What changed in this filing

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Item 1A. Risk Factors

2022-02-24 compared with 2021-02-25 · 96 added, 124 removed, 257 unchanged (46% of the section changed)

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Widespread health developments and economic uncertainty resulting from the ongoing COVID-19 pandemic could materially and adversely affect our business, financial condition and results of operations.

Our business has been, and may continue to be, adversely impacted by the response to the ongoing COVID-19 pandemic in countries where we operate or our customers and suppliers are located, due to recommendations or mandates from governmental authorities to close businesses, limit travel, avoid large gatherings or self-quarantine, as well as temporary closures or decreased operations of the facilities of our customers, distributors or suppliers.

Our business has been, and may continue to be, adversely impacted by the response to the ongoing COVID-19 pandemic in countries where we operate or our customers and suppliers are located, due to recommendations or mandates from governmental and local authorities to require vaccinations, close businesses, limit travel, avoid large gatherings or self-quarantine, as well as temporary closures or decreased operations of the facilities of our customers, distributors or suppliers.

These impacts include, but are not limited to:

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the temporary inability of consumers to purchase our products due to illness, quarantine or other restrictions, store closures, or financial hardship, shifts in demand away from one or more of our higher priced products to lower priced products, or stockpiling or similar activity, reduced options for marketing and promotion of products or other restrictions in connection with the COVID-19 pandemic;

if prolonged, such impacts could further increase the difficulty of operating our business during the pandemic, including accurately planning and forecasting customer demand;

• Inability to meet our consumers' and customers’ needs and achieve cost targets due to disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements, such as raw materials or purchased finished goods, logistics, reduction or loss of workforce due to the insufficiency or failure of our safety protocols, or other manufacturing and distribution capability;

such impacts could further increase the difficulty of operating our business during the pandemic, including accurately planning and forecasting customer demand;

• Inability to meet our consumers' and customers’ needs and achieve cost targets due to disruptions in our manufacturing and supply arrangements such as the loss or disruption of essential raw materials or purchased finished goods, disruption of logistics, reduction or loss of workforce due to the insufficiency or failure of our safety protocols, or disruption of other manufacturing and distribution capability;

• Failure of third parties, including those located in international locations, on which we rely, including our suppliers, bottlers, distributors, contract manufacturers, third-party service providers, contractors, commercial banks and external business partners, to meet their obligations to us or to timely meet those obligations, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties;

• Significant changes in the conditions in markets in which we manufacture, sell or distribute our products, including quarantines, governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees’ ability to perform necessary business functions, restrict or prevent consumers from having access to our products, or otherwise prevent our third-party bottlers, distributors, partners, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of our products.

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All of these impacts could place limitations on our ability to execute on our business plan and materially and adversely affect our business, financial condition and results of operations.

We continue to monitor the situation, have actively implemented policies and procedures to address the situation, and as the pandemic continues to further unfold, we may adjust our current policies and procedures as regulations or governmental orders are implemented or more information and guidance become available.

The impact of COVID-19 may also exacerbate other risks discussed in Item 1A of our Annual Report, any of which could have a material effect on us.

This situation is changing rapidly and additional impacts may arise that we are not aware of currently.

We operate in intensely competitive categories.

The industry in which we operate is highly competitive and continues to evolve in response to changing consumer preferences.

Some of our competitors, such as Coca-Cola, PepsiCo, The Kraft Heinz Company and Nestlé S.A., are multinational corporations with significant financial resources.

These competitors can use their resources and scale to rapidly respond to competitive pressures and changes in consumer preferences by introducing new products, changing their route to market, reducing prices or increasing promotional activities.

We also compete with a number of smaller brands and a variety of smaller, regional and private label manufacturers.

Smaller companies may be more innovative, better able to bring new products to market and better able to quickly exploit and serve niche markets.

We also compete for contract manufacturing with other bottlers and manufacturers.

In Canada, Mexico and the Caribbean, we compete with many of these same international companies as well as a number of regional competitors.

Our sales may be negatively affected by numerous factors including our inability to maintain or increase prices, our inability to effectively promote our products, ineffective advertising and marketing campaigns, new entrants into the market, the decision of wholesalers, retailers or consumers to purchase competitors' products instead of ours, and increased marketing costs and in-store placement and slotting fees due to our competitors' willingness to spend aggressively.

Competitive pressures may also cause us to reduce prices we charge customers or may restrict our ability to increase such prices.

In addition, the rapid growth of e-commerce may create additional consumer price deflation by, among other things, facilitating comparison shopping, and could potentially threaten the value of some of our legacy route-to-market strategies and thus negatively affect revenues.

A significant percentage of the Coffee Systems segment's financial performance is attributable to sales of K-Cup pods for use with Keurig brewing systems.

