Q3 2024 Westrock Coffee Co Earnings Call
Okay.
Speaker Change: Good day and thank you for standing by welcome to the West Rock Coffee Company third quarter 2024 earnings Conference call.
Speaker Change: At this time all participants are in a listen only mode.
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Speaker Change: I'd now like to have the conference over to your first speaker today Robert Monger.
Speaker Change: Okay.
Thank you and welcome to what Stuart called the company's third quarter 2024 earnings Conference call today's call is being recorded.
Speaker Change: With us are Mr. Scott Ford Co founder and Chief Executive Officer, and Mr. Chris Pleasure, Chief Financial Officer by now everyone should have access to the company's third quarter earnings release issued earlier today. This information is available in Investor Relations section of the West Rock Harping on this website.
Speaker Change: And investors don't want start coffee dot com certain comments made on this call include forward looking statements, which are subject to the safe Harbor provisions of the problem Securities Litigation Reform Act of 1995.
Speaker Change: These forward looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements.
Speaker Change: Please refer to today's press release and other filings with the SEC for more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today.
Also discussions during the call we'll use some non-GAAP financial measures as we describe business performance. These SEC filing as well as the earnings press release provides reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures and with that it's my pleasure to turn the call over to Scott for it our co founder and Chief Executive Officer.
Scott Ford: Thank you Robert and good afternoon, everyone. It's a pleasure to be with you and I. Appreciate you spending a few moments with us getting updated on our progress.
Scott Ford: Restaurant Coffee company had a strong third quarter. Despite what continues to be a challenging macroeconomic environment for the consumer our quarterly segment adjusted EBITDA for beverage solutions was up 19% year over year and is now up 20% year to date over last year right on track with our previous guidance issued last quarter.
Scott Ford: Likewise, our sustainable sourcing and traceability segment is up 45% year over year for the quarter and 132% year to date.
Scott Ford: This is the third consecutive quarter of impressive combined segment year over year performance, which is all the more satisfying is it is essentially solely driven by improvements in our base business as the Conway extract an RTD plant will not see subsequent ZIP revenues until early 'twenty five.
While our single serve cup business remains soft as consumers continue to shop down and packaging side. These volumes have seen a slight uptick recently and we have received a major new customer volume commitments for next year that should create a material volume and profit lift for this unit.
Scott Ford: Additionally, as I explained on our second quarter call earlier. This summer we made the decision to extend the startup date for one of our larger customers and our new Conway extract and RTD plant by about six to nine months.
This decision while neutral to accretive in the long term compounded our current run rate pressures throughout fiscal 'twenty, four and we had to work hard to overcome this added pressure.
Scott Ford: Finally, because of the teams great efforts, we are now quite pleased with our financial position as we move from product launch approvals into commercial production in Conway.
Scott Ford: While painful short term refusing to be pedantic and near sided with our customers as they adjusted to shifting consumer behaviors has now secured us major new customer volume commitments for next year and single serve cups and garnered us a contract extension and ready to drink.
Scott Ford: These type of accommodations to large customers are never popular in a beat and raise this quarter's numbers market dynamic.
Scott Ford: They are the path to compounding value over the long term.
Scott Ford: Turning now to what is new news since we last presented which is the completion of a vast array of new contracts and agreements that have been converted into finished product production schedules.
Scott Ford: With volumes by customer SKU date and machine.
Scott Ford: This SKU production schedule, obviously grants us much greater clarity into our monthly financial forecast beginning in January of 'twenty five than we have ever had before.
Scott Ford: The sales and customer Onboarding work that the team has excelled at over the past two years is nothing short of a phenomenon and has resulted in more than a dozen new customers, who began commercial volume purchases in the first quarter of 'twenty five.
Scott Ford: To understand the impact of these contract wins I will simply offer one proof point.
Scott Ford: Once fully on boarded these new customers combined are expected to produce more annual EBITDA than the entirety of our current base business.
Scott Ford: This is the promised earnings power of the Conway extract an RTD plant coming to fruition as this facility transforms from a construction and product development project into a filled operational production facility.
Scott Ford: Importantly, the production in Conway has two elements for each individual product.
Scott Ford: The start date and the slope of this scale up brand.
