# How Keurig Dr Pepper makes money

CXProWealth Business Lens · Keurig Dr Pepper (KDP) · Q2 FY2026

Read from the 10-Q for the period 2026-04-01 to 2026-06-30, filed 2026-08-10 with the SEC (accession 0001418135-26-000051): https://www.sec.gov/Archives/edgar/data/1418135/000141813526000051/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $7.3B (+101.1% on the year)
- Operating income: $628.0M (operating margin 8.6%)
- Net income: $142.0M (net margin 1.9%)
- Gross margin: 41.9%
- Free cash flow: $714.0M (9.8% of revenue)
- Cash conversion (operating cash flow / net income): 6.30x
- Capital expenditure: 2.5% of revenue

## Where the money goes (Q2 FY2026)

- LRB → Net sales: $3.4B
- K-cup pods → Net sales: $3.5B
- Appliances → Net sales: $148.0M
- Other → Net sales: $278.0M
- Net sales → Cost of sales: $4.2B
- Net sales → Gross profit: $3.1B
- Gross profit → Selling, general, and administrative expenses: $2.4B
- Gross profit → Other operating expense (income), net: $41.0M
- Gross profit → Income from operations: $628.0M
- Income from operations → Interest expense, net: $336.0M
- Income from operations → Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total: $292.0M
- Other (income) expense, net → Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total: $13.0M
- Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total → Provision for income taxes: $95.0M
- Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total → Net income: $210.0M
- Net income → Net Income (Loss) Attributable to Noncontrolling Interest: $68.0M
- Net income → Net income attributable to KDP: $142.0M

## Where the revenue comes from

### Products and services (Revenue (Details))

| Member | Value | Share |
|---|---:|---:|
| K-cup pods | $3.5B | 48.2% |
| LRB | $3.4B | 46.0% |
| Other | $278.0M | 3.8% |
| Appliances | $148.0M | 2.0% |

The members sum to total revenue.

### Segments (Segments - Schedules of Results (Details))

| Member | Value | Share |
|---|---:|---:|
| U.S. Refreshment Beverages | $2.9B | 40.0% |
| JDE Peet's | $2.8B | 38.3% |
| U.S. Coffee | $918.0M | 12.6% |
| KDP International | $664.0M | 9.1% |

The members sum to total revenue.

## Income statement, as filed

| Line | Q2 FY2026 | Of revenue |
|---|---:|---:|
| Net sales | $7.3B | 100% |
| Cost of sales | $4.2B | 58.1% |
| **Gross profit** | $3.1B | 41.9% |
| Selling, general, and administrative expenses | $2.4B | 32.8% |
| Other operating expense (income), net | (-$41.0M) | 0.6% |
| **Income from operations** | $628.0M | 8.6% |
| Interest expense, net | (-$336.0M) | 4.6% |
| Other (income) expense, net | ($13.0M) | 0.2% |
| **Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total** | $305.0M | 4.2% |
| Provision for income taxes | $95.0M | 1.3% |
| **Net income** | $210.0M | 2.9% |
| Net Income (Loss) Attributable to Noncontrolling Interest | $68.0M | 0.9% |
| **Net income attributable to KDP** | $142.0M | 1.9% |
| Basic (in dollars per share) | $0 | 0.0% |
| Diluted (in dollars per share) | $0 | 0.0% |
| Basic (in shares) | 1,360,600,000 |  |
| Diluted (in shares) | 1,364,500,000 |  |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2008 | $5.7B | -$168.0M | -$312.0M | $709.0M | $304.0M | $405.0M |
| FY2009 | $5.5B | $1.1B | $555.0M | $865.0M | $317.0M | $548.0M |
| FY2010 | $5.6B | $1.0B | $528.0M | $2.5B | $246.0M | $2.3B |
| FY2011 | $5.9B | $1.0B | $606.0M | $783.0M | $238.0M | $545.0M |
| FY2012 | $6.0B | $1.1B | $629.0M | $482.0M | $217.0M | $265.0M |
| FY2013 | $6.0B | $1.0B | $624.0M | $866.0M | $179.0M | $687.0M |
| FY2014 | $6.1B | $1.2B | $703.0M | $1.0B | $170.0M | $852.0M |
| FY2015 | $6.3B | $1.3B | $764.0M | $1.0B | $179.0M | $835.0M |
| FY2016 | $6.4B | $1.4B | $847.0M | $961.0M | $180.0M | $781.0M |
| FY2017 | $4.3B | $897.0M | $378.0M | $1.7B | $66.0M | $1.7B |
| FY2017 | $6.7B | $1.4B | $1.1B | $1.0B | $202.0M | $836.0M |
| FY2018 | $7.4B | $1.2B | $586.0M | $1.6B | $180.0M | $1.4B |
| FY2019 | $11.1B | $2.4B | $1.3B | $2.5B | $330.0M | $2.1B |
| FY2020 | $11.6B | $2.5B | $1.3B | $2.5B | $461.0M | $2.0B |
| FY2021 | $12.7B | $2.9B | $2.1B | $2.9B | $423.0M | $2.5B |
| FY2022 | $14.1B | $2.6B | $1.4B | $2.8B | $353.0M | $2.5B |
| FY2023 | $14.8B | $3.2B | $2.2B | $1.3B | $425.0M | $904.0M |
| FY2024 | $15.4B | $2.6B | $1.4B | $2.2B | $563.0M | $1.7B |
| FY2025 | $16.6B | $3.6B | $2.1B | $2.0B | $486.0M | $1.5B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: +8.2% (year before +3.6%): accelerating
- Operating income: +38.0% (year before -18.8%): accelerating
- Net income: +44.3% (year before -33.9%): accelerating
- Free cash flow: -9.1% (year before +83.2%): slowing