We compete for sales of K-Cup pods against local and regional brands, as well as against private label brands developed by retailers.

Our ability to gain or maintain share of sales in the countries in which we operate or in various local marketplaces or maintain or enhance our relationships with our partners and customers may be limited as a result of actions by competitors, including as a result of increased consolidation in the food and beverage industry and a significant increase in the number of competitive pod contract manufacturers.

Continued acceptance of Keurig brewers and sales of K-Cup pods to an increasing installed customer base are significant factors in our Coffee Systems' growth plans.

Any substantial or sustained decline in the sale of Keurig brewers, failure to continue to reduce the cost of Keurig brewers, or substantial or sustained decline in the sales of K-Cup pods could materially and adversely affect our business.

Keurig brewers compete against all sellers and types of coffeemakers.

If we do not succeed in continuing to reduce the costs of manufacturing Keurig brewers or differentiating Keurig brewers from our competitors in the coffeemaker category, based on technology, quality of products, desired brands or otherwise, or our competitors adopt their respective strategies, our competitive position may be weakened.

Costs and supply for commodities, such as raw materials and energy, may change substantially and shortages may occur.

The impact of COVID-19 may also exacerbate other risks discussed herein, any of which could have a material effect on us.

As this situation continues to evolve, new risks or uncertainties may arise that we are not aware of currently.

Costs and supply for inputs to our products, including raw materials and transportation, may change substantially and shortages have occurred and may continue to occur.

The ongoing COVID-19 pandemic and its resulting impacts on the global economy, particularly supply chain constraints and labor shortages, have led to inflation in input costs, logistics, manufacturing and labor costs.

We have experienced supply chain disruptions and significant inflation, which have impacted our results of operations in the current year and may continue to do so in the future.

Our raw materials are sourced from industries characterized by a limited supply base, and their cost can fluctuate substantially.

Under many of our supply arrangements, the price we pay for raw materials fluctuates along with certain changes in underlying commodities costs.

Price increases for our raw materials could exert pressure on our costs and we may not be able to effectively hedge or pass along any such increases to our customers or consumers.

Furthermore, any price increases passed along to our customers or consumers could reduce demand for our products.

Such increases could negatively affect our business and financial performance.

Furthermore, price decreases in commodities that we have effectively hedged could also increase our cost of goods sold for mark-to-market changes in the derivative instruments.

Our principal raw materials in our hot business include coffee beans and K-Cup pod raw materials (including cups, filter paper and other ingredients) used in the manufacturing of our K-Cup pods.

Price increases for our raw materials have placed pressure on our costs and could continue to do so, and we may not be able to effectively hedge or pass along any such increases to our customers or consumers.

Furthermore, any price increases passed along to our customers or consumers could significantly reduce demand for our products and could negatively affect our business and financial performance.

In addition, price decreases in commodities that we have effectively hedged could also increase our cost of goods sold for mark-to-market changes in the derivative instruments.

Our principal raw materials in our coffee business include coffee beans and K-Cup pod raw materials (including cups, filter paper and other ingredients) used in the manufacturing of our K-Cup pods.

We purchase, roast and sell high-quality whole bean coffee and related coffee products.

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These are known as price-to-be-fixed contracts.

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The supply and price of crop commodities we purchase, such as coffee, apples, and corn, can also be affected by multiple factors in the producing countries, including weather, natural disasters, crop disease (such as coffee rust), general cost increases in farm inputs and costs of production, inventory levels and political and economic conditions, as well as the actions of certain organizations and associations that have historically attempted to influence prices of various commodities through agreements establishing export quotas or by restricting supplies.

Speculative trading in commodities can also influence prices.

The supply and price of crops we purchase, such as coffee, apples, and corn, can also be affected by multiple factors in the producing countries, including weather, natural disasters, crop disease (such as coffee rust), general cost increases in farm inputs and costs of production, inventory levels and political and economic conditions, as well as the actions of certain organizations and associations that have historically attempted to influence prices of various commodities through agreements establishing export quotas or by restricting supplies.

Speculative trading in commodities, such as coffee, has and may continue to influence prices.

If we are unable to purchase sufficient quantities of our commodities due to any of the factors described herein or a worldwide or regional shortage, we may not be able to fulfill the demand for our products, which could have an adverse impact on our business and financial results.

We also have a limited number of suppliers for certain strategic raw materials critical to our operations.

We may have limited negotiation leverage with regards to these suppliers, which could negatively affect our operations and the financial performance of our business.

We may have limited leverage to negotiate with these suppliers, which could negatively affect our operations and the financial performance of our business.

In addition, in order to ensure a continuous supply of high-quality raw materials, some of our inventory purchase obligations include long-term purchase commitments for certain strategic raw materials.

