Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Keurig Dr Pepper’s Earnings Call for the First Quarter of 2020. This conference call is being recorded and there will be a question-and-answer session at the end of the call. I would now like to introduce your host for today’s conference, Keurig Dr Pepper Vice President of Investor Relations, Mr. Tyson Seely. Mr. Seely, please go ahead.

Thank you, and hello, everyone. Thanks for joining us. Earlier this afternoon, we issued our press releases for the first quarter of 2020. If you need a copy, you can get one on our website at keurigdrpepper.com in the Investor section. Consistent with previous quarters, today, we will be discussing our performance on an adjusted basis, excluding items affecting comparability. The company believes that the adjusted basis provides investors with additional insight into our business and operating performance trends. While the exclusion of items affecting comparability is not in accordance with GAAP, we believe that the adjusted basis provides meaningful comparisons and an appropriate basis for discussion of our performance. Details of the excluded items are included in the reconciliation tables included in our press release and our 10-Q, which will be filed later this week. Due to the inability to predict the amount and timing of certain impacts outside of the company’s control, we do not reconcile our guidance. Here with me today to discuss our first quarter 2020 results are KDP Chairman and CEO, Bob Gamgort; our CFO, Ozan Dokmecioglu; and our Chief Corporate Affairs Officer, Maria Sceppaguercio. And finally, our discussion this afternoon may include forward-looking statements, which are subject to the Safe Harbor provisions of this Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of these risks and uncertainties is contained in the company’s filings with the SEC. With that, I’ll hand it over to Bob.

Thanks, Tyson. Let me start by expressing my sincere hope that everyone dialed in is safe and healthy, and I want to thank you all for joining us this afternoon. As you can see from our Q1 results, we started the year in a strong manner, with financial delivery very much in line with our long-term targets and with continued strong free cash flow and deleveraging. We expanded market share across the majority of our portfolio and believe that we were just getting started, as we began to introduce our best lineup of innovation yet. The continued underlying strength of our business is reflected in the results we reported today, as COVID-19 had only a modest impact on us in the first quarter. Ozan will take you through some of the relevant highlights from the first quarter that carry over into the full-year. But I want to acknowledge that Q1 represent a very different environment than the one we’re operating in today. Therefore, I want to focus my comments on the second quarter and beyond, addressing a number of topics that I believe are most relevant to our investors at this moment. Specifically, we will discuss how consumer behavior has recently shifted and share our assumptions for how we believe that will evolve going forward, explain how those shifts have impacted our portfolio positively and negatively. We’ll do this through the lens of both product categories and retail channels. Review the critical steps we’ve taken to date to navigate this unusual situation, and how we’re managing the business and channel mix to ensure continued success in the short-term and in the long-term. And finally, we’ll provide a more granular view on financial expectations by segment for the next quarter and update you on our outlook for earnings, cash generation, and…

Thanks, Bob, and good afternoon, everyone. Since our press release provides significant detail on our performance, let me touch quickly on our results for the first quarter, before shifting to a discussion on some more relevant items, since the environment has changed significantly. At a high level, the first quarter was another very good one for us, reflecting the strength of the business throughout the quarter, as well as the small net benefit of COVID-19 in the final weeks of the quarter. Excluding the impact of foreign exchange, net sales increased 4.5%, with the growth from all four segments and particular strength in packaged beverages. We delivered adjusted diluted EPS growth of 16% in the quarter, fueled by the growth in adjusted operating income, a lower effective tax rate and lower interest expense, due primarily to continued deleveraging. Free cash flow in the quarter was as strong at $464 million, translating into an adjusted free cash flow conversion rate of nearly 115%. We reduced bank debt by $42 million and repaid $107 million of structured payables, and we ended the quarter with almost $200 million of unrestricted cash on hand. In terms of leverage, our bank debt to adjusted EBITDA ratio, which we refer to as our management leverage ratio, improved to 4.2 times versus 4.5 times at the end of 2019. This improvement was driven by lower outstanding debt balances and continued growth in adjusted EBITDA, including the inclusion of certain permanent amortization expenses, which were not previously recognized in the calculation of adjusted EBITDA. I would like to take a moment to provide more information on this change. As part of our detailed financial review with the strategic refinancing we recently completed, we determined that certain components of our reported amortization expense were not reflected in the calculation…

