Q2 2021 Bellring Brands Inc Earnings Call
Welcome to Bell ring brands second quarter, 2021 earnings conference call and webcast hosting the call today from Bell ring brands are Darcy Davenport, President and Chief Executive Officer, and pulpwood price of the Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 130 P. M Eastern time.
The dial in number is 805 8583, and six seven and the passcode is 588539 at this time all participants have been placed in a listen only mode. It is now my pleasure to turn the floor over to Jennifer Meyer Investor Relations of Bell ring brands for introductions you may begin.
Good morning, and thank you for joining us today for salaried and brands second quarter fiscal 2021 earnings call with me today are Darcy Davenport, our president and CEO, Paul Rudd, CFO, Darcy and Paul will begin with prepared remarks and after.
The words, we will have a brief question answer session.
This release and supplemental slide presentation that support these remarks are posted on our website and both of the Investor Relations and the yesterdays filing sections of salary and Dot Com. In addition, the release and slides are available on the SEC's website.
Before we continue I would like to remind you that this call will contain forward looking statements, which are subject to risks and uncertainties that should be carefully considered by investors and actual results different could differ materially from these statements.
These forward looking statements of current as of the date of this call and management undertakes no obligation to update these statements. As a reminder, this call is being recorded and an audio replay will be available on our website.
And finally this call will discuss certain non-GAAP measures for a reconciliation of these non-GAAP measures to the nearest GAAP measure see our press release issued yesterday and posted on our website with that I will turn the call over to Darcy.
Thanks, Jennifer and thank you all for joining US last evening, we reported our second quarter results and posted a supplemental presentation to our website.
I'm pleased to report that our results were strong with net sales of 282 million and adjusted EBITDA of $42 million.
Net sales were up 10%, despite lapping of difficult comparable and the prior year driven by COVID-19 pantry loading on the Premier protein brand.
Diamond ties of which grew an impressive 29% this quarter with strong results across channels and further benefiting from and easier international comparable.
Our first half results combined with continued topline momentum give us confidence to raise our outlook for the year. We now expect net sales to be between 1.17, and $1 2 billion equal and growth of 18% to 21% and exceeding our long term algorithm of 10 to 12 per cent.
We are also raising our adjusted EBITDA guidance range to between 214 and $220 million.
We are excited about our sales momentum. However, we continue to experience cost pressure as inflation ramps up ahead of our expectations are.
And our price increase on shakes, which goes into effect and the third quarter combined with our cost out programs are largely offsetting the anticipated commodity and freight headwinds.
On our powder business, we are expecting we are expecting significant increases on whey protein and are pursuing opportunities to mitigate that additional margin pressure later this year and into next.
Now turning to our category brand highlights and growth strategies.
The overall convenient nutrition category remains stable and healthy we continue to see macro trends, such as health and wellness snacking and mainstreaming of protein driving category growth.
Liquid and powder momentum remains strong with growth outpacing historic rate driven.
Driven by shelf space gains and strong velocities.
As mobility increases, we expect category of growth to accelerate providing additional tailwind to the overall convenient nutrition category.
Premier protein shake consumption grew a healthy 20% this quarter across the tracked and untracked channel.
This was on top of and elevated consumption quarter last year are the result of the COVID-19 stock up.
Distribution, great gains interim incremental promotional activity and strong velocities drove this growth.
All of our channels Grill with e-commerce, food and mass leading the way each growing nearly 60 per cent compared to year ago.
As we lap the prior year of pantry Deload and Q3 overall consumption has significantly accelerated in April up 61%. However, even more encouraging we are seeing strong sequential growth with consumption up 13% versus March.
We continue to make great progress against our growth strategies Premier Protein's household penetration reached an all time high of seven 4% and increase of 12% over prior year.
Our repeat rate on 30 Gram Shake line remains at the category leading 51%.
Which highlights the strength of the brands and why we continue to believe and our long term and the long term potential of this business.
We had a great distribution build in Q2 with brand P D piece of 14% sequentially and 55% versus year ago.
Our our T D market share and tracked channels gained two percentage points, reaching 22%.
Our national marketing campaign, which kicked off in January of performed well and with a clear contributor to our strong quarterly performance.
Our new flavors and pack sizes continue to drive significant growth and distribution cafe latte and set of mineral remained and the top 15 per cent of the category were sold.
