Why Profits Are Down For Keurig Dr. Pepper After Price Increases

It's rare to hear of a company that does not boast about how its profits are soaring. The Conversation, for example, reported in June about how inflation, constricted supply, and companies driving up food prices beyond what was necessary created 62 "food billionaires." In more precise numbers, the food and agribusiness leaders increased their wealth by 42%.

Yet despite the general skyrocketing of wealth in the industry, Keurig Dr Pepper reported that its 2Q profits were down. According to a press release shared with Market Insider, the company's net income was down by 51.3%, decreasing from $448 million to $218 million. However, net sales rose by 13.2% from $3.14 billion to $3.55 billion.

The drop in income, however, has not hurt Keurig Dr Pepper. Seeking Alpha reports that due to how sales numbers exceeded expectations, the company has both raised its sales expectations further and enjoyed a bump in stock prices. So, on the whole, it's a solid enough quarterly report. It just doesn't join in the record profit headlines enjoyed by other companies. 

Keurig Dr Pepper blames the supply chain

The given reason for why Keurig Dr. Pepper is not enjoying a dragon's pile of earnings is the same reason used for most food business issues over the previous year: the supply chain. Summarizing the data of the second quarter's report for the press release, Chairman and CEO Bob Gamgort claimed that the company succeeded in bouncing back from the disruptions in the supply chain while raising prices.

MarketWatch, however, stated that the hiked price could not fully offset the supply chain issues. That is why, the piece inferred, the sales for Keurig Dr Pepper went up while net income dropped. In fairness, Keurig Dr Pepper could have moved beyond supply chain issues, but still feels the lingering effect of the disruption. Food Navigator quoted Gamgort's Q1 forecast in February: "We expect Q1 to represent our most challenging comparison to last year, as we managed through the peak levels of supply chain disruption and significant ongoing inflationary pressures." So, profits may still be on an upswing from a dramatic drop. In any case, Keurig Dr Pepper looks more than comfortably placed even if it isn't the biggest corporation in town.