Keurig Dr Pepper's Soda Business Is Carrying the Whole Company While Coffee Keeps Slipping

Keurig Dr Pepper reported third-quarter net sales of $7.34 billion, up 70.6% from a year ago, almost entirely a function of folding in its newly acquired JDE Peet's coffee business. Strip that acquisition out and legacy Keurig Dr Pepper still grew a healthy 8.6%, with GAAP diluted earnings per share up 20.4% to $0.59 and adjusted diluted EPS up 22.2% to $0.66.

The segments tell a lopsided story. US Refreshment Beverages, the soda and flavored-drink side of the business, grew net sales 10.9% to $3.0 billion with adjusted operating income up 8.3% to $884 million, a 29.1% margin. US Coffee grew net sales just 2.7% to $1.0 billion, and its 11.4% jump in adjusted operating income to $353 million only held up thanks to a one-time tariff refund; strip that out and the coffee business is leaning hard on volume growth to offset a 4.2% price decline. International sales grew 11% but operating income there slipped slightly on cost pressures including a Mexican beverage tax and heavier marketing spend. JDE Peet's itself contributed $2.6 billion in net sales and an 18.1% operating margin in its first quarter fully inside Keurig Dr Pepper's results. CEO Tim Cofer said the refreshment beverages portfolio "maintained its double-digit sales growth momentum," and that the company remains on track to hit its 2026 targets.

There's an obvious tension buried in that confidence: Keurig Dr Pepper is simultaneously integrating a massive coffee acquisition and telling investors it's working toward a planned separation of the company, the kind of corporate split that usually happens when management has decided the pieces are worth more apart than together. For now, soda is paying the bills while coffee gets by on a tax refund, which is not exactly the balanced growth story a company planning to break itself up would want to be telling.

Source: Keurig Dr Pepper

Kyle Duford, Founder & Editor, BRNDWIRE. More from Kyle →