Q3 2020 Laird Superfood Inc Earnings Call
Food, Inc. I.
I would now like to turn the call over to Ms. Ashley just sumo managing director at IC are to begin.
Thank you good afternoon, everyone and welcome to layer Super Foods third quarter 2020 earnings conference call and webcast.
On todays call.
Our Paul Hodge, Chief Executive Officer, and Valerie Oh, Chief Financial Officer by.
By now everyone should have access to the Companys third quarter earnings press release.
Filed today after market close.
This is available on the Investor Relations section of their Super Foods website at.
The U.W.W. top players superfood dot com.
Before we begin please note that all the financial information presented on today's call is on audits and during the course of this call management may make forward looking statements within the meaning of the federal Securities laws.
These statements are based.
Management's current expectations and beliefs.
And involve risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements.
Please refer to todays press release, the Companys quarterly report on form 10-Q for the quarter ended September Thirtyth 2020.
Filed with the FCC and other filings with the SEC grade detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today.
And now I'd like to turn the call over to Paul Hotch, Chief Executive officer of layered superfood.
Paul.
Thank you Ashley and Aloha, everyone. It's a pleasure to be speaking with you on her first earnings call as a public company.
On today's call I'll briefly provide an overview of who we are and the business model. Then review some highlights from our third quarter and discuss the reasons why we believe layer cheaper feed is well positioned for long term growth.
Dollar yells, our Chief Financial Officer will then review our third quarter financial results in more detail before we open the call the QNX.
Large super food is a high growth plant base natural food manufacturer with an open ended growth opportunity in the $695 billion grocery industry.
At large super food, we believe.
Better food lead to a better world because when people are healthier and feel good to make better decisions.
Our products provide daily sustained energy nutrition, and hydration that we need to sell 300 days from sent up some down as part of our daily ritual, starting with our superfood Kramer and coffee.
Our mission is simple, we make products that deliver great tasting great quality.
We want our products be convenient easy to use affordable and available to all.
We are proud to have to known as an investor the known as the global leader in the food industry, who shares our vision of a world of healthy and sustainable foods.
And provides us incredible expertise.
Our flagship product line is our line of functional superfood coffee creamers, where in a short amount of time.
We established a number one natural powder cream or in the United States.
Our products are designed around daily use and we're building a broad based natural food plot.
Reflecting the authenticity of our founders.
And that authenticity and trust in our brand is a critical differentiator driving revenue growth.
So our Omnichannel sales strategy allows us to reach our customers where they are.
We primarily sell online in wholesale but also have a young.
Foodservice division with tremendous promise in the long term.
We are native digital and our online business accounts for around half of our total revenue today.
The online presence is a powerful customer engagement tool and the online revenues highly recurring with approximately two thirds of our direct website sales coming from repeat or.
Subscription orders.
Despite a significant new customer growth, all indicating unique level of trust in our brand.
In wholesale our customers span major grocery chains, as well as Costco and Cvs.
And we expect our presence at grow to multiples of the 7200 retail doors, we are in today.
And.
Our wholesale channel this quarter, we witness better than expected shelf turns on or beta launch of liquid creamer up to six turns per week for Vinnolit Kramer.
And we really consider this be outstanding, especially in the early trajectory for that product and its further nod to the residents of the Laird brand.
Consumers lever brand for its authenticity.
Nominates with high performance and healthy living combined.
Combined with the great taste for products.
And it's no surprise that we continue to see evidence of this across both the online and wholesale channels.
So in wholesale we grew 223% Q3 this year over Q3 of 2019 a growth.
Zack in both adding total door count as well as adding more skus in existing doors with our valued wholesale customers.
Online, our Q3, new customer acquisition rate increased 149% year over year.
We're really pleased with the improvement year over year in converting first time customers are repeat customers.
We saw a 40% improvement there, which we attribute to a number of things including effective marketing.
We are using your trusted brand platform developed new products and families need products addressing large total addressable markets are tams. So this includes coffey in 89 billion dollar total addressable market where we.
Anthony working on a deep pipeline of highly innovative functional coffee products.
Which will continue to release in the coming quarters.
We have solid data from wholesale partners and online sales supporting this expanded functional coffee launch in the early read on our initial blend is very strong function.
