- Keurig Dr Pepper is reorganizing its executive leadership team and creating new product divisions. Mauricio Leyva, the current president of international and business development, is the company's first president of the coffee business. Derek Hopkins, the current chief commercial officer, is its first president of cold beverages. Andrew Springate, the current chief marketing and concentrate officer, will assume leadership for the company’s concentrate business.
- These executives will take on their new roles effective Nov. 1. The changes are taking place two and a half years since the $19 billion merger that formed Keurig Dr Pepper.
- Following the upheaval of the pandemic, companies are looking to recoup some of the losses experienced during lockdowns, when many businesses closed their doors. Keurig Dr Pepper's coffee and cold beverage areas were its two largest at-home consumption segments, which both grew last quarter.
Since the merger, the former Dr Pepper Snapple and Keurig Green Mountain units have operated in unison. Now, the pandemic has forced the entire corporation to look introspectively and consider whether its structure is set up to cater to today's consumers, who are spending more time at home.
Although the company’s latest earnings report showed a net sales increase of 5.2% to $3.02 billion from $2.87 billion for the same time last year, numbers indicate there were losses from commercial and foodservice sales that continue to weigh on the company’s revenues.
In the coffee segment, drops in orders of office and hospitality beverages “significantly” offset the gains made in the company’s sales, CFO Ozan Dokmecioglu said, according to a transcript of the earnings call. Still, coffee was one of the growth drivers for the quarter, with double-digit dollar growth in K-Cup coffee pods for at-home consumption. The company anticipates this will continue to be a profitable segment.
“I think as people move from coffee out of the home and in home they take their favorite coffee shop brands with them, which tend to be priced higher,” CEO Bob Gamgort said in an earnings call.
The premiumization of coffee can be seen by the household penetration of the company’s Keurig brand, which is expected to add 3 million new households using the K-Cup system this year. With such growth, it is no surprise that Leyva was appointed to focus specifically on coffee. This includes marketing and innovation for the Keurig brand, as well as brands owned and licensed by the company, including Tully’s Coffee, Peet’s, Caribou Coffee and High Brew cold brew.
Packaged beverage sales saw a similar trend, with volume sales declines in the convenience and gas channels partially offsetting the gains in cold beverages. Keurig Dr Pepper focused a lot of its sales and marketing efforts into the packaged beverage channel, according to the company’s earnings call. In response to dwindling commercial sales in places where sodas are generally sold individually, leadership at Keurig Dr Pepper has turned to releasing more multi-packs, as well as larger pack sizes to cater to consumers shopping in bulk.
Keurig Dr Pepper’s cold beverage segment is not just made up of soft drinks. It also includes bottled water brands and better-for you drinks including Bai and Core Nutrition. By appointing an official to oversee this portfolio, the company is indicating this is a core segment to the business and one that is anticipated to drive growth long term.
Though two divisions benefit from increasing consumer demand for healthier beverage alternatives as well as access to Keurig Dr Pepper’s vast distribution system. They are also made up of portfolios that cater to different audiences. The company shows it recognizes this, stating that each segment will have a strong focus on marketing and innovation.
It is becoming increasingly important for companies to think of how to connect different types of beverages to the largest number of consumers, rather than relying on distribution channels that deliver to locations that many different types of consumers frequent. Keurig Dr Pepper is developing its e-commerce strategy to reach consumers who are no longer frequenting brick and mortar establishments. Gamgort said in the earnings call e-commerce represents more than 10% of total Keurig Dr Pepper sales, and an even larger portion of coffee sales.
Even with increased reach through online sales, the company is still struggling with the ramifications of foodservice closures. Keurig Dr Pepper leadership anticipates the aftershocks to continue through the first quarter of 2021. This new company organization, however, may help alleviate some of that damage by creating a new focus on the consumer of the "new normal," and working to cultivate that audience.