Q4 2021 Whole Earth Brands Inc Earnings Call
[music].
Good morning, and welcome to the whole Earth brands fourth quarter and full year 2021 results conference call. All participants will be in a listen only mode. After today's presentation. There will be an opportunity to ask questions. Please also note that todays event is being recorded.
At this time I'd like to turn the conference over to Jeff Sonic Investor Relations at ICR. Please go ahead Sir.
Thank you and good morning, today's presentation will be hosted by Albert Men's only chief Executive Officer, and Duane Portwood, Chief Financial Officer.
Decorative chairman Irwin Simon is also participating on the call and will be available for Q&A.
Comments during today's call and the accompanying presentation contain forward looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
All statements other than statements of historical facts are considered forward looking statements. These statements are based on management's current expectations and beliefs as well as a number of assumptions concerning future events.
Such forward looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward looking statements some.
Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC. We'll also refer to certain non-GAAP financial measures today. Please refer to the tables included in the earnings release, which can be found on our Investor Relations website Investor got whole Earth brands Dot com for reconciliations of non-GAAP financial measure.
Yours to their most directly comparable GAAP measures. Additionally, we have provided a supplemental earnings presentation on the Investor Relations website that may be useful in your analysis of the company's performance with that I'd now like to turn the call over to Albert men's only CEO .
Thank you, Jeff and thanks to everyone for joining the call today.
Like to begin by welcoming Duane Portwood to his first earnings call holders.
As you know Dwayne joined the whole Earth as CFO in January bringing with him a wealth of experience and wisdom and has hit the ground running I'm excited us partner of the Waldorf theme.
2021 was a transformational year for older.
And I am pleased to deliver on our financial commitments I need a complex and challenging operational environment.
In response to supply chain disruption and labor shortages, we took actions to position the company for success and I am proud of our achievements in parts you could really grateful for the efforts of our team, including those in our frontlines towards their resiliency and persistence, which is critical in men.
Turning to our operations and service levels with customers.
Or 40 year 2021 which is our first full year as a public company, we drove 2% consolidated organic constant currency revenue growth, which included acquisitions in both periods Brendan.
Branded CPG segment pro forma organic constant currency revenue growth grew 0.7% versus 2020, and 11, 9% on a two year stack basis versus 2019, due mostly to growth in.
In flavors and ingredients segment product revenues grew seven 1% versus 2020.
We generated over 82 million in adjusted EBITDA.
As you know our guidance range through the power of our portfolio and strong cost discipline.
It has been an exciting journey seen sort of a business combination in June 2020, and I would like to take a moment to reflect on the older friends accomplishments in this short time and the opportunities that lie ahead.
At the time, we went public we saw an immense opportunity to bring global leadership to an unorganized yet extremely attractive category that not only had a large total addressable market, but was also supported by powerful secular tailwind geared towards better for you alternatives to.
Accomplish this goal we needed capital to unlock this opportunity to compound value for shareholders overtime.
This capital provided us the ability to significantly improve our capital structure and reduce leverage.
We also needed to generate scale, particularly in North America.
We successfully acquired two amazing businesses and hold some of this work, which nearly doubled our revenue base and provided the foundation, which has become our power of one strategy to drive growth across our diverse portfolio of brands.
And finally, we weren't able to invest in our team and strengthen our bench, which is a critical point for a growing business with great aspirations.
We have assembled the talent capabilities and leadership to deliver on the potential of our global business for brand expansions, new product innovations distribution increases and supply chain optimization.
We have a fund them into these strengths and entrance formed our business.
To that end I'd like to recognize our team once again for all of our accomplishments to date.
Our power of one strategy to enhance our shelf presence and drive greater DGB tier with retail customers across our portfolio of natural and traditional sweeteners is working.
We're seeing the retail distribution gains that we have been building towards with momentum in ecommerce and foodservice is recovering nicely.
This is a wonderful combination of forces that puts us in a formidable position as.
Look ahead to 'twenty to 'twenty, two and beyond.
I view 2022 is a Europe building upon the foundation, we put in place in 'twenty one.
Fundamentally we are an organization focused on profitability and cash flow generation.
And we believe we have a durable foundation to build from that would provide us the flexibility to advance our growth initiatives.
Our opportunity to create value lies with a healthy global category, our world class brands and our ability to leverage our commercial teams in key global regions to drive penetration.
In North America.
Our power of one strategy continues to provide us with a framework to drive long term growth.
We felt a holder sweeteners brands, we continue to execute on opportunities to expand distribution and build out adjacencies.
Poor swerve.
And the whole Earth innovation and expansions in the baking portfolio are critical factors that will support growth and distribution gains in wholesale we have an amazing brand that has defined the word organic in the sweetener category for many years.
We see an opportunity to build upon our hold some brand equity and expanding its portfolio into over areas such as baking mixes.
