Q1 2025 Oatly Group AB Earnings Call
Good day and welcome to the old lease first quarter 2025 earnings conference call. All participants will be in listen only mode. So do you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask question.
Speaker Change: Last question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference call over to Brian Kearney VP of Investor Relations. Please go ahead.
Speaker Change: Good morning, and thank you for joining us today on today's call are our Chief Executive Officer, John Kristoff, Blizzcon, our global President and Chief Operating Officer, Daniel <unk>, and our Chief Financial Officer Murray just Debbie.
Speaker Change: Before we begin please review the cautionary statement regarding forward looking statements and other disclaimers on slide three which are integrated into this presentation and includes the Q&A that follows. Please also refer to the documents we have filed with the SEC for a detailed discussion of the risks that could cause actual results to differ materially.
Speaker Change: Really from those expressed or implied in any forward looking statements made today also please note on today's call management will refer to certain non <unk> financial measures, including adjusted EBITDA constant currency revenue and free cash flow. Please refer to today's release for a reconciliation of non <unk> for us.
Speaker Change: Financial measure to the most comparable measures prepared in accordance with item for Us in addition.
Speaker Change: Posted a supplemental presentation on its website for reference with that I'd now like to turn the call over to John Kristoff. Thank you, Brian and good morning, everyone.
Speaker Change: Slide four Q.
Speaker Change: <unk> I want you to take away from today's presentation.
Speaker Change: You mean, the Helios use the wood pulp.
Speaker Change: Not today.
Speaker Change: I believe the biggest take away from today is that we are making progress to Waldo no style of structural consistent profitable goals as.
Speaker Change: As we discussed last quarter, we believe the significant transformation over the past two years and we've all felt good in the first quarter of 2025.
Speaker Change: In this first quarter, our financial results came in largely as we expected.
Speaker Change: And we made progress on our top line.
Speaker Change: Cost structure and cash flow.
Speaker Change: Today, you will hear more from them yet.
Speaker Change: The both how we are executing on our 2020 priorities.
Speaker Change: These 2025 anti <unk> or.
Speaker Change: The overarching theme of disciplined allocation of resources in order to create value and.
Speaker Change: And we believe that is exactly what you should see you know results.
Speaker Change: We have been allocating resources with the goal of igniting positive momentum in our business.
Speaker Change: These kids all seems that'd be time people and capital to engage with customers and consumers in the unique way that only.
Speaker Change: D C cab and.
Speaker Change: And we are starting to see results.
Speaker Change: We are being disciplined in D. C colocation and we are generating the fuel for these investments by simply continuing to drive efficiencies throughout the company.
Speaker Change: In the quarter, we continued to make progress in driving efficiencies in both self seemed like Chad and SG&A and we redeployed a portion of those savings TOBA gold focused investments.
Speaker Change: We believe this progress keeps us on track to deliver our first full year of profitable growth as a public company.
Speaker Change: Therefore, with one quarter left because it's behind us and we've talked planned for the rest of the year or full year guidance remains unchanged.
Speaker Change: Slide five shows a summary of our quarterly performance.
Speaker Change: I am proud to report that we have made progress on many of our key financial metrics.
Speaker Change: It is a big Echo nation for the teams at fault. So over the past two years to see that the our first quarter results for gross profit gross margin adjusted EBITDA and free cash flow.
Speaker Change: Sure.
Speaker Change: First they have been since our IPO.
Speaker Change: Our topline performance was a bit me so.
Speaker Change: Why do we grew volume a solid nine 2% in the quarter with most of the strong volume growth you know greater China segment.
Speaker Change: And so did volume both in Europe and international.
Speaker Change: Constant currency revenue growth was <unk> seven in the quarter.
Speaker Change: As we entered 2025, we plan for our first quarter topline growth to be below the full year guidance level.
Speaker Change: Why do we made good progress and even outperformed our expectation in several markets. We continued to face some challenging dynamics in North America, where we have not yet fully deployed resources. So a nice positive momentum.
Speaker Change: We believe the investments we are making combined with our action plans to drive positive momentum will enable us to accelerate total company goals later this year.
Speaker Change: Now I will turn the call over to Danielle to give you a more detailed update on how we are progressing on our 2025.
Danielle: Thank you J P and good morning, everyone.
Danielle: As a reminder, our 2025 priorities are to ignite positive momentum globally.
Danielle: Aggressively pursue cost efficiencies to simplify and generate fuel for additional demand driving investments.
Danielle: And to deliver our first full year of profitable growth as a public company.
Danielle: First to ignite positive momentum globally, we're executing against three pillars.
Danielle: Increasing our relevance to customers and consumers.
Danielle: <unk> barriers to conversion, most notably preconceptions on taste and misinformation is home health.
Danielle: Increasing the availability of our products to consumers.