Functional coffee is an adjacent land are already established presence in.
And Kramer expanding our reach out to consumers, who don't use whitener.
And so we're really excited about the opportunity addressing innovate even larger coffee market.
And also better for you snacks addressing the $101 billion snack category.
In early fourth quarter, we released our first ever snack product purely units.
Dennis wasn't intentionally limited launch and the results were eye opening weeks.
We quickly sold out at the day of launch and we think the sell through results and adoption by our customers. We are indicators of how we can eventually expand sales of food products and the overall platform.
The third quarter was another record quarter for us net sales increased 180.
In percent, the 7.6 million relative to last year, we drove a significant expansion of our customer base in both online and traditional wholesale channels.
We were and remain hyper focused on the launch of our liquid creamer.
Which contributed more than half a million of gross revenue in the quarter.
Our liquid creamers and now in more than four.
T 100 retail locations and our initial read is that are highly differentiated liquid tumors are on trend.
Selling up to our expectations.
We are hearing from customers that this product is a game changer for them. They love the added functionality the uniqueness and the tree clean label there.
Theres, great shell philosophy here customers love it.
Followers love it.
So we talked during the road show about the supply demand mismatch that we're solving increased margins.
And since we have also learned that the shelf life and our current packaging is just too short for the distributors to manage effectively and.
And this ultimately means high split trades, which in the quarter undermined our gross margins.
So the good news is we believe we have a solution for a packaging change that will extend their shelf life from 45 days the four to six months to solve this issue.
And we anticipate having the updated version on shelf by mid 2021.
As pilot runs are underway currently.
The much longer shelf life has made.
Bandits it makes it far easier to manage supply and demand.
It gives it the distributors ample time to deal with the logistics.
And they also improved the customer experience by giving them longer to use the product before spoilage.
So the same solution with some minor tweaks will also enable us to sell the cream or shelf stable format.
Many of which gives us the upside next year for D to C and Amazon sales to further balanced margins.
This is a really exciting solution for large superfood.
We are learning all the time and in real time, how to optimize their business and particularly the liquid creamer business.
That said this was a record breaking revenue quarter and.
You're not be more excited about what lies ahead for us.
And we have strong confidence at the Laird brand can operate at world class margins profitability.
We are constantly analyzing evaluating and executing the path to get us there.
Helping us on that path I'm delighted announce our new Chief operating officer, Scott Maguire.
And when he joins our team next Monday and brings many years of operating manufacturing and supply chain experienced declared.
God has led to operating roles at CPG, and fresh food companies, including Nestle, Pepsico and bond while fresh Americas. We're so excited to welcome Scott Zeller team.
In summary, our third quarter was.
Our record breaking revenues in all channels are up.
And we've made great strides and identifying specifically, where we can continue to improve our operating efficiencies and our projects in motion to take layered super food to the next level.
I want to give a huge my hollister, our amazing team remain focused and true to our mission and then.
I'd now turn the call over to Val who will walk you through our financial highlights.
Thank you Paul and good afternoon, everyone. It's great to be speaking with you on our first earnings call as a public company.
As Paul noted we are very pleased with our third quarter financial results.
Our net sales increased 118% seven.
1.6 million relative to the third quarter of 2009 pull reflecting a combination of growth in online and wholesale channel for online grew 57% year over year with our direct web site sales up 122, but that.
And wholesale grew 223%, reflecting continued success with key partners as well as strong.
Like the consumer performance ongoing success of our shelf open.
We saw 135% growth in our coffee creamers platforms.
278% growth in coffee tea, and hot topic product and 53% growth in hydration and beverage enhancing settlement.
Gross margins were 24 point.
<unk> percent during the third quarter.
Although a slight increase over Q2, the sequential decline in margin from the last year, whereas all of the following.
Well, it's really related to our liquid cream relaunch and process refinement.
Elevated co packing fees related to our liquid creamer line and that product launch continues to grow.
But also from outsourcing some of our shelf stable business, while we awaited our recently install second internal production line to become fully operational.
And the combination of elevated shipping expenses and reduced shipping income for our direct online business, where we have continued the free shipping initiative and on an absolute basis.
Kevin outbound shipping costs also increased approximately 10% during the quarter.
