Q1 2023 Charlotte's Web Holdings Inc. Earnings Call
Speaker 1: recreate capitalizes on the growing trend of CBD-infused functional botanical wellness formulations of self-care and mental well-being, certainly among Millennials and Gen Zers who make up approximately 47% of this multi-billion dollar CBD market. They're also among the most active daily users of CBD when they wake up throughout the day across different occasions making this a very important demographic for broad-spectrum CBD. Launching this new need states driven brand with new formulations across multiple formats coincides with the first year of our MLB partnership and packaging that bears the iconic MLB logo with NSF certification. We launched recreate daily edge tincture last month exclusively available on our e-commerce site.
Speaker 1: and we'll begin rolling out new formats, starting with a line of Neat State gummies, which will be available on our site in the summer and retail during the second half of this year. Recreate products of secured early interest from leading retailers, including Fresh Time, the Vitamin Shop, and others, as well as Southern Glaziers Wine and Spirits. We recently appointed Andrew Schaffer as our Chief Marketing Officer, leading our cross-platform activations with MLB and the sports vertical for Recreate to drive online traffic and sales. Andrew comes to us from two decades of Verizon, leading brand strategy, digital experience, social marketing, while benefiting as well from his work with professional sports partnerships.
Speaker 1: Finally, we recently announced a partnership with Philips Pet Food and Supplies, the largest pet specialty channel distributor servicing over 14,000 retail stores across the country.
Speaker 1: And by the way, PET is a $400 million channel, but today less than 10% of our revenue is in a quarter.
Speaker 1: The second pillar of our strategy is regulatory. In Washington, D.C., and increasingly at the state level, we are actively progressing both. Jared has taken a critical leadership role in these initiatives and will speak more to those in his remarks.
Speaker 1: We also activated the third strategic pillar, unlocking the value of the company's IP in botanical wellness. This means formally pursuing an IND pathway seeking an FDA approved botanical drug based on our proprietary cultivars.
Speaker 1: through the right partnerships and structures.
Speaker 1: Jessica and Jared will each touch on this in their remarks.
Speaker 2: So with that, I'll now pass the call over to our CFO , Jessica Saxon. Thank you, Jacques. Our financial results and adjusted EBITDA are reviewed in detail in our earnings release and 10Q. As such, I will not go through all of them on this call.
Speaker 2: However, I am happy to answer any specific questions you have in our Q&A session.
Speaker 2: Net revenues of $17 million declined 12% compared to last year, with B2B down 8% and e-commerce down 14%. However, our unit volumes only declined 6%.
Speaker 2: Consumer shifts from pink shirt to other formats, principally gummies, continues for the category and for us specifically.
Speaker 2: Pink Shirts and Gummies are number one and number two formats in the market with 19% and 15% share respectively.
Speaker 2: This continued shift represents a strain on revenues given the price points of tinctures versus gummies.
Speaker 2: We expect this to continue until the growth in gummy volumes more than offsets the drop in tincture volumes.
Speaker 2: In the quarter, this mix shift resulted in pink shirt revenues, declining five points to 27% of our revenue mix with gummies up seven points to 43% of our revenue mix.
Speaker 2: In the quarter, Gummy volumes were up high single digits year over year.
Speaker 2: Charlotte's Web operates the largest e-commerce business in the industry. Our e-commerce business generates more than 66% of our revenues with attractive gross margins.
Speaker 2: B2C revenue of $11.3 million was 14.2% lower on a year-over-year basis in Q1 as we continued to experience lower traffic to our site.
Speaker 2: Increasing top of the funnel by educating and attracting new consumers into CBD and Charlotte's Web remains the number one priority in turning around the company's overall revenue trajectory.
Speaker 2: As we have talked about previously, we believe the MLB partnership, as we go through the seasons and activate against MLB's jewel events, leveraging the league's enormous fan base and media platforms, will be an unlock against this business priority.