And finally beyond the retail shelves, we continue to pursue opportunities we see north over sales channels, such as E Commerce and foodservice, we felt thoughtful approach to meet the shifting consumer needs and appetites or better for you products.
Within our international markets, we are in an advantaged position with very recognizable brands that are number one or number two share in most key markets.
Our aim is to continue to drive greater penetration with brands, such as Kinder rail equal and pure via through portfolio expansion to baking and over Adjacencies.
At the same time, we're excited by our expansion momentum into new geographies, such as India and China.
From an operational standpoint inflation and supply chain management continues to be top of mind for the entire CPG industry and it is a focus of ours as well.
In fact, our North America supply chain reinvention project is focused on identifying opportunities to derisk, our supply chain wide enhancing service and ultimately creating efficiency.
We're fortunate 18. Many regards that are focused began prior to the extreme disruption to global supply chains.
Project is all the more important today as we work to mitigate incremental costs and disruptions.
The key for US stuff. This project was to bring select production activities in house to improve our cost structure, while improving service levels.
In fact in response to the rapid shifting environment, we made the strategic decision to accelerate the project timeline to minimize the impact on customers.
While these efforts are ongoing I am confident that our exposure would be significantly greater had we not invested the time and resources to optimize our network.
Yeah.
Why do we weren't immune to the supply chain disruptions. We continue to believe we are in advantage position relative to others in this space.
Nonetheless, we are actively working to accept inflationary pressures with price SKU rationalization and aten attention on maintaining profitable relationships with our customers.
We're also making every attempt to mitigate the timing mismatch that erodes margins.
With respect to our recent results our fourth quarter was negatively impacted and we expect this to continue through first quarter of 'twenty, two as well until our pricing actions are implemented.
We believe the effects are temporary and we anticipate returning to more normalize the margin rates beginning in second quarter with a pricing structure that would offset forecasted cost pressure for the balance of 'twenty two.
Yeah.
We will continue our initiatives to mitigate volatility protect margins increased opportunities to drive greater efficiencies over the long term.
These include trade spend optimization and ongoing focus on sourcing manufacturing operations logistics and distributions and synergy extractions from our integration of swerved and hold some to help protect our business against macroeconomic forces.
With respect to our flavors and ingredient segment.
We're very pleased with our performance we added some new leadership in critical investments in R&D and sales.
<unk> been instrumental in shifting our commercial approach to the diverse end markets that we serve.
This is visa boarding our innovation and product development strategy, which now clearly maps to the body has application across our suite of Magnum branded products to drive us and sales growth.
We continue to view this business as a strong free cash flow generator, we said defensible moat and global leadership position that will support our broader growth initiatives as we further diversify and grow our business.
Older rents.
He is the global leader in the bet, there 40 years sweetener and reduced sugar categories.
Our team continues to pursue three priorities first.
Disrupted the massive 100 billion total addressable refined sugar markets, which is being displaced by fast growing sweeteners.
Second.
Drive category leadership for best in class innovation and brand building expand our global distribution and leverage our strong supply chain capabilities and continue to further accelerate our growth through strategic M&A.
<unk> continued to evolve our brands and product portfolio towards becoming a large organic natural plant based food company.
Yeah.
We remained focus on both organic and inorganic opportunities for growth. We have demonstrated that we can be simultaneous new strategic and opportunistic in our transaction and would continue to do so.
We believe 2022 will be another productive and profitable year for older and our portfolio of products.
We have competitive advantages that include market positions global scale industry, leading R&D and best in class supply chain, we're well position to execute our growth strategy and achieve our goals.
Fine.
Before turning the call over to Dwayne I want to mention our progress in ESG initiatives. We were excited to recently announce the launch of our ESG framework and strategic board areas.
Strong ESG performance is fundamental to our business strategy. It is reflected in everything we do from product development to ingredient sourcing and manufacturing and beyond.
Our commitment to enabling wellness by offering natural tendencies and clean label products supports our ability to deliver on our ESG vision over the next decade and beyond.
We're excited to launch this framework after our first full year of operating as a public company and shared history with customers consumers and investors.
In the coming months older rents plan to further develop measurable targets.
The baseline to strategically address the key ESG issues.
We look forward to sharing our progress with you.
Duane.
Thank you Albert and good morning to everyone.
As a reminder, we acquired sort of on November 10th 2020, and wholesome on February 5th 2021 .
I will speak to reported results, which includes swerve in wholesome for the full fourth quarter of 2021.
Additionally, we will provide some select pro forma results as if we owned both swerving wholesome in 2020 , one 'twenty 2020 19 to assist in your analysis of the organic growth of the combined portfolio.
Also please refer to our non-GAAP reconciliations at the end of the press release for additional detail and I encourage you to view the supplemental earnings presentation in our Investor Relations website.
