Keurig Dr Pepper Inc. Q3 FY2025 Earnings Call

Good morning, and welcome, everyone. We appreciate you taking the time to join us today, both in-person in New York City and over the webcast. Before walking through the agenda, let me first draw your attention to the slide in recognition of the forward-looking statements we'll make today. Please also keep in mind that we will be citing non-GAAP financial measures throughout our remarks and in the presentation that is posted on our website. Now let's discuss what to expect during our time together. Our Chairman, Bob Gamgort, will kick off the formal presentation with welcome remarks, followed by our CEO, Tim Cofer, discussing our value creation framework and the strategic rationale for the JDE Peet's acquisition and our planned separation. Tim and Olivier Lemire, our newly appointed President of U.S. Coffee, will then walk through our future Global Coffee Co business in more detail. After a short break, Eric Gorli, our President of U.S. Refreshment Beverages, will discuss the future Beverage Co; SVP of Finance, Jane Gelfand, will provide an update on financials and capital structure; and Roger Johnson, our Chief Transformation and Supply Chain Officer, will walk through our integration and separation plans. Finally, Tim will provide an overview of Q3 earnings and share some final thoughts. In total, the prepared remarks portion of the day should take around 2.5 hours. We'll then break for 45 minutes to allow the in-person attendees to explore our product showcase, and then we'll return for a Q&A panel. We expect to conclude our event and the webcast at around 1:00 p.m. Eastern Time. We hope it will be a productive and insightful session for you. Let me kick things off by welcoming our Chairman, Bob Gamgort, to the stage, and he will introduce the rest of the Board members joining us today. Over to you, Bob.

Good morning. It's great to see everyone. Thanks for joining us here. We've got updates to provide on KDP in general and on the transaction that we announced in August. We also have some great Q3 results to talk about. So we don't want to forget those either. As Chethan mentioned, we've got a number of directors here today. And what I'd like to do is just take a minute to introduce them. They are mostly all located to our right over here. Pam Patsley is our Lead Independent Director. She chairs our Remuneration Committee. She's our longest-standing director, having been at the Dr. Pepper Snapple Board prior to joining KDP. Tim Cofer, our CEO, you're going to hear a lot from him today. Juliette Hickman, right over there. Juliette serves on our Audit Committee and is one of our very newest directors, Mike Van de Ven, who also serves on our Audit Committee. And the directors are going to be available to interact with you during breaks and during the product demonstration, so please engage with them. Pam and I are going to come back on stage with the management team at the end of the day and answer questions as part of the formal Q&A session. So my purpose today is really to represent the perspective of the Board, and I want to kick off today by offering five points that I think the Board would like to emphasize at the start here. And first of all, KDP has a long and consistent track record of delivering strong results. Since formation, 6% revenue CAGR, 11% EPS CAGR, and that places us in the top tier of CPG peers. But from a Board perspective, our job is not to look backwards and congratulate ourselves on good results. It's really to position the company for future success. And that's why we have conviction in this acquisition and separation. What's important is for you to have more detailed information, more insight in our thought process. And that's what we want to do today so that you can come along with us on our journey on how we came to that conclusion and why we continue to have great confidence in the value creation potential of the transactions. Having said that, we heard your feedback. We certainly noted the market reaction and that made it really clear to us that we needed a day like today to better explain the strategy and the thought process behind it. We also recognized we needed to change some of the executional elements of the transaction. You saw the press release today. Those are good developments, and we'll talk about more optionality going forward. And we really think that we're on the right track and are being very responsive to your feedback. So going from today to this future end state requires great execution. So in addition to talking about the end state, we need to give you confidence in execution. And we'll do that today by showing you our integration plans. But I think more importantly, we're going to give you exposure to more people on our management team who are actually responsible for that and for running the company and making sure that we continue to deliver great results like we just did in Q3. So you'll meet them. And then we're going to be flexible. I mean, you've seen that we've been flexible since announcement. We're going to look for other opportunities to maximize value. And we'll talk about some of the areas where we're thinking about flexibility going forward throughout this presentation. So I think there are three points that I would like to comment on before I turn it over to Tim because I'm in a unique position to do this. So, first of all, is the global coffee category. So you'll find it interesting, but the left-hand side there is my trophy from 1985. This was an on-campus competition sponsored by General Foods, and it was called the Maxwell House brand management challenge, and it was about the coffee category. And my team won it, which is why we have the trophy. It sparked my career in CPG. It also is how I entered General Foods, and it also started a 40-year relationship with the coffee category. So I've seen it over an extended period of time. So, there's no question in the post-COVID period, we saw a slowdown in the global coffee category. We also are beginning to see signs of recovery. And what typically happens is a three-year window starts to become reality. We never thought that this was anything more than temporary or cyclical. It's not structural. And if you look at the category over 40 years, you will see periods of time where the category slowed down only to accelerate rapidly afterwards. And that's exactly where we think we are right now. We're in the beginning of a recovery period. Over that 40-year period, the volume growth of coffee is a 2% CAGR. And we know that in CPG, volume growth, real growth is scarce and important. But it's undeniable when you look at a 40-year trend on coffee, the trajectory continues to be going in the right direction. Actually, Tim has a chart that will show you that very, very clearly. So let's think about this. If you believe it's cyclical, and we're in the beginning of a recovery. We have a strong business in KDP coffee anchored by Keurig. We really believe to succeed going forward in coffee, you've got to be global. We'll talk a bit about that. So if you want to form a global coffee powerhouse, the best partner is JDE Peet's. This is a scarce and valuable asset. It's a high quality, and honestly, there is no alternative other than matching these two businesses together. And when you see the fit, it is striking how much each business complements each other. And we're confident that together, we will form a formidable global coffee competitor. So that gets to another question that came up from time to time in the past couple of weeks, which is what happened to the investment thesis? How has it changed? So I'll start with a real obvious comment, which is since we put the companies together seven years ago, a lot has changed in the world. Competitors, consumers, our customers in the way they think about it. Certainly, the macro environment is different. So I think it's natural and necessary to evolve our strategy as well. In 2018, the play was a really good insight at that point in time. We took two subscale beverage companies who were solely focused on North America. We brought them together to create a beverage challenger of scale, and it was wildly successful. If you take a look at what's happened over the past seven years, I gave you the aggregate financial performance. But beyond that, the strength of each individual company enhanced significantly over that time. So if we're going to put together these two companies to form a global coffee competitor, and we'll talk about why global is important later, we could run them together. It is an option to run them as one company, but we think it is optimal to separate them. One company focused on a global opportunity, which is a very different management mindset. Obviously, on one category, coffee across the entire world of all forms and the other to continue to run this very valuable North American refreshment beverage growth machine that has significant runway still in front of it. It also gives investors a choice in two different styles of running these companies. More to come on that, but it really shows that there was this natural evolution that started in 2018 and is our choice to run them separately. You're going to hear from a number of speakers. And I think the third area where I can offer unique perspective is my confidence in the management team. Tim, who you're going to hear from right after me, will run the combined businesses. And then upon separation, he will be the CEO of our stand-alone beverage company. Olivier, Eric and Roger, I have worked with since the take private of Keurig in 2016. My experience with Jane goes back further than that. Jane was at Barclays in 2012, and she was part of the team that supported the IPO of Pinnacle Foods, where I was CEO. And the reason I give you that time period of my experience is I have seen this team deliver across a wide variety of challenging situations time and time again. I have the highest level of confidence in their ability to execute, and that gives me confidence that we can get from where we are today to an outstanding end game when we separate these companies. So, with that, let me turn it over to Tim Cofer, our CEO. He'll take you through a significant amount of content along with all these other presenters. And as I said upfront, I look forward to being back up here at the end with Pam, and we'll be happy to answer your questions at that time. So, Tim? Over to you.