Regarding liquid tumor spoilage as Paul alluded to we have to keep that to create a clear and realistic path to a more optimized operation recorded a quarter spoilage should be less of a concern.
We are planning a new package design that will dramatically increase the shell.
The life of our product extending out 45 days to four to six months.
And this gives us line of sight oil is right in line with industry standards in the single digits.
We are also evaluating separate shelf stable liquid option to launch at some point in 2021, which would enable us to sell our liquid product.
Online and through Amazon, which as we see with our other products can provide a higher blended gross margin between direct retail and wholesale.
Regarding co packing of our shelf stable products our sales.
Can production line now installed and operational.
It is still ramping up to running at full speed.
Between.
Shelton production line, we are working hard to build up our thinking docket finished goods on hand ahead of any potential impacts COVID-19 resurgence.
We have been very fortunate to have like any material production impact thus far due to covance, but we do not want to take any chances for I'm, sorry, I missed opportunities for growth. So we will be there.
Regarding our inventory on hand over the coming months and as a result, we will likely continue the use of co Packers in the 2021 until we feel we have adequate safety stock on hand.
So to summarize sometime after the first half of 2021 expect margins to improve as we plan to revamp our liquid creamer packaging to extend Michelle.
Welded blank and cut down on their spoilage rate.
Ramp up our second production line and simultaneously increase our inventory on hand.
After that point, although this land we would be looking to reduce the outsourced work in ship back to supporting our growth with our existing infrastructure and reap the benefits of the fixed cost leverage available to us.
Via our vertical integration.
Regarding shipping after.
After testing the removal of free shipping in the third quarter, we reviewed the data and decide Didnt keep free shipping turned on for now this is a margin impact where we believe the investment is justified by the top line at this stage of aggressive market share growth.
However, shipping rate have increased in fact, we received notice of an additional 15% increase in shipping costs in October and so this is an important area of focus but as we optimize the build that part of our business.
While we can't control shipping rate, we certainly hope that post cobot and post holidays with some changes in our fulfillment.
Element profit, we can identify a more optimal solution for this call.
Moving further down the income statement Opex remained firmly in our control and as we have done historically, we continued to show very effective management on these expenses across the board we.
We have significant fixed cost leverage in the business, particularly in Opex and you.
Patient safety and effectiveness of our teams continue to show here as we make progress toward our long term goal metric as a percent of sales.
With an eye on high growth of course, we anticipate the opportunity to invest capital on growth, whether it be an online spend or other forms of marketing and advertising so long as the returns.
Justify the spend and that will always be the biggest delta here the sales and marketing number.
But across the board, we have various button numbers outside of the nonrecurring go public cost and we expect this to be the case moving forward.
We believe we have scaled this company to be public and this will continue to be a source of leverage for us.
Now on to Capex we.
We would like to reiterate how minimally capital intensive our core business is as it stands right now.
Capex remained low even now with our second line in place.
We have tremendous fixed cost leverage and excess capacity once our second line is running at full speed.
As many.
No My Roadshow, we do not believe this is a business can guy court.
We intend to issue annual guidance in 2021, and we operate with long term targets in mind those.
Those long term targets, which we discussed on the road show have not changed over the next three to five years in 2023 to 2025, we believe the.
You hit and run with annual revenue growth in the double digit growth margin north of 40% and EBITDA margins in the mid teens.
Our breakeven EBITDA margin target coincides with total revenue of $67 million.
But today it is the nature of the business at this early high stage of growth to be choppy in both direct.
Business quarter to quarter as we experienced changes in the timing of orders and a variable cost environment.
In the days following our IPO, our sell side analysts published 2020 revenue consensus at $23.4 million and we continue to feel comfortable with that initial revenue expectation.
On the gross.
Margin by expectation should take shipping factors into account as we navigate the optimal balance of free shipping and increasing shipping expenses for our DTC business, including increased shipping costs beginning in the fourth quarter.
It should also take oil hedge into account potentially through the first six months of 2021, following which our margin should begin to slow.
Direct slope upward.
We intend to discuss full year 2021 expectations. When we report our fourth quarter early next year.
Thanks, Phil So before we go to questions I just want to let you know our number one priority day is to optimize the fast growing business, we have immediately before us.
