The bottom-line is, we’re going to continue to play where we believe we as a super premium brand should be playing. So, there are some segments of the market that are going to be less interesting thus. It doesn’t mean that we would never roll products out into those segments. But what we would rather do is continue to compete at a higher and higher level in the segments that we believe a super premium coffee brand should be present. So, we’ve been very proud of the business that we’ve built in PODS. We’re very proud of the fact that we’ve built again this strong number 4 bagged coffee business. And we do have a canister business which continues to grow. We only have one SKU there. So, again, I think for us, the opportunity is going to be within some of the segments that we compete in now, how do we really continue to build our share momentum there and help our retail partners to build their categories, which is something that we’ve been phenomenal at so far.
And then yes, we will continue to evaluate. So an example of that would be the concentrate that we went into. We’re now a 13 share in cold brew concentrate. That’s a small segment, but growing very rapidly. So, obviously we had our eye on the ball on that and we’re very pleased with what we’ve been able to do thus far. We’ll continue to evaluate other segments in coffee as those develop, as well.
Steve Kadenacy: And maybe just to add a little bit on the end of that. We’re seeing similar characteristics, on sales and velocity as we break into the rest of the FDM market, as well. And so, the product is really resonating and as a result the diversification of our sales on a customer basis is quite significant during the course of 2024.
Jon Anderson: That was helpful. That was going to be my next kind of follow-on question. So I appreciate that tag on. In the RTD business, could you talk a little bit about where you are? I mean, obviously you’ve made significant strides from an inventory perspective. You’ve got SKUs performing at very high levels in terms of top 20 and top 30-ish you mentioned. Where is that business from a gross margin perspective, not asking you for a absolute figure, but just relative to where you think it should be down the road? And what are some of the levers that you can pull or plan to pull to improve the margins in that part of the business?
Chris Mondzelewski : Yeah, thanks. So I’d start by saying, we’ve made enormous strides forward. So as you think about the overall, margin improvements in the business and what we have planned for ‘24, RTD plays a huge role in that, right? So, we feel great about a lot of the improvements that we’ve made thus far. As I discussed though, no, we’re not done. I mean, we’re not pleased necessarily with where we are right now as a final landing spot. I think one of the things we’ve also discussed in previous calls is, RTD operates under a different margin structure than say, center store coffee, those categories simply compete differently. So we understand that. Our goal will be as a super premium position brand, we believe that we should be able to build a margin structure that is at the higher end of the market.
And so, that is what we are working towards with that. And again just to reiterate I said before there’s two components to that. I think we’re going to continue to work on the margin profile of the existing products that we have. And we will consider when we think about innovation, what are some of the areas that we can go that allow us to not only operate first and foremost well as a brand, but to continue to build that margin further forward. And we’re looking at all components of this as we do this. Again, it’s not just what we do alone. To have a great RTD business you have to have partners, right? We talked about our distribution partners. We talked about our manufacturing partners. And so, we’re always considering all of those elements, as well.
What are the ways that we partner in a way that we can really ultimately create the most overall value in the markets, for the entire supply chain.
Steve Kadenacy: And when you look at our ACV of around 43% for RTD, that’s kind of, stating the obvious but volume creates margin, as well. So we’re kind of poised given the fact that we’re growing significantly faster than the RTD coffee category as a whole that as we expand that ACV through the expansion of our distribution that we’re poised to take margin in that regard, as well.
Jon Anderson: Great. That’s really helpful. And then as you reflect kind of free cash flow positive in ‘24, any thoughts on kind of use of cash or just kind of capital allocation in general? Thanks. Appreciated.
Steve Kadenacy: We don’t have significant CapEx during the year, significantly lower because we have put the tactical pause on stores, which was the largest capital expenditure category for us previously. So, during the year, we expect CapEx to be somewhere around $8 million significantly lower. And that’s that I would say that’s more routine maintenance CapEx. So the cash flow the free cash flow that we expect would be primarily to delever and lower interest rate until we determine in our long-range plans how to allocate that capital to growth again.
Jon Anderson: Very helpful. Thank you.
Steve Kadenacy: You’re welcome.
Operator: Thank you. And we have reached the end of the question and answer session. I’ll now turn the call back over to CEO, Chris Mondzelewski for closing remarks.
