Good morning, ladies and gentlemen and thank you for standing by. Welcome to Keurig Dr Pepper's Earnings Call for the Fourth Quarter and the Full Year of 2019. 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's Vice President of Investor Relations, Mr. Tyson Seely. Mr. Seely, please go ahead.

Thank you and hello, everyone. Thanks for joining us. Earlier this morning, we issued two press releases one announcing that we entered into a long-term strategic agreement with Nestlé USA to continue manufacturing Starbucks-branded packaged coffee and K-Cup pods in the U.S. and Canada. The second press release we issued was for the fourth quarter and full year 2019 results. If you need copies the releases are available on our website at keurigdrpepper.com. Consistent with previous quarters, today we will be discussing our performance on an adjusted basis excluding items affecting comparability and with regard to the year ago period for the full fiscal year. Our financial performance also takes into account pro forma adjustments due to the merger. The company believes that the adjusted and adjusted pro forma basis provide investors with additional insight into our business and operating performance trends. While these two -- while these pro forma adjustments and the exclusion of items affecting comparability are not in accordance with GAAP, we believe that adjusted and adjusted pro forma basis provide 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-K, which will be filed later today. 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 fourth quarter and full year 2019 results and our outlook for 2020 are KDP Chairman and CEO, Bob Gamgort; our CFO, Ozan Dokmecioglu; and our Chief Corporate Affairs Officer, Maria Sceppaguercio. And finally, our discussion this morning 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. Before turning it over to Bob, I'd like to share that KDP is hosting a sell-side analyst event on March 19, 2020 which will be webcasted live. As we get closer to the event, we will issue a press release providing more details. But for now please mark your calendars for a 2:00 to 4:00 p.m. Eastern live webcast. With that, I'll hand it over to Bob.

Thanks, Tyson and thanks to everyone for dialing in. Two years ago, we laid out a bold vision and ambitious financial targets for our new company. We saw significant opportunity to create an organization focused exclusively on beverages of all formats by being the first to combine hot and cold beverages at scale and by harnessing an unrivaled distribution system that can reach nearly all selling outlets using seven different routes to market ranging from direct store delivery to e-commerce. Since the announcement, we successfully combined our two legacy companies uniting nearly 26,000 employees into one forward-looking organization with a common platform and culture. We also delivered financial results that have exceeded our three year targets invested in the foundation for long-term sustainable growth and have upped our game on corporate responsibility and sustainability. In 2019, we delivered very strong financial performance with underlying net sales growth of 3.2%, adjusted operating income growth of 10% and adjusted diluted EPS growth of 17%. Importantly, the sales performance reflected growth from all four segments and in-market performance that remains strong as we grew dollar consumption and gain market share in nearly all of our key categories. And our free cash flow in 2019 was exceptionally strong at $2.4 billion, enabling us to reduce debt by $1.3 billion. As a result, we reduced our management leverage ratio to 4.5 times at year end compared to 6 times at the July 2018 merger close. The strong free cash flow also enabled us to pay down structured payables by $531 million. In addition to delivering strong and balanced results in 2019 we built a foundation for growth upon which we can drive the business faster and more effectively and we prioritized investment opportunities during that year that we are now beginning to activate. Therefore in…