For the fourth quarter ended December 31, 2021 consolidated product revenues grew 75, 3% to $132 $7 million versus the prior year quarter.
On a pro forma basis, including swerve in wholesome for the full quarter in both the current and prior year periods organic constant currency product revenue was flat with the prior year fourth quarter.
Reported gross profit was $38 $7 million compared to $25 $2 million in the prior year fourth quarter.
Results were positively influenced by contributions from the swerve in wholesome acquisitions.
$5 $9 million favorable change in noncash purchase accounting adjustments related to inventory, partially offset by $6 $2 million of costs associated with our supply chain reinvention projects.
Reported gross profit margin was 29, 2% in the fourth quarter of 2021 compared to 33, 3% in the prior year period.
Adjusted gross profit margin was 34%.
From 42% in the prior year, driven primarily by the inclusion of wholesome in 2020 , one which has a lower profit margins.
The product mix.
Consolidated operating income was $6 $4 million compared to an operating loss of $6 $9 million in the prior year and consolidated net loss was zero point $4 million compared to a net loss of $5 1 million in the prior year period.
Consolidated adjusted EBITDA increased 47, 5% to $26 million driven by contributions from the swerve in wholesome acquisitions and revenue growth, partially offset by higher bonus expense compared to 2020.
Now shifting to the segment results for Q4.
Branded CPG segment product revenues increased $52.3 million or 98, 1% to $105 $6 million for the fourth quarter of 2021, driven primarily by the addition of swerve in wholesome.
On a pro forma basis, including the impact of both acquisitions in the current and prior year quarters organic constant currency product revenue decreased four 3% compared to the prior year fourth quarter, primarily due to temporary supply constraints that were partially offset by solid volume growth at wholesome.
On a two year stack basis, when comparing fourth quarter 2021 to fourth quarter 2019 branded CPG segment pro forma organic constant currency revenue increased nine 1%.
Operating income for the branded CPG segment was $4 $4 million in the fourth quarter of 2021 compared to operating income of $6 $2 million in the prior year period.
The decrease was driven by a decline in revenues from the legacy branded CPG business higher bonus expense and costs associated with our supply chain reinvention projects, partially offset by contributions from the acquired sewer and wholesale businesses and lower purchase accounting adjustments.
Flavors and ingredients segment product revenues increased 21, 2% to $27 $1 million for the fourth quarter of 2021.
The increase was driven by increases in all product categories, including liquorice extracts peer derivatives and the Magnum sweet product lines.
Operating income for the flavors ingredients segment was $7.6 million in the fourth quarter of 2021 compared to an operating loss of 2.0 a million dollars in the prior year period.
The increase was primarily due to a $5 $9 million favorable change in purchase accounting adjustments related to inventory revaluations.
Revenue growth and lower operating costs.
Operating expenses for corporate for the fourth quarter of 2021 were $5 7 million compared to $11 $1 million of operating expenses in the prior year period.
The decrease was primarily due to lower M&A transaction fees and nonrecurring public company readiness expenses.
Now I'll briefly cover our full year 2021 results.
As a reminder, our consolidated full year 2020 results reflect both predecessor and successor periods indicative of the June 25th 2020 business combination data.
The full year results I will discuss compare the results for the year ended December 31, 2021 to the combined year ended December 31, 2020, which includes the successor period from June 'twenty six 'twenty 'twenty through December 31, 2020, and the predecessor period from January one 'twenty 'twenty through June 2000.
Fifth 2020.
Additionally, our consolidated reported financial results reflect the completed acquisitions of sewer and holes.
Pro forma comparisons include the impact of both acquisitions in the periods of comparison.
Consolidated product revenues increased 79, 3% to $494 million as compared to the full year of 2020.
On a pro forma basis organic constant currency product revenues increased 2% compared to the prior year.
Branded CPG segment product revenues increased 119.1% to $389 $2 million, reflecting the acquisitions of wholesome it's worth.
On a pro forma basis organic constant currency product revenues increased <unk>, 7% compared to the prior year and grew 11, 9% on a two year stacked basis as compared to the full year 2019.
Flavors and ingredients segment product revenues were $104 $8 million, an increase of seven 1% as compared to the prior year.
Reported gross profit was $158 $8 million, an increase of $62 $5 million from $96 $3 million in the prior year.
Gross profit margin was 32, 1% for the full year ended December 31, 2021 as compared to 34, 9% in the prior year.
Adjusted gross profit margin was 34, 5% down from 42.0% in the prior year driven by the inclusion of wholesome.
Consolidated operating income was $22 $8 million compared to an operating loss of $44 $3 million in the prior year and consolidated net income was zero point $1 million for the full year ended December 31, 2021 compared to a net loss of $42 6 million.
In the prior year.
The improvement was largely due to a $46 million of noncash impairment charges recorded in 2020 and.