Our newest flavor of chocolate peanut butter was launched and ecommerce during Q2 is off to a great start quickly, becoming our third strongest flavor and that channel.
Premier Powders also had a fantastic quarter with track consumption at the 144% driven by both distribution and velocity.
Now to diamond types.
Our strategy of expanding distribution to more mainstream channel. If it's working the business was up 24% domestically driven by club mass and E Commerce channel.
We identify the right products and pack sizes for these channels and the brand is responding well to dedicated media.
And so 100, fruity and cocoa pebbles are also bringing flavor excitement to the brands and driving velocities across all channels.
Our international sales grew 32% with both premier protein and diamond ties contributing Premier shakes and Canada saw meaningful growth supported by success of a successful club promotion and our first national digital media campaigns.
Diamond types of international sales rebounded as we began to lap the COVID-19 impacts of the prior year.
To close I remain confident and our plans for 2020 one of our category is healthy and providing a significant tailwind we have a portfolio of strong brands that target complementary consumers.
Our advertising and promotions are working and driving growth and household penetration.
Our distribution continues to meaningfully belt.
Our new products are generating consumer excitement and are thriving and market.
And our innovation pipeline is the strongest it has ever been.
We know what drives our business and our recent performance allows us to reinvest in those proven tactics and continue the growth cycle.
I continue to be optimistic about our future and and thankful for all of the hard work of our employees, who have made who make it happen every day.
I will now turn the call over to Paul.
Thanks, Darcy and good morning, everyone.
Net sales for the quarter were $282 1 million of nine 6%.
Just the EBITDA was $42 2 million down two 8% and EBITDA margin was 15.0%.
North of the indicated our strong second quarter results were against the tough prior year comparable as we lap COVID-19 related pantry loading.
Amir of protein net sales increased eight 2%, primarily driven by RTD shakes second quarter results benefited from distribution gains for both existing and new products and incremental promotional activity.
For your protein net sales also benefited from strong growth and powder products and a favorable customer mix driven by increased <unk> sales.
<unk> net sales grew 28, 8% this quarter driven by distribution gains and club and mass and continued strong e-commerce growth.
Favorable product and customer mix were also benefit to net sales growth.
Sometimes of international sales showed year over year growth as we begin to lap the COVID-19 related declines in the prior year.
Turning back to consolidated results gross profit of 87.0 million decreased one 4% this quarter with an expected decrease in gross profit margin to 38 per cent.
As we have previously discussed this decline results from higher input cost free and planned incremental promotional activity.
SG&A expenses were $48 2 million and as a percentage of net sales declined 130 basis points to 17, 1%.
SG&A expenses and the current year included <unk> 7 million of restructuring of facility closure costs related to our business realignment.
These expenses were partially offset by <unk> 3 million of lower separation costs, both of which were treated as adjustments for non-GAAP measures.
Excluding these items SG&A was flat compared to prior year, despite $2 2 million of higher marketing spend reflecting expected leverage of our SG&A base.
Operating profit of $15 6 million decreased $19 5 million compared to prior year and was negatively impacted by $17 7 million of accelerated the amortization.
This was a non cash expense recorded in connection with our decision to discontinue our Supreme protein brands.
And was treated as an adjustment for non-GAAP measures.
We expect the remaining $12 million of noncash accelerated amortization to be recorded and the third quarter.
Before reviewing our outlook I would like to make a few comments on cash flow.
The strong second quarter free cash flow generating 50 million from operations as.
As of March 31, net debt was $594 million and net leverage was three times and <unk>.
February we completed and opportunistic repricing of our term loan.
This reduced our annual cash interest by approximately $8 million.
Now expect cash interest expense for the year to be approximately $37 million with 8 million and both Q3 and Q4.
Turning to our outlook as North sea of previewed we are raising our fiscal 2021 net sales guidance range of 1.17 to $1 2 billion with adjusted EBITDA expected to range between 214 and to our $20 million.
Compared to prior year, our updated guidance implies topline growth and the second half of 24% to 30% and EBITDA growth of 17% to 23%.
Sales are expected to grow sequentially.
The EBITDA roughly split across Q3, and Q4 as a result of higher planned promotional and marketing spend in Q4.
Our revised guidance for EBITDA contemplates higher than anticipated inflationary pressures, notably way and bulk proteins, which is expected to impact our second half gross margin.
We are pleased with our performance through the first half of our confidence and the Bell range story remains unchanged with that I would like to turn the call back over to the operator for questions.
