The paragraph is an introduction to Keurig Dr Pepper's earnings call for the fourth quarter and full-year 2024. The Operator welcomes attendees and introduces the Senior Vice President of Finance, Jane Gelfand. Jane provides an overview of the call's agenda, mentioning the release of a press announcement covering the company's financial results, which will be discussed during the call. She cautions that the statements presented will be forward-looking, reflecting the company's judgment as of the current day, and notes that actual outcomes may vary from expectations. She also clarifies that the discussion will focus on non-GAAP adjusted results and advises on where to find more detailed information. Jane then introduces CEO Tim Cofer to discuss the company's performance, describing 2024 as a pivotal year for Keurig Dr Pepper.

In a challenging operating environment, KDP delivered strong performance aligned with its long-term goals and introduced a refresh strategy for future growth. The company expanded its product portfolio, enhanced commercial capabilities, and balanced meeting annual targets with setting up for consistent success. Notable 2024 achievements included successful brand-building initiatives, leading limited-time offerings, and capitalizing on social media trends to drive market share growth. Key innovations included Dr Pepper Creamy Coconut and Canada Dry's Fruit Splash Cherry, as well as significant progress in the coffee segment with the original donut shop refreshers line.

In 2024, KDP successfully expanded its portfolio by integrating brands like Electrolit, La Colombe, and Black Rifle into its distribution network and acquiring GHOST, a brand in the high-growth energy sector. The company's strategic initiatives included expanding into Arizona to enhance its manufacturing and distribution capabilities and optimizing its existing operations, which led to strong marketplace performance and productivity savings. KDP also focused on generating cash flow for capital allocation activities, including share buybacks, dividend increases, and strategic investments. Looking ahead to 2025, KDP aims to maintain operational excellence and advance its strategic pillars to further strengthen its position in the beverage industry.

In 2024, the company achieved financial results aligned with its long-term goals, with a 4% growth in net sales and 8% growth in EPS. This performance was driven by strong productivity, overhead savings, and improved free cash flow, mainly led by U.S. refreshment beverages and international segments, which account for over 70% of revenue. The U.S. coffee segment also showed resilience amid inflation. In Q4, the company experienced significant top line growth, with net sales increasing over 6%, particularly in U.S. refreshment beverages, which saw a double-digit increase. Both volume mix and pricing contributed to this growth, despite some price pressures in U.S. coffee. Overall, the company's productivity and overhead management helped counter inflation, allowing for more brand investment and solid EPS growth, with notable success in carbonated soft drinks.

The paragraph highlights the strong performance of the company's CSD brands, particularly Dr Pepper, which gained significant market share and became the second-largest CSD in the category. Successful marketing campaigns, innovations like Dr Pepper's zero sugar and new flavors, and brand activities contributed to growth. Canada Dry and 7UP also performed well with new offerings and refreshed designs. Looking ahead to 2025, the company anticipates continued growth through new innovations such as Dr Pepper Blackberry and 7UP Tropical and engaging marketing efforts. Additionally, the Electrolit brand showed strong growth after integrating into their distribution system.

Electrolit is rapidly growing in the sports hydration category, and efforts in 2025 will focus on expanding its distribution and presence, especially in multi-pack and zero sugar offerings. Significant progress has been made in the energy sector with strong growth for C4 and transitioning Black Rifle Energy and Bloom to their distribution network, along with acquiring GHOST. The company has increased its energy market share to over 6%, aiming for a double-digit share with over $1 billion expected in retail sales by 2025. Overall, the U.S. refreshment beverages segment performed well, capping a strong 2024 with promising plans for 2025. In contrast, U.S. Coffee sales declined slightly in Q4 due to temporary price drops, but there is optimism about the category's improvement and portfolio efforts.

The paragraph discusses the U.S. coffee market's performance and strategies in Q4, highlighting improved year-over-year trends in at-home coffee. Key initiatives included emphasizing affordability, driving premiumization, and expanding cold coffee offerings. The company also made progress in underrepresented formats and channels, with a strong performance from its ready-to-drink partnership with La Colombe and improved momentum in away-from-home coffee. These efforts position the company to be more resilient in 2025 despite anticipated inflationary pressures from rising coffee commodity costs. To manage these challenges, the company aims to preserve profit and reinvestment opportunities, having implemented price increases in response to rising costs.

The paragraph outlines the company's strategies and achievements. It focuses on improving productivity, optimizing product mix, and possibly adjusting prices. The company aims to grow its coffee segment through marketing, innovation, and expanding product formats, with future plans for disruptive launches like Keurig Alta and eco-friendly pods. Internationally, the company experienced robust sales growth, with strong coffee and cold beverage performance, particularly in Mexico. A new licensing deal with Nestea in Canada is expected to strengthen their position in the iced tea market. Overall, the international segment is a priority for future growth, and the company is pleased with its 2024 performance despite challenges.

