Narrow-moat Keurig Dr Pepper KDP today unveiled its CEO succession plan, with the appointment of consumer packaged goods veteran Tim Cofer to the COO role effective in November and the arrangement for him to take the top job from current CEO Bob Gamgort in the second quarter of 2024. We believe Cofer’s CEO experience at publicly listed Central Garden & Pet, and his 25 years of executive roles at wide-moat Mondelez International and predecessor Kraft Foods overseeing business operations, distribution, and strategic integrations, have prepared him well to lead Keurig Dr Pepper in its quest to grow faster and solidify its competitive position in beverage and coffee. We don’t expect any material change in the firm’s growth roadmap or capital allocation priorities, as long-time executive Bob Gamgort will retain the executive chairman role. As such, we are maintaining our Standard Capital Allocation Rating and our $35 fair value estimate. Shares trade in a range we’d consider fairly valued.
We believe Cofer can hit the ground running shortly after he officially joins Keurig Dr Pepper, given his prior experience leading the coffee, chocolate, and packaged foods businesses during his tenure at Mondelez. This should free up time for Gamgort, who has articulated his intention to step back from day-to-day operations to focus on strategic acquisitions. Moreover, Cofer’s top executive roles in key markets such as Asia-Pacific and Europe may help Keurig Dr Pepper, which up until now now has largely been a U.S.-focused company, to identify new growth avenues and channel partners internationally, especially on the coffee side. For beverages though, we think revenue opportunities outside of North America will likely remain limited since Keurig Dr Pepper’s predecessor had sold the international distribution rights of its best-known brands including Dr Pepper to wide-moat Coca-Cola and wide-moat PepsiCo.
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