Yes.
At this time, if you'd like to ask and audio question you may do so by pressing star and the number one on your telephone keypad again that Starwood one will all for just the moment.
The first question will come from the line of Ken Goldman with J P. Morgan.
Okay.
Oh, hi, Thank you I just wanted to understand a little bit of the guidance I thought you had been saying earlier.
On the.
And the pricing was largely offsetting the commodities and the freight inflation and then.
And I thought I heard at the very and you're saying that the inflation was higher than you thought and it will hurt you.
Gross margin. So it was the pricing higher as well I just wanted to think about the balance of that as we model of the gross margin out here.
Yes, sure I'll take that.
Since the fits our February call inflation has increased more than we expected.
And the second half of the second quarter was right on track from a margin perspective of what we expected, but the second half has increased and it's a place of really across several fronts.
One thing Thats in the.
The visually significant but they add up we've seen some increase on them on the whey proteins and our milk proteins as well to a lesser degree.
Right, so our price increases offsetting the.
The inflation and the second half of the inflation is a bit more than we anticipated last quarter. So that is weighing on our margins and that's kind of a second half.
Okay.
And then I know there had been some concerns were just question is really about weight loss season, potentially coming and a bit lighter than in prior years.
I understand it's not always easy to tell why of consumers purchasing of products, but is it your understanding that weight loss went well or did that kind of did that season gets shifted a little bit into your third quarter I just wanted to get a little bit of a sense for how you're seeing that.
Our Q on Q2, what we.
We kind of term as new year on new U, which I think is what you are saying kind of weight loss season, and we didn't really well so and the category and you know it just.
And it really.
It dependent on what form and I think it was depressed by the on the go. So for instance, the liquids and powder did very well, while borrowers did not do very well and that was really because borrowers are more heavily weighted on the on the go occasion. So overall I think when you look at the category.
And this last quarter and.
And the liquids and powders every kind of needs the increased with the exception of of weight and so adult was that sports nutrition was that every day and nutrition with that which is really the area that the premier plays and Diamond type of in force.
The way it was down and then when you look on across the overall convenient nutrition category at both liquids and patterns wrap and bars was down and so.
I do think that the people who are there's no doubt that the pandemic has added weight to people and I do think that it will come back, but I think what the what drives the.
The convenient nutrition category is much bigger than just weight management.
No understood very much thank you.
Thanks, Ken.
Yeah.
The next question will come from the line of and <unk> with Barclays.
Good morning, everybody.
Good morning.
Darcy with I think it's about 15 flavors now available.
The penetration, reaching seven four and and obviously the significant distribution gains you mentioned and some of the previously less developed channels I guess.
The question starts to shift a little bit towards how much run how much run rate is sort of left and these things and is there one of those particular drivers of that is most important among the those that I listed going forward. How do you think about that the.
The room, that's left to go I think on and your answer but I wanted to get a sense of how youre thinking about it.
I think you probably know my answer and.
On the upside and still in mens and just let the AD. We always look at household penetration being the biggest driver and household penetration, yes is that seven four at the.
<unk> category is at 24% the overall convenient nutrition category is around 50%. So yeah. There is so much upside just and household penetration and what's nice is the tactics that we are.
Our of driving so our advertising the promotional.
On activity as well as just the distribution and new channel the highest what's really you know it is driving household penetration and as we've seen by by the rises.
Debt from a distribution standpoint, you're right. We have launched a lot of new flavors, our flavor strategy and our upsizing initiative is absolutely working but just to give you a sense of of our space and the upside. So we have an average in track channels of.
About seven and a half items on shelf.
Net.
One of our competitors, which has about an equal market share as as they of 13 items on the shelf. So that just gives you you know we are incredibly productive skus and so even though our distribution is up 55% versus a year ago you know the.
Upside potential is still very large.
Thank you for that and then Paul just a quick follow up.
In terms of visibility for the rest of this year in terms of your costs interest and what can be sort of locked in and what you have a sense of do you have a pretty good handle on what youre, maybe forward coverage might be for those things that you can cover I'm trying to get a sense of how much movement can now change or not with respect to your costs down and look at least for this fiscal year.
Yes at this point of the in the year, we have a pretty good handle on on the protein side free doesn't quite as long, but again on the most part at this point of time, we feel pretty comfortable with our coverage and understanding of <unk> of.
The margin structure and second half thank.