Thanks, Bob and good morning everyone. Since our press release provides significant details on our performance, I will touch on our fourth quarter results very quickly and then turning to the larger drivers in our 2019 performance, along with our 2020 guidance. At a high level, the fourth quarter was another solid one for us. Excluding the prior year sales of BODYARMOR in October last year and foreign exchange impacts, net sales increased 4.6% in the quarter with contribution from all four segments. The sales growth along with product – strong productivity, synergies and network optimization drove operating income growth in the quarter of 13% and operating margin expansion of 210 basis points. We delivered adjusted diluted EPS growth of 17% in the quarter, fueled by the growth in operating income and the lower effective tax rate, partially offset by higher interest expense due to comping last year's benefit of interest rate swaps in the fourth quarter last year. Turning to full year results. Free cash flow in 2019 was exceptionally strong at approximately $2.4 billion. This translated into an adjusted free cash flow conversion rate of nearly 140%. We also ended the year with $75 million of unrestricted cash on hand. In terms of leverage, we reduced our outstanding bank debt by approximately $1.3 billion in 2019. As a result, our bank debt-to-adjusted EBITDA ratio, which we refer to as our management leverage ratio, improved by nearly a full turn to 4.5 times versus 5.4 times at the end of 2018. Since the merger closed in July 2018, we have reduced our leverage ratio by 1.5 turns. In addition, we also paid down $531 million of structural payables during 2019, resulting in total payments between debt and structural payables of $1.8 billion. In terms of synergies, 2019 was the…

Thanks, Ozan. We've covered quite a bit of territory in our remarks today. And look forward to providing more details, during our March 19 webcast. We're excited about the progress we've made in the past 18 months, to build a foundation for our company that we can now leverage to drive accelerated growth, beginning this year. The strong results we have delivered since the merger closed, demonstrate the strength of our strategy and team. And we are confident in our 2020 guidance. And remain committed to delivering the three-year merger targets, we established, more than two years ago. I will now hand it back over to the operator, to open it up for your questions.

Thank you. [Operator Instructions] Your first question is from the line of Bryan Spillane with Bank of America.

Hey guys. Good morning. It's actually, Pete Galbo on for Bryan. Thank you for taking my question.

Good morning.

Good morning.

Bob, I just wanted to get your thoughts around, supply chain, particularly coming out of China with a lot of the disruption, we've seen at ports. And how you're thinking about that, in terms of brewer growth particularly maybe in the first half of the year?

Yeah. So I mean, first of all, you're talking about the supply chain. I think, it's important to talk about there is no demand impact on our business. Because the great majority of our business nearly all of our business is in U.S., Canada and Mexico. So, that's why you get to the supply chain side. We've done a couple of things that have served us well. I mean, the first thing that we did was, geo-diversified our supply chain for our brewers, outside of China. Our original catalyst for doing so was tariffs. But that served us well in this current situation. We just came out of our peak selling season during the holiday, with spectacular selling results. And as we go into this year, we're in a lower seasonality period, which allows us to build some inventory. And so, we really at this point in time, we're really shaped from a supply standpoint. We'll watch it very carefully. But we don't anticipate any disruption at all.

Got it. Got it. That's helpful. And then maybe just on free cash flow, obviously very impressive in 2019 that $2.4 billion. Just want to get some thoughts around sustainability of that in 2020 and 2021?

Sure. I mean I believe we have demonstrated quite a bit of ability to drive outsized cash flow from variety of sources. For example, we have -- and as we've just announced our core free cash flow conversion ratio to net income was 140%. And it would be obviously, we will continue our programs in order to generate still outsized cash flow. For example our business is quite highly cash generative. Second we have a strong working capital management programs in place, as well as we tap into other initiatives, if we see opportunity in order to unlock the cash generation using our asset base. For example asset sale leaseback was one of the initiatives. Therefore we do expect to generate outsized cash flow and turn our free cash with -- in excess of 100% in the upcoming few more years.

Great. Thank you.

Your next question is from the line of Peter Grom with JPMorgan.

Hey good morning everyone. So I just wanted to ask a couple of questions on the revenue outlook. So first, I guess would it be possible to break out your expectation for what is organic in the 3% to 4% target for 2020 as I know you guys get a benefit from McCafé in the back half of the year? And then just more broadly you reiterated your long-term EPS guide this morning, but didn't mention anything around long-term net sales growth. And maybe I'm reading too much into this, but should we expect faster growth beyond 2020 as a result of this increased investment?

