Q2 2023 Zevia PBC Earnings Call
Welcome to the <unk> second quarter 2023 earnings conference call.
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I would now like to turn the conference over to Reid Anderson with ICR. Please go ahead.
Thank you and welcome to <unk> second quarter 2023 earnings conference call and webcast on today's call are Amy Taylor, President and Chief Executive Officer, and <unk> Chief Financial Officer.
Now everyone should have access to the company's second 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 CDN dotcom.
Before we begin please note that all the 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 <unk>.
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 a non-GAAP financial measures as we describe business performance the SEC filings as well as the earnings press release and 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> com.
Now I'd like to turn the call over to Amy Taylor.
Thanks, Ron and good morning, everyone and welcome to the Q2 2023 earnings call for <unk>.
Before we address the supply chain disruptions I'd like to provide an update on the fundamental is immediate.
Medians brand remains healthy demand is strong and accelerating as the brand refresh rolled out in velocity continues to grow at double digit rates.
Our price increase has been well received reinforcing our premium that accessible positioning and.
And supporting our gross margin improvement we remain in a strong cash position, even while investing in initiatives to strengthen the brand and the operations for the future.
<unk> spending on the brand is up for household and for Tret.
Order book reflects demand and keeping with our expectation.
And as we pre announced our net sales for Q2 were materially impacted by interruptions to our customer fulfillment.
Interruptions are short term in nature.
Are the result of missteps in our supply chain transformation efforts the transformation of media supply chain is a critical initiative to support our continued growth enhance our customer service and drive efficiency and ultimately materially reduced costs as we scale, but that said, we experienced some pain points in the transition.
<unk> to new which I will detail here today with a focus on the actions we are taking to course, correct them and the expectations going forward.
Main message I would like for you to take away from today's call is that anemia has significant long term potential and the broader value proposition remains one of the most relevant in all of beverage a very exciting category devious demand reflected in velocity data via scan, which measured over 21% for the quarter.
Demonstrates that the brand and the product portfolio to meet the needs of today's and Tomorrow's consumers.
The steps, we are taking continue to bolster margins and improved profitability, reflecting the exciting potential in the years to come.
Customer fulfillment challenges are short term and the supply chain will be stabilized by year end and optimize for 2024.
He is mission focuses on global health for people and the planet and in Q2, we removed another 3.1 thousand metric tons of sugar from consumers diets and never having sold a plastic bottle.
It's more affordable than 65% non alcoholic beverages in North America, even as we realized price in keeping with the market.
Our continued focus is taking better for you beverages mainstream making them available and affordable for consumers across all income levels.
So I will walk us through second quarter results, and then speak to our focus now and going forward.
We delivered net sales of $42 2 million below expectations for the quarter.
<unk> was strong and bolstered by the brand refresh and double digit retail sales growth with sustained where service levels were not interrupted as is clear in select customers and across the market and our scan data.
Our order book was at or above expectations across the quarter gross margins continued to improve we've demonstrated strong cash management disciplined adaptations to our promotional strategy and price increase implementation with a strengthened key accounts team as we've moved from a field sales model to a national account focus this year.
We've realized immediate benefit from the strong brand refresh and we believe collectively these initiatives will reinforce our foundation and position us to deliver on our ambition of sustainable profitable growth.
I'll speak to our consumer base evolution and retail indicators be a panel and scan data insight and then I'll walk us through the measures we are putting in place to address customer fulfillment maybe.
He is household penetration remains above 6% and Cvs households increased their brand spend by 6% once again driven by another 9% increase in spend per trip with consistent purchase frequency rates.
Strong indicators of the health of our brand and our user base.
We also saw strong new item performance in the form of Vanilla Cola single can soda sales and 12 packs.
The most important scan metric of a quarter is velocity sales per point of distribution.
<unk> grew velocity 21, 3% in the quarter demonstrating that when stock video remains double digit growth Brett.
