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Keurig Adds Coffee-Maker Line, New Facility to Create Jobs

Zacks Equity Research

Keurig Dr Pepper Inc. KDP is focused on bolstering business through the launch of innovative product lines as well as investing in production and supply-chain facilities to support growth. In sync with these objectives, the company is planning to open a high-tech production and warehouse facility in Allentown, PA. The facility is likely to facilitate capacity expansion for its new and existing brands while also enhancing its supply-chain network in the Northeast, driven by large-scale warehouse operations.

The new facility will not only enhance the company’s operations but also help serve the society through the creation of 400 jobs in Allentown. It expects to invest nearly $200 million toward this action.

In another development, the company is launching the K-Duo portfolio, which is its innovative coffee-maker product line, combining the functionalities of single-serve and carafe brewing experiences into one machine. This is the first time the Keurig brand has combined these functionalities. The K-Duo offers convenience and flexibility of brewing a single cup of coffee using K-Cup pods, and premium drip coffee using coffee powders.

The K-Duo line comprises three modern coffee markers, with different features and price points, to suit the taste and budgets of consumers. These include the K-Duo Essentials Coffee Maker, K-Duo Coffee Maker and K-Duo Plus Coffee Maker. Already launched at the Wal-mart WMT stores and website, the K-Duo Essentials is designed to serve drip plus pod brews side-by-side, with three brew sizes for a single cup and a 12-cup glass carafe.

Meanwhile, the K-Duo Coffee Marker model offers four single cup brewing sizes and a 12-cup glass carafe. It also has a programmable Carafe Auto-Brew option, enabling consumers to program an automatic carafe brew up to 24 hours in advance. The model is expected to be launched at Target TGT, Best Buy BBY and Amazon.com AMZN in this fall.

Further, the K-Duo Plus is the slimmest model, with same features of pod and carafe brewing along with a multi-position water reservoir. The reservoir has the flexibility to be placed either to the left, right or at the back of the brewer to optimize counter space. The company expects to launch this model at retail stores like Bed, Bath & Beyond BBBY, Kohl’s KSS and Keurig.com in this fall.

The company’s aforementioned expansion plan and launch of new product line justify its growth plans. Additionally, partnerships and acquisitions form an important part of its growth strategy. In recent years, the company added Big Red, CORE Hydration and Forto Coffee Energy Shots either through acquisitions or strategic partnerships. Further, it signed a long-term agreement to sell, distribute and merchandise the Evian brand across the United States. The company also added the iconic Canadian coffee brand, Tim Horton’s, and U.S.-based bakery-cafe brand, Panera, as Keurig partners.

Furthermore, the company is witnessing strong in-market performance across most of the business, which is clear from the market results based on IRI. During the second quarter, it reported dollar consumption growth, with market share gains across the majority of its portfolio category. It experienced market share growth in the categories — including CSD's3, single-serve coffee, shelf stable fruit drinks, unflavored still water and RTD3 coffee. This was backed by strength in Dr Pepper and Canada Dry CSD brands; Peet's, CORE Hydration and Forto RTD coffees; and Snapple juice. Further, in coffee segment, retail consumption for single-serve pods manufactured by KDP rose nearly 5% while dollar market share was in line with the prior year’s 81.6%.

These efforts have led this Zacks Rank #2 (Buy) stock to gain nearly 16% in the past year, comfortably outpacing the industry’s growth of 2.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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