Q3 2021 Alkaline Water Company Inc Earnings Call
Greetings and welcome to the alkaline water company fiscal 2021 third quarter results conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference.
Is being recorded I would now like to turn the conference over to your host and director of Investor Relations Saatchi Dowdy.
Good afternoon, everybody and thank you for joining us for the off on water companies third quarter fiscal 2021 earnings call.
Sales from Vicky Reich, President and CEO, and David <unk>, Our Chief Financial Officer.
On the call, we'll be making forward looking statements within the meaning of the safe Harbor provisions of U S security laws and we may make additional forward looking statements.
During the question.
Okay.
Forward looking statements involve risks and uncertainties on undue reliance should not be price.
Certain material factors or assumptions, you're making.
Making forward looking statements from actual results may differ materially from those expressed or implied in fact statements.
For additional information about factors that may cause actual results to differ materially from expectations on that material factors or assumptions applied in making forward looking statements. Please consult the company's form 10-Q, which was filed today and its other reports filed with the Securities and Exchange Commission on that day and Canadian Securities regulators on SEDAR.
In addition, such forward looking statements on any projections for the company's future performance represents managements estimates as of today February 16, 2021. The company does not undertake to update any forward looking statements or projections, sometimes just for clarity.
First of all losses, including the United States, and Canada Securities losses.
Actual results could differ materially from both on any forward looking statements other than itself.
Moving but not limited to general economic and business conditions competitive.
Changes in business strategy on development.
<unk> the trough for retain qualified professionals as well as changes from legal and regulatory requirements.
Company issued a press release announcing its financial results on form 10-Q, the Dfc true statistically on this call who may not have already done so may wish.
If you look at those documents as the company will provide for somebody I think they're both discussed on today's call.
I will now turn the call over close to the right.
We will give an overview of the company's third quarter fiscal 2021 results financial results. Following my.
David Green, our Chief Financial Officer will provide an overview of the company's operating results Vicky will follow David just for my closing remarks from the Gabon open up.
For question on average.
And now I'd like to turn the call, but you're right.
Thank you Sasha <unk>, Hello, everyone and welcome to the alkaline water companies third quarter fiscal 2021 conference call.
The momentum we saw over the summer and into our second quarter continued right through the third quarter Fios.
Fiscal 2021 has been a challenging yet very rewarding year for the company.
We believe our core business is stronger than ever alkaline 88 is once again, the fastest growing top 10 value added water brands in the country.
As for fiscal 2022 approaches and the economy normalizes, we are well positioned and our lifestyle products 88 C V D.
Alkaline 88 flavor infused and other products to accelerate growth going into our fiscal 2022.
Our strategic priorities focused on achieving broader distribution of all our skus in the grocery supermarket and drugstore trades growing the convenience store channel through strategic strategic direct store distributions.
And expanding our hospitality and foodservice presence opening up international markets and accelerating our growth and our direct to consumer ecommerce sites alkaline 88, Dot com and 80 H E B D dotcom.
Our teams are pursuing clearly defined strategies for each of these growth areas, which I will be highlight each shortly.
During our third fiscal quarter revenue grew approximately 20% year over year to a record 10.2 million.
The 50, 226, 13 and for week scan Nielsen data shows that we exceeded the value added water category growth both on a dollar volume and unit basis and in fact in calendar 2020 alkaline 88 was the fastest growing non flavored top 10 brand in the category.
For the first nine months for fiscal year <unk>.
Revenue grew approximately 21% to 35.2 million our team has done a great job of executing against our plans and driving growth across all trade channels throughout the fiscal year.
Our brand momentum continues to grow with our lifestyle products now available on over 75000 retail locations nationwide.
We expect to add another 9000 stores by the end of the current quarter. The company is very well positioned for future growth in the value added water category. This is supported by the latest Nielsen data January 23, 2021, which shows that the first for weeks at the new year. Our brand has continued to outperform the category.
