Keurig Dr Pepper Q2 2026 Earnings Report

Keurig Dr Pepper EPS Results

• Actual EPS: $0.57
• Consensus EPS: $0.54
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: $0.49

Keurig Dr Pepper Revenue Results

• Actual Revenue: $7.31 billion
• Expected Revenue: $7.23 billion
• Beat/Miss: Beat by +$77.41 million
• YoY Revenue Growth: +75.60%

Keurig Dr Pepper Announcement Details

• Quarter: Q2 2026
• Date: 8/6/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, August 6, 2026
• Conference Call Time: 8:00AM ET

Keurig Dr Pepper (NASDAQ:KDP) Inc. (NASDAQ: KDP) is a beverage company that produces, distributes and markets a broad portfolio of hot and cold beverages. Its products include coffee, soft drinks, flavored sparkling water, juices, teas, sports drinks and mixers, sold under brands such as Keurig, Dr Pepper, Green Mountain Coffee Roasters, Canada Dry, Snapple, 7UP, A&W, Bai and Core Hydration.

The company’s coffee business includes single-serve brewing systems, coffee makers, pods and related beverages. Its refreshment beverage operations offer carbonated soft drinks, bottled water and other nonalcoholic beverages through a range of owned, licensed and partner brands. Keurig Dr Pepper reaches consumers through grocery stores, convenience stores, restaurants, food-service providers, e-commerce channels and other retail outlets.

Keurig Dr Pepper was created in 2018 through the combination of Keurig Green Mountain and Dr Pepper Snapple Group. The company primarily serves markets in the United States and Canada, with products distributed through a combination of direct operations, third-party distributors, licensing arrangements and strategic partnerships.

Keurig Dr Pepper Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 results exceeded expectations: Net sales rose 74.6%, including JDE Peet’s, while operating income increased 42.9% and adjusted EPS grew 16.3% to $0.57. Management reaffirmed its low-double-digit constant-currency EPS growth outlook for 2026.
• Positive Sentiment: U.S. Refreshment Beverages remained a key growth engine, with sales up 10% and operating income up 11.9%. Dr Pepper Zero Sugar, Creamy Coconut, energy brands Bloom and Ghost, and newer platforms such as sports hydration and water drove volume and market-share gains, although growth is expected to moderate against tougher comparisons in the second half.
• Positive Sentiment: JDE Peet’s delivered $2.8 billion in sales and $414 million in operating income, ahead of expectations due to pricing discipline, productivity savings, and favorable timing. KDP expects its planned $400 million in cost synergies to build, supported by procurement, IT, SG&A, manufacturing, and logistics initiatives.
• Negative Sentiment: U.S. Coffee remained pressured: sales declined 3.2%, operating income fell 24.7%, and pod shipments dropped 8.3% excluding the Peet’s reporting shift. Higher green coffee costs and tariffs, weaker single-serve category trends, private-label mix, and trade inventory headwinds hurt results, though management expects profitability and volume trends to improve in the second half.
• Neutral Sentiment: KDP is advancing integration and preparations to separate Beverage Co. and Global Coffee Co. in early 2027, while reducing pro forma leverage to 4.4x and targeting approximately 4.1x by year-end; however, the Global Coffee Co. CEO search remains ongoing and management provided no specific appointment date.

Presentation

[Operator]

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Keurig Dr Pepper's earnings call for the second quarter of 2026. This conference call is being recorded, and there will be a question and answer session at the end of the call. I would now like to introduce Chethan Mallela, Vice President of Investor Relations at Keurig Dr Pepper. Please go ahead.

[Chethan Mallela, VP of Investor Relations at Keurig Dr Pepper]

Thank you, and hello, everyone. Earlier this morning, we issued a press release detailing our second quarter 2026 results, which we will discuss on today's call. An accompanying slide presentation is available and can be viewed in real-time on the webcast. Before we get started, I'd like to remind you that our remarks will include forward-looking statements, which reflect KDP's judgment, assumptions, and analysis only as of today. Our actual results may differ materially from current expectations based on a number of factors affecting KDP's business. Except as required by law, we do not undertake any obligation to update any forward-looking statements discussed today. For more information, please refer to our earnings release and the risk factors discussed in our most recent Form 10-K and our latest 10-Q, which will be filed with the SEC in the coming days.

[Chethan Mallela, VP of Investor Relations at Keurig Dr Pepper]

Consistent with previous quarters, we will be discussing our Q2 performance on a non-GAAP adjusted basis, which reflects constant currency growth rates and excludes items affecting comparability. Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings materials. Here with us today to discuss our results are Keurig Dr Pepper's Chief Executive Officer, Tim Cofer, and Chief Financial Officer, Anthony DiSilvestro. I'll now turn it over to Tim.

[Tim Cofer, CEO at Keurig Dr Pepper]

Thanks, Chethan, and good morning, everyone. In Q2, we delivered another quarter of strong results. We demonstrated healthy momentum across the majority of our business, led by U.S. refreshment beverages, and our performance exceeded our expectations. Halfway through the year, we remain on track to achieve the goals we set at the beginning of 2026, delivering our low double-digit EPS growth guidance, integrating and activating JDE Peet's, and hitting key separation milestones. While we expect the external environment to remain dynamic in the back half, our plans, executional discipline, and year-to-date performance reinforce our confidence in delivering our 2026 guidance while setting up for a successful separation in early 2027. Before turning to our results, let me begin with an update of our transformation work.

