Thank The Vita Coco Company 4th quarter and fiscal year 2023 earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentations, there'll be a question-and-answer session. To ask a question at that time, please press star 11 on your telephone. Please be advised that today's call is being recorded. I will now turn the conference to your host, John Mills, Managing Partner at ICR. Please go ahead. The Vita Coco Company 4th quarter and full year 2023 earnings Results Conference Call. Today's call is being recorded. With us are Mr. Mike Kirban, Executive Chairman; Martin Roper, Chief Executive Officer; and Corey Baker, Chief Financial Officer. By now, everyone should have access to the company's 4th Quarter earnings release issued earlier today. This information is The Vita Coco Company's website at investors.vitacococompany.com. also on the website, there is an accompanying presentation of our commercial and financial performance results. Certain comments made on this call, including forward-looking Statements which are subject to the safe harbor Provisions of the Private Securities Litigation Reform Act of 1995. 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. Please refer to today's press release and other filings with the SEC for a 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, during the call, we will use some Non-GAAP financial measures as we describe the business performance. The SEC filings, as well as the earnings press release and supplementary earnings presentation, provide reconciliations of the Non-GAAP financial measures to the most directly comparable GAAP measures and are available on the website as well. With that, it is my pleasure to turn the call over to Mr. Mike Kirban, our Co-Founder and Executive Chairman. Thanks, John. Good morning, everyone. Thank you for joining us today to discuss our 4th Quarter and Full Year 2023 financial results and our commercial plans and performance expectations for 2024. I want to start by thanking all of our colleagues across the globe for the record year they delivered The Vita Coco Company and their dedication to our mission of creating ethical, sustainable, better-for-you beverages that uplift our communities and do right by our planet. 2024 marks our 20th year in business, and although I'm super proud of all we've accomplished in these 20 years, I have never felt more excited and energized for what lies ahead. We've solidified our category leadership in coconut water over the last 20 years, which enters 2024 as the fastest-growing category in beverages in the U.S. and the U.K. markets. Although coconut water is still a nascent category representing just 3% of the sales in the U.S. water aisle, over the last 13 weeks, it has driven 20% of the dollar growth. I believe our recent success is confirmation that our current strategies are working. Our focus on growing the coconut water category and our focus on consumer conversion and retention, supported by the strength of our coconut water supply chain, has grown our overall sales at a 15% CAGR for the last four years, with our Vita Coco Coconut Water net sales growing at a 20% CAGR. In 2023, our flagship Vita Coco Coconut Water remained the major driver of consolidated net sales, producing 14% full-year growth against the prior year. Importantly, this growth was driven by full-year volume growth of 11%, demonstrating that consumer demand for our brand is very healthy. In the United States, according to Circana, we continued to gain share, finishing the year with 51% value share on a 52-week basis. Total coconut water category retail sales grew 16% in 2023, with Vita Coco growing 19% for the full year in value and 14% in volume. Our 15% net sales growth in 2023 exceeded our expectations and partially benefited from an extra Vita Coco promotion with a club retailer in the spring, some temporary distribution gains for private label product, and some bulk commodity sales that were opportunistic. Even without these effects, our growth was still very strong. Our priorities for 2024 remain very similar to what we prioritized last year, and we will double down on the initiatives that have been driving our growth. Our coconut water business remains very strong, and we expect it to grow volume in line with category growth of mid to high single digits. We estimate the impact of the previously announced decision on our private label oil business and the non-repeating gains in 2023 that I just mentioned to create a current-year drag on our business, which mostly offsets the strong core business health. While we expect to grow net sales at a slower rate in 2024, I remain excited about the EBITDA growth potential and believe that we should return to healthier net sales growth rates in 2025 once these drags to our business performance are behind us. We're focused on what we can impact to drive category and brand growth, and the primary focus is on expanding occasions for coconut water and the appeal of our Vita Coco brand across all demographics and markets as we continue to expect the category to develop into a household staple across both North America and Western Europe. Our efforts will focus on consumer education around the many usage occasions for coconut water, whether it be at the breakfast table, after a workout, in a cocktail, or after a few too many cocktails. Coconut water is one of the very few beverages that have such broad and diverse usage occasions. Expanding these occasions should be the main driver of expanding households and increased usage. We will continue to drive our multi-pack strategy, which grew scans 45% in the U.S. In 2023 to gain