Thank you.
The next question will come from the line of Chris Growe with Stifel.
Hi, good morning.
Good morning, Good morning, I just had.
The question for you on the the revenue growth guidance.
The little beat of expectations on the second quarter, but obviously your second half is going up pretty significantly.
Youre seeing a nice significant increase it seems like in April and I, just want to get a sense of as you think about the guidance and you did talk about on the sequential improvements through the <unk> through the remainder of the year, but how much of that incremental revenue growth expectation. You have is that the <unk> or is it really kind of split across <unk> <unk> and <unk>.
And I'm, just trying to get a sense of that.
Yeah, it's split across three two and four two so remember.
Q3 of 2020 had the pretty big trough.
And following COVID-19, so and Jack if just to give U S and if we did exactly if we if our results were exactly the same sales of H, one and that would already be at 16% increase and what we have on top of that is organic growth more distribution we have.
The mental promotion and the second half and some incremental advertising. So that gives you a start hopefully it gets us comfortable with our build of why we're seeing of 24% to 30% growth and the back half.
That's helpful. Thank you guys and I just one other question I think for Paul, but just a bit of a follow on to the inflation question. So.
Could you characterize the rate of inflation and the second half of the year versus the first half of the year out of the first half had quite a bit of inflation is.
The second of kind of caught up to where the first half as I really sort of pricing coming through I'm, just trying to get a sense of how that shifts from first half the second half.
Yes on the second half based on our revised guidance.
We definitely have.
Expecting higher.
Both milk and whey protein cost and the second half versus the first half and so it is it is up year over year more than we had anticipated previously.
On the milk side of it.
Its relatively small on the percentage basis of <unk>.
Low single digit.
<unk>. So it's on a major change where on the on whey proteins, which is the primary ingredient and our powders.
Much more significant increases on those that arent really is impactful for us. This year, we do expect some impact on our fourth quarter, but it's more for as we get into fiscal 'twenty two of the inflation on our whey powder business.
I'm sorry.
Okay. So you would call it seems like the second half rate of inflation below that of the first half of that would be a fair characterization and again realizing of some pricing coming through.
The rate of inflation and Youre correct is low.
But it is still a headwind yes sure. Okay. Thanks, so much for that.
Thank you.
The next question comes from the line of David Palmer with Evercore ISI.
Okay.
Thanks. Good morning, just wanted to get a sense of the level of and perhaps of the year over year increase in marketing and promotion spending the quarter and sort of how you see that playing out through the year. What I'm thinking about is you had big plans in 2020 and COVID-19 happened. So I'm wondering.
And if there is some leftover business and and.
And perhaps even some pivoting that youre, making about how you think the consumer will be behaving coming out of COVID-19. So.
Any color there would be helpful.
Yes sure.
Yeah go ahead.
I can take the numbers and then if you want to give me the.
The qualitative so you'd asked about the second quarter marketing was up about $2 million versus last year. Our first half of marketing spend was around 4% of net sales.
As we look at the the second half we expect to continue to invest.
As a percentage of net sales and a similar high threes to 4% range as we're really seeing the marketing.
The effective and then I'll turn it over the RC for additional color.
And just sort of from a strategy and of pivoting standpoint.
On the advertising is working I think the change slight change of strategy that we made this year versus last year.
And as I.
I think I've talked to you guys about our taste of ammonia testimonials, which we've long used are devoted fans to tell other consumers why they love the product. We will continue to use that what we have augmented it with is what we called taste of testimonials, which is really focusing on one of the things.
That really differentiate the premier protein brand, which is amazing taste and we have added commercial of both digital and analog.
On.
The flavors. So we have one on cafe La I tell you we of went on caramel and they are really performing.
We actually are seeing the velocities on both of those flavors.
Yeah far exceed the rest of the line. So that has been a very positive move it really has nothing to do with COVID-19. It has more to do with just what we are getting better and better and knowing what drives our business.
And just to comment and maybe you can comment on the comment it seems like you're you almost let the functionality of your product and how consumers use your product whether it's about immunity.
And we're meal replacement protein seeking or the weight and weight management aspects of that youll, let that not be part of your message almost on purpose is that how youre playing it and do you think.
To your point do you think the net effect of those need states will be positive going forward I E. The immunity dropping off will be more than outweighed by people looking for weight management and the future. How are you thinking about that.
