Keurig Dr. Pepper (NASDAQ:KDP) is not as well-known as its larger non-alcoholic beverage peers. Both Coca-Cola (KO) and PepsiCo (PEP) attract attention due to their size and many years of dividend growth. But KDP is now a viable competitor after a series of acquisitions that formed the third largest non-alcoholic beverage company in the U.S. by 2018. There are four reasons why KDP is a buy: strong and growing brands, distribution network, market leadership in single-serve coffee, and deleveraging. Further, the COVID-19 tailwinds for consumer staples companies are benefitting KDP. Granted, leverage is still high, competition is fierce, and the dividend is not being raised. But still, investors may want to take a look here since the valuation is reasonable. I view the stock as a long-term buy.
Source: Keurig Dr. Pepper
Overview of Keurig Dr. Pepper
Keurig Dr. Pepper is the result of a ~$20B merger between Dr. Pepper Snapple (DPS) and Keurig Green Mountain completed in mid-2018. The new company started trading on July 10, 2018. DPS shareholders retained 13% of the company while privately-held JAB Holding Company now owns 87%. KDP is now the third largest non-alcoholic beverage company in terms of revenue behind Coca-Cola and Pepsi and the seventh largest food & beverage company in the U.S.
KDP reports four business segments: Coffee Systems, Packaged Beverages, Beverage Concentrates and Latin America Beverages. Major owned brands include Core, Dr. Pepper, Sunkist, Canada Dry, Bai, 7UP, A&W, Snapple, Nantucket Nectars, Mott's, Hawaiian Punch, Keurig, and Green Mountain. KDP also has many third-party partner brands for a total of 125+ brands in its portfolio. The company is the market leader in single-serve coffee brewers and pods, mixers, and flavored sodas. It is No. 2 in ready-to-drink teas, premium water, and fruit juices and drinks. KDP had net sales of about $11.12B in fiscal 2019.
