Q1 2024 Keurig Dr Pepper Inc Earnings Call

Operator: Good day, and welcome to the Keurig Dr. Pepper First Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touchtone phone. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to introduce the company's Vice President of Investor Relations and Strategic Initiatives, Jane Gelfand. Please go ahead.

Good day and welcome to the Keurig, Dr. Pepper first quarter 'twenty 'twenty four earnings conference call.

All participants will be in a listen only mode.

Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one unattached homes all.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

I would now like to introduce the company's vice President of Investor Relations and strategic initiatives.

Kelvin: Kelvin. Please go ahead.

Jane Gelfand: Thank you and hello everyone. Earlier this morning, we issued a press release detailing our first quarter results, which we will discuss during this conference call. We have also added a slide presentation to our earnings material. The slides accompany our prepared remarks and can be tracked in real time on the live webcast. They will be archived on our IR website afterwards.

Kelvin: Thank you and Hello, everyone earlier. This morning, we issued a press release detailing our first quarter results, which we will discuss during this conference call.

Kelvin: We have also added a slide presentation to our earnings material.

Kelvin: The slides accompany our prepared remarks, it can be tracked in real time on the live webcast.

Kelvin: It will be archived on our IR website afterwards.

Jane Gelfand: 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 forms 10-K and 10-Q filed with the SEC.

Kelvin: Before we get started I'd like to remind you that our remarks will include forward looking statements, which reflect Katy piece judgment assumptions and analysis only as of today.

Kelvin: Our actual results may differ materially from current expectations based on a number of factors affecting T D piece of business.

Kelvin: Except as required by law, we do not undertake any obligation to update any forward looking statements discussed today.

Kelvin: For more information please refer to our earnings release and the risk factors discussed in our most recent Form 10-K, and 10-Q filed with the S. E C.

Jane Gelfand: Consistent with previous quarters, we will be discussing our Q1 performance on a non-GAAP adjusted baseline, which reflects constant currency growth rates and excludes items affecting comparability. Definitions and Reconciliations to the Most Directly Comparable Gap Metrics are included in our earnings material. Here with us today to discuss our results are Keurig Dr Pepper's Chairman and CEO, Bob Gamgort, Incoming CEO and Chief Operating Officer, Tim Cofer, and Chief Financial Officer and President International, Sudhanshu Priyadarshi. I'll now turn it over to Bob.

Kelvin: Consistent with previous quarters, we will be discussing our Q1 performance on a non-GAAP adjusted basis, which reflects constant currency growth rates and excluding items affecting comparability.

Kelvin: Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings material.

Kelvin: Here with us today to discuss our results are keurig, Dr. Pepper's Chairman and CEO, Bob Camborne incoming CEO and Chief operating Officer, Tim Cofer, and Chief Financial Officer, and President International seed Honshu Preah dashi.

Kelvin: I'll now turn it over to Bob.

Robert J. Gamgort: Thanks, Jane, and good morning, everyone. It has been a busy and exciting start to the year at KDP. First quarter performance was strong, with solid Consolidated Sales Growth and double-digit EPS. Momentum in our U.S. refreshment beverages and international segments remained healthy.

Robert Edward Ottenstein: Thanks, Jane and good morning, everyone.

Robert Edward Ottenstein: It has been a busy and exciting start to the year of GDP.

Robert Edward Ottenstein: First quarter performance was strong with solid consolidated sales growth and double digit EPS growth.

Robert Edward Ottenstein: Momentum in our U S refreshment beverages and international segments remained healthy.

Robert J. Gamgort: And U.S. coffee results showed meaningful sequential recovery.

Robert Edward Ottenstein: In U S coffee results showed meaningful sequential recovery.

Robert J. Gamgort: We invested in marketing and capabilities across the business, while also delivering attractive, broad-based margin expansion. The strong start to the year enhances our visibility to an unchanged on algorithm 2024 growth outlook. In Q1, we also advanced several strategic initiatives that position the company for multi-year success and demonstrate our confidence in the value creation opportunity ahead. First, we unveiled a revolutionary future vision for the Keurig brewing system that has been years in the making.

Robert Edward Ottenstein: We invested in marketing and capabilities across the business, while also delivering attractive broad based margin expansion.

Robert Edward Ottenstein: The strong start to the year enhances our visibility to an unchanged on algorithm 'twenty 'twenty four growth outlook.

Robert Edward Ottenstein: In Q1, we also advanced several strategic initiatives that position the company for multi year success and demonstrate our confidence in the value creation opportunity ahead.

Robert Edward Ottenstein: First we unveiled a revolutionary future vision for the Keurig brewing system that has been years in the making.

Robert J. Gamgort: When launched, our new proprietary K-Rounds plastic and aluminum-free pods and Keurig Alta brewers will enable consumers to brew a wide variety of hot and cold barista-style beverages from a single machine using a pod that can be easily and sustainably disposed of. This system has the potential to redefine

Robert Edward Ottenstein: When launched our new proprietary K round plastic and aluminum free pods, and keurig Alto Brewers will enable consumers to brew a wide variety of hot and cold Barista style beverages from a single machine using a pod that can be easily and sustainably despite.

Robert Edward Ottenstein: Those.

Robert Edward Ottenstein: This system has the potential to redefine how consumers through coffee for decades to come.

Robert J. Gamgort: redefine how consumers brew coffee for decades to come.

Robert J. Gamgort: And we're excited to begin beta testing later this year. At the same time, we are committed to growing our preeminent existing KCUP system, including through a strong slate of innovation in 2024. Second, in Q1, we also took advantage of a highly compelling and dislocated stock valuation by executing a $1.1 billion buyback of 38 million KDP shares. This was our largest quarterly share purchase repurchase in our history. We have progressively increased our buyback activity over the past several years, and with another $1.8 billion remaining on our authorization, we intend to stay opportunistic when we see attractive value in our shares.

Robert Edward Ottenstein: And we're excited to begin beta testing later this year.

Robert Edward Ottenstein: At the same time, we are committed to growing our preeminent existing K Cup system, including through a strong slate of innovation in 2024.

Robert Edward Ottenstein: Second in Q1, we also took advantage of a highly compelling and dislocated stock valuation by executing a $1 $1 billion buyback of 38 million Katy P shares.

Robert Edward Ottenstein: This was our largest quarterly share purchase repurchase in our history.

Robert Edward Ottenstein: And we have progressive we increased our buyback activity over the past several years.

Robert Edward Ottenstein: And with another $1.8 billion remaining on our authorization, we intend to stay opportunistic when we see attractive value in our shares.

Robert J. Gamgort: Third, we introduced our Evolved Enterprise Strategy, which we unveiled at an Investor Day hosted last month. This strategic framework combines many of the philosophies and practices that KDP has developed over the last five years. With new elements intended to drive strong and self-reinforcing growth in our next chapter as a public company. Many elements of this strategy were already evident in our first quarter results. Finally, this morning, we announced that Tim has been appointed KDP CEO and will join our board effective tomorrow, marking the culmination of a robust transition process that began when he joined us in November.

Robert Edward Ottenstein: Third we introduced our evolved enterprise strategy, which we unveiled at an Investor day hosted last month.

This strategic framework combines many of the philosophies and practices that Kt B has developed over the last five years with new elements intended to drive strong and self reinforcing growth in our next chapter as a public company.

Robert Edward Ottenstein: Many elements of this strategy were already evident in our first quarter results.

Robert Edward Ottenstein: Finally, this morning, we announced that Tim has been appointed Katie P. C E O and will join our board effective tomorrow.

Timothy P. Cofer: Marking the culmination of a robust transition process that began when he joined us in November.

Robert J. Gamgort: I have worked closely with Tim over the past several months and have seen firsthand how our company is benefiting from his deep and diversified CPG experience, strategic vision, and personification of our Challenger Culture. I look forward to continuing to partner with Tim and the broader leadership team in my ongoing capacity as KDP's Executive Chairman and could not be more confident in their stewardship of the company's next chapter.

Timothy P. Cofer: I have worked closely with Tim over the past several months and have seen firsthand how our company is benefiting from its deep and diversified CPG experience strategic vision and personification of our challenger culture.

Timothy P. Cofer: I look forward to continuing to partner with him and the broader leadership team and my ongoing capacity as Katie Pease executive chairman and could not be more confident in their stewardship of the company's next chapter.

Timothy P. Cofer: With that, I will turn the call over to Tim.

Timothy P. Cofer: With that I will turn the call over to Tim.

Timothy P. Cofer: Thanks, Bob. And good morning, everyone.

Timothy P. Cofer: Thanks, Bob and good morning, everyone. Let me start by once again expressing my appreciation to Bob and our board of directors for the honor and privilege of leading this dynamic company into the future I'm energized to partner with our 28000 colleagues across the globe.

Timothy P. Cofer: Let me start by once again expressing my appreciation to Bob and our Board of Directors for the honor and privilege of leading this dynamic company into the future. I'm energized to partner with our 28,000 colleagues across the globe to build on KDP's strong track record and guide our next chapter of growth and value creation. I see a tremendous amount of upside ahead. At a recent Investor Day, I shared the many elements behind my conviction and discussed how we intend to unlock this future opportunity. If you've not yet had a chance, I would encourage you to watch the replay of that event.

Timothy P. Cofer: To build on Katie piece strong track record and to guide our next chapter of growth and value creation.

Timothy P. Cofer: I see a tremendous amount of upside ahead at.

Timothy P. Cofer: At our recent Investor day, I shared the many elements behind my conviction and discussed how we intend to unlock this future opportunity.

Timothy P. Cofer: If you have not yet had the chance I would encourage you to watch the replay of that event.

Timothy P. Cofer: Now, as Bob mentioned, we recently introduced an evolved strategy, which is anchored by five strategic pillars. These are effectively a roadmap to guide each of our employees' actions every day. And it includes directives to champion consumer-focused brand building, shape our now and next beverage portfolio, amplify our route to market advantage, generate fuel for growth, and dynamically allocate capital. This strategic framework will guide our company over the next few years and is designed to deliver a sustainable cycle of growth.

Timothy P. Cofer: Now as Bob mentioned, we recently introduced and evolved strategy, which is anchored by five strategic pillars. These are effectively a roadmap to guide each of our employees actions everyday and it includes directives to champion consumer obsessed brand building shape, our now and next beverage portfolio amplify.

Timothy P. Cofer: Our route to market advantage generate fuel for growth and dynamically allocate capital.