[Tim Cofer, CEO at Keurig Dr Pepper]

We successfully closed the acquisition of JDE Peet's in early April, on day one stood up an interim operating model that is purpose-built to support both near-term delivery and separation readiness. The model embeds distinct responsibilities and clear accountability across our KDP Enterprise, Beverage Operating Unit, and Coffee Operating Unit leadership teams, all of which are functioning well as we advance our integration and separation priorities. Let me share some key highlights from our work. We've quickly begun to capture Coffee Co cost synergies, with initial savings flowing through in the second quarter, have also commenced work to offset anticipated Beverage Co dyssynergies. We've now consolidated our U.S. customers to an integrated sales force and single invoice for the joint Keurig and Peet's portfolio, with the transition completed on schedule and without disruption. We've largely finalized our post-separation organizational structures, including across critical operational, commercial, and finance functions.

[Tim Cofer, CEO at Keurig Dr Pepper]

We've made significant progress establishing IT and financial reporting readiness for each future company, we've begun deleveraging our balance sheet following the JDE Peet's close, reducing pro forma management leverage to 4.4x at quarter end. This was slightly better than our expectations, we remain on track to end the year with leverage of 4.1x. In addition, our search for the future CEO of Global Coffee Co is well underway. The Nominating and Governance Committee of our board of directors is leading the process and has engaged a top-tier executive search firm to help identify and evaluate candidates. The role has already attracted considerable interest, we're confident we will recruit the right CEO to shape and execute Global Coffee Co's value creation strategy. Let's now turn to our second quarter results. Total net sales grew 75%, inclusive of the JDE Peet's acquisition impact.

[Tim Cofer, CEO at Keurig Dr Pepper]

Net sales for legacy KDP increased at a high single-digit rate, with both net price realization and volume mix contributing. We translated our top-line improvement into significant profit growth, with consolidated operating income up over 40% and EPS increasing 16% to $0.57. Overall, our second quarter was ahead of our expectations, primarily driven by upside in our JDE Peet's and U.S. Refreshment Beverages segments, including some timing benefits that Anthony will discuss. We also delivered solid results in KDP International, partly offset by subdued trends in U.S. Coffee. Let me walk through each segment in more detail. I'll start with U.S. Refreshment Beverages. Segment net sales and operating income each grew at a double-digit rate in the second quarter, reflecting strength across both our core portfolio and newer growth platforms. Our largest business, carbonated soft drinks, continued to grow nicely.

[Tim Cofer, CEO at Keurig Dr Pepper]

Category trends were healthy, with consumers responding to the compelling value proposition and significant commercial activity from major players. We gained market share in the quarter, led by Dr Pepper. The brand's Zero Sugar platform sustained its momentum, growing retail sales nearly 30% and gaining more share than any other trademark in the zero sugar space, driven by increasing household penetration. This reflected the benefits of marketing support, increased distribution, and greater display activity, we will continue to deploy these levers to drive further expansion. Dr Pepper franchise trends were also fueled by our Creamy Coconut limited time offering, which launched in April. The response to the innovation has been positive, with the distribution build, display support, and most importantly, consumer sell-through, all tracking well ahead of Creamy Coconut's prior market run. Canada Dry also had a robust quarter, with retail sales increasing at a double-digit rate.

[Tim Cofer, CEO at Keurig Dr Pepper]

Our Fruit Splash platform continued to serve as a sustainable growth driver. With this year's highly incremental Strawberry launch performing well. The brand was further supported by our impactful marketing investments, including the recent Dry Time is My Time campaign. Bloom Pop also contributed to our CSD growth. The brand is scaling rapidly, driven by distribution expansion and compelling innovation, and was the leading market share gainer in prebiotic CSDs in the second quarter. Moving to energy drinks, our portfolio achieved a key milestone, crossing the 9% market share threshold in the quarter. Bloom and Ghost were two of the top performing trademarks in the category, underscoring their meaningful consumer resonance and reflecting each brand's great tasting products, authentic positioning, and social media savvy.

[Tim Cofer, CEO at Keurig Dr Pepper]

Growth also came from high-quality frontline execution to expand distribution points and cooler penetration, as well as compelling innovation such as Bloom Crisp Apple and Summer Splash and the Ghost 7UP limited time offering. C4 recently introduced updated packaging across its performance and ultimate lineups with clearer caffeine and benefit communication, bolder flavor cues, and a simplified visual system. This refresh is designed to improve shelf presence and make the portfolio easier to shop, and early results are encouraging with a double-digit sales lift and significant velocity increases in geographies where it's present. We expect brand momentum to build as the new packaging rolls out more broadly. Overall, we continue to view our energy portfolio as advantaged with a long runway for each of our brands and good visibility to our double-digit market share goal.

