Apr 25, 2025 (MarketLine via COMTEX) --
US drinks heavyweight Keurig Dr Pepper is looking to take measures to address pressures in its local coffee business, including making changes to its sourcing.
Following the release of its first-quarter results yesterday (24 April), CFO Sudhanshu Priyadarshi told analysts actions may include “pushing hard on cost savings, evaluating additional pricing and mix management, and pursuing alternate sourcing”.
The soft drinks and coffee major continued to see pressure on its US coffee business in the quarter as it tackles so-called green coffee inflation and the potential impact of tariffs.
The company’s US Coffee segment saw net sales dip 3.7% to $900m, with price increases weighing on volume/mix in the period.
The group's GAAP operating income for the coffee business declined 18.5% to $202m, while adjusted operating income dropped 12.5% to $253m, amounting to a margin of 28.8% of net sales.
CEO Tim Cofer said on the analyst call that Keurig Dr Pepper (KDP) would be looking for “a sharper focus on the highest returning products, channels, and households”.
He also spoke of plans to focus on “cold”, “premium and next-generation propositions” in coffee.
In the “back half” of 2025, the chief executive added the company would assess the need for “additional inflation mitigation steps” in response to coffee-price inflation and tariffs.
“Additional pricing could be one of the levers, but there are others as well - productivity mix and a broader cost base,” he said.
Priyadarshi added the group was predicting an “improvement” for the second half of its fiscal year.
“Though segment performance is likely to remain subdued in 2025, we are laying the groundwork for stronger and more multifaceted growth in the years ahead,” Cofer told analysts.
Priyadarshi echoed Cofer's sentiment, noting the group expected “sales and [operating income] pressure in US coffee” in 2025, noting “we feel that whatever coffee does this year, it will continue to be subdued”.
In its first quarter, the 7Up maker's total net sales grew 4.8% on a reported basis and 6.4% on an adjusted basis, to $3.64bn.
GAAP operating income increased 4.7% to $801m, while adjusted operating income was up 3.9% at $847m, making up 23.3% of net sales.
The Canada Dry owner's GAAP net income grew 13.9% to $517m. Adjusted net income increased 8.5% on the year prior, to $568m.
Hispanic consumerWhen asked about its Hispanic-Latino consumer activity in the US, Cofer said the company had seen recent “softening trends among Hispanic consumers relative to the broader population”.
He noted, however: “The slowdown year-to-date that we’re seeing in the Hispanic consumer purchase dynamic is not yet sufficient to move the needle on our enterprise trends… I think it’s contributing to the overall dampened consumer sentiment you’re seeing in the US.”
Earlier this month, both Heineken and Constellation Brands pointed to the weak consumer sentiment being seen across Hispanic and Latin American consumers in the US.
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