Scott Ford: So when we look at 2025 consolidated adjusted EBITDA, we have the new run rate for single serve accounted for in our 2500 forecast. We have the large can lines sold out and scheduled for full production late in the first quarter of 'twenty five.
Scott Ford: Our second can line largely sold out and beginning commercial production in the third quarter of 25, and the glass lines sold out and going into phased in production between the third quarter of 25 in the first quarter of 2006.
Scott Ford: Finally, the multi serve bottle line is expected to continue at $50 to 75% of capacity throughout the year 2025.
Scott Ford: This production schedule in Congo. It results in a heavier volume run rate in the back half of the year than in the first half simply due to the combination of the start date and the scheduled ramp up slopes.
Scott Ford: Chris will take you through the various detailed performance and guidance data in just a moment, but let me summarize the financial and value creation impact of the update I've just given you.
Scott Ford: In 2024, and as discussed on our call last quarter, we expect to end the year at the bottom of our previously announced guidance range, while we had higher expectations for volumes. This year. The team has done an exceptional job delivering on the things we can control the.
Scott Ford: The consumer will strengthen our single serve volumes are already coming back we have accommodated the largest brands in the categories. We have been awarded additional volumes and contract extensions and we are set or a great financial return from our Conway plant investment.
Scott Ford: The combined results of our base business operations.
Scott Ford: Substantive cost controls we are now executing across the company as we exit the Conway startup mode and enter a more normal production environment, coupled with the expected results from the Conway production schedule I just walked you through should see us generate consolidated adjusted EBITDA of between 80.
Scott Ford: And $100 million in our updated presentation format for 2025.
Speaker Change: With that I'm going to turn the call over to Chris pleasure, our CFO. So that he can take you through the details of our third quarter and guidance update then I will rejoin you in order to give you an update on our strategic positioning as we prepare to kickoff 25.
Chris Pleasure: Chris Thanks.
Chris Pleasure: Thanks, Scott and good afternoon, everyone before I dive into our quarterly results I'd like to highlight the change in presentation of our consolidated adjusted EBITDA that we noted in our release.
Chris Pleasure: We have historically excluded conway extract and ready to drink facility startup costs from our presentation of consolidated adjusted EBITDA.
Chris Pleasure: Those startup costs included two categories. The first category is preproduction costs, which are non capitalized costs necessary to place our production and packaging capabilities into commercial production.
Chris Pleasure: And the second category is comprised of scale of operating costs, which represent certain recurring operating cost incurred once the capability is placed into commercial production, but before completion of production scale up.
Chris Pleasure: In response to a comment letter from the SEC staff, beginning with the third quarter 2024 results, we no longer exclude the second category scale of operating costs from our presentation of consolidated adjusted EBITDA.
Chris Pleasure: As a result, we've revised our year to date presentation of our consolidated adjusted EBITDA to account for the impact of scale up operating costs in prior periods.
Chris Pleasure: Because we did not commercializing in the Conway facility prior to our second quarter of 2024, there is no impact of scale of operating costs in any prior period other than the second quarter of 2024 in which we incurred $1 $2 million of such costs.
Chris Pleasure: While we have adjusted our presentation of consolidated adjusted EBITDA, We've not made any changes to our presentation of segment adjusted EBITDA, which is the segment performance measure we use to assess the performance of our operating segments.
Chris Pleasure: Segment, adjusted EBITDA as defined consistently with consolidated adjusted EBITDA, except that it excludes scale of operating costs related to the economy facility as.
Chris Pleasure: As we continue to commercialize and scale the conduit facility over the next year, we expect the subtotal of our segment adjusted EBITDA will converge with consolidated adjusted EBITDA.
Speaker Change: With that I'll now turn to the results for the quarter.
Speaker Change: On a consolidated basis net sales for the third quarter were $229 million flat to the third quarter of 2023.
Speaker Change: Consolidated gross profit for the quarter was five 8% over the third quarter of 2023, primarily driven by increased gross profit growth from our <unk> segment.
Speaker Change: Consolidated adjusted EBITDA for the quarter was $10 3 million and was burdened by almost $4 million of Conway scale up operating cost related to our multi serve bottle roasting and grinding and extraction capabilities. This.
Speaker Change: This compares to consolidated adjusted EBITDA in the third quarter of 2023 of $11 6 million, which included narrower Conway Scaleup operating costs for context. Historically, we would have added back the $4 million of economy of scale of operating cost and our third quarter 2020 for consolidation of net sales, which is a decrease of approximately 7% compared with third quarter prior year.