Timothy P. Cofer: This strategic framework will guide our company over the next few years and is designed to deliver a sustainable cycle of growth.

Timothy P. Cofer: Each element of this strategy was featured in the first quarter, which represented a strong start to the year. Net sales growth accelerated sequentially with continued momentum in U.S. refreshment beverages and international and meaningful progress in U.S. coffee. Gross margin expanded significantly, driven primarily by robust net productivity, which funded reinvestment to support future growth and drove strong earnings growth in the quarter. And we flexed our capital allocation priorities toward direct shareholder returns, taking advantage of a unique opportunity to efficiently repurchase a large number of shares at an attractive valuation.

Timothy P. Cofer: Each element of this strategy featured in the first quarter, which represented a strong start to the year.

Timothy P. Cofer: Net sales growth accelerated sequentially with continued momentum in U S refreshment beverages, and international and meaningful progress in U S coffee.

Timothy P. Cofer: Gross margin expanded significantly driven primarily by robust net productivity, which funded reinvestment to support our future growth and drove strong earnings growth in the quarter.

Timothy P. Cofer: And we flexed our capital allocation priorities towards direct shareholder returns taking advantage of a unique opportunity to to efficiently repurchase a large number of shares at an attractive valuation.

Timothy P. Cofer: Overall, our first quarter performance demonstrates the health of our business and provides enhanced visibility to our unchanged full-year outlook for mid-single-digit net sales and high single-digit EPS growth. Taking a closer look at the intersection of strategy and Q1 results, we were encouraged by the quarter-over-quarter acceleration in net sales growth to nearly 3%. Though top line momentum remained pricing-led, volume mix improved to nearly flat following declines during 2023. Consumer-led innovation, leveraging our comprehensive demand space framework, was an important contributor to this improvement. Here are two quick examples.

Timothy P. Cofer: Overall, our first quarter performance demonstrates the health of our business and provides enhanced visibility to our unchanged full year outlook for mid single digit net sales and high single digit EPS growth.

Timothy P. Cofer: Taking a closer look at the intersection of strategy and Q1 results. We were encouraged by the quarter over quarter acceleration in net sales growth to nearly 3%.

Timothy P. Cofer: The topline momentum remain pricing led volume mix improved to nearly flat following declines during 2023.

Timothy P. Cofer: Consumer led innovation leveraging our comprehensive demand space framework was an important contributor to this improvement here are two quick examples.

Timothy P. Cofer: In US Refreshment Beverages, we launched Canada Dry Fruit Splash, a flavor extension of our second largest CSD brand. The innovation is performing well during the early launch phase, proving incremental to the Canada Drive franchise and driving market share gains. In International, we introduced Schweppes Mocktails as the first canned mocktail product in Mexico, securing distribution with several large customers and generating very strong initial consumer acceptance.

In U S. Refreshment beverages, we launched Canada dry fruit splash, a flavor extension of our second largest CSD brand.

Timothy P. Cofer: The innovation is performing well during the early launch phase proving incremental to the Canada dry franchise and driving market share gains.

Timothy P. Cofer: In International we introduced Schweppes, Mark tails as the first can mocktail product in Mexico, securing distribution with several large customers and generating very strong initial consumer acceptance the launches already exceeding our plan and we have yet to turn on the advertising.

Timothy P. Cofer: The launch is already exceeding our plan, and we have yet to turn on the advertising. Innovation activity ramped up across our portfolio in Q2, and we're excited to build on our initial momentum as we move through 2024. Our top-line growth during the first quarter also reflected the continued successful execution of our partner strategy. Electrolyte sales and distribution commenced during the quarter, and La Cologne ready-to-drink beverages are now ramping through the system with smooth distributor handovers and early traction. C4 energy also continues to grow strongly, and we achieved further key performance milestones in Q1. DSD execution is a key enabler to this success, and we continue to invest to drive greater efficiency throughout the system.

Timothy P. Cofer: Innovation activity ramps across our portfolio in Q2, and we're excited to build on our initial momentum as we move through 2024.

Timothy P. Cofer: Our top line growth during the first quarter also reflected the continued successful execution of our partner strategy.

Timothy P. Cofer: Electra elite sales and distribution commenced in the quarter and lock home ready to drink beverages are now ramping through the system with smooth distributor handovers and early traction.

Timothy P. Cofer: See for energy also continues to grow strongly and we achieved further key performance milestones in Q1.

Timothy P. Cofer: DSD execution is a key enabler to their success and we continue to invest to drive greater efficiency throughout the system.

Timothy P. Cofer: Improving first quarter trends in US coffee owned and licensed brands illustrate our commercial and route to market effect. Our owned and licensed market share began a recovery, which steadily strengthened throughout the quarter. Distribution growth, increased display activity, price gap management, and increased marketing all contributed, and this better trajectory has sustained quarter to date with more high-quality activation to come later this year. Total KDP gross margin expanded 350 basis points in the first quarter, and gross profit dollars grew approximately 10%.

Timothy P. Cofer: Improving first quarter trends in U S coffee owned and licensed brands illustrate our commercial and route to market effectiveness, our owned and licensed market share began a recovery, which steadily strengthened throughout the quarter.

Timothy P. Cofer: Distribution gross increased display activity price gap management and increased marketing all contributed and this better trajectory has sustained quarter to date with more high quality activation to come later this year.

Timothy P. Cofer: Total Katy P. Gross margin expanded 350 basis points in the first quarter and gross profit dollars grew approximately 10%.

Timothy P. Cofer: This strong performance reflected an enterprise-wide focus on productivity, which yielded meaningful benefits during the quarter and more than offset persistent inflation, as well as benefit from an additional C4 performance incentive. Gross profit progress provided important fuel for growth, funding reinvestment, including a double-digit increase in marketing, and also contributed to the very strong bottom line results in Q1. Specifically, operating income grew an impressive 17.5% year over year, and earnings per share advanced 12% ahead of our ongoing expectations.

This strong performance reflected an enterprise wide focus on productivity, which yielded meaningful benefits during the quarter and more than offset persistent inflation.

Timothy P. Cofer: As well as the benefit from an additional C for performance incentive.

Timothy P. Cofer: Our gross profit progress provided important fuel for growth funding reinvestment, including a double digit increase in marketing and also contributed to the very strong bottom line results in Q1, specifically operating income grew an impressive 17, 5% year over year.

Timothy P. Cofer: And earnings per share advanced 12% ahead of our ingoing expectations.

Timothy P. Cofer: With top line momentum expected to build from here, I'll now spend a few minutes discussing each of our segments' Q1 net sales performance and why we have confidence in the balance of the year. Let's start with US refreshment beverages.

Timothy P. Cofer: With topline momentum expected to build from here I'll now spend a few minutes discussing each of our segments Q1, net sales performance and why we have confidence in the balance of the year.

Timothy P. Cofer: Okay.

Timothy P. Cofer: Let's start with U S refreshment beverages.

Timothy P. Cofer: Revenue momentum remained healthy with mid-single-digit net sales growth in the quarter. Our performance was led by solid growth in CSDs and our expansion in energy and sports hydration, partially offset by softer trends in certain still beverage categories. As anticipated, segment growth moderated from Q4 as we lapped year-ago pricing measures and due to innovation timing, which phases later in 24 when compared to 2023.

Timothy P. Cofer: Revenue momentum remained healthy with mid single digit net sales growth in the quarter. Our performance was led by solid growth in Cst's and our expansion in energy and sports hydration, partially offset by softer trends in certain still beverage categories.

Timothy P. Cofer: As anticipated segment growth moderated from Q4, as we lapped year ago pricing measures and due to innovation timing, which phases later in 'twenty four when compared to 2023.

Timothy P. Cofer: In Q1, we celebrated the launch of Dr. Pepper Strawberries and Cream, which was a standout success and went on to become the number one CSD category innovation of 2023. Looking ahead, we expect an exciting 2024 innovation and brand activation slate to drive a larger sales contribution in future periods. Our Dr. Pepper Creamy Coconut limited-time offering is launching as we speak just in time for the summer season, and it capitalizes on the popular dirty soda social media trend. The complete redesign of BiWonderwater is just beginning to roll out, and our core hydration partnership with U.S. Gymnastics will be held during the summer Olympics.

Timothy P. Cofer: In Q1, we anniversaried the launch of Doctor Pepper, strawberries, and cream, which was a standout success and went on to become the number one CSD category innovation of 2023.

Timothy P. Cofer: Looking ahead, we expect an exciting 'twenty 'twenty four innovation and brand activation slate to drive a larger sales contribution in future periods.

Timothy P. Cofer: Our Doctor Pepper creamy coconut limited time offering is launching as we speak just in time for the summer season, and it capitalizes on the popular dirty soda social media trend.

Timothy P. Cofer: The complete restage of by Wonder water is just beginning to roll out and our core hydration partnership with U S gymnastics will be activated during the Summer Olympics.

Timothy P. Cofer: We expect these collective activities will have a larger impact in the back half. In addition, our partnership with C4 should continue to enjoy good momentum, and our sales and distribution of Electrolyte will build over the course of the year. While the magnitude of overall U.S. refreshment beverage pricing should moderate going forward, as we increasingly anniversary year-ago activity, some modest incremental pricing across CSDs was announced earlier this year and will contribute to growth.

Timothy P. Cofer: We expect these collective activities will have a larger impact in the back half.

Timothy P. Cofer: In addition, our partnership with sea bore should continue to enjoy good momentum in our sales and distribution of Elektra lead will build over the course of the year.

Timothy P. Cofer: While the magnitude of overall U S refreshment beverage pricing should moderate going forward as we increasingly anniversary year ago activity, some modest incremental pricing across Cst's was announced earlier this year and will contribute to growth.

Timothy P. Cofer: We also continue to optimize price pack architecture to fit consumer needs across the portfolio and various channels. Moving now to US Coffee, as expected, net sales strengthened considerably relative to the fourth quarter and decreased at a more modest low single-digit rate in Q1. Notably, volume mix was basically flat, improving from a high single-digit decline last year.

Timothy P. Cofer: We also continue to optimize price pack architecture to fit consumer needs across the portfolio and various channels.

Timothy P. Cofer: Moving now to U S coffee as expected net sales strengthened considerably relative to the fourth quarter and decreased at a more modest low single digit rate in Q1.

Timothy P. Cofer: Notably volume mix was basically flat improving from a high single digit decline last year.

