So, I don’t think our assumptions are unreasonable. Obviously, we’ll be prepared for better, and obviously, we’ll be prepared for worse, too. But, I don’t think those assumptions are unreasonable. But that’s what sort of goes into it. I wouldn’t say we have a great crystal ball. We have to pick a number and then build plans around it and make sure that our supply chain planning can deal with variance in those outcomes.
Jon Andersen: Okay. That’s helpful. Makes perfect sense. With respect to your own sales guidance, I just want to make sure I understand the puts and takes. It sounds like you again, correct me if I’m wrong, but you’re looking for Vita Coco branded growth in-line with the category in 2024? And could you talk a little bit about your volume and price assumptions? I’m not sure if you’ve already taken some pricing on the branded part of the portfolio or if maybe that’s expected in 2024. And then, what some of those offsets are, if you can kind of quantify those for us to a greater extent? I think you mentioned the oils business, perhaps some one time bulk volume. And I think you even mentioned a promotion that might not repeat? Thanks.
Martin Roper: Yes. Well, let me take the sort of drags or the headwinds first. I think, we chose and to be honest, we’ve chosen not to sort of categorize the size of each partly because the private label piece is obviously proprietary information to a certain retailer, and we’re uncomfortable breaking out that private label all business. But, just listing them and maybe in order of magnitude or maybe not as the case may be, obviously, the loss of the private label coconut oil business is the biggest factor. There is some reduction in promotional activity that we know won’t repeat because it was a little opportunistic last year because we had inventory and the retailers wanted it. So, that’s a little bit of a drag, we have, as I mentioned, the non-repeating commodity sales, which were to commodity sales for us is coconut water concentrates and stuff like that, and we just don’t expect that to re-occur.
It was sort of, again opportunistic. There was another customer who needed it and we had it, so we sold it, right, sort of thing. And then, I also think our growth rate is challenged. In 2023, we said as we talked about in Q1, Q2, we had a major promotion with a major club retailer, and that was incremental promotion. It’s hard to duplicate that growth again, right? So, that’s also a little bit of the headwinds. But we’re going to more than offset all of those headwinds with the core business growth, as you noted, plus the private label growth is going to more than offset that. So yes, it’s a little bit of a reset year for us, but we feel really good that the business is going to emerge from it stronger. And now I’ve completely forgotten the other part of your question.
The other part of your question. I do apologize.
Corey Baker: I think pricing, Jon, in our guidance, we didn’t assume a lot of incremental pricing over where we currently are. Obviously, there’s a lot of stuff going on in the macro environment, but right now we haven’t seen significant pricing. So, broadly it would be volume-based growth within our guidance.
Jon Andersen: Super helpful. Thank you.
Corey Baker: We’re confident in our assumption.
Martin Roper: Thank you.
Operator: Thank you. One moment please. Our next question comes from the line of Jim Salera of Stephens. Your line is open.
Jim Salera: Hi, guys. Good morning. Thanks for taking our question. Martin, I appreciate all the color on the ocean freight rate. And if you’ll indulge me on just one real quick question on that, maybe kind of tie the loop there. It sounds like you’re expecting, and I appreciate that you guys pay rates that’s lower than the current spot rate, but it sounds like you’re expecting current spot rates to decline as the year goes on. And, if I’m wrong in that, please correct me. But if spot rates stay where they’re at currently, would that provide or would that yield a headwind to the gross margin guidance as it’s currently put together?
Martin Roper: So yes, I think if you look at the indexes, at least last one that we look at was published last Thursday, you can see that the increase in spot rates sort of peaked about three, four weeks ago and has started to decline. Declines are different by market, but there’s sort of weakening there. As you noted and as we indicated earlier on the call, we’re not paying the spot prices, we’re paying prices that we think better than that. And so, we see this happening, right? And what I would say is our guidance assumes that what we’re currently paying continues for a reasonable period of time, given what’s causing it. And yes, we have optimism that the rates should continue to soften, but that’s a little bit of the crystal ball question.
Jim Salera: Okay. That’s helpful. And then if we can shift back to the category growth side of things. You talked about growth in-line with the overall category. But given the uplift you guys have seen from multipacks and some of the innovations, can we think about there as being upside to branded as some of those things continue to perform well in the market and presumably you guys gain some more shelf-spaces as the resets go through?
Martin Roper: Yes, absolutely, you can think about it and we think about it a lot, right? And our, Mike, it’s very challenging to us to, okay, guys, we need to grow share, right? It’s obviously a little harder to grow share from where we are than where we were three years ago, but we’re committed to trying to do so. Mike talked about the initiative with the juice, our cans, obviously, the multi-packs gives us an advantage in food and mass in the mainstream part of the section. We need to find ways to win in the can section in food and mass. That’s a multi-year sort of goal, right? But yes, our goal is to continue to gain share. And if we do so, then obviously, there’s upside.
Jim Salera: Okay, great. And then maybe if I can just sneak in one quick one on the juice cans. You’d mentioned some offerings for that outside of convenience. Would that include a multi-pack offering of the cans or is that still going to be all one count at in mass and other outside of convenience?