We feel confident.
About the plans in place to optimize liquid creamer business and we feel this effort is worth the time and resources because the consumers are there the brand is traction.
Our customers loved glared products, and we know we can take a meaningful share of the multi billion dollar creamer opportunity in front of us.
All in all this quarter was huge for us and for the brand and we are hyper.
Focus on the market opportunities in front of us.
We are still delighted with the expanded team we have in place and now let's go to questions.
Thank you in order to ask a question you will need to press star one on your telephone if you need to withdraw your question press the pound key.
And your first.
Question comes from the line of Bobby Burleson from Canaccord. Your line is open.
Yes. Good afternoon, thanks for taking my questions.
Hi, Jamie.
Hi, guys, Hey, Valerie.
Tim and Paul So I think my first one is just on the spoilage impacts on gross margin.
Just curious if you guys kind of zero in on what that was in terms of basis point.
Yeah sure of course so.
All the good creamer spoilage, you mean over the past two quarters and then each quarter spend of between 100 to 300 basis points in margin, but again like it like we've not mentioned on the call they were pretty.
Sided and confident about this solution we haven't place in comes a lot of upside potential as potential E com option down the road.
Okay, great and so just the kind of incremental spoilage I guess versus expectations.
It's much too much about this before.
Is there a way to kind of isolate what was that.
In terms of Howard weighed on margins.
Yeah.
Yes, so historically when we when we talked on the road show and and in those conversations really we initially attributed that it really to a mismatch in supply and demand. If you recall, we had a minimum run quantity with our co Packers and we were initially launching in the.
Well in quarter I mean that was that was the main driver and.
And partially I'll, let you speak to the subsequent yeah I mean, what we've realized just in the past really over the past month is as that sort of mismatch.
Was corrected for most part is that we're still having spoilage. So as we dug in with the distributors see what's going on.
What we've really learned it was just that the distributors themselves were not able to really handle the product in an efficient enough manner with a 45 day shelf life to get it from where we co pack to the stores say East Coast West Coast.
And getting on the shelves.
You know with enough shelf life to do any good.
In some cases for example distributors might pick up a shipment late as much as like a week late from our factory. After we produce it and then by the time it gets to their warehouses on the west coast. They can accept it because it has less than 75% shelf life capability. So it was kind of surprised when we dug into it really look at it.
What was going on there so with.
The health of the non we we found a great solution for this extended shelf life and its going to completely pretty much eliminated our problems are taking it from 45 days to four to six months, we're pretty comfortable in those ranges.
And that.
Basically eliminates this the sort of logistics issue so to speak that with the distributors and it.
It was it was a bit of a surprise. So the spoilage was continuing to happen even after we kind of correct that mismatch and.
We are making some strides in the meantime to.
You know reduce that.
Just in some ways, but it's never really going to be completely fixed until we go. This new solution. So we are in trial runs already with the new packaging and we're basically driving this as quick as we possibly can without sacrificing quality.
Okay, Great Great and then just a quick follow up here you guys mentioned the key.
Extremely high.
Turns for your funnel of flavored liquid Kramer and I noticed that my local.
Stores said, they're going to go up is like almost sold out.
See unflavored wasn't.
I'm just wondering are you guys, making adjustments in real time in terms of your inventory planning.
It seemed like it was incredibly lopsided towards.
Demand for for Noah.
Yeah, Yeah, absolutely we were currently.
Analyzing not in producing the product as.
As it needs, but don't don't underestimate the actually that unsweetened and regional are also turning very well.
There's some great turn on that product gets but no. One has the highest but the others are all three those flavors are performing well by kind of standards and especially being.
Being that it's brand new in the marketplace and the good sign that I look at is as you know that the weekly turns are actually increasing still which has really.
Really good sign it basically means that people are getting.
Using the product and coming back for more and we are building a customer base in the stores. So we're still seeing those rates ramp up which is really exciting. So I think we're really on to.
And we get the feedback from consumers through our customer service portal people just loved the product.
Yes.
It seemed like I had some conversations with the checkout people at the stores they shop at and they were saying they were aware of the product. So there was kind of a buzz building it seems like.
Good and then I just I guess the last one just on online curious.