Speaker 2: as will ReCreate, our new lifestyle brand, which is both attractively priced and carries the MLB logo on packaging.
Speaker 2: Our online conversion rates remain strong at 11.7%. Our subscribers account for approximately 40% of revenues, showcasing that when we bring people into our ecosystem, they go through their consumer journey, from awareness to purchase to ultimately becoming subscribers.
Speaker 2: representing significant lifetime value.
Speaker 2: We are prioritizing growing traffic to our web store and have a cross-functional team working on improving the user experience on our site.
Speaker 2: In the food drug mass retail channel, Q1 sales were 9.3% lower year over year, outperforming the total category, which was down 10.1%.
Speaker 2: As a result, we held 18.7% share in Retail Dollar Volume and the number one channel position.
Speaker 2: In FDM, we increased the number of retail doors while we saw a decrease in the number of doors for the overall category.
Speaker 2: This speaks to our brand strengths.
Speaker 2: In addition, our ARP was up 7% in FDM while the category was down 15%.
Speaker 2: And we hold four of the top ten SKUs in the channel.
Speaker 2: In the Natural Channel, Q1 sales were 12.8% lower year over year, outperforming the category again, which was down 13.5%.
Speaker 2: I want to spend a minute on the natural channel.
Speaker 2: What we saw in the last quarter was interesting. First, we grew doors with existing customers within the quarter at about two times the category rate. However, while more doors are selling Charlotte's Web and CBD, retailers are also reducing the total facings on shelves.
Speaker 2: and the number of SKUs and formats carried.
Speaker 2: principally taking gummies and reducing tinctures. For us, the number of doors carrying our gummies grew ahead of the category, while the number of doors carrying our tinctures declined slightly higher than the category.
Speaker 2: Net, despite significant incremental penetration in the quarter, given the mix, revenues were negatively impacted. Given our leadership in the category, and with the highest velocities, that bodes well for the longer term opportunity for Charlotte's Web to grab an incremental share of shelves.
Speaker 2: We expect to gain further market share pending customer receptivity to our soon-to-launch recreate gummies, and positively impact revenues when the rate of growth in other formats, particularly gummies, eclipses the decline in tinctures.
Speaker 2: We expect to gain further market share pending customer receptivity for soon to launch recreate gummies and positively impact revenues when the rate of growth and other formats, particularly gummies eclipses the decline and pinchers. Moving to sgna.
Speaker 2: Our first quarter SG&A was 14% lower year over year, despite the addition of the MLB Right See amortization, as well as a $1 million non-cash amortization expense from the convertible debenture we completed with VAT last fall.
Speaker 2: Going forward, each quarter will include an amortization expense in our SG&A related to the MLB asset, reflecting this valuable three-year partnership.
Speaker 2: Notwithstanding the additional MLB expense, we expect SG&A for the full year of 2023 to be comparable to 2022. Excluding these amortization items, our SG&A expenses in Q1 were approximately $14.7 million.
Speaker 2: which is a decrease of more than 20% year over year. Our material reduction in operating expenses significantly reduces our cash burn to a manageable level.
Speaker 2: Net cash used for operations was $6.1 million in Q1 2023 versus $4.7 million last year, with the increase entirely attributable to the initial quarterly rights fee payment to MLB.
Speaker 2: With our $61 million cash position at the end of the first quarter, we are in a stable financial position moving forward, which is also an advantage against the bulk of our competitive set in the current environment.
Speaker 2: Jock discussed earlier the collaboration with AUSHNA Biosciences and BAT to pursue a botanical drug. I wanted to give a little bit more insight into the rationale of the structure and the benefits for Charlotte's Web and our shareholders. On April 6, we announced this collaboration with BAT and AUSHNA and the Biosciences and
Speaker 2: with the formation of the floria, which each party is contributing.
Speaker 2: Charlotte's Web is contributing existing studies and a license permitting the use of certain proprietary hemp intellectual property, including clinical and consumer data. Aajna is contributing laboratory provisioning, regulatory services, and IND clinical expertise, such as Dr. Oren Devinsky.