All right. Good morning, everyone. Great to see all of you again. I hope you've had a chance already to enjoy some of the amazing beverages that we have across these stations for those of you that are here live with us at NASDAQ. I can imagine the coffee stations were hit pretty hard it being a Monday morning and all. So, building on Bob's comments, we have strong conviction in the strategic and financial merits of this acquisition of JDE Peet's and the subsequent separation into these two pure-play companies. We are creating North America's most agile beverage challenger and a true global coffee powerhouse. At the same time, as Bob said, I have spent the last two months absorbing shareholder feedback, and of course, the initial market reaction post the announcement. And I recognize that there are a few areas of concern as well as some open questions that would benefit from more explanation. That is why we're here today. So, in my discussions with each of you, I think the questions have largely spanned these four areas. Why is JDE Peet's the right acquisition? What does the separation into Beverage Co and Global Coffee Co. uniquely enable? How will we optimize KDP's capital structure post the acquisition and establish appropriate balance sheets for each of these separate entities? And how will we ensure that KDP delivers with success throughout this process. Over the next couple of hours, we will answer these questions and more. Now before diving into these topics, let's reground you in our business and our strategy. We operate with a sole focus on beverages. I truly believe this is the best sector in CPG. It's large. It generates $1 trillion at a global level. It's growing. We expect a mid-single-digit CAGR in the coming years, supported by structural tailwinds to sustain that momentum. It's dynamic with ever-evolving consumer preferences that create endless opportunities to drive consistent growth through innovation, through mix management, through premiumization. It's financially attractive, strong profitability, compelling industry return profiles. So we understand this beverage industry very well, and we have a proven and successful value creation strategy. At the core of this, as you see on this slide, our five pillars. They serve as our blueprint for how we drive sustainable, consistent, compelling performance over time. The first three of those are commercial priorities, broadly geared around the top line. The true enterprise enablers support that growth in a profitable, efficient and high-return way. Let me touch very briefly on each one, championing consumer-obsessed brand building. This means being consumer-led, consumer-centric as we nurture and expand our iconic brands, shaping our now and next beverage portfolio to access growth accretive white spaces via our flexible build, buy or partner model, amplifying our route-to-market advantage, strengthening our multichannel leadership with differentiated distribution capabilities, generating fuel for growth by reinforcing a continuous productivity mindset and a lean overhead operating model and, of course, dynamically allocating capital to support that long-term value creation. How have we applied that to our businesses? Let's start with Refreshment Beverage. Our results speak for themselves. Our flagship Dr. Pepper, we've turned this into the CSD category's innovation and marketing leader. We've driven nearly a decade of consistent market share gains, and we've established ourselves as the #2 market share position in the category. We've thoughtfully built out meaningful incremental growth platforms in white spaces that we previously didn't compete in like energy and sports hydration. And we've strengthened our competitively advantaged route-to-market DSD network through capital-efficient territory expansions through brand partnerships and capability investments. The result of the efforts you see at the bottom of the page, a high single-digit net sales CAGR since 2018. And we're just getting started with business momentum that should support continued sustained growth into the future. What about in coffee? Look, we know the operating backdrop in U.S. Coffee has been more dynamic over the last few years, particularly in that post-COVID world and the multiple commodity cycles like the one we're in now. And yet, we've made important strides. We've reinforced Keurig's position as the #1 North American single-serve system across both brewers and pods. We've extended our portfolio into exciting growth areas like cold and super premium. We've continued to expand the number of households that brew Keurig every morning now at 47 million strong and growing. And we are preparing to catalyze the next chapter of our growth agenda with disruptive innovation. We've invested in unique assets that drive competitive advantage, including our differentiated and highly profitable direct-to-consumer e-commerce capabilities. All of these initiatives have supported a steady low single-digit sales CAGR in recent years, consistent with our go-forward expectations. So through these commercial achievements as well as robust productivity and thoughtful cash deployment, we've delivered strong results at an enterprise level. Since KDP's formation in 2018, as you see on this slide, we've grown net sales at a 6% CAGR. We've grown adjusted EPS at an 11% CAGR, while also returning meaningful cash to our shareholders. Now at the same time, both our businesses and the external environment have changed in significant ways since 2018. Just as Bob discussed earlier, the original merger thesis was really predicated on combining what at the time was two subscale businesses. We did that to create a North American beverage challenger. What's happened in the last seven years? Our refreshment beverage business is no longer subscale. In fact, it is the same size today as total KDP at merger. Our actions to evolve our ref bev portfolio to strengthen our route to market have also structurally raised the organic profile of this business relative to 2018. And in coffee, while we've made progress, we acknowledge that the category growth trend has fallen short of our expectations in recent years. And while we're the clear leader in North American single-serve, that business is arguably subscale in particular, relative to our global competitors that can leverage broader advantages in technology, in sourcing and who can participate across the entire global coffee category. So as a Board and a management team, we observed these changes since 2018. We discussed these and we reached a couple of conclusions. First, our refreshment beverage business has both the scale and the advantaged positioning to succeed, as Bob said, either as a combined company or a stand-alone. And second, while our coffee business has clear strengths, it is not yet optimized to reach its full potential in current form. And we decided as a Board that it needed further assessment, and it could benefit from potential enhancement. So the first step in that assessment was to step back and take a fresh look at the coffee category. You've heard Bob's story 40 years ago, the Maxwell House Award. I've also spent a lot of my career in coffee in a past life, different employer. We're long-term believers in the attractiveness of the global coffee category. We believe in the structural tailwinds supporting future growth, but we did the analysis once again to underwrite our confidence. Let's start with the consumer lens. Coffee remains a preferred way to address the universal human need for energy, and it's ever more important these days. Coffee is a highly emotional category. It evokes passion. It's artisanal. Craft specialization plays a key role in premiumizing the category, which is a clear growth tailwind. Coffee is habitual. Coffee has unmatched global frequency of consumption. And coffee is healthy, even as defined by regulators, both in this country and globally. Simply put, coffee is the #1 beverage American consumers cannot live without, and I am certainly one of them. And it enjoys a similar status in so many markets around the world. Now to see the evidence of this category's essential nature, look at the long-term trend on the chart. Bob mentioned this in his opening remarks. What you'll see over 40 years is a low single-digit global volume growth. And in dollar terms, recent growth trends are even faster, thanks to premiumization and innovation. Importantly, the structural factors supporting consumption growth remain as powerful as ever. And I would highlight that increased adoption, especially in emerging markets as younger generations embrace coffee culture and begin to shift versus historic tea culture is yet another growth tailwind long term. Now as with many categories, coffee goes through cycles, including most recently this post-COVID lull that we've experienced. But as Bob said, and as this chart, I think, pays off nicely, the historic pattern is that these lulls are temporary and the category recovers to its long-term growth trajectory. We're seeing signs of this right now in the United States; this post-COVID recovery is underway. Category volume trends bottomed out in 2022. They've been stabilizing ever since. And encouragingly, this dynamic also holds true this year, year-to-date 2025, even as this high inflation has fueled significant price increases. You see here that the elasticities on an absolute basis compare favorably to the historic trend. So that was our assessment, our step back assessment on the coffee category. With renewed confidence in the attractiveness of that global coffee category, our challenge was then to determine how do we optimize our coffee business. Our goal here was to create an even stronger business with higher growth prospects, greater resilience and improved operational efficiencies. And look, we considered all options. All options were on the table: sell the business, spin it off as a stand-alone, continue to operate it as part of KDP. But ultimately, after thorough diligence, our management team and our Board of Directors determined that the acquisition of JDE Peet's represented the most attractive and actionable path for maximizing the value of our coffee business. Here's the reality. Scale matters in coffee. The category addresses a universal need state. Common formats, common consumer trends, similar premiumization opportunities across markets. This means that consumer insights, innovation, technologies can be leveraged and reapplied across markets. And of course, in coffee, there are clear economies of scale in operations and costs. Bob said it in his opening remarks, JDE Peet's is one of the very few assets of global scale in this category, and it will step change Keurig in several ways. You see it on this chart. Our coffee net sales will more than triple to $16 billion, making us the second largest global coffee player and the largest pure play. We'll gain access to additional geographies, including many high-growth markets. We'll become a significantly larger manufacturer and the #1 coffee buyer in the world. These elements are critical to fortifying Keurig as an even stronger coffee player. In JDE Peet's, we also see a unique fit with the Keurig business. Through this combination, we can bring together the best of both companies. Keurig's North American leadership, know-how, innovation prowess and JDE Peet's global reach, leading brands and full format expertise. The resulting Global Coffee Co. will enjoy an advantaged and complementary portfolio, incremental revenue opportunities, visible, actionable, achievable cost synergies and greater resilience. Let's unpack each of these four. Starting with advantaged and complementary portfolio. The combined company will be able to benefit from global category growth, given its strong brand portfolio, including $4 billion-plus trademarks, broad participation across every coffee subsegment and geographic diversification. Moving to enhanced revenue potential. We see upside potential from scaling Keurig's system expertise and JDE Peet's format capabilities across more brands and more markets, capitalizing on the growth runway for Peet's here in the United States and extending Keurig's next-generation coffee systems beyond North America. The third is clear and actionable cost synergies. We will discuss this in more detail, but we have identified clear and actionable efficiencies that we know will generate $400 million in savings in the next three years. These synergies can fund reinvestment while also supporting earnings growth. And finally, increased resilience. Obviously, as a larger company with greater supply chain capabilities, we will be much better positioned to navigate external volatility like tariffs and commodity fluctuations. Together, the union of JDE Peet's and Keurig will create a stronger business that is more efficient and more capable of delivering consistent, profitable growth. So, upon closure of the JDE Peet's acquisition, we will, for the first time, have scaled advantage platforms in both Refreshment Beverages and coffee. Through the subsequent separation, each of these businesses will become that focused pure play with attractive yet distinct profiles. Beverage Co., a growth-oriented player, supported by a leading brand portfolio, a competitively advantaged route to market. The business will be disruptive. The business will be entrepreneurial, and it will deliver an attractive growth profile with potential upside from strategic optionality over time. Global Coffee Co. will be a steady grower with strong and resilient cash flow, enhanced by near-term synergy capture opportunities. Performance will be supported by differentiated deep coffee capabilities and expertise. And as we've said earlier, while we could conceivably run these two businesses together, we believe the separation will provide clear benefits to both entities. What are those benefits? First, focus. Each company will tailor its strategy, its operating model, its capital allocation priorities to align with distinct category and geographic exposures. Culture. The respective leadership teams will have strategic clarity, and we can structure and incentivize our organizations accordingly. Strategic optionality. Each stand-alone entity can think creatively and flexibly in pursuing additional value creation opportunities. And finally, shareholder benefits. Investors will be offered the opportunity for two very attractive yet distinct investment opportunities. Now as I said at the beginning of my remarks, we have conviction in these transactions, and we have a clear view of the compelling destination once this is complete. It's now on us to execute with excellence. And that all begins with a robust plan and the right team. So we've recently established a transformation management office or a TMO to drive this comprehensive integration program. Bob mentioned it earlier; it will be led by our newly appointed Chief Transformation and Supply Chain Officer, Roger Johnson. You'll hear more from Roger in a minute. The TMO structure is designed to establish the processes and the workflows to guide our integration teams while also importantly, freeing up the rest of the KDP organization to focus on maintaining that great base business momentum that you've seen us deliver again in Q3. The TMO will be comprised of a dedicated internal team in partnership with key advisers that will be responsible for the integration planning, the future company design for the value capture. Our Board of Directors and my executive steering committee will obviously provide support and oversight. Importantly, many of these leaders, team members, advisers, obviously have significant experience in executing complex transactions like this. As just one example, among others, I was fortunate enough to have a central role in the Kraft acquisition of Cadbury and the subsequent separation into Mondelez International and Kraft Foods Group. Many of the other leaders, including those you'll hear from today, have had similar experience with complex transactions like this. We will draw upon those collective experiences to further de-risk the next steps. So one important element of executing these transactions is ensuring that we have the appropriate capital structures for KDP at acquisition close and importantly, for each independent entity upon separation. We are well aware that some investors were uncomfortable with our initially proposed post-transaction leverage. And as you've seen today in the press release, we've taken meaningful action to address those concerns. So we've announced two cost-efficient transactions, a minority investment into a newly created coffee manufacturing JV and a private convertible investment into our future Beverage Co. These two equity-like instruments will help to shore up our balance sheet. As you see on this slide and in the release, we now expect net leverage to be below 5x when the acquisition closes, and we're also targeting initial leverage ranges for Bev Co. in a range of 3.5x to 4x and Global Coffee Co. in a range of 3.75x to 4.25x. Based on the anticipated cost of this new financing, we continue to expect very attractive returns on our JDE Peet's acquisition, including year-one EPS accretion of approximately 10%. These capital raises also have the benefit of partnering and aligning KDP with sophisticated strategic investors, including Apollo and KKR, who understand and appreciate our vision. Let me walk you through the key acquisition, integration and separation milestones from here. We said this back when we announced the deal in late August. We continue to expect that the JDE Peet's deal will close in the first half of 2026. Our path to separation will be milestone-based with a plan for us to be operationally ready by the end of 2026. But before separating, we want the following conditions to be in place. First, a quick start to synergy capture; second, balance sheet readiness for both companies. Third, an independent Board of Directors and experienced leadership team for each stand-alone company; and finally, market conditions that are conducive. But as we've said all along, we will be flexible in our approach to secure the best outcome. In that spirit, as we optimize from here, one element where we're taking a refreshed approach is to our leadership. We've made the decision to not name the leader of Global Coffee Co. at this time, and we no longer intend for Sudhanshu Priyadarshi to serve in that future role. We will name full leadership teams of both new companies at a future date closer to separation. So, before we unpack both Global Coffee Co. and Beverage Co., let me conclude with three priorities to maximize value creation. First, maintaining base business momentum. As you saw this morning, we reported strong Q3 results. In fact, we raised net sales outlook, and we reaffirmed our full year EPS guidance. You should have also seen that JDE Peet's this morning reaffirmed its full year guidance. Indeed, we are initiating this transformation from a position of strength. Second priority, integrating with excellence to achieve our key deal objectives. You'll hear more from Roger about the processes and the plans we're putting in place to underwrite successful outcomes. And third, setting up each company for success with focused strategies, tailored operating models, purposeful capital allocation. After the separation, we expect both companies will offer their shareholders quality, consistency, simplicity and be viewed as world-class leaders in their sectors. Okay. With that, let's move to Global Coffee Co. We're going to bring this new company to life in a couple of sections. First, I'll invite Olivier Lemire to stage. He's our recently appointed President of U.S. Coffee, and he'll give an overview of the attractive Keurig Coffee business. I'll then return to talk about JDE Peet's specifically and then the combined Global Coffee Co. Real quick additional intro on Olivier. He is a tremendous leader. He's been with KDP for 14 years. The last four, he was President of our KDP Canada business. And I can tell you, in that capacity, he led KDP Canada to significant coffee outperformance, consistently growing pod volume, brewer volume, net sales and operating income. Indeed, Olivier knows the coffee business. He has deep experience with integrations as well, including steering the former Keurig Canada and Canada Dry, Mott's integration. Overall, he built a very strong Canadian organization, and we're very excited for him to take this U.S. coffee desk. Olivier, over to you.