You tried to shut off.
Free shipping a little bit.
Thought you guys were always kind of planning on keeping that turned on a little bit longer was that was there a change in strategy there or was this an experiment that you've been planning all along.
You know, we're going to constantly be testing the free shipping initiative and.
You know, it's hard to measure the second.
Most of it unless you do have those times, where you can measure the opposite so we want to turn off to really get kind of get a new measurement of returns and then Theres also a lot of different new creative ideas that we're implementing to test various different versions of at that time.
To to really look at ways that we can reduce or.
I think cost, but also provide that really solid customer experience and.
A little too.
In essence compete with Amazon with the free shipping initiatives and so we're really excited about a whole number of tests that were actually going to be running over the next say three to four months to look at how we fully optimized that.
Initiative and so it is important to continue to play with it and to be able to measure the data I think.
And he said that shipping costs were up 15% in October is that correct.
Yes, we received notice from actually a couple of our primary carriers that there is a rate increase and so.
We are going to be hyper focused on the sorry, the business because we feel that there.
Theres a lot of room here to really find some improvements and by the way Scott Mcguire, our new COO is highly experienced in the supply chain fulfillment logistics area is what I consider a global expert in this arena and.
So starts on Monday, So we're really excited to get them onboard and one of his first initiatives is going to be to dig deep into this area the business.
Sounds like a great higher congratulations on the upside in the quarter.
And thanks for taking my questions.
Thank you.
Your next.
Your question comes from the line of Alex Fuhrman from Craig Hallum Capital. Your line is open.
All right. Thanks, very much for taking my question and congratulations on a really nice quarter here I wanted to ask about the subscription that you have on on layered superfood dot com I know thats been a pretty meaningful.
X. contributor of revenue for you historically.
Can you share how much of the third quarter online sales were generated by subscriptions or any color you can give us on how your number of subscription has been trending throughout the year would be really helpful.
Yes of course so.
Subscription and repeat business continues to make up about two thirds of our direct online business. Despite that strong new customer growth in the third quarter.
It was still around 31% repeat was still slightly north of that 30% to 33% and then in terms of just the scripts subscription counts and that continues to go over all as well so.
We believe we are up about 24% over the second quarter, but when you look back a year and were up 277% over Q3 of last year. So continued strength in that part of the business and subscriptions is always going to be a focus for us because again that LTV of a subscriber is is dramatically improved and enhanced over of a onetime purchase.
There are repeat purchasers and we're going to put a lot of attention there.
Great. That's really helpful. Thank Bell and then just trying to kind of put it all together I mean, it seems like you're seeing really nice continued momentum on the online sales all wholesale obviously is going to be a little bit Choppier and you had the big sell in with the liquid launch here.
Here in the third quarter.
It looks like you guys have grown revenue quarter over quarter pretty consistently for a long time here is it reasonable to think that given the magnitude of the liquid cream or sell into retail in Q3 that Q4 is probably going to take a step back before resuming growth next.
Next year.
Yes.
I'll just say that this business at this stage that were at its very hard to predict.
Quarter to quarter, which is why we're guiding annually.
And.
You know it it said, we obviously we've got some.
Eight programs in place, we're hoping to make an impact on black Friday, but we don't know how to forecast out exactly.
You know, there's there's a big wholesale orders come in or it could get pushed into Q1 and those are hugely impactful in those numbers. So while we would just say is just we gave the annual.
Greetings and we just stick to that and the end of the next quarter. We will provide our guidance for next year and you know we're definitely not trying to hide anything from anybody. This is just a very high growth dynamic business and it's very very hard to predict quarter to quarter right now once.
The company matures down the road a couple of years I am sure that will change and we can change that sort of process, but in the meantime, I would just stick with that and.
And we're happy to talk through every little business issue in great detail.
And share everything that we know.
Meantime, and happy to keep those discussions going.
I appreciate that Paul, but Thats really helpful. And then if I could just ask on the feeling that that you mentioned.
Sold out quickly in the trial it seems like Thats, an exciting new new area. Just just the category snacking in general I'm curious was that mostly your.
Existing customers that that quickly reacted to that that product, just curious who who's buying it and what the timeline is to get that product back out there.