## Operating figures stated in the filing

- Owned, licensed and partner brands (more than): 150 brands (as of 2026-06-30). "KDP is a leading beverage company with more than 150 owned, licensed, and partner brands, that meet a wide range of needs and occasions." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Markets served by the coffee business (more than): 100 markets (as of 2026-06-30). "Our global coffee business spans more than 100 markets" (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Coffee and related products sales volume growth, consolidated (includes JDE Peet's): 416.5% (as of 2026-06-30). "Coffee and related products 416.5" (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Net price realization, consolidated: 4.2% (as of 2026-06-30). "Net price realization 4.2" (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- U.S. Refreshment Beverages sales volume growth: 2.4% (as of 2026-06-30). "Sales volume increased 2.4% in the second quarter of 2026, led by growth in energy and sports hydration drinks, partially offset by declines in the balance of our portfolio." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- U.S. Refreshment Beverages net price realization: 3.5% (as of 2026-06-30). "U.S. Refreshment Beverages 6.5 % 3.5 % - % 10.0 %" (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- U.S. Coffee appliance volume growth: 2.1% (as of 2026-06-30). "Appliance volume increased 2.1%." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- U.S. Coffee coffee and related products volume decline: 12.8% (as of 2026-06-30). "Coffee and related products volume decreased 12.8%, reflecting price elasticity impacts, single serve category softness, and a temporary reporting shift of Peet's K-cup pods into the JDE Peet's segment." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- U.S. Coffee net price realization: 5.0% (as of 2026-06-30). "U.S. Coffee (8.2) 5.0 - (3.2)" (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- KDP International LRB sales volume growth: 4.5% (as of 2026-06-30). "LRB sales volume increased 4.5%." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- KDP International appliance volume growth: 6.3% (as of 2026-06-30). "Appliance volumes increased 6.3%." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- KDP International coffee and related products volume decline: 2.0% (as of 2026-06-30). "Coffee and related products volume decreased 2.0%." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- KDP International net price realization: 5.9% (as of 2026-06-30). "KDP International 6.5 5.9 7.2 19.6" (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)

## Key insights

### Drinks earn more than the whole company's operating profit

U.S. Refreshment Beverages earned $857M, 136.5% of the company's $628M operating income, as JDE Peet's lost $62M and unallocated corporate costs weighed.