Speaker Change: Consistent with prior quarters, we continue to see strong results from our flavors extracts and ingredients platform with 7% sales growth while volumes remained under pressure in both core coffee down 6% from the third quarter of 2023 and single serve down 24% from the third quarter of 2023, despite the drop in net sales beverage salute.
Speaker Change: <unk> segment, adjusted EBITDA increased almost 19% to $11 8 million and our segment adjusted EBITDA margin for beverage solutions with F 157 basis points.
Speaker Change: And our sustainable sourcing and traceability segment sales net of Intersegment revenues were $56 9 million in the third quarter of 2024, an increase of 33% compared to the third quarter of 2023 due to a 36% increase in volumes.
Speaker Change: <unk> segment adjusted EBITDA for the quarter was $2 5 million compared to segment adjusted EBITDA of $1 7 million in the third quarter of 2023.
Speaker Change: Moving on to capital expenditures during the third quarter, we deployed approximately $36 million of Capex, primarily related to our Conway extracting RTD facility.
Speaker Change: The end of the third quarter, we spent approximately $275 million of the anticipated $315 million of our conduit facility.
Speaker Change: We expect to spend approximately $30 million in the fourth quarter of 2024 and the balance in the first half of 2025. We also plan to spend an additional $20 million in capital expenditures in Conway to install a second RTD can line, which will put into service in the second half of 2025.
Speaker Change: At quarter end, we had approximately $90 million of consolidated unrestricted cash and undrawn revolving credit commitments and our leverage continues to be in line with our expectations. As previously reported on September 30, we completed our warrant tender offer exchanging all of our private placement warrants and over 97% of our public warrants issuing five.
Speaker Change: 4 million common shares in connection with the exchange offer we obtained consent from the requisite number of warrant holders to amend the warrant agreement that allowed the company to force exchange any warrants that remained outstanding after the closing of the exchange offers.
Speaker Change: On October 16th we exchange the remaining outstanding public warrants by issuing approximately 100000 common shares.
Speaker Change: As a result, there are no remaining warrants outstanding and the public warrants had been delisted.
Speaker Change: Turning to our guidance the change in presentation of our consolidated adjusted EBITDA noted in our release and described earlier on the call also necessitates a change in the presentation of our 2024 and 2025 consolidated adjusted EBITDA guidance.
Speaker Change: With that in mind, we expect our reported $50 million of consolidated adjusted EBITDA in fiscal year 2024 under our new presentation. This includes $10 million of scale of operating costs associated with the Conway facility.
Speaker Change: This expectation correlates with the low end of our previously announced range. The big drivers of growth that underpinned. Our original 2024 guidance for continued sales growth in flavors extracts and ingredients strength in single serve cup volumes being delivered on a platform that now has all the equipment necessary to efficiently produce the volumes and the materials scalar sale.
Speaker Change: RTD cans and glass bottles from our conduit facility in the third and fourth quarter of 2024.
Speaker Change: While flavors extracts ingredients had a big year, the challenging macroeconomic environment for the consumer has negatively impacted our single serve pet volumes and the sales ramp of our extract an RTD products out of our conduit facility, leading us to the low end of our original 2024 guidance while.
Speaker Change: While we still have to complete our 2025 budget work preliminarily for fiscal year 2025, we expect to generate consolidated adjusted EBITDA between 80 and $100 million under our new presentation. This includes approximately $10 million to $15 million of Scaleup operating costs associated with the <unk> facility.
Speaker Change: The year over year growth in the variability within the 2025 guidance is driven by volume growth and the Companys core coffee business from new retail customers, many of whom were on boarded in the back half of 2024.
Speaker Change: New volume commitments from existing single serve customers on our expectation for new single serve customer wins in 2025.
Speaker Change: The full year benefit of expense savings from our cost reduction and facility consolidation efforts and the rapid scale up of our RTD can volumes beginning in the first quarter of 2025 and continuing throughout 2025 and the launch of our RTD glass products in the third quarter of 2025.
Speaker Change: We will update this guidance as part of our fourth quarter call with that I'll turn the call back over to Scott for some closing remarks. Thank you Chris.