Thanks, Tim. Good morning, everyone. After 14 years in the coffee and beverage industry, I've seen firsthand the unique power of coffee to bring people together—friends, families, colleagues; there is no other beverage like it. From my time in coffee origin countries with farmers to walking the floors of our coffee labs and manufacturing facilities to building strong relationships with our many brand partners, my passion for coffee and conviction about the future of our coffee business has only grown. It is a real honor to now lead our U.S. coffee business and the amazing team behind the Keurig system. With this system, we've created and now drive a highly profitable subsegment of the coffee category. Over the last 12 months, we've driven $4.6 billion in net sales and $1.4 billion in adjusted EBITDA. We are trusted by some of the best coffee brands in the world with unmatched capability, quality and scale—brands like Starbucks, Lavazza, Dunkin', Peet's, McCafé, La Colombe and Tim Hortons, among many others. The same goes for our own powerhouse coffee brands: Green Mountain Coffee, The Original Donut Shop and Van Houtte. Keurig is a beloved brand, and it's all driven by the Keurig name. Keurig has 94% brand awareness and is truly the undisputed leader in single-serve coffee. It is one of those businesses that have become synonymous with their category. People don't say, “I hope our vacation rental has a single-serve coffee maker.” They say, “I hope our Airbnb has a Keurig.” We don't take that lightly. Since 2019, we've added 13 million active households, reaching 47 million in North America by 2024. We've gone from being one in four coffee makers sold at retail to being one in three today. The Keurig system has continued to gain market share in both coffee makers and coffee formats, with K-Cup pods now the largest coffee format and driving twice the retail sales of the next closest format. From the start, the Keurig system was designed to offer variety and choice to our consumers, and this open system drives significant value for all stakeholders. Consumers love us for quality, convenience and the variety of brands and beverages they can enjoy. Our partners value our quality, system expertise and coffee know-how. Retailers recognize that we've driven premiumization in the coffee category, with single-serve and K-Cup pods delivering more revenue per cup. This creates a very strong growth engine: more brands and more variety appeal to more households, generating more profit to be reinvested in the system. We also have a strong track record of building and accelerating coffee brands, starting with our own Green Mountain Coffee, now realizing more than $800 million in retail sales annually and holding the number two position in the Keurig system. It is part of a robust owned and licensed portfolio that drives strong distribution and retail activation. A few examples: McCafé was a brand in decline when it transitioned to our system in mid-2020 and has grown share every year since. Lavazza is the fastest-growing brand since we took over selling rights, and we see accelerating distribution and retail activation. The Original Donut Shop shows that flavored coffee is growing faster than black coffee and is the leader in flavored coffee growth with unique partnerships and beverage types. In addition, we have a powerful asset in Keurig.com. The Keurig.com consumer consumes twice the daily average and has five times the lifetime value versus the average household. While Keurig.com is an excellent sales channel for our coffee business, it is also a significant driver of household penetration and is the fourth-largest sales channel for brewers by volume. The site enables us to have a one-on-one relationship with more than 1.5 million consumers each month. If it were part of our retail channels, Keurig.com would be among our top five, alongside other industry giants. For those who know our brand history, Keurig was founded in the workplace to deliver fresh-brewed coffee over the dreaded still pot. On that foundation, we've built a strong away-from-home business with 650,000 workplaces with active brewers and 1.2 million hotel rooms. We see significant upside in large away-from-home areas—primarily corporate workplaces, manufacturing, healthcare and construction. There is a powerful synergistic relationship between our out-of-home and at-home channels, with workplaces serving as a great trial environment for both the Keurig system and our many brands. Our coffee business has delivered meaningful productivity over the last five years, averaging 4% year-over-year cost savings through initiatives ranging from tactical to strategic. These programs include brewer-direct import, large nestable compacts, lightweight cups and meaningful reductions across process and product waste. Our productivity initiatives often serve the dual purpose of generating cost savings and advancing our sustainability agenda—reducing packaging, eliminating waste and driving more efficient logistics. By being cost conscious and driving a productivity mindset throughout the organization, we unlock fuel to reinvest in our business. With that fuel, we can drive and accelerate our strategic imperatives. We know our business is strong, and we know we can improve. Over the last year, we've refined our consumer-centric strategy and are focused on four key areas: driving household penetration, growing premium coffee, scaling cold coffee solutions and defining the future coffee system. For Keurig, we're excited about a new marketing campaign launching in Q4 that will have strong in-market presence. With consumer insights and data-driven campaigns, we believe we can continue to unlock household penetration. On premium coffee, we are about to launch our first coffee brand with the Keurig name, the Keurig Coffee Collective. It will be our first scaled premium owned brand, featuring elevated packaging, 30% more coffee per cup and distinctively delicious blends. We're also leaning into cold coffee solutions with innovations across brewers, pods and ready-to-drink offerings. We recently launched new refreshers inspired by TikTok trends and found new ways for consumers to customize their favorite cold beverages. As you would have seen in the product showcase, and I invite you to see at the break, we are getting ready to disrupt the coffee category again with the launch of a breakthrough system, Keurig Alta. Alta uses K-round plastic-free and aluminum-free pods and is designed to offer a large range of barista-style beverages, including rich cups of coffee, authentic espresso and a variety of coffee-shop-style beverages, hot or cold. We have completed multiple rounds of in-home testing with the Keurig Alta system, supported by pilot production of the K-rounds, and we look forward to sharing this innovative format with consumers soon. While it's early days, we are excited about the potential to scale this innovation in the future. With that, I'd like to welcome Tim back up to speak to JDE Peet's and how these two complementary businesses will be even stronger together. Thank you.

All right. I will put in a plug for those last two coffees that Olivier shared with you. If you've not tried our new Keurig Coffee Collective, for those of you in the room, it's in that station back there, my favorite new K-Cup pod, outstanding cup of coffee. And then Alta, please be sure and try Alta before you go today. So I will start this next section with thoughts on JDE Peet's, including an overview of the business, why we think it's such a compelling asset and some of the recent strategic changes that are underway at that management team. Then I'll discuss Global Coffee Co. and highlight how the complementary nature of JDE Peet's and Keurig creates this attractive pure play that's truly positioned to win. So if you're wondering, what am I doing here? Why am I the guy talking about JDE Peet's? The answers are, number one, I will be responsible for it while we run for a period of time as a combined company. Number two is I do have an up close perspective on this, having spent months of diligence on this acquisition and getting to meet and interact with this leadership team. And number three is, believe it or not, I used to run some of these brands back in the past life, brands like Jacobs, Tassimo, Kenco, Gevalia and others. So I actually think I know firsthand the strength of these brands and the roles that they play in the lives of our consumers and our customers. I also want to tell you, we are very pleased that we actually have the CEO of JDE Peet's, Rafa Oliveira, in the room. Rafa, you can give a quick wave. There he is. He's in the audience. Rafa and I, as you might imagine, have gotten to know each other pretty well over the last few months, and he's actually here stateside for a couple of days. Tomorrow, he'll be at our Boston headquarters as we're advancing our integration and transformation agenda. So let's talk about JDE Peet's. JDE Peet's is a unique asset. It's large. It's profitable. It is a global pure-play coffee company, $11 billion in net sales, nearly $2 billion in adjusted EBITDA. The company holds the #1 or the #2 share position in dozens of markets around the world, reflecting an enviable portfolio of leading coffee brands. The business is anchored by billion-dollar icons like Peet's, L'OR, Jacobs, but it also boasts a sizable regional and local portfolio, brands like Pilão, Moccona and Friele, among others. JDE is also distinguished by its rich coffee heritage. This company has deep, deep coffee expertise. Its participation in coffee dates back to the 1700s with the founding of Douwe Egberts in the Netherlands, and its capabilities are quite strong. As one example, we put it on this chart, the company has the ability to produce over 1,000 distinct coffee blends. You can imagine that's a skill and capability, especially useful in times of extreme coffee inflation and the tariff volatility. For me, one of the simplest ways to understand this company's strength is by looking at a map of the world. Many countries have large and vibrant coffee categories, and JDE Peet's is present in most of those countries, often with a leading position. Coffee is a category in which the market leader is frequently a regional or local favorite, not necessarily a global brand. Consumers are fiercely loyal to their local brands, particularly in the largest and most developed coffee markets. And JDE Peet's has a portfolio aligned to that reality. So in the Netherlands and Belgium, Douwe Egberts is the category standard. In the U.K., it's Kenco. In Brazil, it's Pilão. In Germany and actually much of Central and Eastern Europe, it's Jacobs. And in France, it's L'OR. And that's just scratching the surface of their market leadership. So we recognize that this company's brands may be less familiar to an American audience. But as you can see, they're powerful equities with strong resonance in their core markets. And I'd be remiss to say that these brands also produce a very good tasting cup of coffee, each very individualized kind of taste of the nation qualities. Again, for those of you that are here, there's a station on my back left there that will give you a nice assortment of their brands, and I highly recommend, if you haven't had enough coffee already, please try it at the next break. Another hallmark of JDE Peet's is the broad category participation. The company has an offering spanning all major coffee formats, from whole bean, roast and ground, single-serve, liquid, ready-to-drink concentrate. The portfolio also captures the full price tiers from mainstream to super premium. The channel diversity is universal, including all major at-home and away-from-home channels where coffee is consumed. You can imagine there are significant strategic benefits to this broad category participation. Now given its advantaged brand portfolio and strong capabilities, it's probably no surprise that JDE Peet's is also a leading partner to retailers across the globe. I'll give you one example. This chart here of a retailer, a major retailer in France. L'OR actually holds the distinction as the #1 brand in all of CPG, driving growth for the retail trade in France over the last 10 years, ahead of even the biggest global trademarks like Coca-Cola. These photos that you see on the slide underscore the level of in-store activation that retailers support because of the power of these coffee brands and the central role that they play in building shopper basket and driving category growth. JDE Peet's brand strength also extends to the consumer. Its portfolio has beloved trademarks, obviously evidenced by those strong market shares I showed you. But what's equally important and I think encouraging for future growth prospects is the brand's particular resonance among younger consumers. In some markets, here are three examples, the sub-30-year-old demographic prefers the leading JDE Peet's brand by nearly a 2:1 margin relative to the next largest player. That type of brand loyalty among the next generation is priceless. As younger consumers