Speaker 2: Lastly, BAT is contributing $10 million to fund phase one of the project, which is being fully managed by AASHNA.
Speaker 2: Financially, the funding from VAT and other potential third parties reduces capital risk for Charlotte's REP. However, we maintain the opportunity to participate in future funding rounds, though not obligated.
Speaker 2: I will now turn the call over to co-founder and COO Jared Stanley.
Speaker 3: Thank you, Jessica before getting into regulatory, let me give a brief update on our progress with our partner in Canada.
Speaker 3: We are progressing on tinctures, topicals, capsules, and gummy formats and on track to launch tinctures late this quarter as we await Health Canada approvals.
Speaker 3: Next, we are focusing our attention on topicals and capsules with gummies as final phase.
Speaker 3: Our Gummy Formulations combined with Health Canada requirements will take more time.
Speaker 3: For this reason we want to ensure we bring other great products to market in a timely manner while ensuring we launch our dummy SKUs with confidence and consistency to what is produced in the US.
Speaker 3: Let me give you an update on the regulatory front, starting with the state level.
Speaker 3: It's been 10 years since CBD was introduced to American consumers as a dietary supplement choice
Speaker 3: It has been nearly five years since the passage of the 2018 Farm Bill. Since then, the lack of FDA guidance has forced states to step in, specifically to address the recent concerns of hemp-derived Delta-8 THC and other intoxicating hemp cannabinoids.
Speaker 3: We have and will continue to educate legislators in this process to ensure that consumer access to therapeutic Full spectrum CBD is preserved while regulating intoxicating compounds like Delta 8 THC
Speaker 3: We have been present in states like Virginia, Florida, and Colorado where our voices were heard and Charlotte's Web full spectrum products will continue to be accessible to consumers.
Speaker 3: A few states have implemented regulatory requirements that impact the sale of non-intoxicating CBD products, and we will take appropriate steps through the legislative process.
Speaker 3: While this process is coming to an end in 2023, this will be an ongoing focus of the company.
Speaker 3: On the federal front, as stated in previous earnings, we are seeing more come together in the last month than we have in years in DC. To highlight impactful events, we are seeing more come together in years in years in DC.
Speaker 3: FDA's position in January stated a need for a new regulatory lane for CBD and their commitment to work with Congress on a new path. We responded by supporting Congress in compiling industry safety and toxicology data to address the FDA's concerns.
Speaker 3: HR 841 was reintroduced in the 118th Congress, now as HR 1629. This shows the intent of Congress to regulate CBD as a dietary supplement.
Speaker 3: Furthermore, Congressman Jamie Comer sent a letter to the FDA investigating the agency's failure to regulate CBD as a dietary supplement.
Speaker 3: Considering our engagement with Congressman Griffith's staff and the letter sent by Congressman Comer, it is clear Congress is holding their position to regulate CBD as a dietary supplement.
Speaker 3: We have established the foundation to support GRIFFA through Coalition for Access Now, a political consumer advocacy 501c4 we support. Additionally, we are addressing the FDA's concern over the safety of CBD by uniting industry talk studies and sharing the reports with Congress.
Speaker 3: Moreover, we engaged an objective firm to bring the industry data together to recommend a safe daily use of CBD based on science.
Speaker 3: We are also actively participating in and supporting the industry coming together under one united strategy to progress the dietary supplement path for CBD. This does not mean we will find a one size fits all approach for every CBD provider. It means the industry is embracing the actuality that a set of standards must be met to address the FDA's concerns.
Speaker 3: Our goal is to embolden Congress with the confidence and credibility needed to land a favorable market for CBD.
Speaker 3: At a minimum, this will require amending the Griffith bill through the legislative process with aligned industry stakeholders to ensure CBD products are standardized across labeling and warning statements, accurate testings, protections against false claims, and GMP standards and facilities registered with the FDA.
