Zevia PBC Q1 2023 Earnings Call
Good morning, ladies and gentlemen, and thank you for standing by and welcome to the C. V. A P. B C Q1, 2023 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation should you require operator assistance during the conference. Please press star zero to signal an operator.
Please note this conference is being recorded.
I'll now turn the conference over to your host Reid Anderson with ICR. Thank you you may begin.
Thank you and welcome to <unk> first quarter 2023 earnings conference call and webcast on today's call are Amy Taylor, President and Chief Executive Officer, and Denise <unk> Chief Financial Officer.
By now everyone should have access to the company's first quarter 2023 earnings press release and Investor presentation filed. This morning. This information is available on the Investor Relations section of <unk> website at investors that CBS Dot com.
Before we begin please note that all financial information presented on today's call is unaudited certain comments made on this call include forward looking statements, which are subject to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095. These forward looking.
Statements are based on management's current expectations and beliefs concerning future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements.
Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today during the call. We will use some non-GAAP financial measures as we describe business performance the SEC filings as well as the earnings press release presentation.
Slides that accompany today's comments and reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investors <unk> Dot com.
And now I'd like to turn the call over to Amy Taylor.
Thanks, Ryan and good morning, everyone. Welcome to the Q1 2023 earnings call for UBS ADC.
We had a strong quarter as we continue our progress toward profitability and drive our focus on distribution and trial, we are demonstrating strong momentum across channels continuing to increase average spend per household even as we gain new households, with increased distribution, we're seeing strong growth in our new single business, even before we enter traditional immediate consumption.
Now, we're realizing price in the market and materially reducing cost in our business, resulting in continuing recovery of our gross margin Q1 saw the strongest gross margin of any quarter to date as a public company and a 470 basis point improvement over prior year.
Critically we continue to manage cash effectively driving improvement on the adjusted EBIT walk.
The strategic shift we made at the halfway Mark in 2020 to focus on profitable growth are paying off the team is executing the plan and the brand continues to demonstrate exciting momentum 2023 is a transformational year for DBS and we're pleased to walk through the results and their indications this morning.
It is mission focuses on global health for people and planet and in Q1, we removed another $3 2000 metric tons of sugar from the diet. The communities, we serve and replace 47 million plastic bottles in our markets.
Maybe it is more affordable with 64% of non alcoholic beverages in North America, even as we realized price in keeping with the market and continue to focus on taking our better for you beverages mainstream making them available and affordable for consumers across income levels.
In Q1 2023, we delivered net sales of $43 3 million just ahead of our expectations, resulting in a 13, 8% revenue growth over prior year and a two 7% decline in volume.
We realized growth from pricing and new distribution.
We are pleased with the team's execution and continued retailer and consumer acceptance of our price increases and we've communicated in another price increase of 5% here in Q2, we're seeing strong growth from new item distribution, new and legacy customers. When we go into the spring and summer beverage season from a position of strength.
Gross margins continue to improve to mid forty's levels in keeping with our expectations with demonstrated strong cash management and have delivered a very strong run rate of improvement on the adjusted EBITDA line cost control disciplined adaptations to our promotional strategies and strong price increase implementation of new precedence with media with a focus on quality.
Yes.
While we've made progress in our brand and unit economics are strong we do not expect our path to profitability to be entirely linear we plan to make investments throughout this year in marketing and supply chain to support our brand refresh to support service level and ultimately to support growth a little bit more detail now with a focus on our <unk>.
Sumer base evolution, and our learnings from syndicated and panel data from Q1.
Maybe as household penetration is six 4% and DBS households increased their brand spend by over 12% in the past 12 months driven by increases in spend per trip with consistent purchase frequency rates amongst the larger brand buying base, we maintained purchase frequency and increased average spend per household.
Even as we added new consumers to the brand.
Following a material price increase these are strong indicators of the health of our brand and our user base across heavy medium and new light users bolstered by strong new item performance.
EBIT grew 7% and scan dollar sales for the quarter as we cycled last year new year leave your best program in favor of this year's focus on spring and summer.
In retail dollar sell through via delivered its highest Q1 on record.
The same is true in e-commerce.
