A turbulent year for markets is brewing amid rising geopolitical tensions, stubbornly high inflation and interest rate hikes by central banks which have precipitated a fresh banking crisis.

Given this uncertain backdrop, tilting portfolios towards stocks with defensive characteristics seems an eminently sensible strategy and one overlooked consumer staples name to consider is Keurig Dr Pepper (KDP:NASDAQ).

This North American beverages business is blessed with a diverse brand portfolio and the pricing power to help it offset the impact of cost inflation. The drinks company is serving up resilient earnings growth, whilst returning capital to investors via progressive dividends and buybacks, and a pullback from last summer’s $40 per share level offers a compelling entry point.

While drinks goliaths Coca-Cola (KO:NYSE) and PepsiCo (PEP:NASDAQ) dominate the headlines, lesser-known smaller peer Keurig Dr Pepper offers similar attractions at an attractive discount.

According to Stockopedia, its shares sell for 19.5 times prospective 2023 earnings with a dividend yield of 2.3%, while Coke trades on 23.1 times forward earnings with PepsiCo swapping hands for 24.2 times forecast earnings, premiums which reflect the larger groups’ scale and market leadership positions.

Formed through 2018’s merger between Keurig Green Mountain Coffee and Dr Pepper Snapple, Keurig Dr Pepper is competing with the big boys with a portfolio diversified across more than 125 owned, licensed and partner brands.

Guided by CEO Robert Gamgort, the $49 billion cap not only distributes coffee brewers and single-serve coffee pods under the Keurig and Green Mountain brands, it also produces the iconic Dr Pepper – the peppery soda established back in 1885 – as well as tipples ranging from Snapple and Canada Dry to Sunkist.

Shares likes the fact Keurig Dr Pepper continues to diversify its portfolio into faster-growing beverage categories. The company recently gained a foothold in the performance energy drinks market through a strategic partnership and investment in Nutrabolt, which included a long-term sales and distribution agreement for C4 Energy drinks.

This followed a $50 million investment for a minority stake in American non-alcoholic craft beer market leader Athletic Brewing and the acquisition of non-alcoholic ready-to-drink cocktail brand Atypique.

Keurig Dr Pepper’s resilient results for the year to December 2022 (23 February) revealed double-digit sales growth of 11% to the best part of $14.1 billion, comfortably ahead of the company’s initial guidance for mid-single-digit growth, underpinned by price increases of 10.6% which demonstrated the strength of the brand portfolio.

The company also guided for constant currency sales growth of 5% for 2023 with adjusted earnings per share growth of between 6% and 7%, estimates we believe could prove conservative.

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