Thanks, Ozan. While we are very pleased with our Q1 performance, which followed a strong 2019, we recognize the need to make bold changes to win in this very different environment and we continue to pivot accordingly. As we look to the future, we don’t have a better crystal ball than anyone else. We built our plans on the assumption that the second quarter will reflect the most severe impact of home sheltering, followed by a gradual reopening of the economy starting in Q3 with offices and schools first. This will be followed by restaurants and travel, and still later, we’ll have large gatherings and events, most likely when a combination of testing, treatment and vaccines are available. We expect consumer spending to be impaired for a longer period of time, with the shift towards a value mindset elevating in-home consumption of food and beverage. We’re also developing our game plan for how to market and create demand for our brands in this new environment, where both the consumer and the retail landscape will show lasting change. The most important takeaway from this conversation, as evidenced by our comments on this call, is the optionality we have to successfully navigate in this changing environment due to the broad beverage portfolio we manage, combined with our diverse and flexible selling and distribution system. Finally, we would not have been able to deliver the Q1 results we share today, nor have the confidence in our guidance we provided, if not for the loyalty, dedication and professionalism of our team. Our front-line employees are executing exceptionally well at retail and keeping our plants safe and running, all to ensure our customers and consumers have the products they need during this crisis. Our team is demonstrating KDP at its very best. With that, we’ll turn it over to the operator for your questions.

[Operator Instructions] Your first question is from Bryan Spillane.

Hey, good afternoon, everyone.

Hi, Bryan.

Hi, Bryan. Good afternoon.

Hey. So just two questions for me. One is, I guess, thinking about the flow of 1Q to 2Q, I think, one of the questions we’re getting quite a bit this evening is just, it seems like previously that there were some sales that would have been pulled into 2Q out of 1Q. So, if we’re going through a reduction or a deceleration sequentially just what changed since there? So maybe I’ll start with that, and then I’ve got [indiscernible]

Sure. So as we said on the call, and then I’ll pause after this part to make sure that I’m answering your question that you had in mind. When you think about the first quarter, as we said, we had modest impact of – on our top line sales from the consumer behavior related to the shelter at-home. It really impacted us in our DSD segment, because you see an immediate reflection of sales in that segment and that shows up in PB as our overall segment. Interestingly, in coffee, we started to see consumer behavior at-home begin to pick up, but we get the immediate hit from the away-from-home segment, because that’s the office coffee piece that we ship directly. And so we see the negative of that immediately. We also see the negative fairly quickly of the fountain foodservice business as well. So that’s what explains Q1, so very solid performance with a little bit of upside on the revenue, almost all in the PB business, with some negative in rest of our business. When we take a look at Q2 and Ozan gave you some very clear specifics on how we see this shaking out. We see growth in coffee, driven by away-from-home, I mean, by at-home, offset by away-from-home. We see this pluses and minuses that I talked about, and these are massive swings in categories of retailers delivering flat in PB. And then the area where the fountain and foodservice business really hits us is in our BC segment. So when you net those all out assuming really a rough Q2 for the industry, we see ourselves coming in around flat total and then obviously improving from there based on the – based on our outlook for the full-year. So does that get at the question, or was there more clarity I can provide?

No, no, I think so. I think the – relative to maybe where external expectations were, it’s really the falloff in Beverage Concentrates in 2Q…

Sure.

…that is going to be severe and probably is, again, just thinking at an enterprise level is what a lot of it drives the sequential change. So that’s helpful.

Sure.