Speaker 3: Our journey began by amplifying the consumer's voice through our support of Coalition for Access Now. This served as the cornerstone of our strategy in Washington, D.C. Now our focus expands to encompass the entire industry, recognizing the crucial collaboration between industry and consumer voices.
Speaker 3: It is essential that we synchronize our efforts to advance the Griffith bill this year. With these vital elements converging, I have full confidence in the progress we will achieve. However, we are simply not waiting for the FDA to act but are driving the destiny of our business.
Speaker 3: The recent announcement of our biotech partnership with AUSHNA Biosciences and BAT is a testament to this commitment we have made to shareholders.
Speaker 3: DeFloria is the name of the entity created to hold the IP and investigational new drug asset in the third leg of our business strategy, the botanical drug path.
Speaker 3: It's critical to understand the difference between a botanical drug and a traditional pharmaceutical to realize the vast market potential.
Speaker 3: A botanical drug refers to a medication that is derived from natural plant sources. It is developed, formulated, and standardized to contain specific active ingredients or mixtures of plant-based substances.
Speaker 3: They're not isolated and synthesized like traditional single compound pharmaceuticals, yet they hold the same requirements for safety, quality, and efficacy for pharmaceutical use.
Speaker 3: The development of botanical drugs involves rigorous scientific research, clinical trials, and adherence to establish guidelines to demonstrate their effectiveness and safety for treating specific medical conditions.
Speaker 3: Botanical drugs are regulated and approved by the FDA.
Speaker 3: Botanical drug guidance was introduced in 2004 and expanded in 2017.
Speaker 3: Combining this with CBD being removed from the Controlled Substances Act in the 2018 Farm Bill enables this path to create an entirely new pharmaceutical category for full spectrum CBD.
Speaker 3: This is the logic behind our IP investment into DeFloria. The joint venture has an amazing team of senior drug experts led by AUSHNA's Chief Medical Advisor, Dr. Oren Devinsky, and recently appointed Chief Scientific Officer of Charlotte's Web, a 21-year cannabinoid researcher, Marcel von Miller.
Speaker 3: The team has already made significant strides in the drug development process.
Speaker 3: AUSNA has engaged with the FDA on behalf of DeFloria and completed its first pre-IND meeting to ensure the partnership meet the administration's botanical drug guidance.
Speaker 3: This meeting provided valuable agency feedback to inform the florida's clinical strategy and trial roadmap
Speaker 3: We are continuing preclinical and commencing Phase 1 trials this summer, and we believe the venture has enough seed funding from VAT to complete the investigational new drug application and the Phase 1 clinical trials.
Speaker 3: I'll now hand the call back over to Jock.
Speaker 1: Thanks, Jared.
Speaker 1: We continue to execute on our three pillar strategy of returning to growth, winning in DC and unlocking the value of our IP and botanical wellness.
Speaker 1: We're confident about our strategic moves and the long-term view of the business. However, in the short term, having a constructive regulatory outcome or optimism remains reserved.
Speaker 1: Yet, in stepping back for a moment, we didn't grow revenues in the quarter, however slowed the rate of decline to 12% in revenues and 5% in volumes.
Speaker 1: There are signs of momentum we should not let be drowned out.
Speaker 1: We nearly double the category growth in expanding doors in the natural channel.
Speaker 1: We grew distribution double digits in FDM while the category was down mid single digits.
Speaker 1: Our average retail price in FDM is up single digits.
Speaker 1: Our average retail price in FDM is up single digits while the category pricing
Speaker 1: down double digits indicating the strength in our brand equity while ineffective brands will not turn at any price.
Speaker 1: How B of E revenue growth is being muted by mix from tinctures to gummies. However, this will pass and year over year growth will return. Particularly with our pending new recreate gummies, spurring incremental SKU sales, it will help grow the traction while bringing new customers into our brand worlds and e-comm. We're working on improving the user experience on our e-comm platform.