Scott Ford: I'd like to take a few moments before we open the call to questions to give you all an update on the strategic accomplishments. This team has delivered on over the past 24 months that will begin to flow through our financial results and the context through which we look at this entire Conway plant build endeavor.
Scott Ford: I believe that owning restaurant coffee stock is not only an investment in this board executive group and operating team and whatever short term balances we encounter as we build this business.
Scott Ford: But as essentially a bit on a set of powerful global consumer and capital market trends.
Scott Ford: After recently completing a two day strategic update session with our board we are more convinced than ever that we are at the leading edge of three mega trends, which are going to create significant value appreciation opportunities over the next few years for the shareholders of west.
Scott Ford: First the continued generational transition from hot to cold coffee tea and energy beverages.
Scott Ford: Secondly, the rapid transition to high quality extracts being the crucial core ingredient in these beverages, rather than each beverage being individually brewed steep or mixed by compress consumers or barista.
Scott Ford: And finally, the continued capital efficiency focused moved from the historically vertically integrated business model of branded companies to the more flexible and higher returning outsourcing to specialized manufacturers by branded packaged food and beverage operators.
Scott Ford: We not only believe that we are at the forefront of these dynamic trends, but have some tangible proof to offer up to you and testimony to this fact.
Scott Ford: We originally targeted 4% to six CPG and private label retailers as customers for our new Conway extract an RTD facility, we have now contracted with well over a dozen such brands.
Scott Ford: We were awarded over 80% of all the contracts. We competed for in 'twenty three 'twenty four for our new conduit facility all of which began production at commercial volumes in 'twenty five.
Scott Ford: The Conway plant is now essentially sold out and our sales team now spends most of its time selling the 26 through 27 expanded production capacity.
Scott Ford: So it is built.
Scott Ford: And it is sold out and if we deliver the production volumes as planned we are not trading at a premium to our peers, but at 25% to 30% of our implied comparable valuation.
Scott Ford: I believe this perspective is the most essential view one needs to come to terms with when considering our business.
Additionally, we are asked what is the potential earnings power of our assets as they sit today after two years of plant expansions and additions.
The answer is approximately $150 million to $180 million today.
Scott Ford: But we also have room for multiple more packaging machines to be added over time.
Scott Ford: So while we do not report out on who our customers are we can give you ever more informed estimates of what those contracts produced at the EBITDA line and I hope, thereby you can see why we remain so bullish on this business and our stock price over time irrespective of the short term gyrations of the stock market.
Scott Ford: We have a very seasoned and informed ownership group and board, who today still own 96% of all the stock. They owned the day, we went public two years ago, and we have an inordinate number of ways to generate equity value over the next few years.
Scott Ford: In order to help ensure our delivery of this potential today, we announced that.
Scott Ford: We are adding a new vice chairman of the board Ken Pear, Ken is the former president of pilot flying J. He is a seasoned executive who helped build pilot from a regional travel center operation into a nationwide multibillion dollar enterprise. We're all extremely excited he'll be joining us as we move from the.
Scott Ford: <unk> and product approval phase of our conduit facility into commercial production.
Scott Ford: I'd like to thank each of you who have partnered with US in this endeavor and are now glad to open the microphones up to take a few questions from those of you who may have thank you very much operator.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please stand by while the compare.
Speaker Change: The Q&A roster.
Speaker Change: Our first question comes from Todd Brooks at the Benchmark Company. Your line is open.
Todd Brooks: Hey, Thanks for taking my question.
Speaker Change: Scott just looking out to fiscal 'twenty, five and obviously the way you laid out the visibility is entirely kept them from what it was.
Speaker Change: Coming into 'twenty four but.
Speaker Change: Yeah.
Speaker Change: Contracts with 12 major.
Speaker Change: Kind of CPG companies out there that you would talk to.
Speaker Change: With.
Speaker Change: With guarantees the slope of the ramp over 25, if there is another case.
Speaker Change: Major client needs to push the launch of <unk>.
Speaker Change: Align are there their product on your line.
Speaker Change: When.
Speaker Change: What are the key kind of start to deliver revenue.
Speaker Change: On expectations.
Speaker Change: With the contracts are calling for.
Speaker Change: Sure.
Speaker Change: Terrific question and I think there is two or three things here that are worth making sure everybody understands.
Speaker Change: First of all the the push that we gave the client that we talked about this year was.