Yes. I mean let's start with 2019 for a second right? If you look at -- there was a lot of noise in 2019 as we talked about numerous times about the ins-and-outs of Allied Brands. I am very happy to say that's all behind us as we go into 2020. So there is no concept of underlying net sales as we go into 2020. But if you go back and look at 2019, our underlying net sales was 3.2%. In the fourth quarter it was 4.6%. And if you wanted the discount underlying our reported was 4.3%. So you saw an acceleration throughout the year in 2019. And that continuation into 2020 is why we have the confidence of taking our revenue targets up for 2020. With regard to organic versus additional really the only thing that wouldn't be organic in your definition would be McCafé as you point out and a couple of points out on McCafé. I mean one, we participate in revenue of McCafé now because we produce the pods. And so we're picking up some incremental difference particularly on the premium bag business, but we already participate in the revenue on pods. So there's not much change there. It's a partial year impact and a lot of the reports out there that quote numbers that I've seen are really looking at retail numbers not manufactured sale numbers. So to answer your question, the great majority of what we're talking about on the increased revenue in 2020 is by your definition organic. In terms of sustainability of that beyond 2020 which is where, I think you're getting at clearly we're not going to sit here and guide beyond 2020. But you can see the investments that we're making are not short term in nature. They're very much long term in nature both in terms of the foundation that we're building that drives our business day in and day out, renovation of our existing brands, launch of new businesses whether we're doing it completely on our own or in partnership with others. And all of that combined suggests that we have a lot of runway in front of us as we talked from the very beginning to improve the operations of our business and fill in significant white space in our portfolio. And that's why we're giving the outlook that we are today.

Thanks. That’s very helpful. Pass it on.

Okay.

Your next question is from the line of Lauren Lieberman with Barclays.

Hi, good morning.

Good morning.

So I just wanted to talk a little bit about maybe opportunities that you have uncovered since closing the deal, sort on a full year in but just -- two years in but vis-à-vis like in particular the network optimization program and some of the things that you started to hint out and promise us we'll hear more in a few weeks. But I was just curious kind of what is sort of incremental discovery as you've gotten closer and deeper into the business versus things that you may be contemplated when the merger first came together? Thanks.

Sure. Let me -- I'm going to break them into three buckets of areas that we've learned. I'm going to talk about portfolio expansion in the white space, I'll talk about our selling and distribution capabilities. And then I'll ask Ozan to talk about the cost side of the business and also some cash I think would be important, right? Because you go in -- as you point out, you go into these mergers with a hypothesis and a merger thesis, but the reality is how can you deliver against that once you're up and running. And so now 18 months into running this business what have we learned? I think our ability to fill in white space in our portfolio and expand into higher-growth segments is very much intact and as evidenced by the fact that we're taking up our target on growth. And you can see where we're targeting to fill in our white space. Water -- premium water is a very attractive segment. We're now the number two premium water company. And through a combination of the Bai business that was there; the partnership that we have with Danone on evian; the acquisition of CORE at the end of 2018, which we really were able to accelerate in 2019; the recent acquisition of Limitless, which is small, but we'll ramp up this year; and some of the other opportunities that we take a look at in water. We see significant growth coming out of that segment and we see more opportunity to fill in additional white space within water. Energy is another one. And energy as we talked about is more -- you have to be more thoughtful about how you want to approach that segment, because of some of the big players that exist. But a…

Sure. On the cost side, let me start with the value capture. As we did defined and shared with you as well comes in two pieces, which we call as base productivity programs as well as the synergies. And as we guided and announced several times, we had the target of delivering $600 million of deal synergies starting -- over three years starting 2019 through 2021. And we just also announced that we talked of actually both of the metrics. In fact on the deal synergy side, we delivered a little bit more than our original plans. Therefore, the things went well in those two buckets in terms of delivering overall value capture and topping off those numbers, which in fact gives us the unique opportunity as Bob laid out a couple of minutes ago to continue to invest behind our business from the -- either the brand investment side or the distribution routes or our manufacturing capability that will further fuel and satisfy our growth as well as further drive the base productivity as well as the synergies. Therefore, there's no surprise. In fact, we have maybe a little bit positive surprise in those two buckets, which unlocking the investments that we have laid out. On the cash flow side, absolutely, there's no surprise. We laid out a deleveraging program, and we are 18 months into it and definitely have delivered exactly what we said we would. We did deliver outsized cash flow in 2019 and we have very solid programs intact and in place both 2020 and 2021 that will get us to the deleverage targets that we put out there. And the more opportunities we find definitely we will put into service as we have been doing.