And then just just one other one and related to Beverage Concentrates and the fountain foodservice piece, can you remind us how big that is as a percentage of the segment? And then also my recollection is that geographically, it’s a little bit more skewed to the Dr Pepper Heartland market. So as we’re beginning to kind of try to model out beyond 2Q and do scenarios beyond that, if you could just give us a little help there geographically, where you’re more exposed in U.S.?. Thank you.

Sure. If you look at the fountain and foodservice segment, as we described it in our 2018 Investor Day, right after we announced the merger, we talked about that being 20% of the legacy DPS business. And so it’s a smaller portion of the total business, all combined. It is a significant portion of the BC segment, and that’s why you see the impact there. And the numbers that are coming out of restaurants, which are widely available, explain the magnitude of the decline, combined with that exposure to our portfolio. So that’s really not a surprise. We do see it improving as the year goes on. We are – from a geographic standpoint, we are now really national in coverage. The legacy was that it was in Dr Pepper’s Heartland in the South and the Southeast, but not anymore. We really have national coverage. Remember, Dr Pepper is the most widely available carbonated soft drink in restaurants. And so as a result, we, by definition, have national coverage. We see the geographic SKUs based on the degree of the consumer impact, but we’re going to perform like the country in total on average.

So just tracking QSR traffic, in general, probably the best way to kind of look at it from the outside?

Absolutely, and we’re very heavily exposed to the QSR segment. And there’s some signs of that improving with drive-thrus, and we hope with a gradual reopening of the economy that’s going to pick up. But again, our estimation is the biggest hit will be in Q2, and I think we’ve modeled a very significant hit in all of our numbers to make sure that we’re able to pressure test our P&L to deliver on EPS and cash.

Okay. Thanks, Bob. I appreciate your color.

Sure. Okay.

Your next question is from Lauren Lieberman.

Great, thank you. I just wanted to talk a little bit about brewer trends, because I know this quarter there was a difficult comparison, but also you had mentioned in the release supply from Asia and some thoughts about some shipments shifting from first quarter to later in the year. So I guess, one, what are you seeing in terms of brewer sell-through from retail? So I think with people at home, not everyone had a Keurig to start when the crisis hit and they all need to make coffee at home. So what are you seeing on that front? What might you be doing to shift your marketing specifically for brewers as you look forward? And then third, anything you can share on innovation plans? I’m going to guess that, how we all gotten together in March, we would have heard a bit about brewery innovation plans for this year, maybe that’s shifted a bit, just given the environment, but would love to hear any update there if there’s one? Thanks.

Sure. The – let me just say, overall, the coffee business in the at-home portion is performing remarkably well. And I’ll reiterate something I said earlier, because it is notable. We are seeing a significant uptick in consumption per machine. As I said, that’s something we haven’t seen for a long time. And we have that connected brewer network, about 10,000 Internet-connected brewers to allow us to be on a real same basis of what’s happening. And it was really striking to see the tick-up happen in the first couple of days and it has remained at an elevated level. So we’re getting growth off of existing machine because of the that behavior. And at some point you could say, what happens in the future when it all normalizes? There’s a lot of indications that, that’s going to stick at a higher level than anticipated. There’s a lot of noise in our ability to read what’s going on with household penetration. And remember, we’re six weeks into it. And there’s great demand for brewers and there are other indicators that you could look at like search terms for coffeemakers in Keurig, in particular, being elevated. The biggest shift is where consumers are buying their brewer. More has moved to online than before. We’re seeing good growth in mass channels. But remember, the entire specialty channel where we sold a considerable number of brewers has been largely shutdown. So the demand for the brewers among consumers is very high. They’ve had to alter where they’re able to buy them. And as a consequence, we’ve altered our marketing vehicle more online and more targeted to where the consumer is searching. We’ll see how that shakes out over the coming months, as consumers know where to get machine that’s easier for them to…

Okay. And then just lastly, the pieces on marketing, what you’re doing in terms of marketing differently for the system…

Yes.

…in terms of driving household penetration?