Timothy P. Cofer: There were a number of green shoots in the quarter for U.S. coffee. Let me outline five key elements that bolster our confidence in continued top line recovery in this segment. Our Pod Shipment Trends Improved Subtly. Though at-home coffee category consumption growth remains muted, the trend modestly recovered relative to Q4.

Timothy P. Cofer: There were a number of green shoots in the quarter for U S. Coffee, let me outlined five key elements that bolster our confidence in continued topline recovery in this segment.

First.

Timothy P. Cofer: Our pod shipment trends improved sequentially.

Timothy P. Cofer: Though at home coffee category consumption growth remains muted the trend modestly recovered relative to Q4, more importantly, <unk>, one volume momentum accelerated throughout the quarter.

Timothy P. Cofer: More importantly, Keurig's own volume momentum accelerated throughout the quarter. Second, our owned and licensed brand market share momentum is building, which is a mixed accretive trend. In Q1, we grew owned and licensed total distribution points at a double-digit rate.

Timothy P. Cofer: Second our owned and licensed brand market share momentum is building, which is a mix accretive trend in Q1, we grew owned and licensed total distribution points at a double digit rate, we increased display activity and supported our brands with higher marketing.

Timothy P. Cofer: We increased display activity and supported our brands with higher market share. In addition, we made tactical adjustments to appropriately align our promotion strategy. This is already having an impact and will allow greater innovation, marketing, and activation to shine through in the balance of the year. Owned and licensed share momentum progressively strengthened throughout the quarter, and we expect the trend to continue, supported in part by upcoming price pack architecture changes to strengthen the value property.

Timothy P. Cofer: In addition, we made tactical adjustments to appropriately align our promotion strategy. This is already having an impact and will allow greater innovation marketing and activation to shine through in the balance of the year.

Timothy P. Cofer: Owned and licensed share momentum progressively strengthened throughout the quarter and we expect the trend to continue supported in part by upcoming price pack architecture changes to strengthen the value proposition.

Timothy P. Cofer: Third, within the coffee maker category, Keurig and Keurig-compatible brewers also continued to gain share in Q1, extending a multi-year track record of outperformance. An exciting innovation like K Brew & Chill, which has not yet launched and will hit retailer shelves later this year, should further support our performance. Fourth, as our volume in US coffee improves, so will our ability to manufacture at a more attractive cost profile. We generated strong productivity during the first quarter, which drove healthy segment margin expansion and funded reinvestment.

Timothy P. Cofer: Third within the coffee maker category Keurig and Keurig compatible Brewers also continued to gain share in Q1, extending a multiyear track record of outperformance.

Timothy P. Cofer: An exciting innovation like K brewing Chill, which has not yet launched and will hit retailer shelves. Later this year should further support our performance.

Timothy P. Cofer: Fourth as our volume in U S coffee improves so does our ability to manufacture at a more attractive cost profile we.

We generated strong productivity during the first quarter, which drove healthy segment margin expansion and funded reinvestment.

Timothy P. Cofer: We're also beginning to optimize our manufacturing footprint to favor high efficiency locations like Spartanburg, where capacity is ramping and unlocking further network optionality, which should also generate fuel for growth. And finally, the Keurig partnership proposition remains very strong, as evidenced by multiple recent brand additions to our ecosystem. Lavazza will transition from a partner to a licensed brand during the second quarter.

Timothy P. Cofer: We're also beginning to optimize our manufacturing footprint to favor high efficiency locations like Spartanburg, where capacity is ramping and unlocking further network optionality, which should also generate fuel for growth.

Timothy P. Cofer: And finally fifth the Keurig partnership proposition remains very strong.

Timothy P. Cofer: As evidenced by multiple recent brand additions to our ecosystem.

Timothy P. Cofer: Lavazza will transition from a partner to a licensed brand during the second quarter.

Timothy P. Cofer: Also in Q1, we reached agreements to welcome Brooklyn Roasting Company, Shark Tank favorite Kahawa 1893 Coffee, and Canadian super premium brand Kicking Horse to our roster. And just this morning, we are announcing the addition of Black Rifle Coffee as a new partner. Black Rifle Coffee's success in the coffee industry is already well-established, and their decision to evolve to a Keurig system partner speaks to the full-value proposition of our stewardship of the single-serve category.

Timothy P. Cofer: Also in Q1, we reached agreements to welcome Brooklyn Roasting company.

Timothy P. Cofer: Shark tank favorite Kahala, 18, 93, coffee and Canadian Super premium brand kicking horse to our roster.

Timothy P. Cofer: And just this morning, we are announcing the addition of black rightful coffee as a new partner.

Timothy P. Cofer: Black rightful coffee is success in the coffee industry is already well established and their decision to evolve to a keurig system partner speaks to the full value proposition of our stewardship of the single serve category.

Timothy P. Cofer: Our La Cologne ready-to-drink coffee partnership is yet another proof point and is just now beginning to scale. In total, these exciting partnerships will begin to contribute to U.S. coffee segment volume growth later in 2024. Moving on to international, which is becoming an increasingly significant part of our business and is a core part of our strategic agenda. The segment's strong sales performance continued into the first quarter with high single-digit growth on a constant currency basis and broad-based strength across categories and markets.

Timothy P. Cofer: Our lock Cologne ready to drink coffee partnership is yet another proof point and is just now beginning to scale.

Timothy P. Cofer: In total these exciting partnerships will begin to contribute to U S. Coffee segment volume growth later in 2024.

Timothy P. Cofer: Moving on to international which is becoming an increasingly significant part of our business and it's a core part of our strategic agenda.

Timothy P. Cofer: The segment's strong sales performance continued into the first quarter with high single digit growth on a constant currency basis, and broad based strength across categories and markets.

Timothy P. Cofer: Our cold beverages portfolio performed particularly well in Latin America, reflecting continued strong DSD execution. Performance was led by our powerhouse Pea-Fial brand, which continues to enjoy strong base momentum, even as we extend the brand into new adjacents. For instance, we recently launched Pena Fial soft self-service, which offers sparkling mineral water with a refreshing touch of flavor, no calories, no sugar, and 100% natural flavor.

Our cold beverages portfolio performed particularly well in Latin America, reflecting continued strong DSD execution.

Performance was led by our powerhouse opinion C. L brand, which continues to enjoy strong base momentum even as we extend the brand into new Adjacencies for.

For instance, we recently launched opinion P L soft selzer's, which offer sparkling mineral water with a refreshing touch a flavor no calories, no sugar and with 100% natural flavors.

Timothy P. Cofer: We also further grew our segment presence in the low and no alcohol alternatives category, with continued share gains for Ati Peak in Canada and strong retail and consumer reception for our launch of Schweppes Mocktails in Mexico. In our Canadian coffee business, market share grew for Keurig brewers and for our owned and licensed pod portfolio, led by the Van Hood brand. As in the US, we continue to strengthen our international route to the market.

Timothy P. Cofer: We also further grew our segment presence in the low and no alcohol alternatives category.

Timothy P. Cofer: With continued share gains for our T peak in Canada, and strong retail and consumer reception for our launch of Schweppes marked tails in Mexico.

Timothy P. Cofer: In our Canadian coffee business market share grew procuring Brewers and for our owned and licensed pod portfolio led by the <unk> brand.

Timothy P. Cofer: As in the U S. We continued to strengthen our international route to market and earlier. This month, we announced a multiyear partnership with the Toronto Blue Jays for poor rights at their ballpark.

Timothy P. Cofer: And earlier this month, we announced a multi-year partnership with the Toronto Blue Jays for poor rights at their ballpark. We're excited to expand Canada Dry, Dr. Pepper, Clamato, Crush, and Ati Peak within the on-premise channel, and we'll continue to seek out opportunities to thoughtfully build the distribution of our brands outside the U.S.

Timothy P. Cofer: We're excited to expand Canada dry Dr. Pepper club model crush and I T peak within the on premise channel and we will continue to seek out opportunities to thoughtfully bill the distribution of our brands outside the U S.

Timothy P. Cofer: In short, we're pleased with the promising start to the year. We demonstrated sequential top-line progress in the quarter and delivered broad-based growth in adjusted operating income and margins across our segments. We did this while simultaneously funding high-quality reinvestment in our brands and capabilities. Sudhanshu will speak more about our margin progress and our intention to continue balancing growth and reinvestment in the coming quarter. We're confident this approach will reinforce our 2024 outlook for on-algorithm top and bottom line growth, which remains unchanged, while also powering a virtuous cycle of growth over a multi-year period. And with that, I'll turn the call over to Sudhan.

Timothy P. Cofer: In short we're pleased with the promising start to the year, we demonstrated sequential topline progress in the quarter and delivered broad based growth in adjusted operating income and margins across our segments.

Timothy P. Cofer: We did this while simultaneously funding I quality reinvestment in our brands and capabilities.

Timothy P. Cofer: Sudan shoe will speak more about our margin progress and our intention to continue balancing growth and reinvestment in the coming quarters.

Sudan: We're confident this approach will reinforce our 'twenty 'twenty four outlook for an algorithm top and bottom line growth, which remains unchanged. While also powering a virtuous cycle of growth over a multiyear timeframe.

Sudan: And with that I'll turn the call over to Sudan Shaw.

Sudhanshu Shekhar Priyadarshi: Thanks to him and good morning everyone. Our Q1 results were strong, demonstrating sequentially improving net sales growth, continued meaningful gross margin expansion, and incremental investments in marketing and capability. With EPS ahead of our plan, we intend to use the Q1 upside as additional fuel for investment to support revenue growth over the balance of the year and as a buffer against pockets of re-emerging commodity inflation. First quarter net revenue grew 2.8% in constant currency. Healthy momentum continued in our U.S. refreshment beverages and international segments, and we are encouraged by the Sequential Top-Line Recovery in U.S. Coast.

Sudan Shaw: Thanks, Tim and good morning, everyone.

Sudan Shaw: Our Q1 results were strong demonstrating sequencing improving net sales growth continued meaningful gross margin expansion and incremental investments in marketing and capabilities.

Sudan Shaw: With EPS ahead of our plan, we intend to use Q1 upside as additional pool put in investment to support revenue growth over the balance of year.

Sudan Shaw: And as buffer against pockets of re margin commodity inflation.

First quarter net revenue grew two 8% in constant currency.

Sudan Shaw: Healthy momentum continued in our U S refreshment beverages and international segments.

Sudan Shaw: And we are encouraged.