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Changing suppliers can require long lead times.

The failure of our suppliers to meet our needs could occur for many reasons, including fires, natural disasters, weather, manufacturing problems, disease, crop failure, strikes, transportation interruption, government regulation, political instability, cybersecurity attacks and terrorism.

The failure of our suppliers to meet our needs could occur for many reasons, including fires, natural disasters, weather, manufacturing problems, disease, crop failure, strikes, transportation disruption, government regulation, political instability, cybersecurity attacks and terrorism.

A failure of supply could also occur due to suppliers’ financial difficulties, including bankruptcy.

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Any significant interruption to supply or cost increase could substantially harm our business and financial performance.

Some of our raw materials and finished products are sourced or manufactured overseas and shipped to the U.S.

Changes in the global ocean transport market, including shortages of shipping containers and availability of U.S.

and Canadian ports, have resulted in and may continue to result in increased costs of transportation for our raw materials and finished products, which may impact our results of operations.

In addition, we use a significant amount of energy in our business, and therefore may be significantly impacted by changes in fuel costs due to the large truck fleet we operate in our distribution business and our use of third-party carriers.

Additionally, conversion of raw materials into our products for sale uses electricity and natural gas.

We operate in intensely competitive categories.

The industry in which we operate is highly competitive and continues to evolve in response to changing consumer preferences.

Some of our competitors, such as Coca-Cola, PepsiCo, The Kraft Heinz Company and Nestlé S.A., are multinational corporations with significant financial resources.

We also compete with a number of smaller brands and a variety of smaller, regional and private label manufacturers.

Smaller companies may be more innovative, better able to bring new products to market and better able to quickly exploit and serve niche markets.

We also compete for contract manufacturing with other bottlers and manufacturers.

In Canada, Mexico and the Caribbean, we compete with many of these same international companies as well as a number of regional competitors.

Our sales may be negatively affected by numerous factors including our inability to maintain or increase prices, our inability to effectively promote our products, ineffective advertising and marketing campaigns, new entrants into the market, the decision of wholesalers, retailers or consumers to purchase competitors' products instead of ours, increased marketing costs and higher in-store placement and slotting fees driven by our competitors' willingness to spend aggressively.

Competitive pressures may also cause us to reduce prices we charge customers or may restrict our ability to increase such prices.

A significant percentage of the Coffee Systems segment's financial performance is attributable to sales of K-Cup pods for use with Keurig brewing systems.

We compete for sales of K-Cup pods against local and regional brands, as well as against private label brands developed by retailers.

Continued acceptance of Keurig brewers and sales of K-Cup pods to an increasing installed customer base are significant factors in our Coffee Systems' growth plans.

Keurig brewers compete against all sellers and types of coffeemakers.

Product safety and quality concerns could negatively affect our business.

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It could also result in the destruction of product inventory, lost sales due to the unavailability of product for a period of time, fines from applicable regulatory agencies, and higher-than-anticipated rates of warranty returns and other returns of goods.

Moreover, negative publicity also could be generated from false, unfounded or nominal liability claims or limited recalls.

Moreover, negative publicity may result from false, unfounded or nominal liability claims or limited recalls.

Any or all of these events may lead to a loss of consumer confidence and trust, could damage the goodwill associated with our brands and may cause consumers to choose other products and could negatively affect our business and financial performance.

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The demand for CSDs has therefore decreased as consumers have shifted towards NCBs, such as water, ready-to-drink coffee and teas, and sports drinks.

If we do not effectively anticipate and respond to these trends and changing consumer beverage preferences, our sales and growth could suffer.

If we do not effectively anticipate and respond to these changing trends and consumer beverage preferences, our sales and growth could suffer.

Consumers are also increasingly focused on sustainability, with particular attention to the recyclability of product packaging, reducing consumption of single-use plastics and non-recyclable materials, and the environmental impact of manufacturing operations.

If we do not meet consumer demands by providing recyclable packaging options and focusing on sustainability throughout our manufacturing operations, our sales could suffer.

If we do not meet consumer demands by continuing to provide recyclable packaging options and focusing on sustainability throughout our manufacturing operations, our sales could suffer.

In addition, consumer shopping behavior is rapidly evolving due to both changes in travel, vacation and leisure activity patterns and the acceleration of e-commerce and other methods of purchasing products.

If we are unable to meet the consumer where and when they desire their products or if we are unable to respond to changes in distribution channels (including e-commerce), our financial results could be adversely impacted.

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If we do not innovate rapidly and successfully to respond to shifting consumer demands, our business may suffer.

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We may also experience delays in extending our respective internal control over financial reporting to newly acquired businesses, which may increase the risk of failure to prevent misstatements in our financial records and in our consolidated financial statements.