[Tim Cofer, CEO at Keurig Dr Pepper]

Beyond energy, we also experienced meaningful traction in other high-growth areas of the segment, like sports hydration, coconut water, and seltzer water. All in, our U.S. Refreshment Beverages business continues to enjoy strong momentum, and we expect the segment will remain a key growth engine for KDP over the balance of 2026 and beyond. Moving to coffee, we delivered solid results at the enterprise level, but experienced differing dynamics between our U.S. Coffee and JDE Peet's segments. Turning first to U.S. Coffee, second quarter performance was relatively consistent with our first quarter, as net sales declined in the low single digits and operating income declined 25%. Year-over-year profit pressure was primarily driven by the impact of significantly higher input costs. As we signaled last quarter, this was due to our hedging approach and inventory positioning, which caused elevated green coffee costs and tariffs to flow through our second quarter P&L.

[Tim Cofer, CEO at Keurig Dr Pepper]

While we always anticipated subdued segment performance in the quarter, the magnitude was larger than we initially estimated. Top and bottom line results were impacted by single-serve category volume declines and unfavorable portfolio mix, which reflected increased consumer caution and value-seeking behavior. Despite these dynamics, we made progress across the business. Notably, brewer shipments returned to growth, supported by our Great Coffee Without the Grind Keurig marketing campaign. We expect further improvements over the balance of the year. In coffee products, our licensed McCafé K-Cups grew retail sales at a mid-single-digit rate and expanded market share, reflecting high-quality commercial execution and effective marketing. Our cold coffee La Colombe ready-to-drink platform also drove outsized momentum, growing retail sales over 50% and gaining more than a point of market share, driven by distribution gains, increased display activity, and strong velocity.

[Tim Cofer, CEO at Keurig Dr Pepper]

Importantly, we continue to have line of sight to improving segment trends over the balance of the year. Our cost envelope will become more favorable as lower cost inventory and improving tariff impacts flow through the P&L. Our brewer business has started to inflect and should benefit from our commercial activity, and we're actioning plans to strengthen trends in pods and other coffee products. Ultimately, we believe our U.S. coffee segment is beginning to turn a corner as we enter the back half, and we remain confident in its long-term growth potential. Moving to the JDE Peet's segment, quarterly net sales were approximately $2.8 billion, and operating income was $414 million. We delivered profitability ahead of our expectations, driven by a couple of factors. First, our teams executed well, particularly in navigating commodity volatility. We maintained pricing discipline as inflationary pressures began to ease, protecting profitability and preserving reinvestment flexibility.

[Tim Cofer, CEO at Keurig Dr Pepper]

In addition, we generated healthy productivity savings through our Reignite the Amazing program, further enhancing operating income in the quarter. Second, the segment also benefited from favorable timing, which added to the profit upside. By brand, L'OR maintained its robust momentum, growing retail sales at a high single-digit rate. Brand performance was broad-based, with particular strength in capsules and beans, and was supported by our successful Destinations innovation platform and Awaken the Senses brand marketing campaign. Peet's was another contributor, with retail sales increasing through a combination of pricing and distribution growth. The brand's innovation activity also resonated with consumers, including the launch of Peet's Middle Ground, a half-caffeinated medium roast designed for the afternoon pick-me-up occasion, which achieved healthy on-shelf velocities. Another coffee segment highlight in the second quarter was the successful integration of JDE Peet's and our legacy Keurig business.

[Tim Cofer, CEO at Keurig Dr Pepper]

The newly created Coffee Operating Unit team has collaborated well, establishing integrated business plans, executing unified commercial programs, and beginning to generate initial cost synergies, which are set to build over the balance of the year. In summary, we're pleased with JDE Peet's second quarter results and expect this business will be a significant contributor to our performance in 2026 and over the long term. Finally, our KDP International segment strengthened from the first quarter, as we expected, with net sales growing at a double-digit rate and operating income flat versus the prior year. Segment performance was balanced across our two key markets. In Mexico, pricing was a key driver, but our business also returned to volume growth as the impact of the beverage tax eased. Peñafiel's Adas and Twist platforms each grew retail sales at robust double-digit rates, driven by distribution expansion and in-store execution.

[Tim Cofer, CEO at Keurig Dr Pepper]

Our teams also capitalized on sports enthusiasm through creative marketing activations featuring Squirt, Peñafiel Mineral Water, and Clamato as the green, white, and red of the Mexican flag. This activity contributed to healthy second quarter trends for each of these brands. Canada growth was similarly broad-based. Our cold beverage performance was driven by a combination of pricing and volume mix, with robust trends across CSDs, alcohol alternatives, and newer categories like energy and ready-to-drink tea. In coffee, growth was led by price, though both pod and brewer shipments were also positive, underscoring the health of the Keurig ecosystem in Canada. Overall, we have momentum in our KDP International segment and expect the business to deliver solid results over the balance of the year. In closing, our second quarter results capped a successful first half of 2026.

