Keurig Dr Pepper Inc. (KDP) Earnings Call Transcript & Summary

Okay. So we're going to get started. Up next, I'd like to welcome Keurig Dr Pepper and the whole team to the stage. Joining us today, we have Bob Gamgort, Chairman and CEO; Sudhanshu Priyadarshi, SVP and CFO; and Jane Gelfand, VP of Investor Relations. [indiscernible] I think you guys have a video you'd like to share with the group. So we're going to do that, and then we'll turn to Q&A. [Presentation]

Okay.

Okay, so it's been 5 years since the merger of Dr Pepper, Snapple and Keurig Green Mountain. So Bob, we will start with you and sort of what is -- what were the successes, the surprises and maybe some things you wished you'd done differently in those years? And how do you think about the next 5 years?

So good morning, everyone. Thank you for coming to see us today. Well, in fact, 5 years ago, a little more than 5 years ago, [ we stayed on the company ], it was because we were greatly excited about the beverage industry. We thought it was a number of elements that are attractive. We also thought it was a really dynamic industry, there's an opportunity for a new player to come in and make a difference. And so our approach to beverage at that time was creating a company that looked at beverage holistically. We thought that previously, people were staying too much in their swim lanes, so we thought there was a lot of interest and growth on the edges. And that was a unique idea at the time. And certainly, this concept of blurring of the lines is talked about pretty much every day. So we're happy with the original insight and the fact that we focus on the consumer first, understanding the needs, occasions and drivers from a consumer standpoint and then translating that through insights to our retailers, innovation pipeline and also informed our acquisition strategy. So when I take a look at the past 5 years, number one, we delivered all of our financial commitments that we put in place and committed to in 2018, delivering the revenue and profit numbers that we talked about, paying down debt and we now have a strong balance sheet, delivering the $600 million or so in synergies that we discussed. And those are all onetime pieces. I think what was most important is the foundation we built to launch into the future. And for me, that foundation is improving the brand portfolio that we have, building a number of capabilities that set us up to win in the beverage industry going forward, among them is significant investment in our routes to market. And on the extremes of all the different ways that we go to market, we've got the leading platform in e-commerce. And then we've got a platform in direct store delivery that we've invested heavily in over the past 5 years and has really set us up to be able to take any new brand on the cold side, run it through that system and instantly generate growth. In addition to all of that, you saw in the video today the -- our capabilities around innovation, our improvement in sustainability, for example, are all big hallmarks. I think from our standpoint, if I go back and look at the acquisition pieces that we put in place or the merger pieces we put in place in 2018 and I compare it to what's happened, and we do this with our Board on a regular basis, the world is fundamentally different than what we projected in 2018. So if there are surprises, it's the surprises that we had internally or timing in comparison to not foreseeing a pandemic, inflation, pricing, supply chain disruption. Nobody could see that. Those are the real disruptors. And obviously, they affected everybody in the industry. What I'm most proud of is despite the fact that the macro and competitive and operational environment was so different after our combination, but yet we still delivered all our commitments and set ourselves for great success in the future, I think, is the piece that internally we're most proud of. So I think about the next 5 years, I think our original thesis of this blurring of the lines and looking at beverage holistically, and now you see people are doing that, not just between hot and cold, but also alcohol and non-alcohol, I think it's still very, very relevant. The industry is a great industry. So I love the industry even more than we did when we got into it. I love our position within the industry because in addition to everything I just talked about in terms of the success, we still have so much upside. We have more white space in our portfolio that is a clear cut to growth on the cold side. And on the hot side of the business, we've added about 12 million households, net new households since we've merged the company, yet we have a line of sight to adding 40 million, 50 million new households beyond that. So love the success, but it is crystal clear what our growth plans are going forward, and that gets me even more excited.

Okay. Great. Let's take it cold first. So now U.S. refreshment beverages, it's performed exceptionally well, led by share gains and in particularly with brand Dr Pepper. So where do you think the future momentum can come from? And kind of are there other brands or categories where you currently compete, or speaking to the white space that you mentioned, that can kind of pick up the baton when we think about growth?