Sudan Shaw: By the sequence Hill top line recovery in U S coffee.

Sudhanshu Shekhar Priyadarshi: On a consolidated basis, we realize positive net pricing, up 3.1% year over year. This was driven by favorable pricing in our U.S. restaurant beverages and international portfolios, balanced against previously flagged Targeted Price Investments in U.S. Costs. Importantly, consolidated volume makes improved to nearly flat year over year, showing a modest 0.3% decline in the quarter.

Sudan Shaw: On a consolidated basis, we realized positive net pricing.

Three 1% year over ear.

This was driven by favorable pricing in our U S. A stretch in beverages and international portfolios balanced against the previously flagged.

Sudan Shaw: Targeted price investments in U S coffee.

Sudan Shaw: Importantly, consolidated volume mix improved to nearly flat year over year, showing a modest <unk>, 3% decline in the quarter.

Sudhanshu Shekhar Priyadarshi: Gross margin expanded significantly, up 350 basis points, driven by the favorable combined impact of productivity, pricing, and normalizing inflation. Gross margin also reflected a performance incentive related to strong commercial execution in our C4 partnership. This benefit contributed slightly over 100 basis points to the gross margin in the quarter and now offers us extra flexibility to drive future reinvestment. SCNA de-leveraged 50 basis points in Q1, due in part to a double-digit increase in market. All in, total company operating income grew very strongly, up 17.5% year over year, with EPS increasing 12%. Moving to the next segment.

Sudan Shaw: Gross margin expanded significantly up 350 basis points, driven by the favorable combined impact of productivity.

Sudan Shaw: Writing and normalizing in patient.

Sudan Shaw: Gross margins also reflected a performance incentive related to strong commercial execution of our seaport partnership.

Sudan Shaw: This benefit contributed slightly over 100 basis points to the gross margin in the quarter and now offers us extra flexibility to drive future reinvestment.

Sudan Shaw: SG&A Deleveraged 50 basis points in Q1 due in part to a double digit increase in marketing.

Sudan Shaw: All in total company operating income grew very strongly up 17, 5% year over year with EPS increasing 12%.

Sudan Shaw: Moving to the segments.

Sudhanshu Shekhar Priyadarshi: US recession beverages net sales grew 4.3%, led by 5.6 percentage points of price. Elasticities remain manageable across most categories, and volume mix declined 1.3%, including an initial contribution from our Electrolyte partnership. As expected, our relative market share and net sales performance reflected a later innovation cadence relative to 2023, particularly in CSDs. These calendar differences will normalize as new products get introduced and our innovation gains traction. In other words, segment net sales drivers should rebalance further towards volume make, as market share performance improves, and as the magnitude of pricing contribution moderates considerably from here. Segment operating income grew an impressive 22.4% in the quarter, and margins expanded 440 basis points. Tailwinds included pricing.

Sudan Shaw: U S recession beverages net sales grew four 3% led by five six percentage points of pricing.

Sudan Shaw: Elasticities remain manageable across most categories and volume mix declined one 3%, including an initial contribution from our electoral it partnership.

Sudan Shaw: As expected our relative market share and net sales performance reflected a later innovation cadence relative to 'twenty, two 'twenty three particularly in Cst's.

Sudan Shaw: These calendar differences will normalize as new products get introduced and our innovation gains traction.

Sudan Shaw: In other words.

Sudan Shaw: Segment net sales drivers should rebalance farther towards volume mix as market share performance improves.

Sudan Shaw: And as the magnitude of pricing contribution moderates considerably from here.

Sudan Shaw: Segment operating income grew an impressive 22, 4% in the quarter.

Sudan Shaw: And margins expanded 440 basis points.

Sudan Shaw: Daily wins included pricing.

Sudhanshu Shekhar Priyadarshi: Strong productivity and the C4 Performance Incentive, which I mentioned earlier, helped fund higher marketing in the quarter. All in, we have a good line of sight to continued operating income gains in U.S. refreshment beverages over the balance of the year, though not at the same magnitude as we experienced over the last couple of quarters. U.S. coffee top line trends significantly recovered relative to Q4, as expected. While net sales declined 2.1%, volume mix was close to flat, down a modest 0.3% year-over-year.

Sudan Shaw: Strong productivity.

Sudan Shaw: And the seafood performance incentive I had mentioned earlier.

This combination of factors helps fund higher marketing in the quarter.

Sudan Shaw: All in we have good line of sight to continued operating income gains.

Sudan Shaw: In U S recession beverages over the balance of the year, though not at the same magnitude as we experienced over the last couple of quarters.

Sudan Shaw: U S coffee topline trends significantly recovered relative to Q4 as expected.

Sudan Shaw: While net sales declined two 1% volume mix was close to flat down a modest 0.3% year over year.

Sudhanshu Shekhar Priyadarshi: All shipments continued their multi-quarter improvement trajectory and decreased 1.1%. This progress was driven by a steady recovery in volume and market share momentum across our owned and licensed portfolio during the quarter. With multiple elements underpinning this trend, including greater distribution and display, and a more appropriately aligned promotional strategy, we expect innovation and activation to begin having an even greater impact in the balance of the year. Brewer shipments increased 26% in Q1, due to a combination of improving trends in the coffee maker category, continued Keurig market share gains, and timing benefits.

Sudan Shaw: Our shipments continued their multi quarter improvement trajectory and decreased one 1%.

This progress was driven by a steady recovery in volume and market share momentum across our owned and licensed portfolio during the quarter.

Sudan Shaw: With multiple elements underpinning this trend.

Sudan Shaw: Including greater distribution and display and are more appropriately aligned promotional strategy we have.

Sudan Shaw: Expect innovation and activation to begin having an even greater impact in the balance of the year.

Sudan Shaw: Brewer shipments increased 26% in Q1.

Sudan Shaw: Due to a combination of improving trends in the coffee maker category.

Sudan Shaw: Continued keurig market share gains and timing benefits.

Sudhanshu Shekhar Priyadarshi: On a rolling 12-month basis, this smooths out some of the inherent quarterly brewer volatility. Shipments are still down just under 2%, representing an improving trend versus the double-digit decline we experienced in 2023. Segment net pricing decreased 1.8% primarily due to previously discussed promotional adjustments across our owned and licensed portfolio.

On a rolling 12 month basis with smooth out some of the inherent quarterly brewer volatility.

Sudan Shaw: <unk> two down just under 2%, representing an improving trend versus the double digit decline we experienced in 2023.

Sudan Shaw: Segment net pricing decreased one 8% primarily due to previously discussed promotional adjustments across our owned and licensed portfolio.

Sudhanshu Shekhar Priyadarshi: This is in response to competitive activity that began in Q3 last year and continues today. These recalibrations more than offset the continued benefit of pricing we are realizing through partner contracts while improving segment mix. U.S. coffee operating income advanced 1.4%.

Sudan Shaw: This is in response to competitive activity that began in Q3 last year and continues today.

These risk calibrations more than offset the continued benefit of pricing we are realizing to partner contracts, while improving segment mix.

Sudan Shaw: U S coffee operating income advanced one 4%.

Sudhanshu Shekhar Priyadarshi: And margins expanded 110 basis points versus the prior year, driven by productivity savings and easing cost pressures, partially offset by higher marketing. As expected, the rate of segment margin expansion moderated versus the back half of 2023 as we are managing towards a more balanced top and bottom line outcome in this segment in 2024. We are pleased with the progress we made during quarter one. International segment net sales grew 11.8% on a constant currency basis.

Sudan Shaw: And margins expanded 110 basis points versus the prior year, driven by productivity savings and easing cost pressures, partially offset by higher marketing spend.

Sudan Shaw: As expected the rate of segment margin expansion moderated versus the back half of 2023, as we are managing towards a more balanced top and bottom line outcome in this segment in 2024.

Sudan Shaw: We are pleased with the progress we made during quarter one.

International segment net sales grew 11, 8% on.

Sudan Shaw: On a constant currency basis.

Sudhanshu Shekhar Priyadarshi: Sales increased 7% with very solid volume mixed growth of 4.8% and pricing up 2.2% year-over-year. Our performance included growth across markets and categories, with particular strength in Latin American LRBs. Segment operating income advanced very strongly, up 25% in constant currency terms.

Sudan Shaw: <unk> increased 7% with very solid volume mix growth of four 8% and.

Sudan Shaw: And pricing up two 2% year over ear.

Our performance included growth across market and categories with particular strength in Latin American L. Arby's.

Sudan Shaw: Segment operating income advanced very strongly up 25% in constant currency terms.

Sudhanshu Shekhar Priyadarshi: Volume Mix Growth, Pricing, and Productivity Netted Favorably Against Inflation and Higher Markets. We also continue to invest in route to market capabilities, including the on-premise expansion in Canada that Tim mentioned, and by strengthening our DST network in Mexico. Given its outsized growth potential, investing in our international business is a significant priority and should support an increased top and bottom line contribution from the segment in 2024 and over time. Moving to the balance sheet and cash flow.

Sudan Shaw: Volume mix growth pricing and productivity netted favorably against the inflation and higher marketing.

Sudan Shaw: We also continued to invest in route to market capabilities.

Sudan Shaw: Including the on premise expansion in Canada that dimension and by strengthening our DSD network in Mexico.

Sudan Shaw: Given its outsized growth potential and investing in our international business is a significant priority and to support an increased top and bottom line contribution from the segment in 2024 and overtime.

Sudan Shaw: Moving to the balance sheet and cash flow.

Sudhanshu Shekhar Priyadarshi: Our Q1 free cash flow represented a use of $73 million. Cash generation is seasonally lower during the first quarter, and the year-over-year difference in free cash flow versus Q1 2023 was largely a function of a front-loaded cadence to our CapEx investment this year. In absolute terms, free cash flow also remained weighed down by roughly $400 million of reductions in supplier financing arrangements.

Sudan Shaw: Our Q1 free cash flow represented a use of $73 million.

Sudan Shaw: Cash generation is seasonally lower during the first quarter.

Sudan Shaw: The year over year difference in free cash flow versus Q1 2023.

Sudan Shaw: It was largely a function of a frontloaded cadence to our capex investments this year.

Sudan Shaw: In absolute terms free cash flow also remained weighed down by roughly 400 million of reductions in supplier financing arrangements.