share of shelf space and increase basket size for our U.S. retailers. Multi-packs in coconut water remain significantly underdeveloped versus other categories, and as the largest brand in the category, we firmly believe we are uniquely positioned to seize this opportunity. Currently, our top-selling multi-packs, our 330 ml, 12, and 18 packs, have only reached 55% ACV, which leaves us considerable runway for growth. We also believe that we have a big opportunity to gain share of the coconut water category by improving our share of the canned segment. In 2023, in the U.S., canned coconut water represented approximately 31% of the coconut water category volume in retail track channels, so gaining share in this segment will enable us to further gain share in the broader category. In 2023, we expanded distribution of Vita Coco Coconut Juice in cans with a focus on convenience stores, achieving U.S. ACV in this channel of 24%. In 2024, we intend to continue to gain distribution in convenience while expanding this product format to select mass and food retailers. We will also continue to focus on gaining additional distribution for Vita Coco Farmers Organic, which is priced at a premium to our regular SKUs and offers organic coconut water in an attractive, shelf-stable package. Farmers Organic allows us to trade up consumers in price while keeping them in our brand family. In 2023, we achieved U.S. ACV distribution in MULO of 50% for Farmers Organic, leaving us significant room to continue driving distribution. Additionally, we see an opportunity to continue gaining share in the private label coconut water segment at new and existing accounts. The 21% revenue growth in private label that we delivered in 2023 highlights the strength of our supply chain to compete in this segment. Although we expect near-term net sales headwinds from the decision affecting our private label oil business, we are confident in the long-term strategic value of private label coconut water to our business. Outside of the coconut water category, we're very excited about expanding the availability of PWR LIFT, our protein-infused isotonic, to include the New York area, where our distributor relationships and street activation strength should allow us to make significant progress in validating this opportunity. In 2023, we began to see real progress in our strategy to grow our international business. Our net sales increased 17% on the year, which was led by strong growth in Europe. In our largest market, the U.K., we reached over 80% share of the coconut water category according to Circana and grew retail scans 23% on the year. The team across Europe has done an amazing job driving growth of the category in the U.K. and growing our business into Western Europe. I recently had the opportunity to spend time with the team in the market, and I was blown away by the strength of the brand and the consumer reaction that I saw, which highlighted the opportunity that we have. I asked myself, why can't the coconut water category and The Vita Coco brand be as big across Western Europe as it is in North America in five years? We believe that the category is underdeveloped in Europe but has real momentum, giving us an opportunity to accelerate our growth. I believe with the right investments, we can deliver meaningful growth to the organization through our international businesses. Related to our environmental and social initiatives, we recently updated our investor web pages with greater detail on all of our ESG initiatives, and we're proud of the progress so far. We've continued to see great progress in our farming communities, where we support building schools and classrooms, training more coconut growers on sustainable practices, and investing in the distribution and planting of coconut trees. We're in the process of registering The Vita Coco Community Project as a charitable organization, which will allow us to involve more partners and accelerate our impact more than ever before. It is hard to believe that in this our 20th year that coconut water is the fastest-growing category in beverage, growing volume 12% in a beverage category that is declining, and growing approximately twice as fast as the energy drink category. I'm more excited than ever and believe that we are well positioned to take advantage of coconut water category tailwinds to continue our strong branded growth and to deliver on our long-term targets. We have stepped up investments in our brands and in the long-term health of our business, and we believe that we are uniquely positioned as one of the few fast-growing, profitable beverage companies of our size, with the talent and commercial capabilities to maintain growth, to execute on new opportunities, and to act as an acquirer of complementary beverage brands that could benefit significantly from our relationships, capabilities, and financial resources. I believe that we are in a stronger position than we've ever been to accelerate our growth. Now I will turn the call over to our Chief Executive Officer, Martin Roper. Thanks, Mike, and good morning, everyone. I'd like to start by thanking our team across the globe for an outstanding year in 2023. I'm very pleased with the performance we delivered this year and the momentum we carry into 2024. We achieved net sales growth of 15% in 2023, driven by strong Vita Coco Coconut Water, which grew 14%. This total company net sales performance represents our third consecutive year of double-digit growth. Overall, we have achieved 74% net sales growth since 2019. Our fourth quarter 2023 net sales were up 15%, with Vita Coco Coconut Water