Keurig Dr Pepper Inc. · NASDAQ:KDP
Keurig Dr Pepper — Investor Day (October 2021)
135 slides from Keurig Dr Pepper's investor day presentation, Oct 1, 2021
Slide 1: A Modern Beverage Company
October 1, 2021 Adjust/replace image with Keurig on right fully visible Keurig DJ A MODERN BEVERAGE COMPANY EXHIBIT 99.2
Slide 2: Forward-looking Statements
2021 Investor Day 2 Forward-looking Statements Certain statements contained herein are “forward-looking statements” within the meaning of applicable securities laws and regulations. These forward-looking statements include, but are not limited to, words such as “outlook,” “guidance,” “anticipate,” “
Slide 3: Bob Gamgort, Chairman & CEO
Adjust/replace image with Keurig on right fully visible Keurig DJ Bob Gamgort Chairman & CEO 3
Slide 4: Three years after its formation, KDP represents a compelling investment opportunity
2021 Investor Day Three years after its formation, KDP represents a compelling investment opportunity The integration of Keurig Dr Pepper is complete, setting the stage for the company’s next leg of transformation and growth KDP delivered EPS within the three-year merger target range, while accelera
Slide 5: The vision behind the merger continues to serve as True North
2021 Investor Day The vision behind the merger continues to serve as True North N ee d s/ O cc as io n s C o n su m er F o rm at s/ B ra n d s S h o p p er B eh avio rs “R eta il” O u tlets A beverage for every need, available everywhere people shop and consume 5
Slide 6: KDP's journey since merger sets the stage for the next leg of growth
2021 Investor Day KDP’s journey since merger sets the stage for the next leg of growth 6 2022+2019-202120182017 New Challenger Proving Our Merger Thesis Modern Beverage Company
Slide 7: KDP has delivered EPS within the merger target range, while accelerating revenue growth
2021 Investor Day 2019-2021 KDP has delivered EPS within the merger target range, while accelerating revenue growth… 7 2-3% 4.2% 15-17% 15.4% MERGER ALGORITHM ACTUAL/FORECAST RESULTS1 Net Sales CAGR Adjusted EPS CAGR 1 Reflects the mid-point of 2021 guidance range; Net sales CAGR is constant currenc
Slide 8: …and won in the marketplace
2021 Investor Day 2017-2021 YTD …and won in the marketplace + LRB $ share change C O L D B E V E R A G E H O T B E V E R A G E pts CSD $ share change + pts M Keurig US Households added since 2017 % KDP MFR pod $ share +1.5 pts since 2017 8 IRi MULO+C, 52 weeks 6/27/2021 Households: third-party surve
Slide 9: KDP has generated superior shareholder return
2021 Investor Day KDP has generated superior shareholder return… 86% 32% 36% KDP Beverage Peers S&P 500 Consumer Staples T OT AL SHAREHOLDER RET URN SINCE KDP MERGER 9 FactSet total shareholder return assuming initial investment at 7/9/2018 close through 9/29/2021, assuming all dividends are reinves
Slide 10: …while transitioning to a widely held company
2021 Investor Day 61% 34% JAB Public Float 14% 13% 73% JAB and Investors Public Float MDLZ MDLZ …while transitioning to a widely held company… • ~700 m i l l i on shares o f add i t iona l pub l ic f l oa t s ince merge r • Remain ing JAB s take represen ts long- te rm inves tment • Monde lez s take
Slide 11: …yet KDP trades at a discount to peers
2021 Investor Day …yet KDP trades at a discount to peers on both an earnings and cash flow basis 19.7x 22.2x Beverage Peers KDP Beverage Peers KDP 13.7x 17.0x P/E RATIO1 EV/EBITDA RATIO1 11 3.2% 2.1% FREE CASH FLOW YIELD AFT ER DIV IDENDS 2 KDP Beverage Peers 1 FactSet, next 12 months data as of 9/2
Slide 12: The Future of KDP
2021 Investor Day The Future of KDP 12
Slide 13: Outlook projects continued attractive shareholder value creation
2021 Investor Day Outlook projects continued attractive shareholder value creation 13 Long-Term Organic Growth Algorithm Net Sales Mid-single digit Adjusted Earnings per Share High-single digit Total Shareholder Return High-single / Low-double digit Net sales growth is constant currency
Slide 14: KDP expects to generate $4 billion of discretionary cash flow over the next three years
2021 Investor Day KDP expects to generate $4 billion of discretionary cash flow over the next three years… 14 Industry-leading cash conversion $ Discretionary Cash Flow 2022-2024 Balanced dividend payout ratio Attractive Organic Growth Algorithm ~45% of FCF ~100% FCF Conversion HSD EPS Growth Discre
Slide 15: …which enables significant M&A capacity
2021 Investor Day …which enables significant M&A capacity $4B Discretionary Cash $20B M&A Capacity Proven capability to integrate successfully and create value 15 Portfolio Expansion and/or Distribution Scale and/or Geographic Expansion and/or New Capabilities C O M P L E X I T Y H L H L S IZ E Fire
Slide 16: Additional options to deploy the $4 billion
2021 Investor Day Special DividendsShare Buybacks Absent M&A, KDP has additional options to deploy the $4 billion to create shareholder value S E C O N D A R Y O P T I O N S T O D R I V E I N O R G A N I C T S R 16 $4B opportunistic share buyback program approved by KDP Board ANNOUNCING 10/1/21
Slide 17: KDP's scalable business model provides a platform for future growth
2021 Investor Day KDP’s scalable business model provides a platform for future growth Bold ESG commitments and collaborations making positive impacts Strong, balanced portfolio with proven ability to expand via innovation, renovation and partnerships Flexible and scalable RTM network, with unique e-
Slide 18: KDP's scalable business model provides a platform for future growth