Speaker Change: Rather rare situation and it had to do with the timing of contracts, where they are coming out of other facilities and coming into ours.
Speaker Change: We're also at that point in time on the low end of their volume ramp and rather than just being a jerk about it we moved and faded the heat.
Speaker Change: Let them finish up with some other.
Speaker Change: People that provide them product today and I think it was the right long term strategic move for us and I think it was greatly appreciated and we picked up a contract extension on the back side for doing that I'll also say, we picked up new products and the SKU from that very client for having been an accommodative helpful partner. So that has been a more than pay for itself.
Speaker Change: Back in time, I think beyond that it's important to understand in the traditional roast and ground business and in the single serve business, although slightly less so historically, we hold volume commitments for customers and then if they don't pull them down and fill them we alone eight.
Speaker Change: The cost of having had the machines and the people and the materials ready and there is no penalty if they don't pull all of their product down that's not the case in the ready to drink and extract business in Conway, where either people are going to pay for product on a take or pay basis within a range up and down.
Speaker Change: Or they will experience some increased price for the lower volumes and I think those are the two most important things to take away from the nature of the contracts in this particular situation. I'll then say the nice thing about the contracts is it forces the teams to sit down and work together on the dates and the dates have multiple milestones before you ever.
Speaker Change: Get into production you have to go through all the product development the approval the line approvals the water approval.
Speaker Change: The bacteria accounts, then you have to go through all of the various checks.
Speaker Change: And then only after that can you get into production instead of pushing people to get into commercial production in 'twenty four and then having to stop the lines and 25, we decided this year given the push out of one large customer that we pushed everybody out to spend this year getting everybody ready.
Speaker Change: So that when we turn it on in 'twenty five a later start date, we have an immediate absorption and we go straight to essentially full capacity on a run rate basis. So the slope of the take up is.
Speaker Change: Straight up if you will as we turn people one in the first quarter hope that's helpful.
Speaker Change: So just a follow up and then I'll hop back in the queue does that imply then is acceptance work is still happening in 2004. So when you talk about really turning things on and the first quarter of 'twenty FIFO, returning on straight and to commercialization or is there still a acceptance window that we're going to have to work our way through in the first half of 'twenty five thanks.
Speaker Change: Yes, so new products have to go through acceptance on their own we are continually getting new products, new skus, new formats, and we will have to work some of those in but the numbers that we've laid out for you reflect commercial production of things that we have already taken through the approval process in 'twenty four.
Speaker Change: That's helpful. Thanks, Scott.
Speaker Change: You bet.
Speaker Change: Our next question. Our next question comes from Eric Dey, Laura at Craig Hallum Capital Group.
Speaker Change: Great. Thank you for taking my questions.
Speaker Change: First one for me.
Speaker Change: <unk> EBITA growth drivers for next year, you cited new core coffee retail customers, new volume commitments to new customer wins and single serve.
Speaker Change: I guess I was just a little bit unclear on which of those were sort of already secured are signed and then which of those may be anticipated, but not exactly over the finish line yet if you could just help me understand that.
So if you start in kind of the retail if you're.
Speaker Change: Starting the core coffee roasting ground business.
Speaker Change: We've on boarded new roast and ground retail customers in the back part of this year and so that volume that's pulling through and positively impacting the P&L in the back half of this year and we will get the full year benefit of it next year and also have new volume coming on through those customers and others. So there is growth in our roast and ground business, which is.
Speaker Change: Something to be excited about the scaled platform and it needs volumes of pushing volume through it is good for the overall economics of that platform on single serve we've got new volume from existing customers that start in the first part of next year and then an expectation for new contract win in next year that will that will increase the <unk>.
Speaker Change: Volume over that platform and we would also expect to see and have seen kind of in the beginning of the fourth quarter.
Speaker Change: Some return to normalcy around single serve Cup volume Thats been soft obviously through the second and third quarter, but we're seeing a little bit more volume.
Speaker Change: Thus far into the fourth quarter and so I think the combination of those things that makes the single serve platform quite frankly returned to and become.
Speaker Change: Kind of the debt.
Speaker Change: Yes.
Speaker Change: Our ability to generate the earnings power of that platform you will see that in 2025.
Speaker Change: Alright Thats helpful.
Speaker Change: And then my follow up is just kind of.