Additionally, new ventures and investments are inherently risky and may not be successful, and we may face challenges in achieving strategic objectives and other benefits expected from such investments or ventures.

We also regularly pursue productivity initiatives, which are focused on strategic opportunities in procurement, manufacturing, and logistics, as well as cost savings and tax initiatives.

These strategic initiatives may include investments in new technologies and optimization and relocation of our manufacturing and distribution footprint.

New ventures and investments are inherently risky and may not be successful, and we may face challenges in achieving strategic objectives and other benefits expected from such investments or ventures.

Any acquisitions, investments or ventures may also result in the diversion of management attention and resources from other initiatives and operations.

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If we are unable to achieve such objectives, our consolidated results could be negatively affected.

Substantial disruption at our manufacturing and distribution facilities could occur.

A disruption at our manufacturing and distribution facilities could have a material adverse effect on our business.

In addition, a disruption could occur at the facilities of our suppliers, bottlers, contract manufacturers or distributors.

The disruption could occur for many reasons, including fire, natural disasters, weather, water scarcity, manufacturing problems, disease, epidemics, strikes, transportation or supply interruption, contractual dispute, government regulation, cybersecurity attacks or terrorism.

Moreover, if demand increases more than we forecast, we will need to either expand our capabilities internally or acquire additional capacity.

Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more than existing facilities or may take a significant time to start production, each of which could negatively affect our business and financial performance.

Our facilities and operations may require substantial investment and upgrading.

We have programs to invest and upgrade our manufacturing, distribution and other facilities, including expansive investments in new manufacturing facilities in Spartanburg, South Carolina;

We have programs to invest and upgrade our manufacturing, distribution and other facilities, including expansive investments in manufacturing facilities in Spartanburg, South Carolina;

Newbridge, Ireland;

and Allentown, Pennsylvania.

In 2020 and 2021, as a result of the COVID-19 pandemic, we have experienced delays in the construction of our new facilities and the production equipment contained within, and we may continue to experience such delays.

We may continue to incur significant costs to upgrade or keep up-to-date various facilities and equipment or restructure our operations, including closing existing facilities or opening new ones.

Additionally, we rely on third parties for the construction and renovation of our facilities and manufacturing of our production equipment.

If our investment and restructuring costs are higher than anticipated, our business does not develop as anticipated to appropriately utilize new or upgraded facilities, or third parties fail to complete the construction or renovation of facilities or production equipment in a timely manner or in accordance with our specifications, our costs and financial performance could be negatively affected.

If our investment and restructuring costs are higher than anticipated, the investments and upgrades are not sufficient to meet our near-term future business needs, our business does not develop as anticipated to appropriately utilize new or upgraded facilities, or third parties fail to complete the construction or renovation of facilities or production equipment in a timely manner or in accordance with our specifications, our costs and financial performance could be negatively affected.

Substantial disruption at our manufacturing and distribution facilities could occur.

A disruption at our manufacturing and distribution facilities could have a material adverse effect on our business.

In addition, a disruption could occur at the facilities of our suppliers, bottlers, contract manufacturers or distributors.

The disruption could occur for many reasons, including fire, natural disasters, weather, water scarcity, manufacturing problems, disease, epidemics, strikes, labor shortages, transportation or supply interruption, contractual dispute, government regulation, cybersecurity attacks or terrorism.

Moreover, if demand increases beyond our production capabilities, we would need to either expand our capabilities internally or acquire additional capacity.

Our intellectual property rights could be infringed or we could infringe the intellectual property rights of others, and adverse events regarding licensed intellectual property, including termination of distribution rights, could harm our business.

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Adverse events affecting those third parties or their products could also negatively impact our brands.

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In some cases, we license rights to distribute third-party products.

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The termination of any material license arrangement could adversely affect our business and financial performance.

We may not be able to renew collective bargaining agreements on satisfactory terms, or we could experience union activity, including labor disputes or work stoppages.

Approximately 8,000 of our employees worldwide are covered by collective bargaining agreements.

These agreements typically expire every three to four years at various dates.

We may not be able to renew our collective bargaining agreements on satisfactory terms or at all.

This could result in labor disputes, strikes or work stoppages, which could impair our ability to manufacture and distribute our products and result in a substantial loss of sales.

The terms of existing, renewed or expanded agreements could also significantly increase our costs or negatively affect our ability to increase operational efficiency.

RISKS RELATED TO OUR FINANCIAL PERFORMANCE

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(iii) lower prices for our products or increased marketing as a result of increased competition;

(iv) not achieving forecasted synergies from the DPS Merger;

(iv) not achieving forecasted productivities;

(v) significant disruptions to our operations as a result of both internal and external events, such as the ongoing COVID-19 pandemic;

and (vi) changes in our discount rates, which could change due to factors such as movement in risk free interest rates, changes in general market interest rate and market beta volatility and changes to management's view of forecast risk, among others.

and (vi) changes in our discount rates, which could change due to factors such as movement in risk free interest rates, changes in general market interest rates and market beta volatility and changes to management's view of forecasted risk, among others.