Youre absolutely right what is unique about premier is that it and appeals to so many different occasions. So many different need states. So we allow consumers to fit it into their life. I mean, if you look at our campaign too good to be good and there is no prescription.
And as to how they should use it and so absolutely.
And you know that on.
On the the second question, we still think immunity. So we are having and we're putting on immunity claim.
<unk> changed our product and that comes out later this summer, we still think health and wellness and immunity and this is Oh. This is going to be a trend and we don't think it's actually even after people are completely vaccinated. We still think it is top of mind and.
And it will continue to drive this category. So we don't think that's going away.
And what I think will happen is that it's going to be the people leaning into weight.
It's just going to be additive.
Thank you.
Yeah.
The next question will come from the line of Pamela Kaufman with Morgan Stanley.
Hi, Good morning, good morning, Gary.
Can you comment on the split the.
Between the change and outlook for gross margin versus your.
Operating expenses and driving the change in your EBITDA and margin outlook for the year, obviously, it seems like you're facing more inflation than originally expected, but you also mentioned the incremental marketing spend so how should we think about the the mix of the two driving your lower margin outlook.
Our lower margin outlook is primarily being driven by lower expectations on our gross margins because of the inflationary pressures on on R. R.
And our key proteins and freight we are spending a bit more on brand investments, but it's not as much of an impact of our overall margins were largely spending in line with our sales growth.
Okay. Thanks, and then.
Can you talk about how you expect to see your customer mix evolve over the coming quarters, as you expand distribution and SDN and <unk>.
This have any implications on your margin profile as well and.
And what impact are you seeing in the club channel as you expand and to SDN.
I'll hit the I mean overall and Paul you can add to this overall our margins are pretty similar across our different businesses. So that really isn't it isn't a factor at the Enzo a little higher but nothing dramatic from a customer and mix.
And <unk> are clearly we have of large club business I think that what as we expand into SDN and our growth and ecommerce food and drug and mass is higher and so that split will change.
Change however, what's interesting and I think I've talked to you guys before about this.
Is all of this.
Net.
Works together, so as we these other new channels and a different product.
And so theyre smaller pack sizes that are that are launched and these other and these channels and so people are trying the product and being introduced to the product and food drug mass and E. Commerce, and then asked and they are then repeating in club. So really the you know kind of virtuous cycle work.
One being more trial and then and then it feeds into the club channel. So overall of the pie gets bigger.
Yes.
Thank you that's helpful.
Yes.
Yeah.
The next question will come from the line of Bill Chapell with true Securities.
Thanks.
<unk>.
Just to kind of more follow up questions one.
And I'm right, saying that most of the price and you are taking is list pricing. There is no real change your promotional calendar for the back half is the correct.
Correct, Yeah and then.
And of the year, our promotional calendar will skew towards the towards the second half and specifically in the fourth quarter and that's that's unchanged.
And so so covering the incremental costs or just through the list price increase does not not any any alterations there correct and thats on the on our shake business correct.
Got you and the second just maybe on a follow up on the on the channels.
Now the I think most of the plan and grants and reset.
What kind of year was this in terms of shelf space gains.
Especially the FTE and but but in general how does that compare versus last year and how does that set you up kind of going forward.
And we gained more shelf space this year than last year, So we're up 55%.
And shelf space and track channel so.
Net they can't change I think what's exciting is.
We are seeing.
Some customers, we're pushing on poor foot debt, which and and where we have that four foot sat within SDN and <unk>.
And we're seeing tremendous market share gains and which is a little bit of ibs, but and what's also happening and it's great for the category. So we're able to sell that to across F. D M and to our customers to really encourage them to expand the space because it will grow the category.
Yeah.
Great well that's fantastic. Thanks, so much thank you.
Yeah.
Yeah.
The next question will come from the line of Kumar Grovel with the credit Suisse.
Hey, everybody good morning.
The first question Darcy you opened with category growth is accelerating and you expect it to continue to accelerate is there is this.
And of the acceleration or growth kind of according to plan or are you seeing something perhaps different from what your view might have been about the category of few years ago, and we are hearing from a few other companies kind of.
The demand rebounding a bit more quickly than anticipated. So this is kind of the year over year comp thing or is there something structurally seem to have shifted.
Helpful.
The cat of it where we are seeing and category growth above slightly above historic rates.
And we you know, we've historically seen and.
And the liquids categories, specifically about five growth of about 5%, Yeah, we are seeing it and.