2021 Investor Day KDP’s scalable business model provides a platform for future growth Bold ESG commitments and collaborations making positive impacts Strong, balanced portfolio with proven ability to expand via innovation, renovation and partnerships Flexible and scalable RTM network, with unique e-
Slide 19: Strong, balanced portfolio with leadership positions in key categories
2021 Investor Day Strong, balanced portfolio with leadership positions in key categories… U N I T E D S T A T E S C A N A D A M E X I C O #1 Single-serve coffee brewing system #1 Flavored carbonated soft drinks #2 Premium water #2 Shelf-stable premium RTD tea #2 Fruit juices/ drinks #1 Mixers #1 Sin
Slide 20: …with significant potential to fill in portfolio white space
2021 Investor Day …with significant potential to fill in portfolio white space 20 B R O A D A N D F L E X I B L E “ T O O L K I T ” Renovation Innovation Partnerships O P P O R T U N I T Y I D E N T I F I C A T I O N Consumption Occasions Consumer Needs Beverage Formats M&A GROWTH CONCEPTS
Slide 21: Household penetration remains the core engine of growth for coffee
2021 Investor Day Household penetration remains the core engine of growth for coffee 21M 2015 33M 2020 Future 21 +57% +2X Innovation Retail Partnerships Marketing E-commerce D R I V E N B YKEURIG US HOUSEHOLDS Third-party survey data and Company estimates
Slide 22: KDP's scalable business model provides a platform for future growth
2021 Investor Day KDP’s scalable business model provides a platform for future growth Bold ESG commitments and collaborations making positive impacts Strong, balanced portfolio with proven ability to expand via innovation, renovation and partnerships Flexible and scalable RTM network, with unique e-
Slide 23: KDP's go-to-market capability combines full portfolio selling teams with a flexible route-to-market system
2021 Investor Day KDP’s go-to-market capability combines full portfolio selling teams with a unique, flexible route-to-market system enabling unprecedented reach 23 Full Portfolio Retail HQ Coverage Company-owned DSD Independent DSD Partners Cola System Warehouse Direct On-premise, Office, Hospitabi
Slide 24: Full portfolio headquarter selling capability enhances strategic relevance to customers
2021 Investor Day Full portfolio headquarter selling capability enhances KDP’s strategic relevance to customers 10/1/2021 Full Portfolio Retail HQ Coverage Responsible for more than $5B of annual retailer profit, enabling access to senior retail decision makers Direct reach to 250+ National and Regi
Slide 25: Go-to-market system is powered by sophisticated data and technology
2021 Investor Day Go-to-market system is powered by sophisticated data and technology 25 10K connected brewers provide the only direct point of consumption data in CPG Data leveraged to geo-target consumers and shoppers for key outreach programs 19M registered Keurig.com consumers Demand generation
Slide 26: KDP's scalable business model provides a platform for future growth
2021 Investor Day KDP’s scalable business model provides a platform for future growth Bold ESG commitments and collaborations making positive impacts Strong, balanced portfolio with proven ability to expand via innovation, renovation and partnerships Flexible and scalable RTM network, with unique e-
Slide 27: Highly efficient model leads peers in converting sales to profit to cash
2021 Investor Day Highly efficient model leads peers in converting sales to profit to cash Mid-double digit Outsized margin growth Low-mid single digit High-single digit Continued margin growth Mid-single digit Cash conversion 117% Cash conversion ratio ~100% $4B discretionary cash (2022- 2024) prov
Slide 28: KDP's scalable business model provides a platform for future growth
2021 Investor Day KDP’s scalable business model provides a platform for future growth Bold ESG commitments and collaborations making positive impacts Strong, balanced portfolio with proven ability to expand via innovation, renovation and partnerships Flexible and scalable RTM network, with unique e-
Slide 29: Since the merger, KDP has become a leader in ESG
2021 Investor Day Since the merger, KDP has become a leader in ESG 29 Environment Supply Chain Health & Well-being People & Communities 2020 Leadership Level A- for both Climate and Water #1 Beverage Company #1 Environmental Score for all Consumer Goods Companies Top 15% of 400 Companies A W A R D •
Slide 30: KDP's scalable business model provides a platform for future growth
2021 Investor Day KDP’s scalable business model provides a platform for future growth Bold ESG commitments and collaborations making positive impacts Strong, balanced portfolio with proven ability to expand via innovation, renovation and partnerships Flexible and scalable RTM network, with unique e-
Slide 31: KDP's high-performance team culture makes speed, flexibility and resilience a competitive advantage
2021 Investor Day KDP’s high-performance team culture makes speed, flexibility and resilience a competitive advantage… Win together. Be the kind of person you want on your team. Achieve our commitments. Then push beyond the expected. Challenge the usual. Dare to try something new. Tell the truth wit
Slide 32: …and KDP has built a Board reflective of its ambition
2021 Investor Day …and KDP has built a Board reflective of its ambition 32 %67 46% Women 54% Men 2 5 6 4+ years 0-2 years 2-4 years 30s 40s 50s 60s 70s Gender Racial/Ethnic Diversity Age Tenure Added Lead Independent Director in 2021 Current Board Composition +
Slide 33: Experienced and capable management team poised to lead KDP
2021 Investor Day Experienced and capable management team poised to lead KDP into the future Tony Milikin Chief Supply Chain Officer Joined Company in 2021 Mauricio Leyva President, Coffee Joined Company in 2020 David Thomas Chief Research & Development Officer Joined Company in 2006 Maria Sceppague