Since a number of factors may influence determinations of fair value of intangible assets, we are unable to predict whether impairments of goodwill or other indefinite-lived intangibles will occur in the future.

Any such impairment would result in us recognizing a non-cash charge in our Consolidated Statements of Income, which could adversely affect our results of operations and increase our effective tax rate.

We have incurred significant indebtedness, which could adversely affect us, including decreasing our business flexibility and increasing our interest expense.

We have significant indebtedness, which could adversely affect us, including decreasing our business flexibility and increasing our interest expense.

The increased levels of indebtedness could also reduce funds available for working capital, capital expenditures, acquisitions, the repayment or refinancing of our indebtedness as it becomes due and other general corporate purposes and may create competitive disadvantages for us relative to other companies with lower debt levels.

Our level of indebtedness could adversely affect us, including decreasing our business flexibility and increasing our interest expense.

In the future, we may be required to raise substantial additional financing to fund working capital, capital expenditures, the repayment or refinancing of our indebtedness, acquisitions or other general corporate requirements.

Our ability to arrange additional financing or refinancing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond our control.

There can be no assurance that we will be able to obtain additional financing or refinancing on terms acceptable to us or at all.

If our financial performance does not meet current expectations, our ability to service our indebtedness may be adversely impacted.

Additionally, in assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as our results of operations and financial position at the time.

If our credit ratings were to be downgraded as a result of changes in our capital structure, changes in the credit rating agencies’ methodology in assessing our credit strength, the credit agencies’ perception of the impact of credit market conditions on our current or future results of operations and financial position or for any other reason, our cost of borrowing could increase.

If our credit ratings were to be downgraded as a result of changes in our capital structure, changes in the credit rating agencies’ methodologies in assessing our credit strength, the credit agencies’ perception of the impact of credit market conditions on our current or future results of operations and financial position or for any other reason, our cost of borrowing could increase.

Furthermore, a significant downgrade in our credit ratings could limit a financial institution's willingness to participate in our accounts payable program and reduce the attractiveness of the accounts payable program to participating suppliers who may sell payment obligations from us to financial institutions.

In addition, a significant downgrade in our credit ratings may reduce flexibility of our business to engage in certain transactions, such as the execution and renewal of certain leases.

Moreover, in the future we may be required to raise substantial additional financing to fund working capital, capital expenditures, the repayment or refinancing of its indebtedness, acquisitions or other general corporate requirements.

There can be no assurance that we will be able to obtain additional financing or refinancing on terms acceptable to us or at all.

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The agreements that govern the indebtedness contain various covenants that impose restrictions on us and may affect our ability to operate our business.

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Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations.

Optimizing our operations following the DPS Merger may be more difficult, costly or time-consuming than expected, and the anticipated benefits and cost savings of the DPS Merger may not be realized.

We continue to optimize our operations as One KDP, which is a complex, costly and time-consuming process.

The anticipated benefits of the DPS Merger may not be realized fully or at all, or may take longer to realize than expected.

There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the DPS Merger.

We are also incurring costs related to the optimization of our operations, including facilities and systems consolidation costs and employment-related costs.

We continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the optimization of our operations.

We cannot guarantee that our share repurchase program will be fully consummated or that our share repurchase program will enhance long-term stockholder value, and share repurchases could increase the volatility of the price of our stock and reduce our free cash flow.

In October 2021, our Board of Directors authorized the Company to repurchase up to $4 billion of our outstanding common stock, beginning on January 1, 2022, potentially enabling us to return value to shareholders.

Our repurchase program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares.

Our share repurchase program could affect the price of our stock and increase volatility and may be suspended or terminated at any time.

We cannot guarantee that we will repurchase shares or conduct future share repurchase programs, and we cannot guarantee that any such programs will result in long-term increases to shareholder value.

RISKS RELATING TO LABOR AND EMPLOYMENT

We could lose key personnel or may be unable to recruit and retain qualified personnel.

Our future success depends upon the continued contributions of senior management and other key personnel and the ability to retain and motivate them.

If we are unable to recruit, retain and motivate the senior management team and other key personnel sufficiently to support the projected growth and initiatives of our business, our business and financial performance may be adversely affected.

Labor shortages, employee turnover, and increases in wages could significantly impact our operations.

The ongoing COVID-19 pandemic and its resulting impacts on the global economy have exacerbated employee turnover and led to labor shortages, particularly in the market for frontline employees in the production and distribution environments.