The Zumiez shopper is a highly desirable one less price sensitive at all income levels, we remain a home stocking brand, which remains a competitive advantage as we simultaneously build our singles business and grow cold availability, which are key to driving brand trial.
DDA shoppers spend 40% more on beverage versus total non alcoholic beverage shoppers are shoppers also make 32% more trips to stores to purchase beverages Cvs shoppers continue to differentiate themselves. Even further from average beverage shoppers as they continue to spend more on the brand and overall.
Our promotional effectiveness continues to increase which supports profitability, but also informs our retail strategies going forward, we had 25% fewer dollars sold on promotion in the second quarter versus prior year.
And continue to improve lift in other words, we sell more <unk> on the merits of the brand to new and existing consumers.
We continue to grow in legacy natural channel retailers and expand in mainstream channels.
We've established incremental pull distribution with our single sodas across natural now our fastest growing pack format. There growing trial with new shoppers, we're gaining single soda distribution in conventional grocery as well and we have new energy drink distribution in the west Midwest and east regional chains, one of the countries.
Top three drug chain is moving <unk> to the carbonated soft drink Isle nationwide starting in September and finally, we have a very strong performance in the carbonated soft drink Isle in test stores and the world's largest retailer and we anticipate continued expansion in that chain with resets in 2024.
CBA has performed at or above expectations with each expansion into mainstream channels, which bodes well for future customer and channel expansion.
So I will now direct our attention to our broader operational efforts and address customer fulfillment.
In the past year, we have redefined the CVA brand through new positioning and packaging. We've entered the new singles business expanded distribution launched top performing flavors and formats built a professionalized key accounts team successfully taken three price increases in keeping with the category and have step changed course.
Management and cash management.
At the end of Q1, we also endeavor to supply chain transformation to deliver a streamlined efficient and effective supply chain built for scale.
This is the right initiative for Ziv, yet and will deliver strong results when complete.
We have experienced short term missteps and its execution, however, with material impact on net sales for Q2 that we expect to continue in Q3.
As we consolidate our warehouse network from 27 locations with Kevin.
Partnering with two capable and proven partners, we encountered challenges, which impacted inventory management and SKU level inventory transfers.
And then accuracy and timeliness customer deliveries and we have taken the following steps to course correct. Firstly, we've hired a new SVP of operations and Chief supply chain Officer, and Bill Williamson, who joined US in July for Monster energy.
Bill has also hired already three new experienced supply chain manager level contributors to step change in house operations.
Secondly, we re phased transition plans for our warehouse network leveraging legacy providers for support through the transition with ample days of supply across all screens.
Thirdly, we established new practices for customer mapping and customer ordering to support fulfillment effectiveness and efficiency.
Fourthly, we changed our approach to freight to improve service levels and reduce cost and then finally, we sold our company owned warehouse to divest of the mixed model and embrace our efficient third party network. This transaction closed in early Q3.
As evidenced in our velocity data via scan demand remained strong.
Our raw materials and finished goods supply and forecasting capabilities are strong.
Short term issue centered around logistics and customer fulfillment and the steps required to fix that are clear and are in place.
We have a long history of strong customer fulfillment with our retail partners and are providing a high level of transparency through this transition to them protect distribution and support future expansion with our retail partners.
I'll wrap with a big picture and turn it over to Denise.
Maybe it has a very healthy brand and business model and continues to experience strong consumer demand increasing spending per household on the brand.
We are realizing price in the market with strong consumer acceptance.
And we continue to grow velocity legacy retail partners and in new distribution, and we are delivering strong and improving gross margins.
And our number one priority in the meantime is to stabilize our supply chain returning to our best in class service levels and putting the network transformation back on track so that it delivers a long term objective of driving sustainable profitable growth.
And then I'll hand, it over to Denise.
Amy and good morning, everyone I will begin with an overview of our second quarter financial results discuss guidance and then open the call for your questions.
In the second quarter of 2023.
We delivered net sales of $42 2 million down seven 2% versus same time prior year.