Speaker 1: I want to make sure we're sharing a balanced view of where we are and where we're heading.
Speaker 1: balanced view of where we are and where we're heading. Now I'll turn the call back over to Corey.
Speaker 4: Thank you. Sergio, can we open the call to questions?
Speaker 5: Jason Yeoman will now open the question and answer session.
Speaker 5: Should you have a question please press star 1.
Speaker 5: If you want to withdraw your question, please press start too.
Speaker 5: Your questions will be pulled in the order they are received. If you are using a speakerphone please leave the handset before pressing any keys. One moment please for your first question.
Speaker 5: Your first question comes from Scott 14 from RoughMKM, please go ahead
Speaker 6: Yeah, good morning and thanks for the questions here. I appreciate the comments in the first talk on kind of the market share but you want to focus a little bit on the market share and what you're seeing in the competitive, you know, in a very competitive, fragmented market here.
Speaker 6: As small brands continue to discount and the shift to the value here, but can you provide a little more color? You mentioned obviously it's come down from 3500 competitors and many with limited capital. You mentioned kind of the shelf at stores, but with your activation and support at the store level,
Speaker 6: Can you provide a little more color? Is Charlotte's Web starting to pick up here, seeing more self-based systems? A little bit of color on the rostralization of these on these shelves and how you see this moving forward. Yeah, sure. Thanks for the question, Scott. Look, I think, and it says in the remarks, but 3500 quote-unquote competitors are coming
Speaker 1: undercapitalized and certainly not with the brand equity or science credentials you know that Charlotte's work can bring to bear. So we're optimistic that we can grow share you know in a category that clearly you know declined last year according to Brightfield and we are although we're doing it by contracting less at the moment than growth.
Speaker 1: CBD brand has the same velocity on shelves, I think that provides an opportunity for us with the highest velocity in the industry to grab that incremental shelf space as competitors have delisted. And so, I look at that as a real opportunity for us that we can...
Speaker 1: really further leverage to the introduction at retail later this year of the recreate brand Which is Jessica alluded to you know will also be at a price point that would be more affordable and an SKU formats that are smaller packs to make the consumer
Speaker 1: coming into the brand for the first time, you know, afford to try. Right? And we know by looking at our econ statistics that once we bring people into our brands, you know, they stay because what they perceive to be the value of the brand for them on a personal basis and they become lifelong.
Speaker 1: consumers for us. So we're excited about the opportunity. It's not going to be overnight, but I think we're doing everything right from a branding, from a pricing, and from a retail and econ point of view to position ourselves to gain additional shares as we go forward here in the market.
Speaker 6: Just a quick follow-up on that. Let's say we do get – you went in DC and we do get the regulatory side of things coming on board. What's your sense of the brands that will be left that can meet the high regulatory standards expected from that standpoint? And then any momentum? Let's say we do get the regulatory side of things coming on board. What's your sense of the brands that will be left that can meet the high regulatory standards expected from that? And then any momentum? Let's say we do get the regulatory side of things coming on board.
Speaker 6: or timing on HR 1629 as it seems as it gets closer to the farm bill. It's kind of a little expectation for the number of brands that can meet these high regulatory standards and what that occurs. Yeah, I'll start and then hand it to Jared to answer the timing piece. And you'll have a...
Speaker 1: much better perspective on the brands. But look, my view, and we've talked about this, is we're certainly not gonna have thousands of brands. How many we have, I don't know, but I don't suspect it's more than 20, 30 at that. And I think you'll see a lot of the brands won't be able to get through the FDA gate.
Speaker 1: obviously have to pivot and I think between now and then you'll see more competitors fall away as they don't have the capital to compete and invest behind whatever brands they do have. So I think the culling will continue and I think post regulation you'll have a very limited number of competitors in the market compared to what we see.