up 8% and Private Label up 36%. In 2023, we delivered strong growth in both the Americas, where Vita Coco Coconut Water net sales grew 15% for the full year, with 12% volume growth, reflecting strong consumer demand. Internationally, where our net sales grew 17%, benefiting from the branded growth in Europe and some key private label wins, partially offset by some volume softness in Oceania. In the fourth quarter of 2023, our Vita Coco Coconut Water net sales grew 8% versus Q4 of 2022, slower than our full-year trend, which benefited from an incremental branded promotion at a club customer in the spring. We also saw an acceleration of private label coconut water sales, driven by a combination of distribution gains, soft prior-year performance, and consumer shifting resulting from lower year-on-year private label pricing. We continue to see strong overall consumer demand for our category. We believe the strong functional benefits of coconut water combined with our marketing efforts, communicating the numerous usage occasions for our products, is leading to this growth. Within the growth, we have seen similar consumer behavior that other CPG companies have talked about. There is a segment of consumers who are seeking value either through value in multi-packs or private label, while another segment is less impacted and is still willing to pay for premium brands and functionality. We believe our dual-pronged strategy of being a strong premium brand with expanding multi-pack availability and being a major private label supplier positions us well to benefit from both effects. Moving on to margins, gross margins maintain the improvement seen in prime quarters as transportation costs normalized during the year and our supply chain operated efficiently and effectively. This is perhaps also best seen by our year-end inventory levels, which were significantly down versus year-end 2022, as the supply chain operated largely without disruption in 2023, which was not true in 2022. It was a great year for revenue, margins, and cash flow, driven by improved profitability and the inventory correction. We believe that our year-end inventory levels were slightly lower than optimum, partially due to stronger sales finish to the year than we expected. We are working to build inventory to acceptable levels to support our key summer selling and promotional periods. Reiterating what Mike said, we are confident in our underlying business, and we believe we are well positioned for a strong 2024 despite the headwinds we face, with multiple commercial initiatives to reduce strong branded top-line growth and improve profitability and a long-term commitment to grow the category and our share. Year to date in Circana U.S. scan data, our Vita Coco brand is up 9% in retail sales dollars through February 18th, 2024, demonstrating that we are starting the year with good momentum. We believe our commercial plans for this year should produce net sales in 2024 between $495 million-$505 million, with expected Vita Coco Coconut Water growth in the high single digits and strong private label coconut water net sales expected to offset the drags Mike spoke about that collectively represent a 6-8 percentage point revenue headwind. On 2024 cost of goods outside of transportation, we are confident in our ability to manage our inflation through scale and productivity as we have done in recent years. On the transportation front, we entered the year with some contract coverage on key lanes, but at significantly lower levels of commitment than prior years, as the contract rates that we were offered were significantly higher than the spot rates available to us. Starting around the new year, we saw some spot cost increases for all ocean freight rates from Asia and then more significant cost increases when carriers started to route away from the Suez Canal. We intend to monitor how spot rates move relative to any contract offers that we receive and enter into contracts only when we think the offers make sense for us. As of today, rates remain elevated but remain significantly below those that we experienced in 2021 and 2022. Obviously, the disruption to ocean freight markets as it relates to shipments from Asia to Europe and the East Coast of America is quite recent, and it's still evolving. Based on rates we are currently being charged and our assumptions on the duration of this disruption, we are comfortable we can manage this pressure with a combination of market pricing and cost discipline and deliver on the full-year guidance that Corey will detail. With that, I will turn the call over to Corey Baker, our Chief Financial Officer. Thanks, Martin, and good morning, everyone. I will now provide you with some additional details on the full-year 2023 financial results. I will then discuss the drivers of our outlook for the 2024 full fiscal year. For the full year 2023, net sales increased $66 million or 15% year-over-year to $494 million, driven by Vita Coco Coconut Water growth of 14% in net sales and private label growth of 21%. On a segment basis within the Americas, Vita Coco Coconut Water strong performance at retail increased net sales 15% to $317 million, while private label increased 17% to $103 million. Vita Coco Coconut Water benefited from 12% volume growth and 3% net price mix benefit, while private label increased 25% of volume, which was partially offset by price mix changes driving full-year net sales growth of 17%. For the full year, our international segment net sales were up 17% with Vita Coco Coconut Water growth of 8%, where strong growth in Europe was partially offset by volume