Keurig Dr Pepper (KDP:NASDAQ) $34.60

Market cap: $46.9 billion

Investors seeking to pep up portfolios with a quality consumer staple selling at a discount to peers should consider Keurig Dr Pepper (KDP:NASDAQ), the North American beverages pure-play whose attractions include a diverse brand portfolio, pricing power and the cash generation to support progressive dividends and share buybacks.

Shares believes this is a tasty time to buy the shares, since Dr Pepper recently crept past Pepsi as America’s number two soda brand in the culmination of years of steady market share gains.

This demonstrates the peppery soda’s growing appeal and we are excited about Keurig Dr Pepper’s future under new chief executive Tim Cofer, a seasoned consumer packaged goods executive with 25 years of experience at Mondelez (MDLZ:NASDAQ) and a formidable track record of driving growth, leading transformations and creating shareholder value.

While Coca-Cola (KO:NYSE) and PepsiCo (PEP:NASDAQ) capture most of the attention in the soft drinks industry, Keurig Dr Pepper offers similar attractions but at an appealing discount with scope to narrow in the years ahead as the group takes market share and delivers earnings upgrades.

According to Stockopedia, Keurig Dr Pepper’s shares sell for 18 times prospective 2024 earnings with a dividend yield of 2.5% while Coca-Cola trades on 22.6 times forward earnings and PepsiCo 20.9 times, premiums which reflect the perceived higher quality of two big competitors which have greater scale and entrenched global market positions.

However, Keurig Dr Pepper has a palate-pleasing growth story all of its own thanks to a portfolio diversified across more than 125 owned, licensed and partner brands.

Besides producing the iconic, purplish-red canned Dr Pepper tipple and drinks brands ranging from Snapple to Canada Dry, the company also distributes coffee brewers and single-serve coffee pods under the Keurig and Green Mountain brands and continues to diversify its portfolio into faster-growing beverage categories.

In 2023, Dr Pepper edged ahead of Pepsi as the US’s number two soda brand according to data from trade publication Beverage Digest. Unsurprisingly, Coke remained the leader by some margin with 19.2% of the US soda market by volume, while Dr Pepper and Pepsi both had 8.3% with Dr Pepper a smidge ahead which feels significant in terms of momentum.

As Dr Pepper has been gaining, Pepsi has been declining as management has focused on the group’s enormous global snacks business. That leaves Keurig Dr Pepper well-placed for growth from a lower base as a pure-play beverages firm with Cofer leading its next phase of growth.

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