Yes. We’ve moved even more online, because that’s where the consumer is going to find brewers. E-commerce has been a real growth engine, not only on the coffee side of the business, but on the total beverage side of our business. We had always talked about at the time of the merger that because of the Keurig legacy, not only in selling within e-commerce, but having our own direct-to-consumer e-commerce site that we were well developed, probably ahead of everyone on e-commerce, that’s serving as well on the Keurig side, as well as total beverage side. So I think that the move online, which has accelerated dramatically in the past six weeks, again, a lot of that is going to stick into the future. And therefore, our marketing will continue to evolve. But it’ll always be a combination of mass vehicles to targeted vehicles. But as more and more brewers shift online, it’s very attractive for us to target to a consumer who was raised his or her hand and interested in buying a coffeemaker to be able to target them with the right message right the time now.

Okay. Thanks so much.

Sure.

Your next question is from Peter Grom.

Hey, good afternoon, everyone.

Hi.

Hi.

So I just kind of wanted to follow-up on Bryan’s question more around Q2 coffee guidance for mid single-digit growth. I know back in March, you mentioned that most of the benefit from the stock-up would really occur in Q2. So does the mid single-digit guidance reflect that benefit? And then you mentioned pod pricing is actually in positive territory. And with some of these category changes likely permanent, how should we be thinking about pricing for pods through the balance of 2020 and beyond? Thanks.

Yes. First of all, coffee is not stocked up. Coffee is elevated consumption. And again, we know that, because we have access to our connected brewers through our household panel. So that’s the conversation we had earlier. When you look at elevated growth in a number of beverage categories, we had to make the conclusion, which of these were one-time stock-up? Which of these are ongoing consumption? And which of these are really categories will be off-trend? And coffee is clearly in the category of being elevated consumption. So this is not a stock-up behavior, but rather a shift in fundamental behavior that’s on there. The mid single digit that we’re talking about here is a representation of significantly higher growth on that, on the at-home side of our business driving that, offset by an office coffee business that has plummeted very similar to trends you’d see in the restaurant business. The net of that is that, we come out nicely ahead, because we have both sides of the equation covered. But it – but there’s no mistake that the office coffee shutdown or slowdown has certainly been an offset to the explosive growth we’re seeing at-home. So that’s the way that we take a look at coffee in total. Again, a lot of this behavior in the in-home side will stick. If we think that there’s a recession coming, we will absolutely see more consumption moving in-home, especially as people have discovered how easy it is to make coffee at-home. And that’s part of what’s driving the pricing trend that we talked about, as people move from purchasing coffee out-of-home to in-home, they’re bringing the premium brands with them. So the IRi or Nielsen numbers that you see over the past month or so show premium brands growing at a faster rate that value brands. You see great improvement in the trends in our owned and licensed portfolio, that’s a positive contributor to pricing. And then you’re seeing more of the category being purchased at full price, not waiting for a deal on all combined, that’s leading to a – an elevated price within pods. I have no idea how to forecast that for the rest of the year. What I would say is, as we’ve talked before, we have great line of sight to the pricing that we charge to our partners and that doesn’t change in this environment. A positive price impact, like you’re seeing right now does have a good profit contribution to our owned and licensed portfolio, but doesn’t have an impact on the long-term pricing agreements we have with our partners.

Thank you.

Your next question is from Bonnie Herzog.

Thank you. Good afternoon, everyone. I’m – I wanted to circle back with a question on your guidance. I guess, I’m wanting to reconcile something you had said last quarter about the first-half. You’d originally guided that first-half sales and EPS growth would be tempered, given several factors, such as higher investments and lower productivity and synergies. So could you guys touch on how much of that you shifted in the quarter, such as maybe pushing out investments or pulling forward some of the savings just trying to kind of think through that? And then I guess, I’m trying to get a sense of, again, how confident you are that you’re going to be able to hit your guidance, especially, if things don’t recover for a while and in light of the recession we’re in, I guess, I’m thinking about it in the context of down trading pressures increasing, especially in your pod business, just can you touch on what is in your guidance as it relates to that? Thank you.