grow their spending and influence in coffee as they age, JDE Peet's appeal to these groups should represent a growth tailwind. The company also has brands with a demonstrated ability to stretch. And I'll give you two examples on this chart. Take L'OR. L'OR began as a roast and ground coffee staple, but it's now expanded into basically all other consumable formats, including into appliances. And these adjacencies now account for a meaningful percent of total L'OR brand sales. The other example, Jacobs. Jacobs started as a German icon. But over the last couple of decades has successfully established #1 positions across Central and Eastern Europe, in fact, in 19 markets. Now more than half the sales of Jacobs is outside of its home country of Germany. I think this is notable because one of the incremental revenue opportunities from combining Keurig and JDE Peet's is the pairing of our technology and our innovation with JDE Peet's brands. We believe the stretch potential of these JDE Peet's trademarks can create intriguing growth opportunities down the road. Beyond the commercial success, the JDE Peet's business has also demonstrated resilient financial performance. I'm sure I don't need to tell anyone in this room. In fact, a few chats I did prior to the start reflect this, that the last few years has been marked by quite a bit of unusual level of green coffee inflation, triple-digit cumulative cost pressure on Arabica and Robusta. You see the numbers on this chart. And yet, even as a coffee pure play, this business has delivered steady and consistent gross profit growth. I think another indication of brand strength. Bringing it all together, it's clear for us that JDE Peet's has a strong structural foundation. This is a good business. It's got iconic brands. It's got significant capabilities. Yet it's also true that it's a business with significant value creation potential that has yet to be fully realized. To be clear, JDE Peet's management team recognized this, and they've already begun the important work to begin to capture that potential upside. They hosted a Capital Markets Day back in July, and they set a path to become a more agile, more focused, more commercially capable organization. I visited Amsterdam a few times with Rafa and team, and I can already see the early stages of this important cultural shift taking hold. The centerpiece of their approach is an evolved strategy, and they aptly call it reignite the amazing. Now there are many elements to the plan, but I'll just highlight a few notable points: an emphasis on fewer, bigger bets with resources and management attention going towards the largest brands, greater consumer centricity and commercial excellence and a stepped-up productivity flywheel to unlock savings, flexibility and agility. The strategy makes sense, and it's definitely aligned with CPG best practices and operating principles. And upon integrating JDE Peet's with Keurig, we would expect to continue this work and harmonize it into a combined strategic playbook for Global Coffee Co. It remains early days as they've embarked on this new strategy, but I would tell you, there's already some initial proof points showing up from this refined strategic approach. I'll give you a couple of examples. On big bets, JDE Peet's is prioritizing leveraging insights and infrastructure to launch compelling innovations and ideas across multiple brands and multiple geographies in a highly efficient and profitable way. As one example, right now, there's a hot trend out there called Dubai Chocolate. JDE Peet's was able to quickly launch a Dubai Chocolate coffee mix across multiple brands in 20 markets this year using this platforming approach. Less visibly, but no less critically, the company has also made progress in refining its marketing approach and building capabilities in key areas like revenue growth management. We certainly know from experience, the payback from these investments can be very high when you get it right. And finally, JDE Peet's is also beginning to progress its productivity program that they unveiled on their Capital Markets Day. The plan targets EUR 500 million in savings through 2032 with roughly half being reinvested in the business. Four primary areas underpinning this target. Portfolio simplification across brands and SKUs and the manufacturing and distribution footprint, simplified ways of working, which involves removing complexity and generating savings accordingly, continuous improvement in sourcing, in design and plant level productivity and driving improvements in the company's asset-light route-to-market system. As you can imagine, we carefully vetted this program as part of our diligence, and we're confident that the savings are achievable. JDE Peet's has already begun to implement this program, including some plant closures and other operating efficiencies that they announced this morning in their press release. So you've now heard Olivier talk about the strengths and our future growth plans for Keurig. You've now heard me walk through the virtues of JDE Peet's. Let's now talk about what happens when we put these businesses together. So let's start with some background. These businesses are strong in their own right. They've proven resilient, and they've delivered solid performance in a very challenging operating backdrop the last few years. You see on this chart, sales growth and adjusted EBITDA ranging in the low single digits. And importantly, each business has proven highly cash generative. For example, you see here, Keurig, we expect to deliver more than $600 million of free cash flow this year. And JDE Peet's this morning reaffirmed its outlook for the year of EUR 1 billion, about $1.2 billion. When we put these two companies together, we expect even stronger top and bottom line growth going forward. And let me take you through why we believe that. To start, Global Coffee Co. will be an advantaged market leader in the $400 billion global coffee category. And as I said previously, scale matters in coffee. This business will have it. Global Coffee Co. will be the #2 coffee player in the world by revenue and the #1 pure play operating across 100 countries. It will have a strong portfolio of brands, diversified across formats, across channels. It will have a strong financial profile, $16 billion in net sales and over $3 billion in adjusted EBITDA. The combined entity will have a broader product line than either stand-alone company had, but in particular, relative to Keurig. Prior to the combination, as you see on this first bar, our business was almost exclusively focused on the single-serve subcategory here in North America. But with the addition of JDE Peet's, you now see Global Coffee Co. will have a format mix that's far more closely aligned with the global category split and yet still with a favorable skew to the high-margin single-serve segment and other more value-add areas. What does that mean? Global Coffee Co. can then fully participate in the growth of the entire category, both in meeting existing consumer preferences and emerging growth opportunities. Similarly, as a true multinational now, Global Coffee Co. will be better positioned to capture a fair share of category growth. At the category level, coffee has two large structural growth drivers. We think both of these are evergreen. The first is per cap consumption growth. This has been and we expect will continue to be a tailwind for the category. It's supported by elements like a rising middle class and ongoing preference shifts, particularly in non-coffee legacy markets of preferences driven by youth from tea to coffee. The second is premiumization as measured by value per cup. This trend is occurring across all formats. And you see it most evident in the growth of premium solutions like single-serve, but it's occurring across brands as well with premium trademarks growing faster than mainstream and value. So while per capita consumption is a greater opportunity perhaps in less developed coffee markets and premiumization is a bigger trend than established countries, we actually see significant runway in both of these structural growth drivers. The business will also enjoy unique revenue opportunities arising from this very complementary combination. Let me quickly talk to these five formats. Given the potential to expand Keurig's brand equities now into new subcategories, leveraging JDE Peet's full segment exposure, technology, especially in brewers, Keurig is best-in-class in brewers. We've been an innovation leader. We know how to produce them at an efficient and profitable manner. We can provide insights to some of JDE Peet's systems like Senseo, Tassimo and L'OR. Channels, we can capitalize on our complementary footprints, including in away-from-home. Next generation: next-generation exciting Keurig Alta and K-rounds innovation now has the potential to think about expansion beyond North America and brands, targeting growth opportunities for specific brands in the portfolio. And one I'll call attention to is Peet's, and I'll give you more in a moment. As you see, the synergistic growth opportunities are ample and indeed global. Let me talk a little bit more about Peet's, just to bring that to life. We all know that brand, I think, pretty well here in the U.S. It has a rich heritage. It's a coffee pioneer. It's got strong brand awareness, premium coffee credentials across the U.S. But as this map shows, the map on the left, its market penetration is very much concentrated in the West Coast, and in particular, California, the home territory. And its commercial execution at point of buying meaningfully lags Keurig's. But as a combined entity, Global Coffee Co. can utilize Keurig's significant commercial scale, our very strong customer relationships to improve Peet's geographic footprint. I'll give you one example with numbers. You see that on the far right. We have the ability to achieve. Well, today, Keurig achieves almost 4x the feature and display activity of brand Peet's. We can and we will close that gap. The result can be a much larger, faster-growing Peet's premium brand over time. So we've talked about the revenue opportunities, but we also see visible cost synergies at Global Coffee Co. Our $400 million synergy target in the first three years spans several areas. In procurement, we will benefit from enhanced scale across green coffee sourcing as well as direct and indirect spend pools. In manufacturing and logistics, we have plans for network optimization for route-to-market consolidation and other go-to-market efficiencies. And for SG&A, we've already identified corporate scale efficiencies as well as IT infrastructure and other system savings. Importantly, these synergies have been scoped and we've developed concrete and actionable plans to deliver on these cost synergies, if not exceed them. Ultimately, we expect Global Coffee Co. will generate consistent, attractive profit growth. This will be driven by a few factors. First, obviously, profitable top line growth. This company will be well positioned to capture its fair share of the coffee category's volume growth, which, as you've heard a couple of times, consistently grows on a volume basis at a low single-digit rate over time. This will obviously generate fixed cost absorption, operating leverage benefits. And in addition to that, the innovation that you've heard about today, our price pack architecture and RGM work, promotional effectiveness can further translate that top line growth into nice bottom line growth. Next, Keurig and JDE Peet's each have robust productivity programs, even beyond the deal synergies I just covered. And obviously, some of these savings will be earmarked for reinvestment, but others will flow through to the bottom line. And finally, it's not built into our baseline financial outlooks, but it's our belief that current coffee prices are clearly well above the long-term trend, and they do not appear to be supported by market fundamentals. I'm not going to try to predict commodity market gyrations on this stage, but it is worth noting that any normalization in this cost would clearly drive a cyclical profit tailwind. Bringing these elements together, the business' structural advantages the potential revenue synergies, the cost synergies of the combination, the other profit levers available to the business, Global Coffee Co. will support an attractive growth algorithm. Now there certainly can be some year-to-year volatility in top line due to commodity volatility. But over time, we project low single-digit net sales growth and high single-digit adjusted EPS growth. And we would expect this business to be highly cash generative. As you see on this chart, anticipated cumulative free cash flow of more than $5 billion from '26 to '28. We are excited to create this global coffee powerhouse the world's largest coffee pure play and a stable of the best loved brands powered by advantaged capabilities. All right. I think you've earned a well-deserved break. Let's take a 15-minute break, and we will come back and talk about Beverage Co. Thank you.

