Keurig Dr Pepper Inc (NYSE:KDP) Q2 2019 Earnings Conference Call - Final Transcript

Aug 08, 2019 • 09:00 am ET

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Keurig Dr Pepper Inc (NYSE:KDP) Q2 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Your first question comes from Bryan Spillane of Bank of America.

Analyst
Bryan Spillane

Hey, good morning everyone.

Executive
Robert Gamgort

Hi Bryan.

Analyst
Bryan Spillane

Bob, maybe just a couple of follow-up questions related to the coffee business. One, if I caught it right, it sounds like the category is growing pods at 6% and you're growing at 5%. So if you can kind of talk about that gap. And then second I guess, given the category growth at 6%, how we should think about that in terms of household penetration for brewers?

Executive
Robert Gamgort

Yes. We talk a lot about quarter-to-quarter, month-to-month. I think this business is actually very stable and very predictable. And I say stable, stable at the growth rate we've all talked about, which is mid-single digit. So if I just step back for a second and talk to you about the last 12 months and then I'll address your specific question. If you look at over the past 12 months, we said at the end of the year when we give our once-a-year omnibus research that household penetration was growing at 7%. If you take a look at the pod category growth based on IRI over the past year, it was growing at 6.2%. And if you look at our shipments over that same time, it's 7.7%. So all of this triangulates around a growth of 6% to 7%. And in any given quarter, we're going to be above, we're going to be behind, but it's pretty remarkable how much the household penetration the category and our shipments all track to the same number, which has been 7% over the past 12 months.

The one piece that's interesting, and we're exploring ways to help you guys get more visibility of this is that we're seeing IRI is now consistently under reporting both our consumption as well as the category consumption. And that's because, in this category probably more than any other food and beverage category unmeasured channels driven by econ [Phonetic], for example, are accelerating and taking a bigger chunk of the total pie. So we're thinking about how we can get you guys exposure to that, but we know that IRI is understating our consumption as well as the category. So I step back and say, we said household penetration growing at 7%, our pod shipments have been 7.7% over the past 12 months, that's all within the right range that you should think about. And therefore, to go right back to your question, a plus 6% versus a plus 5% is within the margin of error that it almost doesn't matter.

Analyst
Bryan Spillane

Okay, great. Thank you.

Executive
Robert Gamgort

Sure.

Operator
Operator

Your next question comes from Lauren Lieberman of Barclays.

Analyst
Lauren Lieberman

Great, thanks. Good morning.

Executive
Robert Gamgort

Hi Lauren.

Analyst
Lauren Lieberman

Hi. I was hoping you could just talk a little bit about new partnerships, owned or partnerships, in particular in the energy space. So there's new agreements for Runa and for A Shoc, and I know the minority investor at A Shoc. So talk a little bit about kind of portfolio