Slide 34: Agenda
2021 Investor Day Agenda 1 OPEN 2 COLD BEVERAGES 3 COFFEE SYSTEMS 4 CORPORATE RESPONSIBILITY 5 INTERNATIONAL 6 FINANCIAL MODEL 7 CLOSING 8 Q&A Derek Hopkins, President, Cold Beverages Mauricio Leyva, President, Coffee Maria Sceppaguercio, Chief Corporate Affairs Officer Ozan Dokmecioglu, CFO & Presi
Slide 35: Cold Beverages
Cold Beverages A MODERN BEVERAGE COMPANY Derek Hopkins President, Cold Beverages 35
Slide 36: NA Beverages is an attractive and growing sector
2021 Investor Day Total Retail NA Beverages is an attractive and growing sector 36 Annual Consumption Occasions in the US 2021 US Retail $ Sales $ Brands over $100M + % $ Sales CAGR 2017 - 2021 Retailer Profit $ $ + Net sales and Adjusted EPS CAGRs presented at mid-point of 2021 guidance range; Net
Slide 37: Industry fragmentation leaves the door open for continued consolidation
2021 Investor Day Industry fragmentation still exists, leaving the door open for continued consolidation 37 Total US Retail Beverages 2021 $ Sales by Brand Owner $ Sales by Distributor All Other 38% KDP/KO/PEP 53% All Other 47% KDP/KO/PEP 62% Brand owner defined as trademark parent company and distr
Slide 38: Emerging categories and new brand entrants provide one path for KDP
2021 Investor Day The expansion of emerging categories and new brand entrants provides one path for KDP to expand its footprint and accelerate growth 38 Both established and emerging categories have driven growth in beverages… …with continued opportunity for whitespace in the market Established Cate
Slide 39: Go to Market / Portfolio
2021 Investor Day Go to Market Portfolio KDP has proven its ability to grow through its go-to-market approach and portfolio strategy 39
Slide 40: Go to Market / Portfolio
2021 Investor Day Go to Market Portfolio KDP has proven its ability to grow through its go-to-market approach and portfolio strategy 40
Slide 41: A unique and powerful go-to-market approach with national reach and scale
2021 Investor Day KDP has built a unique and powerful go-to-market approach with national reach and scale 41 Full Portfolio Retail HQ Coverage Company-owned DSD Independent DSD Partners Cola System Warehouse Direct On-premise, Office, Hospitability E-commerce 1 2 3 4 5 6 R O U T E S T O M A R K E T
Slide 42: A unique and powerful go-to-market approach with national reach and scale
2021 Investor Day KDP has built a unique and powerful go-to-market approach with national reach and scale 42 Full Portfolio Retail HQ Coverage Company-owned DSD Independent DSD Partners Cola System Warehouse Direct On-premise, Office, Hospitability E-commerce 1 2 3 4 5 6 R O U T E S T O M A R K E T
Slide 43: Integrated Commercial Selling organization leveraging the full portfolio
2021 Investor Day 43 Brands & Categories Commercial Centers of Excellence National Sales Teams Routes to Market Seamless experience to retailer regardless of RTM Scale provides access to senior customer leadership Portfolio solutions for in-outlet activations Price/promotional discipline Shopper Mar
Slide 44: KDP has invested to build a DSD system with national reach
2021 Investor Day KDP has invested to build a DSD system with national reach 44 Full Portfolio Retail HQ Coverage Company-owned DSD Independent DSD Partners Cola System Warehouse Direct On-premise, Office, Hospitability E-commerce 1 2 3 4 5 6 R O U T E S T O M A R K E T
Slide 45: Acquisitions improved the quality of company-owned DSD
2021 Investor Day Acquisitions have played a key role in improving the quality of KDP’s company-owned DSD breadth and depth 45 US population coverage with DSD since merger has enhanced company-owned DSD effectiveness • 77% company-owned • 23% strategic partnerships ~100% Investment Acquisition 2019-
Slide 46: Materially improved capability to activate company-owned DSD system
2021 Investor Day KDP has materially improved its capability to activate its company-owned DSD system 46 Investing in the final mile Embedding data and analytics Building talent pipeline and improving structure • Retail-level in-outlet executional standards • Front-line sales training • DSD transfor
Slide 47: We have also built stronger alliances with critical partners
2021 Investor Day We have also built stronger alliances with critical partners 47 Optimizing footprint with a key partner Implemented a new portfolio approach Built multi-faceted relationships • Full KDP and PepsiCo portfolio on the same trucks in key Southeast market • Improved scale by combining t
Slide 48: A unique and powerful go-to-market approach with national reach and scale
2021 Investor Day KDP has built a unique and powerful go-to-market approach with national reach and scale 48 Full Portfolio Retail HQ Coverage Company-owned DSD Independent DSD Partners Cola System Warehouse Direct On-premise, Office, Hospitability E-commerce 1 2 3 4 5 6 R O U T E S T O M A R K E T
Slide 49: KDP has a leading e-commerce platform
2021 Investor Day KDP has a leading e-commerce platform that positions it to drive accelerated growth 49 Long-term consumer migration to e-commerce has accelerated due to COVID Beverages have benefited from the adoption of expanded e-commerce fulfillment options National Ship Local Delivery Curbside
Slide 50: KDP positioned in foodservice / on-premise landscape
2021 Investor Day As consumer choice expands in the foodservice / on-premise landscape, KDP is well positioned to capture new areas of growth • Over 1/3 of restaurants now own their fountain equipment, building new opportunities for KDP CSD expansion • KDP has built capability to gain deeper penetra
