Keurig Dr Pepper Inc. reported results for the first quarter of 2024, reaffirmed its full year guidance, and announced the completion of its CEO succession process.
Commenting on this final step in the CEO transition, which began in fall 2023, Chairman and CEO Bob Gamgort stated in the announcement: “It has been a privilege to help establish Keurig Dr Pepper into the formidable company it is today, and I look forward to supporting its future growth as Executive Chairman. As KDP enters its next phase, Tim and his leadership team are activating an exciting, evolved strategy that I am confident will extend our track record of success and continue to differentiate KDP within the beverage industry."
Incoming CEO Tim Cofer added in the announcement: “I am honored to lead the next chapter of value creation as CEO of Keurig Dr Pepper and excited to partner with Bob, our Board, and all 28,000 colleagues to unlock our full potential as a beverage industry leader. We have a unique and competitively advantaged business, with a significant growth opportunity that we intend to realize through our evolved strategy. I'm pleased with our strong first quarter results, which reflect consistent execution across the organization and demonstrate the health of our business. This performance underscores our confidence in our 2024 outlook, which is in-line with our long-term financial algorithm."
First-quarter consolidated results
Net sales for the first quarter increased 3.4% to $3.5 billion. On a constant currency basis, net sales advanced 2.8%, driven by net price realization of 3.1%, partly offset by lower volume/mix of 0.3%.
GAAP operating income increased 31.0% to $765 million. The growth was driven by strong operating momentum, aided by a favorable year-over-year impact of items affecting comparability.
Adjusted operating income increased 17.5% to $825 million and totaled 23.8% as a percent of net sales. Adjusted operating income growth was driven by 9.7% adjusted gross profit growth, translating to 350 basis points of adjusted gross margin expansion. Adjusted operating income growth reflected higher net price realization and net productivity, partly offset by higher SG&A costs, including increased marketing investment, and the impact of the modest volume/mix decline.
GAAP net income for the quarter decreased 2.8% to $454 million, or $0.33 per diluted share. This performance primarily reflected an unfavorable year-over-year impact of items affecting comparability, partly offset by strong operating momentum.
Adjusted net income for the quarter advanced 10.0% to $530 million, and adjusted diluted EPS increased 11.8% to $0.38. The adjusted diluted EPS growth was driven by the adjusted operating income growth and a lower share count, partly offset by a higher non-GAAP tax rate and higher non-GAAP interest expense.
First-quarter segment results
U.S. Refreshment Beverages
Net sales for the first quarter increased 4.3% to $2.1 billion, driven by net price realization of 5.6%, partly offset by a decline in volume/mix of 1.3%. This performance reflected higher pricing compared to prior year, continued manageable elasticities across most categories, and the contribution from the company's recently commenced Electrolit partnership.
GAAP operating income increased 25.5% to $615 million. Adjusted operating income increased 22.4% to $622 million and totaled 29.7% as a percent of net sales, driven by higher net price realization, net productivity, and an earned C4 performance incentive during the first quarter, partly offset by lower volume/mix and higher SG&A costs, including increased marketing investment.
U.S. Coffee
Net sales for the first quarter decreased 2.1% to $0.9 billion, driven by a net price decline of 1.8% and a modest volume/mix decline of 0.3%.
K-Cup Pod shipments declined 1.1%, strengthening on a sequential basis, reflecting improving market share trends across the company's owned and licensed portfolio.
Brewer shipments totaled 10.0 million for the 12 months ending March 31, 2024, declining 1.9% year-over-year. In the quarter, brewer shipments grew strongly, reflecting Keurig market share momentum and timing benefits.
GAAP operating income increased 6.9% to $248 million, primarily reflecting a favorable year-over-year impact of items affecting comparability.
Adjusted operating income increased 1.4% to $289 million, primarily driven by net productivity, which more than offset the impacts of targeted price reductions and increased marketing investment. Adjusted operating income margin totaled 31.7% as a percent of net sales and expanded 110 basis points versus the prior year.
International
Net sales for the first quarter increased 11.8% to $0.5 billion. On a constant currency basis, net sales advanced 7.0%, driven by volume/mix growth of 4.8% and net price realization of 2.2%. This strong performance reflected continued momentum across markets.
GAAP operating income increased 40.0% to $112 million, aided by favorable year-over-year impacts from items affecting comparability and currency translation.
Adjusted operating income increased 25.0% to $109 million and totaled 23.5% as a percent of net sales, driven by net sales growth and net productivity, partially offset by increased marketing investment.
2024 guidance
KDP reaffirmed its fiscal 2024 guidance for constant currency net sales growth in a mid-single-digit range and adjusted diluted EPS growth in a high-single-digit range.