On both volume and in unit growth by a factor of two and five respectively.
We have also risen to the eighth largest company and the value added water category.
For recent beverage marketing corporations reports the bottled water category continues to gain over the carbonated soft drinks driven by consumers' preference for healthier options for it.
The same report alkaline in essence water continues to be the growth leaders. Overall, we are pleased with the substantial progress we have made during the first nine months of our fiscal year.
With the health and wellness consumer in mind, we have strategically introduced key lifestyle products for our beverage and CBD portfolios over the past two years today, we offer a robust portfolio of lifestyle brands and have expanded our beverage offering offerings for 14th Skus in our CBD portfolio to 20 for natural topic.
And Ingestible products.
Our lifestyle brands are currently available on over 75000 retail locations we.
We see strong demand for our products, and especially discount retailer trailers as well and recently added the 99 cent only stores to our growing base of customers. In addition, we'll soon be launching other leading retailer in this category. They will carry our 700 mill and our alkaline 88 flavor infused waters beginning.
Beginning next quarter, our one gallon 1.5 leader and our 500 milliliter eco friendly aluminum bottles will be on the shelf of a premier Midwest Top 15 retail banner I'm also pleased to announce that on existing customer in the drugstore channel, we'll be adding our one gallons. In addition to the three leader that they already carry nature.
And wide and will also be offering a one leader in their open air coolers section across a number of stores nationwide.
We continue to see a strong pull through of small formats, we expect to reach 90 to 110000 stores by the end of our fiscal 2022.
We will provide further details on these large wins in the coming months.
As we prepare for the strong demand on our strategic objectives of penetrating the C store channel. We believe based on our dominance in the grocery channel. The timing is ideal for expanding our direct store delivery DSD strategy. We are pleased to now so we have entered into agreement with a premier distributor in the southwest this part.
And who is one of the largest and most respected family on beverage distributors in a nation. Its customer base includes 9000 retail locations. This partner will carry the full line of our smoothed tasting alkaline 88 water portfolio and our alkaline 88 flavor infused waters under this agreement.
This will be the first time in a major metropolitan markets for the company has adopted a DSD model for its entire alkaline 88 line.
According to Arris done in advisory and intelligence research firm convenience stores are emerging as a key distribution channel for premium bottled water brands on account for over 60% of the distribution network in North America.
Additionally, we have added three regional DSD east in the southwest mid Atlantic and East coast regions, which provide us access to an additional 12000 customers.
And our fiscal 2022, we look to add additional premier beverage distributors and other key U S markets. We believe this will accelerate sales for our single serve offering and our 88 CBD products management believes it by adopting a drugstore distribution model and a number of key markets, we will increase our sales.
<unk> into the C store channels.
We have also made significant progress on expanding our distribution partners for 88, CBD lifestyle brands during our third fiscal quarter, we expanded our relationship with K, He who will now carry our topical lines, giving us reach into 12000 customers in excess of 30000 stores now.
And we've also added betterment our S E C b focused DSD to dry C store on grocery store CBD sales growth.
We are seeing strong interest from these engagements and recently added incremental Lee 150 stores for our 88 CBD portfolio of products.
Innovation remains a core focus for our entire ath CBD portfolio.
During the quarter, we introduced Beacon, gummies, and sour gummies and gluten free powder packs and for exciting flavors. We believe our 88 CBD product line is one of the best in the industry.
And like all our products superior distribution multiple sales channels and trusted price will allow us to continue to gain market share.
Based on the changing habits of consumers, we have Alice located additional resources to our ecommerce and digital marketing strategies, both on the water and the CBD categories.
We have tested and will expand on programs that have shown extraordinary rois in our test markets did they add in E. Commerce sales for our 80 H E B D portfolio and water continued to grow.
Since the launch of the Ath CBD dotcom in February of 2020.
We have already nearly a quarter million unique visitors and seeing customer retention rates in the 20% range.
Some of the best selling products on a day CBD sites have been muscle cells deep released key cream and hand foot cream.