We're starting in one minute. Everyone find your seats. Please welcome Eric Gorli, President of U.S. Refreshment Beverages.

Right. You all hear me? Excellent. Good morning. Thrilled to be here getting to represent this great business. And most likely, I'm a new face to most of you. Believe it or not, I've actually been in this industry closing in now on 30 years. I spent the first 20 in the bottler system, and I just hit my 10th year anniversary here at KDP. And look, as I've told Tim, Bob, our Board, there is absolutely no other place than I'd rather be right now than here with this collection of iconic brands and the incredible team that we've been able to assemble. So let me tell you why I feel that way. Tim hit some of this to start with, we work in a fantastic industry. It is large, over $300 billion in retail sales. And most importantly, year after year, it has demonstrated the ability to consistently grow sales dollars north of 3%. And what fuels that growth is just how dynamic the consumer and her ever-increasing demands are. Underlying megatrends, these are things we all experience in our day-to-day lives: convenience, wellness, the need for functionality. They fuel a cycle of innovation and the opportunity to continuously participate in new pockets of growth. And this landscape is way more fragmented than most people realize. We view this as an opportunity for future expansion, particularly with our unique build, buy, partner model. So let's talk a bit about Bev Co. and why we feel like we are uniquely positioned to be a formidable challenger in this industry. We have scale. We exited 2024, as you saw in Tim's slides, north of $11 billion in net sales. Our business is profitable. Our EBITDA margin is at 30%. And again, importantly, we're growing. Since 2018, we've averaged a top line growth rate of 8%. We have incredible portfolio of brands with incredible organic growth upside. That's going to be most of my presentation today, just the confidence we have in these products. We also have an advantaged commercial and route-to-market model. This includes one of only three national direct store delivery systems for nonalcoholic beverages here in the U.S. And we've invested significantly in our operations to support network expansion. And yet we still have so much room for improvement. So I'll now get into the details on why I personally have so much confidence we can maintain this momentum into the next chapter. So one of the things that is so very special about beverages is just how they are so very personal. These are products where consumers create deep lifelong relationships with their favorite brands. We have many of these brands inside our portfolio, brands that consumers love, brands that our retailers value. So a few facts and figures. On the slide, you'll see over 25 brands that have over $100 million in annual retail sales. They are led by our $3 billion trademarks, brand Dr. Pepper, fast approaching the $6 billion mark as well as category leaders like Canada Dry and Mott's. Some other key brands, you'll see icons like Snapple, A&W, 7UP, as well as a few fast-growing disruptors like Bloom, GHOST and Electrolit. Today, we believe we have a portfolio that not only provides us with exposure to growing categories, but it creates scale for us with our customers and efficiency inside of our operations. So over the past several years, we've done a really nice job of being very thoughtful in how we want to evolve our portfolio. As you heard Tim mention, we employ a flexible but disciplined model that's really centered around building, buying or partnering. It all starts with build. And you can see on the slide where we have demonstrated a really strong track record of bringing innovation. No better example of this than inside of our CSD portfolio. Here, we are repeatedly recognized by our retailers for our market-leading innovation. We've also been very purposeful in our approach to utilizing different ways to expand the portfolio, particularly our partnership model. Our approach to partnerships is very, very unique in the industry. We work hard to ensure that there is a win-win in the relationship that we have aligned incentives and that both partners are in it for the long term. These partnerships are able to leverage our DSD network and allow us to rapidly participate in growth pockets with a very capital-efficient model. And in a number of cases, they provide us with a superior risk-adjusted return that we likely could not achieve on our own through a build model. So we'll start now with the portfolio with my favorite brand, our flagship brand Dr. Pepper. I literally could speak for an hour to brand Dr. Pepper alone. It is a brand that has had incredible success, and yet we still believe tremendous headroom for growth. A couple of years ago, you heard Tim say, Dr. Pepper became the #2 most consumed soft drink brand. This year, 2025, we will complete our ninth consecutive year of share growth. This is all built upon a consumer obsession for the brand. You can see that demonstrated in category-leading household penetration growth as well as industry recognition for our marketing campaigns. We believe we have a repeatable playbook that works. It starts with Dr. Pepper's unique flavor, its distinct positioning. It plays firmly and wins in what we call the treat demand space. We're able to take that positioning and then make meaningful connections with what consumers really care about and where their passions are. Right now, you can see that on Any Given Saturday come to life in season 8 of our highly successful Fansville campaign. We also leverage winning innovation, innovation that creates excitement not only with our consumers, with our retailers and our distributors. That drives some of the scale retail activation you'll see in market for the full trademark. Importantly, not only for the innovation, this also attracts new households into our base flavor; we execute this well. So this is great, but what excites me the most is the runway we still have ahead of us. Let me talk about Dr. Pepper Zero Sugar, still very much in its early days. You'll see in your scan data, it's already the #2 Zero Sugar CSD, but still has significant opportunity in terms of distribution, display presence, even consumer awareness. As a percentage of the trademark mix, we're still only about 60% of the development of the #1 Zero Sugar CSD. Point number two, Dr. Pepper is Gen Z's most popular beverage brand, and we've rapidly been adding households within this cohort. If you are like myself, a student of our industry, you know that this type of trend is highly encouraging for longer-term consumption growth. And then finally, we have outsized growth opportunities in specific geographies. While we're currently approaching a 13% share nationally, however, in any given local market, we could be as high as the mid-20s in our heartlands or mid-single digits on the coast. What's really encouraging right now is we are growing share across all market types. In lower share markets, our innovation has been the most impactful in actually bringing new households into the trademark. And then final point, as good as the marketing has been on Brand Dr. Pepper, we honestly believe we can get even better. This year, we've begun to leverage some of our new capabilities in precision and personalized marketing. This is now allowing us to go reach target consumers with relevant content in a hyper-efficient approach. We'll speak a little bit more about that in a couple of minutes. So this playbook, we think it's a repeatable model that we can go apply to other parts of our portfolio. And let me just give you two quick examples of work in flight today. So Canada Dry, #1 ginger ale, a long track record of growth. Canada Dry plays in the relaxed man space. It also has a unique and ownable position. Here, we've seen innovation also play an important role. Back in 2024, we launched what we call our fruit splash platform. That year, it was recognized as the #1 CSD innovation. We're bringing the second flavor in for 2026. And much like brand Dr. Pepper, Canada Dry also has geographic opportunities. While it's a 3 share nationally, it's as high as a 12 share here in parts of the Northeast. And let's take a minute to talk about Mott's. Mott's, #1 apple juice and sauce brand, a staple for moms, incredible equity and health. Here, though, we still have potential for growth. Great example you see on the slide is in our sauce portfolio. Inserted formats like cup and jars, we're north of a 50% share, but we have been a relatively small player in the growing pouch segment. Over the past year, with a focused marketing and commercial activation plan specifically against pouch, we've been able to unlock significant growth. So I'll let you see on the right-hand side of the slide. You can see a host of other iconic brands within our portfolio that we think we can deploy the same playbook to unlock organic growth. For those of you, probably most of the audience here, local to New York City, you may have noticed Snapple has both a new campaign, and just last week, the return of its iconic glass packaging in five classic flavors, honoring the city where it was born and its five boroughs. So let me shift gears here. Another space I probably consume too much of, but we're excited about as a company, the energy category. Energy now, the third largest category in beverages, $28 billion. If you look at the standard data growing rapidly. What's really remarkable about energy is just how over the past two decades, this category has continued to reinvent itself. It's been able to leverage different product profiles, whether it be ingredients, caffeine amounts, serving sizes, brand positionings. The category has been able to continually unlock additional occasions and bring in new households. Right now, we're really seeing the latest iteration of this with the female-targeted product lines. Three years ago, we rounded honestly to a zero share in energy. We knew this was a big opportunity, so we set out to go create a portfolio to win where we saw the growth occurring, products with great taste, products that played in the zero sugar space, products that we could target against distinct demand spaces with unique authentic brands. Today, we believe we have a complementary portfolio of brands that can win within their respective segments, especially when you couple that with our commercial approach and our national distribution network. You'll see in your scanner data over the past four weeks, we've now surpassed the 7.5% share, and we have line of sight to our stated goal of the 10% share in the next few years. So aside from energy, we've also established platforms in several other high-growth categories over the past two years. Through our long-term distribution partnership with Electrolit, we now have a strong play in sports hydration. Specifically, we are the #1 player in the rapid hydration segment. This is a $2 billion segment that is growing at a blistering pace. This summer, we entered the prebiotic CSD space with Bloom Pop, building on Bloom's incredible success to date in energy. In its launch retailer, velocity per SKU was on par with the market leaders. We're really excited about Bloom Pop's potential, and we just began scaling this nationally at the end of Q3 through our DSD network. And then finally, earlier this summer, we had an acquisition, a company called Dyla brands, which has allowed us to go play in the drink mix space. Dyla is bringing both brands as well as capabilities. Additionally, it's going to let our broader portfolio instantly access this high-growth and attractive functional powder segment. So a lot of effort has gone into building this portfolio. However, entering a category is one thing. The bigger question, can you effectively sustain the success? And you can see on the slide across a variety of time horizons in a spectrum of categories, how we have been able to significantly increase our market share relative to pre-KDP distribution. This reinforces that access to our network, it's more than distribution. It's our ability to step change the selling and activation for a brand all the way from the national buying desk down to the outlet level. So, part of the secret, whether it's successful innovation or some of the partnership scaling I just spoke about are some of the top-tier capabilities that we've been able to create in our marketing and commercial functions. I mentioned earlier with brand Dr. Pepper, my excitement around our new capabilities to go amplify what we already believe is world-class marketing. This is all grounded in new abilities to go leverage AI-powered data and analytics to go create a deeper understanding of the consumer. This helps us guide our innovation. It's helping us set brand strategy. And now it's also allowing us to create highly relevant personalized content and creative. Our marketing and communication platforms are increasingly connected across both channels and platforms. This is going to let us unlock precision media capabilities, allowing us to go target the individual and drive efficiency and effectiveness in how we fight our marketing investments. Right now, at KDP, we think we have access to the right data, the right systems and most importantly, the right talent, underpinned by an agile operating model to measure and react almost real time to ensure we're driving the best returns for our marketing investments. This fall, we started to go deploy this with our Fansville campaign. You're going to hear us talk a lot more about this in the future. And then an area that I've spent a great deal of my time helping to build out is the middle part of the slide is what we call our commercial engine. So this is the function which really serves as the critical link between our brands and ultimately our routes to market. So inside the gears of the engine, you see some of the best-in-breed capabilities we've created. It could be omni marketing, revenue management, category management, how we show up with our customers. These are capabilities that allow us to effectively represent our products with our customers with a high degree of confidence in the ability to go create value. The advantage of us doing this well, so regardless of the brand owner or the route to market, is we can create a seamless experience for our retailers, bring them meaningful commercial solutions that can fully take advantage of the breadth of what our portfolio has to offer. And then final point on the slide, we all know it, strong national distribution, absolutely critical to go win in beverages. Right now, we have six different options that we can use and it really depends on what is the right fit for the product or what is the need of the retailer. So let me speak a bit more about those options. So I'll talk more about company-owned DSD. We have it both here in the U.S. and in Mexico. But we also are able to leverage some leading bottlers that complement our company-owned DSD footprint in specific geographies. For some products, we still utilize the warehouse direct model, particularly for categories that have lower velocities or where there's a real preference by the retailer for that mode. Fountain foodservice and on-premise, extremely important. These channels provide access to high-value away-from-home occasions. These are critical for building brands. Notable, brand Dr. Pepper is the most pervasively available fountain beverage. This allows us to have direct relationships with most major operators and customers in the foodservice space. And finally, winning in e-commerce has become increasingly important. By our measures today, roughly one in eight cold beverages purchases are occurring in a digitally oriented means. And in many categories and retailers, it's providing over 100% of the growth. We are making the right investments to ensure we've got the specialized capabilities to effectively partner for growth, whether it's a pure play or our omnichannel retailers. So let's talk a bit more about DSD. Why does it matter so much for beverages? Well, when you get into it, great DSD execution is more than just a replenishment model. Done well it is a powerful competitive advantage that allows you to build brands over time. DSD provides access to outlets that are not serviced by warehouse direct. Most of the convenience retail channel, most of on-premise cannot get there with that warehouse model. And even within retail channels, it allows a local selling associate to build a meaningful relationship with decision-makers at the outlet level. These relationships, coupled with the merchandising resources we provide can translate into a superior retail presence for our brands as well as getting you critical access to cold drink equipment and other means of trial. Scale is what makes a DSD system work. To generate the local brand-building benefits, there is significant labor and fixed costs. Scale drives a virtuous cycle that benefits from the leverage on that infrastructure and done well, it enables further reinvestment and growth. So let me orient you to our DSD network. These are the trucks that carry the majority of our portfolio. Again, we have one of only three systems that can cover the entirety of the U.S. footprint. Our company-owned trucks, they're depicted in the maroon on the slide. They cover roughly 80% of the population base. And for the balance of the country, we have long-standing strong strategic relationships with leading independent distributors who operate with scale in their own respective geographies. Look, I've had the chance over the past few years to spend a great deal of time with some of the 13,000 DSD employees that we have. When you get a chance to experience the passion these team members have for our brands, the expertise they bring to our customers every day, hitting almost 200,000 outlets, you can see firsthand why this is such a powerful competitive advantage. So we're really proud over the past six years of the work we've done to strengthen our DSD network. We're improving every day in terms of both the service and the capabilities that we're providing our retailers. So let me talk about each of these vectors; we'll start with territories. Since 2019, as Tim mentioned, we've made over 30 acquisitions, some relatively modest, a few rather large. What's universal though is where we made these investments, we've been very satisfied with the returns that they've generated. That said, there is not a one-size-fits-all model here. Our primary goal is to have a scaled and relevant DSD operation that puts the right focus on our brands, whether it's a partner or something we own; access is what is key. Let me shift to portfolio. One of the goals of our portfolio expansion has actually been to help us generate additional scale for our company-owned DSD operations, meaningful participation in categories like energy or sports hydration; they've had a material impact within specific channels. No better example than inside of convenience retail. Here, we've been able to improve our drop sizes close to 70% and in some instances, have had the opportunity to revisit our service frequency to better map to some of our customers' needs. Again, a great example of that virtuous flywheel I spoke about a moment ago and how it can strengthen our ability to capture growth, particularly in C-stores, which is an extremely profitable space. So final point on the slide is going to reference some of our digital capabilities. These here are really focused on our frontline selling. We're rolling these out recently in the market, really pleased with the results. The one I'll highlight is our perfect order. This is an application that's leveraging algorithms based on outlet-specific data to help pre-generate the order for the next delivery. And just to bring this home, if you think about a big box store, generally a couple of hundred thousand square feet, we may have 250 different SKUs spread across that store that a sales associate is responsible for writing the next delivery order for. Where we've been able to deploy this application, we are seeing meaningful improvement in in-stock rates as well as a significant reduction in the time it takes spent on lower-value activities, like walking around the outlet. With that additional time, we can enable these same individuals to shift their focus to local selling activities. Here, we're also implementing real-time access to outlet-specific data. We're starting to enable it with AI to help generate specific insights; that's going to help aid in their ability to work with the local customer decision-maker to unlock growth inside of that outlet. Extremely excited about where this is going to go. So shift gears a minute. Let's talk about Mexico. We also have a fast-growing profitable $1 billion-plus business in Mexico. Though it's at an earlier stage, we think the same model that has driven success in the U.S. also can be leveraged here. We have a leading brand. It starts with our flagship brand Peñafiel. If you are not familiar with Brand Peñafiel, it is a 100-year-old locally sourced icon that is the #1 mineral water in Mexico. We're now seeing that brand have success moving into some adjacent spaces. We also believe some of our U.S. trademarks can play a much bigger role in the Mexican market, particularly Brand Dr. Pepper. Finally, like the U.S., we continue to make meaningful investments in expanding our DSD network. Much like the U.S., for Mexico, a critical enabler of brand development, particularly in a market where the traditional trade is still thriving. Today, our company-owned footprint reaches about half of the marketplace. We cover population centers in the central and northern part of the country. All this together is why we feel great about our ability to generate strong returns from Mexico for many years to come. So spoken a lot about growth. I also want to emphasize, though, we are focused on the right kind of growth, growth that's going to allow us to expand our margins over time. Pricing, critical lever. We are very well positioned to drive sustained net price realization across our major categories. Another key thing is our largest category, CSDs; we still believe it has a very attractive price-to-value ratio, particularly when you compare that to other beverage options for purchase. Let's talk about mix management. We have very strong revenue management capabilities. Done well, we're able to meet both some affordability requirements, but also identify different levers to improve our unit economics, whether it's through promotional optimization or package and product mix. I highlighted the virtuous cycle in convenience stores. The ability to continue to grow immediate consumption soft drink occasions as well as energy, these are really profitable levers to continue to get great margin accretive mix in your portfolio. And then finally, I'll touch on productivity. We all know productivity supports reinvestment back into the brands, and ideally can help expand margins. Annually, we target 3 to 4 points of productivity, and we've been able to consistently deliver in that range over the past few years. Specific focus areas where we have made and will continue to make investments are in our network, both within our manufacturing and our distribution facilities; we've got opportunities to further leverage automation and optimize our footprint. Digital, I spoke a lot about frontline a few moments ago. We also have digital initiatives in flight to help step change our demand and supply planning visibility across the vast network. And then finally, operating model. We're continuing to strengthen how we manage this productivity pipeline, increasingly driving accountability down to our local orbits. So when you bring it all together, Bev Co. has delivered consistent strong financial results. Since 2018, on a compounded annual basis, top line growth approaching 8%, EBITDA growth almost 12%. And look, we've achieved these outcomes through what I covered today, strong base business momentum and share gains, deliberate capital-efficient portfolio reshaping initiatives and targeted actions, which we were able to mitigate inflation and help us reinvest back against the core tenets of our business. And we expect to sustain this momentum. That supports the algorithm you'll see up on the page: mid-single-digit net sales growth and high single-digit adjusted EPS growth. Additionally, we expect to generate significant free cash flow, which will, as Tim mentioned, provide optionality for us to either invest organically or pursue inorganic additional growth levers. So a few points to reiterate as I close here. This is a powerful platform in a fantastic industry. Over the past six years, this team has proven its ability to consistently deliver attractive financial returns. We now head into the future. We're equipped with a fortified portfolio, the right brands, the exposure to high-growth demand spaces, which we believe can meet our growth goals organically. Additionally, we're poised to benefit from a step change in our new digitally enabled marketing capabilities. We have a model against our portfolio that creates optionality against how we can add to the portfolio in a very capital-efficient manner. We are strengthening our network, and we're going to continue to recognize the benefits of improved execution. These improvements will drive growth in margin-accretive categories, packages and channels. And then finally, we have demonstrated the ability to unlock meaningful productivity, and we believe we have a robust pipeline of opportunities to come. So as you assess some of these efforts, I think now, hopefully, you can understand why I have so much confidence in this team. And as we head into the next chapter for Bev Co., I have confidence about our future and our ability to deliver this very attractive algorithm we have up on the page. Thank you guys so much for your attention this morning. I'm now going to turn the podium over to Jane.