[Tim Cofer, CEO at Keurig Dr Pepper]

We exceeded our EPS expectations for the quarter, reinforcing visibility to our full year guidance. We closed the JDE Peet's acquisition and quickly advanced integration activities, including synergy work streams. We made important progress on key separation milestones. While there is still meaningful work ahead in the back half, we are confident in our ability to deliver on our 2026 commitments while advancing preparations to establish two world-class standalone companies. With that, I will turn the call over to Anthony to walk through our financial results and outlook in more detail.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

Thanks, Tim. Good morning, everyone. Our second quarter results were driven by strong execution in a dynamic operating environment and the incremental contribution from JDE Peet's. Consolidated net sales grew 74.6% in the quarter, reflecting the JDE Peet's acquisition, which closed on April one. Excluding the JDE Peet's contribution, legacy KDP net sales grew 7.3%. Growth for legacy KDP was balanced, with net price realization contributing 4.2 percentage points and volume mix adding 3.1 points. By segment, legacy KDP's top line was led by double-digit increases in U.S. refreshment beverages and KDP International, partly offset by a low single-digit decline in U.S. coffee. Consolidated gross margin was 46.5%, 860 basis points below the prior year, primarily due to the mix impact of adding JDE Peet's to the portfolio.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

Excluding the acquisition impact, gross margin contracted 210 basis points as elevated cost pressures more than offset the benefits of pricing and productivity. While gross margin for legacy KDP declined as a percent of sales, on an absolute basis, gross profit dollars increased 3.2%. SG&A as a percent of sales declined 400 basis points. Excluding the mix impact from JDE Peet's, SG&A leveraged 100 basis points, driven primarily by productivity savings and disciplined cost management. In total, Q2 operating income increased 42.9% and including the below-the-line impact from acquisition financing, EPS increased 16.3% to $0.57. Turning now to our segment results. U.S. refreshment beverages net sales increased 10%, driven by 6.5 percentage points of volume mix growth and 3.5 points of net price realization.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

Growth was broad-based, led by energy, CSDs, water, and sports hydration. Segment operating income grew 11.9% as net sales growth and productivity savings more than offset cost inflation. Moving to coffee. Our performance in aggregate was solid but varied across the segments, with pressure in U.S. coffee counterbalanced by strong results for JDE Peet's. The divergence was primarily driven by operating factors, which I will discuss shortly. However, I would also like to highlight a reporting dynamic that affected segment comparisons in the quarter. With the closing of the acquisition at the beginning of April, the partner economics for Peet's K-Cup, previously reported in U.S. coffee, shifted to the JDE Peet's segment. We have since integrated distribution and transitioned to Peet's to a unified Keurig invoice. As a result, the full sales and profit recognition for Peet's K-Cup will reside in U.S. coffee going forward.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

These reporting shifts had an unfavorable impact on U.S. Coffee in Q2 and will be a benefit in the back half, with the opposite effect on our JDE Peet's segment. Importantly, these changes are neutral at the KDP Enterprise level. With that background, let's now discuss the specific trends in each of our coffee segments. Starting with U.S. Coffee, second quarter net sales declined 3.2%, with volume mix driving an 8.2 percentage point decline. Pod shipments declined 11.6% on an as-reported basis and 8.3% excluding the impact of the Peet's reporting shift. The decrease primarily reflected subdued category trends in the quarter. Brewer shipments increased 2.1%, returning to growth through impactful marketing and commercial activity, as well as the benefit from lapping prior year retailer destocking. Net price realization contributed five percentage points to growth, driven by carryover pricing actions from 2025.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

Turning to profit, segment operating income declined 24.7%, driven by continued cost pressure from green coffee inflation and tariff impacts. The volume mix decrease and increased marketing spending also played a role, partially offset by net price realization and productivity savings. While we continue to expect subdued segment results for the full year, our cost profile should improve in the coming quarters, and we have good line of sight to improving profit trends in the back half. Our JDE Peet's segment generated $2.8 billion in net sales and $414 million in operating income in the second quarter, exceeding our expectations. Segment profitability was primarily driven by favorable pricing net of cost inflation, along with robust productivity savings. The business also benefited from timing factors, including related to the recognition of derivative gains, as well as some marketing phasing.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

Looking ahead, we expect continued healthy results for JDE Peet's over the balance of the year, particularly as synergies build in the second half. That said, we now believe our second quarter operating profit likely represents the high-water mark for JDE Peet's quarterly earnings contribution in 2026 based on the timing benefits I just discussed, as well as the impact of the Peet's K-Cup transition to U.S. Coffee in the back half. In our KDP International segment, both revenue and profit trends improved sequentially from the first quarter, consistent with our expectations. Net sales grew 12.4%, driven by 6.5 percentage points from volume mix gains and 5.9 points from net price realization. Segment operating income was flat versus the prior year. Benefits from net sales growth and productivity savings were offset by higher costs, including green coffee inflation and the Mexico beverage tax, as well as increased marketing investments.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

Turning to the balance sheet and cash flow. We generated healthy free cash flow of $714 million in the second quarter, driven by strong EBITDA and good cash conversion, including improved working capital trends, particularly in inventory. We continue to target approximately $2.5 billion in free cash flow for the full year. Our cash generation supported our deleveraging goals with pro forma management leverage of 4.4x at quarter end, slightly better than our expectations. We continue to expect to end the year with management leverage of approximately 4.1x Our capital allocation priorities remain unchanged. In the near term, we are focused on three areas: investing in our business, maintaining our current dividend, and paying down debt consistent with our commitment to investment-grade credit ratings for KDP, Beverage Co., and Global Coffee Co.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