And between you know fixed.
Six and 7%, so definitely higher than the past and and slightly higher than our expectations too.
Okay, Great and then on.
Any color and commentary on price elasticity, obviously of.
Given input cost you need to take pricing once again.
And just talk about what you've seen in the past what Youre planning for this go around give us a sense.
Yes, the way that.
And we've talked about this debt, we took price and 19 and we and the in market Elasticities were very similar to what we project debt.
So those are in our pricing increase this time is pretty similar to what we experienced or what we took and 19. So we're expecting the same I think that the upside here is that it assumes no other competitors take price.
And given the far reaching inflation affecting everyone, especially in proteins and freight and.
We do expect.
We do expect competitors to follow and if that's the case then obviously our.
Our outlook will be conservative.
Okay, great. Thank you.
Thanks.
The next question will come from the line of Rob Dickerson with Jefferies.
Great. Thanks, so much.
Darcy.
And I heard you earlier comment.
The innovation pipeline remains robust so I.
I just wanted to dig into that a little bit.
Obviously, the mix of the business increasingly.
Going to shakes shakes are doing well you, obviously, highlighting shakes right. It seems as if kind of of the bar business.
And you're gradually not as much of a focus let's say so what.
And I don't know if that's correct and then two it's just when you think about innovation and are you speaking kind of more to other variations of the Shakespeare flavor of what have you or bill.
A picture of the distribution works well on velocities worked well and certain products and categories that the brands that you might extend.
Could extend into other areas.
Yeah, our focus is definitely on beverages, so both the ready to drink and powders and we.
We have pulled away from bars at least domestically. We are still we still have a pretty strong bar business and the EU and so we'll continue that but on the bulk of our business and Zac and you're exactly right with the on beverages.
Yeah, our innovation pipeline I am incredibly excited about.
Have really leaned into this area organizationally and and I think it's really paying off so we.
Our new leader and what.
We call VP of growth, we've added to our insights team, we've expanded our R&D team and we.
Really the focus on.
The ready to drink.
And powder, but really focusing on ready to drink beverages, because they're very complicated to develop.
And when you look at the pipeline I would we still have a few new products that are coming out later this year I've talked about the immunity claim but also this idea of expanding flavor and.
And we it is working it's working from our household penetration and of buy rates don't standpoint. So we're going to continue that I kind of put the pipeline into it's about flavor and function and.
And we'll continue to bring news and excitement around flavor on both of our brands, but then we will also.
Really elevate the force Shannon and I think that's I think what I'm excited about is we're exploring new benefit areas.
And we're really encouraged by the results of Cafe Latte, where we added the benefit of caffeine it opened up new occasions.
And to what has predominantly been a breakfast occasion and now we're seeing people drinking shakes and kind of that late afternoon, and so leveraging that success and where.
We're already.
Thinking about other benefit areas that are potentially new to the category.
But it will be likely in the beverage and.
Category, so it'll be either ready to drink or pattern.
Okay Super and then.
The question is just you know.
On the.
And the distribution game plan.
You have the example earlier.
Comparator in the space that is ex number of Skus and you have fewer skus right. So.
If you're let's say, bringing the new innovation.
Market and you look at the current retailers Youre in now would.
Would you say that kind of the closer in push on potential distribution gain.
Yeah, as we think forward call. It the next day to work through 'twenty one.
It's more about getting.
Incremental shelf space the preexisting customers.
A bit more so than pushing into new customers.
And getting new distribution from there. So it really just the new customer versus tdp's within pre existing customers and that's it. Thanks so much.
Yes, correct.
We see the bigger opportunity the bigger immediate opportunity is just more space and our existing customers. However, new channels is definitely a growth area, we've talked about and recently and the last year, we entered into the dollar channel well, that's really it's doing very well and.
Against the Great trial channel, we've talked about out of home and and kind of like the.
The convenience and and.
And.
Foodservice channels, which we really haven't gone there yet and that's the big opportunity. So I would say short the biggest immediate opportunity of definitely more space, where we already are but then we're already laying the groundwork for the new channels as well.
Alright, great. Thanks, Darcy and thank.
Thank you.
The next question comes from the line of Ken Zaslow.
Bank of Montreal.
Hey, good morning, everyone.
Good morning, Mark.
Can you talk about how your business case with diamond prices and changed it seems like there is seemingly more opportunity there than maybe you initially thought yours back just kind of parallel and back to your initial comments back and the separation.