In store sales remained robust through a healthy mix of volume and price and we anticipate continued progress in quality growth driven by the brand refresh marketing support and strategic retail programming in the coming months.
And data continues to demonstrate the dizziness shopper is a highly desirable one less price sensitive at all income levels, we remain home stocking brand, which remains a competitive advantage as we simultaneously build a singles business and grow cold availability.
Shoppers proved valuable to retail partners with a remarkable 40% higher beverage spend versus total non alcoholic beverage shoppers are shoppers also make 30% more trips to stores.
<unk> beverages versus the average shopper, we see similar dynamics in E Commerce, where we are the number one carbonated soft drink and where we continue to grow at pace with retail.
As mentioned in the first quarter of 2023 marks our promotional calendar shifts for CVA versus years past based on the strategic changes we made as a new leadership team for this annual operating plan focusing less on Q1 and more on peak beverage season in retail activity Q1 results were driven largely through new items and new store distribution.
Which accounted for 78% of our growth while organic velocity growth accounted for the remaining 22%. We expect this will balance closer to 60 40 in the coming months based on calendar shifts and our focus on the brand refresh.
Distribution growth in the quarter was rooted in new packages are 12 ounce sleek single soda can our APAC and mass and our 12 packs and food.
A single Pan continues to grow in units per store per week doubled when merchandise cold.
Singles are becoming a major driver of our business with key natural channel customers.
New stores also bolster distribution growth as we close gaps in the food channel and gain new store selling and warehouse club, we gained 2700 new stores selling soda in the quarter.
As we cycle, our first year in distribution and warehouse club, we're pleased to see the 64% of shoppers who bought DBA in club stores with new to brand and half of those new shoppers also bought DBA and additional channels spending 67% more on <unk> than the average EBT shopper.
This demonstrates the power of the Zebra brand discovery in club as it Spurs trips and spending in traditional retail channels. We have further opportunities to expand in club region, selling and we will be able to share more updates on this in the coming months.
Moving onto velocity, the consumer shift to larger pack sizes continues.
Jackup options are driving growth category wide and also with Libya, and apex and larger now account for more than 50% of our business in measured channels.
Well I think growth is driven in part by consumer trade up as retailers switched from the Genpact to a more profitable 12 pack, but also by our expansion in the mass channel and the broader trend home talking and consumption at home and nonalcoholic beverages.
This is a competitive strength because there will be a brand through food warehouse club and E Commerce.
E Commerce, some natural channel players and much of warehouse club sit outside of measured channels.
Operationally, we are beginning to make fundamental changes in our supply chain that are expected to contribute to cost reduction efficiencies and process improvements over time.
We also continue to work on reducing selling call to.
To improve agility and to reduce store level out of stocks for our customers. These changes will be happening in parallel with the brand refresh and will require continued focus.
I'll wrap at the Big picture and turn it over to Denise.
India has a very healthy business and continues to experience strong consumer demand growing the consumer base and simultaneously increasing spend per household on the brand.
We are realizing price in the market, having announced another 5% increase effective in Q2 and are reducing costs in our business.
In the first quarter, we delivered the strongest gross margin ever since becoming a public company in 2021 critically we continue to manage cash effectively and drive improvement on the adjusted EBITDA line.
We're headed into the summer from a position of strength, we expect continued double digit growth on the year bolstered by an exciting brand refresh and a supply chain and transformation.
Cvs brand refresh break the sharp new logo and brand identity, new modernized differentiated pack design and radically improved on shelf visibility, but most of all increased residents with new consumers incremental to our highly engaged base.
Thank you and I'll hand, it over to Denise.
Thank you Amy and good morning, everyone.
I will begin with an overview of our first quarter financial results. We will then open the call for your questions.
In the first quarter of 2020, we delivered net sales of $43 3 million growing 13, 8% versus same time prior year.
Growth was driven by higher price realization as volume was down two 7% on an equivalent basis to $3 3 million in the period.
Gross margin continued sequential improvement with our strongest margins yet as a public company at 46, 4% for the first quarter of 2023.
Four seven points above same quarter, a year ago, primarily due to the impact of pricing offset by slightly higher manufacturing costs.