softness in Asia. Private Label revenue grew 46%, which is the result of new business gains at large European retailers. For the year, the international segment represented 13% of total company net sales, which is flat to prior year. On a full-year basis, consolidated gross profit was $181 million, up $77 million versus prior year. On a percentage basis, gross margins were 37% on the full year, an improvement of approximately 1,300 basis points over the 24% reported in full year 2022. The increase resulted mainly from decreased global transportation costs, increased volumes, and improved branded pricing, which was partially offset by price mix effects within Private Label products. Gross margins in the fourth quarter were 37.5% versus 24.4% in the prior year quarter. The quarter performance is representative of the improvement of global transportation costs and branded pricing we've seen throughout the year. Moving on to operating expenses, full year 2023 SG&A costs increased 24% to $124 million, primarily reflecting investments in sales and marketing expenses and increased people expenses, including incentive compensation. Net income attributable to shareholders for the full year 2023 was $47 million or $0.79 per diluted share, compared to $8 million or $0.14 per diluted share for the prior year. Net income for the year benefited from increased gross profit, partially offset by SG&A costs for the full year, a lower year-on-year impact from unrealized FX derivatives, and higher year-on-year tax expense. Our effective tax rate for 2023 was 19.5% versus 28% for the prior year. Full-year Adjusted EBITDA, our Non-GAAP measure, which is defined and reconciled in our press release, was $68 million or 13.8% of net sales in 2023, up from $20 million or 4.7% of net sales in 2022. The increase was primarily due to the gross profit improvements previously discussed, partially offset by the planned investments in SG&A. Turning to our balance sheet and cash flow, as of December 31st, 2023, we had total cash on hand of $133 million and no debt under our revolving credit facility, compared to $20 million of cash and no debt as of December 31st, 2022. The strong cash generation in the year was driven by the increased net income of $47 million in the year and strong working capital management that provided $15 million, primarily from reduced inventory, which Martin discussed earlier. Late in December, we began a share repurchase program in connection with the previously announced $40 million authorization. As of December 31st, 2023, we had repurchased 30,000 shares for $773,000. As of February 28th, 2024, the company has repurchased a total of 421,544 shares under the program for an aggregate value of approximately $10 million. As we turn to 2024, we expect net sales between $495 million-$505 million, which is based on category growth of mid- to high-single digits, with our coconut water business growing in line with the category, partially offset by the impact of the previously announced decision on our private label oil business and the cycling of temporary private label distribution and the opportunistic commodity sales. We are continuing to build additional commercial initiatives to improve our top-line performance. We expect gross margins on the full year of 36%-38% based on our current best assumptions for ocean freight costs, reflecting margin improvement over 2023, offset slightly by the impact of the current ocean freight market, which would begin impacting our P&L in Q2. We expect disciplined SG&A spending throughout 2024 with SG&A roughly flat to slightly declining year-over-year, producing our guidance of adjusted EBITDA of $74-$78 million. We may adjust our SG&A spending if we see improvements in ocean freight quicker than expected or if we see productive investment opportunities to strengthen the business for the long term. We anticipate our cash balance will remain healthy through the year, allowing us to fund any potential M&A opportunities that emerge, fund further share buyback activity, or to invest in our business for the long-term growth. With that, I'd like to turn the call back to Martin for his closing remarks. Thank you, Corey. To close, I'd like to reiterate The Vita Coco Company, our ability to build a better beverage platform, and the strengths of our Vita Coco brand. We are confident in our ability to navigate the current environment and excited about our key initiatives to drive growth. We have strong brands and a solid balance sheet, and we are well positioned to compete domestically and internationally. Thank you for joining us today, The Vita Coco Company. that concludes our fourth quarter prepared remarks, and we will now take your questions. Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star 11 on your telephone. Again, to ask a question, please press star 11. One moment for our first question. Our first question comes from the line of Bonnie Herzog of Goldman Sachs. Your line is open. All right. Good morning. Hi, everyone. I am. Hey, Bonnie. Good morning, Bonnie. Hi. I just had my first question. It's quick. Just on your top line, which came in much stronger in the quarter than what your guidance implied. So I was just wanting to get a sense of the drivers of this. And then really, if any of it was pulled forward from Q1, and the reason I'm asking it, it maybe sounds like that just based on your comments that it sounds like you guys are trying to build some inventory at retail ahead of the summer. Yeah, Bonnie. I'll take that. And Corey or Mike can come in. I think Q4 surprised us a little bit. Obviously, very happy. We did benefit