Frank Smalla: No. I mean there are 2 elements to it. There’s a capital portion, which is the largest portion and as systems go live, that’s when the depreciation starts and you would see that. And we have started that. So — and then there’s an expense portion that’s expensed as we go along. And that’s happening. I think we are in the middle of it.
Operator: And the next question is from the line of Bonnie Herzog with Goldman Sachs.
Bonnie Herzog: All right. I guess I have a question on your guidance. So if your shipment volume comes in at the low end of your guidance or, I guess, down 8%. I guess I’m still trying to understand how you’re going to be able to hit your gross margin guidance this year. I mean, not only we have the deleverage, but I assume there’s an increased cost of adding the fruit juice for Truly. And then I guess I wanted to understand the volume targets with your contract manufacturers, were you able to lower those targets this year? Or are you still locked in at higher levels, so there could be risk there? I guess I’m just hoping to better understand all the puts and takes.
Frank Smalla: Yes. So we feel on the gross margin, I mean, we have the food juice that is all reflected that we have. So with the 8%, we have reflected that in the lower margin, as I said, that’s going to come in below the average. And we have — so when you look at the gross margin, the underlying projects that we have to improve the gross margin, they’re ongoing. And we’ve made progress also last year a big chunk you don’t see because of the significant amount of scrap that we had. It was number one. And then also with the suboptimal volume allocation that we have between internal and external breweries. So we couldn’t run. So first of all, we had less volume available in our internal brewers because we didn’t get to the efficiencies.
And then what we had, we didn’t fully use because we needed to use that as the adjustment for lower volume. So yes, there was some progress made. It’s just not shown in the — or you don’t see it in the numbers because it’s masked by other impacts. And we have very clear programs on building blocks that I spoke about earlier. They are in place. People are working against it, and we are expecting real progress in 2023. Again, the guidance that we have of minus 2 to minus 8, the lower the volume, the higher the cost basically of the incremental decline that you have. So that’s what’s making the underlying positive impact that we have on gross margin. So that was your first question on margin, what’s the second.
David Burwick: The co-packers.
Frank Smalla: The co-packers, yes. So we are discussing clearly with our co-packers because, I mean, it’s pretty obvious. We have our 2 main core-packers. We have significant volume commitments with them. which are much higher than what we need at the moment, okay? It will cover us over the years to come. But the flip side also is that the co-packers have to make sure that they have the capacity available to us. So we are discussing with them ways to better balance like their needs and our needs in terms of they would like probably to use their capacity. So we are discussing with them defining a bit of balance in the short term and with hopefully a positive outcome for everybody.
Bonnie Herzog: But you — and just to clarify on that point, Frank, you’ve considered an outcome where you can’t essentially renegotiate in terms of your gross margin guidance that’s factored in.