Slide 51: Go to Market / Portfolio
2021 Investor Day Go to Market Portfolio KDP has proven its ability to grow through its go-to-market approach and portfolio strategy
Slide 52: KDP's portfolio is well positioned, with leadership positions in key categories
2021 Investor Day KDP’s portfolio is well positioned, with leadership positions in key categories 52 CARBONATED SOFT DRINKS WATERS JUICE AND TEA #1 Flavored CSD Growth Leader in CSD #2 Premium Water portfolio #2 Juice / Drink portfolio #2 Premium Tea MIXERS AND INGREDIENTS ENERGY, COFFEE, OTHER #1 M
Slide 53: Consumer-led approach to guiding portfolio expansion
2021 Investor Day KDP leverages a consumer-led approach to guiding portfolio expansion 53 B R O A D A N D F L E X I B L E “ T O O L K I T ” Renovation Innovation Partnerships M&A O P P O R T U N I T Y I D E N T I F I C A T I O N Consumer Needs Consumption Occasions Beverage Formats GROWTH CONCEPTS P
Slide 54: Growth accelerated from owned brand revitalization
2021 Investor Day 2.1% 6.7% 2.4% 1.3% KDP growth has accelerated from owned brand revitalization, while the contribution from partner brands has continued 54 DPSG Owned Brands KDP Owned Brands KDP Partner Brands DPSG Partner Brands +8.9% +3.7% +5.4ppts IRI Retail $ Sales Contribution 2016-2018 IRI R
Slide 55: Owned brand growth accelerated through innovation, renovation and package evolution
2021 Investor Day Owned brand growth has accelerated through innovation, renovation and package evolution… 55 Launched market-leading innovation on Dr Pepper Modernized CSD portfolio Invested into new functional needs and occasions Invested in the right package solutions for shopper occasions Refres
Slide 56: …combined with world-class marketing and consumer programs
2021 Investor Day …combined with world-class marketing and consumer programs 56
Slide 57: Owned brand portfolio achieved new industry milestones
2021 Investor Day KDP’s owned brand portfolio has achieved new industry milestones over the past three years 57 #1 share growth in all of LRB IRi 52WE 6-27-2021 vs PY #1 HH penetration brand in Premium Tea IRi 52WE 6-27-2021 +3 pts of $ share on the leading national brand in Apple Juice From 2017 to
Slide 58: Unique approach to partnerships built the #2 Premium Water business
2021 Investor Day Case Study: KDP’s unique approach to partnerships has allowed it to build the #2 Premium Water business… S T I L L S P A R K L I N G UNSWEETENEDFLAVORED UNFLAVORED PLANT STRUCTURE DATE Partner/ Acquired Partner/ Acquired Partner Partner Partner Owned Acquired 2013/2016 2016/2018 20
Slide 59: …and we have driven success across our partnerships
2021 Investor Day …and we have driven success across our partnerships 59 Delivered first year of share growth since 2016 +3 pts share growth over last three years Doubled availability in new markets in first nine months of partnership IRi Total US MULO+C 2016 through YTD 8/22/2021
Slide 60: Unique, flexible and scalable go-to-market powerhouse
2021 Investor Day Unique, flexible and scalable go-to-market powerhouse Ability to leverage a broad and flexible approach to expand the portfolio• Full portfolio HQ selling capability • Upgraded distribution systems with capacity for expansion • Access beyond traditional retail channels • Innovation
Slide 61: Coffee Systems
Coffee Systems Mauricio Leyva President, Coffee 61
Slide 62: The US Coffee Market is large and growing
2021 Investor Day The US Coffee Market is large and growing, with billions of at home occasions added every year 62 coffee occasions per year L A R G E % of coffee occasions happen at home A T H O M E + % coffee occasions CAGR ’10–‘20 G R O W I N G Kantar World Panel annualized weekly at and away fr
Slide 63: The Keurig ecosystem continues to transform the US Coffee Market
2021 Investor Day % The Keurig ecosystem continues to transform the US Coffee Market… 63 Keurig has driven of all coffee retail dollar growth since 20161… IRI MULO $ Share 2021 YTD 54% Keurig compatible All other coffee formats 46% …and is now approaching half of all coffee retail dollars2 1 IRi MUL
Slide 64: Increasing household penetration and share of coffee maker category
2021 Investor Day 7M 11M 15M 19M 21M 23M 26M 28M 30M 33M …increasing both household penetration and share of total coffee maker category Keurig At Home US Households1 US HOUSEHOLD PENETRATION 25% 3M 1M 2M 4M 5M 6M Q1 Q2 Q3 Q4 Single serve brewers outsold traditional brewers for the first time ever i
Slide 65: Widest choice of brands and varieties in any coffee ecosystem
2021 Investor Day Supported by the widest choice of brands and varieties in any coffee ecosystem, maximizing value to consumers, partners and KDP 65 Owned Licensed Partner
Slide 66: Keurig core growth equation catalyzed by new digital capabilities
2021 Investor Day The Keurig core growth equation remains sound and is now catalyzed by new digital capabilities 66 Maximize Household Value Price per Pod Pod Mix E-commerce Innovation Marketing 1:1 Connectivity Partner & Retailer Value Proposition Grow Installed Base
Slide 67: Significant headroom to double household penetration
2021 Investor Day The Keurig system has significant headroom to double its household penetration... 67 128M Total US HHs 89M AH Weekly Coffee Drinkers 81M Keurig Aware 45M Keurig Owners 33M Current Users 12M Inactive Users 36M Aware, never owned 8M 39M Do not drink coffee at home Not Aware 56M incre
Slide 68: Clear line of sight to consumer segments that will drive adoption