Gross margin also improved sequentially by two one points versus Q4 of 2022.
Gross profit delivered in the period was $20 1 million up $4 2 million to 26, 6% versus a year ago, reflecting growth in net sales driven by pricing and lower promotional spend.
Selling and marketing expenses decreased 15, 2% to $11 9 million, reflecting lower freight and warehousing costs of $1 3 million, driven primarily by improved pricing and efficiencies and a reduction of non working marketing costs of <unk> 9 million.
G&A expenses were $8 6 million or 20% of net sales in the first quarter of 2023 compared to $10 1 million or 26, 6% of net sales in the first quarter of 2022, a decrease of six six points as a percent of net sales.
The year on year dollar decrease was attributed to lower employee cost and lower public company expenses.
Stock based compensation, a non cash expense was $2 4 million in the first quarter of 2023 as compared to $8 9 million in the same quarter last year.
Net loss was $2 9 million compared to a net loss of $17 5 million in the first quarter of 2022, an improvement of $14 6 million or 83, 3% as compared to the first quarter of last year.
Loss per share was four cents per diluted share of class a common stockholders compared to 28 in the first quarter of 2022.
Adjusted EBITDA loss was <unk> 5 million compared to an adjusted EBITDA loss of $8 3 million in the first quarter of 2022, a year on year improvements of $7 9 million or 94, 6% showing continued progress managing towards profitability and generating cash flow from opera.
Nation.
Our balance sheet remained strong with $56 million in cash and cash equivalents and no outstanding debt as of the end of the first quarter of 2023 as well as unused credit line of $20 million.
We maintained healthy working capital for the period of $73 $3 million.
Turning to guidance.
Based on our results and strong consumer metrics, we are reaffirming our 2023 annual net sales guidance of 180 million to $190 million, an increase of 10% to 16% over 2022, including 48 million to $51 million an increase.
The 5% to 12% in Q2 of this year.
In anticipation of the brand refresh which is being launched in late Q2 phase through the rest of the year, we plan to invest in marketing to support our brand ambition and continue to anticipate that the brand refresh philosophy driving initiatives and our new distribution will support our growth ambitions. This year.
That concludes our prepared remarks, we will now open the call for your questions operator.
Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue. Please press star two for.
Vince using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please we poll for questions.
Our first question is from Bonnie Herzog with Goldman Sachs.
Thank you good morning.
Alright.
Good morning, I just had a few questions on the brand refresh I just wanted to clarify.
Something did you ship any of it during Q1 is that all expected to be you know starting to ship now in Q2, and that's why you have some visibility so far.
Sure. So it is shipping now Bonnie.
We have some call it in store right now and specifically our innovation. So creamy route there. The six pack is in market for the first time, we had just been sold and 12 pack and Penn pack only previously.
And then our new flavor Vanilla Cola also rolling out the new brand IV and then the existing portfolio followed.
Okay.
So that's helpful. And then just thinking about that in the context of your Q2 guidance.
No you're lapping a tough volume comps in Q2, but you know in light of the refresh that is rolling should we expect some volume growth in Q2.
You know on your top line or will it will continue to be price driven.
I would anticipate it largely price driven and the brand refresh will start to impact the business in late Q2, and then through the summer into Q3 as it fully to bright on shelves. So when we look at guidance, we think about the brand refresh.
As a tailwind.
Forthcoming price increase.
And then we also have in mind some of our supply chain transitions because all of this taking place in flowing through at one time, they're all factors in our guidance both timing as well as just confirming the full year.
So.
Yes, I think I think we've got a lot of tailwind coming from the brand refresh and then the other I think.
Same worth mentioning that we talked about in your prepared remarks as well is that we will increase our investment in marketing in parallel with the brand refresh and we think about memorial day and following so the obvious kind of peak beverage consumption months.
As being a tailwind and good support for the new look and feel as well.
Okay that yet that kind of brings me to it.
Next question and final and then I'll pass it on just hoping you could touch a bit on.
Any shelf space gains you might have received especially in light of the brand refresh during the spring resets.
And then just exactly what you mentioned about the step jobs are incremental and spent any more color on that and maybe the supply chain changes that you highlighted just.