Speaker 3: What we're seeing and what I meant by my comments is that you're starting to see, you know, what really we call in passing this bill. There's two strategies. There's focusing on regular order and what we're calling the four corner strategy. And focusing on regular order is really just the legislative process where you have committee hearings and you start to have markup and you amend the legislation through committees of jurisdiction. And in this process, this is where
Speaker 3: Industries will unite and will engage the committees and it'll really be the industry that supports the technical drafting to ensure the final legislation. You know, reflect the best approach for the industry, which ultimately we're here for the consumer, which then gives the best guarantee to consumer access.
Speaker 3: But in that process, it's very important because we've had the FDA come in with their concerns. So for the industry to come together to also address the concerns made by the FDA is a very important process as we amend this bill through focusing on regular order. The next part is you've got, you know, the what we call referred to as the four corners.
Speaker 3: You can look at HR 1629 with 21 co-sponsors where previously have 45, 46, but by focusing on the four corners, this is where we get a little bit more strategic and we have to realize that.
Speaker 3: There's very narrow majorities in the House and Senate, and it's a very politically charged environment. So very few pieces of legislation will bake it to the President's desk this year. And in other words, meaning CBD and FDA legislation is not going to move as a free standing bill. What we see instead is...
Speaker 3: we will be focusing on what we call the four corners, which is the chair and ranking members of the Senate Health and the House Energy and Commerce Committees in Congress.
Speaker 3: By using these committees and hearing markup processes, we can catch a ride on a must pass piece of legislation like the drug pricing bill or the 2024 spending bill. And all of this really happens in the fall, but the groundwork and the process and support by focusing on these ranking committee members in Congress.
Speaker 3: is where we're at right now.
Speaker 3: we're at right now. Does that answer your question?
Speaker 6: Yeah, no, I appreciate that. That's great detail for that. And just my last follow-up here, you mentioned ReCreate. I just want to kind of follow up on that lifestyle brand launch. You provide a little bit of color of the positioning of it, but how should we look at this with the product mix or the SKU availability ahead of, you know, maybe the
Speaker 1: Go ahead Jared. I was just going to say I think you know
Speaker 1: We've launched recreate tinctures, you know, and we're going to be launching additional SKUs, additional formats in concert with the first, you know, the All-Star game in July . And then, you know, we should see some pipeline into retail later in the year.
Speaker 1: But I'll let Jared kind of take you through the needs dates and the formats that were initially going to have in the market and sort of a pipeline of what's to come. Yeah, sure. Hey, Scott. So we're looking at the brand as new targeted needs dates. I don't know if we recall we were engaged the MLB process.
Speaker 3: the lion's mane CBD which gets us into the whole new functional mushroom category which functional mushrooms what you could compare it to what CBD was four or five years ago and its growth. And then we've got a sleep product which uses a botanical passion flower. We look at our sleep gummy skews today and in the current legacy Charlotte's Web and it's our number one selling SKU but I would contend...
Speaker 3: Is that product in the CBD market or is it in the melatonin market? So this allows us to get to a sleep product with the functional botanical. Then we also have gone even further to get more active lifestyle support for you know your everyday consumer. And so we've hit muscle recovery with a tart cherry as well as endurance with a beet powder.
Speaker 3: Those are the new need states that are coming out. And then we're also focusing on what I can refer to really more as an innovation behind tinctures to support the decline in tinctures. These are spray formats. So think grab and go, throw in your gym. And these would also be need states focusing on sleep.
Speaker 3: energy endurance, and then we're also working on powder formats, which are soon to come, likely late this year or early next year, which powders, opens the door to multiple innovation formats. I think, Scott, if I could just add as well, I think we need to be clear that, you know, ReCreate is positioned against the targeted demographic groups.
Speaker 1: Gen Z Millennials, which is really an opportunity and a white space for us when you think about the consumers going into the Charlotte's Web brand. So first and foremost, very different targeted approach.