Looking ahead, we expect each business to deleverage quickly, which will provide greater capital deployment optionality over the medium to long term. With that, let me close with our full year guidance, which we are reaffirming. For the total company, we expect net sales in a range of $25.9 billion-$26.4 billion, including an $8.5 billion-$8.7 billion contribution from JDE Peet's. We continue to expect legacy KDP to grow 4%-6% in constant currency, but now see the high end of the range as most likely. On the bottom line, we are reaffirming our outlook for low double-digit constant currency EPS growth. This consists of an anticipated six to seven percentage points contribution from the JDE Peet's acquisition and 4%-6% constant currency growth for legacy KDP.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

Based on current rates, we continue to expect an approximately one percentage point FX tailwind to total company net sales and EPS growth for the full year. While our EPS outlook is unchanged, there are two new elements to highlight. First, during the second quarter, we completed the initial JDE Peet's purchase price allocation. This resulted in higher fixed asset depreciation expense for the acquired entity than we previously anticipated, and our guidance now incorporates an incremental 2% non-cash expense headwind to 2026 EPS versus our prior view. Second, our outlook also now includes an anticipated one-time cash benefit from tariff refunds. On a net basis, we expect these two factors to largely offset, resulting in a neutral impact to our full year EPS outlook. Moving to below the line metrics, we are now assuming the following.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

Interest expense of approximately $1.12 billion-$1.14 billion, an effective tax rate of approximately 22%-23%, approximately 1.37 billion diluted weighted average shares outstanding, approximately $190 million in pre-tax Coffee JV costs, and convertible preferred P&L costs based on the securities approximately 8% proportionate share of earnings. In closing, we delivered a strong second quarter. Exiting the first half, we are well-positioned to meet our full-year commitments while also preparing KDP for its exciting next chapter. With that, I will turn the call back to Tim for closing remarks.

[Tim Cofer, CEO at Keurig Dr Pepper]

Thanks, Anthony. As said, we're pleased with our strong second quarter results, which are a testament to the capabilities and hard work of our global team. I want to recognize and thank our more than 50,000 colleagues from around the world for their contributions to our inaugural quarter as a newly combined organization. Spending time with our teams in Amsterdam and Boston has reinforced my passion, enthusiasm, and confidence in the future Global Coffee Co. I'm equally energized by the future Beverage Co. business, which continues to deliver outsized performance and is well-positioned for standalone success. Indeed, our teams are executing with discipline across both coffee and beverages, enabling KDP to deliver on our near-term objectives while making meaningful progress on integration and separation work streams.

[Tim Cofer, CEO at Keurig Dr Pepper]

We have good momentum and well-calibrated plans for the balance of the year and look forward to a strong finish to 2026 while laying the groundwork for our separation in early 2027. With that, we're now happy to take your questions.

[Operator]

We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We ask that you please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question today comes from Chris Carey with Wells Fargo. Please go ahead.

[Chris Carey, Equity Analyst at Wells Fargo]

Hi. Good morning, everyone. I wanted to ask about the strength that you're seeing in the U.S. Refreshment Business. Certainly, it continues to come in very strong. Can you help us understand the contributions of your underlying owned business, how partners are contributing to the business, and expectations going into the back half of the year? I'm mindful that the outlook for the higher end of the net sales ex currency, excluding JDE Peet’s, does imply a deceleration into the back half. U.S. Refreshment is obviously a key enabler of your total company growth. I would just love to get a bit more sense of what's driving Q2, how you see the segment performing into the back half of the year, and perhaps some construct for volume mix versus pricing. Thank you.

[Tim Cofer, CEO at Keurig Dr Pepper]

Good morning, Chris. Yeah. We feel very good about the performance of U.S. Refreshment Beverages. Again, here this quarter, you saw the double-digit top and bottom-line performance, and that was led by a 6.5% increase in volume mix. When you look at the drivers of the strength of that volume mix performance, you start with CSDs, carbonated soft drinks, reflecting healthy category, MSD type performance, and then on top of that, market share gains in our portfolio. I talked in the prepared remarks about continued strength of Dr Pepper Zero Sugar, where we saw about a 30% growth on that platform, the Creamy Coconut LTO, as well as Canada Dry and our Bloom Pop offering within prebiotic CSDs. Really strong performance there.

[Tim Cofer, CEO at Keurig Dr Pepper]

Outsized growth and energy would be the second driver, driven by the momentum we have, in particular in both Bloom and Ghost, and good early traction from the brand refresh of C4. You go to sports hydration, you see continued strong trends with our Electrolit offering. Finally, I'd point to improving still beverage performance led by waters. To your question, that was the Q2 drivers. What about the balance of the year? We expect, quite honestly, these same drivers to support continued segment momentum. However, we will lap some tougher comps in the back half, we expect the magnitude of the growth, which was double digits so far this year, to moderate a bit, relative to H1. It will be another strong year of performance in 2026 and sustain the momentum into the separation. The second part of your question was around partners.

[Tim Cofer, CEO at Keurig Dr Pepper]

On that, I'd just say, look, you've heard us say we have a very flexible build by partner model. It's been a core element of KDP's refreshment beverage strategy for years. It gives us the ability to meet evolving consumer needs while driving growth and profitability across our portfolio. The benefits of this model were evident in our first half performance. When you look at the contribution, both owned and partner brands, each meaningfully contributed to the top and the bottom line. I think you should expect the same going forward. Owned and partner brands will continue to play that important and complementary roles for KDP, and you'll see us remain committed to investing in both as part of our balanced growth strategy.