So our success to date on the cold side of the business has been driven by share growth in our existing portfolio, and that's really important. This is not as if we're adding new business to cover up a leaking bucket on the core business. Our core business has been growing share in absolute marketing through innovation and renovation, but also excellent execution in that route-to-market system that I described before because that has a multiplier effect on everything for us. So the core has been incredibly healthy. And on top of that, we've added new positions. So premium water was an area of focus for us. We're now the #2 player in premium water. And we did that through our own business, through distribution partnerships, through investments and through straight-up acquisitions. I mean it's all said and done, we're now #2 in that space. Also within -- in the cold portfolio, if you think about going forward, the white space that I referred to earlier is our opportunity to continue doing what we did before and yet add new spaces. So when we were having this conversation pre-COVID, I think was the last time we were sitting up here on stage, you were asking about energy. And I said, we're working on that. Well, we've added C4. We've got a great position in energy. It's doubling in size. And we're really excited about that. And as great as that is that we now have a good position in energy, we still have less than a 5 share of the energy market. We've talked about ready-to-drink coffee. We just did this partnership with La Colombe. We still have less than a 1 share of the ready-to-drink coffee business. We had essentially no share in the sports hydration business. So as big as our company is and as strong as our portfolio is, we have these massive gaps in our portfolio that are all growth opportunities for us going forward as we fill them in. And again, we drive them through the infrastructure that we built, and it makes that infrastructure more efficient and more effective. The way that we talk it internally is it's really 3 themes. We say we're going to keep capturing space where we exist. That's your Dr Pepper point. By the way, Dr Pepper has been the #1 share gain over this entire time period. We talk about gaining new space, and that's what I just talked about in terms of portfolio. And then there's a third area that we don't talk about a lot, which is premiumization. And you say, do you really want to talk premiumization in a potential recessionary environment? And the answer is yes, because here's the reality of the beverage market. Population grows at 1%, people consume what they're going to consume. They don't consume any more or less beverage every single year. Category grows between 3% or 4%. That's a critical part of growth in the beverage industry. It's an area we haven't talked about, but it's an area that we've been driving really heavily going forward.

Okay. So let's think about premiumization, I want to come out of this lane, to think about pricing, right? So [ onto cuts ] in pricing over the last 2 years for the category and, well, staples overall. I guess, can you just talk a little bit about where you see elasticity to the kind of consumer category level and whether you expect the industry to -- how it's going to react as inflationary pressure has kind of moderated? Do you expect rational and price-led, more pricing to come? Or is there a risk of things kind of going the other way as the inflationary environment [ says ]?

Yes, let me take just 1 minute and talk about premiumization with -- relating to pricing, and I want to ask Sudhanshu to pick up this conversation about the pricing that we've taken and elasticity. I think when we think about premiumization, pricing in the traditional form is one part of that premiumization, and a lot of it comes from mix improvement. So if you sell more energy, that's just a higher price per ounce, we get a mix off of that. And then a lot of the work that we've done on pack portion sizes and pack innovation is actually driving higher price per ounce in a way it is not -- you're taking a price increase out there. And obviously, the price increases that we've taken have been substantial in the industry, driven by inflation, but there are more -- there are many ways to get to premiumization that go beyond just straight-up pricing. Do you want to talk about the pricing that we've taken over the past couple of years and how it's impacted the plans?