Sudhanshu Shekhar Priyadarshi: We expect the impact of the carryover effects of these changes to moderate in the coming quarters. And for free cash flow to accelerate, with full year conversion projected considerably ahead of the 2023 level. This will support our capital allocation agenda. Our priorities include making organic and inorganic investments to further our growth. Continuing to strengthen our balance sheet and returning cash to shareholders through a steadily growing dividend and via an opportunistic share buyback. We will remain dynamic in managing across these priorities at any point in time, with a balanced approach over the long term. For example, in Q1, we repurchased 38 million shares for a total of 1.1 billion, taking advantage of an attractive valuation and the liquidity event presented by J.B.'s Secondary Office. Though our management leverage ratio increased modestly as a result.

Sudan Shaw: We expect the impact of the carryover effects all of these changes to moderate.

Sudan Shaw: Over the coming quarters.

Sudan Shaw: And for free cash flow to accelerate.

Sudan Shaw: Full year conversion projected considerably ahead of 2023 levels.

Sudan Shaw: This will support our capital allocation agenda.

Sudan Shaw: Our priorities include making organic and inorganic investments to further our growth.

Sudan Shaw: Continuing to strengthen our balance sheet.

Sudan Shaw: And returning cash to shareholders through a steadily growing dividend and we are opportunistic share buybacks.

Sudan Shaw: We will remain dynamic in managing across these priorities at any point in time with.

Sudan Shaw: With a balanced approach over the long term.

Sudan Shaw: For example in Q1, we repurchased 38 million shares for a total of $1 1 billion.

Sudan Shaw: <unk> advantage of an attractive valuation.

Sudan Shaw: And the liquidity event presented by Jbs secondary offering.

Sudan Shaw: Duo our management leverage ratio increased modestly as a result, we.

Sudhanshu Shekhar Priyadarshi: We remain committed to our long-term target of 2 to 2.5 times, moving now to our 2024 guidance. On a constant currency basis, we continue to expect mid-single-digit net sales growth and high single-digit EPS growth in 2024, both consistent with our long-term financial algorithm. Our plans continue to embed strong top-line momentum in our U.S. and Western beverages and international segments, with relatively muted growth contribution from U.S. coffers. We expect productivity savings to help offset a more normal level of inflation. There are, however, pockets of emerging commodity inflation, for instance, in the green coffee price.

Sudan Shaw: We remain committed to our long term target of two to two five times.

Sudan Shaw: Moving now to our 2020 for guidance.

Sudan Shaw: On a constant currency basis, we continue to expect mid single digit net sales.

Sudan Shaw: And high single digit EPS growth in 2020 for.

Sudan Shaw: Both consistent with our long term financial algorithm.

Sudan Shaw: Our plants continue to embed a strong top line momentum.

Sudan Shaw: In our U S assessed in beverages and international segments.

Sudan Shaw: It's relatively muted growth contribution from U S coffee.

Sudan Shaw: We expect productivity savings to help offset a more normal level of inflation.

Sudan Shaw: There are hardboard pockets of three emerging commodity inflation.

Sudan Shaw: For instance, in the Green coffee price.

Sudhanshu Shekhar Priyadarshi: We will need to monitor and manage these, particularly in the back half, throughout the balance of the year. We also plan to continue to deploy investment dollars behind brands and capabilities to support our top line growth. The incremental flexibility afforded to us by our Q1 outperformance should enable us to balance these considerations. As a result... We continue to anticipate healthy operating profit growth and full-year operating margin expansion on a consolidated basis.

Sudan Shaw: We will need to monitor and manage these particularly in the back half.

Sudan Shaw: Throughout the balance of the year.

Sudan Shaw: Also planned to continue to deploy investment dollars behind brands and capabilities to support our topline growth.

Sudan Shaw: The incremental flexibility.

Sudan Shaw: Got it to us by our Q1 outperformance should enable us to balance these concentrations.

Sudan Shaw: As a result, we continue to into debate healthy operating profit growth and full year operating margin expansion on a consolidated basis.

Sudhanshu Shekhar Priyadarshi: Consistent with our original guide, we expect some of this operating momentum to be offset by a net headwind from below-the-line items constraining operating profit flow through to EPS. Our 24 outlook embeds the following below-the-line assumptions, which now reflect share repurchase and financing activity from Q1. Interest expense in a $625 to $645 million range for the full year. An effective tax rate of approximately 22 to 23 percent and approximately 1.37 billion diluted weighted average shares outstanding.

Sudan Shaw: Consistent with our original guide.

Sudan Shaw: We expect some of this operating momentum to be offset by a net headwind from below the line items constraining operating profit flow through to EPS.

Sudan Shaw: Our 24 outlook Embeds the following below the line assumptions.

Sudan Shaw: We should not reflect share repurchases and financing activity from Q1.

Sudan Shaw: Interest expense in a $625 million to $645 million range for the full year.

Sudan Shaw: And effective tax rate of approximately 22% to 23%.

Sudan Shaw: Approximately 137 billion diluted weighted average shares outstanding.

Sudhanshu Shekhar Priyadarshi: In closing, we are pleased with the stronger than anticipated start to the year, which bolsters our confidence in our ability to deliver on our full year guidance while fueling a virtuous cycle for the long term. With that, I will now turn the call back to Tim to close. Thanks.

Sudan Shaw: In closing we are pleased with the stronger than anticipated start to the year.

Sudan Shaw: Which bolsters our confidence in our ability to deliver on our full year guidance.

Sudan Shaw: While feeling a virtuous cycle for the long term.

Sudan Shaw: With that I will not turn the call back to Tim to close.

Timothy P. Cofer: Thanks, Sudhanshu. Before we move to Q&A, I want to thank our KDP colleagues for embodying our company's challenger mindset every day. In Q1, we collectively put the business on an accelerating path in a dynamic macro environment. Strong execution was visible across our results and in every country and market in which we compete. We intend to keep building momentum as the year progresses. Bob, Sudhanshu, the broader executive team, and I feel the team's energy and enthusiasm for KDP's evolved strategy, which was particularly evident at this month's annual summit of the company's top leaders. Together, we're excited to activate this strategy to unlock considerable future value for our shareholders. Thanks for your time, and we're now happy to take your questions.

Timothy P. Cofer: Thanks, Sudan shoe before we move to Q&A I want to thank our KDB colleagues for embodying our company's challenger mindset every day.

Timothy P. Cofer: In Q1, we collectively put the business on an accelerating path and that dynamic macro environment strong execution was visible across our results and in every country and market in which we compete we intend to keep building momentum as the year progresses.

Speaker Change: Bob Sudan shoe, the broader executive team and I feel the team's energy and enthusiasm for Kt piece evolved strategy, which was particularly evident at this month's annual summit of the company's top leaders.

Speaker Change: Together, we're excited to activate this strategy to unlock considerable future value for our shareholders.

Speaker Change: Thanks for the time and 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 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the key.

Operator: In the interest of time, please limit yourself to one question and one follow-up. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Bryan Spillane with Bank of America. Please go ahead.

Speaker Change: In the interest of time, please limit yourself to one question and one follow up.

Speaker Change: Is it any time your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Okay.

Speaker Change: The first question today.

Speaker Change: I'm from Bryan Spillane with Bank of America. Please go ahead.

Bryan Douglass Spillane: Hey, thanks, operator. Good morning, everyone.

Bryan Douglass Spillane: Hey, Thanks, operator, and good morning, everyone, Tim Congratulations on the new role and Bob.

Bryan Douglass Spillane: Tim, congratulations on the new role. And Bob, hopefully, it sticks this time, right? I don't want you to come back.

Bryan Douglass Spillane: Hopefully it sticks. This time right, we don't want you to come back.

Bryan Douglass Spillane: I'm confident it will, Brian. Thank you. So, you know, Sudhanshu, I just wanted to pick up on the comment you made about inflation and understand green coffee costs. If you could also give us a perspective on aluminum, that would be great. You know, given the headlines about the sanctions and just the potential increases in aluminum costs, how should we be thinking about that? And Tim, maybe just on the coffee point, you know, if we're going to see green coffee inflation, but we've also been discounting to get price points, you know, in line with where consumers see value. How do we just think about managing margins in coffee if we do see a sustained increase in green coffee costs?

Bryan Douglass Spillane: Confident O'brien, thank you Brian.

Bryan Douglass Spillane: So you don't see the answer I just wanted to pick up on the comment you made about inflation.

Bryan Douglass Spillane: And understand Green coffee cost if you could also give us a perspective on <unk>.

Bryan Douglass Spillane: Aluminum you know just given the headlines about the sanctions and just the potential increases in aluminum costs, how we should be thinking about that and Tim maybe just on.

Bryan Douglass Spillane: On the coffee point, if we're going to see green coffee inflation, but we've also been discounting to get <unk>.

Bryan Douglass Spillane: Price points.

Bryan Douglass Spillane: In line with where consumers see value.

Bryan Douglass Spillane: How do we just think about managing margins.

Bryan Douglass Spillane: In coffee if if we if we do see a sustained increase in green coffee cost.

Sudhanshu Shekhar Priyadarshi: Good morning, Brian. Let me take the first inflation question, and then Tim will take over and take the next question. So, inflation, we continue to expect some inflation in 2024 overall, but at a more moderate level than in recent years. We talked about green coffee.

Speaker Change: Good morning, Brian Let me take the first the inflation question and then Tim will take over the next question. So of inflation. We continue to expect some inflation in doing 24 overall, but at a more moderate level than in recent year, we've talked about green coffee.

Sudhanshu Shekhar Priyadarshi: We're also seeing inflationary albarium, but as you know, we manage it within our guidance, within our range of outcomes. We have factored all of this inflation and commodity, and we also had some stuff for six to nine months in our guidance. So our overall guidance for the year, which is mid-single digit top line and high single digit EPS, factors in all of these scenarios. Yeah, Brian, I'll take it.

Timothy P. Cofer: We are also seeing efficiently albarium, but as you know we manage it within our guidance within a range of outcomes and.

Bryan Douglass Spillane: We have factored all of these inflation.

Timothy P. Cofer: And commodity and we also had some stuff for six to nine months in our guidance. So our overall guidance for the year, which beats mid single digit top line and high single digit EPS factors in all of these scenarios.

Speaker Change: Yeah, Brian I'll take the second part of your question I mean stepping back on coffee, obviously as the pioneers of single serve.