Our intangible for portfolio, which launched later in the calendar year has been gaining momentum both on the E commerce sites and the brick and mortar sites.
We have also entered into an agreement with C. A fortune.
To accelerate our growth in the ecommerce water area, specifically, helping us work on our Amazon and Amazon distribution.
Since inception the other.
On water company is focused on having the smallest carbon footprint print per liter of any major water brand in the past 52 weeks, we have taken major steps in reducing our carbon footprint. We've already begun to include 25% recycled P. D. P T in our bauxite.
We continue to focus on sustainability throughout our new initiatives as demonstrated by being the first national water company within the aluminum bottle.
We are the clean beverage company and care about not only what goes into our products. What we what we can do to minimize our impact on the environment.
I'd like to provide a brief update on our international efforts as well last quarter I shared with you that we received FDA approval for for exports to key international markets from three of our strategically located co Packers.
It now appears that our first foray into the international markets will be Mexico, we.
We are currently negotiating with a key partner in the region and expect an export unit premature materialize soon.
It's true of the F. D. A co packing facilities are on the southern border on the U S. Our logistics to Mexico or less complicated and it is well known that Mexico has one of the largest consumption of bottled water per capita in the world.
Also the rebounding hospitality industry should contribute to significant revenue growth during fiscal 2022.
In addition to our wins with Dot foods and I be a food services, we are negotiating with one of the largest foodservice companies in the world.
That will further cement our presence in the on premise business beverage business, we hope to be able to make that announcement soon.
From an operational standpoint, as we prepare for increased demand over the coming fiscal year. We have taken the following steps we are expanding on our co packing facilities and plan to add two new plants and Additionally, we are increasing.
Our process of domestic capacity for raw materials and finished goods, we will be announcing new plants and new raw material providers that should increase our overall capacity and positively impact. Our gross margins are current providers of bottles and handles are doubling up on capacity by opening up East coast plants. In addition to increasing our gross margins in <unk>.
Passes.
They will significantly decrease our carbon footprint is there new plants will be closer to our east coast Co Packers we.
We are targeting to open two additional co Packers in the next six months are targeted as they add a Midwest facility.
By the beginning of fiscal quarter, one 2022, and our west coast plant by fiscal quarter Q2.
This will add additional incremental wholesale capacity of $12 million to $15 million.
And effectively position us for strong growth expected in fiscal 2022 and beyond.
Lastly, another cure area of focus has been working with the National agency to develop our brand messaging for the coming year and to help us identify on a list celebrities that shares our brand values with a growing base of loyal customers, who are typically health conscious and pursue a helpful lifestyle, we believe in.
Ideal celebrity brands partner would be a homerun for our family of brands.
Overall I'm pleased with the progress we are making against our strategic objectives.
Expect substantial returns from the investments we are making.
We expect a solid fiscal fourth quarter and a very strong fiscal 2022 for our lifestyle brands. It's a great time for the alkaline water company, which has emerged as from a single vault brand west of the Mississippi to a trusted national and soon to be global brand.
With multiple in demand lifestyle consumer packaged goods and products.
With that I would now like to turn the call over to David Guarino, Our Chief Financial Officer, who will take you through the third quarter fiscal 2021 financial results David.
Thank you Ricky before I begin I'd like to encourage constrained listeners to review the form 10-Q that we filed with the SEC earlier today for a more detailed explanation on some of the quarter results I will be highlighting.
For the three months ended December 31, 2020, we reported revenue of approximately $10.2 million, which increased approximately 20% year over year.
And for the first nine months versus fiscal year, we delivered growth of 21% compared to the same period last year. The increase in sales was due to continued strength with our existing customers and expanded distribution of our product for additional retailers throughout the country.
Our gross profit from sales in the third quarter ended December 31, 2020 was $4 $2 million versus gross profit of $3 4 million in the quarter ended December 31, 2019, our gross margin percentage of 41, 2% increase compared to the prior year quarter.