Danielle: The first pillar is relevance rooted in a fantastic portfolio of products that consumers love.
Danielle: Power Barista family is second to none as demonstrated by its velocities and continuous growth.
Danielle: It has changed the game.
Danielle: It grows into occupying more usage locations channels and price points. It is best place to leverage the growing momentum in the coffee and beverage space.
Danielle: You should expect us to continue to expand into the coffee and beverage space.
Danielle: Further driving cultural relevance and conversion into oat milk.
Danielle: But really that's not start and stop with the product hopefully is a generation of brands that maintains its cultural edge with millennials and Gen Z as you can see in the examples on slide nine.
Example of how we are activating the brand at global scale is a collaboration with espresso with whom we developed and opened branded pods for the perfect lofty or flat wide experience.
Danielle: And express our boutiques across most cities of the World experienced this collaboration over the course of this year with stunning disability.
Danielle: At local level, we continue to execute relevant brand activations like it works in tea in the U K reminding breaks down our product war chest as well at <unk>.
Danielle: As they do in coffee.
Danielle: This result of these high impact Activations have been outstanding in terms of awareness and you should expect us to continue executing this in the future.
Danielle: We're not stopping there slide 10 show you. Some examples of how we're attacking one of the primary targets to conversion, which is the preconception on taste.
Danielle: Those of you who have followed us for a while not that our proven model is to drive experience in the foodservice channel and then to ensure that consumers can find us in retail so that they can repeat the experience at home and other locations again and again.
Danielle: We're taking that exact model and dialing it up owning the growing momentum there is in the coffee and the debit space.
Danielle: There is a taste bonanza flavor bonanza going on in coffee.
Danielle: Round the world and our teams are intimately woven into this community so whether in a coffee shop in Shanghai, Brussels, Mexico, Dubai, or Boston, hopefully is uniquely positioned to bring the hottest emerging global pace trend to their menus.
Danielle: We're working with most of our foodservice customers to revitalize their menus and bring the most exciting thing new news to the category.
Danielle: Want us to help them better understand the market better understand Gen Z and therefore, better anticipate what is next and held them to become more competitive.
Danielle: On the left you can see a few examples of what we have been developing with them among thousands of signature drinks that we are creating for our customers all around the world.
Danielle: These examples on the slide just to be the tip of the iceberg.
Danielle: And we are supporting these efforts with provocative integrated brand activations across digital and in real life platforms that encourage consumers to try converting from dairy to potently.
Danielle: An example is our ongoing blind taste test activation, we have been executing taste test across many markets and the results are remarkably consistent showing that roughly half of the sample refers only to dairy milk.
Danielle: Since our household penetration has not yet reached that 50% level that potentially means that millions and millions of people are having a suboptimal coffee drinking experience.
Danielle: Finally, we closed the loop with impactful in store retail executions I am happy to say that our in store execution is ever so strong.
Danielle: Has become one of the key reasons behind the sustained commercial traction that is reflected in market share gains and velocities that remain well above our competitors.
Danielle: Slide 11 shows what we have been doing to attack another large barriers to conversion, which is misinformation on him.
Danielle: Instead of creating more noise, we have been systematically engaging with registered and renal dieticians nutritionists and key opinion leaders.
Danielle: Arming them with science based facts about our category on our products. So they can be advocates for the truth.
Danielle: The science behind the product is unequivocal fortify plant based milks like opening a recommended in dietary guidelines all around the world.
Danielle: There's plenty more to do to ensure that the public is not being misled are tracking data that shows that the negative media coverage has declined very significantly compared to last year.
Danielle: So we're making progress on ensuring the discussion of our category is balanced and honest now let's stop results starting on slide 12.
Danielle: We have started to roll out the strategy in Europe and this slide shows the retail takeaway data for our European markets. You can see that we have started to accelerate our volume growth.
Danielle: Persistently highlighted of the continues to outperform both the plant based milk category as well as the old meal categories.
Bill: Slide 13 is even more interesting bill.
Bill: But the data gives us the confidence to say that we're on the right track.
Bill: Two largest markets in Europe, or the UK and Germany, and they are precisely what we started to rollout on the left you can see that our German business has accelerated growth to nearly 8% in the last 12 weeks.
Bill: On the right you can see the UK data as Youll recall from several quarters ago, We mentioned, how the UK market will see some sluggishness.
Bill: We believe the actions that we have taken has started to revitalize our UK business moving from declining putting CPM growth.
Bill: So good progress and plenty more to do.
Bill: It is important to note, though that we have not yet fully deployed this playbook across all of our markets, but we will do so throughout the course of this year and consistently as we move forward.
Bill: Igniting category momentum will not happen, but its not of a finger, but by consistently focus on breaking down the barriers that exist with culturally relevant execution.
Bill: <unk> resource allocation.
North America is the largest market what we have not yet rolled out this playbook, but the strategic direction will be identical.
