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KDP Will Be Formed By Merger of Keurig, Dr Pepper Snapple

Dr. Pepper products

Last updated on January 31st, 2018 at 09:09 am

Dr Pepper Snapple Group  (DPS) and Keurig Green Mountain announced a merger agreement on Jan. 29. The new company will be Keurig Dr Pepper (KDP).

A completed merger would create a company comprising beverage brands Dr Pepper, 7UP, Snapple, A&W, Mott’s, Sunkist and Green Mountain Coffee Roasters; the Keurig single-serve coffee system; and more than 75 owned, licensed and partner brands in the Keurig system.

Larry Young, president and CEO of DPS, said, “This transaction will deliver significant and immediate value to our shareholders, along with the opportunity to participate in the long-term upside potential of our combined company and attract new brands and beverage categories to our platform in a fast-changing industry landscape. We are excited to combine with Keurig to build on the rich heritage and expertise of both companies and provide the highest-quality hot and cold beverages to satisfy every consumer throughout the day.”

Bob Gamgort, Keurig CEO, said, “Our view of the industry through the lens of consumer needs vs. traditional manufacturer-defined segments unlocks the opportunity to combine hot and cold beverages and create a platform to increase exposure to high-growth formats. The combination of Dr Pepper Snapple and Keurig will create a new scale beverage company which addresses today’s consumer needs, with a powerful platform of consumer brands and an unparalleled distribution capability to reach virtually every consumer, everywhere. We are fortunate to have talented leadership teams within both companies, and I look forward to working together with the Dr Pepper Snapple team to make this combination a success for all of our stakeholders.”

Dirk Van de Put, CEO of Mondelēz International, which will have a significant stake in KDP, said, “We have been very pleased with our coffee partnership with Keurig, and strongly support the strategic rationale for this transaction. We look forward to continuing to participate in the compelling value-creation and long-term growth opportunities inherent in this powerful beverage platform.”

Since becoming a private company following its acquisition by a JAB-led investor group in March of 2016, Keurig has renewed its marketing investment and improved its new brewer innovation pipeline, which has resulted in renewed top-line volume growth, increasing U.S. household penetration for Keurig brewers to 20 percent, from 17 percent, in the last two years.

In the same period, Keurig has added key brand partners into the Keurig system with the help of strategic pod price reductions and value-added services. The combination of those two factors has allowed the company to improve its pod growth from the low-single digits to mid-single digits in the second half of calendar year 2017.

Gamgort will serve as CEO of the combined company, and Ozan Dokmecioglu, current CFO of Keurig, will serve as its CFO.

Young intends to transition to a role on KDP’s board of directors to help the new management team realize the full potential of the company. Bart Becht of JAB will serve as chairman of the company’s board, and Gamgort will become an executive member of the board. Four additional directors will be appointed by JAB; two directors will be appointed by Dr Pepper Snapple, including Young; two directors will be appointed by Mondelēz International; and two independent directors will be appointed.

Keurig and Dr Pepper Snapple will continue to operate out of their current locations, and Gamgort will be based in Burlington, Massachusetts. The combined company will draw on the leadership teams of both companies, who will continue running their respective businesses.

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