Yes, we well assuming shipments are all happening as they should be because there there can be delays we should.
Should hopefully have those back and sucked in by the end of next week.
I will say.
Yes, we are existing customers really responded well to that but there were also some are biggest customer acquisition days, we've had in a long time for new customers.
Our our marketing programs getting out there. So it was really quite eye opener.
Winner for Us honestly, it far exceeded our expectations as far as how quickly those that's the product with live and we thought incredible response from our customers that did receive the product they are lucky enough to get it.
In the meantime, and we've got a huge waiting list for people wanting more so we're excited about the snack category.
It was our first.
Bumped into that field, we've got some other snacking healthy snacking products coming out at in the near future and.
It just kind of shows the power of the brand platform that we have here. So we're building this trusted cut.
Customer base and Bill.
Building this company based on this authenticity.
Our summers I get it they are going to be here and.
Just shows the power of this brand platform my opinion.
Great Thats really helpful. Thank you very much.
Thank you.
And your next question comes from a line of George Kelly from Roth Capital Partners. Your line is open.
Hi, everybody thanks for taking my questions.
So I just have a few for you.
I guess to start sort of continuing the dialogue you were just having on peanuts.
What can you maybe more broadly talk about your new product pipeline.
And I'm curious.
Theres more still coming this year and then I.
I guess, just not sure sort of what you want to tell us or we can tell us what's next year like what should we kind of expect as far as new products for next year.
I mean, I I will frame, it and just saying that.
We are probably more excited about our new product pipeline for 2021 than we've ever been and we've got a really solid line of what we consider really exciting and really innovative products.
For the rest of this year.
You know these product launches kind of move because some of the things are out of our control for.
Sure hunting packaging timelines kind of busy time here for printers and things like that but we do.
And we talked on the road show, having some additional functional coffee products coming out that we're really excited about once again I'm personally very excited about this category I think the future of the coffee space is functional and I think.
Print them, we've got some products that are.
Going to resonate really well and we saw how well our first functional product coffee did did as a performance machine product and.
And I always say you know performance mushrooms are a little interesting. It's like some people are concerned maybe days like mushrooms or what exactly deeper.
Things, especially as do forming but some of these other functional copy launches are a little bit more clear as to what those functions are we're excited about that that should be in Q4 here. We do have our daily essential Greens planned which is for sometime in the next 30 days to down.
Down to the marketplace.
And.
No one knows there do we have that Thats scheduled for this year for sure.
Yes.
There may be one other I can't say exactly what's going to hit this year next year, but.
Theres Theres. Some theres. Some continued product launches are happening this year of course with appealing thats coming back as well.
Okay, that's great.
And then maybe effects of liquid creamer I, just want to try to understand understand.
Your commentary.
Your prepared remarks.
So are there any changes or will that will be existing form continue being.
Sold through mid 2021, and then secondly can you talk more about this solutions.
Yes, it surely ingredients or just packaging or anything else you can tell us about about the fix.
Yes.
B to the ingredients one change at all the same.
Thanks ingredients same formula we're it's going to take its exactly as it does it's really just a packaging change the package is still the same size.
It's just the way the packaging itself is designed to better protect the product.
And it is what gives it the sort of extended shelf life sales.
Sort of process.
And there is a small tweak to the solution that yes.
Eases again, a slightly different version of the packaging.
But through the same production line process that will then also give us the ability to have a fully shelf stable aseptic product, which would give us a 12 month shelf life.
Same with.
At at room temperature storage conditions.
Conditions, and that's really exciting for us as we can then move the product on Amazon, we can sell it need to Cedar online business and do you like that we do with the rest of our products or we get this then blended margin approach.
So we are excited about that as far as timing.
Okay.
It's a little bit tough to say as I had mentioned, we're we're doing trial runs now everything's looking really strong we're going to move into the market as quick as we can.
I would say definitely by by the middle of.
The year, we'll have it on the shelf and and then start to see that the margin impact some improvements.
[noise] upfront and enjoyed just to round that out and we definitely will keep the existing hurricane on shelf until that solution is in place and then we'll swap it out because when it is on shelf shelf, it's selling really well as Paul mentioned earlier the sell through data is fantastic, especially for being this early on in life. So we're not going to impact that at all.