Speaker 1: In terms of the brand, how we position the brand, lifestyles, and how we price it on a more affordable basis for consumers, as I mentioned earlier, relative to Charlotte's Web. So I think the fact that the need states, the formulations, the pricing. At the same time, companies require more manufacturers with general surveillance experience, including mark-HSB Redarm WITH
Speaker 1: and the targeted demographics we're going after, and the MLB support and amplification as we go through the term of the deal with them, you know, really positions us for incrementality as opposed to, you know, running what you typically see as more of a cannibalization risk. So we're very comfortable that this unlocks an ability for us to be much more relevant with a different demographic of consumers.
Speaker 1: who can come into the recreate brand, but also have the availability as I'm going, for example, on our e-commerce platform and shopping the rest of the Charlotte's web portfolio, depending on what their specific needs and what they're looking for. So, you know, we're looking at this as a very different, it's not a brand extension, if you will, but it's a new line, new product, new look and feel, new messaging.
Speaker 5: kind of course. Please go ahead.
Speaker 7: Hi, thanks. Good morning everybody. I just wanted to talk a little bit about the margin difference between gummies and tinctures. Is there any notable difference there or is the impact to the P&L mostly on revenue?
Speaker 1: I'd say I'll start and turn it over to Jessica for any color, but it's really much more of a revenue negative mix than it is margin. Whether it's tinctures which we produce in-house or gummies that we produce today through Comans, our margins are pretty healthy across the portfolio spectrum.
Speaker 7: It's really more of a revenue mix impact than it is a margin impact, as you've seen with the margins that we put up in the first quarter. On the co-manufacturing, is there a point where the gummy mix skews higher as a percentage of your revenue that it would make sense to potentially bring that in-house? Do you guys have the capability or the capacity to be able to do that over time? Yeah, Derek, thanks for that question. The answer is yes.
Speaker 1: you know, we have the capacity. And more importantly, we've made the capital investment a few years ago. You know, recall we've put $40 million into a state-of-the-art facility where you're operating at about, I'll call it 20% capacity plus or minus. So we have the capacity, we've invested the capital. And to your point, you know, when the economics turn in our favor, we will certainly be looking at that.
Speaker 7: your, you know, when I think about your overall revenue.
Speaker 7: split or product mix, however you guys want to put it. What percentage of sales or volumes is more value focused these days versus premium focused?
Speaker 1: Again, I'll let Jessica come in, but I'd say Charlotte's Web across all of our formats continues to be priced at a premium to the rest of the competition. So we're very concerned about keeping that brand equity. So we continually look at our pricing relative to the price of our products.
Speaker 1: its web portfolio at the moment.
Speaker 1: But overall, we believe we do have a premium product that deserves premium pricing, and then it's always a question of how much is that index and where is the sweet spot for it, which we consider to be a look at.
Speaker 7: Yeah, and then in terms of, I guess, just that industry pricing, as you start to see some of these smaller scale brands.
Speaker 7: go away. I think you mentioned a thousand going to hopefully 20 or 30 over time. Have you seen that pricing change at all? Is it starting to stabilize? Any changes there just in the dynamics around pricing over the last couple quarters?
Speaker 1: Yeah, we've seen a relative stability in pricing. There's mixed impact on overall pricing as well. But as we mentioned earlier, our average retail price has grown when the categories come down. And so we've been relying less on price promotions.
Speaker 1: And when products don't turn at retail, and you don't have the brand equity, then there's only one thing you can do to move product and that's take pricing down. So we have done as we think appropriately to protect pricing and the premiumization, but we constantly need to look at the level of index of our brands versus the competitive set that remains. But.
Speaker 1: I'd say, again for us, relative stability pricing.
Speaker 7: Yeah, okay, that's good to hear. Thank you very much.
Speaker 8: Thank you. Thank you.
Speaker 4: If there are no further questions at this time, you may proceed. Well, I'd like to thank everybody for participating in our first quarter call, and we'll look forward to speaking to you again after our second quarter results in August . Thank you.