Yes. Thanks, Bob, and good morning, everyone. So there are 2, 3 things you have to keep in mind with beverage industry. One, yes, like any other categories, we have seen a record level of pricing. But we've also seen a record level of broad-based inflation. But despite that, we have seen that demand has been resilient. We have not seen -- very limited elasticity, we have seen. And the reason we have seen it because beverage is everyday product, it's to treat people, people go there, which just brings them joy. So we have not seen much elasticity. And if we look at historically, beverage industry is all about maintaining margin and maintaining investments. You need to do that to keep your brand vibrant to invest in marketing, invest in innovation. So we feel good about where we are. We are seeing limited elasticity in our brands. At the same time, we don't think the industry will go back because historically, it's all about the investment in brand, investment -- and keeping the brand vibrant. But at the same time, we watch our consumer. We see that [ deflating ] pressure. And on the edges, we've seen them switching through to value. So we'll continue to monitor it. At the same time, I think in the overall, other players in the industry will monitor it too. But right now, we feel pretty good about it.

Yes, I just -- I would add 2 things to that, to your points there. I mean one is where the [ product is at ], we were really excited when we put the 2 companies together, about the beverage industry, we felt it was very attractive, and there was a lot of opportunities for growth within there with a new player. One of the things that's attractive about the beverage industry, it's very rational. To your point, Sudhanshu, there is a focus on maintaining margins. And I've been in the food and beverage industry, mostly on the food side, for almost 40 years. And it's a very different dynamic in beverages where there is a lot of discipline, focus on the brand investments and focus on the long-term growth. While it's improved, there's a lot of temptation to take price down for a short-term share gain. And so I think beverage for that reason is one -- that's one of the reasons that we really like it. And I think your point about the elasticities is really an important one. We've seen different elasticities in different segments within beverage. It's not as if it's all the same. So on some of the still portfolio items, we see more elasticity. Interestingly, carbonated soft drinks has been the area we've seen the less -- the least amount of elasticity. One of my hypothesis is because it was too good of a value at the start at this. It was underpriced. And so when you are able to take that amount of pricing and have absolutely no impact on the consumer, it tells you that we were giving too much of the product away historically.

Yes. Okay. Let's shift to coffee. So lots of focus there amongst the investment community, obviously, just given the volatility in the last several years, the pandemic, we're in it, we're out of it, [ whatever ]. So if you just kind of zoom out, I guess, how do you think about the key drivers of coffee revenue growth longer term, including the runway that you mentioned earlier for the household penetration? And how do you judge now the pace of category volume recovery today? Where do you stand?

Yes. So I think as we talked about before, the biggest driver of -- well, first of all, let me back up for a second, is what we're talking about first is the total at-home coffee market. So all forms of coffee consumed at home, that's been the area where we've seen softness. If you double click on that and say, well, let's take a look at single serve within there, single-serve has been gaining share within that segment. And obviously, the biggest driver of single-serve growth is converting people from brewing by the pot to brewing it by the cup. But let's talk about now the recovery that we're seeing. I don't know, you want to start off with that piece of it? And then I'll talk about what we're seeing immediately.

Yes, Bob. So the volatility is all about pandemic and post-pandemic normalization. You've seen it in many categories. And you saw in 2020 when stay at home -- everybody is staying at home, the volume view, and it's getting normalized in 2021 and 2022, mainly due to the mobility driven. But we're seeing that normalizing in 2023, but you've got to look at it in the more of a long term. And if you take all those noise out, our curate volume grew mid-single digit, the part volume. And we expect that based on the household penetration, we have a lot of runway to grow from 38 million last year to close to 90 million household who drinks coffee. So we have a lot of runway to grow in terms of household penetration. We have innovation. So we will -- we expect this, the mid-single digit pot volume growth, but we saw there will be shift quarter-to-quarter, year-to-year. But in the long run, we feel good about that we will be able to continue to drive that kind of growth.