So I think, I mean the net of all of that is we were really confident going into this merger. 18 months later, we're even more confident with what we know. And the one thing we didn't mention in any of that was we did everything we just talked about on top of delivering a home run of the year for Coffee Systems, and our outlook on that is as robust as ever. So we're sitting out here 18 months into this feeling good as you can tell.

That's great. Thank you so much.

Your next question is from the line of Steve Powers with Deutsche Bank.

Hey, great. Good morning. Two questions if I could. I guess the first one just building as quickly enough for Ozan. It looks like outside of a couple hundred million dollars in asset sales in the fourth quarter your free cash flow would have actually come in a little light of the full year target. And I guess that was probably planned on your part. But I guess can you just give us a little bit more insight to what was sold? And as we think about the path the future free cash flow, is that a driver there? Is there a line of sight to similar sales in the future?

Well, first of all, I mean, we delivered $2.4 billion of free cash flow. And that equates Steve to 140% of the conversion -- cash conversion percent free cash flow to net income, which is best-in-class and best in our industry, so obvious number. Therefore, we did planned a potential asset sale lease. In fact, we did plan during the deal types of those numbers, because we always look to our opportunities in a very holistic manner. And therefore we just delivered the mid part of our guidance that we put out there. Therefore, probably it will be a little bit unfair to say that we are short in absence of flows, let's say a couple of asset sale leaseback that we did. In fact, once we release our 10-K today you will find further details. The sale – the asset sale leaseback operation that took place in December, which we did, planned as such by the way, in 2019 was on the three manufacturing units that we had. And obviously we have a very long-term lease contracts in place even the options on us to be able to renew two terms further after the first expiry of the lease period. And therefore that was within our algorithm. And whenever we find opportunities to unlock the untapped opportunities, either on the profit side or the cash side, definitely we will go after. So what matters is if you take a holistic look to our cash flow generating, again, we have very solid programs in place with regards to continue expanding our working capital. This business including our EBITDA generation is very cash generative. And there are ample other opportunities that will enable us to continue to deliver outsized cash flow.

Yeah. The one thing that, I would add in all of that, this is Maria – is that, if you look at our results for the year there's a fair amount of noise in it. And any time you put two large companies together you're going to have that. There are things that are positive and things that are negative. One, I would venture to say, if you look at 2018 and 2019 and you make a list of them and the vast majority of that stuff is disclosed you will see that we had more benefit in 2018 than we did in 2019. So, on a year-over-year basis, our growth if you strip all the noise out would actually be higher than what we reported. It would be north of 17%. So there is some work that has to be done to kind of get to that, but the reality is that the underlying performance was really good.

Okay. Yeah, that's helpful. Thanks for the clarity. I guess, second question, if I could for Bob. And I guess this builds on what you were just discussing in response to Lauren's question, your ability to leverage legacy DPS distribution platform assets to expand accelerate new brands. That's always been a big part of your longer-term strategy and the industrial logic of taking on DPS in the first place. But I guess, are you removed from the merger 18 months or so? As strong as legacy Keurig and core DPS have been it looks like that part of the value proposition maybe a little bit just lagging, if I could. I mean, clearly, you're excited about 2020, but you've spoken in the past about some of Bai's challenges and the slower ramp of Allied Brands. I think Allied Brands' contribution were supposed to turn positive in the quarter. I'm not sure, if that happened. So I guess just can you give us a little bit more clarity on – or color on how you're thinking about it and the system's ability to develop smaller underpenetrated brands in the future? And as it relates to – and maybe some of that relates to your comments about plans to acquire new territory because that too seems like an evolution from some of your comments in the past. So just some further wrap-up there would be great. Thanks.