And our strategy on diamond prices and around expanding the brand to mass channels.
Definitely working and are focused around ISO 100 is the flagship product line and really rallying all of the dedicated media around that line is also working and I think flavor excite.
Meant around these licenses and.
And again is bringing kind of new life and <unk>.
But I think again and we figured out the recipe that work and the I think the the old diamond ties of only being sold and the specialty channel.
And with just two limited the the consumer is everywhere and they shop across channels, so and expanding it.
The specialty channel is still very important to us and we will continue to be.
But we think there's a ton of opportunities the ecommerce is doing incredibly well and and then theres a lot of growth within there.
With that as well as the performance and Premier.
And you think that your 10% to 12% long term growth algorithm is more of the <unk>.
The floor, then a actual algorithm going forward. It just seems like that 10 to 12 and seemingly more of a floor than anything else given the change between the diamond does business and the shelf space and the momentum there and I'll leave it there. Thank you.
I don't think it's a floor.
Still think its a good long term algorithm and we will you know we're still of a new public company and so we will continue to evaluate if that is the the right algorithm theres been a lot of noise. Since we went public as you guys know, so just and but it has held up.
And this year, obviously, where we're exceeding it we will we will continue to look.
And that given our brand portfolio of adult adult Ms Barr and and if we see that Theres upside we'll update it.
Alright, Thank you would be well.
Thanks, you too.
Yeah.
The next question will come from the line of Jason English with Goldman Sachs.
Hey, good morning folks. Thanks for the question first of all to me and I appreciate it and.
And congrats congrats on another good quarter.
And I guess of bit of play the other side of the question of whether or not what the right durable grocery is for the business.
It sounds like a lot of your growth right now is coming from distribution expansion and if we look at one channel where you have been present for a long time the club channel.
Your business has slowed a lot and we're down into the low single digit type growth.
So can you can you give us first.
The sense of what's happening on the club channel and then to play Devil's Advocate should we look at that sort of the reference point of what sustainable growth is on the distribution tailwind and society.
Yeah. It's a great question. So this quarter and you're absolutely right club channel was a low single digit but it really is more of a factor.
And what it's lapping so last year the.
The COVID-19 stock at really affected club it affected it early and and more and then.
And the other channel so we're lapping it if you actually look at April the.
Our business is.
50% and very much in line with.
And the rest of and the.
The business I mean, obviously lap it's the law of big numbers, so, but we're still it's still driving growth and we still see upside there are because of our long standing partnership with club and because and we.
And we go to them with new innovation, just like the the rest of our customers, but they are great partners and we've really built the business there and we still see and I talked about earlier that cycle, where we and we.
Get trial through these other channels and many move and repeat in the clubs, we see that as the long term.
Driver and model for the business.
Okay. That's helpful. Thank you.
And then on on competitive dynamics in the liquid space.
And we wanted the clock to the time you were coming public and was there was obviously a lot of the brands coming in and retailers, who are pushing with private label the growth the trucks competition always and forever and.
And youre highlighting the sustained very stellar growth there.
Are we still in sort of proliferation mode in terms of competitors trying to come in and get a piece of this on.
We'd be guidance of sort of shake out some of that and re concentrate the category.
It's I mean, you described it well this is the high growth category every year. So we're always going to be there is always going to be a lot of competition and there has been and we have seen a little bit of shakeout on the specific 30 gram competitors, which seem to.
The hit I hate when we went public and some of them have disk and been discontinued but there are some that will stay.
Thank you know the way we look at it is even through all of the.
Kind of headed and trees throughout the same you know the law.
Last couple of years, we still have been able to grow double digits. So I'm you know.
The comment you know competition is good but you know.
Competition is not bad, especially when youre talking about of category that has such low household penetration.
It means that people are driving new household they're spending they're bringing new people to the category and we think that we bring something different to the category and so I.
I think that and then just on the private label comment interesting enough.
And private label this quarter has seen some softness within liquids are actually down and some of the private label and.
Retailers have seen some issues around quality and supply and so I think they're understanding that this the.
The product form is complicated and I and it's kind of what we've been touting for for a long time.
Makes sense, thanks, Bob and I'll pass it on thanks.
And with that we have reached our allotted time for questions.
This does conclude today's conference call. We thank you for your participation and ask that you. Please disconnect your line.
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