Primarily due to a positive change in sales mix and lower cost of goods sold.
Total operating expenses for the three months ended December 31, 2020 was approximately $8 4 million.
Compared to the approximately $6 1 million in the prior year quarter.
Specifically for the three months ended December 31, 2020 sales and marketing expenses was approximately $4 $7 million compared with approximately $4 1 million in the prior year quarter.
The increase in sales and marketing expenses resulted from higher freight and promotional expenses due to the increased sales.
During the same period general and administrative expenses were approximately $3 $5 million compared with approximately $1 8 million in the prior year quarter.
G&A expense of approximately $3 $5 million. This fiscal quarter ended December 31, 2020 consisted primarily of three items approximately $2 million of professional media and legal fees approximately $800000 of wages and wages related expense and approximately 400000 in noncash stock option.
Compensation expense.
Net loss per share on the quarter ended December 31, 2020 was approximately six cents per share improving approximately 14% from the quarter ended December 31, 2019, the net loss per share was negatively impacted by roughly $700000 in net non cash items, which resulted in a negative <unk> <unk>.
Impact on our bottom line.
Cash used by operations during the nine months ended December 31, 2020 was approximately $9 6 million as.
As compared to the approximately $8 9 million in the prior year period. The increase was primarily due to an increase in inventory specifically related to our E. CBD line.
Importantly, our cash position as of December 31 was approximately $1 7 million.
Specifically, we believe that between the cash on hand as of December 31, 2020, our expected conversion of our outstanding warrants and our credit line, we will have sufficient cash to sustain our operations at least through December 31 2021.
And with that I'll turn it back to Ricky Thank you.
Thanks, David once again I would like to thank you for participating in our call today.
In closing I would like to say this past year has been an incredible nine months for us.
With the global pandemic in early 2020 that disrupted global economies, we have managed to maintain the company's revenue growth and added exceptional talent.
We're coming out of it stronger than our competitors. Our efforts resulted in increased brand awareness with our flagship brand alkaline and 88 emerged as the fastest growing brand and are proud of category. This past year as.
As of 123 2020 once Nielsen report, we continue to be the only top 10 value added company in the country.
Grown double digits for both sales and units every month since December 2019.
We have innovated based on consumer demand with new and unique products gained market share expanded our omni channel presence and quickly adjusted to the changing market dynamics. This is a testament to our team our partners and our resilient business model I couldnt be more proud of our branch journey.
Through today and genuinely believe that the best is still ahead of us.
I would also like to thank you our shareholders and our board for their contribution and continued support we're making great strides in making alcohol on 88 alkaline any.
88 flavored infused in 88 C V D. The most trusted lifestyle brand in America.
At this time, we'll be conducting an answer answer a question and answer session. If you'd like to ask a question. Please press star one on the telephone keypad a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants.
Since using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
And our first question is from David Bain with World Capital. Please state your question.
Great, Thanks, and nice quarter.
My first question would be on the hospitality rebound and I guess, what I'm trying to get a sense of is the timing of meaningful revenue generation from this segment and I guess, maybe put differently.
When can we see a run rate toward say 100000 cases and is there anything different with the new potential hospitality partner in terms of you know.
Revenue cadence now that hospitality is coming out of Covid.
It's a new partnerships won't be structured differently than the first any kind of color on that would be great.
Hey, David Thanks for attending today.
Yes, the cash.
Hospitality industry is recovering we are in some.
<unk>.
Believe it or not golf courses.
We're doing on test with one of the largest golf course groups in the country universities are opening up to us as well, we're still a little slow in the restaurant and hotel segment of it.
Over our new partner was extremely strong on both of those are new potential partner and it's just going to be a great add for US I was looking at the segment segment reporting requirements just before the call I think we are at least couple of quarters out David before we have to do some segment reporting.
Okay. That's helpful actually okay, great and then.