Speaker Change: On the single serve cups, and that sort of rebound that you've seen so far can you just kind of touched on it a little bit but I'm wondering if we should think of this as sort of a return to sort of year over year growth at this point mark for sort of plateauing and the.
Speaker Change: The decline has has improved I was wondering if you can kind of flesh that out a bit more for us.
Scott Ford: Sure. This is Scott there I think Chris was.
Scott Ford: Right on in his description of the nature of the volume moves I'll try to summarize for you.
Scott Ford: It may be in between the nature and the EBITDA impact what we're seeing in the cup space on a like for like DC for DC basis is starting to firm up just a bit which is what Chris was talking about what we have been informed us we are winning more Dcs. If you will on from current customers and.
Scott Ford: We have new customers coming in and then we have customers that we did a small amount of business for this year that have new sales into next year and so it's quite possible that youre looking at a business that the industry is growing small single digits.
Scott Ford: And we would be perfectly comfortable with that but right now we're looking at being up.
Scott Ford: 60% to 80% and our volumes next year, if everything comes to pass that we're talking about.
Scott Ford: At this level and we have not assumed all of that in these numbers because <unk>.
Scott Ford: You, we want people to be pleased that we beat numbers instead of missed them, but we are talking about being on the customer.
Scott Ford: A really important step up in the scale of that single serve platform as more and more.
Scott Ford: Customers add to us and more and more new customers come to us.
Speaker Change: Very helpful. Thank you for the color.
Speaker Change: Our next question comes from Matt Smith at Stifel.
Matt Smith: Hi, Good afternoon, Thank you Scott and Chris for taking my question.
Speaker Change: When you talk about con way more than doubling the EBITDA based on the existing business.
Speaker Change: Point of clarification here.
Is that for the lines you expect to be operating exiting 2025 or is that specific to the orders you expect to have up and running in the first half I'm just trying to understand the doubling of the base business EBITDA versus <unk>.
Speaker Change: Got your concluding comments about the earnings power being more in the 150 to 180 range.
Speaker Change: Yes, great.
Speaker Change: Great question.
Speaker Change: Parse that.
Speaker Change: The earnings power of the customers that we have sold.
Speaker Change: If they were all starting on January one and they all went through December 31.
Speaker Change: We would be reporting a much higher EBITDA guidance range than 80 to 100 exactly what that would be we're finishing all the work on that.
Speaker Change: So the fact that some of them start later in the year, even some of them that start early in the year add skus through the year. We've already walked you through the glass line doesn't come on until the third quarter, then goes through a three quarter ramp so when we take all of that.
Speaker Change: Beginning date and the slope of the ramp up in you get to 80 to 100, if everything had started January one and everything was fully on board, we would be closer to $1 50.
Speaker Change: And thank you for that Scott and then as a follow up you previously talked about kind of an exit run rate in 2025, I realize you have more moving parts now given the.
Speaker Change: The nature of scale up costs are you able to provide any color on how you view an exit of 2025 or does the slope and the scale of cost kind of Optus gate your ability to have visibility into that.
Speaker Change: No I think the numbers that we're kicking around plus or minus I think we said last quarter. It should be 125 to $1 50.
Speaker Change: On the back end run rate I think that's still the right number and frankly, maybe on the high end of that.
Speaker Change: Thank you Scott I'll leave it there.
Speaker Change: I'll give you one interesting tidbit, Matt on this point I think it might help if you look at our top 25 customers for next year.
Speaker Change: Well above them do no business with us in 'twenty four and are all coming in in 'twenty five half of our top 25 customers are brand new to the business, we've never even reported a substantive dollar of revenue from them.
Speaker Change: Completely different than the business we've been running.
Speaker Change: Sure.
Speaker Change: Thank you. Our next question comes from Chevron Barra.
Speaker Change: Great.
Speaker Change: I have two questions I'll start with the.
Speaker Change: Thing those pro can.
Speaker Change: Can you help us take a deeper dive into what's happening like the volumes have been down by 20%. So can you help us understand what.
Speaker Change: What is happening there are you losing customers is that a shift in how consumers shop.
Speaker Change: Didn't know like.
Speaker Change: Deeper dive on the <unk>.
Speaker Change: Volume declines in that business.
Speaker Change: And then I have upon request.
Speaker Change: Yes.