We did see positive impacts from our strong implementation of our price increase in the quarter, coupled with our price increase from August 2022, which delivered a positive impact of $3 6 million offset by decline in volumes of 16, 8% or $6 9 million due to the supply chain disruption.
Lower order fulfillment.
But the key fundamentals of our business remained strong as shown in our gross margin adjusted EBITDA and cash management in the period, which I will discuss next.
Our gross margins continued sequential improvement with our strongest margins yet as a public company at 46, 6% for the second quarter of 2020 342 points above the same quarter, a year ago, primarily due to the impact of price increases and tailwind from lower aluminum costs.
Set by lower volumes and slightly higher manufacturing costs associated with higher fees as a result of inflationary pressures and labor rates.
Gross margin also improved sequentially by 20 basis points versus Q1 2023.
Gross profit delivered in the period was $19 7 million up $12 4 million or one 9% versus a year ago.
Selling and marketing expenses increased one 4% to $16 1 million, reflecting increases in freight and warehousing rates 69 cents per unit or <unk>.
88% year on year increase in costs, primarily due to the supply chain transformation initiative and disruption and additional investment in marketing in the period of <unk> 2 million.
G&A expense was $6 2 million or 14, 7% of net sales in the second period of 2023 compared to $9 8 million or 21, 6% of net sales in the second quarter of 2022.
Decrease of six nine points as a percent of net sales.
The year on year decrease was attributable to lower employee call discretionary spend and public company cost.
Stock based compensation, a non cash expense was $2 4 million in the second quarter of 2023.
Compared to 8 million same time last year.
Net loss was $3 9 million compared to a net loss of $11 1 million in the second quarter of 2022, an improvement of $7 2 million or 64, 6% as compared to the second quarter of last year.
Loss per share was eight cents per diluted share of class a common shareholders compared to a loss per share of <unk> 27 in the second quarter of 2022.
Adjusted EBITDA loss was $2 6 million compared to an adjusted EBITDA loss of $6 4 million in the second quarter of 2022, a year on year improvement of $3 8 million or 59%.
Our balance sheet remains healthy with $47 million in cash and cash equivalents and no outstanding debt as of the end of the second quarter of 2023 as well as an unused credit line of $20 million.
Working capital at the end of the period was $78 4 million.
Turning to guidance.
2023 annual net sales guidance is $163 million to $168 million, including 38 million to $41 million.
In Q3 of 2023, which reflects our expectations that the supply chain logistic challenges will continue to have a material impact on Q3.
While we do not provide guidance on gross margins and adjusted EBITDA, We do expect costs associated with the supply chain transformation and current supply chain disruption to negatively impact both our gross margin and adjusted EBITDA over the remainder of the year as we invest to complete the transformation and take corrective action.
To resolve the disruption.
That concludes our prepared remarks, we will now open the call for your questions operator.
Thank you we will now begin the question and answer session.
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Today's first question Bonnie.
Bonnie Herzog with Goldman Sachs. Please go ahead.
Alright. Thank you good morning, everyone.
I am Tony I had a quick question first on the underlying demand that you mentioned their products just wanted to confirm that you know you saw demand actually accelerate month to month in Q2 or should we think about it more as just broadly remaining pretty strong are consistent and then just.
Curious how demand has trended you know in July and early days of August so far and if you could share.
Sure. So we saw strong demand growth year over year year to date throughout the first half of 2023.
And then in the in the month of July we saw acceleration.
So as promotional dollar investment has reduced in part out of necessity.
Our lift has improved and our velocity has accelerated.
So we're just looking at July .
Data scans.
Scanner data through July 17th.
We saw for example is seven out of our top 10 retailers.
Hosting improvements versus prior period, and soda scan sales on materially reduced.
Promotional dollars and all posting accelerated dollar growth so hopefully that answers your question Bonnie.
No that was helpful color and then.
My second question I guess is on your full year guidance, which you know now calls for quite a bit of topline improvement in Q4, just based on what you're kind of shared regarding Q3. So.