Bill: So if the external context, and the relevance of the brands and the portfolio. So less then discuss North America.
Bill: Last quarter, we mentioned some discrete headwinds within the segments.
Bill: First we are navigating a changing sourcing strategy, our largest customer and second we're going to SKU rationalization on certain items.
Bill: In the first over 100% of the segments year on year sales decline came from the impact of our largest customer and the decline in the frozen business.
Bill: We expect these headwinds to continue to impact our year on year growth rates for the rest of the year, we view them.
Bill: Temporary.
Bill: We were able to offset some of these headwinds most notably with distribution gains on the core portfolio. However, the gains were not enough to offset the declines from the largest customer unfolds.
Bill: Slide 16 goes a level deeper in.
Bill: In the quarter, we continued to outperform both the plant based milk category and the ultimate category, even when including the impact of the frozen business declined.
But if we remove the impact of the frozen products, our retail scanner data would have show only a 1% decline in the quarter.
Bill: This outperformance relative to the category was driven by share gains in each of our drinks subcategories, which outline the core beverage portfolio strategy that I referred at the beginning of my discussion.
Bill: This is clear evidence that we continue to execute well despite category headwinds.
Bill: Retailers are seeing the strong execution and allocating us more shelf space as shown on slide 16, we see these distribution gains are evidence that our customers continue to see a great future for our category.
Bill: And these distribution gains are an important building block as we prepare for the North America segment to execute the brand playbook in a similar fashion to Europe.
Bill: Additionally, our lineup of Trimas, another coffee complements which include a variety of flavors and pack sizes has been performing well with solid velocities.
Bill: We continue to pursue additional distribution opportunities in both measured and non measured channels and you should expect us to report steady progress on these fronts.
Bill: Slide 17 shows that the greater China segment.
Bill: It's performing well.
Bill: As many of you know the category here is not as developed as it is in the other two segments. So the application of our strategy is still focused on strong execution with the foodservice channel and it's just now starting to rebuild our retail presence in a disciplined manner.
Bill: The foodservice business continues to perform well in the quarter and it is now larger than it was before we executed the strategic reset as you will remember we initiated meet 2023.
On the right side of the page you can see that the retail side of the business is starting to gain traction now that we have entered the top channel. While it is early days, we continue to believe that the retail channel is a very large opportunity for this segment and we're making good steady progress.
Bill: Now I want to turn the discussion to our second priority, which is to aggressively pursue cost efficiencies that generate the fuel demand driving investments.
Bill: Slide 19 shows some of the progress we have been making.
In the first quarter will reduce our cost of goods sold per liter by 15% year on year, and 6% compared to last quarter. Our teams have done a stellar job leveraging our fixed asset with volume growth finding additional efficiencies renegotiating contracts as well as <unk>.
Sizing our network, including plant closures.
Bill: I am pleased to say that this translates into a year on year total cost of goods reduction of $10 million.
Bill: Slide 20 shows the progress we have been making on SG&A efficiencies as.
Bill: As we discussed last quarter, we have driven a significant reduction in our total SG&A over the past two years and we continue to make progress in quarter one.
Bill: It has been driven primarily by a reduction in overhead expense.
Bill: We have taken a portion of the savings from the supply chain and SG&A and strategically redeploy part of these savings into the brand investments I mentioned previously.
Bill: Turning now to slide 21.
Bill: As we look forward, we intend to continue to drive productivity and efficiency savings in our supply chain and SG&A and then redeploying a portion of those savings into demand driving brand activation to a nice positive momentum.
Bill: We will start to rollout the strategy to more European markets.
Bill: North America in quarter two.
Bill: And given the size of the market, we expect that our investments will be tilted towards the North America segment.
While we have confidence in our strategy, we know that it will take time for it to generate equal impact, especially North America, where the category remains soft and.
Bill: And as we roll out this strategy, we will continue to pursue additional distribution opportunities across all channels.
Speaker Change: I will now like to turn the call over to <unk>. Thank.
Speaker Change: Thank you Dan and good morning, everyone.
Sri: Thank you Sri shows another view of the courtyard upenn.
Sri: In the first quarter, we have reported a revenue decline of eight.
Sri: 8%.
Sri: Constant currency revenue growth of 7%.
Sri: We continue to drive strong gross margin expansion.
Sri: Our first quarter gross margin expanded 450 basis points year over year.
Sri: One 6%.
Sri: Adjusted EBITDA was <unk> seven.
Sri: 7 million.
Sri: The quarter, which nicely.
Sri: <unk> 5 million improvement compared to last years fourth quarter.
Sri: Torture.
Sri: Our gross margin and adjusted EBITDA are our best parts and.
Sri: Is it simply company.
Sri: Before she loves the bridging item.
Sri: Today's call Daniela and imports.