Yeah. I think you're referring to our PB segment which is where our company-owned distribution resides. I mean, first of all, just to reiterate because I know our – there's complexity around our routes to market. But we have the ability to reach 100% of the U.S. with direct store delivery. Approximately 75% of that is through company-owned DSD and the remainder is through long-term partnerships with independent distributors. So we have the ability to take any new brand and get it to every store in the U.S. through our – through a DSD system, which is really powerful. I mean, there are only a few companies that can do that. Within the PB segment you have to remember to Maria's point on noise that is the noisiest segment with regard to the movement in and out of Allied Brands. And that was disruptive, but I think we managed through it really well. And if I just take a look at the quarterly trends on the PB segment in the first half of the year, we were – our underlying growth was around 1% to 1.5%. In Q3, it was plus 3%. In Q4 it was plus 4%. So you're seeing an acceleration after cleaning up some of the noise of the Allied Brands through our own company-owned DSD system. And yeah, the Allied Brands some of them were a little bit slower to ramp up that we talked about before and there are always brands that you have to work on. We talked about Bai, we talked about Snapple tea. But everybody who has a big portfolio always has a group that is growing rapidly a group that's growing nicely and a group you have to work on. The key is you have the balance right. And again our total company growth in the fourth quarter underlying was 4.6% and our PB segment was plus 4%. So yeah, we feel great about where we are with this one. We just always have a few things we have to work on that you can pick out. But net-net, everything is going in the right direction and that's reflective in the targets, we put out there for 2020.

Okay. Thank you.

Sure.

Your next question is from the line of Robert Ottenstein with Evercore ISI.

Great. Thank you very much and congratulations on a strong year. Two questions. First you talked – and it went fast, but it sounds like it looks like you're going to be pushing mini cans much harder than the past. And it's obviously, obvious why you would do that but that does represent a change in strategy certainly from prior management. And if I recall and correct me, if I'm wrong I think it may have been a change in strategy from your initial views on the business due to supply chain costs and complexities. Is that correct? And what kind of -- how are you thinking about dealing with those changes to the supply chain to execute on that effectively? So, that's question number one. And question number two, obviously gaining some really nice share in the cold drink segment. Can you say what channels that you're seeing those share gains? Or is that pretty broad? Thank you very much.

Sure. So, we keep talking about why we're so bullish on our business going forward is the amount of opportunity we still have in front of us that we haven't yet accessed. I mean we talked a lot about segments that we're entering that we didn't have great participation in that we are now able to access. Its -- mini cans falls into that same category. You know, it's been a big growth driver for the industry. It's not only a driver of revenue growth, but it's good profit as well and we just haven't participated in it for a number of reasons. There's no change in our thesis on this. We've always wanted to do it. It's just a matter of gearing up our supply chain and getting the can supply to be able to do that. And now we're able to do that in a broad way -- in a big way going into 2020, which is another source of incremental growth and profitability. The industry has access to that we're underdeveloped. We'll be able to close that gap, because we need to make sure that our brands are available in a format that consumers want. With regard to where we're seeing share gains, it's really across the board. It's no particular channel. That's the great thing about this business is that we have access to every customer and every channel. And when we're able to drive growth and share gains through great marketing through innovation or renovation or through new segments, we get the benefit of that across every single channel.

Terrific. Thank you very much.

Okay.

Your next question is from the line of Kevin Grundy with Jefferies.

Hey, good morning, everyone, and congratulations on a strong year.

Thanks.

Bob, can we pick-up on Coffee Systems? So the household penetration was up nicely this year, and then also reflective in strong brewer volume growth of 8%, which is great. Can you put some context again on -- just revisit where you think household penetration can go? I think there's been some context around mid-60% household penetration in parts of Europe. Maybe just some updates on your targets here. And then how quickly you think you can achieve them? And then what that potentially means as we think about growth in this segment?