The labor force has been and may continue to be impacted by a number of factors related to the ongoing COVID-19 pandemic, including government actions, such as vaccination mandates, unemployment benefits and subsidies, and laws and regulations related to employee health and safety.

Additionally, competition in the labor marketplace for qualified employees has led to increased costs, such as higher wages in order to recruit and retain employees.

A prolonged labor shortage or inflation in labor costs could have a significant impact on our results of operations.

We may not be able to renew collective bargaining agreements on satisfactory terms, or we could experience union activity, including labor disputes or work stoppages.

Approximately 8,000 of our employees worldwide are covered by collective bargaining agreements.

These agreements typically expire every three to four years at various dates.

We may not be able to renew our collective bargaining agreements on satisfactory terms or at all.

This could result in labor disputes, strikes or work stoppages, which could impair our ability to manufacture and distribute our products and result in a substantial loss of sales.

The terms of existing, renewed or expanded agreements could also significantly increase our costs or negatively affect our ability to increase operational efficiency.

Increases in our cost of employee benefits in the future could reduce our profitability.

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To the extent we provide concessions or trade terms that are favorable to retailers, our respective margins would be reduced.

Retailers also have leverage to require us to provide increased marketing and promotional expenditures, including larger, more tailored promotional and product delivery programs.

Retailers also have leverage to require us to provide increased marketing and promotional expenditures, including larger, more tailored promotional and product delivery programs, as well as to demand fines for late or incomplete product shipments.

If we and our partners, including bottlers, distributors and licensees, do not successfully provide appropriate marketing, product, packaging, pricing and service to these retailers, our product availability, sales and margins could suffer.

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Deteriorating economic conditions could negatively impact the financial viability of third-party bottlers.

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Failure to maintain strategic relationships with brand owners and private label brands could adversely impact our future growth and business, potentially resulting in the termination of those agreements.

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If these manufacturers are not able to scale their manufacturing operations to match increasing consumer demand for our brewers at competitive costs, our overall results will be negatively affected.

Our reliance on third-party manufacturers also exposes us to increased risk that certain minerals and metals, known as "conflict minerals", that are contained in our brewers have originated from "covered countries" (as defined in Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010) but cannot be determined to be "conflict free".

As a result of the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC adopted disclosure requirements for public companies whose products contain conflict minerals that are necessary to the functionality or production of such products.

Under these rules, we are required to obtain sourcing data from suppliers, perform supply chain due diligence, and file annually with the SEC a specialized disclosure report on Form SD covering the prior calendar year.

We have incurred and expect to incur additional costs to comply with the rules, including costs related to the determination of the origin, source and chain of custody of the conflict minerals used in our products and the adoption of conflict minerals-related governance policies, processes and controls.

Moreover, the implementation of these compliance measures could adversely affect the sourcing, availability and pricing of materials used in the manufacture of our products to the extent that there may be only a limited number of suppliers that are able to meet our sourcing requirements.

There can be no assurance that we will be able to obtain such materials in sufficient quantities or at competitive prices.

We may also encounter customers who require that all of the components of our products be certified as conflict-free.

If we are not able to meet customer requirements, such customers may choose to not purchase our products, which could impact our sales and the value of portions of our inventory.

RISK RELATING TO OUR CAPITAL STRUCTURE

We no longer meet the requirements to be a “controlled company” within the meaning of the rules of Nasdaq and the rules of the SEC.

However, even though we are no longer a "controlled company," we will continue to qualify for, and may rely upon, exemptions from certain corporate governance requirements that would otherwise provide protection to stockholders of other companies during a one-year transition period.

On August 19, 2020, Maple Holdings B.V., an affiliate of JAB, completed the sale of 45 million shares of KDP stock in a public secondary offering.

On September 8, 2020, JAB distributed an additional 76 million shares of KDP stock to its minority partners.

On November 19, 2020, Maple Holdings B.V.

completed the sale of an additional 20 million shares of KDP stock in a public secondary offering.

As a result of these transactions, JAB and its affiliates now own approximately 34% of KDP's common stock, and we are no longer a “controlled company” as defined in the Nasdaq rules.

However, even though we are not a "controlled company," we will continue to qualify for, and may rely on, exemptions from certain corporate governance requirements that would otherwise provide protection to stockholders of other companies during a one-year transition period.

The Nasdaq rules require that our Board be composed of a majority of "independent directors," as defined under the rules of such exchange, by August 19, 2021 and that our Remuneration and Nomination Committee consist entirely of independent directors by August 19, 2021.

During these transition periods, we may continue to utilize the available exemptions from certain corporate governance requirements that would otherwise provide protection to stockholders of other companies, as permitted by the Nasdaq rules.

If we fail to meet the above deadlines for these requirements, our common stock could be delisted from Nasdaq, which would negatively impact the trading of our common shares and our business and financial condition.