Our international expansion I know you Rick you have a ton of experience their first for Mexico is there any kind of Tam. We can think about I guess, we should do our own homework, but if you have somebody that's been on feed us that'd be great and then.
If you could touch on strategy. There are the new partnership you spoke to is that a distributor or are there other strategic dynamics for penetration you can you can help us with I mean, I don't know if it were to go into acquisitions or are you know what what we're gonna be doing to sort of make a big splash in Mexico.
Yeah day, David we've actually explored a number of different opportunities.
Into Mexico.
I've got some help from some of my board members along those lines excuse me strength, some smoothed out my 88 water.
And.
This particular deal.
We're in the final throes of negotiations, we're candidly just getting down to the final pricing.
And we should we should be able to announce on a week or two I believe it will be that quick it is to a very large group, it's a little different than that where we will actually be selling into a direct route that has distribution within their current locations.
And.
The details on that it will be a substantial account though.
The nice thing.
Kind of equivalents, if I were to look at the U S market.
One of our mid range.
Our groups that we already deal with.
Probably not as big as the publics, but certainly as big as some of the.
But the change we have with two or 300 source. So it'll be a nice it'll be a very nice add for us.
And it'll be up will be U S, which is also a very nice thing for us.
And lastly, just as a follow up on that if you don't mind on.
In terms of pricing and margins are like per unit pricing and then just margins overall is there anything we should think about as you.
Until that market.
I don't think there'll be much contraction because of the applebee's shipping and the our ability to.
Make sure that we're priced competitively with with our other retailers.
Okay.
Great. Thanks, so much.
And our next question is from Luke Hannan with Canaccord Genuity.
Hey, good afternoon guys.
Wanted to follow up on that point as well actually on the margins.
You talked about on the call Ricky that there's you expect to see some sort of margin expansion from.
These new plants and new raw material providers that you guys are going to be adding can you quantify at all like what we should be thinking as far as what the what the.
The margin profile increase would be there and maybe rough timing on when you expect to achieve that.
So.
Just looked at the excel spreadsheet a couple of days ago look so internally, it's going to some of it is going to be predicated on if we put any working capital towards these arrangements are not from capex.
We have not to date, but we are considering that as a company to potentially a directly invest in some of ours can become a little bit more vertically integrated we wouldn't run it but we'd be we'd be able to get a little better pricing. The big savings initially, though will come frankly from the freight cost.
We are going to pick up on the on the freight bound in significant dollars right away, whether that's a one or two points I don't know for sure David might be able to better answer that but it's definitely significant we've done our rois on on any potential investment as well.
David anything on the what do you think it might be it's still too early to tell from a percentage point of view, but from.
From a timing point of view, we won't see anything until Q1 fiscal 2022.
Okay.
That's helpful.
If we look at.
One other things that you also talked about is that you're allocating more resources towards those.
Areas, where youre seeing.
Really high Rois in your test markets can you elaborate.
Elaborate I guess on what exactly those sort of Rois are you referring to.
An average customer basket relative to the customer acquisition cost can you give maybe a little bit more color on what exactly.
Are you seeing there.
Yeah, I can we started out with the you know some seven 700% or 800% we'd run them now and I think five markets. David Yes, five different markets are very small tests, you know five to $10000.
Pop, but we're seeing tremendous.
Return on those investments and I'm going to guess, David you might have a better I think last time, we talked it was close to 300% ROI on the investment is that still about little less than that but about that okay. So so that's why when we look at those look at does it makes all the sense in the world to continue to pursue that until.
It continues to adjust downward won't make any sense, but right now and that's mainly digital day.
And it's not so much acquisition a lot of these are being done well excuse me I'll step back for two seconds.
A lot of those returns and that sort of return have been in the <unk>.
Food channel our grocery channel. So we've done digital progress now HEB.
Number of other big Big companies that we've worked on on the last year food Lion et.