Sri: We grew volume by nine 2% in the quarter, which was partially upset by eight 5% decline in pricing.
Sri: So our next 10 was at one 5% headwind.
Sri: As mentioned on our last earnings call.
Sri: Our total deferred revenue growth will be impacted by a change in sourcing strategy at our largest hotel.
Sri: It's a customer in North America.
Sri: The impact of that headwind in the first quarter was approximately 270 basis point headwind.
Sri: Yeah.
Sri: Slide 25 shows the drivers of our strong year over year gross margin expansion.
Sri: But then I think I'm sorry.
Sri: And supply chain improvements.
Sri: Improved margin by 490 basis points.
Sri: This reflects the benefit of right sizing our supply chain.
Sri: Including the Florida, our senior for manufacturing.
Sri: Remember, which drove approximately.
Sri: 40 basis points or just under half of this year.
Sri: That churn driven margin expansion.
Sri: I remind eric Samsung volume upside from progressing efficiency as well as improved sourcing.
Sri: Pricing and product mix added 30 basis points to our gross margin in the quarter.
Speaker Change: While our revenue bridge that I discussed on the third slide headwinds.
Speaker Change: Headwinds from technique, we true and mix benefits in the quarter as we already said no our margin and increase in <unk>.
Speaker Change: Our marketing products.
Speaker Change: We experience.
Speaker Change: 50 basis point headwind from inflation in the quarter.
Speaker Change: Finally, the impact of foreign exchange movement was it 10 basis point headwind to gross margin.
Speaker Change: Slide 26 shows the year over year improvement in our adjusted EBITDA.
Speaker Change: The nice thing time, Linda improvement compared to last year's first quarter was mainly driven by $8 4 million increase in gross profit.
Speaker Change: The $1 1 million year over year improvement journey and over reflect our ongoing efficiency program.
Speaker Change: Which were partially offset by increase in branding and advertising.
Speaker Change: Slide seven shows segment level detail on that.
Speaker Change: At that time, our zero seven Suntrust your revenue growth.
Speaker Change: We are slightly below our expectation as the Europe and international and direct our climate segment.
Speaker Change: <unk> outperformed our expectations, while the North America segment other perform.
Speaker Change: I just didn't think that our 3000 7 million loss in the quarter was slightly better than expected.
Speaker Change: Primarily driven by Europe and international segments.
Speaker Change: Turning to our balance sheet and Thats on slide eight first.
Speaker Change: Our business plan remains fully funded.
Speaker Change: As of the end of the quarter, we had 74 million of cash and 411 million of our credit facility.
Speaker Change: Then you've got all this slide shows our free cash flow improvements in the first quarter free cash flow was 21 million use of cash which was our best quarterly performance as a company and a 25 million improvement compared to last year first quarter.
Speaker Change: Within that 21 five.
$5 5 million was for payments related to restructuring and severance.
Speaker Change: One seven.
Speaker Change: Seven 6 million for annual incentive plan payments.
Speaker Change: We expect the majority of the statement, we love that chart again this year.
Speaker Change: On the right side, you can see our progress in working capital.
Speaker Change: In the quarter, we have reduced our trade working capital by another $2 million.
In that forecast.
Speaker Change: Where do we see that both were below 100 million for the first time since Q1.
Speaker Change: One hour test data to mature we have created a cash mindset into the entire organization and dickies generics in great depth.
Speaker Change: In summary, we are making solid progress on improving our cash flow and we expect continued improvement.
Speaker Change: Our second half adjusted EBITDA is expected to be higher than the first half.
Speaker Change: CMS cash flow drivers are expected to improve for the year.
Speaker Change: Our first priority for 2025 is to deliver our first full year of profitable growth as a public company.
Speaker Change: Slide 14 shows our outlook.
Speaker Change: We continue to expect constant currency growth in the range of 2% to 4%.
Speaker Change: The improvement from the first quarter's growth rate is expected to be largely driven by the benefit of existing to table Daniel discussed small project.
Speaker Change: For adjusted EBITDA, We continue to expect to report in the write up was it decides to take India.
Speaker Change: We continue to expect the improvement to be primarily driven by both parties as the business is stronger in that test as well as our ongoing efficiency program.
Speaker Change: Cool.
Speaker Change: So again I mentioned earlier, the North America segment and several European countries are expected to launch integrated brand activation in the second quarter.
Speaker Change: We intend to support the launches from increased inbound activation.
Speaker Change: Assets second quarter, adjusted EBITDA is likely to be comparable to Q1 level.
We are not currently including any significant direct impact of carry into our guidance. Since we believe the majority of the products we bought from Canada.
Speaker Change: With MCA guidance, we do however, assume that the current economic conditions and consumer behavior.
Speaker Change: They largely consistent for the rest of the year.
Speaker Change: Finally, we spoke and you expect capex to be in the range of 30 to 35 million.