Yes. The first quarter results that we delivered are reflective of everything that we said on the last call in terms of the sequence of timing of impacts. I won’t go through all of those, I think, it’s well documented in the earnings release and nicely covered by Ozan on the call. No big surprises in the first quarter other than we outperformed and we could talk about where that performance came from, but there are a number of factors. I would suggest that for Q2 and on that guidance that we gave back at the end of fourth quarter, it doesn’t even matter anymore. It’s a completely new world and it’s a complete reset of our plans than any other company operating in this environment isn’t looking at its AOP anymore. They have completely zero-based their budgets and they look at the new world, and that’s how we’ve thought about it. And so while we assume some gradual recovery beginning in Q3, those are the words we used, we have pressure-tested our P&L to be able to deliver in the priority that Ozan talked about, which is being competitive in the marketplace, continuing to gain share, protection of cash and earnings in that order, and we have every confidence in our ability to do so, otherwise, we would not continue to reiterate that.

Okay. Thank you.

Your next question is from Steve Powers.

Yes. Hi. Can you hear me?

Yes, Steve.

Yes.

All right, great. Hey, I guess, I wanted to build a little bit on what you’ve already said and just dig further into visibility into the Coffee System and pod demand over the balance of the year, considering all the cross-channel volatility that you referenced. Maybe you could just talk through how an earlier or conversely later returned to social mobility, for lack of a better term, might impact your planning on that coffee business over the balance of the year versus the slow recovery base case that you’ve referenced, I’m just trying to figure out how you toggle those plans going forward, based on a lot of different outcomes channel-by-channel?

Steve, just to clarify, are you saying what happens if the recovery is faster?

Is faster or conversely, slower longer duration?

Yes. As I talked about before when I used the term that we pressure tested our P&L, is we put a base case out there. And anybody in this environment, who is managing to a single number forecast, would be fooling themselves, because the ranges are significant. Nobody is managed in a territory like this, where we’re seeing double-digit movements up and down across different segments. So everything that we’ve done internally is within a range. And so we look at scenarios in which the Bonnie’s question, the recovery is slower, and we look at other scenarios and what comes in faster. And so how you have to toggle all of these things are, as we said before, the at-home consumption is benefiting from work from home, but we’re getting hit very hard on our office coffee business. As we get a recovery and people go back to work, our office coffee business improves nicely. And one of the things we’re fascinated with is, how much of that at-home business will stick? And we believe that a good portion of that will stick and we’ve got a number of reasons to believe that, I quoted a couple earlier in the call, so I won’t repeat those. And so we think that that’s a win. If it extends longer, again, we’ve pressure tested ourselves, otherwise, we wouldn’t have the confidence that we put out there around the EPS or the cash. And so we would love a return to business as usual. This is not a – we’re not a company who has got a one-time gain from this crisis, who then is going to have to worry about what we do once things recover, we would like everything to recover. But we’d be able – we’re able to toggle the mix elements of our portfolio very uniquely, given the broad portfolio that we manage, as well as the cost elements of our portfolio that Ozan talked about to be able to manage ourselves to success on almost any one of the scenarios that we described. It occurs to me that I didn’t answer part of Bonnie’s question, which was about what do we think about down trading or a recession on the Keurig business? We think we’re set up really nicely for that. First of all, people trade from premium price away-from-home products, food and beverage going to the coffee shop to in-home during the recession, so we’re a great value compared to that. And also think about all the work that we’ve done to strategically lower our price, both on brewers and pods, you can get a high quality pod now for around $0.30. We are not concerned about a recession and its impact on the Keurig business. We think it’s actually a net positive on that business if that were to occur.

Thanks. That helps a lot. Can I just ask one quick question, different topic, some of your smaller third-party independent bottling partners. I’m just curious any comments you have on how they’re faring with a mix shift away from immediate consumption channels, which are obviously very profitable for them? Just your confidence in their ability to weather the toughest part of this downturn through 2Q? Thanks.