And the positive impacts of acquisitions on our 2021 results.
Consolidated adjusted EBITDA increased 57% to $82.2 million driven by contributions from the acquired swerve in wholesome businesses and revenue growth, partially offset by higher bonus expense.
Now moving to cash flow and the balance sheet.
Cash flow provided by operating activities for 2021 was $9 $5 million.
That is net of $26 9 million of nonrecurring or unusual items, such as M&A transaction related costs and restructuring costs.
Capital expenditures for the year ended December 31, 2021 were $12 $2 million and free cash flow, excluding the nonrecurring or unusual items was $24 $2 million.
As of December 31, 2021 we had cash and cash equivalents of $28 $3 million and $387 $2 million of debt net of unamortized debt issuance costs are.
Our net debt to adjusted EBITDA ratio at December 31, 2021 was 4.37 times.
<unk> balance sheet leverage continues to be a corporate priority.
Sure.
Now shifting to our initial full year 2022 outlook, which includes the full year impact of the wholesome acquisition.
As a reminder, our outlook represents our expectations for growth on a pro forma organic basis, we define pro forma organic growth to be as if the company owned wholesome for the full year 2021.
For 2022 we expect consolidated product revenues to be in the range of $530 million to $545 million, representing reported growth of 7% to 10% and pro forma organic growth of 3% to 6%.
We expect consolidated adjusted EBITDA to be in the range of $84 million to $87 million.
And we expect total capital expenditures will be approximately $10 million.
Finally, I want to take a moment and provide some context around the quarterly cadence for the year.
As you heard the ramp up of our supply chain reinvention projects is creating some headwinds for us in the first quarter. These relate to the inflation price mismatch that is putting some temporary pressure on margin through about mid quarter. When a significant number of our price increases take effect. Additionally.
Additionally, the supply constraints that impacted fourth quarter 2021 we will have a residual impact on the first quarter of 2022.
And lastly from a comparability perspective, we anniversaried the wholesome acquisition on February 5th which put some pressure on the reported year over year comparison.
As we look to the balance of the year, we see our sales and margin rates reverting to more normal levels and expect relative consistency and seasonality relative to the prior year.
Before we open the call for Q&A I want to thank Albert for his kind words to open his prepared remarks.
The two months since I joined whole Earth brands and the attributes that attracted me to the company have not only been validated they've been strengthened.
First we operate in a fantastic category and are well positioned to take advantage of organic topline growth opportunities, which will drive profitability and cash flow.
We have a platform to take advantage of acquisition opportunities and the discipline to do it right.
And finally, we have a team that has the experience the bandwidth and is all in to meet the challenges and take advantages of the opportunities I couldn't be more excited to be part of this team.
That concludes our prepared remarks, operator back to you. Please open the call for Q&A.
Thank you.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of Brian Holland with Cowen <unk> Company. Please proceed with your question.
Yeah. Thanks, Good morning, and forgive me I hopped on a little bit late were you able to.
So if I missed this forgive me, but were you able to quantify the impact of the supply constraints are either in for fewer the extent to which that impacts your fiscal 'twenty guidance.
Good morning, Brian Hope Youre well.
We didn't quantify the impact then I would pass it onto Duane to comment on that but what I would tell you is that.
We're very pleased to have been very proactive.
Head of essentially any supply chain disruption.
As you do know after the acquisition of <unk> and wholesome, we essentially sold the opportunity and you see the <unk>.
Number of dots on the supplemental deck of older locations, we were operating essentially synergize and bring those things together and we very decidedly to cover some of the production in house for especially in bags and you know looking back.
We're extremely happy that we did this because that position us very strongly for 2022, where we're able to mitigate essentially cost inflation.
Inflation with our productivity together, we felt pricing and so that had an impact.
Yeah.
In Q4, some lingering effects in Q1 and Thats behind US we also.
Took that opportunity importantly to do some SKU rationalization, which we had not done in quite some time, especially on the private label side and lower margin products.
Again that bodes well for 2020 to Duane.
Good morning, Brian by the way.
I think from a.
To your first question in terms of did we quantify the impact of the constraints. We did not that said I will say you know we ended up within our guidance range on the on the top line. We would have been certainly over the midpoint of our guidance range had that have that constraint not been present.
Okay fair enough I appreciate that.
Next question and maybe just again around the fiscal 'twenty to guide you know as a later reporter.
You, obviously have more information in a very dynamic and fluid environment I think you called out some of the Geo political factors.
You know within the card.
Got it.
Can you give us any color or just help us understand.
It's from a raw material sourcing perspective or on the revenue line what exposure you might have as a result of recent conflict in eastern Europe .
Sure Let me let me start to this by attending you. So let me break it down a little bit by telling you that we're very comfortable about.
Our guidance for 2022.