Yes, I say this on every earnings call that when you look at the dynamics of at-home coffee in total and the Keurig system specifically on a quarter-by-quarter basis, it's not particularly helpful. You have to look at things over a longer time period. And when you take out all the noise of COVID, as we talked about, if we look at 2019 to 2022, you could take a longer period of time, if you wish, you end up seeing that pot volume growth grows at mid-single digits. And that's very consistent with our long-term plan of adding about 2 million households per year, which has been consistent for a long period of time. And what's important about that is to understand the -- our business model, so think about it for a second, I can tell you that the way that we grow the Keurig business and make money is we convert households from brewing by the pot to the cup. I said that before. Nobody is on the other side of that, meaning retailers like that conversion and our coffee partners like that conversion. And every time it happens, we participate in it. So there's literally nobody rooting for the other side of this to happen. It's a very unusual business structure. Again, all my years in CPG, it's usually about win or lose. This is about everybody aligned to make that happen. The question is the pace of that change and looking beyond all of that short-term noise where it went up during the early parts of COVID and then it's recovering since then. I think to your question about what are we seeing now in terms of coffee recovery, this is where it's going to get a little frustrating for you because you're looking at IRI or Nielsen, it covers between 50% to 60% of the market. This is an interesting category in that the non-leisure channels are substantially higher. They're 40% to 50% of the consumption. Why is that? Well, e-commerce is a big driver of this business. If you think about it, premium price is light, it's shelf-stable, it can't be damaged, it's a perfect product for e-commerce. That area has been exploding. And some of the unmeasured -- other unmeasured channels, club, for example, has been doing incredibly well. So every week internally, we look at what IRI looks -- shows and we look at what we call our [ cube ], which is our ability to look at all sources of information, not to mention the fact that we have point-of-consumption data coming from our connected brewers. So we triangulate all of these, and the category recovery is much stronger than what we're seeing in IRI. Having said that, we'll be under-shipping that consumption in the near term, as we talked about a couple of times. It's worth emphasizing because of the comparison a year ago when there was a whole bunch -- when there's significant recovery due to supply chain. But the fundamental recovery is underway right now. And I think what's frustrating is it's not showing up as much in IRI, and we can't show you the [ cube ] data. All I can tell you is that it's running significantly hotter than what you're seeing in IRI.

Okay. No pun intend.

That's right. Actually, we intend it.

Okay now -- but now I'm going to ask about cold. So you talked about there's no one kind of rooting against the shift to -- from pot to cup, but there's another big trend, right, which is cold coffee. So you recently announced the partnership with La Colombe, like you mentioned, on ready-to-drink. But how does KDP participate even beyond that cold coffee trend?

Yes. Cold coffee, it represents about 3/4 of consumption occasions, get-away-from-home coffee right now. I mean it's really significant. A lot of that is because it's been difficult to make it at home. So people view that as an opportunity to go out of home to be able to have coffee cold format. And it's not just cold. It's all specialty, it's with flavors and with all kinds of other elements to it. By the way, the price differential, and that's when you get into price differential of 10x the price when you do a side-by-side comparison. So our understanding of the consumer has been pointing us in this direction. The question is, how do you do it? So we've been improving the brewers over time. So you could always do a brewer rice. We then have enhanced brewer rice. In fact, we've launched brewers now that are dedicated to [ coffee ] iced brewers, and they've been selling incredibly well. We debuted them at Target, I think, last year or a year before that. And now we've expanded that line. We've also introduced consumable pots. So you could pick any brewer with any pot and brew it over rice, and the satisfaction rates that we get from consumers in terms of what do they think of that beverage compared to cold beverage they get, I think, is in the 80%. So it's an awareness issue, not a product issue. It's awareness opportunity, I should say, not a product issue. But as we continue to improve with brewers that do [indiscernible] of melting less ice and with consumables that allow for more concentrated coffee to give that experience, we continue to see rapid expansion in that territory within the Keurig business. And that's not only household penetration opportunity. It's over time an attachment rate opportunity because at home, the cold coffee occasion tends to be more in the afternoon, and that's an area where we haven't been strong. We also know that ready-to-drink coffee is a big factor. We've got this powerful DSD distribution system. We've got the ability to access great plans through our partnerships, and yet we've not had great success in being focused in delivering its ready-to-drink coffee. So we're really excited now that we have a ready-to-drink coffee platform that we're forming. We've got people who are dedicated to that. We've had the Peet's brand, but we really haven't activated the Peet's brand. We have this partnership with La Colombe, and the partnership with La Colombe gives us a couple of things. One is it's a really unique differentiated ready-to-drink coffee. We're a great brand behind it, but it also gives us the ability to take premium pods, its super premium pods into the hot side of our business as we've done with some of our other players like Intelligentsia, [ frills ] we just added, for example. And it also allows us to start to work together on the supply chain. And the supply chain of ready-to-drink coffee is significantly more complex than you might think. It's more like producing dairy than it is beverage. I mean when you're selling ready-to-drink coffee, you're primarily selling dairy with coffee in it. When you think about all of the capabilities that we have in beverage, we can produce just about any form of beverage, dairy is not a strength of any existing beverage company. That's why you see other players making investment in that dairy space. And if you think about La Colombe, La Colombe is a coffee company with dairy capabilities, but it's owned by Hamdi, who also owns Chobani, has great dairy expertise. And our partnership with Hamdi is particularly strong and something that I think will serve us both well in the future.

