CoffeeNetwork (New York) - Keurig Dr Pepper Inc. (NASDAQ: KDP) today reported strong financial results for the fourth quarter and full year ended December 31, 2021 and affirms guidance for 2022.
Full-year 2021 highlights
Strong performance in 2021 marked the successful completion of the Company's three-year merger period, with results that met or exceeded all key commitments. Highlights of 2021 performance include:
• Posted high single-digit net sales growth and double-digit Adjusted diluted EPS growth.
• Grew market share2 in nearly 75% of the Company's cold beverage retail base.
• Added nearly three million new U.S. households to the Keurig system, bringing total Keurig households to almost 36 million, reflecting successful brewer innovation including the Keurig Supreme Plus Smart – KDP's first connected brewer launch.
• Improved KDP's management leverage ratio to 2.9x at year-end 2021.
• Continued to navigate the evolving macro challenges presented by COVID-19 and prioritize and invest in the health and safety of employees.
• Advanced KDP's corporate responsibility agenda, including adding new goals for Diversity & Inclusion, Positive Hydration, and Regenerative Agriculture.
2021 Full Year Consolidated Results
Net sales for the full year of 2021 increased 9.2% to $12.68 billion, compared to $11.62 billion in the year-ago period, driven by strong growth in each business segment. On a constant currency basis, net sales increased 8.4%, driven by higher volume/mix of 5.7% and favorable net price realization of 2.7%. On a two-year basis, constant currency net sales advanced 13.9% versus 2019.
In coffee, retail dollar consumption of single-serve pods manufactured by KDP in IRi tracked channels grew 2.7% versus prior year and KDP manufactured share remained strong, advancing to 83.2% for the year. Performance in the away-from-home business improved versus year-ago, although the increase in overall consumer mobility has not yet fully translated into a broad return to offices. On a two-year basis, retail consumption of single-serve pods manufactured by KDP increased 12.7% in IRi tracked channels.
Coffee Systems
Net sales for the full year of 2021 increased 6.4% to $4.72 billion, compared to $4.43 billion in the year-ago period. On a constant currency basis, net sales advanced 5.6%, driven by higher volume/mix of 6.5% and lower net price realization of 0.9%. The net price realization reflected continued moderation in strategic pod pricing and customer fines stemming from challenged service levels in the fourth quarter of 2021, only partially offset by the benefit of list price increases on owned and licensed pods and brewers which were implemented late in the year.
The volume/mix growth of 6.5% reflected pod volume growth of 5.6% and exceptionally strong brewer volume growth of 10% that successfully lapped the 21% growth in brewer volume in the prior year. The pod volume performance reflected continued strong growth in the at-home business, largely reflecting the benefit of significant growth in households in the Keurig system, and improving trends in the away-from-home business.
The strong brewer growth was driven by continued, successful innovation, marketing investment to grow household penetration and a strong holiday season. For the full year, U.S. households regularly using a Keurig brewer increased approximately 9% on top of similar growth in 2020.
GAAP operating income increased 3.9% to $1.32 billion in 2021, compared to $1.27 billion in the year-ago period. This performance reflected the growth in net sales, productivity and merger synergies, as well as the favorable year-over-year impact of items affecting comparability. Partially offsetting these drivers were the impacts of broad-based inflation, significant supply chain disruption, including higher operating costs to meet strong consumer demand, and the unfavorable comparison to a $16 million strategic asset investment program benefit recorded in the segment in the first quarter of 2020.
Adjusted operating income totaled $1.52 billion, compared to $1.51 billion in the year-ago period and, on a constant currency basis, Adjusted operating income decreased 0.4%. On a percent of net sales basis, Adjusted operating income in 2021 was 32.1%, compared to 34.2% in the prior year, largely due to the timing of pricing in the market lagging inflation, as well as the costs of supply chain disruption in the fourth quarter not being fully offset by productivity.
Fourth Quarter Consolidated Results
In coffee, retail dollar consumption of single-serve pods manufactured by KDP in IRi tracked channels increased 3.4%, driven by growth in partner brands and KDP owned and licensed brands, partially offset by a decline in private label pods manufactured by KDP. KDP manufactured share remained strong, advancing 60 basis points to 83.5% in the quarter. Performance in the away-from-home business improved versus the year-ago shelter-in-place environment, although the increase in overall consumer mobility has not yet fully translated into a broad return to offices. On a two-year basis, retail consumption of single-serve pods manufactured by KDP increased 11.2% in IRi tracked channels.
Fourth Quarter Segment Results
Coffee Systems
Net sales for the fourth quarter of 2021 totaled $1.32 billion, essentially even with the year-ago period. On a constant currency basis, net sales declined 0.5%, reflecting higher volume/mix of 0.1%, and lower net price realization of 0.6%. The net price realization reflected the benefit of pricing actions taken in the quarter, primarily on owned and licensed pods, more than offset by continued moderation in strategic pod pricing and customer fines incurred due to challenged service levels, as strong consumer demand for pods exceeded capacity due to supply chain challenges and labor shortages exacerbated by Omicron.
The volume/mix increase of 0.1% in the quarter reflected pod volume growth of 2.7%, which was capacity constrained, and a 10.8% decline in brewer shipments due to comparison to the very strong brewer shipment growth of 28% in the year-ago period. Pod growth reflected strong demand in the at-home business, fueled by the significant growth in households using Keurig brewers, and improving trends in the away-from-home business.
GAAP operating income declined 15.5% to $326 million in the fourth quarter of 2021, compared to $386 million in the year-ago period, largely reflecting the broad-based inflationary environment and the impact of supply chain challenges, including capacity constraints and labor shortages. Also impacting the comparison was the unfavorable year-over-year impact of items affecting comparability. Partially offsetting these drivers were continued productivity and merger synergies, as well as lower marketing expense.
Adjusted operating income declined 12.3% to $378 million, compared to $431 million in the year-ago period and, on a percent of net sales basis, Adjusted operating income in the fourth quarter of 2021 was 28.7%, compared to 32.7% in the year-ago period.