Speaker Change: Sure. So long I think at its simplest level. The consumer is down on an apples to apples basis in single serve we've been down roughly 10% to 12% in volume of Cups, and Thats because they have gone down from a larger pack size to a smaller one so theres still shopping they are still shopping every week.
Speaker Change: But they are buying a smaller package and they are stretching it out to make it work.
Speaker Change: In and.
Speaker Change: And out of the actual consumer flow through on an apples to apples basis. We've had some places where we lost Dcs, which we had in the beginning of the year and Thats part of our volume drop year over year. That's the biggest part of it I think and then we have recently won a bunch of new Dcs that will come in in the first part of <unk>.
Speaker Change: Next year and Thats that bridge is what we're trying to help people.
Speaker Change: Work their way through larger what else would you say on that front I think that's true I think you are see Eamonn you continue to see kind of at home coffee consumption has been a little muted. This year, that's not unique to our business you've heard other folks talk about it but I think you're also seeing is kind of the inflation gap between in home and out of home.
Speaker Change: Lessons is that gap get smaller I think youll see youll continue to see.
Speaker Change: More growth in the at home space.
Speaker Change: Got it and I have a question on the comp maybe I am sure you ran through the scenarios, but for that one large customer we're pushing all the products and for life and on next year and even.
Speaker Change: Bottling plant in third quarter or so.
Speaker Change: Got upset some of your other 11 customer that you are.
Speaker Change: And when.
Speaker Change: Does it not push them off.
Speaker Change: Second question is does it not like deep can you knock on ships.
Speaker Change: I think it's almost ready.
Speaker Change: Last slide over the summer. So can you not run ships on the products in line.
Speaker Change: We are already there just mathematically to pull it off I'm just curious to know the thought.
Speaker Change: No it's really around it's really around being able to complete the commercialization work for all of the customers. So that as we start 2025 from a from a on a can line for Mccann volume perspective that we're starting a very steep ramp on sales volume as we start 2025 and.
Speaker Change: The exciting thing is.
Speaker Change: The first can line like Scott that is sold out.
Speaker Change: Can line ramps in the first half of the year. We had the second can line that will start towards the beginning of the second half of the year, that's able to off take volume off the first so that we can increase the speed of the first and have new volume throughout the year. So that the volume sales ramp on our on our canned products is going to increase throughout the year, which gets you.
Speaker Change: The exit velocity that Scott was talking about first and so the push out of the other customer doesn't really impact.
Speaker Change: <unk>.
Speaker Change: It's just really about making sure that from a timing perspective that we've got that was going to be our big customer for cans.
Speaker Change: In the fourth quarter of this year and kind of ended the third quarter that volume is not going to be there thats going to start in the first quarter of 2025, and so we're taking the time to make sure that we're ready for all of 2025 kicks off we're ready to roll.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Our last question comes from Bill Chappell at Shirley Securities.
Speaker Change: Hi, This is David <unk> on for Bill Chappell.
Speaker Change: So we've been hearing from some other companies that the RTD coffee category is slowing and we were just wondering how that might be impacting your business or the contracting process or your outlook going forward.
Yes.
Speaker Change: One of the things that these guys at a large scale have is they have multiple places to have product manufactured and so whether the market is growing 8% or shrinking 8%.
Speaker Change: Just like in the single serve Cup example, Emilio the important thing is that we that we take share.
Speaker Change: And then if the market grows over time, you take share in a growing market. That's how you really stacked chips up so we've been taking share and that share coming on is enough to.
Speaker Change: Double triple quadruple our earnings over the next short few number of years just from the share that we've won irrespective of what the category in the hole is doing.
Speaker Change: Got it thank you.
Speaker Change: So my point was on single serve single serve can be growing 2% and we're likely to grow 60% next year from share right.
Speaker Change: The opt in states in the short term when especially when you are turning something on.
Speaker Change: It dwarfs.
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Speaker Change: Underneath it.
Thank you. This concludes our question and answer session I would now like to turn it back to Scott <unk> for closing remarks.
Scott Ford: Well. Thank you guys for getting on the phone. We appreciate it. Thank you for your questions.
Scott Ford: Where we are be glad to answer any follow ups that you have got and I know that this is a busy time of year and we will wish you all a good evening. Thanks, so much.
Scott Ford: Okay.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
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