KDP - Keurig Dr Pepper announces strategic partnership with La Colombe

2023-07-20 09:24:47 ET

Keurig Dr Pepper Inc. ( NASDAQ: KDP ) announced that it struck a strategic partnership with La Colombe that includes a long-term sales and distribution agreement for La Colombe ready-to-drink coffee and a long-term licensing, manufacturing and distribution agreement for La Colombe branded K-Cup coffee pods.

La Colombe is described as an independent, high-growth, super premium coffee company that serves consumers across multiple channels, including the retail trade, branded cafes, foodservice and direct to consumer. The brand is the only vertically integrated ready-to-drink coffee company, owning the entire coffee journey from conscious bean sourcing, and premium roasting to the creation of exceptional product experiences for loyal customers.

As part of the arrangement, Keurig Dr Pepper ( KDP ) will also make an equity investment in La Colombe, enabling KDP to participate in the value creation upside expected from the partnership. The bevergae company will make a cash investment in La Colombe of $300M, in exchange for a 33% ownership stake  making KDP the second largest investor in La Colombe behind its majority owner and Chairman. La Colombe plans to use the proceeds to accelerate growth and pay off debt. KDP's investment in La Colombe represents a multiple of approximately 3.0X estimated 2024 consolidated net sales.

Under the long-term sales and distribution agreement in place, KDP will sell and distribute shelf-stable La Colombe RTD coffee beverages in KDP's direct store distribution network, which is expected to drive meaningful growth in the brand's availability across these mainstream retail channels. In addition, KDP will manufacture, sell and distribute La Colombe branded K-Cup coffee pods, under a license agreement, in the U.S. and Canada.

"This partnership will enable KDP to expand its reach into high growth ready-to-drink and super premium coffee segments and will meaningfully increase La Colombe's availability to consumers," noted KDP Chairman and CEO Bob Gamgort.

The transition of La Colombe ready-to-drink coffee distribution to KDP will begin in late 2023, while the launch of La Colombe branded K-Cup pods will occur during 2024. The equity investment, which is subject to regulatory approval, is expected to close by the end of Q3. KDP expects the strategic partnership to be modestly accretive on a full-year basis, beginning in the back half of 2024.

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