Yeah. Let me get -- let me just give the real headline numbers on how we see the Coffee Systems' number in 2019, because as you know, there's a lot of -- when it comes to reporting, there's -- I think there's still an over-reliance on the IRI numbers, because they're available, but they don't really tell the whole story. When I look at the key metrics for 2019 on Coffee Systems, we see household penetration of 7%. We see pod shipments of 9%. We've always said over time shipments and household penetration will equal each other. We see brewer shipments of 8%. But if you take a look at NPD, which is a good source of brewer sales, they were up 9.5% for the year. And in the fourth quarter, which was -- which benefited from the introduction of the K-Duo launch, NPD was up 15.5%. So that's why I said, it's a home run of the year on Coffee. And not to mention we expanded our margin by 90 basis points at the same time we did all of that. In terms of household penetration, we're sitting at around 23% household penetration. All of the work that we've done going back to the launch of the merger, and we showed you in our first Investor Day, we said that we believe that household penetration should be north of 50%. There is -- every piece of evidence has suggested that number is still very much the target something north of 50%. And we're just chipping away at it every year, and at a pace that we're looking at growing that at 7%. You could do the math and figure out when we would get to 50%, but the good news is it's a long way off. And so that speaks to our ability to continue to drive outsized growth in Coffee Systems for the foreseeable future.

Okay. That's helpful. And then just a follow-up to Robert's question. So, specifically around Beverage Concentrates, so the volume number there has been strong, and it's been strong for the past two quarters. So, Bob maybe just talk about the disconnect between what we're seeing in the Nielsen data. You alluded to some stronger growth in track channels -- in non-track channels, excuse me. But I'm just trying to understand the sustainability of the wide gap that we're seeing between the Nielsen data and then what we're seeing in volume growth in Beverage Concentrates. Talk about the emphasis in non-track channels, but specifically I think it would be helpful that the magnitude of the gap that we're seeing, is this just sort of the first half, you picked up distribution in the first half of 2020, we should see this -- that gap close? Or do you think this is sustainable we should see this gap higher? And if so why?

So, I think if you -- are you talking about -- just for clarification, are you talking about in the months of January, February? Or are you talking about fourth quarter?

I'm talking about fourth quarter Bob, but I'm also talking about third quarter. So, if you look over time, there's been a tighter gap between the volume numbers in Beverage Concentrates versus what we see in the Nielsen data, and that gap has widened in 3Q and 4Q. So the question is sort of premised on that.

I think there's a couple of thing. I think one is you don't see everything in the Nielsen IRI data. So, for example, a big part of our business that shows up in Beverage Concentrates is what we call fountain and foodservice. So that is our sales to restaurants across the board. And remember, Dr Pepper is the most available soft drink across all restaurant formats. And so, that's an area where we continue to see very strong growth behind demand in our brands. And that -- what's the demand driven by? Great marketing because those are really the core brands limited number of SKUs. And so that's when you see core Dr Pepper or Canada Dry doing really well in those segments behind good marketing. That probably explains the biggest difference in the gap there. The other thing I thought you were alluding to is when you take a look at the IRI or Nielsen numbers that's been reported, and you see somewhat of a slowdown in the fourth quarter and a little bit into this year that's really a category driven piece that comes in from lapping of pricing in the fourth quarter and the previous year. Our differential performance, KDP versus the category though has held up really nicely. So the category slowed down as would be expected when you lap pretty aggressive pricing. You're seeing the price impact being lower, but the volume impact higher. But most importantly, we continue to outperform the category and that hasn't slowed down at all. Does that get at your question?

I think so. I mean, the way I'm seeing just -- not to put words in your mouth, but it seems like you picked up some distribution in foodservice. That's what's driving the disconnect in 3Q and 4Q, which would suggest that that gap remains the same or roughly the same in the first half of 2020, but then maybe normalizes in the back half of 2020. Is that fair?

