Fortune sits down with Keurig Dr Pepper CEO Tim Cofer to explore how the $15B beverage giant is outpacing rivals like Pepsi. Cofer breaks down the company’s bold strategy—expanding in energy drinks, innovating in coffee with plastic-free K-Rounds, and navigating inflation and tariffs. Here's how KDP is rewriting the rules of the beverage business under its new leadership.
00:01You may not know it, but all the drinks here are owned by just one company, Keurig Dr. Pepper.
00:08We have a dawn-to-dusk portfolio that literally covers every demand space and every need that a consumer has in terms of beverages.
00:18KDP generated $15 billion in revenue last year.
00:23We put the consumer at the center of everything we do here at Keurig Dr. Pepper.
00:26With both legacy brands like Green Mountain and newer brands like Ghost Energy, they've invested a lot to keep up.
00:34What up, y'all? I got my hands on the new Dr. Pepper Blackberry.
00:37All right, let's try this.
00:39Having that relationship with the consumer, understanding what's important in their lives, understanding the cultural moments that really define that younger generation, gen Xenials, and then tapping into it in a very authentic, one-of-a-kind way.
00:53Smash or pass. Classic Dr. Pepper.
00:55Smash.
00:56And though Dr. Pepper just overtook Pepsi as the second best-selling soft drink in North America, their coffee business is cooling off.
01:05Keurig Dr. Pepper grew up another wave of growth.
01:08Yeah, this is one that I really like, although I always get the bottles.
01:21The big news is that Dr. Pepper has just gone to number two among all soft drinks.
01:26The milestone that you just referenced is one that's been really years in the making.
01:32And I think it's a combination of many factors. I'd point to innovation. I'd point to marketing and sales excellence.
01:39This is a brand unique, one-of-a-kind, oldest soda brand in America since 1885, but a really unique personality.
01:49In 1885, one year before the birth of Coca-Cola, a pharmacist in Waco, Texas, famously mixed 23 soda fountain syrups in an experiment to recreate the drugstore's aroma.
02:03The blend became Dr. Pepper. Fast forward 140 years, the soda is one of the most popular in North America.
02:13And in 2018, Keurig Green Mountain and Dr. Pepper Snapple Group merged in a nearly $19 billion deal to form Keurig Dr. Pepper.
02:22All right, here's some cold beverage. Let's look at some of these.
02:25Today, the beverage powerhouse has over 125 hot and cold drink brands.
02:31And in recent years, Dr. Pepper has seen a surge in popularity.
02:34Yo, we gonna make us a dirty soda.
02:38Let's make a dirty soda, just like the Mormons do.
02:41Dirty soda. It's been a thing in Utah for years where people started spiking soda with everything from cream to flavored syrup.
02:48Delish. All right, that's it. Goodbye.
02:51You have appealed to a much younger audience here. Was that an intentional strategy? How did that happen?
02:58We put the consumer at the center of everything we do here at Keurig Dr. Pepper.
03:02Having that relationship with the consumer, understanding what's important in their lives,
03:07understanding the cultural moment, really defining that younger generation, Gen Zennials,
03:13that was kind of the impetus of us picking up on this dirty soda trend.
03:17And that allowed us to drive that great new innovation, really winning marketing across the patch.
03:23Here's our Ghost lineup. C4, that performance brand, fitness brand.
03:28Bloom, a more female forward brand, started by a young lady.
03:32And then Black Rifle, veteran focused.
03:35The energy drink market has exploded in recent years, fueled by a younger demographic,
03:40wellness trends, and a demand for functional beverages.
03:44Once dominated by Red Bull and Monster, the category has seen new players.
03:48Keurig Dr. Pepper, historically absent from the core energy segment, is now making strategic moves to catch up.
03:55What we saw a few years ago is an opportunity to continue to shape our portfolio in a way that would be more growth accretive.
04:03We love our position in carbonated soft drinks, but we knew there were other verticals, like energy, like sports hydration,
04:10where we had an opportunity to participate more meaningfully.
04:14And so energy is our latest big bet.
04:17Three years ago, we were non-existent in energy.
04:20Today, we have over a six market share, and I have an ambition to be a double-digit market share player here in a couple of years.
04:28One of Keurig Dr. Pepper's competitive advantages is DSD, its direct store delivery network.
04:35While many beverage companies rely on third-party distributors, KDP owns and operates a vast logistics system
04:42that delivers products directly to retail shelves.
04:45In the beverage industry, DSD, direct store delivery, is a scarce asset and it's a critical asset.
04:54Because that consumer is looking for that beverage wherever she shops and needs it right then,
05:00and ideally needs it cold, right?
05:02So DSD, direct store delivery, is a big source of competitive advantage.
05:06And it's one of the reasons why we attract so many partners.
05:09Partners who might not have that critical distribution.
05:14One of the highly unusual things about the company was the combination of hot and cold.
05:20What power did you see in that combination?
05:23You know, I'd start once again at a consumer level.
05:26We have a dawn to dusk portfolio that literally covers every demand space and every need that a consumer has in terms of beverages.
05:35This is one of our newest brewers in terms of the intersection of hot and cold.
05:40This is called the K Brew and Chill.
05:42Yeah.
05:43This is the first brewer that actually makes cold coffee to the touch.
05:48As COVID began, KDP used data from home coffee makers to foresee a spike in demand after the sudden shift to the stay-at-home economy.
05:57The then-CEO ramped production and secured big shipments of cans well before rivals saw the wave building.
06:04But as more Americans returned to offices and cafes, demand for at-home coffee began to soften.
06:11We love our coffee business.
06:13We have over a $4 billion coffee business.
06:16And coffee remains today a ubiquitous category.
06:21In fact, coffee is second only to water as the most consumed beverage today.
06:26Indeed, to your point, however, of late you've seen coffee under pressure.
06:31And so we're really playing the long game on coffee.
06:36Coffee will come back.
06:37And when it does, we're going to be really well positioned to capitalize it, including a revolutionary new system that we'll be launching here in the next year or so.
06:46So this is K Alta, Sean, the new system.
06:49This is obviously a prototype.
06:51We're actually just went into beta testing in consumer homes.
06:55No plastic, no aluminum, 100% coffee.
06:59You can, I mean, smell that.
07:02That's just nothing but coffee with a plant-based coating.
07:07We're disrupting ourselves with a sustainable option that is plastic-free, aluminum-free K rounds.
07:15As the beverage landscape evolves, Keurig Dr. Pepper is betting that a diversified portfolio and a powerful distribution engine will keep it competitive even as consumer tastes continue to shift.
07:27Give that a try.
07:28So it's your favorite ginger ale with a real splash of cherry juice.
07:33It's terrific.
07:37Good luck.
07:380590, hope no parcelfield.
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