Keurig Dr Pepper (KDP)
Key Statistics
EV/EBIT = 18.2x
ROE = 8.71%
Debt/Equity = 67%
FCF Yield = 1.4%
Dividend Yield = 2.5%
Market Cap = $46.6 billion
The Company
Keurig Dr Pepper Inc. (KDP) is a beverage company known for producing, marketing, and selling a diverse range of hot and cold drinks, along with single-serve coffee makers.
Some of their well-known brands include Dr Pepper, Canada Dry, Snapple, and Keurig. KDP currently sells over 125 brands.
KDP was formed on July 9, 2018, by the merger of Keurig Green Mountain and Dr Pepper Snapple Group. This merger was first announced on January 29, 2018, when Keurig Green Mountain acquired Dr Pepper Snapple Group for $18.7 billion.
Dr Pepper, a renowned Texan soda, has a long history with origins tracing back to the 1880s.
In 1885, pharmacist Charles Alderton created a unique 23-flavored drink at Morrison's Old Corner Drug Store in Waco, Texas, initially called "Waco" but later renamed Dr Pepper. Over the years, Dr Pepper underwent several acquisitions and mergers. In 1984, it merged with 7Up to form Dr Pepper 7Up, which was acquired by Cadbury Schweppes in 1995.
Meanwhile, Snapple, a popular tea and juice brand, was founded in the 1970s and gained significant market share by the 1990s. Cadbury Schweppes, already owning Dr Pepper 7Up, acquired Snapple in 2000, along with other brands like Royal Crown Cola. In 2008, Cadbury Schweppes spun off its North American beverage business, forming Dr Pepper Snapple Group.
Meanwhile, Keurig began in the early 1990s when John Sylvan aimed to solve the problem of stale office coffee by creating a single-serving pod and a brewing machine.
He partnered with Peter Dragone, a former college roommate, to develop a business plan, and in 1992, they founded Keurig. The name "Keurig" is derived from the Dutch word for excellence. Keurig faced many challenges initially, requiring significant funds for development. Their first investment came from Green Mountain Coffee Roasters (GMCR) n 1993. By 1997, GMCR offered its coffee in Keurig’s K-Cup pods, and in 1998, Keurig launched its first office brewing system.
Keurig successfully created a new category with their single-serve pod-style brewing. As consumer demand for a single-use home brewer grew, Keurig introduced a home brewer prototype by 2004. Despite competition from large companies, Keurig’s live demonstrations and free samples helped them dominate the home brewer market. In 2006, GMCR completed its full acquisition of Keurig.