Okay. Great. Let's switch to coffee margins. So last couple of years, I have seen segment margins contract by several hundred basis points. And you focused on margin recovery in the segment, you're expecting an inflection in the back half. What are the biggest drivers behind the expansion? And do you think KDP can recover prior coffee margins?

Yes. The simple answer is yes, that's our target to recover the prior peak coffee margin. There are 4 factors of the model, as you all know: one is price, second is inflation, third is productivity and fourth is mix. As we said in July, we have taken pricing now. We have further lag in pricing with partners contract. That's mostly flowing through. So we have made progress there. Inflation is moderating. We said the green coffee is moderating and overall inflation is moderating. So we will see that impact in second half because last year, coffee -- green coffee prices started coming down, but we hedged for 6 to 9 months, and we talked about it takes 6 to 9 months before we start seeing that impact. So you will see that impact on moderate inflation. Productivity is key. Last couple of years, we were focused on customer service and we said any cost. Now productivity is as we have focused as it was before. So productivity is the third, and mix is a smaller piece. So all of these 4 aspects of margin drivers will help us, and we will see first a margin improvement in second half, especially most in quarter 4, and you will see us start getting this journey of getting back our margin. It's not a 1-year thing, but that's a target for us to get back to the margin we were before.

And some of the visibility, because it is very 4Q weighted, it's mechanical, right?

Yes. It's mechanical.

And so the thing that you know today, so you have visibility into it, will shift by the time we get into 4Q...

Yes, it's all -- as I said about the green coffee, last it started, it's happening, so 6 to 9 months of that, it takes for us from the hedge thing to go away and then the pricing we have taken. So yes, we feel good about what we said in July on the second half. And we also feel good about that it will expand in 2024 and beyond.

Okay. Great. So Sudhanshu, I'm going to stick with you. Higher rate environment, right, we've seen meaningful reductions now in the scale of the strategic asset investment program and supply chain financing already. And it's been a big area of question for investors as you well know. So can you talk a bit more about the wind-down of supply chain financing fees, kind of what's been done? What's left that you intend to do and how you balance that against other financial policy objectives?