[Operator]

The next question comes from Peter Galbo with Bank of America. Please go ahead.

[Peter Galbo, Analyst at Bank of America]

Hey, good morning. Thanks for taking the question. Tim, I wanted to go back to your comments around the CEO search for Global Coffee Co. Obviously a bit of a restart on the process. It seems like you're making good progress there, but maybe you could help us put a few more guardrails around timing of when we might expect an announcement. I don't know if it's by Q3. I think there's just a bit of concern in the market that any sort of further delay could potentially delay the spin, maybe you can just help to quell some of those concerns with a bit more finite timeline. Thanks very much.

[Tim Cofer, CEO at Keurig Dr Pepper]

Thanks, Peter. As said, the search for our future Global Coffee Co. CEO is well underway. I would tell you it's progressing nicely. What are we looking for? It's a world-class executive with significant and relevant experience to this platform, prior proven success leading scaled global businesses, a strong consumer orientation, a track record of navigating complex market conditions and leading through change. Finally, we're looking for a leader that can build culture, a winning culture, and really generate a lot of followership. I can tell you this role has attracted considerable interest from highly qualified candidates. We're well on our way through the interview and assessment process. We remain confident we'll have a CEO in place with sufficient time to engage with the business, shape the strategy, ahead of our targeted 2027 separation.

[Tim Cofer, CEO at Keurig Dr Pepper]

I'd say the last thing is we will prioritize finding the right CEO. It's critical that we've got the right CEO to really unlock the full potential as a standalone company. We're not going to compromise on quality and service of speed. We're confident we can do all of this on the timeline we've shared.

[Operator]

The next question comes from Lauren Lieberman with Barclays. Please go ahead.

[Lauren Lieberman, Analyst at Barclays]

Great. Thanks so much. Given green coffee volatility and the prior pricing actions in 2025, just where do you believe you are in the pricing recovery cycle? Just wondering how we should think about the balance between protecting margins and then restoring volume trends over the next several quarters in coffee. In the prepared remarks, Tim, I know you specifically mentioned plans to strengthen pods and coffee products in the second half. In this context, I wanted to hear a little bit more about that. Thanks.

[Tim Cofer, CEO at Keurig Dr Pepper]

Should we talk first a little about green coffee costs, Anthony, and then I can speak a little bit to pricing?

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

Sure, absolutely. As you know, green coffee costs have been highly volatile in recent years, inflationary in 2024 and early 2025, turning deflationary as we got into the latter part of 2025 and early 2026. As you've seen, inflationary again in the recent weeks. Just as a reminder, we've talked about this before, there is a lag between those green coffee price movements and when we see it come through the P&L. In terms of the most recent upward move, it's primarily related to speculation about El Niño's potential impact on supply. Because of that, we think it's likely C price could remain volatile until that situation evolves. I'd say from a KDP perspective, our priority is to solve for the operational visibility. We're not sitting here trying to predict future C price movements, as a result, we typically forward hedge our commodity purchases.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

There is that lag between coffee prices and when it hits the P&L in performance. In terms of looking ahead, I'd say in the second half, we have really good line of sight to improving coffee costs that will move into lower cost inventory, as well as tariff impact easing. The cost position for us in the second half will become more favorable as we look ahead.

[Tim Cofer, CEO at Keurig Dr Pepper]

Yeah. Then, I'll just pick up broadly on your pricing question. I guess, obviously, first recognize pricing's a topic of high interest across CPG, given the overall inflationary envelope we've all had to manage through. Our goal over time at KDP and Bev Co and Coffee Co is to grow sales through a sustainable balance of price, mix, and volume. I think you look at our Q2 print, and it's a testament to this objective. KDP, if you look at a legacy KDP, you see a growing volume mix of 3% and a price of 4%, so pretty well-balanced supporting that total sales of seven. You jump into coffee more specifically, no doubt the first half benefited from carryover pricing. That will be increasingly anniversaried in the back half.

[Tim Cofer, CEO at Keurig Dr Pepper]

In addition with the coffee cost basket easing, JDE Peet's has already implemented some pass-through of lower coffee prices in certain formats and regions. U.S. Coffee, Keurig and K-Cup model is less pass-through in nature and has some different cost phasing that Anthony and I talked about in prepared remarks. We'll also look for opportunities to invest in value for our consumers in the balance of the year. Overall, as you take these factors together, we expect enterprise pricing will probably be less of a net sales contributor in H2 versus H1, primarily due to the coffee dynamics that I discussed.

[Operator]

The next question comes from Peter Grom with UBS. Please go ahead.

[Peter Grom, Analyst at UBS]

Great. Thank you. Good morning, everyone. I kind of wanted to follow up a little bit on Lauren's question and stick with coffee, but maybe just more from a U.S. Coffee standpoint. I know coming into the quarter, it was expected to be under some pressure, but I think it still came in a bit below your expectations. Can you maybe unpack the weakness, why you think performance fell short? As we look out to the balance of the year, I think you mentioned you'd expect subdued top line with some improvement on profitability. Can you maybe just unpack what that looks like relative to what we saw here in the second quarter? Thanks.