2021 Investor Day …with clear line of sight to consumer segments that will drive adoption 68 25% >2x % of US HHs Keurig system potential Single Serve Coffee HH Penetration FranceBelgium 67% 71% Coffee Quality Environment Value Batch Cold Coffee Specialty Modern KDP Consumer Research 2021
Slide 69: Innovation families of brewers
2021 Investor Day • Four innovation families launched since Fall ‘17 • Each family has several brewers hitting different price points Coffee Quality Batch Value Specialty Modern New features and improvements are cascading across multiple brewer families Cold • Fall ‘21 brings two new families K-Sele
Slide 70: MultiStream Technology extended across brewer families
2021 Investor Day New features like MultiStream Technology are established in a flagship brewer before being extended across multiple brewer families 70 MultiStream Technology – Saturates the grounds more evenly to extract full flavor and aroma 68% of owners reported a richer cup of coffee1 MultiStr
Slide 71: BrewID technology platform creates 1:1 consumer connectivity
2021 Investor Day New BrewID technology platform creates full system value through 1:1 consumer connectivity 71 BrewID Recognizes the specific brand and roast and automatically customizes brew settings Keurig App Wider Choice Voice and graphic enhanced control over Temperature, Strength, Size, Recip
Slide 72: BrewID is the gateway to personalized interaction
2021 Investor Day BrewID is the gateway to innovate and interact at a personalized level Relevant, timely marketing messaging Seamless replenishment through SMART Auto-Delivery Custom product offerings Consumer understanding at household level opens door to new streams of revenue 72 1:1 Connectivity
Slide 73: Keurig Supreme Plus Smart receives positive consumer sentiment
“To put it simply, if you love good coffee but don’t have it in you first thing in the morning to do anything other than push a button (if that!), this machine is for you.” Keurig Supreme Plus Smart receives very positive consumer sentiment and high-profile press reviews “I used to think that making
Slide 74: BrewID enables commercial innovation in Away From Home
1-2 2-15 15-25 25-50 25-50 75-150 150-300 75-150 BrewID enables commercial innovation in the Away From Home business K E U R I G C O M M E R C I A L P O R T F O L I O 2 0 2 1 1:1 Connectivity
Slide 75: Multi-cultural marketing
2021 Investor Day Multi-cultural marketing Creative marketing campaigns drive awareness in new segments and build Keurig brand equity Advertising campaigns Advertising campaigns Partnerships & collaborations Experiential & trial 75 Marketing
Slide 76: Keurig partners benefit from growth and mix improvement
2021 Investor Day Keurig partners benefit from growth and mix improvement Keurig drives revenue and margin for retailers The ecosystem value proposition for retailers and partners creates a compelling set of aligned incentives 76 66% 53% 34% 47% Volume Value Keurig Compatible Other Coffeemakers 26%
Slide 77: Strategic pod pricing a lever to drive household penetration
2021 Investor Day Strategic pod pricing has been a powerful lever to drive household penetration by aligning price with consumer expectations, thus addressing the top barrier to system adoption 77 Slides from KDP Investor Day – March 2018 Price per Pod Under $0.50, ~90% no longer find K-Cup pods “to
Slide 78: Pod pricing moderated at consumer price thresholds
2021 Investor Day $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 CY15 CY16 CY17 CY18 CY19 CY20 CY21 YTD Pod pricing has moderated at levels that are consistent with consumer price thresholds 78 Mainstream** Single Serve Coffee Category Price / Cup1 Premium* Private Label $0.66 $0.50 $0.31 Price per Pod U
Slide 79: Pod volume growth and moderating pricing drove revenue growth above forecast
2021 Investor Day Continued pod volume growth, combined with moderating strategic pod pricing, has driven Coffee System revenue growth above levels forecasted in 2018 Coffee Systems: CY 2017- Q2 2021 -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% CY21TDCY18 CY19CY17 CY20 Pod Shipment % Change vs. YA Coffee Syst
Slide 80: Coffee innovation and partnerships drive growth and pricing through mix
2021 Investor Day Coffee innovation and new partnerships provide opportunity to drive Owned/Licensed brand growth and enhance pricing through mix + % Premium $/Pod Coffee House New KDP Licensed brand since 2020 Cold Occasions % % Pod Market Share Incremental to KDP 80 Pod Mix IRi MULO 26 weeks 8/29/
Slide 81: Sustainability-focused innovation provides opportunity for mix enhancement
2021 Investor Day In addition to driving HH penetration, sustainability-focused innovation provides opportunity for further mix enhancement 81 Certified Responsibly Sourced Coffee Recyclable K-Cup Pod Post-Consumer Recycled Materials Easy-Peel Lid Home Compostable K-Cup Pod 100% Goal achievement 100
Slide 82: Easy-peel lids are the next step in pod sustainability
2021 Investor Day Easy-peel lids are the next step in our pod sustainability journey 82 + Purchase Intent + Recycling Intent PTS PTS Launching this Fall on Keurig.com and Keurig.ca, new Easy-Peel lids will make K-Cup pods easier to recycle Additional brands and pack sizes rolling out in 2022 Simply
Slide 83: World-class e-commerce rooted in early online coffee adoption
2021 Investor Day A KEY COMPETITIVE ADVANTAGE THAT OPERATES ACROSS THE FULL KDP PORTFOLIO AND THROUGH ALL MODALITIES KDP’s world-class e-commerce rooted in early online coffee adoption 83 KDP TotalAverage FMCG* KDP Coffee KDP Brewers ~5% >10% % of sales made online FROM: TO: Ship to Home Delivery fr
Slide 84: Keurig.com is an at-scale direct to consumer site