Et cetera, and those of offshore on tremendous returns for us on the digital side and then on the cash cost per acquisition on the E. Commerce sites, we have run a bunch of things on that we know what doesn't work and we'll begin to push from additional dollars to bring that cost of acquisition down below where it is today.
Got it and then on on the CBD for on Ricky are you noticing how does the alkaline brand how do you sort of differentiate yourself then what's admittedly a pretty crowded field thing have you have you noticed anything.
And the metrics that youre seeing or feedback you're hearing from customers that your product is actually standing out and sort of differentiating itself.
Look the one big thing that I do know when I get it from my sales guys all the time.
We're about a taste profile.
And that there's nothing that we've made that people just don't think is absolutely outstanding on the adjustables, obviously, shea butter and some other higher cost ingredients on the on the topical as well and then finally, what we're really carrying the day on at least on the brick and mortar side is that people love alkaline 88.
And just open those doors I was shocked to see.
From the meeting is taking place this coming quarter.
Strictly on only a result of us being alkaline 88.
Open the door for the Ath <unk> sales team and hopefully some of those come in I Love. This time of year for us because we've had some big wins in the last couple of weeks you know, we don't usually announce until the P. O com. So that's why you see the.
Kinda obfuscated.
Answers or discussion within our actual relief those are clear, but theyre not in the stores yet we haven't gotten the firm.
But we are and were in line for the plan O Gram et cetera, and you'll see some of that coming in the CBD arena very quickly as well. So this time of year everybody is making their decisions. The buyers are both on the CBD side and the water side.
And we're getting a lot of ws and so over the next.
Two weeks here three weeks a lot of those ws will come to fruition.
Got it last one for me if I may and then I'll pass the line.
With the New administration Thats in place now have you noticed anything in your dealings with potential customers like where you are noticing a more positive tone a more positive outlook on the prospects for some of your CBD adjustable products or have you heard anything.
From the regulators that that suggest any incremental positive there.
That's so much regular regulators, obviously, you know I read the.
The legislative updates almost every day.
There was a bill that passed in.
And Congress, but was same as last year's Bill, but obviously with the administrative change we do believe there'll be some additional guidance. The good news is that whether we believe it or not some of the retailers believe it.
And there was a march changed after November six.
And the fact that retailers were much more wisely.
Talk to us about adjustables I would've said before November six we were pretty much on 90, 10, ingestible or topical as to adjustables and now we're no worse than 50 50.
Got it that's great color. Thanks, a lot.
Thank you.
Yeah.
And our next question is from Kevin Dede with H C. W.
Eric 70.
Hey, Kevin can you hear me.
I'm good I'm good.
Hum I was really happy to see your numbers so congratulations.
Thank you Sir.
I think the big question for me Ricky.
You know I defer to my esteemed colleagues, who probably already picked up on it but you know last year, you're at eight five now you're at 10 two.
Can you just help us take it apart a little bit.
I apologize, but it all seems kind all lumped them together, it's hard to see what was C. CBD, it's hard to see what flavor infused it's hard to see what was on line what's in the stores.
What should we do to try that.
Take a look at some other parts.
I'm not sure I can.
I've been pretty firm on this Kevin that we're not providing guidance segmented segmented guidance thats kind of why I went on to data to see what the real answer was there when we're going to push over that line, but what I will tell you is to give you some guidance that.
January was our best January ever.
And the first two weeks of February were our best two weeks of February ever and there is not even close second so the momentum continues to grow with the brand and its across all all parts of the brand.
I just did a survey two weeks ago actually my sales group did a survey for me and one other things that again on a color basis.
You can look at where we've penetrated.
The various.
60000 storage you to strictly the.
<unk> channel.
And you can see that.
For instance.
40% net return Qunar one leader.
And another 27% on a $1, 520% on our infused. So those are the kinds of things that we move metrics is again and then on the wins coming up.
Is that kind of on a year.
We have on 11000 new.
As you scheduled for 11000 stores ready willing and ready to take a news to us.
On the upcoming fiscal year.