in 2023 from some sort of opportunistic commodity sales, box sales that also helped that number. And I think we feel that we finished the year with wholesaler inventories, distributor inventories pretty much in line, maybe a little heavier than a year ago. So certainly, that could potentially correct a little bit in Q1 on the shipment side. We don't think that retailers are heavy or light. We think retail stock position is good. So I think it did exceed our expectations a little bit. And obviously, we're happy with that. It obviously makes the growth more challenging this year to go up against that last year. But we feel good. I think, as we sort of said in our comments, year-to-date, scan data is healthy, reflecting, we think, the strength of the category and the brand. So we feel good about the core business for the year. Okay. That's helpful. And then maybe on the gross margins, you guys walked through that pretty thoroughly and maybe just a little more color on the puts and takes. And I guess my question would be just trying to get a sense of how much visibility you really have and you feel pretty good about sort of your gross margin guidance. And I guess in the context of that, where do you see, I don't know, maybe the biggest potential upside or downside on your gross margins? If there's anything you could call out there, that would be helpful. Thank you. Sure. Well, one, obviously, we feel good about the guidance that we're giving. I think that goes without saying. I think when we look at our cost of goods side, the cost of goods of the product, ignoring the transportation cost issues, we have pretty good visibility too. Obviously, there are inflationary pressures. But I think as we have done in prior years, we're trying to offset those through supply chain optimization and negotiation and efficiencies. And I think as we've mentioned before, we have a team of engineers that work with our partners to sort of try and deliver cost improvements each year. So we feel pretty good about that. As it relates to the transportation environment, obviously, it is significantly more stable than two years ago, the 2022-2023 time period. It's more stable both for how the product is flowing and then also the cost side of that. We obviously have recent visibility to cost increases on certain ocean freight rates that might be affected by the activities in the Gulf. Our guidance sort of takes into account what we currently know with some assumptions that that's going to continue for a little bit, right? So we feel pretty good about that. We think we have other levers we can play on the gross margin side, obviously, with potential pricing action if things were to deteriorate or be very prolonged. So we have actions we can take. That sort of supports the guidance we're giving and why we're comfortable in that. I think the point I would make about the ocean freight is the spot rates that everyone is looking at are obviously significantly lower than they were in that 2022-2023 time period. So that's the first point. Multiples lower. So this increase, while it is a blip on the spot rate indexes, is not nearly as big as the sort of life-threatening events of 2022. And then the other thing is those are spot rates, and they don't necessarily reflect what we are paying. So I wouldn't want people to draw conclusions from that. I think it's indicative of the pressures, but not necessarily indicative of the rates. And so net-net, we're totally comfortable at this point in time in our gross margin guidance for the year. Super helpful. I just maybe want to clarify something. I might have missed it. Can you share how much then is locked in? Is that the visibility that you mentioned that you have? You feel good? I think as we said in prior quarters, we were going to sort of rest on the commitments a little bit and sort of take advantage of the spot markets. As in prior quarter communication, we did enter into some short-term contracts for certain lanes where we needed to guarantee capacity. We remained significantly lower contracted than we were in 2020, when I think we talked historically, we would perhaps be 75% contracted. We are very much significantly below that. We still believe our current strategy of basically taking the spot market and working with relationships we have is the best thing right now. No, the comments that I just made were not reflective of a significant change in that strategy. Okay. Much appreciated. Thank you. I'll pass it on. Yeah. Thanks, Bonnie. Thank you. One moment, please. Our next question comes from the line of Chris Carey of Wells Fargo. Your line is open. Hey, Chris. Good morning, Chris. Morning, Chris. Hey, good morning. Just one follow-up on the Q1. So when you gave that year-to-date Circana number, are you indicating that you would expect to ship below consumption for the quarter, or are you just saying it's kind of unclear one way or the other? We'll see how it goes. Just wanted to. Yeah. I would just say it's unclear. The Circana number only tracks a certain part of the business. There's other timing issues that could affect the quarter. So I don't think we're implying anything. I just think what we were merely stating was that Q4 shipments were pretty good and maybe a little ahead of our expectations. And obviously, when that happens, you always scratch your head as to whether that presents a headwind for Q1. But we're not implying anything as it relates to how stuff would trend. I think we would say that Circana data is pretty good, indicative of what's going on in the category, not necessarily on a monthly basis or even on a quarterly, but