The paragraph discusses the successful performance of KDP due to the efforts of its employees and strategic initiatives. The company's leadership expresses gratitude and highlights a strong financial year with notable achievements, such as 3.9% net sales growth, a 9% increase in operating income, and a 7.8% rise in EPS. Despite facing inflationary pressures, the company ended the year positively with a 6.2% net sales growth in the fourth quarter, driven by U.S. and international beverage sales and new partnerships. There was a focus on productivity and efficient expense management, alongside strategic groundwork for future success, particularly in 2025. However, there were challenges, such as a contraction in gross margin due to inflation and last year's tough comparison, but these were partially mitigated by productivity savings and positive pricing strategies.

In the latest quarter, the company's operating income rose by 3.4%, contributing to a 5.5% increase in EPS, aided by fewer shares outstanding. The U.S. restructuring beverages segment saw a net sales growth of 10.3%, mainly due to a 7.5% rise in volume mix and successful CSD performance, alongside contributions from the Electrolit partnership and favorable calendar shifts. Pricing increased by 2.8%, boosting segment operating income by 8.6%. In contrast, U.S. Coffee segment net sales fell by 2.4%, with a slight volume mix increase but a 4% decline in brewer shipments due to seasonality. Pricing in this segment dropped by 3.1%, though improvement is expected in 2025 amid green coffee inflation. Internationally, net sales grew by 8.5% in constant currency.

In the reported quarter, the volume mix increased by 6.5%, driving strong results despite unfavorable foreign exchange impacts, leading to a modest net sales increase of 0.8%. Segment operating income fell by 8.6% due to reinvestment and rising coffee costs, but the company expects these effects to be temporary. For the full year, free cash flow was $1.7 billion, significantly higher than the previous year, with expectations for further improvement in 2025. KDP used its cash flow for strategic investments, share buybacks, and increased dividends in 2024. The GHOST transaction elevated the leverage to 3.3 times, above the long-term target, prompting a focus on deleveraging in 2025. The company anticipates a strong free cash flow will continue to support its diverse capital allocation strategy, including steady dividend growth.

The company's 2025 guidance anticipates mid-single-digit net sales growth and high single-digit earnings per share growth, despite facing a 1-2 percentage point headwind from foreign exchange rates. They expect strong performance in U.S. refreshment beverages and international segments, with additional growth from the GHOST acquisition. U.S. Coffee may remain slower due to commodity fluctuations. The company plans to maintain strong productivity and manage overhead costs to support growth. They project interest expenses between $680 million and $700 million, a tax rate of 22% to 23%, and 1.37 billion diluted weighted average shares. The company expects stronger momentum in Q2 to Q4, especially as GHOST integrates into its distribution network. Following solid 2024 performance, the company is optimistic about continued progress in 2025.

The paragraph is part of a company's earnings call, where Tim Cofer discusses the company's performance and outlook for 2025. The company expects to continue showcasing operating agility amidst currency volatility and industry momentum. They plan to navigate challenges such as consumer sentiment, inflation, and regulatory changes with agility. They are focusing on marketing, innovation, sales activation, and productivity savings. Pricing adjustments in response to inflation are anticipated to ensure continued business investment. The company is also excited about activating a new distribution venture, GHOST. In a Q&A session, Chris Carey from Wells Fargo queries about 2025 planning, focusing on positive consumption trends, Q1 developments like the leap year and Easter, and impacts on revenue and profit.

The paragraph discusses the company's financial outlook for the year 2024 and beyond, focusing on sales and earnings per share (EPS) drivers. The speaker notes that, despite macroeconomic factors, they see potential for strong revenue growth at the upper end of their mid-single-digit (MSD) range, driven by momentum in the U.S., international markets, innovation, commercial plans, and some pricing increases. The U.S. coffee market is facing challenges due to a dynamic commodity environment, even with higher pricing. The company also plans to consolidate GHOST starting in Q1, with growth expected in Q2 as distribution expands. EPS growth is expected due to net sales growth and modest operating margin leverage, resulting in high-single-digit (HST) constant currency EPS growth.

The paragraph discusses a company's financial outlook, emphasizing expected profit growth from U.S. and international operations, with a positive contribution from the GHOST product due to early distribution. However, the company faces challenges from rising inflation, particularly in green coffee. The strategy to counter inflation includes adjusting pricing, enhancing productivity, and managing overhead. They target mid to high single-digit percentage growth in constant currency, although they anticipate foreign exchange headwinds. The first quarter is expected to be tough due to fewer shipping days and delayed benefits from coffee pricing. Earnings per share (EPS) growth is projected to be limited initially but expected to accelerate throughout the year as conditions normalize and strategic initiatives take effect. The paragraph ends with a transition to a question from Peter Grom of UBS, seeking insights on the coffee market heading into 2024.