2021 Investor Day Keurig.com is an “at scale” direct to consumer site that elevates the subscription experience… 84 Top 5 Keurig retailer by revenue 19M consumers on file >70% coffee business is done through subscription >2x subscriber profit compared to an average system user Subscription membershi
Slide 85: Keurig's leadership will continue to drive Coffee Systems growth
2021 Investor Day Keurig’s leadership in single serve coffee will continue to drive Coffee Systems growth, benefiting all participants A Healthy Ecosystem • Single serve to overtake traditional • Innovation addressing new segments • Expanding e-commerce advantage • Sustainability roadmap • Partner v
Slide 86: Corporate Responsibility
Corporate Responsibility Maria Sceppaguercio Chief Corporate Affairs Officer 86
Slide 87: ESG is at the heart of how KDP creates value
2021 Investor Day ESG is at the heart of how KDP creates value and is critical to KDP’s next chapter of transformation and growth Since the merger, KDP has launched its Drink Well. Do Good. platform, an ambitious corporate responsibility agenda KDP has achieved commitments and enhanced transparency
Slide 88: Four key strategic pillars of corporate responsibility
2021 Investor Day Integrated programs | Clear commitments | Strong governance | Transparency KDP has built a strong corporate responsibility platform focused on four key strategic pillars ENVIRONMENT Refreshingly Responsible SUPPLY CHAIN Good From the Start HEALTH & WELL-BEING Better Choices, Better
Slide 89: In 2020, KDP delivered on its long-standing goals
2021 Investor Day A C H I E V E D In 2020, KDP delivered on its long-standing goals… All K-Cup pods now recyclable 100% responsibly sourced coffee 1M people engaged across our supply chain to improve their lives Play opportunities provided to more than 14.6 million kids 89
Slide 90: Fully embraced ESG transparency
2021 Investor Day 2020 Leadership Scores for Climate and Water Supplier Sustainability Awards 2019 Supplier Sustainability Awards 2020 …and has fully embraced ESG transparency E S G F R A M E W O R K S E X T E R N A L R E C O G N I T I O N 90
Slide 91: Partnership philosophy accelerates progress in ESG focus areas
2021 Investor Day KDP leverages its unique partnership philosophy to accelerate progress in critical ESG focus areas… Improving Plastic Recycling Engaging For Climate Resilience & Water Security Building A Strong & Inclusive Value Chain 91
Slide 92: Expanded ambitions for 2025
2021 Investor Day …and expanded its ambitions for 2025 Reducing plastic waste Driving climate & water resilience Expanding sustainable supply-chain solutions Increasing positive hydration Advancing diversity & inclusion EXPANDED GOALS NEW GOAL NEW GOALS P R I O R I T Y A R E A S F O R 2 0 2 5 92
Slide 93: Reducing plastic waste and advancing circular economy
2021 Investor Day Reducing plastic waste and advancing circular economy solutions are KDP priorities 93 20% virgin plastic reduction 100% packaging recyclable / compostable 30% PCR content 2 0 2 5 G O A L S A M B I T I O N compostable packaging and reuse models Design for Recyclability Invest in Rec
Slide 94: Driving climate and water resilience
2021 Investor Day Climate reduction in direct emissions 30% reduction in indirect emissions in select categories 15% of electricity used in operations from renewable sources 100% emissions 100% improvement in water use efficiency 20% Replenish 2 0 2 5 G O A L 2 0 3 0 G O A L S Water 2 0 2 5 G O A L
Slide 95: New goals to advance sustainable supply chains
2021 Investor Day Regenerative agriculture Responsibly source 2021 Investor Day KDP is building on leadership in coffee with new goals to further advance sustainable supply chains 95 our brewers, top priority crops and other priority inputs on 250K acres of land by 2030 Support
Slide 96: First major beverage company to set a Positive Hydration goal
3rd Party Validation KDP is the first major beverage company to set a goal for Positive Hydration… 96 A Positive Hydration product provides a serving of fruits/vegetables is below 40 calories per serving with a functional attribute or at least 10% Daily Value of a nutrient to encourage. % Provide Po
Slide 97: Building team strength through Diversity & Inclusion
2021 Investor Day KDP is building the strength of its team through Diversity & Inclusion… 97 R E P R E S E N T A T I O N G O A L S % Women in Director+ Leadership Roles by 2025 % People of Color in Director+ Leadership Roles by 2025
Slide 98: Established D&I program with executive sponsorship
2021 Investor Day 98 Established program with Executive Sponsorship and a D&I Leadership Team Launched Employee Resource Groups to support connection & community Listened to employees via Roundtables & Digital Conversations to inform our strategy Completed training for all leaders; phased roll-out t
Slide 99: Detailed progress in 2020 CR Report
2021 Investor Day KDP’s detailed progress and disclosures are provided in its 2020 CR Report View more information about all of our reporting and progress at https://www.keurigdrpepper.com/cr
Slide 100: International
International Ozan Dokmecioglu Chief Financial Officer & President, International 100
Slide 101: International businesses accretive to total KDP growth
2021 Investor Day International businesses have been accretive to total KDP growth, and industry momentum is projected to continue 7% 4% Canada & Latin America Beverages Total KDP Constant Currency 6.6% 5.9% 3.9% Mexico Canada US Retail Sales ’ 1 9 – ’ 21 K D P NE T S A LE S CA G R ‘2 1 – ’2 5 L R B
Slide 102: ~10% of KDP's footprint is outside the US