Thinking about the ultimate impact on your profitability, especially and even in the next couple of quarters. Thank you.
Sure, Let me talk a little bit about step change in store presence and shelf sets and then I'll turn it over to Denise to to answer the balance of your question and talk a little bit about the outlook on profitability and touch on supply chain. So we've had some really nice gains at spring resets those are taking place now in some customers late February others rolling into May.
In the natural channel, we have really beautiful full brand.
So top to bottom shelf four to eight feet, depending on the store format with our full line represented in that brand refresh rolls out, including six pack cardboard over reps, we have a great Billboard effect in our natural channel, where some of the origins of our brand we had some gains in conventional grocery as well.
And some gains and then some test stores for further gains in mass, which represents significant upside for us in distribution. So when you think about a brand with six 4% household penetration and a lot of ground still to gain channels like mass and the value channel and drug.
Still upside for us as we continue to chip away distributions some of that will follow in 2024, but in 2023, we had nice gains both at shelf and in other portions of the store such as cold availability in conventional grocery and now increasingly through test stores through the year in the mass channel and then in a couple of instances we've gained.
Some new regions within clubs so that's all forthcoming.
I will turn it over to Dave just to comment on supply chain and the outlook on profitability.
Thank you Amy good morning, Bonnie.
Well I would say is that we expect a few one time.
Payments are associated costs with transitioning our supply chain.
And that's primarily the change in the network in terms of our coverage with distribution. So our three PL partnerships and going from a large number of up to retail partners to smaller group and also as we look at our co manufacturing arrangement. So we expect that they're going to be a few one time cost that we have to incur.
Impacted in addition to that we are going to invest heavily in marketing to support the <unk>.
<unk> refreshed each quarter for the remainder of the year and so those costs will impact our adjusted EBITDA margin.
Through the rest of this year.
Hopefully that answers your question.
Alright, thank Bonnie.
And if any further color on that Bonnie.
Hi.
Oh no.
Just trying to understand that the contacts I mean, you're guiding top line just trying to think through the phasing of EBITDA. So we should expect a little bit more pressure on EBITDA.
Here are spending behind drive topline, but ultimately you're expecting more profitable growth moving forward yes.
Yes, I would.
And I would say Q1 is indicative of our capabilities, but will make choices through the balance of the year to support the brand refresh as you're only new ones. So that's sort of our outlook some investments in marketing and then some transitional costs and supply chain, which will ultimately benefit our unit economics and profitability materially going for.
Forward.
Alright.
Alright, thanks, Thanks, Michael.
Our next question is from Christian <unk> with Bank of America.
Good morning, you have Christian on for Brian Thanks for taking our question so.
According to your financial outlook, you guys are expecting <unk> sales to grow 5% to 12% year over year can you discuss what needs to transpire for you guys to hit the higher end of your sales range and also just according.
According to Nielsen retail sales for April were up 4% year over years.
This accurate or is Nielsen not accurately capturing the underlying performance of your business. Thanks.
Yes Christian I appreciate the question and I know you understand how some of this work. So scan data is not quite reflective of our internally track result, as it represents a subset of our business I mean, if not entirely apples to apples.
But some of the numbers that youre seeing is because we are launching our sight or excuse me cycling our original launch in club and.
And because we are cycling our strategy in prior years of heavy investment in the front end of the year.
And so this year, we reduced promo support in the first three to four months of the year in favor of the brand refresh in the peak beverage summer months, So youll see scan data kind of catch up.
To reflect our reported results through the summer.
To speak about the guidance and what has to happen for us to hit the top end.
We have obviously a diverse portfolio across soda energy drinks teas et cetera, and we'll be rolling our brand refresh out in phases sort of with an eye as I like to say on the P&L on the planet in other words youre not doing a hard cutover will be rolling that out and that hand in hand with the supply chain <unk>.
<unk> Denise mentioned earlier are both factors in our Q2 guidance so to hit the top end of that those will all need to go smoothly, we'll need to manage out of stocks at shelf because we are indeed, a high velocity brand and we need to continue to gain in store space in order to build stock out in store at retail.