The paragraph discusses the coffee industry's growth and challenges. Tim Cofer acknowledges that while the improvement in category growth has been slower than anticipated, coffee remains a promising long-term market due to its widespread and passionate consumer appeal. Despite inflationary pressures, there are opportunities for premiumization and diversification in coffee formats and channels. Cofer highlights the value of at-home coffee compared to away-from-home options, specifically mentioning their single-serve leadership and new ready-to-drink offerings through a partnership with La Colombe. In 2024, the focus was on stabilizing volume amidst low inflation, and they experienced modest growth. However, entering 2025, the industry faces a new challenge with record-high green coffee costs, prompting a shift in focus.

The paragraph discusses a company's strategy to focus on long-term investments, acknowledging that recent pricing changes might lead to some trade-offs in volume elasticity. They aim to preserve profit despite inflation by adjusting pricing, product mix, and productivity, while continuing to invest in the future of their coffee products, including innovations in pods and brewers. They are aiming to expand their coffee offerings beyond single-serve options where they already have a strong position. Despite expecting subdued performance in their U.S. Coffee segment, they remain confident in their overall enterprise outlook. Additionally, there is a brief mention of ambitions in the energy market, particularly involving brands like GHOST, C4, Black Rifle, and Bloom, amidst competitive market activity from other players like Red Bull and Monster.

Tim Cofer discusses the optimistic outlook and strategic positioning of the company's portfolio in the rapidly growing energy category within the LRB sector. He highlights the potential for offering differentiated and profitable brands that meet unique consumer demands. The energy sector's growth allows for opportunities in household penetration, channel development, and segmentation. Cofer mentions the company's recent acquisition of GHOST and notes that such moves indicate the attractiveness of the energy category, fostering competition and expanding the market. He emphasizes the significant growth in the company's share in the energy sector, stating that it has risen from zero to over 6%, with a goal of reaching double-digit market share in the future. The portfolio is designed to target distinct consumer groups and demand spaces effectively.

The paragraph discusses the company's performance and strategy concerning various brands. It highlights C4 as a leading brand in the fitness space and mentions a partnership with Black Rifle Coffee, emphasizing its American roots. The company has a distribution deal with Bloom, a female-focused brand, and is expanding its relationship with GHOST, a lifestyle brand targeting younger consumers. They believe their partnership with GHOST, set to expand distribution in March, will positively impact its growth. The paragraph concludes with an investor Q&A segment where Andrea Teixeira from JPMorgan asks about the potential recovery of pod volumes amid pricing changes and seeks clarity on the company's strategy for achieving double-digit market share in the energy segment, questioning whether this will involve organic growth, mergers and acquisitions, or a combination of both.

The paragraph discusses the company's strategy in response to inflation and increased costs in the single-serve coffee category. Tim Cofer mentions that they implemented a pod price increase in January, which they had announced during the previous quarter. While anticipating weaker volume due to price elasticity, the consumer response so far has met expectations. The company is monitoring competitive pricing and considering various strategies such as productivity improvements and expense discipline to manage incremental pressures. The primary goal is to preserve profit to maintain the company's ability to reinvest in the future. There is also a brief mention of a topic related to GHOST, which is not elaborated on in this paragraph.

The paragraph discusses Keurig Dr Pepper's (KDP) acquisition of GHOST and emphasizes the potential for KDP to add significant value through distribution and other areas like supply chain, R&D, and insights. The transition of distribution to KDP's Direct Store Delivery (DSD) system will begin in March, aiming to enhance availability, display quality, and sales of GHOST. The company sees this acquisition as part of a broader strategy to strengthen its portfolio of complementary brands and boost energy sales. Additionally, KDP's overarching vision is to offer a beverage for every consumer need, and they have been strategic in shaping their portfolio to align with this goal.

The paragraph discusses a company's recent progress, emphasizing its focus on energy and health-conscious products. It highlights the expansion of its portfolio to include popular hydration and low-calorie offerings like Electrolit, La Colombe, Vita Coco, and Evian. The company is adapting to consumer trends by transitioning its portfolio towards low or no-calorie options and nutrient-enriched products. The strategy involves exploring growth opportunities in promising market areas, potentially through organic growth or partnerships. The discussion then shifts to a question about future gross margins in 2025, with concerns about commodity inflation, productivity improvements, and expectations for modest operating margin expansion.

The paragraph discusses several key drivers for the company's performance, including operating leverage from healthy volume mix growth, positive pricing, and active mix management. It anticipates another strong year of productivity growth at the top end of their 3% to 4% range and emphasizes ongoing overhead discipline. The company is optimistic about its plans and intends to remain agile while investing in the long term. Specifically regarding aluminum, the company doesn't purchase it directly but instead sources it from U.S.-based suppliers and locks in pricing through supplier contracts. Despite hedging strategies, price changes are only delayed, not avoided. The company is confident about meeting its earnings per share targets. The paragraph concludes with a closing statement from Jane Gelfand, thanking participants and offering further assistance from Investor Relations.

This summary was generated with AI and may contain some inaccuracies.