2021 Investor Day ~10% of KDP’s footprint is outside the US, providing incremental access to large, growing markets 102 CA NA D A ( ~ $ 80 0 M NE T S A L E S I N 2 0 2 0 ) ME X I C O ( ~ $ 50 0 M NE T S A L E S I N 2 0 2 0 ) #1 Single-serve coffee brewing system #1 Flavored carbonated soft drinks #1
Slide 103: Growth driven by expanding brands to new occasions and channels
2021 Investor Day Growth will be driven by expanding brands to new occasions and channels 103 • Extend leading single serve coffee position in Canada and grow powerful trademarks in Mexico • Expand DSD and traditional trade footprint in Mexico • Leverage partnerships to extend C-store reach in Canad
Slide 104: Grow the Core: extend Peñafiel brand in Mexico
2021 Investor Day Grow the Core example: Continued opportunity in Mexico to extend Peñafiel brand 104 • The leader in mineral water in Mexico • Strong growth of +8% CAGR from 2018-2021 • Opportunity to expand the trademark into new consumption occasions beyond simple hydration, including new “Ades”
Slide 105: Expand into Whitespace
2021 Investor Day E X P A N D I N T O W H I T E S P A C E KDP is positioned to capture new avenues for powerful expansion 105 • “Lift and shift” brands from KDP’s distinctive portfolio, such as Bai expansion into Canada • Accelerate growth in rapidly expanding RTD alcohol category in Canada • Pursue
Slide 106: Accelerate KDP brands in RTD Alcohol in Canada
2021 Investor Day Expand into Whitespace example: Accelerate powerful KDP brands in fast-growing RTD Alcohol segment in Canada, while strengthening KDP distribution through partnerships 106 E X T E N D A B L E B R A N D S R T D B U S I N E S S $ 1 3 0 M A T R E T A I L * F L E X I B L E R O U T E S
Slide 107: Financial Model
Friday, October 1st, 2021 Financial Model Ozan Dokmecioglu Chief Financial Officer & President, International 107
Slide 108: KDP represents a compelling investment opportunity with attractive organic growth
2021 Investor Day KDP represents a compelling investment opportunity with attractive organic growth and significant optionality Long-term organic algorithm delivers accelerated revenue growth fueled by increased investment across the business Revenue growth, combined with ongoing productivity, fixed
Slide 109: Outlook projects continued attractive shareholder value creation
2021 Investor Day Outlook projects continued attractive shareholder value creation 109 Long-Term Organic Growth Algorithm Net Sales Mid-single digit Adjusted Earnings per Share High-single digit Total Shareholder Return High-single / Low-double digit Net sales growth is constant currency
Slide 110: Strong and evolving financial model drives KDP value creation
2021 Investor Day Strong and evolving financial model drives KDP value creation +15% CAGR Driven by strong operating income growth, combined with lower interest, due to deleveraging, and tax efficiency >350 bps margin growth Expansion fueled by merger synergies and productivity +4% CAGR, acceleratin
Slide 111: Strong and evolving financial model drives KDP value creation
2021 Investor Day Strong and evolving financial model drives KDP value creation +15% CAGR Driven by strong operating income growth, combined with lower interest, due to deleveraging, and tax efficiency >350 bps margin growth Expansion fueled by merger synergies and productivity +4% CAGR, acceleratin
Slide 112: Margin levers have unique roles in driving profit growth
2021 Investor Day Offset to inflation, also reflects increasing brand strength Margin levers have unique roles in driving KDP profit growth L E V E R R o l e i n K D P F i n a n c i a l M o d e l Pricing Primary offset to inflation, also fuels incremental growth investmentProductivity Accelerated gr
Slide 113: Productivity pipeline drives continued efficiency gains
2021 Investor Day Productivity Robust productivity pipeline drives continued efficiency gains 113 Offsets inflation Funds growth Key Drivers • New state-of-the-art manufacturing • Design-to-value / Source-to-value • Network optimization • Warehouse automation Adjusted Operating margin
Slide 114: Pricing: revenue management supports top-line growth and margin
2021 Investor Day Pricing Revenue management capabilities support top-line growth and margin management 114 Offsets inflation Enabled by brand strength Key Drivers • RGM strategy • Favorable mix via innovation • Price-pack architecture • Moderating strategic pod price investment Adjusted Operati
Slide 115: Fixed Cost Leverage maximizes operating leverage
2021 Investor Day Fixed Cost Leverage Overhead efficiency maximizes operating leverage as top line grows 115 Expands margin Key Drivers • Integrated organization provides opportunity to scale • Creation of center(s) of excellence • Leverage existing DSD and manufacturing capacity • Indirect procur
Slide 116: Strong and evolving financial model drives KDP value creation
2021 Investor Day Strong and evolving financial model drives KDP value creation +15% CAGR Driven by strong operating income growth, combined with lower interest, due to deleveraging, and tax efficiency >350 bps margin growth Expansion fueled by merger synergies and productivity +4% CAGR, acceleratin
Slide 117: Long-term organic algorithm builds upon performance since merger
2021 Investor Day KDP long-term organic algorithm builds upon performance since merger 117 Productivity Pricing Fixed Cost Leverage Inflation Brand Investment Synergies Margin Tailwind Margin Headwind Net Sales Growth Long Term2019 – 2021 Adjusted EPS Growth +4% +15% MSD HSD Adjusted EPS Net sales a
Slide 118: Inflation expected to outpace industry pricing near-term