on a full-year basis, it is. And so we would just direct you to think about it like that. Okay. Great. On the question around if freight changes and the ability to cover that, I think there's quite a bit of, I don't know if concern is the right word, but given the experience of the last freight cycle, there's certainly a lot of focus on your ability to protect your gross margins, right? And so I guess the way that I kind of want to attack this, if that does happen and you take pricing, can you just talk about the tension of some of the private label seems to be giving back some pricing, and perhaps there's some shift into private label volume as a result? I don't know if that's happening, but it sounds like that's kind of what you're implying. And so just the pricing power on the branded offerings, should that happen? If pricing isn't the right lever, what else is at your disposal? Sure. Let me just start with the freight situation and make another comment. I think some of the analysts who follow the ocean freight companies have made the point that the spot rate increases that they've seen do not necessarily reflect the costs that the ocean carriers are experiencing from bypassing the Suez Canal. And so it appears that there was some opportunistic pricing taken. And so as we look at it, and this is one of the reasons that we're in the spot side of this, we think those are artificially high on a temporary basis. And the rates that we're seeing, while certainly they pressure gross margin, we believe we can handle them through the offsetting measures that we have on our P&L, either pricing, maybe incremental volume, or whatever, to basically deliver our sort of gross profit sort of goals. So we're currently feeling pretty good about that at the current levels that we're currently experiencing. As it relates to your second question, private label pricing in the market tends to track COGS. And obviously, we're on the back end of a cost of goods cycle. And so you're seeing some private label price gaps start to reemerge back to maybe historical levels relative to brand. And so we are seeing that. And you are seeing some volume gains because of that on the private label volume side, right? And we're obviously monitoring that, right? And we firmly believe we have a great brand that commands premium. And nothing really is happening that isn't back to where the price gaps were in 2020. So maybe that's just a normalization. And if there is an effect, it's probably a one-year effect. I also think, as we sort of said on the call, we're sort of uniquely positioned to play both sides of this. We're one of the most significant private label suppliers, certainly in the U.S. We also have the primary multi-pack strategy in the category also to take advantage to well-positioned to take advantage of consumers looking for value. We're playing both sides of it. There certainly will be some interplay. That can sometimes make our total net revenue look a little odd as the volume moves between private label and branded. But we're well-positioned, and we feel very good about it. It's just going to be a year of sort of that transition because these gaps have emerged. We'll take a year for it to all shake out. Okay. Thank you. Thank you. One moment, please. Our next question comes from the line of Michael Lavery of Piper Sandler. Your line is open. Thank you. Good morning. Hey, Michael. Good morning, Michael. I just want to start on multi-packs. I like the sales bridge you show, the slide that just shows how big a contributor that's been to the growth. Can you maybe just give a sense of how much of that might have been pipeline fill that we should be aware of or just contextualize it a little bit? I know you gave some color on this, but a little more of maybe kind of the runway ahead and just how to think about how big that opportunity could be. Yeah. So one, it's not really pipeline because these are retail scans. The data on slide 9 in the investor deck is retail scan data. So it reflects consumer consumption. We're seeing really good velocity on these items. And obviously, there's a little bit of cannibalization with singles, but singles have held up remarkably well. And so the total brand is growing. The growth happens to be mostly in the multi-packs, but the singles have held on. I think it's still early innings, right? Some of these multi-packs have only been in market for 8-9 months. Some are a little longer, maybe 12-18 or 2 years. It's still early innings. It's still consumer adjustment to them. We still have distribution gains. And that opportunity is, again, laid out in slide 9. And so what I would just say is I think when we talked about this a year ago, we said it was like a two-year acceleration of our business or two-year program to reach fruition. And we're one year in and obviously very happy both with the results and also the fact that we sort of have proven that we're the only brand that can really carry these multi-packs in food, right? So we feel good, and we think it's going to fuel growth this year. And we think it has at least another year to run. As you think about modeling, though, Chris, it would be shipment load-in in Q1. Oh, Michael, sorry. But on the full year, it would be immaterial to the revenue. Okay. That's helpful. And you touched on some of the flex in SG&A. Obviously, depending on what freight does, that could go either way. But you mentioned potentially opportunistic increases in investments if freight gets more favorable, which you seem to obviously make a case for the possibility of at least. Is that the right way we should think about