To make sure that we can meet demand.
Then we will need to transition our supply chain smoothly as we gained tremendous efficiencies and the changes that we're making now for the long term, but we anticipate that we can have some challenges through the next couple of months just as we transition as Denise mentioned, two fewer more efficient warehouses and diversify our co manufacturers for long term cost benefits.
So to hit the high end of the guidance. We just need continued consumer pull through continued consumer base growth continued increased spending per household all of which have been a reality for us quarter over quarter over quarter, and I anticipate with even more tailwind now with a brand refresh in place, but we also need for all those products are flow through operationally.
Cleanly without any hiccups and to smoothly walked through this supply chain transition. We're in the midst of so hopefully that answers your question Christian.
Yes, that's very helpful. Thank you I'll pass it along.
Our next question is from Jim <unk> with Stephens.
Hi, guys. Thanks for taking my question.
Not surprising doesn't taken price you see a little bit of demand elasticity.
But given the kind of the traditional zebra a consumer buys beverage at a higher rate.
As the time that it takes for them to kind of readjust that shelf price.
Become shorter because theyre more frequently buying beverages, you kind of recoup some of those volume losses faster because they're coming back to this a little more often.
Jim I think that's a very astute question about our brand because youre right that we have still a relatively small and highly engaged base.
I would say the answer to your question is probably.
And the reason I say, probably and not definitely yes is because we are still new in the game and taking price increases our first material price increase as the company was last August 1st.
Prior to that we had done an increase on six pack only but the full portfolio. We took a price increase on August 1st we are lapping those lower price points and deeper promotions right now and we will have the tailwind going forward or an additional price increase as well as a full lap of the pricing actions that we took last.
Year.
So early indicators are that yes, indeed, the shopper adjust to the new price point, because our price increases have been simply in keeping with the market not ahead of it.
And so we anticipate that the consumer adjust to new price points pretty quickly and early indicators would say that's true but it is early days for us out of the gates in given our pricing history as a company does that answer your question.
Yeah, that's great and if maybe I can ask a follow up on out of the broader advertising strategy.
Only launched once you guys have put a lot into kind of this brand refresh and having much more visibility at shop level from the consumer.
What channels are you going to use it in terms of advertising whats kind of the message you want to drive to bring consumers into the brand that might not be familiar with them.
Yeah, that's a great question and the thing that I'm, probably the most excited about so to answer your question on channels <unk> has historically supported what I'll call push marketing so retail marketing at the point of purchase and we will continue that tactical support the business to drive velocity.
New however is that we seek to support the new brand refresh a new look and feel and really a new brand identity and voice with some tactics. We have an important in the past so broader in market sampling what I'll call below the line activity. So in market brand building engaging with consumers.
Entry social media activity.
Digital advertising and then some additional advertising tactics on a spot geographical basis based on what we know about let's call it low VDI and CVI markets, where we have opportunity.
Most of these rollout after memorial day, some of it in the late summer.
And our goal is to reach as you say new consumers and you ask what's the message I would say we've got great feel good flavor. We are all about driving trial and having people experience DVS when a consumer tries the product conversion rates are very high. So we know that sampling initiatives are very high.
Roy.
Attractive for us and will continue to invest in building awareness and trial, so top of funnel, especially in the back half of the year and then full 2024, when the Brent refreshes is fully to shelf.
And we're excited about inviting more consumers into the franchise and then maintaining them once they taste the product and realize they can have zero sugar and clean ingredients and still have a product tastes great.
Okay awesome.
Maybe if I could just squeeze in one more question.
Going into the summer.
Do you guys have any thoughts on if you can provide any detail on kind of <unk> offerings, especially with kind of the non core so you'll see the energy and fees.
Bring them into the mix and maybe get some cross sell with a kind of a core soda buyer or bring somebody in who is unaware of the GDP.
The energy or to your offering.
You mentioned, a tremendous opportunity for us, which is driving awareness and trial of our categories beyond soda we've been in soda for over 10 years and really set the pace for a zero sugar product in that space and we have big upside for energy in tea and so the most important thing for us to do is to build cold.
Availability for those products in store visibility and trial.
