Keurig Dr Pepper(KDP) - 2024 Q4 - Annual Report

Retail and Sales Performance - KDP's largest retailer, Walmart, accounted for approximately 16% of consolidated net sales in 2024[37]. - Net sales increased by $537 million, or 3.6%, to$ 15,351 million for the year ended December 31, 2024, compared to $14,814 million in the prior year[172]. - Total net sales increased by 3.6% to$ 15,351 million for the year ended December 31, 2024, compared to $14,814 million in the prior year[182]. - U.S. Refreshment Beverages segment net sales rose by 5.8% to$ 9,331 million, while income from operations decreased by 24.4% to $1,878 million[183]. - U.S. Coffee segment net sales decreased by 2.6% to$ 3,967 million, with income from operations down by 6.8% to $1,079 million[186]. - International segment net sales increased by 6.8% to$ 2,053 million, with income from operations rising by 14.7% to $545 million[189]. Acquisitions and Investments - KDP acquired a controlling interest in GHOST, initially purchasing a 60% stake, with an agreement to buy the remaining 40% by 2028[32]. - The company entered into a definitive agreement to acquire a controlling interest in GHOST for approximately$ 1 billion, purchasing a 60% stake[165][166]. - The company actively evaluates investments in companies to fill whitespace in its beverage portfolio[19]. - The company is focused on future mergers and acquisitions to extend geographic coverage and enhance its product portfolio[211]. Product Innovation and Development - The company launched the Keurig K-Brew+Chill brewer featuring Quick Chill Technology, allowing iced beverages below 60 degrees[33]. - KDP's innovation pipeline includes new brewers and K-Cup pods to enhance household penetration and meet consumer preferences[31]. - The company is committed to innovation and product development to differentiate its offerings and maintain competitive positioning in the market[82]. Financial Performance - Gross profit rose by $449 million, or 5.6%, to$ 8,529 million for the year ended December 31, 2024[172]. - Net income decreased by $740 million, or 33.9%, to$ 1,441 million for the year ended December 31, 2024[172]. - Earnings per diluted share fell by $0.50, or 32.3%, to$ 1.05 for the year ended December 31, 2024[172]. - The effective tax rate increased to 24.7% for the year ended December 31, 2024, compared to 20.9% in the prior year[172]. - The company reported a gross margin of 55.6% and an operating margin of 16.9% for the year ended December 31, 2024[172]. - Income from operations decreased by $601 million, or 18.8%, to$ 2,591 million for the year ended December 31, 2024, primarily due to non-cash impairment charges[178]. Operational Challenges - The company faces risks related to supply chain disruptions, including increased commodity and transportation costs, which may adversely affect financial results[74]. - Labor market challenges, including shortages and increased turnover, could significantly impact the company's ability to attract and retain a skilled workforce[100]. - Rising employee benefit costs, particularly in healthcare and retirement programs, are expected to pressure profitability[102]. - The company is exposed to risks related to acquisitions and investments, which could affect expected revenue increases and operational results if not managed effectively[90]. - The company must successfully manage its information systems to avoid disruptions that could negatively affect business operations and financial performance[96]. Market and Consumer Trends - Consumer preferences are evolving, and failure to respond to these changes could adversely affect sales and growth[81]. - The beverage market experiences seasonal variations, with cold beverage sales peaking in warmer months and hot beverage sales in cooler months[58]. - The company faces intense competition in the beverage industry, which may negatively impact sales if unable to maintain or increase prices or effectively promote products[80]. Sustainability and Governance - The company is committed to transparency in its environmental, social, and governance initiatives, focusing on areas such as climate action and consumer health[66]. - The company is focusing on sustainability, particularly in packaging, to meet consumer demands and avoid potential sales declines[83]. - Concerns regarding plastic use and disposal may lead to increased costs and regulatory compliance, impacting product demand and overall business performance[127]. Risk Management - The company’s risk management system includes oversight from executive leadership and the Audit and Finance Committee regarding cybersecurity risks[142]. - The company is subject to ongoing cybersecurity risk assessments and training to mitigate potential threats and vulnerabilities[141]. - Cybersecurity risks from third-party service providers could disrupt business operations and adversely affect financial reporting and reputation[129]. - The company faces potential significant liabilities from ongoing litigation and legal proceedings, which could adversely affect its reputation and financial performance[125]. Employee and Workforce Management - The company has approximately 29,400 employees, with 22,400 in the U.S., 5,300 in Mexico, and 1,400 in Canada[59]. - The company’s employee benefits programs are designed to support the physical, mental, and financial health of employees, including access to medical and retirement benefits[62]. Capital Expenditures and Financial Commitments - Capital expenditures for property, plant, and equipment were $563 million in 2024, up from$ 425 million in 2023, indicating a 32.5% increase[205]. - The company authorized a share repurchase program of up to $4 billion over a four-year period starting January 1, 2022, aimed at returning value to shareholders[104]. - As of December 31, 2024,$ 1,810 million remained available for repurchase under the authorized share repurchase program of up to $4 billion[155].