[Tim Cofer, CEO at Keurig Dr Pepper]

Sure, Peter. If you elevate up to our new total coffee business, I think solid results, but differing trends across JDE Peet's and U.S. Coffee, and U.S. Coffee definitely under a bit of pressure. The Q2 performance for U.S. Coffee was similar to Q1. We knew the first half would be challenging given the elevated C price impacting our P&L, and it was. I think more specifically to your question, that the Q2 trends were further impacted by a coffee category slowdown and a bit of unfavorable mix shift to private label, along with some continued trade inventory headwinds on pods. Importantly, I'd say as we look to the back half, we do remain confident that we'll see better trends for U.S. Coffee in the second half and certainly over the longer term.

[Tim Cofer, CEO at Keurig Dr Pepper]

In the near term, the input cost envelope is set to become more favorable in the back half, reflecting the timing of cost flow-throughs due to our hedging and inventory positioning. We believe volume mix will start to improve as trade inventory dynamics in pods begin to normalize. In addition to that, we think we'll benefit from some good ROI to support our sustainable long-term growth initiatives around pod and brewer innovations that we've got loaded for the back half, our precision marketing campaign specifically driving Keurig brewer sales and incremental household penetration. We believe we will be growing household penetration in the back half on Keurig brewers. I think these initiatives will support both a category growth improvement and KDP share improvement as we go to the back half. In aggregate, I do anticipate a subdued full year 2026 for U.S. Coffee, a significantly improved second half.

[Operator]

The next question comes from Robert Ottenstein with Evercore. Please go ahead.

[Robert Ottenstein, Analyst at Evercore]

Great. Thank you very much. I was just wondering if you could remind us about the Bloom brand. It really looks like a phenomenal brand that has broad shoulders. Can you remind us what your ownership stake is, how it hits your income statement? I know you do distribution. Do you do manufacturing? What is the long-term plan for the brand? Is there any possibility of buying it and gaining control? All those sorts of questions, again, really in the context of what an attractive brand this is. Thank you.

[Tim Cofer, CEO at Keurig Dr Pepper]

We certainly share your view, Robert, on the attractiveness of the Bloom brand. We have a tremendous relationship with Nutrabolt and the founders of Bloom. In fact, just last week, we had a meeting here in Dallas with both Nutrabolt founder and Bloom founder. We've got exciting plans for the back half and for 2027 to continue to grow this brand. This brand, as you know, is what we call a bit of a female-forward brand. It's done a tremendous job in both active nutrition powders, in energy, and in prebiotic sodas of attracting quite a following. There's a tremendous amount of social savvy there, excellent capabilities in developing winning flavors. Our customer partners are giving us appropriate focus and attention in terms of distribution and through our DSD capability, a lot of incremental displays. Love the brand and see continued robust growth potential going forward.

[Tim Cofer, CEO at Keurig Dr Pepper]

From an ownership standpoint, Bloom is part of the Nutrabolt organization where there's a strong ownership there. We have a long-term partnership with Nutrabolt that obviously covers both C4 and Bloom. We own a 36% stake in Nutrabolt and actually have multiple board seats. That's the ownership stake that you had asked about. Overall, I'd say we're just excited to continue to work very closely with Doss, the founder of Nutrabolt, with Bloom's founder, and we're quite bullish on our ability to drive mutual value creation in the years to come.

[Operator]

The next question comes from Robert Moskow with TD Cowen. Please go ahead.

[Robert Moskow, Analyst at TD Cowen]

Hey, thank you for the question. I was intrigued by your comment about the joint business plans that now have been taking place between Keurig and JDE Peet’s. Can you give a little more detail on what they're able to do on a joint basis? I think the perception out there is that these are still two very separate geographic businesses. Then maybe drill in a little more on the synergies. Originally, the expectation is that you could get some synergies in coffee procurement. I wanted to know, in this very volatile environment, is it still possible to get those synergies, or are there any complexities that happen when coffee gets more volatile?

[Tim Cofer, CEO at Keurig Dr Pepper]

Good. I think I'll start, Anthony, on kind of the Keurig and Peet's combination benefits, then kick it over to you to talk more specifically on synergies.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

Sure.

[Tim Cofer, CEO at Keurig Dr Pepper]

We are already well underway in beginning to capture the benefits of bringing these two companies together. I'll let Anthony, as I said, talk more specifically on the cost synergy side. On the, if you will, revenue synergy side, the biggest opportunity is here in the U.S. This is the geography where you've got the biggest overlap between legacy Keurig Green Mountain and legacy Peet's brand. The opportunities we've already got organizationally, we've moved to one team under one leadership team. We've actually transitioned Keurig and Peet's to a single invoice and an integrated sales force, that really will help us unlock these opportunities. We see opportunities for commercial investment, reinvesting some of the synergies that Anthony will talk to you about to fund high ROI marketing and promotions. We see coordinated programming opportunities for cross-portfolio marketing, promotions, variety packs. We see new formats.

[Tim Cofer, CEO at Keurig Dr Pepper]

When you think about the legacy Peet's business and the way that they participate across all formats and segments of coffee, there's opportunities for us to leverage that in our system. There's opportunities in cold coffee as you bring these two together. Then there's even opportunities to think about next generation brewer. We've talked about Keurig Alta, we have announced now that as part of the Keurig Alta, when we first go to market with that here in the coming months, we will offer both Keurig and Peet's Alta rounds as the consumable. I can tell you, our teams in Boston, legacy Keurig, and Emeryville, legacy Peet's, are already working together quite well. They're presenting joint plans to the customer, we think that can be an important unlock on the growth side. Do you want to talk costs?