Well, this is a great question. So first, as Bob mentioned, we are entering into second chapter of growth for KDP. First 5 years was all about lowering our debt, so improving our balance sheet, capturing all the merger synergies. And we use tools like strategic assets. It helped us monetize the assets so we can invest in brand, we can invest in foundation building for both combined company. We also use supply chain financing. At lower interest rate environment, it's helpful. That allowed us to pay down debt. But now we are in a different market. It's a macro environment, there's a higher interest rate. So you saw we have evolved our financial policy. I think soon after I joined, we laid out a new financial policy where we lowered the leverage target. We said it will be 2 to 2.5x. We also said we will continue to invest in organic investments to get the best payback there. And we will continue to do partnership. You saw with our -- we saw -- we did [ Nutrible ]. We see -- invested in asset in brewing. We did La Colombe. And we're maintaining our dividend payout ratio and opportunistically be versus close to [ 24 million ] a share. So you can see us we're managing it in a very dynamic way how we're deploying our cash. At the same time, we have also reduced the supply chain financing because it's an important part of it. At higher rate environment, it doesn't make sense. So what happens now to managing it selectively is case-by-case basis. So what you do, you reduce the payment term, but then you get better benefit in gross profit. You get more suppliers coming -- well, some of the suppliers will not take part into the 360-day payment term. So you expand the supplier base that helps your operating [ inventory ], too, because you can get a better negotiation in gross profit of the product. And so it is helpful. We will do it in a gradual way. At the same time, we will continue to generate industry-leading cash conversion. That's a focus area, but we will do it in a gradual way. We have made a lot of progress. We've been working the [ pain ] when you change the payment term. So we've already made a lot of progress. And we'll do it in a major way while continuing to generate more cash conversion. And as you can see, we are doing everything we are doing in terms of investing, dividend, share repurchase, so we can manage all of these competing priorities dynamically.

Great. Okay. So big picture now. So Bob, you've led multiple CPG businesses across various cycles. You made a unique perspective on kind of where we are in the industry at the moment. So I'd be remiss not to take advantage of having you up here to ask this question. Past several years have been anything but normal for the industry. What's your outlook for '24, just given the potential for a recession, and then we'll bring it back to KDP, of course, but how is the company now preparing to navigate through a tougher consumer backdrop?

Yes. I don't need to go back and say how volatile the last 5 years has been. I don't think there's any benefit in wondering when normal will return because I don't even know what normal looks like anymore. When you have 5 years of this kind of disruption, to me, that is the normal. I think when you think about 2024, there's still a lot of things to figure out. Everybody has talked about a recession and forecasting the fourth quarter is going to play -- the time in which we will see. We'll see. It would be -- in my opinion, all of the real disruptors over my career have been things that nobody forecasted. So this would be the most forecasted recession ever. And usually, when something is forecasted and there's consensus around it, it never happens. Having said that, we got a playbook for -- if it were to happen, we have our normal recessionary playbook, which I could talk about, but it's pretty straightforward, and we've got the optionality in our portfolio and our tactics to be able to do just fine in that environment. I think that -- let me just talk about what we believe is the case for 2024 as we sit here today because I think it's probably most helpful. I think number one, there will be less pricing in 2024. That means that growth is going to go back to being driven more by volume and mix, not just pricing. And as I talked about premiumization before, that doesn't just mean pricing, mix is a big part of that. But volume and mix is going to be a more important part of everybody's growth plans going into 2024, which is going to mean some need for investment in marketing and innovation. Second part of it is we are still operating in an inflationary environment. Yes, there are some components that might be deflationary. But when you add up the total basket of all of our costs, it is still inflationary. The good news is the weight of inflation is moderating, but prices will be higher for us, cost will be higher for us next year than they are this year; it's just at a lower rate than it's been in recent years. The good news in that is that we've taken a significant pricing that was constantly lagging inflation. And you saw that across the industry. Everybody with those margins were below where they were before. I think 2024 is a time where we start to catch up. And we're already seeing that in our business in 2023. I think we'll start to catch up in 2024. Now that's going to present an interesting opportunity for the industry and for us, specifically, which is how much of that improvement, given my comment about volume/mix, is going to drop to the bottom line or reinvested back into growth. And as I sit here today, I don't know what that's going to be, but that's going to be our biggest internal conversation that we're going to have. It's going to always get down to what we believe the return on the investment is for those growth initiatives. Sudhanshu mentioned it before, interest rates are higher, and we believe they're going to stay higher. That has an implication on the macro economy, it has an implication on the consumers and has an implication on some of the financial decisions we make within our business. But when I add those all up, I would say there's still a lot of game left to be played in 2023. And so we're not just jumping to 2024. We're in the planning process right now, but we're really focused on 2023 on delivering our 5% to 6% revenue growth that we committed to and our 6% to 7% adjusted EPS growth. And as we get closer and closer, obviously, on the next earnings call, we'll probably have more on how we think about 2024, but I think those are the given. To your point about how do we think about us going forward on here, it goes back to the playbook I talked about before. You heard on the coffee business, we continue to add roughly 2 million new households per year. A lot of the storm that we weathered on the at-home coffee category is improving as the category improved. Some of the structural things within Keurig in terms of our delayed pricing realization is now getting addressed. Sudhanshu talked about green coffee pricing and our ability to have pricing flow through now on a delayed basis versus everyone else. We talked about that on our last earnings call. And on the cold business, our ability to continue to drive our portfolio through what I talked about before in terms of marketing, adding new businesses is as strong as ever. And yet, we're still in the early days of [ sequel ], we're just get going on La Colombe. So we've got a lot of good stuff in the pipeline here. So we feel good about 2024, but it would be another unique year, like it was in 2018.