U.S. Refreshment Beverages earned $857M of operating income on $2.9B of net sales, a 29.3% margin. U.S. Coffee earned $149M on $918M (16.2%) and KDP International $152M on $664M (22.9%). JDE Peet's, in its first quarter inside KDP, reported an operating loss of $62M on $2.8B of net sales. _(from the filing)_
As shares of the $628M total, U.S. Refreshment Beverages is 136.5%, KDP International 24.2%, U.S. Coffee 23.7% and JDE Peet's -9.9%. A share above 100% is possible because the total also carries the JDE Peet's loss and unallocated corporate costs, which the filing ties partly to transaction and integration costs for the acquisition and the planned separation. _(from the filing)_
Analysis: for now the drinks business carries the coffee expansion. The JDE Peet's loss includes the one-time inventory step-up recognized in cost of sales as the acquired stock was sold, so it is not a clean read of that business's earning power. Quarters without that charge are the cleaner measure of what JDE Peet's adds. _(analysis)_

### Interest now takes more than half of operating profit

Net interest of $336M equaled 53.5% of operating income, against 20.0% a year earlier, as acquisition debt arrived while operating income fell 30.1%.

Net interest expense was $336M against $180M a year earlier, while income from operations fell to $628M from $898M. The filing says the company "incurred and assumed significant debt" for the JDE Peet's acquisition, and that Moody's and S&P downgraded its ratings, which "remain investment grade". _(from the filing)_
After interest, pretax income was $305M against $718M. The effective tax rate rose to 31.1% from 23.8%, which the filing attributes to a non-cash revaluation of state deferred tax liabilities. _(from the filing)_
Analysis: the share is inflated by a quarter that also carries deal costs and the inventory step-up in operating income. It can fall in two ways: operating income rising as integration and separation costs fade, or debt coming down from operating cash. The filing warns the downgrade may raise borrowing costs, which would push the other way. _(analysis)_

### Outside investors took 32.4% of net income

Of $210M of net income, $68M went to outside investors, mainly in the Pod Manufacturing JV, leaving $142M for KDP, 74.0% less than a year earlier.

Net income was $210M against $547M a year earlier. Of it, $68M went to non-controlling interests, mainly the Pod Manufacturing JV, against nothing a year earlier, leaving $142M attributable to KDP. Diluted EPS was $0.04 against $0.40, which the filing says was also reduced by dividends allocated to preferred holders. _(from the filing)_
The JDE Peet's purchase was funded with several kinds of capital: a term loan, new bonds, convertible preferred stock, and the sale of a minority stake in the pod manufacturing business to outside investors, who receive a targeted return from its cash. _(from the filing)_
Analysis: each layer is cheaper or less dilutive than issuing common shares at once, and each is paid before common holders. Net sales rose 75.6% while income attributable to KDP fell, so growth in consolidated profit reaches the common share only after interest, the JV partners and the preferred dividend. _(analysis)_

### U.S. Coffee: net price up 5.0%, coffee volume down 12.8%

Brewer volume still rose 2.1% while coffee volume fell; the filing cites price elasticity, single serve category softness and a temporary reporting shift.

U.S. Coffee net sales were $918M with operating income of $149M, a 16.2% margin. Net price realization was 5.0%. Coffee and related products volume fell 12.8%, "reflecting price elasticity impacts, single serve category softness, and a temporary reporting shift of Peet's K-cup pods into the JDE Peet's segment." Appliance volume rose 2.1%. _(from the filing)_
Outside the U.S., KDP International had net price realization of 5.9%, coffee and related products volume down 2.0% and appliance volume up 6.3%. The filing warns that partner brands could begin "vertically integrating to manufacture their own Keurig-compatible pods", which it says could compress prices and gross margins. _(from the filing)_
Analysis: part of the drop is a reporting move rather than lost demand, and the filing does not split it out. If pod volume steadies once the price increases are a year old, the drop was elasticity at a point in time. If it keeps falling while brewers keep selling, households are brewing less or buying other pods, which is a different problem. _(analysis)_

### Competitive edge

- **Selling concentrate to bottlers keeps drinks margins high** U.S. Refreshment Beverages earned a 29.3% operating margin, against 16.2% in U.S. Coffee, with bottlers carrying much of the capital-heavy bottling and delivery.
- **A small brewer line feeds a large coffee business** Appliances were $148M, 2.0% of net sales, against $3.5B of coffee and related products: the brewer is sold once, the coffee it brews recurs.
- **JDE Peet's turns Keurig into a global coffee company** JDE Peet's added $2.8B of net sales, 38.3% of the total, and brands such as Jacobs, L'OR and Peet's across more than 100 markets.