And so to directly answer your questions. We don't have any limited time offers in the summer we do have some new flavors in the pipeline. So in so that we have vanilla Cola.
Two new energy drink flavors that are coming out alongside our brand refresh in a radically different look and feel on can for energy drinks.
A drive to support cold singles availability to drive trial and visibility and drive the business there and we have one new flavor coming out in tea and are anticipating some increased distribution for T. Our limited time offers will likely follow in the winter. So holiday time, featuring some variety packs.
Which is also a great tactic for us to drive in store visibility, but for the most part its our existing portfolio and new permanent flavors that will help bolster display and drive visibility and the way you are describing.
Perfect.
First of all.
Thanks.
Our next question is from Andrew <unk> with BMO.
Hey, good morning, Thanks for taking the questions.
I guess I was hoping you could start by talking about the cost environment. Obviously the company is doing a very good job controlling internally.
But I'm seeing but then more broadly are externally what are you seeing from a cost environment perspective, how does that contribute to the gross margin outlook are you still expecting kind of mid <unk> is that still the right way to think about gross margins for the balance of the year.
Andrew Hi, This is Danny yes, Akshay I would think of margins being in the mid 40% for the rest of the year.
We are still seeing some inflation from a cost perspective.
But not to the rates that we saw last year, but we are anticipating with our with our pricing and promotion strategy.
And looking at what we expect in supply chain to be in the mid 40 for the rest of the year hopefully that answers your question.
Yes.
And.
The other.
Maybe just a clarification, but I just wanted to confirm you called out it makes headwind in the press release is that just the single serve or are you seeing anything else either with the channels or pack sizes or anything like that just if you could talk about the mix side of the business and how consumers are treated with different different areas.
Sure I think a mix for US is is an upside just in the sense that we are now seeing more than 50% of our of our volume coming through packs of APAC and larger.
So for that for us that has been a positive and then the other opportunity is to continue to drive singles cold availability and so singles are performing very well, where they're sold cold.
And exceptionally well and natural channel, where consumers know the brand, but what's exciting for US is building out single distribution in conventional to win new consumers, but generally speaking we see a positive mix benefit as consumers continue to trade up and we remain a hot home stocking brand, which for US is really a strategic advantage relative to the rest of.
The category introduced does that answer your question I wasn't sure what you were asking with regard to the release.
So I think in the press release, you actually called out that makes sense.
Last quarter, you saw that as a benefit.
As you start making sure that there was no.
Consumer impact trade down impact channel shifting anything like that maybe I had it wrong, but I believe that was called out in the release here.
So that's what I was asking about.
Got it okay.
We anticipate that the mix has continued to be supportive both from a margin and a volume perspective, and then I think what we're most focused on as we roll out the brand refresh is in gaining new consumers. So we're seeking to drive trade ups with our heaviest user.
And also to adapt our portfolio based on profitability metrics by channel and then drive cold availability in singles and Thats, what we should expect will be a tailwind for us going forward.
Got it makes sense. Thank you very much.
Once again to ask a question. Please press star one our next question is from Chris Carey with Wells Fargo.
Hey, everyone.
Can you just comment on the.
The logistical barriers or opportunities from expanding single serve obviously.
Your distribution network has been geared toward that kind of offering or things changing or the supply chain initiatives that youre going to put in place over the course of the rest of the year are going to give you a greater opportunity to go after that market specific SKU.
Yeah.
Sure I can touch on the distribution component as you say the logistics with a focus on singles and then I'll turn it over to Denise to just touch on supply chain, if theres any follow up questions.
We are not DSD writes a direct store delivery and that is inherently a hindrance in in store merchandising as it relates to cold availability across multiple channels.
We are fortunate in that we're a high velocity exciting and leaving item and natural so we are able to get solid merchandising from our retail partners in that environment.
And once we have great pull through data, we then get greater interest from conventional despite our lack of direction or distribution and delivery.
The other channels. So right now we're driving maximum single distribution within the capabilities of our route to market as well as studying and evolution of our route to market to accommodate opportunities like drug in the cold box and most of all convenience.
So that'll be a next step for us Chris.
