category where there’s a large attractive segment, it begins to fragment until you start to break things out in terms of differential benefits, clean energy, and more fitness-oriented energy. And that’s the normal pattern you see in every large high-growth segment.” Gamgort said KDP has one of the few systems that can scale energy drinks at the right locations. “In a lot of these large, fast-growing attractive categories, we don’t have to be the No. 1 or even No. 2 player,” he continued. “We just have to have a meaningful business that’s incremental to our portfolio and that allows us to participate in these really attractive categories. And energy is an area where we have a lot of white space. And therefore, we view that as truly an opportunity for future growth, which is why we’re entering this with multiple players.”’

DSD. Gamgort also expressed confidence in the company’s direct-store-delivery system after an analyst question about ready-to-drink coffee. “The game is won or lost store-by-store, shelf-by-shelf, day in and day out,” he said. “With the DSD system, you have a tremendous amount of latitude to influence both merchandising and distribution at the local level. It’s why we like it so much. That’s why there are only a few systems, and we’re one of them, that can get a single bottle or can merchandised nationally in every small outlet in a cold format. That is a very local action. So the real magic is a combination of a centralized decision-making with an execution force that can be coordinated locally.”

Share Sale. On May 16, KDP announced that its majority shareowner, Acorn Holdings, will sell some of its shares in KDP to increase the amount held by outside shareholders to 20%. Acorn is a brand investment arm of JAB Holdings that controls KDP, Jacobs Douwe Egberts coffee, and Peet’s Coffee.