And then I think we've said in the leases and pick up about 9000, new stores that will be coming in the new fiscal year and a lot of it SBU I did do that today.
The one I was focusing on more than anything Kevin to be Frank again was I wanted to see other two liters was two liter was being accepted.
I love that market for us.
With well over 1000 stores that the two liter is scheduled to go into.
And if you look at either.
Our single serves on our flavored infused aluminum.
Well over 3000 for picking those up and after the fiscal year on up to 11 from if we get it off balance.
Okay.
Okay.
Impressive Ricky it's impressive I, it's just a little I guess to use your.
Verbiage, a little obfuscated from or for at least from my perspective I'm sure. The other guys have a better handle on it it's just a.
Are hard to run numbers without sort of seeing a little more detail.
I guess.
The other thing maybe you can help me with is understanding what's where I mean, I know the DSD is sort of a new strategic effort for the alkaline water company and I I guess, what I'm, hoping you can share with us is.
What you think their focus is on.
In terms of storefronts and what products are they helping you move.
Good question, Kevin because it is a new focus for the business I.
I wanted to add a little bit of color because I only had 17 minutes on my prepared speeches. So it gave myself a little more time on Q&A.
Yeah no.
I appreciate you moving it along Ricky.
[laughter] one of the.
One other things that you have to understand is that most people pull the trigger on drugstore distribution way early.
They have a new idea that Avenue concept I think the only way the way to get in there is the higher DSD and that sits on the shelf, we kind of did it the opposite we're looking only at strategic market Big Big markets.
In our DSD network, and we have an excellent excellent reputation in the.
Grocery channel I look today at the Nielsen reports that came out on on.
123 of this year, and we have a 3% market share in grocery and.
On the enhanced water space, which just shocked the heck out on me, Kevin because if you look down the list you'll see a lot of big names that are substantially less than ours that you would think would have that much share, but a little out on 88 had a modest share. So the name recognition is out there that will allow us to go into really the strength.
AG is convenient stores and up and down the street.
As for the DSP is really set up to do we've done an excellent job Frank Chesnut and his team has done an outstanding job penetrating the.
The grocery channels and some of the major boxes and now it's time to have a strategy, we hired a guy last year from essentially.
We just had an additional hire in the northeast and we haven't announced it yet, but he's a DSD guy that actually.
Let's I think losses to come to us and.
So we're serious about the effort.
And we think that the ability to penetrate this new stores is essential for growing the brand.
Here in the U S and accelerating our growth.
I don't like to use comparative, but if you look back two years ago.
18 months ago, our Celsius.
Chelsea piers second bite at the Apple on.
On DSD.
They fell flat on their face and they did 15 years ago when they didn't have any name recognition.
But they took that bite at the Apple 18 months ago, I think the big guys or was there first one out in New York and they continue to roll and done very very well.
So that's a little bit of a we view it.
We think we have just done a smarter.
We think we wait until we had the name recognition and then went and had guys that literally two years ago wouldn't block for us.
Negotiating with this where we think we are very very good DSD agreements.
So the other big question is what.
You know what other Skus could you pull through.
Once you've established your.
Yeah, So I'm just kind of trying to.
Get my arms around.
You know the opportunity is it's it's on.
All tantalizing don't get me wrong, it's just starting to see what's where and what you plan on.
In most cases.
Kevin in most cases, the one leader is a no brainer for these guys. Okay, our sports cap as a differentiation and so as our aluminum and then they're all carry on the flavor and infuse as well. So we do have two or three differentiations in terms of product.
I would like to see the two liter get on some shelves.
I think that's a good on another differentiation that we have its handier sized tactful for the refrigerator in the gym.
Okay for Pompe.
And so I see that as a big differentiation as well wouldn't surprise me.
But at some point in time, we have all three the gallons for three leader in the two leader in some of our grocery channels.
And then I see in the in the.
Convenience store channel I do see the aluminum.