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GENERAL RISK FACTORS

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Weather, natural disasters, water availability, and climate change or related legislation could adversely affect our business.

Unseasonable or unusual weather, natural disasters or long-term climate changes may negatively impact the price or availability of raw materials, energy and fuel, our ability to produce and demand for our products.

Unseasonable or unusual weather, natural disasters or long-term climate changes are expected to add volatility to commodity prices and have the potential to disrupt the availability of raw materials, energy and fuel, our ability to produce and demand for our products.

Unusually cool weather during the summer months or unusually warm weather during the winter months may result in reduced demand for our products and have a negative effect on our business and financial performance.

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Even where water is widely available, water purification and waste treatment infrastructure limitations could increase costs or constrain our operations.

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We are also faced with the impact of disruptions to crop growing conditions as a result of changing weather patterns, which can cause changes in geographical ranges of crops, as well as weeds, diseases and pests that affect those crops.

These impacts may limit availability or increase the cost of key agricultural commodities, such as coffee, corn and tea, which are important sources of ingredients for our products.

These impacts may limit availability or increase the price volatility of key agricultural commodities, such as coffee, corn and tea, which are important sources of ingredients for our products.

Concern over climate change, including global warming, has led to legislative and regulatory initiatives directed at limiting greenhouse gas emissions.

For example, proposals that would impose mandatory requirements on greenhouse gas emissions continue to be considered by policy makers in the countries in which we will operate.

Laws enacted that directly or indirectly affect our production, distribution, packaging (including K-Cup pods and the disposal of K-Cup pods), cost of raw materials, fuel, ingredients and water could all negatively impact our business and financial results.

Laws enacted that directly or indirectly affect our production, distribution, packaging, cost of raw materials, fuel, ingredients and water could all negatively impact our business and financial results.

and international laws and regulations could adversely affect our business.

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In addition, any significant change in such laws or regulations or their interpretation, or the introduction of higher standards or more stringent laws or regulations, could result in increased compliance costs or capital expenditures or significant challenges to our ability to continue to produce and sell products that generate a significant portion of our sales and profits.

For example, changes in recycling and bottle deposit laws or special taxes on soft drinks or ingredients could increase our costs.

In addition, changes in legislation imposing tariffs on or restricting the importation of our products or raw materials required to make our products, restricting the sale of K-Cup pods, requiring compostability of K-Cup pods, limiting the ability of consumers to put K-Cup pods into municipal waste or recycling streams or requiring manufacturers of K-Cup pods to pay responsible producer or other fees to local or other governmental entities in connection with the collection, recycling or disposition of K-Cup pods could increase costs for us or, at least for some period of time, cut off a significant source of our sales and profits.

Regulatory focus on the health, safety and marketing of food products is increasing.

Certain federal or state regulations or laws affecting the labeling of our products, such as California’s “Proposition 65,” which requires warnings on any product with substances that the state lists as potentially causing cancer or birth defects, are or could become applicable to our products.

For example, changes in packaging laws or special taxes on soft drinks or ingredients could increase our costs.

Changes in bottle deposit and recycling laws, including requiring manufacturers of K-Cup pods to pay responsible producer or other fees to either governmental or non-governmental entities in connection with the collection, recycling, or disposition of K-Cup pods, which may support our corporate responsibility objectives and goals, but could increase our costs.

We depend on key information systems and third-party service providers.

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Any disruption or failure of these systems or services could cause substantial errors, processing inefficiencies, security breaches, inability to use the systems or process transactions, loss of customers or other business disruptions, all of which could negatively affect our business and financial performance.

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In addition, because we primarily accept debit and credit cards for payment in our e-commerce channel, we are subject to the PCI Standard, issued by the Payment Card Industry Security Standards Council.

The PCI Standard contains compliance guidelines with regard to our security surrounding the physical and electronic storage, processing and transmission of cardholder data.

We are not fully compliant with the PCI Standard and there can be no assurance that in the future we will be able to operate our facilities and our customer service and sales operations in accordance with the PCI Standard or other industry recommended or contractually required practices.

We are in the process to be in compliance with the PCI Standard.

We are in compliance with the PCI Standard.

However, complying with the PCI Standard and implementing related procedures, technology and information security measures requires significant resources and ongoing attention.

Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology such as those necessary to achieve compliance with the PCI Standard or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations.

Even if we are compliant with PCI Standard, we still may not be able to prevent security breaches.

Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology, or the maintenance and support of existing systems and technology, to maintain compliance with the PCI Standard could also disrupt or reduce the efficiency of our operations.

Further, even though we are compliant with the PCI Standard, we still may not be able to prevent security breaches.

Any material interruptions or failures in our payment-related systems could negatively affect our business and financial performance.