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

Sure. To add to Tim's comment, we've remained very confident in the $400 million cost synergies program. In fact, the deal closed April 1, we had teams across KDP, JDE Peet’s, and third-party consultants working on this well ahead of the acquisition close in terms of identifying, planning, and assigning ownership for a number of work streams. That work has only accelerated since the deal closed. The financial contribution in Q2, fairly modest, we certainly have line of sight to a building benefit in the second half, and certainly as we move beyond 2026.

[Anthony DiSilvestro, CFO at Keurig Dr Pepper]

In terms of breaking down the $400 million, there are a number of areas. Rob, one area you mentioned was procurement, I would say that, we see a sizable opportunity in procurement even with the current coffee volatility. I would say even more so given what's happening in the marketplace. IT and SG&A is another significant area in terms of simplifying that organization, rationalizing some of the applications and systems, eliminating duplications. On the manufacturing and logistics, Tim referenced integration in North America that, in fact, has already happened in terms of bringing the distribution of pods together. We're on a single invoice out of Keurig already. We're well underway and are confident in achieving the $400 million.

[Operator]

The last question today comes from Filippo Falorni with Citi. Please go ahead.

[Filippo Falorni, Analyst at Citi]

Can we get a little bit more color on the energy drink category and your expectations there. You had a previous target of getting to double-digit market share, maybe where you stand versus that target. Bigger picture, how are you thinking the growth in the category is impacting coffee? We've obviously seen a lot of younger consumers shifting their caffeine intake into energy drinks as a replacement for coffee. Maybe if you can talk about the interaction between those categories and your perspective there will be great. Thank you.

[Tim Cofer, CEO at Keurig Dr Pepper]

Sure, Filippo. Energy, we're big believers in energy. This is a fantastic category, a large category, $30 billion, one of the fastest-growing spaces in liquid refreshment beverage. I think there are multiple structural growth drivers that suggest that this growth won't end anytime soon. There are continued distribution point expansion opportunities. There's household penetration upside when you look at household penetration on energy relative to other LRB, more developed categories. There are occasions that have yet to be fully fleshed out. There are cohorts, certainly these days, the female consumer who has not only entered the category, but really a growing affinity and usage there. There's channel diversity yet to be fully exploited. Obviously, the category was born and raised in C-store, it continues to feature prominently there. There's a lot of upside in other channels and opportunities across large format and others.

[Tim Cofer, CEO at Keurig Dr Pepper]

Bullish on the category. Our position, confident in our position. We like our portfolio. We've really curated this over the last many years. We're gaining market share. We've got real scale now. Right now on a run rate basis, Filippo, we're looking at a $1.5 billion net revenue, net sales business. If you look at what's driving our performance, I think this portfolio with authentic and distinctly positioned brands, when you think about C4, Bloom, Ghost, Black Rifle, great-tasting products, great innovation, strong commercial programming, overlay the DSD capability that KDP brings to the party. Strong frontline execution, driving distribution, driving display activity. I think the other thing to point out is we focus on the most attractive part of the energy category, which is zero sugar. That's our whole portfolio, and zero sugar is the outside contributor to category growth.

[Tim Cofer, CEO at Keurig Dr Pepper]

Really proud of what we've done. I would remind you that just about four years ago, we had less than a 1% market share, as I mentioned in the prepared remarks here in Q2, we're a 9% share, just crossed the 9% share a few years later. That puts us well on our way to my goal of a double-digit market share. In fact, I would tell you in 15 major customers across the U.S., we've already crossed that double-digit threshold. The other part of your question was, are we seeing any sort of interaction between energy and coffee? What I'd tell you is we monitor that potential shifting behavior very closely, and we have not seen any sustained share movement between coffee and energy.

[Tim Cofer, CEO at Keurig Dr Pepper]

Now, in any given year, the share shift from a, say, a panel data standpoint, can lean one way or another. If you look at it over the last three to four years, I would tell you the impact's roughly neutral. There are some years where energy is a net gainer. There are other years where coffee's a net gainer. When you look at it in aggregate over the last many years, you see it broadly neutral. We continue to liken our current portfolio that we've got leading and winning solutions to serve that energy and alertness need that consumers have, whether that's through energy drinks or through coffee.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to Chethan Mallela for any closing remarks.

[Chethan Mallela, VP of Investor Relations at Keurig Dr Pepper]

Hi. Thank you for the time and the attention this morning. I know it's a busy earnings day, and the IR team is around if you have any follow-ups. Have a great day.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Chethan Mallela, VP of Investor Relations
• Tim Cofer, CEO
• Anthony DiSilvestro, CFO

Analysts

• Chris Carey, Equity Analyst at Wells Fargo
• Peter Galbo, Analyst at Bank of America
• Lauren Lieberman, Analyst at Barclays
• Peter Grom, Analyst at UBS
• Robert Ottenstein, Analyst at Evercore
• Robert Moskow, Analyst at TD Cowen
• Filippo Falorni, Analyst at Citi