### What to watch

- **Acquisition debt and a ratings downgrade** The filing says KDP "incurred and assumed significant debt"; Moody's and S&P downgraded it, and net interest rose to $336M from $180M.
- **Input costs that price increases may not cover** Gross margin fell to 41.9% from 54.2%; beside the inventory step-up, the filing names ingredients, materials and tariffs, and warns price may not offset costs.
- **Integrating JDE Peet's, then splitting in two** SG&A rose 76.8% to $2.4B with deal costs, and the filing warns integration may cost more and the separation may not happen as planned.

## Operating income by segment

- U.S. Refreshment Beverages: $857.0M (136.5% of operating income)
- KDP International: $152.0M (24.2% of operating income)
- U.S. Coffee: $149.0M (23.7% of operating income)
- JDE Peet's: -$62.0M (-9.9% of operating income)

## Investor view

**JDE Peet's lifted sales 75.6%, but deal costs and interest left Keurig Dr Pepper earning far less than a year earlier**

### How it makes money

Keurig Dr Pepper sells two things: drinks and coffee. This quarter's $7.3B of net sales split into coffee and related products at $3.5B (48.2% of sales), liquid refreshment beverages at $3.4B (46.0%), appliances such as brewers at $148M (2.0%) and other at $278M (3.8%). The company describes a portfolio of more than 150 owned, licensed and partner brands. _(from the filing)_
Four segments carry the sales: U.S. Refreshment Beverages $2.9B (40.0% of net sales), JDE Peet's $2.8B (38.3%), U.S. Coffee $918M (12.6%) and KDP International $664M (9.1%). JDE Peet's, bought at the start of the quarter, adds Jacobs, L'OR and Peet's. The coffee business now spans more than 100 markets, including hot beverage service to businesses and institutions. _(from the filing)_
U.S. Refreshment Beverages earns most of the profit. It sells "branded concentrates, syrups, finished beverages, and other consumables" to bottlers, distributors and retailers, and earned $857M of operating income on $2.9B of sales, a 29.3% margin. That is 136.5% of the company's $628M operating income: the JDE Peet's loss and unallocated corporate costs outweighed the profit of the other two segments. _(from the filing)_
Coffee earns through a system. U.S. Coffee sells K-Cup pods, single serve brewers and accessories to partners, retailers and directly through Keurig.com. Brewers and other appliances are a small line at $148M of sales, against $3.5B for coffee and related products. U.S. Coffee earned $149M on $918M of sales, a 16.2% margin. KDP International, covering Canada, Mexico, the Caribbean and other markets, earned $152M on $664M, a 22.9% margin. _(from the filing)_

### What shifted

Net sales rose 75.6% to $7.3B from $4.2B a year earlier, mostly because JDE Peet's joined at the start of the quarter and added $2.8B. The legacy business grew as well, helped by net price realization of 4.2% for the company as a whole. Liquid refreshment beverage sales rose 12.9% to $3.4B. _(from the filing)_
Gross margin fell to 41.9% from 54.2%, as cost of sales rose 122.4% against sales up 75.6%. The filing names the causes: the inventory step-up from the acquisition, recognized in cost of sales as the acquired stock was sold, and "the net impact from changes in ingredients, materials, and productivity, inclusive of tariffs." _(from the filing)_
Operating income fell 30.1% to $628M from $898M, and operating margin to 8.6% from 21.6%. SG&A rose 76.8% to $2.4B, which the filing attributes to the inclusion of JDE Peet's SG&A expenses and to transaction and integration costs for the acquisition and the planned separation. Other operating expense of $41M, against $1M a year earlier, mainly reflects non-cash write-offs of certain intellectual property assets. _(from the filing)_
Below operating income, the deal's financing shows. Net interest expense was $336M against $180M. The effective tax rate rose to 31.1% from 23.8%, driven by a non-cash revaluation of state deferred tax liabilities. $68M of net income went to non-controlling interests, mainly the Pod Manufacturing JV. Net income attributable to KDP fell 74.0% to $142M, and diluted EPS to $0.04 from $0.40, also reduced by dividends allocated to preferred holders. _(from the filing)_
Inside the legacy business, the two halves moved apart. U.S. Refreshment Beverages volume rose 2.4%, "led by growth in energy and sports hydration drinks", with net price realization of 3.5% and a 29.3% margin. U.S. Coffee raised net price 5.0% while its coffee volume fell 12.8%, reflecting "price elasticity impacts, single serve category softness" and a temporary shift of Peet's pods into the JDE Peet's segment. Its margin was 16.2%. _(from the filing)_