Good morning. The financial targets for each independent company remain the same as we outlined in August. For Beverage Co., that includes an outlook of mid-single-digit net sales growth and high single-digit adjusted EPS growth. And for Global Coffee Co, we envision an outlook and long-term targets consistent with low single-digit net sales growth and high single-digit EPS growth. These will be strongly cash flow generative businesses with Bev Co. projected to generate over $6 billion of free cash flow over the next three years and Global Coffee Co. set to produce more than $5 billion. While the exact dividend at each company will be determined closer to separation, what we can commit to you today is that across the two, we'll maintain the level of our current dividend to start. And we also come to you today with a clear view of starting net leverage for each stand-alone company. Upon separation, we expect Beverage Co. to have net leverage between 3.5x and 4x, with Global Coffee Co targeted between 3.75x and 4.25x. Of course, both companies will continue to delever and strengthen their balance sheets following the separation as we keep to a commitment to a strong investment-grade profile. Let's zoom in on each company in a little bit more detail, and this will build on the remarks of my colleagues. For Beverage Co., the financial algorithm and capital structure that we've laid out are carefully designed to enable its growth potential, its growth strategy and continued outperformance. As you just heard from Eric, our Refreshment Beverages business has already proven itself to be an agile challenger in North American beverages, and we fully intend to build on this standing with long-term targets that reflect that. Multiple factors are expected to contribute to mid-single-digit net sales growth. Over the last several years, we have worked really hard to evolve our portfolio mix towards a faster-growing weighted category average, which now features a well-balanced set of volume, mix and price drivers. On top of that, we layer a proven track record of market share gains supported by strong innovation and commercial capabilities. And in addition, our ability to enter white spaces and activate capital-efficient partnerships now and in the future, they're attached, which means further growth optionality as we move through this period of integration and then afterwards during and after the separation. So combined with operating margin upside and some below-the-line leverage, what becomes clear is the path to high single-digit EPS growth for the Beverage Co. And to facilitate this, we expect the capital structure at separation will be only modestly above where KDP's would have been prior to the deal with cash flow to delever quickly thereafter. Separately, we will optimize Global Coffee Co. for more resilient growth and strong cash flows. What that means is our vision remains to create a pure-play cash-generative global coffee company. How does that manifest financially? A combination of low single-digit net sales growth over time with some volatility up and down over the course of commodity cycles due to pricing pass-through dynamics and high single-digit EPS growth, thanks to a combination of actionable cost synergies, continuous productivity and below-the-line leverage. This combination should drive more steadily growing cash flow with upward potential should coffee price normalize from here. And for Global Coffee Co. too, what we want is a balanced capital structure out of the gate, which means net leverage likely between 3.75x and 4.25x at separation. So you now kind of better understand the financial vision, and I'd like to shift the discussion to how we get there. Over the last several weeks, we set out to optimize our acquisition financing mix with two objectives. The first was to lower leverage at acquisition close. And the second was to establish a clear line of sight to solid capital structures for each of the individual separated companies. That process successfully culminated in today's announcement of a combined $7 billion strategic equity investment anchored by two leading global investment firms, Apollo and KKR. I would highlight several benefits to the revised financing package. One, we will, in fact, reinforce our investment-grade profile as a combined company with net leverage at close now approximately a turn lower than our original plan entailed. Secondly, we will have greater visibility to investment-grade worthy capital structures for each independent company akin to what I just described. And even though the new capital is equity-like, it comes with a reasonable cost while pairing us up with world-class investors who see the strength of the opportunity at KDP and its successor companies. All in, against the backdrop of more comfortable leverage and attractive year-one EPS accretion of approximately 10%, we hope this update will allow the strategic logic and value of the deal to take center stage in your evaluation. I'll take a closer look at the structure of the deal. Under our previously announced plan, assuming a June 2026 close, net leverage at 2026 year-end was projected in the low 5s. What that meant was a starting point at close that would have been at approximately 5.6x. After today, we expect initial leverage at close to be in the mid-4s. And from there, we plan to delever at roughly 0.5 turn a year, thanks to a strong focus on cash flow. The new investments will allow us to replace the full balance of junior subordinated notes and a smaller portion of senior debt that were originally intended to be part of the financing package. And all in, the weighted average cost of capital of the deal is expected to be only modestly higher than the original plan. The new instruments we've stood up take two forms. Let's start with the creation of a new Global Coffee Co. joint venture with a consortium of investors led by Apollo and KKR. The JV will focus on single-serve manufacturing in North America with the earnings from pod manufacturing to be split among the partners, including KDP. In fact, KDP will retain a controlling interest in the JV as well as operational control of the assets. And in establishing the JV, we'll receive $4 billion in total proceeds at a cost of capital of just above 7% in a 7.3% to 7.4% range. In addition, KKR and Apollo have made a strategic investment into KDP and ultimately, the Beverage Co., yielding $3 billion of incremental capital. The second instrument is an attractively priced convertible security. It features a preferred dividend of 4.75% to be netted against any common dividends and the conversion price is $37.25. That's a 6% premium to where KDP last traded prior to the announcement of the acquisition, an outcome that speaks to the upside potential we all see here. I should mention that we plan to offer our shareholder partners an opportunity to participate in this financing. To help with your modeling, you'll find a page in the appendix that outlines the accounting implications of each instrument. And when you run your models, what you'll see is that we've been able to effectively drive leverage lower while making a manageable trade-off in terms of accretion and cost of capital. Based on your feedback, which informed our decisions over the last several weeks, we believe this is a more optimal balance to strike. As Tim said, ensuring solid balance sheet for each company is one of the critical milestones towards a successful separation, and we expect to be operationally ready to go by year-end 2026. In the meantime, our job will be to focus on EBITDA growth and cash flow generation to facilitate that timeline. However, should we want to further accelerate the deleveraging path, there are other levers that we could employ to raise additional capital. For instance, we might consider monetizing select noncore minority stakes and nonstrategic brand assets. And we may also evaluate a partial IPO of Beverage Co. to begin the separation process, which could raise additional primary proceeds. To be clear, these are simply options for us to consider. The only concrete commitment on this page and on this stage is the strong free cash flow generation to support our transformational vision of the future. And speaking of commitments, we recognize we have come to you with quite a bit of news today, and we're focused on supporting your full understanding. So of all the messages I hope you'll take away from my presentation, it's the following: we will ensure an appropriate capital structure for KDP at transaction close as well as each individual company at separation and beyond. Our focus is on strong cash flow to support deleveraging as well as maintaining our competitive and attractive dividend. Through all of this, our unwavering goal is to set Beverage Co. and Global Coffee Co. up for financial success and operational success. And as we do so, we will stay consistent and transparent in our financial communications to help build and maintain your confidence. With that, thank you very much, and I'll pass it on to Roger Johnson.

Good. Okay. My name is Roger Johnson, and I have the privilege of being the Chief Transformation Officer and Chief Supply Chain Officer here at Keurig Dr. Pepper. In my capacity as Chief Transformation Officer, I am responsible for the integration of JDE Peet's into KDP and then the subsequent separation into Global Coffee Company and Beverage Company. I'd like to take a few minutes today to walk through our approach and the execution of the transformation and provide more details of how we're approaching the work in front of us. First off, we are genuinely excited about the opportunities ahead for both stand-alone companies. And as Bob and Tim mentioned earlier, we have strong support and oversight from our Board of Directors and the specially created transaction committee. To guide this transformation, we've established an executive steering committee that meets weekly to provide critical oversight and timely strategic direction. We've also added rigor through a transformation management office, our TMO, which is focused on capturing synergies and driving growth opportunities. To keep everyone focused, we've named a dedicated internal TMO team to lead these initiatives, allowing most of our teams to continue driving base business momentum. This process is fostering strong communication between JDE Peet's and KDP leadership as well as both internal functional experts. And to ensure success, we've partnered with outside advisers who bring deep experience in integrations and complex transactions, and they are long-standing relationships, both for us and JDE Peet's, which means we can leverage their detailed knowledge of our collective businesses and their proven expertise from hundreds of similar processes across industries worldwide. Let me add more context to the scope of our transformation management office. We fully stood up critical work streams focused on objectives of integration planning, future company designs, separation, synergy value capture and spin readiness. For both Global Coffee Company and Beverage Company, these efforts have been mobilized in collaborative but discrete work streams. We've organized these objectives into three primary focus areas for execution. First and foremost, change management. We're engaging the hearts and minds of our organizations, showcasing future opportunities and creating that winning culture as we move towards stand-alone success. In commercial and supply chain, we're leveraging this unique moment to optimize and unlock growth potential across marketing, selling organizations and key go-to-market opportunities. And then finally, for enterprise functions, we are focused on building fit-for-purpose teams calibrated to each company's unique needs and scale, ensuring both organizations have the strength and agility to succeed. As we fully mobilize the TMO, I've seen fantastic collaboration across our teams in these early days. It's really inspiring to watch our leaders lean into the road ahead. Together, we've shifted into the next gear and are planning against key milestones. First, we're focused on integration planning following the acquisition close with detailed action plans to capture synergies. And we're accelerating readiness work, developing future company operating models for both Global Coffee Company and Beverage Company and getting into the functional-specific preparation required for success. Secondly, we're deep into separation planning to ensure clean operational readiness for two world-class public companies. Our goal is to be ready to separate by year-end 2026. And that means everything within our control will be stood up and ready by then. As Tim mentioned earlier, the actual timing will depend on achievement of multiple milestones, including our own. But our commitment is clear: secure operational readiness as early and as robustly as possible while actively capturing cost synergies. Our goal is clear: build a global coffee powerhouse and the most agile North American beverage leader. This transformation approach will make that vision a reality. To make sure both stand-alone organizations reach their full potential, we've placed a heavy focus on communications and change management. Recently, we had the chance to spend meaningful time with the JDE Peet's team on International Coffee Day, very fitting. It was a fantastic event in Amsterdam, where we shared our vision, answered questions and amplified the excitement across both teams. The shared love of coffee brought the teams together and really gave everyone, including myself, a glimpse of what a true coffee powerhouse could feel like. At the same time, we launched aligned communications approaches, high-frequency town halls, feedback loops, multichannel digital outreach, both internally and externally. This ensures we're reaching every employee and engaging top leadership, including our director and above populations. For many, this is the first time in their careers they've experienced a transformation of this scale and enrolling them in the journey is an exciting opportunity. To reinforce collaboration, we've shared clear guiding principles and leadership commitments on how we will work together for the outstanding outcomes we expect. We believe a consistent drumbeat of communication is critical to a seamless integration and eventual separation without missing a beat. So far, employee feedback has been very positive, especially around leadership transparency, communication depth and the opportunities ahead of us. And I can tell you firsthand from Amsterdam, Frisco, Burlington, all over, our colleagues are energized about the future potential of these two great companies. As mentioned earlier, our Coffee company value capture plan, about $400 million, is well underway with opportunities across procurement, manufacturing and SG&A and IT. This target has been validated through both top-down and detailed bottoms-up planning, and we see it as highly actionable. As Tim highlighted, these efficiencies are balanced across the three major buckets of procurement, manufacturing and logistics, SG&A and IT. And ahead of close, we've established clean teams to ensure that work can happen outside the day-to-day business so we can move quickly once the acquisition closes. Immediately after close, we'll activate each functional focus area to deliver on our three-year synergy capture plan. And we're confident these cost synergies, combined with future growth opportunities will set Global Coffee Company up for long-term success. And our job is to do the same for Beverage Company, minimizing dis-synergies before and after separation. We expect that impact to be approximately $75 million, and we largely plan to offset it. That means we must redesign organizations and spend structures with agility in mind, keeping any leakage manageable within the beverage company's overall P&L. I hope you can see and feel my excitement and confidence in our ability to land the right structure, build two successful companies and create value for everyone throughout this transformation. So thank you for your time and engagement. I'm going to turn it back to Tim to give a Q3 earnings update. Thank you.