Timothy P. Cofer: Yeah, Brian, I'll take the second part of your question. I mean, you know, stepping back on coffee, obviously, as the pioneers of single-serve coffee here in the U.S. and the steward of the category with almost 80% of the share of manufactured pods. Our primary focus is on growing the entire ecosystem, and that's quite honestly more important than maximizing market share of any given brand. We aren't particularly interested in competing on price, but at the same time, and to your point, you know, we did make some decisions of late to protect, particularly our owned and licensed brand portfolio, when we felt that our competitive positioning was impacted based on some competitive movement that we saw in the back half of last year.

Speaker Change: Coffee here in the U S and the steward of the category with almost 80% share of manufactured pods. Our primary focus is on growing the entire ecosystem.

Speaker Change: And that's quite honestly more important than maximizing market share of any given brand, we aren't particularly interested in competing on price.

Speaker Change: But at the same time and to your point, we did make some decisions of late to protect particularly our owned and licensed.

Speaker Change: Brand portfolio.

Speaker Change: When we felt that our competitive positioning was was impacted based on some competitive movement that we saw in the back half of last year. So we did make the decision to adjust the pricing really a couple of points around price gaps, having said that Brian I would say when you look at our first quarter results. Yes, there were some <unk>.

Timothy P. Cofer: So we did make the decision to adjust the pricing, really a couple of points around price gaps. Having said that, Brian, I would say when you look at our first quarter results, yes, there were some tactical promotional adjustments, but we also grew our owned and licensed distribution points at a double-digit rate. We increased display activity. We also increased brand support, and brought some innovation, and I think all of these factors contributed to an important strengthening of our business in owned and licensed.

Speaker Change: <unk> co promotional adjustments, but we also grew our owned and licensed distribution points actually at a double digit rate. We increased display activity. We also increased brand support brought some innovation and I think all of these factors contributed to a <unk>.

Speaker Change: Important strengthening of our business on unknown at license and I expect going forward other activity around the innovation agenda, you've heard us talk about bolt on pods and Brewers.

Timothy P. Cofer: And I expect going forward, other activity around the innovation agenda, which you've heard us talk about both for pods and brewers. Accelerated marketing and activation will help us drive continued strength in, or I would say improving sequential strength in, coffee for the balance of the year.

Speaker Change: Accelerated marketing and activation will help us drive continued strength in or I would say improving sequential strength in coffee for the balance of the year.

Lauren Rae Lieberman: The next question is from Lauren Lieberman with Barclays. Please go ahead.

Speaker Change: Yeah.

Speaker Change: The next question is from Lauren Lieberman with Barclays. Please go ahead.

Lauren Rae Lieberman: Great, thanks. Good morning. I wanted to talk a little bit about marketing coffee because one of the things that I've been thinking about recently is that the messaging that you've shared with the street, you know, the messaging on affordability, some of the advertising you've shared, all feel very spot on. And yet, perhaps over the last 12 months, you haven't had the reach to consumers or the impact on consumers that you might have hoped for with some of the communications, some of those messages.

Lauren Rae Lieberman: Great. Thanks, good morning.

Lauren Rae Lieberman: I wanted to talk a little bit about marketing in coffee.

Lauren Rae Lieberman: One of the things that I've been thinking about recently is that the messaging that you've shared with the street and the messaging on affordability and the advertising you've shared all feels very spot on and yet.

Lauren Rae Lieberman: Perhaps over the last 12 months, you haven't had the reach to consumers or the impact to consumers that you might've hoped on communications kind of messages and so as we're thinking about affordability still being very much a concern and I would think a selling point of.

Lauren Rae Lieberman: And so as we're thinking about affordability still being very much a concern, and I would think a selling point of the single-serve Keurig coffee and also the launch of the Iced, or sorry, the Chill machine. I want to hear a little bit more about maybe how you're targeting or approaching marketing differently, key channels to reach the consumer, and what you might be doing to kind of turn up the volume or do things a bit differently than you did in 2023 to, you know, get better reach with those messages.

Lauren Rae Lieberman: Single serve coffee and also the launch of the ice or sorry, the chill machine I wanted to hear a little bit more about maybe how you're targeting or approaching marketing differently key channels to reach the consumer and what you might be doing to kind of turn up the volume or do things a bit differently than you did in 2023.

Speaker Change: Hey, you know get better reach and end with with those messages. Thank you.

Timothy P. Cofer: Thank you. Absolutely. So.

Speaker Change: Absolutely so.

Timothy P. Cofer: Absolutely. So, you know, we are seeing, and we saw this quarter an increase in our total marketing investment in coffee. And I think, you know, as we've realigned back to the question that Brian asked, making sure that from a price point standpoint, we feel good about our own and licensed brands. It's an opportunity now for our marketing and innovation to work even harder. I think there's, we're employing, you know, what we characterize as a bit of a barbell strategy, reflecting both the opportunity to reinforce value in our pod business as well as drive on the premium side.

Speaker Change: We are seeing and we saw that this quarter an increase in our total marketing investment on coffee and I think as we've realigned our back to the question that Bryan S, making sure that from a price point standpoint, we feel good about our owned and licensed brand, it's an opportunity now for our marketing and innovation work.

Speaker Change: But even harder.

Speaker Change: I think there's we're employing what we characterized as a bit of a barbell strategy, reflecting both the opportunity to reinforce value.

Speaker Change: On our on our.

Speaker Change: Pod business as well as drive on the premium side. When you look at the consumer broadly you do see at the higher income levels are really robust participation in the keurig ecosystem and actually growing sales.

Timothy P. Cofer: When you look at the consumer broadly, you do see at higher income levels really robust participation in the Keurig ecosystem and actually growing sales. Where we see a little bit more pressure of late is on the lower and mid-income levels. And to that end, you will see new marketing, Lauren, starting in the second quarter that is more sharply focused on a value message, particularly against a broader frame of away from home coffee. While at home coffee represents three quarters of the volume, away from home coffee is the larger dollar ring.

Speaker Change: Where we see a little bit more pressure of late is on the lower and mid <unk>.

Speaker Change: Income and to that end you will see new.

Speaker Change: Marketing Warren coming starting in the second quarter that it's more sharply focused on our value message, particularly against a broader frame of away from home coffee, while at home coffee represents three quarters of the volume away from home coffee is the larger dollar ring and we think in today's.

Timothy P. Cofer: And we think in today's economic environment and given the quality and variety that we're providing, a sharper value-based message will be one that's well received. And you will see that activated as of Q2 this year. So that's yet to come.

Speaker Change: Unmik environment, and given the quality and variety that we're providing.

Speaker Change: Harper value based message.

Speaker Change: We will be one that's well received and you will see that activated as of Q2. This year. So that's yet to come another one is around our iced and cold platform and indeed launching the refreshes that we've done which is obviously a big part of away from home coffee shop experience as well as new ice.

Operator: Another one is around our iced and cold platform and indeed launching the refreshers that we've done, which is obviously a big part of the away from home coffee shop experience, as well as new ice pods and the new brew and chill brewer that will be launching in the fall. That will also be incremental and new marketing against that platform, which I think is a big source of growth and opportunity for us. And then finally, on the premium, on the premium and super premium, we've really rounded out our roster. I made reference to a number of new partners in the Keurig ecosystem at the premium and super premium level.

Speaker Change: Pods, and the new Brewer and chill Brewer that we'll be launching in the fall that will also be incremental and new marketing against that platform, which I think is a big source of growth.

Speaker Change: <unk> for US and then finally on the premium and premium and Super premium, we've really rounded out our roster I made reference to a number of new partners into the keurig ecosystem at the premium and Super premium level.

Operator: You will see marketing against that. And I'd be remiss if I didn't mention, from a total coffee consumption standpoint, the big opportunity around ready-to-drink in single serve with our La Cologne partnership, and you'll see marketing against that. So I think we've got a stacked series of new news, both in terms of innovation and marketing messaging. Most of that is yet to come as we go through the year.

Speaker Change: You will see marketing against that and I'd be remiss, if I didn't mention as well from a total coffee consumption standpoint, the big opportunity around ready to drink and single serve with our <unk> partnership and Youll see marketing against that so I think we've got a stacked series of new news both in terms of the.

Speaker Change: Innovation and marketing messaging most of that is yet to come as we go through the year.

Christopher Michael Carey: The next question comes from Chris Carey with Wells Fargo. Please go ahead.

Speaker Change: The next question comes from Chris Carey with Wells Fargo. Please go ahead.

Speaker Change: Okay.

Christopher Michael Carey: Hi, good morning.

Christopher Michael Carey: Morning, Chris. Two quick questions, first on the coffee business. So adding Black Rifle is a very interesting development. Can you just talk about how that partnership came to be and whether this makes you more confident on your ability to continue to see sequential improvement in your coffee volumes into the back half of the year and perhaps into 2025, just given the momentum around that business? And then, if I could, just on the cold side, Sudhanshu mentioned some of the innovation timing dynamics of the underlying cold business. Would you expect those to start looking better as innovation comes to market?

Christopher Michael Carey: Good morning, Chris.

Christopher Michael Carey:

Christopher Michael Carey: Two quick questions first on the coffee business, so adding black rifle.

Chris: Interesting development can you just talk about how that partnership came to be and whether this makes you more confident on your ability to continue to see sequential improvement in your coffee volumes into the back half of the year and perhaps into 2025.

Chris: Just given the momentum around that business and then if I could just on the cold side. You don't you mentioned some of the innovation timing dynamics at the underlying core business would you expect those to start looking better as innovation comes to market. It can you just remind us on timing of the innovation suite specifically with.

Timothy P. Cofer: And can you just remind us of the timing of the innovation suite, specifically with Creamy Coconut? Thanks so much. Sure.

Chris: With creamy coconut thanks, so much.

Timothy P. Cofer: Sure, so first on Black Rifle, as I mentioned in my prepared remarks, we are excited to welcome Black Rifle into the Keurig ecosystem. I think Black Rifle's coffee success, I'm sure you know, Chris, is already well established in the coffee industry. And I think their decision to evolve to a Keurig system partner really reinforces our full value proposition and our stewardship as the single serve category leader. I am so pleased with that development.

Speaker Change: Sure. So first on Black rifle as I mentioned in my prepared remarks, we are excited to welcome black rifle under the Keurig ecosystem I think black rifles coffee success I'm sure you know what Chris has is already a well established in the coffee industry and I think their decision to evolve to a keurig system partner really reinforces.

Chris: Our full value proposition and our stewardship is the single serve category leader.

Chris: So pleased with that development, you know bigger picture and I referenced it in the prepared remarks, we partner with a broad range of coffee brands nationwide and.

