Can Keurig Dr Pepper's Energy Growth Offset Coffee Market Softness?

Keurig Dr Pepper KDP is gaining strong traction in the fast-growing energy drink category, which is emerging as an important growth engine for its U.S. Refreshment Beverages business. The company’s energy portfolio crossed the 9% market-share threshold in the second quarter of 2026, up significantly from less than 1% about four years ago. Brands such as Bloom, GHOST and C4 have benefited from distribution expansion, product innovation and strong in-store execution. KDP’s energy business is now running at roughly $1.5 billion in annualized net sales, putting the company well on track toward its double-digit market-share goal.

The momentum in energy comes at a time when KDP’s U.S. Coffee business remains under pressure. U.S. Coffee net sales declined 3.2% in the second quarter, while volume mix fell 8.2 percentage points and pod shipments dropped 11.6% on a reported basis. Segment operating income declined 24.7%, hurt by higher green coffee costs, tariffs, unfavorable mix and increased marketing spending. Nonetheless, brewer shipments increased 2.1%, marking a return to growth, while management expects lower-cost inventory, easing tariff impacts and improving trade inventory trends to support better Coffee performance in the second half.

Importantly, KDP does not appear to view energy growth as coming directly at the expense of coffee. Management noted that shifts between the two caffeine categories have been broadly neutral over the past three to four years, suggesting consumers continue to use both for different occasions. This gives KDP an advantage through its diversified exposure to beverages and coffee, with energy providing a strong source of incremental growth while the Coffee business works through near-term cost and demand pressures. Continued gains in energy, coupled with a potential improvement in U.S. Coffee trends, could support a more balanced growth profile for KDP over the balance of 2026.

Keurig Dr Pepper’s Zacks Rank & Share Price Performance

Shares of this Zacks Rank #3 (Hold) company have gained 8.7% in the past three months, outperforming both the industry and the broader Consumer Staples sector, which have grown 5.1% and 2%, respectively.

KDP Stock's Past Three-Month Performance

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Is KDP a Value Play Stock?

Keurig Dr Pepper currently trades at a forward 12-month P/E ratio of 12.97X, lower than the industry average of 19.95X and the sector average of 17.24X. This valuation positions the stock at a modest discount relative to both its direct peers and the broader consumer staples sector.

KDP P/E Ratio (Forward 12 Months)

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Stocks to Consider

Darling Ingredients Inc. DAR, which is a global developer and producer of sustainable natural ingredients, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Darling Ingredients' current financial-year sales indicates growth of 12.7% from the prior-year level. DAR delivered a trailing four-quarter earnings surprise of 38.9%, on average.

The Coca-Cola Company KO is a leading beverage company with a portfolio of 32 billion-dollar brands spanning sparkling beverages, water, sports drinks, dairy and value-added beverages. KO currently carries a Zacks Rank #2 (Buy).
    
The Zacks Consensus Estimate for Coca-Cola’s current fiscal-year sales and earnings implies growth of 4.03% and 9.7%, respectively, from the year-ago reported figures. Coca-Cola delivered a trailing four-quarter earnings surprise of 4.6%, on average.

Primo Brands Corporation PRMB is a leading North American branded beverage company focused on healthy hydration. It currently has a Zacks Rank #2.

The Zacks Consensus Estimate for Primo Brands’ current fiscal-year sales indicates growth of 2.5% from the prior year’s reported levels. PRMB delivered a trailing four-quarter earnings surprise of 7.7%, on average.

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This article originally published on Zacks Investment Research (zacks.com).

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