it in terms of if we see favorability in spot rates where you have more exposure than usual, that you're more likely to reinvest it or that you might? Or can you just help us understand as we see some of the rate moves, how to think about flowing that through and how you might manage that? If we see opportunity to invest it productively, we'll invest. That's the primary objective if there's favorability. I hope we've demonstrated discipline, P&L discipline, over the last 2-3 years. And we would continue to do so. And we're not the sort of company that spends money just because we have it. But we would obviously reserve the right to spend it if we thought something would work. It's not like you've got a waiting list of things on deck that are kind of simply teed up if there's favorability. It's just that you would evaluate as it progresses and see what might make sense. Yeah. I'd say our approach to marketing is we do a lot of things. And things that work, we try and spend more money on. So other things that my marketing team will tell me are going to work and my marketing team will tell me that they want more money for, absolutely. Obviously, the proof is, do we see what do we like the results? And then we can ramp it up. So yeah, there's always opportunities. And there's always things we could do more of. But it's not like we're sitting here sort of not wanting to do what we want to do. We're doing what we want to do, and we could do more of it if it works. Yeah. There's always opportunities to amplify long-term initiatives. Okay. Very helpful. Thanks so much. Thank you. One moment, please. Our next question comes from the line of Eric Des Lauriers of Craig-Hallum. Your line is open. Great. Thank you for taking my questions. First one from me, just a bit more on ocean freight and transportation costs here. Could you provide just a bit more color on some of the different shipping lanes that you're exposed to? I would imagine the vast majority of your shipments don't go really anywhere near the Red Sea. So could you give us a sense of the sort of geographic mix of your shipping lanes and then if there are any material differences in pricing amongst those? Yeah. So the way I would think about it and obviously, we haven't disclosed it fully. But the way if I was an analyst, I would approach this is to identify that one major market is North America with a West Coast and an East Coast port. And one major market is Europe. And you can sort of get to those numbers from our breakout of international and America business. And then as it relates to the America business, east and west, you can sort of make some assumptions based on population, east and west of the Rockies to get to percentage of business going into east and west. And so our primary routes are Asia to east, west, America, and to the UK. And there is just one wrinkle. I think we've previously disclosed that about a third of our supply or a quarter of our supply comes from Brazil. That would come into the East Coast. Again, we haven't provided the data because we prefer not to. If you wanted to model it, you would do your model based on population and then assume that roughly a quarter or a third of the business is coming in from Brazil. As it relates to rates, if you look at historic rates and I go back to before 2020, Asia to Europe was pretty cheap. I'm going to quote a number, but please don't hold me to it. I'm going to say $1,000 a container, that sort of level. Then Asia to West Coast was more expensive, and Asia to East Coast was more expensive than that. Obviously, Brazil into East Coast is a much shorter lane, and you would conclude was cheaper than Asia into East Coast. Okay. That's very helpful. I appreciate that. And then just, I guess, excluding ocean freight costs, just kind of sticking with these comparisons back to the sort of COVID era here, can you comment on some of the other transportation, warehousing, inventory costs that you experienced during that COVID time and sort of how those compare to what you're experiencing now? Yeah. So during that period of time, we saw very significant costs related to port, demurrage fees, warehousing, congestion charges just because of the supply chain around the ports was basically a bit of a mess. And I don't think we were alone in that. And I think what we said was that when we talked about the $65 million that we experienced and we absorbed in excess transportation costs, I think we said roughly a third was the domestic stuff. The other part of the domestic stuff was also there was a lot of inflation on over-the-road transportation and in warehousing costs. And particularly at the end of, I hope I have my years right. At the end of 2022, because of how all the global supply chains had reacted, there was a shortage of warehouse space in the U.S., which drastically increased costs for everybody. There basically wasn't space. You were ending up with multiple warehouses instead of single warehouses. So that's the background. I would say that by the end of the, or maybe by the middle of the, second quarter last year, all of that dissipated. Over-the-road rates were back to competitive rates. Obviously, a lot of this is also partly what the consumer demand is. And obviously, that was reduced as people started going back out and eating out, etc., etc. Warehouses freed up. It was possible to get everything back into one warehouse where you only wanted one warehouse. And the ports have largely been congestion-free. I say largely because there's always occasional instances, whether it's a strike or something happens that blocks a port up. So domestic