Okay. Great. I'd just add on '24 while it's early, and we'll speak more about it as the year goes on, '23 is a year where we're achieving a lot. We're improving the composition of our earnings while also absorbing many of the inflationary headwinds that persist this year. As we look into next year, we are oriented towards our long-term algorithm, but where we believe it's still a little bit of a TBD that [ we'll make high ], but we'll talk about it as we get further in the year. But I think what we're doing this year as it relates to, again, driving the business in a very kind of positive fundamental way while also managing through some of the headwinds gives us confidence that next year, we can start orienting around that long-term algorithm.

That's a good point. And then I think that part of that discussion about where we land in the algorithm is going to be on the investment profile in our business.

Okay. Great. Finally, so Bob, last year, you announced you were leaving the CEO role to focus on external opportunities as Chairman and then quickly return. So any kind of lost focus on M&A because of this? I mean I know there's been activity. And then also what's the status of succession planning?

Yes. On the M&A side, it was great to be able to have dedicated focus on developing the partnerships and driving investments in M&A. We built a much better capability internally for that. So we realized, especially when I came back, that we were going to have to accelerate other players within our organization to be able to do that. It still gives me the opportunity and other key players on our senior team to build those contacts and relationships, but doing a lot of heavy-lifting where we'll delegate some of that down. If you take a look at what we've done in the past year between investments in Athletic acquisition of [ ATP ], C4 and now La Colombe, really lost no momentum on that. And understand, a lot of those -- all of those are usually a result of long-term conversations and relationships. It's very unusual that you show up, you meet somebody and then you acquire their business. Typically, these are multiyear conversations. If you're thinking about selling, if you want to change your distribution system, we should talk. Polar is a great example of that, many-year conversation on that one. And so we continue to do that. And as a result of that, I think our internal M&A capabilities, both in terms of making acquisitions and integrating them, is stronger than ever. On the succession side, the Board's job is to have a succession plan. Any executive change, especially at senior level, has some element of risk to it. So when we made the change a year ago, we were considering internal candidates, external candidates, a very thoughtful process. We were confident in our choice and, of course, we had a backup plan. In that case, the backup plan was me being Executive Chair, staying very close to coach and advise the team during the transition; and then the insurance policy, if something goes wrong, to come back in. We collect an insurance policy, but we did. And so I was only out for 100 days, but very involved. So there's no lost of momentum of all coming back in. And it's coming up on almost a year, which is hard to believe, and we've got a lot done in that year. But let's be clear, there needs to be a succession plan, there will be. And when there is, we'll have the same thought process behind it, which is how do we have a smooth transition and how do we mitigate risk going forward. And I tried to stay connected with the company for a very long time in a variety of roles.

Okay. Great. We are out of time. Time for breakout. So please join me in thanking the KDP team for going here.

Thank you.

Thank you.