I was hoping to better understand the visibility and confidence you have that you'll see this type of improvement in Q4, and then you know I recognize it's early but just any thoughts on you know.
Your topline growth you know the acceleration next year and beyond you know just thinking about what's you know what do you think that's a realistic roadhouse for.
Or your business you know in light of everything you you've been working on whether it's the brand refresh the investments you've made extra eyedrop. Thanks.
Sure. So the fundamentals are obviously in place that we can see in velocity that the brand health is strong and that the brand refresh is already having an impact with or without incremental marketing dollars spent by simply driving on shelf visibility and trial, so new consumer trial and demand throughout the year has.
<unk> strong we haven't experienced any loss of space at retail with our recent customer fulfillment challenges. So a return to growth is simply a matter of how quickly we can return to normal customer fulfillment levels and I think that explains our bullishness on on Q4, just being able to actually realize the impact of net sales.
Consumer demand and our outlook for the future remains bullish. So we are a double digit growth brand you can see that in our velocity. We expect it to return its scan sales and of course in our shipments and net sales and we also expect distribution expansion to support in 2024, such that we're growing based on.
Our balance between velocity and distribution growth.
Also had a strong response to price increases that we've put into the market. So that indicates that we have further room in price as well. So in 2024, we would expect growth from price and then a nice mix between velocity and distribution expansion.
Okay, just maybe I want to confirm something and then I'll pass it on so to be clear that's super helpful. And then just thinking about the supply chain disruption and the work you're doing to resolve it.
Should assume that will be fixed throughout Q3, and that's really where you're going to face you know still some impact, but then by the time, we hit Q4 things well.
Accelerate you know getting the underlying demand et cetera.
You're definitely right about the acceleration in Q4, and then just to clarify with regard to the timeline on recovery of supply chain back to the fully on small and really best in class fulfillment levels that we sustained in the past, including through Covid and through the aluminum can prices, we've always been quite competitive and reliable there.
And so we expect the timeline there as we've said to be by or before yearend. So definitely impacting Q3, it'll take months and not weeks to fix.
We do expect to be in good shape by or before year end body.
Okay.
Very helpful. Thanks, so much.
Thank you I appreciate it and our next question comes from Christian <unk> with Bank of America. Please go ahead.
Good morning, you have Christian on for Brian . Thanks for taking our question Denise I believe at the end of your prepared remarks, you mentioned, how the supply chain transition will negatively impact gross margins and operating expenses for the third quarter can you share the magnitude of that impact should we expect gross margins.
<unk> to decelerate this upcoming quarter, they've been trending in that mid 40% and just.
The magnitude of.
The impact on selling and marketing expenses.
For instance, it came in higher than we anticipated this quarter I don't know if there was.
A onetime cost this.
This quarter that you could share with us. Thank you.
Sure good morning.
And so and gross margins, we expect it to continue to be in the mid Forty's and though we expect to see pressure, we expect it to remain in the mid Forty's on adjusted EBITDA, We expect it to be lumpy costs theyre going to accelerate selling costs, primarily in the in the third and fourth quarter we.
That will happen through the rest of the year, primarily related to what's happening with supply chain. So we don't expect it to be at the levels you see Q1 and Q2. However, we do expect that we will see some normalization late in the fourth quarter.
Does that give you.
That answer your question perfect. Yeah. That's very helpful. And then just one quick follow up for me just any early reads from the brand refresh what are retailers and consumers, saying and just.
Now what are some of the internal metrics you guys use to that you guys are using to gauge the success of the brand refresh.
Yep overtime the brand refreshes job is to expand our household penetration is to win new consumers and to build brand health through the.
Blends of image.
And then and brand love and loyalty and so obviously far too early to measure success based on this but early indicators would be our retailers engaging our retailers see the in store visibility improvement that comes through the brand refresh Merit increase space Merit increases increased frequency of display and various engagement and <unk>.