We hope.
We continue to see that trend of weekly improvements in those turns.
Well, it's mainly.
We think we found the right solution here and.
Looking forward to having in place.
In 2021.
Okay, Great and then last question for me just a modeling question can you breakdown.
Online.
Revenue.
How much we were super food Dot com and everything else.
Yes, so overall channel mix for the quarter I mean online sales was about 49% of that it was about a 60 40 split this quarter between layer typically dot com and Amazon and then of course with wholesale making about 50% of the total sales and food service rounding out with.
That would there, meaning 1% to 2%.
Great. Thank you so much and congrats on the strong first quarter out of the gate.
Thank you.
And your next question comes from the line of Bobby Burleson from Canaccord. Your line is open.
Hey, guys Im back.
I will Miss you.
Well.
So I was just wondering on the new products, you're talking about that are happening here in Q4 over the next 30 days.
Are those all capable being shipped.
Correct or are some of them wholesale when we at this point.
Actually these products will initially be direct only and then we will gauge the performance and then look at the wholesale channels I will say, we do fully expect the functional coffee blends are coming to go into wholesale early.
Early next year.
Just because we do.
Yes, we've seen some really strong wholesale demand for these products and performance and would like to.
Make sure we get those out but our typical playbook does to kind of reiterate but with our products as we like to start the products online and how we're building this online sort of daily ritual product.
Iducs and.
We're going to we're going to want to run those online for some amount of time and just really understand the performance customer feedback to understand if maybe we need a packaging change or some tweaks and sizes or flavors before we make the big investment and going to the wholesale.
The functional coffield started to be the one exception that we're going to accelerate.
Process, just because we already know it's going to be while we don't need to do the testing. It's it's going to perform in our minds and we're willing to go ahead and make that investment to get them to wholesale channels as soon as possible.
And any feedback on how that is.
Scaling with Costco.
Hi, Yes, it's it's been going.
Good even with the performance mushroom blend, which you know we feel of the three flavors.
I wouldn't have as strong of a resonance with the mass market consumer, but with that Costco is continuing to reorder and keep it in their their ace stores and.
With that so we're we're supporting Minot and its.
It started out in one region I think we are selling in three regions now at the coffee. So there's been some recent expansion as well.
Great I'm going.
It sounds like you guys have a good pipeline of new products slated for 2021.
I'm wondering if we think about.
The cadence of introductions this year versus 2021 is there a deceleration in the number of Skus coming out and then are you also.
Culling the portfolio up some stuff that's underperforming.
How's that going to what are the trade offs like there.
Absolutely, we're going to be constantly looking for underperforming skus there there have been a few.
Matt that we're looking to.
Replace and that's just part of the process.
Well, it's it's a little bit hard to talk about the future pipeline because it's quite the process there is a.
I would say for every 10 product ideas that come to mind one of them makes it to this stage.
Stage to where we're actually planning to launch it in schedule it but theres still a lot of variables that can really affect the timing of when those go out but I will say when we look at the number of products that we have next year.
It's the.
Probably theres more products that were anticipating the launch next year than in any year prior.
Great and then just in terms of retail distribution that pure wholesale customers that theres opportunities, obviously, it's hard to get and others like that I'm wondering.
How about someone like a 711 it seems like they're building out there better for.
Are you.
Sections of their crude oil.
Is that a company that's on your radar.
So so part of that product development pipeline. There are some products that we have slated for next year, which are.
Really kind of designed and engineered to be more in that sort of C stores and.
Environment.
So that it is something we're thinking about and are on.
Our new VP of sales are not I guess, new new in Q3.
As some great experience in that area and so were we.
We are anticipating eventually looking into those sales channels.
And having some products that fit their built from the ground up for that.
Okay great.
Alright, well, thanks again for answering my follow ons.
All right. Thank you.
There are no further questions at this time Mr., Paul Hodge I turn the call over to you for some closing remarks.
Okay, well, thank you everybody and have a have a great holiday season be safe and.
We're excited for the future we're excited to talk to you during our next call.
And I guess, we'll see you then we'll be giving 2021 guidance and kind of summarizing 2020.
So really appreciate everybody in the support and going on in.
On this growth journey with legacy profit.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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Okay.
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