Michael Kirban: Eventually likely, but for now it’s single serve. It’s single units.
Jim Salera: Okay. Thanks, guys. I’ll hop back in the queue.
Martin Roper: Thank you.
Operator: Thank you. One moment please. Our next question comes from the line of Eric Serotta of Morgan Stanley. Your line is open.
Eric Serotta: Morning. Thanks for taking the question. I’m hoping you could give some perspective on your price points relative to some competing beverage categories, whether it’s bottle of water, sports drinks or even [CFCs] (ph), sterilize don’t directly compete. Looks like you’ve probably benefited from improved relative affordability over the past few years, with pricing in alternative categories clearly, or price increases moderating, not seeing any deflation to be clear. How are you thinking about the potential for further price increases in Vita Coco Coconut Water and, sort of LRB against that backdrop?
Michael Kirban: So, Eric you’re correct. Over the last few years there’s been a significant compression in the relative price between us and other beverage categories. Going forward, like I said, I don’t expect much pricing at this point in our guidance for us this year. And I think what we’ve heard from most other beverage companies it’s not a lot of pricing probably in the overall LRB category. So, we expect those relative price points to stay the same at this point unless something changes. We’re always monitoring the market and we’ll make adjustments competitively as needed. But I would assume at this point that those relative points would stay the same or relatively close.
Eric Serotta: Okay. And then lastly, I think Martin you joked last quarter in terms of giving your preliminary outlook that, well, Mike expects me to gain share each year. I think that was last quarter. So, I know there’s been a lot of back and forth about sort of the cycling some of these one-time benefits that you had in terms of coconut water one-off sales last year. To be clear, when you strip out those kind of one time, cycling those one-time benefits, do you think your underlying growth or is going to keep pace with the category or your underlying share is going to keep pace with the category or even exceed it?
Martin Roper: Yes. So, I think our plan or hope is that our branded business tracks the category as a minimum expectation. And I think we think the private label at least this year could be a little faster than that just because of the price gap issue. So, that’s the goal. It’s a little hard to talk about one year goals like that because it’s obviously, as you said, all these other stuff going on. I think our long-term goal remains mid-teen branded growth. We’ve delivered that the last four, five years. This year, we have a little bit of it’s a little more challenging for us to do it this year, which is why we’re giving the guidance we’re giving, but it doesn’t take that long-term goal off the table.
Eric Serotta: Great. Thanks so much.
Martin Roper: Thank you.
Operator: Thank you. One moment please. Our next question comes from the line of Bryan Spillane of Bank of America. Your line is open.
Bryan Spillane: Hey, thanks operator. Good morning, everybody.
Martin Roper: Hi, Bryan.
Michael Kirban: Good morning, Bryan.
Bryan Spillane: I just have one question. And, I guess if we just step back and make a scenario, I guess, not make an assumption, but think about a scenario where all this discussion about freight and boats is really geopolitical, right? Like this isn’t the COVID boat supply demand imbalance. This is it’s tough to navigate traditional trade routes right now and may for a while. I mean, it’s the Barbary wars, right, impacted trade and freight rates for years, right? So, I guess I have two questions related to that, right? One is, is there a way to change the product form? Could you like we do with natural gas, milk, right, can be converted to powder. So, if you were to try to reduce the incidence of freight and concentrate, is there a way to concentrate the product to just at least reduce the number of ships that you actually have to procure, one?
Two, if just sourcing from Asia becomes more impractical over time, would it be possible to source more from Brazil? So I know it’s kind of a big picture question, but again, it just seems like this could be a recurring theme if the world continues to be as unstable as it is. And just curious if there’s other ways to sort of adjust the supply chain to adapt to that? Thanks.
Michael Kirban: I think it’s less geopolitical and more opportunistic for the freight carriers to increase rates. I mean, when you think about it, they’re not going through the Suez anymore. They’re going around Africa, which is not that much more expensive and does take a little bit longer. So, it’s an opportunity for them to try to spike rates. That’s how we look at it. Now if you think about moving production, can’t move supply to the U.S. because there’s not enough coconuts clearly, there’s like a few in Miami. That guy with the pushcart in Miami is on the beach. But so, it’s going to be hard to get the coconuts, right. But, if we look at moving more supply to Brazil, that’s clearly something that we’re working on and something that we’ve been working on for quite some time, and Brazil is a great location for us because it is a much shorter transit time, and it’s further diversification of our supply chain.
So, obviously that’s something that we’re looking at. And then from if we think about concentrate, it’s also an option, but it changes the product that we’re selling today. So it’s not the primary focus.
Operator: Thank you. Okay. Ladies and gentlemen, I’m showing no further questions. This does conclude today’s conference. Thank you all for participating. You may now disconnect. Have a great day.
Martin Roper: Thank you everybody and thank you, Valerie for hosting us. Thank you.
Operator: You’re welcome. Take care.
Martin Roper: You have a great day.
