Keurig Dr Pepper Inc (KDP) has a solid risk profile and is one of the top ten companies based on our proprietary risk assessment of the non-alcoholic beverages sector in the consumer industry. Country, industry, and operational risk pillars boosted the overall risk score for the company. Its integrated business model and financial performance are its strengths, whereas its liquidity position remains a cause for concern.
KDP is a manufacturer and distributor of beverages. The company's product portfolio includes coffees, flavored soft drinks, teas and waters, juices, juice drinks, and mixers. It markets its products under Dr Pepper, Snapple, Keurig, Green Mountain, Donut Shop, Laughing Man, Van Houtte, REVV, and Mott's.
KDP is one of the leaders in the non-alcoholic beverages industry, with reported revenue of $11.61 billion in the financial year 2021 (FY2021), which increased 4.48% over that in FY2020. The company's net income also increased 5.66% in FY2021 compared to that in FY2020.
Our proprietary risk assessment uses a combination of four risk pillars – Country, Industry, Operational, and Financial. Scores are based on a scale of 1 to 5, 1 being the lowest risk and 5 being the highest.
KDP's overall risk score is better than the sector's average. Companies like Monster Beverage Corp, National Beverage Corp, and Nongfu Spring Co Ltd are the leaders in the sector.
Country Risk:
KDP has a solid country risk score of 4.78, as it derives most of its revenue from the US (88.81%), followed by Other Countries (11.19%). Geographical concentration is a cause for concern for the company. Dependence on a limited area could affect the company's operational and financial performance and increases its business risks by exposing it to the economic and geopolitical risks associated with the country, which could affect the demand for its products or disrupt the supply chain and restrict its market share and growth opportunities in the future.
Industry Risk:
The company's primary exposure is to the non-alcoholic beverages sector. It generates 61.84% of the revenue from the non-alcoholic beverages sector, characterized by moderate profit margins and weak growth projections compared to other sectors. The remaining revenue is derived from the household appliance sector
Operational Risk:
KDP has an operational risk score of 3.55, primarily driven by its scale and business positioning. It has leadership positions in specialty coffee and tea, soft drinks, juice, water, juice drinks, and mixers and sells the No.1 single-serve coffee brewing system in Canada and the US. It has a portfolio of more than 125 licensed, owned, and partner brands. An integrated business model provides KDP opportunities for sales and profit growth. The company is an integrated brand owner, manufacturer, and distributor of beverages in North America. It has healthy profitability margins in the low-20s but a mid-single-digit return on equity and weak inventory turnover ratio, which affected the overall financial risk scores.
Financial Risk:
The company has a financial risk score of 1.90, below the industry average. Higher inventory turnover days signify that the company incurs high inventory carrying costs, which affect its operating performance. The same has also resulted in a low current ratio, affecting the liquidity pillar. A liquidity position indicates decreasing ease in funding the company's day-to-day operations, limiting its ability to capture growth opportunities in the market. The low cash flow to debt ratio reflects a greater risk of not making interest payments, affecting the overall financial risk scores. However, the low debt-to-equity ratio compared to its peers boosted the overall financial risk scores.
GlobalData risk scorecard for a sector provides the analysis of various risks a company is vulnerable to. Our risk framework comprises four pillars – country, industry, operational and financial. The country risk for an entity signifies the risk of operating in a particular country. GlobalData's proprietary country risk assessment framework is used to calculate the risk for individual countries. Industry risk is an integral part of risk analysis, and it implies the riskiness and stability of the industries in which a company operates. The operational and financial risk profile comprises a company's risk and return potential based on its key operational and financial metrics. Our scores are based on an average of the latest three fiscal year data.
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