<unk>, where we were still fairly new in the games, such as energy and based on those anecdotally, we're very happy with the brand refresh its driven a lot of engagement as both retailers and consumers consider the new look and feel to present, a premium but accessible Brandon first of all our relevant brand anecdotally from consumers be it on social media or repos.
Influencers postings Evs things easier fits my vibe now, we're seeing a lot of positive feedback, but again, it's early days and this is very anecdotal I think one of the more important and folks to share is from one particular top retailers, where we have been able to maintain in stock levels for the period because of ample shelf.
Sort of holding power off shelf displays and strong execution and in this particular retailer growth has been consistent since the beginning of the year, but accelerated to 22% in the period ending July <unk> with the brand refresh in store in the same time, reducing our promotional spend by 20%.
And so I highlight this just to say it is our belief that we are selling <unk> Z beyond the merits of the brand post brand refresh.
That will continue so we're very bullish on the brand refresh delivering trial expanding consumer base expanding in store presence and ultimately helping to improve lift efficiency and growth on the merits of the brand. So thanks for the question Krishna.
Thank you I'll pass it along.
Thank you and our next question today comes from Jim <unk> with Stephens. Please go ahead.
Oh, good morning, guys. Thanks for taking my question.
And I wanted to ask on the acceleration once the supply chain is kind of Reoriented is that's going to come just from better kind of in fill rates and having all the products on the shelf and having several skus D or is that you know why.
Wow.
For displays and GAAP displays.
More visible to consumers outside of the kind of traditional in our product offering.
Jim you're doing a great job of breaking down both reasons. So effectively we know the demand is there and in fact, if I can give you a little bit more color.
If we had filled our on shelf and display GAAP.
For the quarter, that's still rate would have bolstered our scan sales at about $4 million and it would've reflected growth rates from a scan perspective of 17%. So meeting our expectations. So to answer your question. The return to growth in other words to have our net sales reflect what our actual demand is.
It will be a product with both things that you mentioned, which is silly depths of shelf to avoid individual flavor and SKU out of stock on shelf as well as returning to the ability to execute display activity and to drive incremental promotions into interrupt shocker shoppers at multiple parts of the store. We're currently having to back off.
Off of that to a degree based on our customer fulfillment issues. So as soon as we're able to fulfill the demand. We're able to then also drive in store presence. So yes, both shelf and display returned to sort of doing their jobs media when customer fulfillment comes back online and in both of those execution considerations helps us fulfill that underlying demand.
And we expect that further accelerate given the brand refresh positive early indicators does that help Tim.
Yeah, that's great and then maybe if I can ask a question on club too.
So at least in my area, we have the T offering in club one with the 30 pack for the start of Q.
Is there any opportunity for energy and club with multi pack for energy or to get more broadly distributed I'm not sure. All representative by area is relative to kind of the broader club distributions, but do you think that you could run it with.
A soft drink SKU in energy SKU and the tea SKU across club.
We absolutely believe that we can't Jim and that is our intent and just with soda has positively surprised every regional buyer in club that has chosen to double down on previous soda. We're in the early days of T rotations as you've observed and again, sometimes doubling expectation so minimum hurdle rates with <unk>.
And we're very early in the energy drinks business, we're seeking to drive energy drink starting now based upon the brand refresh because we wanted to put the new look and feel the energy in front of the consumer and broader brush visibility versus the old look and feel we feel that the new design materially better represents our position as a clean.
And pure energy option at a premium but accessible price with awesome taste and this is the feedback that we're getting so we believe the club distribution could be an exciting way to continue to reach more consumers with the energy proposition as well so yes to the future of tea in club and yes in the future of energy in club as upsides.
Okay, great. Thanks, I'll pass it along.
Thank you.
Thank you and our next question comes from Sharon Zackfia with Telsey Advisory Group. Please go ahead.
Great. Thank you guys.
Saddam Rudolph with Dana Telsey.
First question is on the supply seems like.
Based on your comments certain customers had strong sales certain did not so can you provide a bit.