This concludes our prepared remarks.
Speaker Change: Alright.
Speaker Change: I'll now prepared to take questions.
Speaker Change: Okay.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick your handset before pressing the keys.
Speaker Change: At any time your question has been answered and he would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Okay.
Max <unk>: The first question comes from Max <unk> with BNP Paribas. Please go ahead.
Speaker Change: Thanks for the question it was great to get color on some of the initiatives you're rolling out in Europe in particular it too.
Max <unk>: The relevance of militant attacks some of these barriers to conversion and also to see the results that that's already having in terms of improving your own performance.
Speaker Change: So on the slides that you presented.
Speaker Change: So far at least really just driving improvement.
Speaker Change: On performance and it's not lifting category growth trends for <unk>. So I'm just curious as you start to roll this out in the U S.
Speaker Change: What's giving you the confidence that this will also lift.
Speaker Change: Still a very thoughtful about that category in the U S. Thanks very much.
Thanks, Mark Daniel here Good morning to you, yes, we do allow me couple of minutes.
Daniel: I will speak up about Europe, first who will provide more color about what we see there is clearly a business that is outperforming markets and competitors right and I would like to start there.
Speaker Change: You can see in in market shares.
Speaker Change: Across the different markets. So that's that's number one you see that in the establish a more mature markets.
I wouldn't like you to forget as well that the expansion markets in Europe, giving us also a signal of increased trucks.
Speaker Change: Traction of the <unk> brand across Europe.
Speaker Change: Hunters like France, Spain, Belgium, Mexico, UAE, we're trying these reporting segments.
Speaker Change: Really really.
Speaker Change: Increasing relevance and contributing to our total company the company growth in a meaningful manner. So that's something that we don't normally take into accounts, but they start building onto the critical mass.
Speaker Change: The initiatives you referred to.
Speaker Change: We would like to be as conservative as we can possibly be although the numbers are giving us confidence.
Speaker Change: This will gain traction the recent why you hear me being conservative because we know that turning around category momentum will not happen overnight right and but the first signals are quite.
Speaker Change: Interestingly right what we see in these two months the two most important markets then it's a matter of.
Speaker Change: Allocation of resources to the different segments. The context, we see it's a bit softer in the U S. As you know.
Speaker Change: But the dynamics are similar and we expect the relevance of the brand and of the playbook to be equally applicable now when it comes to the U S. I would also like to draw your attention much would you know very well the ocean of opportunity we have in distribution in all channels measured and measured.
Speaker Change: Be it retail b.
Speaker Change: Yes.
Speaker Change: The clubs and the foodservice.
Speaker Change: Enormous. So this is why we plan for a softer quarter one yes as.
Speaker Change: First half of the year in North America and we.
Speaker Change: Those things to be improving as well as we start deploying now going back to your question of category and playbook deployment, we will do so according to our North star, which is profitable steady profitable growth, which means that by reporting segments, which has reported.
Speaker Change: Consistent now.
Speaker Change: EBITDA positive EBITDA, we will allocate resources. According to these tempo that we set for ourselves moving forward.
Speaker Change: More in the second part of the year than in the first part of the year, but again with a clear not start that JC set up in this call again, and again, which is first year of profitable growth as a public company.
Speaker Change: Great. Thanks, very much and then as a follow up.
Speaker Change: Progress Youre, making on gross margin is very clear.
Speaker Change: Setting a new record of improving sequentially.
Speaker Change: Year over year by meaningful amounts and it looks like it's primarily driven by supply chain improvement in absorption, which largely is within your control. So I'm just trying to get a better sense for any sort of update on how you're thinking about your gross margin for the full year and beyond given given the smart progress that you are.
Speaker Change: Okay. Thanks very much.
Max <unk>: Yes, no sure let me take this question Max.
Max <unk>: Guiding specific number and we expect an improvement in our gross profit in France to be thank you.
Max <unk>: As we mentioned already biggest driver being.
Max <unk>: The biggest drivers in gross margin being the improvement in our adjusted EBITDA.
Max <unk>: So the gross margin is expected to increase compared to the 28, 7% we reported in 2024.
Max <unk>: As you mentioned as we continue to optimize the production footprint.
Max <unk>: We continue to drive efficiency through the supply chain. We also mentioned two times already that we're negotiating contracts and we are managing our product mix.
Max <unk>: Of course, what we also know abuse, creating garber with NPS.
Max <unk>: Exactly.
Max <unk>: That could be over our sales guidance range that could be our customer mix that could be potentially foreign exchange.
Max <unk>: And potentially structure developmental the tariff situation is cleanup.
Max <unk>: So our plan is continue to make good progress.
Max <unk>: On our path towards our long term gross margin target, which is a 35% to 40% as we have already mentioned.
Max <unk>: Great. Thanks, very much I'll pass it on.