Sure. We stay very close with them. And they are – the share growth numbers that I talked about earlier, our independent operator performance is embedded in those share numbers. And so they’re executing very well right now. It’s a challenge for them to manage like it is for all of us, but we don’t have any concern in their ability to weather the storm.

Great. Thanks so much.

Okay.

Your next question is from Kevin Grundy.

Hey, good evening, guys. Sorry about that.

Good evening.

Hey, Bob, I wanted to pick up on the coffee business and the working from home dynamic longer-term. So clearly, it’s a positive here was in March seems to be into April. I guess, it’s still a little bit murky, I think, for some of us with with the pantry load and going beyond coffee and into other beverage categories as well we’ll see where the dust settles. But where I’d like to sort of drill down here is, how positive this could be the working from home dynamic, which will be with us for a long period of time, I think, even beyond the recovery here with the virus? And what sort of positive that could be for your business? So the increased coffee usage is there with the 10,000 brewers that you have, I guess, that that’s unsurprising, because people are spending more time at home, but then you’re down to a trickle probably in the office space. So how should we think about that longer-term? And then to sort of like frame that context, you talked about the 20% of the business in Beverage Concentrates its own premise, what percentage of the business in coffee is going to be leveraged to off-premise channels as well? I think that would kind of help us think about it and you’re sharing that channel as well. Thanks for all that, Bob.

Yes. We would love for the economy to go back to normal. People will go back to work. Net-net, we go back to delivering our long-term trends, where we talked about accelerated growth this year, 13% to 15% EPS, we’d like that world. So again, I would reiterate that this is not one that we view as more desirable for a number of reasons. Having said that, we’re in a unique situation. Now we’re able to satisfy consumers’ needs in a unique way in the moment in which they really need it. And that is, we’re able to take care of all of their beverage, their coffee needs in-home. They’re using our machines more frequently. And we know that, as that continues to happen and new people come into the system, which they are right now, that that’s going to be sticky. And so there’s a scenario as people go back to work, where they’re more attached to their Keurig machine at-home than ever before. There are more people using Keurig machine at-home than ever before. And yet, we’re able to pick up the office coffee business as well. So we’re very bullish, as you can tell on the long-term prospects of the entire Keurig system. And that’s why when you think about all these different scenarios that the questions are centering around today, what if the current crisis lasts longer? What if the recovery is faster? We can navigate through any of those scenarios and come out in a good place on the Keurig business. And when you look at the impact on our total company, that’s why we’re in a unique position. We’ve got a portfolio that covers almost every beverage need. We have routes to market that we talked about now for two years, where we can cover anything from a C-store all the way through to e-commerce, those seemed interesting at the theoretical level. You’re seeing that all play out live right now in this environment. And as it recovers, whichever path recovery takes, it’s not going to be a straight line. We’re very comfortable that we can navigate through that as well.

Thanks, Bob. Yes, just to make sure I’m clear, though, and maybe I missed this, what percentage of the business in coffee is away-from-home? So it’s 20% in on the legacy Dr Pepper side, all of that in Bev Con? How much on the coffee side of the business and what’s your share relative to the 80%-plus that you speak to in the food channel?

Yes. You didn’t miss it, because we never have disclosed that and we’re not planning to. We’ve talked about 50% of our business on the coffee side being in the unmeasured channels and that includes e-commerce specialty, but also includes away-from-home coffee. And our share in that channel is significantly lower than our share in the in-Home channel. The office called is a very fragmented business. And all the – all of the exposure to these different channels that you guys are asking about, that’s all embedded in the guidance that we’ve given you for the year and also for Q2, which is more granular guidance than we’ve ever given before.

Okay. Thanks for that, Bob. Good luck.

All right. Thanks.

Thanks.

Your next question is from Bill Chappell.

