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Keurig Dr Pepper CEO Says Coffee Subscription Will Drive D2C eCommerce Growth

Keurig Dr Pepper

Keurig Dr Pepper is looking to coffee subscriptions to bring in recurring direct-to-consumer (D2C) revenue as consumers increasingly turn to digital channels to get their caffeinated buzz.

The beverage giant shared on a call with analysts Thursday (Oct. 26) discussing its third-quarter financial results that it is seeing strong performance on digital channels.

“eCommerce, which was growing prior to the pandemic, accelerated significantly during the pandemic, and it really has shown no signs of pulling back from that,” Keurig Dr Pepper CEO Robert Gamgort said. “You can imagine, when you look at individual segments, that single-serve coffee is really an ideal segment for eCommerce. It’s lightweight, high value, long shelf life, not fragile to ship.”

Overall, many consumers are purchasing food and beverage products via digital channels. According to the PYMNTS Intelligence report “Consumer Interest in an Everyday App,” created in collaboration with PayPal, which drew from a survey of more than 2,200 U.S. consumers, 16% of those who had purchased groceries in the previous 30 days did so exclusively using internet-connected devices. Plus, 45% did so both via connected devices and more traditional means.

Keurig Dr Pepper, for its part, is looking to subscription models to grow digital engagement in an effort to keep customers loyal to its eCommerce channels.

“We’ve been increasing our own subscription business and services to the consumer,” Gamgort said. “And as we put more SMART brewers out there, [that] allows for SMART consumption-based reordering, I think that eCommerce will continue to grow.”

The company’s subscription follows a subscribe-and-save model, providing discounts for recurring purchases. Specifically, its Auto-Delivery program offers 25% off, enabling consumers to choose which pods they want to receive at frequencies ranging from every two weeks to every 12 weeks.

Plus, the company’s SMART line of single-serving coffee makers, which can be controlled by connected device apps, offers rewards for subscribing, promising points that can be redeemed for pods and accessories on every dollar spent on Auto-Delivery.

These kinds of programs can be quite popular among consumers already open to subscriptions. The report “The Impact of Subscription Models on Consumer Choice,” a PYMNTS Intelligence and collaboration, which is based on a survey of more than 2,100 U.S. consumers, reveals that 40% of subscribers hold discount refill subscriptions, with these options disproportionately popular among older consumers.

In fact, these types of subscriptions pose a significant opportunity for companies offering products such as coffee, which many consumers go through on a regular basis, given that customers are not necessarily looking for the lowest cost — rather, they appreciate the opportunity to set it and forget it. The same study finds that convenience is the most common reason discount refill customers cite for subscribing.

Indeed, convenience is a top-of-mind concern for many of Keurig Dr Pepper’s customers, and the brand is seeing it as a key factor motivating digital adoption.

As Gamgort explained, “The convenience of eCommerce and pickup and delivery services continues to resonate well after any pandemic-related uplift would have normalized.”