Mexico, Canada and beyond: Keurig Dr Pepper’s international growth strategy

That international portfolio currently consists mostly of sales in Mexico and Canada, but the soft drink and coffee giant – created by the merger of Dr Pepper Snapple and Keurig Green Mountain in 2018 – sees opportunities to build in further markets.

It will do that via a ‘buy, build and partner model’ – similar to how it’s building up its business in the US.

Penafiel, Clamato, Squirt...

While enjoying a place alongside The Coca-Cola Company and PepsiCo as one of the biggest US soft drink companies, KDP does not have the global reach of TCCC and PepsiCo.

Keurig Dr Pepper’s US unit pulls in some $13bn in net sales a year: with $9bn coming from soft drinks (boosted by big and growing brands such as Dr Pepper,​ other carbonated beverages, and newer, edgier sports hydration brands); and $4bn from coffee.

The International portfolio is still small in comparison – around $2bn in sales a year – but it’s growing. The portfolio saw sales growth 9% CAGR between 2018 and 2023 – and KDP identifies this as an ‘increasingly significant growth driver’ moving forward.

That opportunity is looking strong: with KDP’s Q2 2024 international net sales increasing 15.5% and coming in at $0.6bn for the quarter.

At the moment, that international business is anchored by Mexico and Canada: markets with strong beverage dynamics.

Latin American brings in around $1bn sales a year for KDP – with 90% of that coming from Mexico. Key brands here are mineral water Penafiel, tomato seafood juice Clamato, grapefruit CSD Squirt and Dr Pepper. And additional countries across Latin America are already reached via export: representing further opportunity.

Canada also accounts for around $1bn in sales a year, driven by Keurig (in fact, some 80% of coffee pods in Canada, by value, are KDP manufactured). That’s accompanied by Canada Dry, Clamato, Crush and around 65 other owned, licensed and partner brands.

“We are very pleased with the momentum in our international segment,” said Sudhanshu Priyadarshi, Chief Financial Officer and President, International at KDP, speaking to analysts on last week’s Q2 earnings call.

“This performance basically reflects a combination of growing categories as well as share gains," he said.

That means both expansion geographically, and into white spaces - such as the low and no alcohol markets in Canada and Mexico. That includes the launch of Schweppes Mocktails in Mexico in 2024, and alcohol-free cocktail Atypique in Canada. 

In Mexico, the company is also seeing success with Peñafiel line extensions and investing in route to market and in cooler in Mexico.

In Canada, the focus continues to be primarily on owned and licensed pods: which have strong momentum for the company.

"We continue to have confidence that this growth contribution from international will continue," said Priyadarshi.

KDP scouts out future growth potential

So what's next in international expansion plans?

“On the future market - first, we have a lot of work to do in our base businesses, basically Mexico and Canada and LAB [Latin American Beverages]," said Priyadarshi. 

"And we have significant opportunity to drive outside growth. But we do look at both inorganic and organic strategy to unlock this potential.

“We have a similar model in those markets to what we have in the U.S. - a buy, build and partner model. And we look at some international markets to see whether we can make some inorganic entry.

"But the main focus right now is driving what we're driving in Mexico and Canada. And while I don't have a number to give you that what will be the mix of it, but the math, you can see last five years, International has grown close to double-digit CAGR and we expect a similar type of growth coming to the business.”