Timothy P. Cofer: You know, bigger picture, and I referenced it in my prepared remarks, we partner with a broad range of coffee brands nationwide. And you know, we're about offering consumers choice and variety and a great, high-quality cup of coffee and really providing consumers with the diversity of their preferences. And Black Rifle coffee is the newest addition, but it's one of many, and one that we feel good about joining our system. As it relates to cold and refreshment beverages, indeed, we have a slightly different phasing of the major innovation on our refreshment beverage this year versus last year. We mentioned this in our February call, but when you look at our relative market share here in Q1, we're under a little bit of pressure right now. We expected that.

Chris: We're about offering consumers choice and variety and a great high quality Cup of coffee and really providing consumers the diversity of their preferences and black rightful coffee is the newest edition, but it's one of many and one that we feel good joining our <unk>.

Chris: System as it relates cold.

Chris: And refreshment beverage.

Chris: Indeed, we have a slightly different phasing of the major innovation on a refreshment beverage this year versus last year. We mentioned this in our February call, but when you look at our relative market share here in Q1 were under a little bit of pressure right now we expected that it reflects that.

Timothy P. Cofer: It reflects that later innovation cadence. And the one I want to draw your attention to was really a blockbuster for us last year. And that was Dr. Pepper Strawberries and Cream.

Chris: Later innovation cadence and the one I draw your attention to was really a blockbuster for us last year and that was Dr. Pepper of strawberries and cream and launched in early in the first quarter of last year. It enjoyed a very strong start and in fact, it became the number one CSD category innovation in the industry in 2023 this year were <unk>.

Timothy P. Cofer: It launched early in the first quarter of last year. It enjoyed a very strong start, and in fact, it became the number one CSD category innovation in the industry in 2023. This year, we're seeing a slightly later phase of that. So, as we speak, we're launching Dr. Pepper Creamy Coconut. You can find it in your local store.

Chris: A slightly later phasing of that so.

Chris: As we speak we're launching our Dr. Pepper cream coconut you can find it in your local store. It's great product. We're also rolling out a complete restage of our bi still portfolio under the banner of by Wonder water in partnership with the Sydney Sweeney.

Timothy P. Cofer: It's a great product. We're also rolling out a complete redesign of our Buy Still portfolio under the banner of Buy Wonder Water in partnership with Sydney Sweeney. We're launching or I would say reinvigorating our core Water Business, the Hydration Business, with the U.S. Gymnastics Partnership. So we've got a lot of activity that really is starting now in Q2 and will ramp into the back half of the year. On top of that, I would mention what you know as well, which is continued strong C4 contribution and a continuing distribution ramp of our Electra League partnership. Therefore, you see more of the firepower hitting in the back half of the 24 versus 23.

Chris: We're launching our I would say reinvigorating our core.

Chris: Water business hydration business with U S. Gymnastics partnership so we've got a lot of activity that really is starting now in Q2 and will ramp into the back half of the year on top of that I would I would mentioned what you know as well, which is continued strong C for.

Chris: Contribution and a continuing distribution ramp of our electrically partnership therefore, you see more of the firepower hitting in the back half of.

Chris: 24 versus 23.

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

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

Peter K. Grom: Thanks, operator, and good morning, everyone. Maybe building on the partner brands, I was hoping to get some color on C4. You know, maybe first, we'd just love to get your perspective on kind of what you're seeing from the category more broadly. Trends have moderated, you know, quite a bit across the board. So just any thoughts on what you think could be driving that. And then, just on C4 specifically, continued strong growth, and some share gains here.

Peter K. Grom: Thanks, operator, and good morning, everyone. So maybe building on the partner brands I was hoping to get some color on <unk> four.

Peter K. Grom: Maybe first would just love to get your perspective on kind of what Youre seeing from the category more broadly trends are moderating quite a bit across the board. So just any thoughts on what you think could be driving that and then just on Q4, specifically continued strong growth with some share gains here you have visibility on where you're sourcing. These.

Peter K. Grom: Do you have visibility into where you're sourcing these share gains from? Do you think it's coming from kind of the legacy brands, like Monster or Red Bull? Or do you really think it's coming at the expense of maybe some of the other performance energy drink brands? Thanks.

Chris: Share gains from do you think it's coming from kind of the legacy brands like a monster rebel what are you really thinking I think it's coming at the expense of maybe some of the other performance energy drink brands. Thanks.

Speaker Change: Yeah Yeah.

Timothy P. Cofer: Yeah, absolutely. Well, hey, we continue to be really pleased with our partnership with C4. I think I share that Investor Day sentiment as of that moment, you know, since KDP took the distribution partnership with C4, and we made that minority investment stake. TDPs are up close to 60%, sales are up 65%, and we continue to see growth potential for C4. C4 has got some exciting innovation this year around flavor extensions and around sizing and packaging configurations as well.

Speaker Change: Yeah, absolutely well, Hey, we continue to be really pleased with our partnership with <unk> I think I shared at Investor day.

Chris: As of that moment with it since KDB.

Chris: Took the distribution partnership with <unk> for them, we made that minority investment stake.

Chris: <unk> are up close to 60% of sales are up 65% and we continue to see growth potential for <unk> four <unk> got some exciting innovation this year around flavor extensions and around sizing and packaging configurations as well indeed.

Timothy P. Cofer: Indeed, the energy segment broadly, as you mentioned, Peter, has seen some softening versus what was a multi-year run. However, I think energy remains very much a resilient category and one that, particularly among Gen Zennials, will continue to play a huge role in daily beverage choice. As it relates to sourcing, we see sourcing broadly. I'm not going to get into specifics around any given competitor, but I think it's both sourcing from other large players in energy as well as broader liquid refreshment beverages, particularly among youth as they make various choices about their caffeine carriers.

Chris: The energy segment broadly as you mentioned Peter has seen some softening versus what was a multi year run.

Chris: I think energy remains.

Chris: Very much a resilient category and one that particularly among gen. Centennial's will continue to play a huge role in daily beverage choice.

Chris: As it relates sourcing, we see sourcing broadly I'm not going to get into specifics around.

Chris: Any given competitors, but I think it's both sourcing from other.

Chris: Large players in energy as well as broader liquid refreshment beverage, particularly among youth as they make various choices on on their caffeine.

Operator: The next question comes from Steve Powers with Deutsche Bank. Please go ahead.

Chris: Carrier.

Chris: The next question comes from Steve Powers with Deutsche Bank. Please go ahead.

Stephen Robert R. Powers: Hey, great morning. Thank you. And congrats to Tim and Bob, as well, for me. Tim, I wanted to play back what you said just a couple minutes ago on the cadence of sequential improvement in underlying refreshment beverage performance. It sounds like with the innovation you're launching now in CSDs and then the buy-relaunch, et cetera, we should see sequential improvement in market share this quarter as we're looking at consumption data, but the full financial impact is going to be more skewed to the second half Just wanted to make sure I got that right. That's correct. Okay, great.

Stephen Robert R. Powers: Okay, great. Good morning, Thank you.

Stephen Robert R. Powers: And congrats to Bob as well for me.

Stephen Robert R. Powers: Tim I wanted to play back what you said just a couple minutes ago on the cadence of sequential improvement in.

Stephen Robert R. Powers: Underlying refreshment beverage performance it sounds like with the innovation you are launching now in.

Stephen Robert R. Powers: <unk> bio relaunch et cetera, it sounds.

Stephen Robert R. Powers: We should see.

Stephen Robert R. Powers: Sequential improvement in market share this quarter as we're looking at consumption data, but the full financial impact is going to be more skewed to the second half just want to make sure I got that right.

Speaker Change: That's correct.

Speaker Change: Okay, Great and then if I could take a longer term perspective with.

Stephen Robert R. Powers: And then, if I could take a longer-term perspective with respect to the Alta Brewer System. As you pursue that, I was just curious as to the engagement you expect from some of your partners. And as you beta test and scale, do you expect to do that with a relatively full brand assortment? Or is that more of a longer-term endeavor?

Stephen Robert R. Powers: With respect to the the altar also the Alta Brewer system.

Stephen Robert R. Powers: As you as you pursue that I was just curious as to the engagement you expect from some of your partners and as you as your beta test and scale.

Stephen Robert R. Powers: You expect to do that with a relatively full brand assortment.

Stephen Robert R. Powers: Or is that is that more of a.

Stephen Robert R. Powers: Longer term endeavor.

Robert J. Gamgort: Yes, Pete, it's Bob. On the ALTA system, obviously, we're excited about it.

Bob: Yeah, Steve It's Bob.

Bob: On the ultra system, obviously, we're excited about its potential to continue to drive growth in the total sales of our category and as Tim I think basically you said earlier that is our top priority. We previewed this system with all of our partners and they've been involved every step of the way and.

Robert J. Gamgort: It has the potential to continue to drive growth.

Robert J. Gamgort: in the total single SIR category. And as Tim, I think, nicely said earlier, that is our top priority. We preview the system with all of our partners, and they've been involved every step of the way. And our decision on how we roll out the system.

Stephen Robert R. Powers: And our decision on how we rollout the system.

Robert J. Gamgort: We continue to implement that over time, but we're still very much in the early stages of that.

Stephen Robert R. Powers: Which brands are in initially and how we continue to execute that over time, but we're still very much in the early stages of that but it's an active conversation with our partners.

Robert J. Gamgort: We're still very much in the early stages of that, but we have an active conversation with the partner.

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

Stephen Robert R. Powers: The next question comes from Robert <unk> with Evercore. Please go ahead.

Robert Edward Ottenstein: Great, thank you. There are two kinds of follow-ups. First, on the pod business... Could you remind us or maybe update us just in terms of what the business mix looks like between own, license, partner, and private label, so we just kind of level set where we are on that and then relate to that, is there any change in strategy in terms of how you're looking at those categories and your emphasis, or is it just pretty much as it has been?

Robert: Great. Thank you to to kind of follow ups first on the pod business could you remind us or maybe update us.

Robert: Just in terms of what the business mix looks like in between license partner private label. So we just kind of kind of level set where we are on that and then you know attach and and related to that is there any change in strategy in.

Stephen Robert R. Powers: In terms of how you're looking at those categories and your emphasis or is it just you know pretty pretty much as it has been.

Robert Edward Ottenstein: And then, second question, great to see all this here; bye back. Is the commitment to the share buybacks purely opportunistic, or does it in any way reflect even a slight philosophical change from where you were three or four years ago, let's say, in terms of the use of excess cash flow, maybe a slight pivot towards share buybacks versus inorganic growth?