Max <unk>: The next question is from Andrew Lazar with Barclays. Please go ahead.
Andrew Lazar: Great. Thanks, so much thanks.
Andrew Lazar: Nice to see early signs of volume consumption improvement for plant based milks and or at least specifically in Europe.
Price mix was a larger drag in Europe in the quarter than we'd modeled I think down 4% or so I was hoping to get a little more clarity on what drove that and what are your expectation around price mix would be in Europe as we move through the rest of the year.
Daniel: Hi, Andrew how are you doing Daniel here, yes.
Andrew Lazar: Exactly largely expected.
Speaker Change: Obviously, just a 4% growth in volume, which is offset by price mix.
Speaker Change: You know start of the year quarter, one some customer renegotiations. Some some some of them got a bit funny.
Speaker Change: Most of them are behind us.
Speaker Change: No I wouldn't do this I wouldn't keep this in a lot of.
Speaker Change: A lot of importance as we move forward of course the context.
Speaker Change: Tight, but super manageable within the guidance, we have provided so I would ask.
Speaker Change: Should guide you not to read anything else as we move forward for the rest of the year got.
Speaker Change: Got it and then in North America.
Speaker Change: Obviously with the loss of problems, some foodservice business and discontinued certain frozen items I assume theres likely some flex in the North America supply network now you called out in the slides Youre, obviously pursuing additional distribution opportunities in the region I guess I'd be interested in hearing what do you think the biggest opportunities are from a distribution standpoint in north.
Speaker Change: Erica and how you how you think about balancing sort of improving sales trends with the improving profitability that youre seeing in the region as well how do you balance those thank you very good very very good question as well I tried to stress it.
Speaker Change: We have opportunities everywhere I see so it's our ability to execute them that is the gap under I would say that perhaps 2025 should be.
Speaker Change: This kind of last part of the cleaning exercise of some part of the portfolio, which is strategic and has to do with as we said always balancing growth and margin.
Speaker Change: We move forward you see the new portfolio. There are items that I'm sure you can pick up in scan data like the new Barista 60.
Speaker Change: <unk> 60 per ounces shields with very promising velocities, the new creamers with very promising velocities. The ACB of those items range around 5% right. So as you can imagine there is ample opportunity within the new core portfolio drinks I underlying drinks because the.
Speaker Change: Unity is very very significant in the new growing beverage space.
Speaker Change: It.
Speaker Change: This category is evolving following how beverages are evolving and we believe we're well poised for that so significant growth opportunity of the portfolio you will see on the picture in.
Speaker Change: Retail.
Speaker Change: All customers.
Speaker Change: Then I would like to underline.
Speaker Change: <unk> clubs.
Speaker Change: I see.
Speaker Change: You would expect to come to you in the following quarters with some new some of these firms.
Speaker Change: Number two and number three foodservice outside the largest customer and even within that.
Speaker Change: This customer we see ample opportunity to continue to grow.
Speaker Change: So I would say pretty much everywhere.
Speaker Change: Thank you.
Speaker Change: The next question comes from Michael Laughery with Piper Sandler. Please go ahead.
Michael Laughery: Thank you and good morning.
Michael Laughery: Just wanted to get a little more color on the U S consumer.
Speaker Change: <unk> pointed to some outperformance for yourselves and the category, especially excluding the <unk>.
Michael Laughery: <unk> cuts, but.
Michael Laughery: The retail sales momentum for the category.
Oh It was decelerating in the last few months.
Michael Laughery: Just stretched consumer trading down.
Speaker Change: Can you help us maybe give some sense of what youre seeing and what you expect looking ahead over the rest of the year.
Michael Laughery: Thank you.
Speaker Change: I would like I will try not to repeat myself, Michael what else I can say here in this front I would say if I look at velocities unit percents, but weak in both dollars and units I don't see an erosion there on the contrary.
Michael Laughery: See slide upsides, when I look at dollars.
Speaker Change: Shares in unit chairs.
I don't see lots of construction on the country.
Speaker Change: Is the category that is.
Speaker Change: Steve.
Speaker Change: Around the tightness now when you remove these one off items like talking about the total different performance. So now.
Speaker Change: Going back to the way in which we will eventually ignite a new category momentum.
Speaker Change: It would not take a snap of a finger, but it will be the adoption of the playbook that.
Speaker Change: But we have been starting to deploy.
Speaker Change: In.
Speaker Change: In Europe.
Speaker Change: Positive signs now.
Speaker Change: The headline was the U S, but I would like to go a step back a bit and see how we're looking at the category in general because we have if you allow me a couple of minutes here. We have seen great momentum also instrumental of these categories for many many many years now this is there's a paradigm shift.
Speaker Change: And growth in this paradigm shift categories is never ever Lynch.
Speaker Change: So.
Speaker Change: We are creating these new ways.
We are starting to create the fundamentals.