We want to do it right and not fast, especially through the lens of profitability and unit economics. So we can sign up with potential DSD partners or a partner to expand our immediate consumption footprint efficiently and also in a way that supports profitable growth, but we're not quite there yet and more news to come on that in the following quarters.
So we don't really have any true logistical barriers to growing our immediate consumption business within the channels, where we play today, but route to market is central and our expansion into convenience as you know.
Does that answer your question or do you have any other follow ups to that on supply chain, where Denise and I could dig in.
Yes no.
That's exactly what I'm getting at just the ultimate opportunity to expand into some of these.
High velocity higher margin single serve panels.
Sounds like this is the.
Do you have the foundation to start that journey.
That's right I think we have the foundation in the form of our unit economics, and our path to profitability and then we have a great data set of performance at strong price points for single sold cold in other channels and I think that's the perfect combination to take to a partner and build some excitement about our future and convenient.
Okay, and one point.
There are no supply chain.
Obstacles on us expanding singles, Okay. So thats clear, perhaps singles as a great opportunity that we continue to see.
See the opportunity and the growth.
Since we launched it the comply changes change not a hindrance to that.
Okay, Alright makes sense. Thanks, so much.
Thanks, Chris.
Our next question is from Joe Feldman with Telsey.
Hey, good morning, guys. Thanks for taking the question.
One of them to ask about the club channel because I know you have some maturity there.
Just what youre seeing how the performance has been in your most mature clubs it sounds like it's continuing to grow.
Thought I heard you say you are getting even more club distribution. So maybe you could just share a little more color around that.
Sure. Thanks, Joe Yeah, we are we're lapping our launch in clubs. So 2022 for the benefit of sort of the pipeline fill in our first full year in club.
Not yet entirely nationally distributed so we still have some regions to gain and more.
Updates coming on that in the following quarters as we head toward Memorial day in the summer.
We're getting good results and we get even better results when we support the club business the sampling.
So 64% of consumers that buy Veeva in club over these past 12 months.
Our buying it for the first time and we also can track those shoppers back to incremental channels.
So adjacent channels like grocery where they continue to spend more than the average devious shoppers. So the net learning there is the Cvs shopper at club is a very valuable shopper both for the club outlets as well as for our brand as they tend to stick with us and spend more.
I think what's next in club is to finish out national distribution.
And then to increase rotations in tea and energy drinks.
Whereas maybe club wouldn't normally be considered to be a trial driving environment. Because it is a high price point purchase because we are a flavor and variety brand and a trusted brand in an important better for you space, which is getting a lot of press and a lot of attention at the moment, it's exciting for shoppers to discover uba tiers media energy drink in a club.
Ironman and so that's starting to prove fruitful and we anticipate being able to sell multiple categories in club as a rotational tests are successful and as we can look to drive increased distribution there.
Got it that's great there's a lot of opportunity for sure.
And then.
Maybe as you probably know.
Where do you guys think that the share gains you're having or are coming from is it just a big obvious ones just triggered drinks or.
From the big guys or are there other like do you see coming from sort of the other smaller players that are.
Entering this category sure yeah. So we have really interesting and varied share of stomach data, meaning that we draw share from diet and zero soda.
We draw share from sugary traditional service from the mainstream players from isotonic and functional beverages.
We also drove volume from sparkling water drinkers, who have flavor fatigue from really sort of want a satisfying soda.
Offer so many different usage occasions that we have quite a broad base of what we call share of stomach.
As more and more better for you products come online. We're also finding increased interest in <unk>. So in the notion that a rising tide floats all boats this macro trend and seeking out better for you products is very much of a benefit to us given we sit again at six 4% household penetration in <unk>.
A lot of upside as we get off the bottom shelf are distributed at eye level start to drive cold availability and now this summer turn on our marketing machine Theres a lot of upside for us in this rising tide and will continue I believe to draw a source of volume from the big mainstream players, but also just an increase.
<unk> interest and those that may have otherwise rejected the soda category altogether.
Okay. That's great. Thanks, guys and good luck this quarter.
Okay.
Thanks, so much Joe.
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Thanks, you for your time and participation you may disconnect your lines at this time.
Thanks, everyone.