It'd be pushed up and can you provide color on.
The supply chain impact is easy no did impact certain customers.
In particular brands like EUR Colo, just curious to know a little bit more on how that impacted.
The current guidance.
Yeah. So thank you for the question I would say unfortunately, the customer fulfillment dynamic was pretty even across the country from a geographic perspective, and while it did not have an outsized impact on individual customers more than others.
Some instances when customers have ordered higher level of stocks in the past they've remained in stock further into our challenge periods than others, and thus had better performance in some instances we were able to.
Promotion.
So big sure that retailers with promotions remain largely in stock, but that was challenging across the country. So I think the simplest way to answer. Your question is it through the lens of customer category and geography, the impact is relatively equal across the country and so we're taking swift.
Action as I've mentioned in the prepared remarks to fix that and Bill Williamson, who started with US in mid July and then full time at the end of July as is brought on three new people in creep up key functional areas to drive improvement he stood up tools and processes necessary to support the team function. During the transition he has demonstrated the ability to drive <unk>.
With decisions with confidence leading the team understanding their daily tasks and then it's slowing our exit from some legacy warehouse providers to support our service levels. During these changeovers and then it's just operating with tremendous energy and impact with our team and then with our third party partners out of the gate. So we're bullish on returning across.
Geography customer and category two best in class service levels.
That's great and just on the brand refresh.
At this point.
Packaging labeling is that being done across all of your <unk>.
Profiles like everybody has been rebranded now the next step is just marketing and distribution is that a fair way to think about the brand refresh steps.
That's right so right so everything coming off the line now is new brand as Evs. So everything we're producing now with fully worked through from a production perspective, the old look and feel and at retail that will vary and how quickly that sells through because as you know, we're taking a rolling approach to to the launch and so some color.
<unk> for the next several months will feature for example, new and old DVT on shelf at the same time as old sells through we don't have any shelf life issues and we can handle that transition through year end. So I think by the end of the year will be fully to bright but in many individual customers and in some geographies with faster volume we already are fully.
<unk> locked with new look and feel on shelf.
That's great. Thank you.
Thank you.
Our next question today comes from Chris Carey of Wells Fargo Securities. Please go ahead.
Yeah.
Hey, everyone.
Hey, Chris.
Right.
So I guess.
It sounds like.
The supply chain issues are not impacting the support you're getting at retail.
Typically when you have such situations.
You put in the penalty box.
For a certain amount of time.
Work your way back then.
Guess, what I'm hearing.
A lot of bullishness that once the supply chain headwinds.
None of that really will be.
A dynamic for CBS .
Are you actually getting.
Even more support.
And so as that.
Like a fair way to characterize the situation and.
I guess, if so why do you think that is it just that the brand performed so well once it's on shelf. So any perspective, there would be helpful.
Yeah, Thanks, Chris I really understand your question and and it wouldn't be accurate to say this misstep is without impact right.
There are two factors I think that help us sustain relationships.
And drive initiatives in retailer with minimal interruption. One is that we stand on a legacy of best in class service and as I mentioned before in all through Covid and all through the aluminum can crisis are our fulfillment rates, where we're virtually uninterrupted. So I think we have some credibility and sort of calling the ball on that end and chartering.
Of course, two to sustain best in class service as soon as we stabilize but secondly, we've just been.
Very transparent coming to our retailers' regularly updating them on our outlook getting at sort of a po level, giving them to the best of our ability expectations on when and how it can deliver for them. So we're doing our best to be a good partner.
And work together with retailers on mitigation plans in the short term disruption, but also standing on credibility from the past. So I don't think it would be fair to say were without impact, but I don't anticipate that we're losing space and thats. The most important thing is that we protect our space. During this period of time and then we return to expansion.
And display activity and in store activation once we're stabilized so.
Hopefully that answers your question Chris.
Yes.
That's a good perspective, the only other one would just be.
Yeah.
It sounds like there is not really going to be a trade off as.
As sales come back that youre going to be.
