Keurig Dr Pepper (KDP) has acquired Arizona-based bottling and distribution company Kalil Bottling Co., expanding the coffee behemoth’s direct-store-delivery (DSD) operations into the state.

Kalil Bottling Co. has bottled drinks for KDP and the deal will see the Keurig and Tully's brands owner add a production facility in Tucson, as well as sales and distribution centres in the city and in Tempe, to its assets. Financial terms were not disclosed.

KDP will place approximately 425 workers on its books, once the acquisition is finalised.

Kalil Bottling Co., which was founded by Frank and Fred Kalil in 1948, has three facilities in the state, as well as a logistics fleet of trucks and vehicles. It works exclusively in Arizona.

The deal includes bottling and distribution rights in Arizona for brands including Canada Dry, 7Up, A&W, Snapple and Core Hydration. Kalil Bottling Co. distributes brands to roughly 4,500 retail outlets in the state, reaching 7.4 million consumers, according to KDP.

Once assets change hands, KDP will run its first manufacturing, sales and distribution operation in Arizona. The group has previously used independent bottlers and distributors, like the newly acquired Kalil Bottling Co.

“This exciting acquisition strengthens our unique national DSD capabilities and creates opportunities for enhanced scale and brand building in a fast-growing region for beverages,” KDP CEO Tim Cofer said.

“Amplifying our route to market advantage is a key investment priority for KDP, and this strategic move will extend our system's reach while providing us more direct insight into the local consumer base and stronger retail collaboration.”

In 2023, KDP generated net sales of $14bn, up 10.8% year on year. It had a net income of $1.4bn, down 33.1% on the previous year. Of that, its US coffee segment had net sales of $4.3bn for the year, up 5.2%. However, its income from operations for US coffee was down 7% to $1.2bn.

In April, after reporting a 2.1% fall in sales from its US coffee business in the first quarter of 2024, KDP said it was seeking to emphasise the “value” of its products to try to stem the declining sales.

Overall, KDP posted first-quarter net sales of $3.47bn, up 3.4% year on year. It had a net income of $454m, down from $467m.  

Sales from its US Refreshment division, which includes soft-drinks brands like Dr Pepper and Snapple, rose 9.1% to $8.8bn. Volume/mix dipped 0.5%.