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Keurig Dr Pepper CEO: we expect 'very strong' growth in 2021

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Keurig Dr Pepper CEO Bob Gamgort joins Yahoo Finance Live to discuss how the company is faring amid the pandemic and outlook for the carbonated soft drink market.

Video Transcript

- Keurig Dr. Pepper has been among the many food and beverage giants that have seen a major uplift in business during the pandemic. Armed with that momentum, the company is looking to introduce a host of new products this year and spend more money on marketing. Joining us now is Keurig Dr. Pepper chairman and CEO Bob Gamgort. Bob, good to speak with you here. You are-- you are about ready to go or embark on really a complete transformation of the Snapple brand. What are your plans there?

BOB GAMGORT: Yeah. So Snapple is a great anchor in our portfolio that's not a carbonated soft drink, because people love to talk about our carbonated soft drinks. And it has been around and loved for years, but it's time to refresh it. So it's the same great product inside, but you're looking at a complete revamp of the packaging. And I think it speaks to the trends of today because it's a plastic packaging with a sleek shape. It's made with 100% post-consumer recycled plastic. It's 85% less material than our current packaging. So we save on shipping costs and it reduces our carbon footprint, and it's a much more contemporary look. So it's a great example of how we take our brands that are already in our portfolio and we continually refresh them. So Snapple is up next on the refresh strategy.

- Are you still-- are you leaving the name diet in place? Is it still Diet Snapple?

BOB GAMGORT: Yes, great question because, on our carbonated soft drink line, we are shifting from diet to zero sugar, and in the case of Dr. Pepper, we're leaving Diet Dr. Pepper and Zero Sugar Dr. Pepper is being introduced. But Snapple will remain with the name Diet.

- Talk to us about the state of the business. How is your business doing right now as people get vaccinated, they're going back out into the wild? Any change you're seeing today compared to, let's say, three or four months ago?

BOB GAMGORT: Yeah, so what's interesting about our business is we performed very well prior to COVID. We've been able to deliver remarkably well during COVID, but the way we got there was completely different. And as we look at our outlook for 2021, we expect a very strong year, on top of the previous two years that we delivered. So we're looking for 3%, 4% revenue growth, 15-- 13% to 15% EPS. And we just declared a 25% increase in our dividend.

So it gives you a sense of the confidence that we have that we can navigate just about any environment that's out there. And we do expect the consumer to increase mobility throughout the year. And that will mean a pivot in not only the formats of the products that we sell to that consumer, but also where they're purchasing, which will be very different than it was in 2020. But again, that speaks to the flexibility we have in our business model.

- You gained-- the company-- the company's name now starts with Keurig. How many households have you gained for the brewing machine during the pandemic, and what's your projection for this year?

BOB GAMGORT: Yeah, so we gained 3 million new households entering the Keurig system in 2020. And that's up from a typical year, which is about 2 million households. So we clearly got a nice little bump from the work from home mindset that people had. But you have to put it in a bigger context. Over the past five years, we've increased the number of households using a Keurig in the US from 21 million to 33 million. So we got a little bit of a lift from COVID, but what's more important is the long-term trend. And as we look forward, that roughly 2 million households per year is what we project going forward into very long-term future.

- What does the future look like for the Keurig machine at the office?

BOB GAMGORT: So that's the area where we had the biggest negative impact in 2020. And we were able to offset that by strength in at home. And that's what's promising about our total business model, because as the consumer moves, in this case, from office to home, we were able to pick them up there. As they return to the office, we, too, will be able to recapture that business for us, which is attractive both from a growth and profitability standpoint.

But we're moving to much more of a touchless environment, as is the norm across all office facilities. And the fact that it is single-serve and prepackaged is now an advantage from a consumer perspective because they like the fact that they know that the coffee is sealed up until the moment of consumption. So that all plays in our favor. And there's a whole wave of innovation coming on Keurig machines, both at home and away from home, including connected technology, which makes these machines much smarter and able to anticipate consumers' needs.

- Bob, why aren't you in the S&P 500?

BOB GAMGORT: Good question. We believe we're now the largest company from a valuation perspective that's not in the S&P 500. So we believe it's just a matter of time. Last year, we switched from the NYSE to NASDAQ, and we immediately entered the NASDAQ 100. And the two predecessor companies, Keurig Green Mountain and Dr. Pepper Snapple, were both in the S&P 500. So we just see this as a matter of time.

- All right, we'll leave it there. Keurig Dr. Pepper chairman and CEO Bob Gamgort, good to see you. I'll be looking out for those new Snapple bottles.

BOB GAMGORT: Thanks, Brian.