Speaker Change: The wave and fundamentals like health taste climate impact are so strong that we believe the future is absolutely irreversible so.
Speaker Change: We created <unk>.
Speaker Change: 70% of consumers 82%.
Speaker Change: In the U S haven't tried to that's our new obsession, we have that to the list of controllable. So.
Speaker Change: Why do we believe that that.
Speaker Change: Yes.
Speaker Change: Those things go in our favor is not just because of the coupons.
Speaker Change: You start seeing in Germany and the.
Speaker Change: The U K.
Speaker Change: We are uniquely placed.
Speaker Change: To serve the new wave of coffee.
Speaker Change: We have the great <unk>.
Speaker Change: <unk> see.
Speaker Change: A key very very few brands around the world.
Speaker Change: All hands on deck.
Speaker Change: He will not happen overnight.
Speaker Change: But really looking forward to the progress and how we're adopting this strategy in the U S very soon.
Speaker Change: Yeah.
Speaker Change: No.
Speaker Change: That's helpful elaboration on.
Speaker Change: Just to follow up on that.
Speaker Change: The outperformance.
Speaker Change: Ex frozen versus oat milk broadly ethanol plant based milk.
Speaker Change: It's pretty meaningful.
Speaker Change: Are you seeing that helped to drive.
Speaker Change: Rationalization of competitors at retail or distribution gains for yourself.
Speaker Change: Is that playing out on shelf.
Michael Laughery: Sorry, do you mind repeating the question Michael.
Speaker Change: Six months ago.
Michael Laughery: If you do the math.
Speaker Change: Yeah, no problem. So as you outperform both oat milk and all plant based milk are you seeing that drive better distribution.
Michael Laughery: For yourselves.
Speaker Change: Just how.
Speaker Change: How is the shelf space evolving.
Speaker Change: So it's a company that it relates to the question I answered before.
Speaker Change: The more robust consolidates, all drinks portfolio that accompanies coffee and accompanies beverages is starting to grow and expand on shelf.
Speaker Change: Of course, we are not walking away from the adjacent categories.
Speaker Change: So on <unk>, we're adapting and Recalibrating, but you should expect definitely that was your question Michael expect us to grow in share of shelf.
Speaker Change: Polyol drinks, both in Chile and in <unk>.
Speaker Change: If you go into the double click of the scan data you will see some disproportionate growth.
Speaker Change: In the ambien shelf, which are neat new lights as well.
Speaker Change: Across the ocean.
Speaker Change: Okay, great. Thanks, so much.
Speaker Change: Yeah.
Ken Goldman: The next question comes from Ken Goldman with Jpmorgan. Please go ahead.
Speaker Change: Hey, This is also on for Ken.
Speaker Change: So you mentioned that some of the brand investments being made in the U S will take time to generate full impact can you elaborate on the timeline for some of those investments to start making an impact should we start to expect the majority of those benefits to be seen later in the year or is that more of a 2026 sorry.
Speaker Change: Thank you Alex how are you, referring specifically to the U S sort of a general question.
Speaker Change: Yeah to be Brendan since being made in the U S.
Speaker Change: Yes in the U S. I think thank you for the clarification. It has to do with the way we're managing the business as a whole you see we presented very solid.
Speaker Change: According to ourselves a solid track record on EBITDA progression in margin progression. So what you can see where it all the time balancing growth with margin and with profit.
Speaker Change: When it comes to a game of resource allocation.
Speaker Change: Expect us to start fully deploying all starting to deploy more strongly.
Speaker Change: Strongly the new playbook in North America in the second part of the year Okay.
Speaker Change: So that's hopefully as much as I can share with you at the moment.
Speaker Change: I would like to stress that as much as we provided color into how these new strategies spanning out in Europe with promising signs I would like to underline that we don't expect that full category turned around overnight. These things take time.
Speaker Change: Great. Thanks, I'll pass it on.
John Baugh: The next question comes from John Baugh.
Gardner: Gardner with Mizuho. Please go ahead.
John Baugh: Yeah.
John Baugh: Good morning, Thanks for the question.
John Baugh: Maybe.
John Baugh: First off coming back to foodservice I'm curious of the feedback that you're hearing from operators, where youre seeing momentum from those operators, who haven't adopted plant based and are doing so now for maybe those who dialed back on plant based and now want to return are there any common themes youre hearing is it primarily the plant base needs to be offered as a creamer.
John Baugh: To keep up with competitors is at that client base is recognized more as a significant product innovation driver itself as the main ingredient in beverages, and that's being seen as a traffic driver. Just how are you seeing some of these newer customers utilizing plant based on the menu.
John: Thank you. Thank you good to speak with you John.
John Baugh: Listen.
John Baugh: Very good question.
John Baugh: So I think thats the color we are observing the macro picture of the of the market and.