2021 Investor Day -2% 0% 2% 4% 6% 8% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2020 2021 Recent acceleration and magnitude of inflation is expected to outpace industry LRB pricing in the near-term… PPI LRB Retail Price Commodity Inflation vs PricingPPI Inflation vs Pricing -20% 0% 20% 40% 60% 80% Q1 Q2 Q3
Slide 119: Reflected in our initial 2022 outlook
2021 Investor Day …which is reflected in our initial 2022 outlook 119 Productivity Pricing Fixed Cost Leverage Inflation Brand Investment Synergies Margin Tailwind Margin Headwind Long Term2019 – 2021 +4% +15% MSD HSD 2022 MSD MSD Update to be provided in Q1 2022 Net Sales Growth Adjusted EPS Growth
Slide 120: Strong and evolving financial model drives KDP value creation
2021 Investor Day Strong and evolving financial model drives KDP value creation +15% CAGR Driven by strong operating income growth, combined with lower interest, due to deleveraging, and tax efficiency >350 bps margin growth Expansion fueled by merger synergies and productivity +4% CAGR, acceleratin
Slide 121: Industry-leading conversion of profit into cash
2021 Investor Day 117% FCF Conversion C A S H G E N E R A T I O N • Primarily driven by superior working capital management • Partially offset by $750M integration cost to achieve ~100% FCF Conversion C A S H G E N E R A T I O N • Continued working capital management • Reduced debt service costs • T
Slide 122: Management leverage ratio and cash uses
2021 Investor Day C A S H U S E S • Debt reduction • Ordinary Dividends • Acquisition / Equity investments Capital Allocation % of total Capital Allocation % of total C A S H U S E S • Optionality to enhance value creation • Ordinary Dividends Free cash flow 6.0x ≤3.0x At Merger M A N A G E M E N T
Slide 123: Discretionary cash of $4 billion over the next three years
2021 Investor Day …with discretionary cash of $4 billion over the next three years 123 Industry-leading cash conversion $ Discretionary Cash Flow 2022-2024 Balanced dividend payout ratio Attractive Organic Growth Algorithm ~45% of FCF ~100% FCF Conversion HSD EPS Growth Free cash flow Discretionary
Slide 124: Capital allocation priorities shift to inorganic shareholder value creation
2021 Investor Day Capital allocation priorities shift from debt reduction to inorganic shareholder value creation 124 Special DividendsM&A Share Buybacks S E C O N D A R Y O P T I O N S P R I M A R Y O P T I O N Free cash flow
Slide 125: …which enables significant M&A capacity
2021 Investor Day …which enables significant M&A capacity $4B Discretionary Cash Proven capability to integrate successfully and create value 125 Portfolio Expansion and/or Distribution Scale and/or Geographic Expansion and/or New Capabilities C O M P L E X I T Y H L H L S IZ E Firepower to dispropo
Slide 126: Capital allocation strategy expands to include inorganic options
2021 Investor Day Capital allocation strategy now expands to include inorganic options to drive total shareholder return 126 Special DividendsM&A Share Buybacks S E C O N D A R Y O P T I O N S P R I M A R Y O P T I O N Free cash flow
Slide 127: Opportunistic share buyback program
2021 Investor Day No required purchase of minimum # of shares Four-year program, beginning 1/1/22 Opportunistically implemented at management discretion Opportunistic share buyback program provides a new tool to drive inorganic value creation 127 share buyback authorization $ Free cash flow
Slide 128: Long-term outlook drives attractive organic growth and strategic optionality
2021 Investor Day Long-term outlook drives attractive organic growth and provides strategic optionality to create outsized TSR Mid-double digit Outsized margin growth Low-mid single digit High-single digit Continued margin growth Mid-single digit Cash conversion 117% Cash conversion ratio ~100% $4B
Slide 129: Closing
Friday, October 1st, 2021 Closing Frisco, TX Burlington, MA 129 Bob Gamgort Chairman & CEO
Slide 130: A Modern Beverage Company… Defined
2021 Investor Day Distinctive and disruptive, based on an insight hiding in plain sight – a beverage for every need, available everywhere people shop and consume Tech enabled, culturally and consumer connected, with a mix of enduring, new and reinvigorated brands that reach a wide range of needs and
Slide 131: A Modern Beverage Company… Value Proposition
2021 Investor Day Access to healthy growth via category strength, household penetration, mix, premiumization and expansion into new segments and geographies Attractive and reliable financial returns, fueled by margin expansion, cash generation and investment that is prioritized to growth Optionality
Slide 132: Appendix
2021 Investor Day Appendix 132
Slide 133: Reconciliation of Net Sales, Adjusted Net Income and Adjusted Diluted EPS
2021 Investor Day 133 KEURIG DR PEPPER INC. RECONCILIATION OF NET SALES, ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS (Unaudited, in millions, except per share data) Net Sales Income from operations Net income Weighted Average Diluted shares Diluted earnings per share Net Sales Income from operation
Slide 134: Reconciliation of Free Cash Flow
2021 Investor Day 134 Free cash flow is defined as net cash provided by operating activities adjusted for purchases of property, plant and equipment, proceeds from sales of property, plant and equipment, and certain items excluded for comparison to prior year periods. KEURIG DR PEPPER INC. RECONCILI
Slide 135: Reconciliation of Adjusted EBITDA and Management Leverage Ratio
2021 Investor Day 135 KEURIG DR PEPPER INC. RECONCILIATION OF ADJUSTED EBITDA AND MANAGEMENT LEVERAGE RATIO (Unaudited, in millions, except for ratio) Pro Forma Pro Forma Three Months Ended Twelve Months Ended Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q2 2018 Net income 253$ 1,074$ 211$ 323$ 1,861$ Interest e