Hi, Andy is obviously, we've seen our long term guidance. The low end just takes into account some of what you say since I would say that as of today nobody knows how bad things could get but we're seeing what we see today first of all we have no exposure to eastern.
Europe , and Russia, either from a sourcing or really from a customer standpoint. So that's first and foremost second of all from a supply of ingredients et cetera, and you had talked about this previously we essentially.
Have amounts of inventories needed.
Located in North America, or in Europe , and close to our production sites and therefore are comfortable with this.
And then number three.
<unk> two.
The brands the innovation the power of one at the distribution where.
The ability to really compensate any inflationary pressures this year through our supply chain productivity and pricing.
And therefore feel very comfortable about our guidance.
I appreciate that color Albert.
Go ahead I'm sorry.
Sorry, Brian .
Echo everything that Albert has said I was in it.
And we're you know we're trying to take what we know right now into account in our guidance as things progress. However, they progressed during the year, obviously that that could change.
As I sit here now and with our with the conflict going on in eastern Europe in gas prices seem to be.
Pretty volatile.
To the extent that that's to the extent that continues then there could be other things and other pressures that go on.
Throughout the year.
And then if I could just sneak in one last one Albert you know I know we've talked about this a lot, but there's obviously challenging optics here with what we see in the scanner data on a you know a bi monthly basis.
With your portfolio down sharply I just wonder if you could just take a minute and just help us parse out you know.
You know kind of your exposure to those channels, how much that represents and maybe why you know that that these data points that we're getting are not.
Why do you think they wouldnt be instructive as to Directionally, where we're where this business is headed or more specifically the category.
Thank you Brian . This is an important question because obviously that's a that's what people see them and I would tell you first of all that to what you're seeing in Nielsen measured channel is really about 25%.
For North America of our total sales.
So first and foremost that's a that's a smaller piece number two.
We are essentially making our biggest gains as we speak outside of those measured channels and that would be specifically into club.
Into foodservice, which essentially grew 30% year on year into E Commerce, which grew 100% versus 2019. So you have significant distribution gains and progress outside of those channels now when you're coming to the channel and you say well if that.
What you do outside why don't you do it here to what.
What I would tell you is the following as part to off those supply chain constraints that really impacted the end of Q3, Q4, and our leading green in Q1, and what would be over this by March April .
Really what we did these two things number one we had a two two.
Stop most of our promotion so from a year over year.
And number two we did have some supply constraints.
That being said again, when you compared us to 2000 2019, you do see.
11% growth.
And that is also for some of our products that are really geared to making et cetera. Some level of deceleration importantly, when you look at 2022, what I would tell you is number one that you know those supply chain constraints are behind US we're back to high customer service levels with our key customers.
And number two we have significant innovation coming upstream into second house, and what I would say on those innovation.
Recently is that a lot of them are not recorded into Nielsen. So all the baking mixes that are coming up with a whole sum and we picked up 3500 stores at the end of February innovation.
That you could see at Expo West last week.
All of this work on chocolate chips cookies et cetera, those things are again not measured.
By Nielsen since they only look at the category as a sweetener.
I appreciate all that context that Albert I'll leave it there best of luck.
Thank you.
Thank you. Our next question comes from the line of Scott Muskegon with our five capital. Please proceed with your question.
Hey, guys. Thanks for taking my question.
I guess.
So I guess it however, they want it.
Where you left off I wanted to go where you left off on our 2022, you talked about the back half some some good product introductions.
Horsham Bacon baked mixes maybe elaborate a little bit more on that maybe also tell you know wears wholesome baked mixes where they're gonna be but what else is in the pipeline.
And you know how.
Do you think these new products could eventually propel you to the top end of your guidance kind of just frame it for us a little bit more.
Sure. So you know if you if you look at 2021, I see that as a very foundational year for all the reasons that we say we made two acquisitions that we brought in house, we doubled almost the size of our company. We took our EBITDA at two <unk> at the mid eighties and.
We essentially showed as a team that we could take those on the work has been intensely going as you can imagine in terms of bringing those brands together, bringing the operations together and branding and innovation pipeline together and you are going to see that really coming.
In 2022, obviously those products are being presented were presented to the retailers, we do see more appetite in the retail environment to take on new innovation as you know the last two years have been more limited due to labor shortages and and so on and so forth, but we do.
You see appetite from the retailers from decent even if it was a risk prudence and could those things on the shelf. So what we're excited about and this talks is essentially to what I said you know the top end of our guidance.
Is it is really geared to our meat to our long term guidance is those innovation seating to shelf as I say some of them are heating as we speak and so you will obviously see that and in fact in Q2 and throughout Q3 and Q4, you would see those innovation.
So I would just add if you'll allow me that.
That you know our international business.
Business grew.
Almost double digit and we continue to see that opportunity going on and we're very excited about this we're doing well in China and India that we started last year insane.