John Baugh: There are two big big dynamics going on here that affects not just the plant based milks category, but affect food service in general the cheese, how cost coffee is massively drastically evolving from.
John Baugh: Art.
John Baugh: A few years ago won't really where millennials, what's driving the worlds of coffee.
John Baugh: Into Gen Z.
John Baugh: Who are driving.
John Baugh: Beverages.
John Baugh: And cold beverages and in some cases Im sure Youll hear a lot of statistics, but we're talking about very significant amounts in some cases cold beverages have overtaken.
John Baugh: Coffee.
John Baugh: <unk>.
John Baugh: I'm sure you read about the matter phenomenon Theres no coffee how much up on yet is the same space.
Speaker Change: You've asked me a general question about foodservice foodservice is evolving and we see many of our most of our very large customers trying to evolve slash catch up with that trend what I'm observing and you can see what Jay C&I post normally on this topic.
Speaker Change: Small to medium and medium large foodservice customers are adapting faster to this trend and are adopting faster.
Speaker Change: Our.
Speaker Change: Playbook.
Speaker Change: And they're seeing very disproportionate growth serving gen Z with this type of offering now.
Speaker Change: Don't expect these to be simply a.
John: Ingredient story for Us John.
John: We have discussed many times before of course, we believe we have the absolute relevance of our foodservice package to be the ones winning in this space.
John: Service package is end to end is the brand is a product based our amazing army of barista market developers around the world have intimacy with this space.
John: And then.
John: Eventually as it happened a decade ago with ultimate will travel into the retail space.
John: So watch this space for some of US if you look at the Nordics.
John: At the moment, we are offering with great initial success.
John: Flavor offering so cold beverage drinks ultimate based with espresso Especial house, one of our key customers in the Nordics market. So.
John: Be on the look for more stuff like that so not just an ingredient, but certainly surfing the wave from hot coffee into cold beverages without distinctive brands uniqueness on service package, that's what we see hopefully.
John: A picture of both the market and how we continue to be at the leading edge of that.
Speaker Change: Yes, Thanks, Daniel and I guess, maybe to follow up coming back to the mentioned in the presentation of the significant reduction in negative media that youre seeing for the category and presumably the work Youre doing as good but your resources alone I don't think are sufficient to affect that kind of a shift in isolation are there are there any other sources.
Speaker Change: Contributors that youre seeing out there that are sort of adding support to the debate in favor of plant based.
Speaker Change: Right now and then I guess moving forward thinking about that support in plant based meat. We've seen some endorsements are positive recognitions for products from the American Diabetes Association Heart Association I know from a product claim perspective, it was very difficult to make claims yourself on products, but I mean do you see an opportunity for plant based beverages.
Speaker Change: To kind of pick up some of these endorsements or support from I.
Speaker Change: I guess, recognizing a third party.
Speaker Change: A medical or health organizations.
Speaker Change: The answer to that is definitely yes.
John but we are not under any illusion that our size.
Speaker Change: Enough to do what you just suggested.
Speaker Change: But allow me to provide a couple of data points, so or sentiment. We see we were quite conservative as to what we shared in the prepared remarks evolution. We see on this point of this information on health.
Speaker Change: In the two key markets will generate and bounce off of each other on the noise fronts, which are the UK and the U S right. They operate as one market.
Speaker Change: What we now see that just by simply by consumers getting tired of all this noise.
Speaker Change: How many people you will get by 'twenty oat milk or the depression, we will get after blue Monday in the U K. Thanks towards milk, which is of course doesn't have a doesn't make a lot of sense.
Speaker Change: Through this work a lot of science and data provided by the key opinion leaders nutritionists and dietitians that have worked with us.
Speaker Change: That we see are tracking shows us that that.
Speaker Change: Science based data is already starting to spread.
Speaker Change: And so we explained to some positive signs about fibers and <unk>, which we have known for life. So we don't believe those things have just pure coincidence right. So people are getting tired and some of the good information coming across.
We are indeed building alliances.
Speaker Change: Be it.
Speaker Change: In Brazos or of the he'll be it with some Ah think alike partners of ours and why not public indication.
Speaker Change: This is something that was discussed in the past.
Speaker Change: And we are acting with schools, you will see us starting to do that some efforts in the U S. This year.
Speaker Change: With schools.
Speaker Change: So all of that to say absolutely, yes, it will take time, but we have decided to go there.
Speaker Change: Great. Thanks Danielle.
Yes.
Speaker Change: Thank <unk> concludes our question and answer session I would like to turn the conference back to Brian Kearney for any closing remarks.
Brian Kearney: Thanks, everyone for joining us today. Thank you for your interest in <unk>. If you have any follow up questions. Please feel free to reach out to me.
Brian Kearney: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Brian Kearney: Okay.
Brian Kearney: [music].
Brian Kearney: Yes.
Brian Kearney: [music].