Vesting behind the sales are.
Get back on gross margin or for marketing.
Said another way.
Sales come back margins remain at this higher level, just wanted to make sure I understand that'd be useful.
Yeah, I think so.
So as Denise said before we expect margins to remain in the mid Forty's I think similar to the answer to your last question. It would be inaccurate to say were unaffected by our challenges in the supply chain, meaning there will be some costs.
On that and adjusted EBITDA as a result, reflecting matters like AR increased selling costs will be lumpy and the outlook for the year. So it would be inaccurate to say were unaffected in Q3 from a cost perspective, one thing that we are doing is making some phasing adjustments.
To optimize our marketing spend in light of the in stock issues, but we are driving sampling locally close to the point of purchase in four markets, where stock levels have been largely intact and then we have do creative hitting the market in the coming months in the form of Jude geographically targeted omnichannel channel campaigns to support top of funnel and brand building. So it will.
Investments into the brand and there will be a cost to stabilizing the supply chain.
Let me see if you have a follow up question, there and if if Denise can provide color.
I think I'm, Okay, I got it so would you expect a little bit of Lumpiness as your.
Adjusting for costs that you'll be facing marketing I think I understand.
Okay. Thanks, Chris.
Okay. Thanks, so much.
And our next question today comes from Andrew <unk> with BMO.
Please go ahead.
Hi, This is Daniel gold on for Andrew Charles Thanks for taking my question.
Sure how you're thinking about hi, good morning, how are you thinking about the changes to go to market with the brand refresh is it more of this year versus next year and some of that shifted or is it more about depleting the products with the original park.
Sure. This is the most important thing about the brand refreshes that it impacts in.
In store visibility.
<unk> brings brand relevance and Pops.
For the consumer in their hand, as well as on shelf and in store and dollar for dollar. This is the most efficient investment a brand can make you can really only do it once but that's happening right now and rolling out in store with impact in 2023. So the brand refresh on its own merit is on schedule and will bring its own impact of lift.
Increased trial, and we expect increased distribution as well, but we will start to ramp up marketing investments against it more in 2024 as I mentioned before informed by the learnings of some forthcoming omnichannel campaigns in the next few months. These are moderate spend.
But we can learn from the tactics used in these omni channel campaigns in order to inform our marketing plan for next year. So to answer your question the brand Regs refreshes Rolling out now as planned it supports the brand by driving in store visibility trial and pull through in the interim and then we'll support it further with marketing activation.
Light touch this year and more significantly next.
Got it.
What are the long term implications now that you've gotten more favorable shelf space with the brand refresh.
Sure. So you know shelf the number one driver of awareness for beverage generally speaking for most brands as in store.
And the biggest opportunity for <unk> to drive awareness and trial. So as we expand space, we expect that that improves awareness trial and it takes consumers down the funnel to support our net sales. So it is the expansion of shelf space in same store sales as well as expansion of new store selling.
And do channels that are fundamental drivers of our growth for several years to come there's a lot of opportunity ahead, yet closing distribution gaps in the mass channel be it expanding further in club being winning dollar channel, finishing out drug where we're growing quickly now and then ultimately cracking into.
Single can sales an impulse purchase throughout convenience and foodservice. So you can see how expansion is facing same store selling supports velocity, but we also have a lot of upside in distribution to be gained.
Right. Thank you that's all for me.
Thank you. Thank you ladies and gentlemen, this concludes our question and answer session.
The conference back over to Andy Taylor for any closing remarks.
Thanks, very much everyone I'll, just close by reminding us all that devious brand is as healthy as ever our philosophy is very strong volcker bolstered as we've discussed by an exciting brand refresh hitting the shelves now and our gross margin expansion and strong cash position further indicators that our fundamentals are in place and so we see a clear path to return.
Turning to our best in class service levels in the coming months to support our sustainable and profitable growth. So thank you for spending time with us This morning.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation.
Obviously, that's one of those rewards for that.
Yeah.