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If we or these third-party commercial partners fail to adopt or adhere to adequate information security practices, or fail to comply with their respective online policies, or in the event of a breach of our networks, our users’ data and customer information may be improperly accessed, used or disclosed.

As cybersecurity attacks continue to evolve and increase, our information systems could also be penetrated or compromised by internal and external parties intent on extracting confidential information, disrupting business processes or corrupting information.

As cybersecurity attacks continue to evolve and increase, our information systems and those of our third party service providers have been and may in the future be penetrated or compromised by internal and external parties intent on extracting confidential information, disrupting business processes or corrupting information.

These risks could arise from external parties or from acts or omissions of internal or service provider personnel.

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When risks such as these materialize, the need for us to coordinate with various third party service providers and for third party service providers to coordinate amongst themselves might make it more challenging to resolve the related issues.

Additionally, in the event of a cybersecurity breach of confidential information that we process and maintain about our employees or consumers through our e-commerce platform could be potentially exposed.

Additionally, in the event of a cybersecurity breach, confidential information that we process and maintain about our employees or consumers through our e-commerce platform could potentially be exposed.

If our controls, disaster recovery and business continuity plans or those of our third party providers do not effectively respond to or resolve the issues related to any such disruptions in a timely manner, our product sales, financial condition and results of operations may be materially and adversely affected, and we might experience delays in reporting our financial results, loss of intellectual property, breach of confidential information and damage to our reputation or brands.

We continue to devote focused resources to network security, backup and disaster recovery, upgrading systems and networks, enhanced training and other security measures to protect our systems and data;

We continue to devote resources to network security, backup and disaster recovery, upgrading systems and networks, enhanced training and other security measures to protect our systems and data;

we are also in the process of enhancing the monitoring and detection of threats in our environment.

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Although we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of a breach or disruption, such insurance coverage may be insufficient to cover all losses.

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We regularly move data across national borders to conduct our operations and consequently are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy, data protection and data security, including those related to the collection, storage, handling, use, disclosure, transfer and security of personal data.

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Our efforts to comply with privacy and data protection laws may impose significant costs and challenges that are likely to increase over time, and we could incur substantial penalties or litigation related to violation of existing or future data privacy laws and regulations.

We could lose key personnel or may be unable to recruit qualified personnel.

Our future success depends upon the continued contributions of senior management and other key personnel and the ability to retain and motivate them.

Litigation or legal proceedings could expose us to significant liabilities and damage our reputation.

We may be a party to various litigation claims and legal proceedings that may include employment, tort, real estate, antitrust, environmental, recycling/sustainability, intellectual property, commercial, securities, false advertising, packaging, product labeling, consumer protection and other claims.

We may be a defendant in class action litigation, including litigation regarding employment practices, product labeling, including under California’s “Proposition 65,” public statements and disclosures under securities laws, antitrust, advertising, consumer protection and wage and hour laws.

We have been, and in the future may be, a party to various litigation claims and legal proceedings that may include employment, tort, real estate, antitrust, environmental, recycling/sustainability, intellectual property, commercial, securities, false advertising, packaging, product labeling, consumer protection and other claims.

We have been, and in the future may be, a defendant in class action litigation, including litigation regarding employment practices, product labeling, including under California’s “Proposition 65,” public statements and disclosures under securities laws, antitrust, advertising, consumer protection and wage and hour laws.

Plaintiffs in class action litigation may seek to recover amounts that are large and may be indeterminable for some period of time.

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In addition, our effective tax rate in any given financial statement period may be significantly impacted by changes in the mix and level of earnings or by changes to existing accounting rules, tax regulations or interpretations of existing law.

In addition, tax legislation may be enacted in the future, domestically or abroad, that impacts our effective tax rate.

Among other things, a number of countries are considering changes to their tax laws applicable to multinational corporate groups, such as the TCJA.

Some foreign governments may enact tax laws in response to the TCJA that could result in further changes to global taxation and materially affect our financial position and operating results.

Moreover, many of the new provisions of the TCJA will need to be implemented through U.S.

Department of Treasury regulations and other guidance that could impact the interpretation and effect of these provisions.

The recent presidential election may additionally impact our effective tax rate, as the new administration may seek to change the statutory rate and associated tax laws.

Further, tax legislation may be enacted in the future, domestically or abroad, that impacts our effective tax rate.

Changes in tax laws, regulations, related interpretations, and tax accounting standards in the U.S.

and various foreign jurisdictions in which we operate may adversely affect our financial results.

and various foreign jurisdictions in which we operate may impact our effective tax rate and adversely affect our financial results.

Failure to comply with applicable transfer pricing and similar regulations could harm our business and financial results.

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What changed 10-K

Item 1A. Risk Factors