Also want to take a moment to really congratulate to the flavors.
And ingredients team and you have seen.
Incredible growth, there, which again comes from laser focused execution.
On the R&D on sales and a Z or two we're very pleased with essentially the power off a very strong position.
Bye.
<unk> and ANZ and distribution.
That's thanks for thanks for the color that actually leads into my right into my second question.
I know you talked about exposure to the war in Ukraine.
What I wanted to also explore is that Asian component I mean, obviously, there's been some concern piece would be China.
So maybe you can walk us through both from a raw material perspective, and then also from a sales perspective.
Typically the flavors ingredients I think our raw materials.
You know how how much liquidity do you have and you know kind of an inventory worth it I think there's some sub manufacturing going on there just kind of walk us through that that would be great and then I'll yield.
Sure. So well you know most of the companies today are global.
And globalization has been a phenomenon now for decades, and you know where where that is going to go and take us nobody knows but what we're doing obviously is a few things number one is to diversify our supply.
From different regions in the word and we're doing that as much as we can number two as I said earlier is also build up inventories in the locations would be Europe or Pizza U S.
So that we have a certain amount of inventories and feel comfortable that we can manage you know starting from labor shortages and freight shortages and those type of things that's really what's initiated it and so this is just taking it to the next level up making sure our exposure from.
Our sales sustained point in customer is obviously still very small.
As I told you previously you know markets like India and China are.
You can you can invest heavily it takes a long time, we have decided to take more of an e-commerce modern trade route.
Those are not big exposure in the context, so far.
Guidance, and where we're heading but I hear you and we are as proactive in terms of diversifying of supply together with different manufacturing centers and building goes up as well as a build putting the right amount of inventories in the strategy.
Nick locations.
Perfect. Thanks, guys.
Thank you Scott.
Yeah.
Thank you. Our next question comes from the line of Bobby Burleson with Canaccord Genuity. Please proceed with your question.
Hi, Yeah, I think you guys have covered a lot of good ground here in the Q&A, but maybe just.
Focusing a little bit more on foodservice I'm curious, how that's contributing to your growth outlook, you know what kind of trends you're seeing there obviously a lot of.
Bass command dates have been removed and there's there's a you know.
A lot of broad you know.
Reopening so curious how that's affecting your outlook into 2022.
Good morning, Bobby and thanks for the question I would start by telling you and I think that comes across with some of the Q&A questions. So far which is the power of our diversified portfolio and you know what what I love about our business is that you operate in two segments you operate in North America.
You operate in international.
You operate across different channels and that is what's it gives me extreme confidence in terms of the sustainability of our results and our operations and so when you then dive into those channels in North America as I was saying our foodservice grew 30% year on year end.
<unk> 2021 and that was great. Because that's you know to start in 2021 foodservice was not out of the woods and as we look forward. What we're excited about is first of all that we have a great portfolio of both.
Traditional as well as natural options and we have seen in the say in the past that we do foresee a number of operators proposing increasingly natural auctions and the second thing is that we have the power of a whole song you. Don go one organic brand in North America, the power offs worth the number one.
Baking brand in North America, Hoarder rents are equal and there's no reason opportunity that we're facing upon to essentially not only work on the front end of the store, but also on the back end and we are extremely happy with the successes, we're getting on the backend of the kitchen waiver summer.
He wants to provide you know calorie free muffin or no organic sugar chocolate cookie and so we have a great team we have great.
Operations, there and we do see a 2022 is a good year for us in foodservice.
Driving our performance.
Great.
Then just in terms of pricing actions those are obviously, helping you here.
And the balance of Q1 and going forward, but there's a lot of fluidity and a cost inflation. This year it looks like I'm curious.
What are the what are the kind of cycle times in terms of identifying cost headwinds and then being able to put through price increases.
Yeah, what's the lag time there Ed.
How much flexibility do you have in a price changes this year given the <unk> to address this dynamic environment.
Yes.
That's a great question Bobby because.
We essentially are taking our prices as we speak and those prices are in the mid single digit those prices are going through as you know it's a it's a never seen before our ability to take some level of pricing and the pricing has gone through.
<unk> number two.
Factor, which you are going to see somewhat in Q1, where you know your Cogs starting January in your price to start to mid quarter. So you are going to see some of that in Q1, which Duane and I alluded to before a number free I would go back to really our supply chain reinvention projects in North America.
I'm, so pleased and thankful for the organization and the team to have taken on the time energy to start at this very early on we didn't wait for inflation to start we immediately we for some ins were took on the opportunity to synergize and <unk>.
These are extremely healthy.
Helpful. Together, we price at this point in time, we feel comfortable with as Wayne said earlier with what we see today to be able to essentially throughout the year to compensate the cogs increases any inflation with the pricing actions and the supply chain reinvention.