We are coming down the home stretch. Thank you, Roger. One of the main objectives in establishing the TMO is not only to do the hard work around integration and separation, but importantly, to minimize the disruption of that activity so that our core teams can focus and deliver on the base business quarter after quarter. I think our Q3 results that you've probably already seen in the press release are a testament to this approach. We continue to operate with focus and discipline. We delivered another strong quarter here in Q3, even with that tough macroeconomic backdrop. So let me share some highlights on the quarter. Net sales accelerated in Q3. They accelerated sequentially; they increased at a double-digit rate with strengthening performance across all three of our reported segments. We gained market share in key categories like CSDs and energy. We successfully implemented another round of pricing on our coffee business. And in international, we drove healthy relative trends among challenging macro conditions. So as you've heard throughout the morning, we are advancing a lot of exciting initiatives right now at KDP across both Refreshment Beverage and coffee. And these are, as evidenced in the results, really contributing to this near-term performance and continued momentum. Having said that, as expected, inflationary pressures ramped during Q3. Even despite this, we delivered solid bottom line growth and generated meaningful cash flow in the third quarter. So with one quarter remaining in the year, as you've heard, we are raising our constant currency net sales outlook and reaffirming our EPS growth guidance. We're confident that our robust commercial plans, our innovation plans, our operating rigor will help us achieve these updated targets and finish 2025 on a strong note. So let's move to the consolidated results. Net sales specifically grew 10.6%, led by about a 6.5% increase in volume/mix with strong results in U.S. refreshment beverage and international. The GHOST integration continues to perform very well. It's meeting all of our key metrics that we set out and delivering on year-one of our investment thesis. It's contributed 4.4 points to the top line. Net price increased 4.2% primarily reflecting the pricing actions we took on our coffee business. On the bottom line, operating income increased roughly 4% versus net sales growth; productivity savings were partially offset by that inflationary pressure I referenced. All in, EPS grew 6% to $0.54, and that included a modest below-the-line benefit from a minority partnership gain. Okay. Let's do a quick tour of the three reported segments, starting with Refreshment Beverage. We maintained what I characterize as exceptional momentum on this business with net sales growing 14.5%, driven by volume/mix increase of over 11%. Net price was also a driver. It added about 3 points to net sales. GHOST clearly was a strong contributor to our growth, but also our base business. In fact, our base business accelerated in Q3, increasing in the high single digits, led by CSDs, energy and sports hydration. Overall, the segment results in ref bev were prepared by that growth playbook that Eric took you through just a few minutes ago: brand building, innovation, commercial execution, each contributing to the strong performance you see. And we see significant runway for future growth in ref bev, and we have strong plans in place going into '26 to ensure we deliver on that momentum. What about segment operating income? It grew 10% with net sales gains and ongoing productivity savings more than offsetting the impacts of inflation as well as lapping earned equity gains that were larger in the prior year. Let's shift to U.S. Coffee. In U.S. Coffee, we continued our recovery trend. We drove modest growth in both the top and bottom line. Net sales increased 1.5%. Net price realization was 5.5% as we implemented additional pricing actions on our pods business and our brewers business in response to inflation. This was partially offset by a volume/mix decline of about 4 points, primarily driven by lower brewer shipments. During the quarter, retailers are continuing to manage brewer inventory very tightly, and there's some adjustment to the recent price increases by consumers. Pod shipments also declined, but more modestly and the elasticities are remaining quite manageable and within our overall expectation. Overall, the coffee category remains resilient in our view relative to the significant increase in input costs, and we're also seeing improvements in our own business. Admittedly, the commodity backdrop is difficult and price overall is driving our top line. Olivier told you earlier, we're actively advancing robust innovation plans. He covered many of them, marketing plans, driving more brewer sales, some exciting news going into '26 with Keurig Coffee Collective and beyond. And overall, while pod shipments declined, we feel good about what we're seeing from an elasticity standpoint. Let's talk about segment operating income. It grew about 2.5% with pricing and cost savings more than offsetting inflationary pressures. We're encouraged by the improved trajectory on the bottom line, but we do expect impact from green coffee inflation and tariffs to build into the fourth quarter. All right. Now international. Net sales grew 10% in constant currency. That's a 6% increase in net price, a 4% increase in volume/mix. Results reflected strong relative performance in Mexico despite widely reported macro challenges as well as the pricing-led growth in our Canadian coffee business. International operating income declined about 4%, primarily reflecting the impact of inflationary pressures as well as a tough year-ago comparison. This was partially offset by the strong top line growth that I referenced and productivity savings. Overall, in international, I would tell you, we continue to see significant potential for this segment to have outsized top and bottom line contribution over time. These Q3 results also underscored the cash generative nature of our business. Free cash flow was more than $500 million in the quarter, bringing that year-to-date total to $955 million. But importantly, and you see it in this box, this year-to-date figure includes the unfavorable one-time impact of the $225 million GHOST distribution payment that we made in Q1 as we acquired this business and took over distribution. Excluding the impact of this one-timer, we would have generated more than $1.1 billion in free cash flow on a year-to-date basis, representing a sizable step-up from last year. Looking ahead, you've heard us say it, and Jane mentioned it, we expect strong cash generation, both in Q4 on a full year basis and in the years to come, which will help support those deleveraging goals that Jane shared with you earlier. All right. Let's move to guidance. Three quarters of the year behind us, we are raising our constant currency net sales outlook to high single-digit from mid-single-digit previously. We're also reaffirming and remain on track to deliver high-single-digit EPS growth guidance. We recognize that the environment remains dynamic, especially when you think about tariffs, the building inflationary impacts, but we've got the innovation, we've got the commercial plans, we've got execution in a great place as well as disciplined expense management and all of that for us means we can continue to deliver on our guidance and for our shareholders. All right. Let's wrap this up, and then we'll go to a break before Q&A. So we've reviewed the strong Q3 results. I want to now come back to the four questions I put up right when I took the stage this morning. And I think over the last couple of hours, I hope you'd agree, we provided meaningful updates and further details on our transformative value creation plans. Let's go back to these four questions. First, why the acquisition? Because after careful consideration, we concluded that the acquisition of JDE Peet's is a unique opportunity to strengthen our coffee business by adding substantial complementary global scale. This combination will catalyze meaningful revenue opportunities, cost synergies and in turn, drive strong financial delivery and sustainable competitive advantage. Second question, why separate it all? Because we believe in the power of focus. We believe strong and distinct cultural identities at Global Coffee Co. and Beverage Co. can create even greater alignment and more purposeful action. And we believe that strategic optionality should be more available and accessible to each business as a stand-alone. Third question, how do we tailor our capital structures to enable these outcomes by making revisions. We've solved for a more comfortable leverage at acquisition close with a different and attractive financing mix. And we've enhanced visibility to two properly calibrated balance sheets for each of these independent companies. And finally, how do we ensure success, by focusing on milestones rather than dates, by putting the right processes in place to achieve those milestones and by appointing the right leaders with the right experience to drive towards those goals. All right. Let me wrap it up by stating the obvious, and it's on this slide. We are truly just getting started. The market reaction after August 25 was not what we hoped for. But I can tell you the reaction from our other stakeholders, including commercial partners, customers, KDP employees and future colleagues at JDE Peet's have all been strongly positive. We've given folks a very inspiring destination and they're ready to go. We're excited about this future transformation as well. But I also want to be clear, we're not in a rush. We are making a big bet because we see enormous potential. And we're going to be highly deliberate in how we go about unlocking it. I hope you sense that after today. Our management team and our Board of Directors see a tremendous amount of value creation opportunity from this two-step transaction, and we will not rest until we get that done. So as you heard today, this was a slide Bob started with. We do have a consistent and proven track record of creating value in beverages. We create vibrant businesses through a playbook that works. We have deep insights that underpin our conviction in this deal, and we have a clear plan to deliver on its promise. At the same time, we're listening and we are adjusting as and when needed. And this leadership team has the confidence, it has the experience to successfully carry out this transaction. But we also have the wisdom and the willingness to stay flexible in our approach. Again, I hope you've seen that today, and you will continue to see that as we chart our course to establishing North America's most agile beverage challenger and a true global coffee powerhouse. Thank you for your time. Those of you that are here with us at NASDAQ, we're going to take a break before we come back for Q&A. I again encourage you to take full advantage of these fabulous beverage stations. And those that are joining virtually, we are going to come back at 12:15 p.m. Eastern Time. Thank you very much.

Ladies and gentlemen, please welcome members of Keurig Dr. Pepper's Board of Directors and management team to the stage.

Thank you. I hope you enjoyed that break. We're able to try some of our great beverages. I will now move to a Q&A session with the panel. So we're happy to take your questions. Dara?

So, Tim, it's been a couple of months now since you announced the transaction. Just can you give us an update as you've done more detailed work and looked more under the hood at any incremental opportunities as you see it on the JDE side as you've looked at the business the last couple of months? And specifically on the cost synergy side, potential maybe for upside there, level of visibility that you can deliver the savings you outlined? And then just secondly, on the base KDP business today, can you just give us an update on the tariff situation, what's embedded in '26 guidance, how we should think about incrementality in '27, but also really wanted to understand how you're managing pricing on both the coffee side as well as the CSD side, given what we're seeing with tariffs and the volatility there.

Yes. Thanks, Dara. I'll start. And Roger, I might kick it to you on cost synergies and then I come back on the tariff and cost outlook. Over the last eight weeks, I've spent a lot of time with our colleagues at JDE Peet's, multiple trips into Amsterdam, et cetera. We did a great deal of diligence prior to announcing this acquisition. But at some point, that's public company diligence. Now being able to really get underneath the hood, meet the leadership team, review things like brand plans and early thoughts on innovation, what I'm seeing is, number one, this is a good business. These are good bones: the brands, the positions. I think number two is improved confidence in our synergies, both on a revenue basis in terms of the growth opportunities and everything from what we can do on the brewer side. One of the strengths of legacy Keurig is our brewer know-how, our brewer innovation, our brewer cost structure and our brewer economics. Having seen the other side brewers and having run one of those businesses in my past life, I think there's real benefits there. Think about taking Keurig legacy brands, like Green Mountain and The Donut Shop, and taking them across all formats now in a more profitable way — that's an opportunity. Then we start talking about things like Alta and other innovations. So the more that I learn, the more excited I am on the base business itself, the early stages of the reignite the amazing strategy that the JDE team is embarking upon as well as the synergies. Roger, do you want to talk a little more on cost?

