KDP Grows DSD Footprint With Dr Pepper Expansion
Keurig Dr Pepper (KDP) is zoning in on its route-to-market approach as part of five key pillars within the company’s strategic roadmap.
As a result, it has been investing in its direct-store-delivery (DSD) to unlock new expansion opportunities.
KDP is adding Dr Pepper to its DSD portfolio in key markets within California, Nevada and the Midwest.
The company expects to drive increased efficiencies across its DSD network to directly influence point-of-sale trends and generate halo effects that benefit other DSD brands, according to CEO Timothy Cofer, who shared details during the latest earnings call.
The move helps scale efforts already underway in those regions, he added, and will generally help grow the electrolyte offerings within the sports hydration business — including for brands Ghost and C4 — which is the fastest-growing subset of the category (up 30% in Q2) and benefits from DSD-enabled distribution expansion.
KDP’s DSD Strategy
This builds on ongoing efforts, including last year’s acquisition of certain bottling and distribution operations in Arizona — an area which is now live with manufacturing and warehousing operations.
“We prioritize investments in our DSD to further strengthen our network, build our capabilities and really improve how we serve our customers and our consumers,” said Cofer, who added that the company is building out digital tools to drive greater efficiency within this effort and to drive in-store effectiveness.
Cofer said DSD is a critical, but scarce asset in beverages. It provides a real-time feedback loop through which it can obtain in-store shopping behavior and trends. Right now, the data shows a fairly resilient consumer, despite the inflationary backdrop and volatile environment.
Also: Earlier this year, KDP and other CPGs responded to the dive in consumer sentiment
Short-Term Pains for Long-Term Growth
The initiative does come with growing pains, however, as distribution transitions generally result in short-term disruptions and require initial investment, but the company expects to unlock “substantial commercial and financial outcomes” related to the DSD expansion.
“We are increasing our scale by adding high-quality, high-velocity volume to our portfolio, which allows us to make that economic flywheel, and that virtuous cycle of growth, turn even faster because that scale allows us to then have greater drop sizes, greater store frequency, and improve the efficiency and economics of the fixed costs associated with DSD," said Cofer.
The DSD expansion is part of KDP’s fuel for growth strategy and productivity program, which remains on track to hit its 3% to 4% business savings target this year.