Okay.
Okay great.
Well. Thank you that's it for me.
Thank you Bobby Bobby.
Thank you. Our next question comes from the line of Ryan Meyers with Lake Street Capital markets. Please proceed with your question.
Yeah. Good morning, guys. Thanks for taking my question just one for me.
You know you talked quite a bit about the price increases so what sort of feedback have you gotten from some of your retailers as far as these price increases go and they've been pretty receptive to it.
Hi, Ryan, Yes, so you have that.
That's the long and short answer and we have taken those prices I would take you across north.
In North America, we have taken the same across international we have taken them on their flavors and ingredients and essentially there is a I would say a very good understanding.
Where this is coming from depending on customers or regions into word you had to dress defined more or less and almost document what is going on and why you are doing it and I would tell you that there is receptivity understanding.
And and and that's what we're doing and I've done as we speak.
Great. That's helpful. Thank you.
Thank you.
Thank you. Our final question. This morning comes from the line of Alex Arnold with Odeon Capital. Please proceed with your question Hey, guys morning.
I guess I have 211 is a little higher level, which is just sort of balancing.
We are looking at the state of the consumer as it relates to your product portfolio, you know sort of on the back end of lapping stimulus and.
Inflation squeezing the wallet, how does that impact sort of a higher value higher price product portfolio relative to trade down and then the other question is.
I guess that the inventory reset versus the supply chain costs almost net out. So if you can just help me other than pricing unpack the other stuff that's running through the <unk>.
The Cogs increase and then also how the.
The supply chain costs might look in Q1.
Okay. So three questions if I understand so.
Give me back the.
The first one and I'm happy to take the first one the first one is as you know when you think about your product portfolio being a premium product portfolio. That's not you know that's not the lowest price what are you seeing out there in terms of consumer behavior on the backend of stimulus going away and inflation squeezing their wallet.
Understood. So this is this is a great question and one that obviously, we spend a lot of time thinking about I would tell you a few things. The first one is this is a portfolio where in a category, where you know consumers come to it either because they need it for.
For health reason or because they wanted for lifestyle reasons. So this is a you know that goes back to this the promise of this category and why I'm excited about it which is really deserves to match process sugar consumers realize what they need to do and the importance of a type say many times.
So you know Covid was just an accelerator of that because diabetes and obesity, where risk factors and so there is this category is prone for consumers to sticking to it number two we do have very importantly for me a number of brands.
And they play across different price points and I consider continue to consider that together with taste cost is a very important element to increase penetration of this category and I'm very pleased to the fact that we do have a portfolio that goes from traditional at a lower price point all the way to the.
Most premium.
Products like our wholesome and that gives the opportunity to consumers to still come into the category, but essentially picking it up whereas they can afford it and playing that portfolio. I think is one of the strengths in the environment that you're describing and I would say that's true also for international or where we have always had a tradition.
Offering and a premium offering this is very important in emerging markets. So taking all the lessons and are benefiting from our global view. This is no different when you talk to different income groups and thinking about channel and international developing market versus <unk>.
A lot of the market and so we.
Know how to operate this and we have a great portfolio to do it.
Does that answer your first question is thanks, Albert I guess, the Duane is probably the next one but I'm really all I'm trying to do is is unpack the the increase in Cogs, a little bit and understand.
How some of the onetime pieces roll forward. So if you if you can give some just some high level guidance, we can drill in further on the zoom later.
Yeah sure Alex I appreciate the question.
From a from a onetime cost perspective, obviously, we have to wait a little bit and.
In Q4, there will be some and and in Q1 as well and then it should taper off dramatically.
From a from an overall inflation perspective.
You mentioned, you know pre buys of inventory and the like I would say generally speaking, we see inflation and our and our production processes throughout whether those are packaging, whether that's raw materials, whether that's that's labor, we've mitigated that somewhat in terms of inventory pre buys and the like.
Obviously, the lens is more clear than in Q1 than it is than it is in Q4, so or no.
We were not as concerned about inflation so to speak in the near term and to the extent that you know like I said like I said at the half on one of the other questions. We were confident that we can control what we see right now.
Hum and.
It should it should things change obviously, we'll have to we'll have to change, but you know as we as we.
Finish what we're doing and in our North American supply chain get stability, there, where we're comfortable that through through these initiatives and through efficiencies there that where we're doing what we can to mitigate the inflation that we're seeing.
Okay.
And then just in terms of supply chain cost the 6 million rules into can you give a rough range for everyone as to what that might look like in Q1.
I would oh getting without getting too specific it'll it'll be significantly less than that it'll be okay, it'll be south of five.
Okay. Thanks.
Yeah.
Thank you. Our final question comes from the line of Pablo <unk> with Cantor Fitzgerald. Please proceed with your question.