Yes. From the cost side, procurement, manufacturing, logistics and SG&A and IT are the primary areas. After the diligence work concluded, we had a chance to dive in deeper and really start to underpin that, learn more about the reignite the amazing plan and then see what's complementary. I echo Tim's remarks around more obvious opportunities like brewers. But there are also things about manufacturing footprint, routes to market and associated IT systems that give us confidence. We're building out the plans as best we can. The next step is to get into clean teams and more detailed modeling over the next couple of weeks to substantiate the plans. But at this stage, I'm confident in the $400 million figure and believe it's actionable. We'll phase actions and make choices, because we can't do everything at once, but sitting here today, I have confidence in that number.

And then on tariffs, just to be clear, the U.S. tariff issue is unique to the U.S. It's not a global impact. That cost pressure was a back half '25, early '26 phenomenon and will continue into that period. As part of your phrasing the question, what's built into '26 guidance — today is not the day for full-year 2026 guidance. You all know we have an algorithm and assumptions that we will discuss at appropriate times. But I will tell you, cost pressure will continue to mount in Q4 and carry over into the front half of next year. We'll manage it through pricing, productivity and other levers as we've demonstrated before.

Two questions, just taking a step back. Strategically with respect to the deal, maybe just spend a moment on the structure of the deal and why the Board believed it made more sense than potentially a spin or sale of the coffee business, where you still get sort of the strategic focus that that sort of transaction would lend itself to? And then relatedly, what learnings does the Board take from this and the market reaction in terms of the way you think about capital allocation, communication with your large shareholders and things of that nature? I'd appreciate your thoughts.

I'll start. We were transparent that we considered all potential alternatives: status quo, selling, spinning and this combination. We analyzed each and looked at potential value creation. Selling is challenging because you need a buyer willing to pay a price we think is fair for this very large asset. Spinning it off on its own, in our view, would have weakened the coffee business and destroyed value because scale in coffee is critical. Spinning off Keurig on its own would lose a lot of the scale benefits. Some have suggested spinning and then merging later — that's not practical in a tax-free spin. The Board's responsibility is to create value across the portfolio. In our analysis, combining Keurig and JDE Peet's to create a global coffee leader while separating the remaining business as an agile ref bev player is the pathway that maximizes long-term value. We also learned a lot from the market reaction. We heard your feedback, and we've been responsive — which is why you see the financing changes and the added clarity today. We took those lessons seriously.

I'll add briefly. We did learn a lot, and we've solicited a wide range of input, including outside advisers throughout the summer. We listened to the market and stakeholders. One governance note: when discussions involved JDE Peet's and potential conflicts, we used a separate committee of independent directors to review those inputs. We feel good about our governance and rigor. The biggest lesson is to maybe slow certain decisions down so we can hear feedback and iterate. We've been responsive and will continue to be.

Two questions, please. First, on the free cash flow outlook, 2026 to 2028: is this a view on free cash flow conversion? Or are you implicitly giving any expectations for net income growth in that time frame? I'm conscious that the algorithms you've laid out are longer term, but are you underwriting high single digits over 2026 to 2028 for those two businesses from an earnings growth perspective? Secondly, in what backdrops would you tap into the additional financing paths you mentioned — e.g., monetizing noncore stakes or a partial IPO — especially if green coffee inflation impacts EBITDA? What are the thresholds for those actions?

Great questions. On free cash flow, our goal was to provide more clarity and data points to help you model. The $6 billion for Bev Co. and $5 billion for Global Coffee Co. are three-year cumulative views, not commitments to a specific annual conversion rate. They reflect our expectations on cash generation across the period rather than pinning down a single year. We'll provide more granularity as we give 2026 guidance. On potential additional financing levers, we've taken a fresh look and improved the acquisition financing, moving expected leverage at close lower. That said, we will evaluate other options like monetizing select noncore stakes or a partial IPO only if they meaningfully accelerate deleveraging in a value-maximizing way. We won't use those options reflexively; we'll pursue them if they improve outcomes for shareholders. The commitment remains strong cash flow generation to support our transformational vision.

On the synergies: I understand the $400 million is incremental to JDE Peet's EUR 500 million program. Could you detail how the $400 million breaks down across procurement, manufacturing, SG&A, and how conservatively you set the guidance? Also, JDE has strong hedging capability on commodities — how will that be linked into the combined approach?

First, to clarify: JDE Peet's own EUR 500 million program runs through 2032 and is separate. The $400 million we announced is incremental and focused on three years post-close for the combined entity. Roger can speak to the mechanics, but broadly it's procurement, manufacturing/logistics and SG&A/IT. We've vetted the savings with both top-down and bottoms-up diligence. On hedging, JDE Peet's has sophisticated sourcing capabilities and hedging expertise. Bringing those capabilities together with Keurig's scale gives a stronger procurement position that should improve our cost flexibility and help manage green coffee volatility.

From a detailed perspective, the $400 million is balanced across procurement, manufacturing/logistics and SG&A/IT. We've validated it through both top-down and bottoms-up planning. Procurement opportunities include green coffee sourcing scale and pooling direct/indirect spend. Manufacturing and logistics include network optimization, route-to-market consolidation and other efficiencies. SG&A/IT taps corporate scale efficiencies and systems consolidation. We've already set up clean teams and will get even more granular in the coming weeks. On hedging, we will bring best practices from both organizations; JDE Peet's experience in hedging and sourcing will be a key benefit to the combined procurement approach.

Peter Grom and then Filippo?

Two coffee questions. The long-term algorithm of low single-digit top line growth into high single-digit EPS: is that inclusive of the identified synergies, or are other factors driving the operating leverage? Second, in Q3, pod and brewer mix didn't change much sequentially despite pricing — how much of the change was mix versus shipment decline, and how are you thinking about elasticities through year-end?

The long-term algorithm is inclusive of the synergies. In the early years, a large portion of EPS growth visibility comes from capture of the $400 million synergies and continuous productivity, plus below-the-line leverage. Over time, top-line growth driven by expanded formats, premiumization and platform benefits contributes further. On the Q3 mix question, we did see some volume trade-offs when pricing was enacted; brewers showed more elasticity than pods. Pods remain relatively resilient. Elasticities are within our expectations and manageable. We expect some build of green coffee inflation into Q4 and into early next year, which may create near-term volatility, but our pricing and productivity plans are intended to manage that.

To add, you should expect the early EPS improvement to show up from cost synergies and below-the-line leverage, with steady contributions from top-line improvements over time. We remain focused on cash generation which will underpin deleveraging and EPS execution.

From a total at-home consumption perspective, we saw a spike in at-home during COVID and then a decline as people returned to normal life. That has stabilized over the last few years. We have a strong foundation with 47 million households and strong marketing plans, including Keurig Coffee Collective and Alta, which we expect to support household penetration and future brewer sales.

On the coffee category long term — Bob and Tim, you both talked about the attractiveness of the category. Can you expand on why coffee was the best category to double down on versus some of the faster growth categories within beverages? And what gives you confidence that the long-term 2% volume CAGR over 40 years remains the right trajectory given other caffeine categories like energy are taking share?

Given my 40-year experience, I'd emphasize taking a long-term view in CPG. Coffee's long-term strengths — emotional connection, premiumization opportunities, habitual consumption, and in many ways a health-positive perception — set it apart. Short-term trends will ebb and flow, but over decades coffee has proven resilient. Energy has taken share in certain occasions, but coffee remains deeply embedded across global markets and occasions. That's why we believe doubling down on coffee at scale is the right strategic move.

You said it well, Bob.

Okay. Rob?

I wanted to ask about the high single-digit EPS target for coffee. There's a lot of leverage implied because net sales are low single digit. What gives you confidence there's enough leverage to bridge those two? Also, coffee category volumes were down for both KDP and JDE over the past few years while global coffee volume grew. Where is that volume going if not to the major players?

I'll take the first. The high single-digit EPS target is driven by a combination of actionable cost synergies, ongoing productivity and below-the-line leverage, along with top-line improvement over time. Those elements together create the path to HSD EPS despite low single-digit net sales growth. Jane, do you want to add on the modeling?

Yes. The HSD EPS expectation is grounded in visible synergies early, continuous productivity and deleveraging. This is what gives us the bridge from low single-digit revenue growth to HSD EPS expansion. Of course, we will prove it over time and provide more detail as we progress.

From the household perspective, we had a COVID-driven peak in at-home consumption that normalized. Pods remain resilient, and there remain significant high-value households that have not fully converted to Keurig. We believe marketing, innovation and distribution can help recover volume share.

Lauren?

I sense a slight change in tone on the timeline to separation — you're saying you'll be operationally ready by year-end '26 but are milestone-based. Can you confirm? What factors would determine moving more slowly versus proceeding? And what changes for Bev Co. specifically?

The timeline expectation remains similar to what we said on August 25: we expect the deal to close in the first half of 2026 and we aim to be operationally ready to separate by year-end 2026. The nuance is that the path to separation will be milestone-based — we won't commit to a hard date if key milestones aren't met. Those milestones include early synergy capture, balance sheet readiness, independent boards and leadership teams and favorable market conditions. We'll only move when those are satisfied. This milestone-based approach gives us flexibility to maximize value.

For Bev Co., the main changes are more focus and cultural clarity as a stand-alone. That means management and functions focused on a fast-moving, DSD-centric business can move faster. We expect to continue the playbook that's worked — brand building, innovation, commercial execution and leveraging our route-to-market advantage. Being a pure-play should increase operational agility and optionality over time.

Steve?

As you pursue this big transaction and separation, how do you balance the opportunity costs and execution risk so you don't compromise the strong refreshment beverage performance? How big a consideration was that? Also, on separation mechanics, if you did a partial IPO of Bev Co., what happens to the existing KDP debt — how will it be allocated between the entities?

Execution risk and protecting the base business has been front of mind. That's why we've established the TMO and designated a dedicated team to focus on integration and separation so the rest of the organization can remain focused on the base business. Our Q3 results show the approach is working. We won't rush — we will execute deliberately to avoid undue distraction. Jane, on separation mechanics and debt allocation?

On the separation mechanics, our priority is a tax-free separation. Options include a pure spin or a partial IPO. In a partial IPO scenario we could float a portion of Bev Co. and raise primary proceeds to accelerate deleveraging. The exact allocation of existing debt between the two companies will be determined to optimize each company's capital structure at separation; we haven't finalized those details yet. We will think carefully about outcomes that maximize shareholder value.

Michael?

Clarify the milestones: would operational performance include businesses running to the algos you've stated? And a quick one on pace of deleveraging: you talked about 0.5 turn a year — how should we think about that relative to previous projections and assumptions?

Yes, operational performance includes maintaining base business momentum against the algorithms we've described. On deleveraging, Jane?

To clarify the numbers: under the plan announced in August, assuming a June 2026 close, net leverage at close would have been about 5.6x. With today's financing announcements, initial leverage at close is expected to be in the mid-4s, and we expect to delever around 0.5 turn a year driven by cash flow. There is some delta versus the original assumptions because we've adjusted the financing mix and timing of synergies, but the key message is stronger balance sheet visibility at close and a disciplined deleveraging path.

Kaumil?

You announced Apollo and KKR as partners — why were they the best partners? Will their board representation be on both successor companies? And what are the key risks you considered with the new structure if things don't go right?

We're excited to partner with Apollo and KKR. They bring strategic capital and deep transaction experience. Their investments underscore conviction in our strategy and assets. They also bring institutional knowledge that can be useful as we navigate a complex separation. We intend to work with them constructively, but board representation and governance for each stand-alone company will be determined as we stand up each independent board. We haven't finalized the specifics and will run a formal process to populate both boards with best-in-class directors. Regarding risks, we assessed integration, execution and commodity volatility as key risks. That's why we established a robust TMO, clean teams and external advisers. We believe the mitigants we put in place substantially reduce those risks.

To add on the governance point: we plan a robust outside search and evaluation process for directors. We need two fully capable boards and will be deliberate in filling them with diverse skill sets. We're not at the point yet to say who goes where; that will follow a formal process.

That's about all the time we have. Thank you to everyone joining us in person and on the webcast. I hope you've heard clearly about our conviction in the acquisition of JDE Peet's and the planned separation into two pure-play companies, and we hope you share our excitement about the future for KDP. Thank you.