### Risks in the filing

Debt. The company says it has "incurred and assumed significant debt" for the JDE Peet's acquisition, which could hurt its financial performance. Moody's and S&P downgraded its ratings after the deal, which still "remain investment grade", and the filing warns that the downgrade may raise borrowing costs and limit access to capital markets and flexibility. _(from the filing)_
Integration and separation. The company may not integrate JDE Peet's as planned, or integration may cost more and take longer than expected. The separation into two companies may not happen on the planned terms or timeline, or at all, may not deliver its expected benefits, and the companies may not keep a satisfactory credit rating afterward. JDE Peet's also brings exposure to Russia, including the possible loss of those operations. _(from the filing)_
Coffee and other inputs. Green coffee, aluminum, resins, sugar and fuel are subject to price swings, and premium Arabica cannot be readily substituted. The company says it may be unable to raise prices enough, or soon enough, to offset higher costs without losing volume, and that its hedges may not match the timing of its sales. European Union deforestation rules could raise sourcing costs and restrict where it buys coffee. _(from the filing)_
Single serve and partners. A significant portion of the business is single serve coffee, so a sustained decline in brewer sales would hurt it. Partner brands could move to other manufacturers or begin "vertically integrating to manufacture their own Keurig-compatible pods", which the company says could compress prices and gross margins. It also depends on third-party bottlers, some of them competitors, who can usually end their agreements without cause. _(from the filing)_
Several of these already show in the quarter. The debt risk shows in interest expense, the input cost risk in the gross margin pressure the filing ties to ingredients and tariffs, and the pricing risk in U.S. Coffee, where higher prices came with lower pod volume. Integration and separation costs are visible too, in SG&A and in the U.S. Coffee segment's profit. _(analysis)_

## Founder view: mechanisms

### Concentrate plus a network that carries other brands

The refreshment business sells concentrate to bottlers, who do the capital-heavy work of bottling and delivering, and runs its own distribution for finished drinks, including partner brands it does not own. A network that already reaches the shelf earns more on every extra brand it carries, so the company adds energy and hydration brands through partnerships and minority stakes rather than building each one from nothing. _(analysis)_

### A brewer that sells pods

Keurig sells a brewer once and pods for as long as the brewer is used. The brewer line is small and exists to create the household; the pods are the recurring revenue. Licensing the format to partner brands and private labels puts more pods in the system, which makes the brewer more useful, which sells more brewers. _(analysis)_

### Paying for a deal with layers of capital

The JDE Peet's purchase was funded with several kinds of capital: a term loan, new bonds, convertible preferred stock, and the sale of a minority stake in the pod manufacturing business to outside investors, who receive a targeted return from its cash. Each layer is cheaper or less dilutive than issuing common shares at once, and each takes its share of profit before common holders do. _(analysis)_

### Buy, combine, then split in two

The company bought JDE Peet's to combine it with Keurig's coffee business and then separate into two US-listed companies, one in beverages and one in coffee. The idea is that each business is better run and valued on its own terms: a high-margin drinks business and a global coffee business with different capital needs, input risks and growth paths. _(analysis)_

## Member research

Signed-in members read, on the page: what Keurig Dr Pepper's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Keurig Dr Pepper 10-Q for the period to 2026-06-30: https://www.sec.gov/Archives/edgar/data/1418135/000141813526000051/ (2026-08-10)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02