Stephen Robert R. Powers: And then second question.

Stephen Robert R. Powers: Great to see all the share buybacks.

Stephen Robert R. Powers:

Stephen Robert R. Powers: Is does the the commitment to the share buybacks is it is it purely opportunistic or does it in any way.

Stephen Robert R. Powers: Reflect even a slight philosophical change from where you were three or four years ago, let's say.

Stephen Robert R. Powers: In terms of.

Stephen Robert R. Powers: Use of excess cash flow, maybe a slight pivot towards share buybacks.

Stephen Robert R. Powers: Versus inorganic growth. Thank you.

Robert Edward Ottenstein: Thank you.

Timothy P. Cofer: Yeah, so I'll take that first question on pods, and then I'll defer to Sudhanshu on the second part of your question. I mean, broadly, and you see this in the syndicated data, when you look at the full estate around pods, you're looking at, roughly, I'll do round numbers here, Rob, 50% is our partners, 25% owned and licensed, 25%, well, 20% private label. So that's the broad makeup of the mix.

Speaker Change: Yeah I'll take that first question on plasma and then I'll defer to Sudan to you on the second part of your question I mean broadly and Youll see this in the syndicated data when you look at the full estate around pods youre looking at roughly I'll do round numbers here.

Sudan Shaw: 50% is our partners, 25% owned and licensed 25% below 20%.

Sudan Shaw: Private label, so that's the broad.

Sudan Shaw: Take up of the mix and you know our strategy Hasnt change.

Timothy P. Cofer: And, you know, our strategy hasn't changed. As I said at the beginning, we are stewards of the entire category. Our responsibility is to grow the category and grow the entire ecosystem. Obviously, owned and licensed brands give us an additional mix benefit and one that, you know, we keep an eye on and want to be sure that they continue to stay robust. I made some comments, both in the prepared remarks and an earlier Q&A, on what we've done to not only protect that franchise but also to grow it.

Sudan Shaw: As I said at the beginning we are stewards of the entire category. Our responsibility is to grow the category and grow the entire ecosystem.

Sudan Shaw: I, obviously owned and licensed brand give us an additional mix benefit and one that we keep an eye on and want to be sure that they continued to stay robust I made some comments both in the prepared remarks, and an earlier Q&A on what we've done to not only protect that franchise, but also to to grow.

Timothy P. Cofer: And I think we've got a great innovation slate and a series of marketing initiatives here to go to keep our own and licensed business robust, but I very much view ourselves as a steward of the entire category. And then I'll pass to Sudhanshu. Yeah, so regarding the CR buyback.

Sudan Shaw: And I think we've got a great innovation slate and series of marketing initiatives here to go to keep our own and license business are robust.

Sudan Shaw: But very much view ourselves as stewards of the entire category and then I'll pass it on.

Sudhanshu Shekhar Priyadarshi: Yeah, so regarding the share buyback, as you know, we had $4 billion worth of authorization, and it is an opportunistic move for us. Our number one priority in capital allocation is investment in our own business, organic and inorganic growth. Number two is maintaining a strong balance sheet; our long-term leverage target is two to two and a half times, but we keep it very dynamic in terms of how we manage it quarter after quarter, year after year.

Speaker Change: Yes, so regarding the share buyback as you know, we had $4 billion worth of authorization and it is opportunistic for us.

Speaker Change: Our number one priority in capital allocation and investment in our own business organic and inorganic growth.

Speaker Change: Number two is maintaining the strong balance sheet, our long term leverage target at two to two and half times, but we keep a very dynamic and also how we manage water after quarter year. After year. So you saw us we saw opportunistic pricing with AAV.

Sudhanshu Shekhar Priyadarshi: So you saw us, we saw opportunistic pricing with JAB secondary sales, and we purchased 38 million shares in 2024. In 2023, we purchased close to 22 million shares, and in 2022, we purchased 11 million shares. We still have 1.8 billion remaining on our share repurchase program, but we will continue to be opportunistic when we see value. In our stock price, we will go and buy back shares.

Speaker Change: Secondary sales and repurchased 38 million shares in 2024.

Sudan Shaw: 2023 reported close to 22 million shares in 2022 reported 11 million sure. They still have $1 8 billion remaining on our share repurchase, but we will continue to be opportunistic when we see value.

Sudan Shaw: And our stock price, we will go and buyback shares.

Operator: The next question comes from Andrea Teixeira with J.P. Morgan. Please go ahead. Thank you, operator.

Sudan Shaw: The next question comes from Andrea Teixeira with Jpmorgan. Please go ahead.

Andrea Faria Teixeira: And good morning, everyone. So my question is on consumption first on coffee can you comment on the exit rate of part consumption and how should we think about the cadence of innovation you you had a lot of in this call.

Andrea Faria Teixeira: Thank you, Operator. And good morning, everyone.

Andrea Faria Teixeira: So my question is on consumption. First, on coffee. Can you comment on the exit rate of pod consumption? And how should we think about the cadence of innovation? You had a lot to say in this call in terms of that cadence in particular. And also with Alta, I understand this is beta testing, but when should we expect that to conclude and start commercializing? And for cold refreshments like the creamy coconut Dr. Pepper, how can we pretty much eclipse it with the strawberry cream ladle, and what should we be thinking about that? And if I can squeeze the marketing commentary that you had about the A&P investments, what we should be thinking in the cadence of the quarters. Thank you.

Andrea Faria Teixeira: Some of that cadence in particular.

Andrea Faria Teixeira: And also if Alta I understand this is beta testing, but when we should expect.

Sudan Shaw: That that to conclude and just start commercializing.

Sudan Shaw: And for code refreshments on the creamy coconut Dr. Pepper, how can you eat pretty much it clips.

Sudan Shaw: The strawberry cream lap and how we should be thinking about that.

Sudan Shaw: And if I can squeeze the marketing commentary that you had about the A&P investments, how we should be thinking in the cadence of the quarters. Thank you.

Timothy P. Cofer: Good morning, Andrea. Thanks. Let me make sure I can get through all this.

Speaker Change: Good morning, Andrea Thanks, Let me make sure I can get through all these I think first on pod shipments and consumption as referenced we saw sequential improvement in our pod shipment trend during Q1 and that was underpinned by better trends at Pos So we've seen both a modest improvement.

Timothy P. Cofer: I think first on pod shipments and consumption. As referenced, we saw a sequential improvement in our pod shipment trend during Q1, and that was underpinned by better trends at POS. So we've seen both a modest improvement in the at-home coffee category broadly, and then, as mentioned, a real acceleration in KDP-specific volume driven by the recovering share trends, particularly on owned and licensed. So, you know, feel good overall that that minus 1%, you know, near flat pod shipment performance in Q1 is obviously significantly above what we saw in Q4 and the back half of last year.

Speaker Change: <unk> in the at home coffee category broadly and then as mentioned a real acceleration in <unk> ADP specific volume driven by the recovering share trends, particularly on owned and licensed so feel good overall that debt.

Sudan Shaw: <unk>, 1% near flat pod shipment.

Sudan Shaw: Performance in Q1 is obviously significantly above what we saw in Q4 in the back half of last year in terms of consumption versus shipments were comfortable overall with the pod inventory levels and didn't see any unusual changes. So it's really it's really consumption driven and continuing while not perfectly linear.

Timothy P. Cofer: In terms of consumption versus shipments, we're comfortable overall with the pod inventory levels and didn't see any unusual changes. So it's really, it's really consumption driven and continuing, although not perfectly linear. I would say we expect a gradual recovery in pod volumes and consumption through the balance of the year underpinned by the initiatives that we've talked about already on this call. You then ask about ALTA; we're doing a beta test in the fall with limited consumers really to get the learning around what's working, how we can optimize, et cetera. At this point, there isn't yet a predetermined path.

Speaker Change: I would say we expect to grow.

Sudan Shaw: Who will recovery in <unk> and pod volumes and consumptions through the balance of the year underpinned by the initiatives that we've talked about already on this call.

Sudan Shaw: When asked about ultra out we're doing a beta test in the fall.

Sudan Shaw: With the limited consumer really to get the learning around what's working how we can optimize et cetera. At this point there isn't already a pre determined path. Obviously, we have various scenarios and plans, but we're going to take the time to learn from that and then scale. It up afterwards based on those <unk>.

Timothy P. Cofer: Obviously, we have various scenarios and plans, but we're going to take the time to learn from that and then scale it up afterwards based on those lessons. So more specificity will come following the beta test that starts this fall. Then, as it relates to CSD innovation, indeed, as I said earlier, we're lapping in Q1 just a blockbuster number 1 innovation in the entire CSD category last year. So that's what you're seeing in some of the share pressure.

Sudan Shaw: So more specificity to come following the beta test that starts. This fall then as it relates CSD innovation, Indeed, as I said earlier.

Sudan Shaw: We're lapping in Q1, just a blockbuster number one innovation in the entire CSD category last year. So.

Sudan Shaw: If that's what you're seeing in some of the share pressure.

Timothy P. Cofer: A year to go, I think we've got a stacked innovation plan, including with the Dr. Pepper Creamy Coconut and many of the others. Canada Dried Fruit Splash is already doing well, and we're only at, I would say, less than half ACV. So that's yet to ramp fully, including in some of the biggest markets.

Sudan Shaw: Year to go I think we've got a stacked innovation plan, including with the Doctor Pepper cleaning coconut and many of the others, Canada dry fruit splashes already doing well and we're only at.

Sudan Shaw: I would say less than half ACB, so that's yet to ramp fully including in some of the biggest markets. So you will see that phased more to the back half.

Timothy P. Cofer: So you will see that phase more in the back half. And then was that it? Good. Thank you, Andrea. And obviously, I am happy to follow up with you further, the IR team or me on more questions.

Speaker Change: And then what was it was at it good. Thank you Andrea and obviously happy to follow up with you further the IR team or me and more questions.

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

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to James Allison for any closing remarks.

Operator: Thank you, Bessie, and thank you everyone for participating this morning. As Tim said, we are available all day to answer any follow-up questions and look forward to continued engagement.

James Allison: Thank you Betsy and thank you everyone for participating this morning as Tim said, we are available all day to answer any follow up questions and look forward Tac continued engagement. Thank you.

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

James Allison: Okay.

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

Sudan Shaw: [music].