I wouldn't take it all the way on to 2020 because it's more than just picking up distribution. We're seeing an increase in velocity on our brands in same stores in the fountain and foodservice channel. It's not just we picked up…

Okay.

…if you got a number -- because reality of it is, if we are the most available beverage out there, there aren't many more places we can go. So really this is driven by velocity. I mean, if you take a look at again the really strong marketing behind our flagship brands Dr Pepper in particular, you see it in the retail channels and you see it in the fountain and foodservice channels, we're getting good velocity increases on that brand.

Okay. Thanks, Bob. I’ll pass it on.

Okay.

Your next question is from the line of Brett Cooper with Consumer Edge Research.

Good morning. At the outset of the deal you guys said, you wanted to get pod pricing to about $0.50 and I think you ended 2019 at $0.49 in measured channels. You also said that consumers found $0.30 pod pricing a bargain. I think private label pricing is in the mid-30s in measured channels. So first I'm just wondering if you see any I guess change in volume pricing as you go forward now that you've gotten those targets. And is it possible with the South Carolina plant to get a partner to $0.30 pod pricing? Thanks.

Yeah. I think look, part of Brett what we've talked about along the way is you're looking at IRI pricing. So remember when you take a look at IRI pricing, it reflects partners and/or retailers who can choose to compress their margins if they wish, because it's still a very attractive segment from a growth and profitability standpoint. And so some of them choose to compress margins and obviously that has no impact on us nor do we control that. With regard to what we said back at the deal launch, I think that's a good place to start. If you go back to the March 2018 Investor Day that we had here in Burlington, we talked to you guys about the current situation on coffee. And as you pointed out at that point in time, pricing was coming down. Volume was growing but it wasn't enough to offset the pricing and we saw negative revenue. And what we projected at that time is that volume would accelerate, pricing would moderate and margin we continue to expand. And we said that revenue would grow to somewhere between 2% to 3% by the combination of all of those factors. That has come 100% true. You're seeing our pricing this is -- forget about IRI for the reasons I talked about, look at our pricing that's in our 10-K, you'll see that it's still declining but moderating over time. Our net sales, which were negative in 2017, were flat in 2018 up slightly. Remember I said 2% to 3%? Our revenue was 2.8% up in 2019. So right on where we forecasted it back almost two years ago to be. And the most important part of it that I think is far more important than pricing, which everybody on the outside tends to focus on is our margin continues to expand. So we were up 90 basis points in 2019, despite making those investments. And what that tells you is that as we said all along, we have line of sight to strong productivity and there's still a lot of productivity left to come. And you just pointed out one of those examples, which is Spartanburg coming online, which will be another step change in the pricing of our pods. So I can't totally forecast where pricing is going to go, although we continue to see it moderating. But we do have line of sight to the increased growth in our business and our increased operating income margin and we feel good about both of those. And I think those are actually the most important metrics.

Your final question is from the line of Sean King with UBS.

Hi, thanks for question. Can you elaborate on any implications, I guess if any of the Starbucks agreement in terms of margins versus dollar revenue or dollar profit reporting? Or is the real value of this agreement just locking in a powerful brand for years to come?

It's really the latter to us. I mean, it is a really important brand for the system. It's now the number one brand within the system and it brings a premiumness to the overall category and our business in total. Obviously we're really important to them. If you look at how big K-Cup Starbucks business is and the profitability behind that, we're important to each other. And I think that's reflected in the fact that we entered into a long-term agreement with them because it's a win for both of us. So I think it's really about that and not a material impact on anything other than we continue to grow the household penetration of the system and Starbucks continues to participate in that growth with us.

Great. Thanks a lot.

Okay.

That’s all the time we have for questions. I will hand the call back over to management for final remarks.

Thanks everyone. This is Tyson. I know you all have busy days today, but the IR team is around to take your questions. So feel free to give myself or Steve a call and we'll talk to you later. Thanks.

This concludes today's earnings call. Thank you for your participation. You may now disconnect.