Being a big big item for us because it is a kolpak item.
That said several calls ago, if you drink our aluminum bottle hold you'll never have a beer again.
That good.
Well, you talked about Ron Guy about that Ricky.
I I'm.
I'm wondering though can you pull CVD true through some of these retail channels as they build.
Yes, we actually hired I don't know if you caught the nuance we hired.
Letterman.
That's right and I didn't hear that.
They're doing a great job for it's not a good job a great job.
And that's some of the announcements are.
That youll hear some of the wins that we've recently had that will come out over the next week or two.
And again I don't like to make announcements for flash I like to be able to go out and take a picture someplace posted social media. So that they can go into their local cvs or Walmart or wherever it is in and grab the product.
It doesn't help sales to have a big news flash and not have anything sitting there.
All right last one for me Ricky I'm sure you just read the big Sigh of relief how many co packs do you have now.
And can you just review your rollout strategy going forward, just so I make sure I have it correct. Please.
I know you gave it to us on the call.
Yes, I think we have a total right now I don't have the list in front of me, but.
Easy one again, Kevin we are very very close to opening one on the east Midwest type of yes, we're in a state where you can call on either one.
Okay.
So we're very very close to having that open that will open first quarter <unk>.
Okay I've got I've.
I've got the actual open dates in.
In front of me.
Now let me see what I think is scheduled for the end of March.
Beginning of April so that one's coming on the.
The raw material guys, both those plants I think.
They went up last week I don't know how much they're producing out where they are still on their test for them.
So again <unk>, you won't see that economically until Q1.
We're still QC and on so that's probably another 30 days before they're really operational.
Based on the net cost of goods for we talked about and David mentioned, we will be available for this quarter and then the west coast plant.
Identified we visited we've qualified.
But it is a newbuild.
And so there are.
Another for five months, probably Kevin before that happens.
Okay.
Thank you so much Ricky I appreciate your patience and your indulgence as always congrats again.
Stay safe everyone.
I want to thank everybody for taking.
<unk> taken the time with us today I appreciate it and again I know I tried to say this every quarter, but I do see rainbows and unicorns ahead for this company.
We're as strong as we've ever been on almost every level. We did add a bunch of people. This year that have all been a players and there's just nothing but strengthen our bench and we get better every day.
And I appreciate your faith in the company.
And as a reminder, if you'd like to ask any further questions. Please press star one on your telephone keypad.
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A moment as we poll for further questions.
Okay.
But maybe.
And the next question is from David Bain with Roth capital.
Oh gosh, alright, we pulled back on sorry, I did have one follow up and I didn't mean to.
You don't go over from IBM, there, but if you can indulge me.
Just one one last one on the international again, because I think that's kind of a big.
Initiative.
Can you give us a kind of a cancellation I looked up the Tam in Mexico, and it looks fantastic the growth looks great for bottled water.
But I don't see anything on value add and I'm wondering how prevalent that is in Mexico relative to the U S and and just putting it in the flag in to the market is that enough for brand building kind of.
Initiative or is there going to be a capex requirement to kind of proliferate.
Alkaline Hay day Fran.
Well you asked all good questions.
We look for both.
We think that our first.
Trip into the Mexico on that in that market.
We'll actually be a much easier trips and then most people experience we've got a unique situation.
David that I think will allow us to actually.
Get immediate sales and immediate return on investment.
Just because the way, we're negotiating and the company we're working with.
The second one will take us a little longer.
We have had some discussions with <unk>.
Different people in Mexico that obviously, you know how do you build that brand we think based on their business model that we would do a co type of arrangement that maybe they would help us in retail for them in the states. So that's really where we're thinking about right now.
Got it okay, so it'd be pretty Capex light that correct.
Yes, it'll be very Capex light.
Absolutely.
I phenomenon.
Yeah.
Oh, I'm, sorry, I think you guys and thanks, everyone for lessons.
Okay.
This concludes Tonight's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great evening.
Yeah.