Thanks. Good afternoon. Hey, just a couple of quick follow-ups. One, I think I’m right in saying that the away-from-home and at-home split before Green Mountain went – or Keurig went was taken private is around 75-25? Is there any reason to think that that’s changed over the past few years? And then secondly, just on the promotional kind of cost environment. Can – I mean, can you get a – give us an update of what you’re doing over the next four or five months? We’re hearing from a lot of food beverage companies of – because the is demand so strong, kind of quickly pulling a lot of promotions, which presumably falls to the bottom line. So just trying to understand if that’s the case and that’s kind of factored into your guidance as well?

Yes. If you take a look at the latest IRi and Nielsen numbers, I would not say that beverage demand, in general, is strong. I would say it is elevated in pockets and it’s weak in other pockets. This is a tremendous mix management challenge for everybody in, in the industry, including us. And that’s how you see that playing out in the Q2 numbers that we talked about before. Fortunately, CSDs are remaining elevated and we’re gaining share in that segment. We’re also gaining share in a number of other segments, some of which are strong like juices and juice drinks, and then there are other categories that are not as strong. So it’s not a situation, where beverage is so strong everywhere the people are pulling promotions. And so we’re targeting our promotions to the right areas, where we think it’s appropriate and there are other areas where it doesn’t make sense. So it’s – there’s not a big macro conclusion you can take out of that. On the coffee side of the business, there is certainly elevated consumption. And it is not a stock-up, it’s an ongoing piece. We’re continuing with somewhat of our normal promotion schedule, but what you’re seeing is the consumers also buying product at full price day in and day out, which is part of the reason, along with the mix towards more premium brands that you’re seeing pricing going up there. So I wouldn’t take any – the way any big conclusions on the promotional environment for us, at least, in general. I think in a lot of these categories, where you’re seeing weak demand from consumers, you’re actually going to see more promotion going forward. Take a look at the Nielsen and IRi trends right now, there are segments that are running negative for a consistent period of time. There’s a lot of incentive for players to promote in that environment. We’ve got good exposure and we’re managing it really tightly.

Got it. And then on the breakout, any reason to think that it’s changed from when it was last disclosed five years ago?

I don’t know those numbers from five years ago. I’ve been there for five years, but I don’t really have a comment on that one, to be honest.

Okay. Thank you.

Your next question is from Sean King.

Great. Thanks for the question. You touched on a pod pricing strategy, but in the context of recession and consumers being more value sensitive, what can you say about the risk that consumers, specifically returned to pod and coffee, especially after they’ve been spending a long period of time at home? And is – I guess, is household penetration at a point where that’s – that risk is, I guess, no longer relevant?

But yes. So I think, first of all, we have got a really established household penetration base that continues to grow at a steady rate year in and year out. I think the second part of it is, when you look at consumer behavior during a recession, the first trade-off they make is out-of-home food and beverage to in-home food and beverage. And if you look at a price comparison of Keurig versus purchasing coffee from outside of the home, it’s a tremendous bargain. But again, the last time there was a recession, the price of pods were significantly higher than they are today. So all of the work that we’ve done to get the price of pods down serves us day in and day out and it prepares us really nicely to be recession-resistant. Similarly, we’ve gotten the price of machines down in some cases. In other cases, we’ve gone to more premium. So we’re able to fill a wide range of consumer needs there, and we have machines that are below $100, we have machines that sell for around $50. And so the thought of a recession and a trade down, I think, is a net benefit to us, not a net risk, as people move from consuming coffee out-of-home to in-home. And as we see right now, in a situation where people are moving their consumption in home, not only are they drinking more coffee, they’re actually drinking more premium coffee right now, because they’re filling that need for the coffee shop occasion that they’re not able to get.

Great. Thanks for the color. I’ll pass it on.

Okay.

There are no further questions in queue at this time. I’ll turn the call back over to management for any closing remarks.

Thanks, everyone. This is Tyson. Thank you for joining us tonight. The IR team is around and available throughout the week and this evening. If you would like to follow-up, just reach out to myself or Steve, and we’ll get back to you. Thanks, everyone. Stay safe.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.