Thank you Albert I mean, its basic numbers question, but can you give more color in terms of your various brands performance in the fourth quarter, I mean minus 4% pro forma I understand that we have to look at the two year stack number.
Can you break that down between I don't know North American internationally between branded CPG and even within North America, maybe more corridor between wholesome swerve in the whole Earth. I mean, just just more of a quarter would help and then I have a follow up things.
Sure So with regard to Q4 and with regard to the supply chain constraints that I talked about it I would tell you that.
The all of the brands to a lesser extent towards some were impacted by the supply chain constraint, a very simply boots and all of them were impacted by a reduction of elimination essentially opened your promo activity. So I would say that that was really a theme across <unk>.
Essentially we are in sourcing you know, especially in bags.
So that's a big component of our business.
Including in foodservice and so that plus 70 was also done with the supply chain constraints. So I would say that was the impact on North America on the international.
We operate from number one number two positions across all of the markets and.
He is healthy you know when you look at the.
On a two year basis, and even year on year basis.
The categories are double digit to high single digits, we are leading in those categories remember that we have a number of markets, where we have a 70% market share.
We're driving the category and I would say that the international ahead very healthy growth.
And that and that would continue.
Similarly, flavors and ingredients and went broke it down for you we're very.
Please with the results here so Pablo.
Does that answer your question, Okay, Yes, and then in terms of just the outlook when I think about in the past about a C V opportunity versus you know whether that means new doors or new skus within the same store maybe.
Maybe expand on that a I'm trying to understand.
What we've seen is a jewelry brands, maybe are beginning to and theater into each other's tariffs right. So the lines are beginning to blur, but I'm sure that our dividends segmentation for each brand in.
And maybe the channel opportunities vary by brand, but maybe just a reminder, when I think of a wholesome versus swear versus whole narrative about D. C V opportunity, whether that's doors versus space within the store Skus and then without any channels that you won't go to like you know maybe hold someone go to a certain place or schwed wouldn't go towards something channel. Thanks.
<unk>.
Yeah. That's a that's a great question and first let me let me tell you that.
If you add our four brands we are as we close the year in North America, and about 85000 doors and that we added 7000 over 7000 doors. This year and that's 90% versus 2020, so our power of one.
Which is essentially going to the customer we have retail solution customer by customer is powerful.
We are elevating this organization and adding resources to continue to move this forward and we're very excited by it number one number two what.
What you were saying about the brand is very important and having worked in portfolio of rents or my life. The last thing you want to do is to have overlaps in cannibalization. That's not why you do a portfolio of brands. We had the question earlier from from Alex about you know the pricing and.
So is there is significant opportunities when you have a great portfolio of brands like like ours number one the recent differentiation on taste and price number two series.
<unk> innovation fields, we talked to earlier about the baking mixes for wholesome, which are delicious food calories.
Baking mixes and Europe's worth going into chocolate chips cookies, which we showcased at the Expo waste, which are amazing with no added sugar products and then to your point you can also play channels right.
Some channels as you know whether you could look at club and mass or natural channels that are not where our product is not going to coexist well and that gives us an opportunity to really play this portfolio to always be in a very strong position and play the channels from a price.
Standpoint, so I would say and I would close by telling you that you know we're excited as Bobby said earlier about our foodservice opportunities.
For 2022, we're excited about our e-commerce , which as I say it grew 100% over the last two years and we're excited about the innovation and discussions and power off one discussions that we have with retailers being nielsen be outside of Nielsen.
Got it thank you.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. <unk> for any final comments.
Sure.
And maybe as a final comment I know that our chairman Irwin Simon This is on the line Irwin if.
If you want to give us some comments that would be great.
Thank you Albert.
Everybody.
And.
I know in regards to supply chain I know in regards to.
What's going on.
Brain in Russia, you know is difficult.
On fuel prices, but.
I must say.
In regards to the horror.
You know 18 months old.
It's a company that owns some great brands today I've been listening to a lot of your questions.
Regards to you know our brands premium brands.
I think what.
Gas prices, where they are today people will stay home and hard.
At home more.
Baked more and I think we're in a good position.
As Albert said, we don't have disruption to Ukraine or Russia.
And you know we have a really good infrastructure and building out the infrastructure that can run a billion dollar company no not everything goes perfect.
And when we had issue we react with regard to supply chain, taking overall manufacturing.
As Albert.
Wayne talked about.
Now putting in place today for a company our size our public company costs are tremendous but.
As I see this company going forward as I saw you know building another natural organic food company.
We're in a really good place here with our brands with their products with their distribution with their brand awareness of our categories and with our free cash so.
You know it's tough but.
With that are there.
Really a good plan in place for 22 is that we're talking about it we got our people we got our brands, we've got a strategy and most important how do we reward our shareholders is something that's very very important to us. So thank you Albert.
Nothing to add to that.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.