transportation costs have largely mitigated back to what I would call normal. I think the other indicator of that is also our inventory levels where obviously, we're supporting very solid sales with significantly lower inventory than a year and a half ago. And so for all those reasons, the domestic costs have significantly subsided. That's a very helpful color. My last question here on private label. So obviously, much of the discussion in recent quarters has been on the relationship with your largest private label customer. But could you just kind of comment on what you're seeing with your other private label customers? Maybe comment on some of the growth between sort of new and existing accounts and just kind of how to think about this section of private label going forward. Thank you. Yeah. I would say overall, the relationship with all of our private label customers is quite strong. We've continued to deliver strong service and value to them. And you can see it in our private label results that there is a strong balance of growth coming from new customers with some big ones in Western Europe and the U.S., as well as incremental distribution, some of which was temporary or is temporary as we've been able to provide better service than others. So we've picked up incremental distribution. And then so overall, we see very strong private label performance that we expect will continue depending on those price gaps that Martin talked about earlier. That's great. Thank you for taking my questions. Thank you. One moment, please. Our next question comes from the line of Jon Andersen of William Blair. Your line is open. Good morning, everybody. Thanks for the question. Congrats on a. Good morning, Jon. Congrats on a strong 2023. I wanted to ask first about just the category. The coconut water category, as you pointed out, has been a terrific category over the past several years and up, I think, 16% indicated in dollars in 2023. But it sounds like you're expecting that to moderate fairly materially in 2024. I think you mentioned category growth in the mid to upper single digits in 2024. Could you just talk about, is this just kind of a return to normal after an unusual 2023? What some of the assumptions are that you're making that lead to that kind of outlook for the category? Yeah. No, great question. I think when we looked at Circana data, we see category volume growth last year around 13%. I think if you look at a 4- or 5-year average, the volume growth has been high single digits. And I think we prudently sort of do our budgeting and planning around assuming that that's a good category number. So does that imply a slowdown from last year? Yeah, maybe. But I'm not sure whether we have any great crystal ball on this. We just have to do some estimates for planning purposes. What I would say is I think the category benefited last year both from our introduction of multi-packs and probably from some competitors returning to full inventory. And so probably there was some maximization of demand, I suppose. And that maybe helped those numbers a little bit. 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 a variance in those outcomes. 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. 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. 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. I think you even mentioned a promotion that might not repeat. Thanks. Yeah. Lot there. Let me take the sort of drags or the headwinds first. I think we've chosen 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 coconut oil 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 we mentioned, the non-repeating commodity sales, which were to commodity sales for us is coconut water concentrate and stuff like that. We just don't expect that to reoccur. 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. 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. It's 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. Now I've completely forgotten the other part of your question. The other part of your question. I do apologize. I think pricing, yeah, 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 assumed significant pricing. So broadly, it would be volume-based growth within our guidance. Super helpful. Thank you. We didn't have that very assumption. Thank you. Thank you. One moment, please. Our next question comes from the line of Jim Salera. of Stephens, your line is open. 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 to maybe kind of tie the loop there. It sounds like you're expecting and I appreciate that you guys pay a rate 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? So yeah, I think if you look at the indexes, at least the last one that we looked at was published last Thursday, you can see that the increase in spot rates sort of peaked about 3-4 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. 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 multi-packs 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 space as the resets go through? Yeah, absolutely. You can think about it. We think about it a lot, right? 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. We're committed to trying to do so. Mike talked about the initiative with the juice, 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 and food and mass. That's a multi-year sort of goal, right? Yeah, our goal is to continue to gain share. If we do so, then obviously, there's upside. 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 in mass and other outside of convenience? Eventually, likely. But for now, it's single serve. It's single units. Okay. Great. Thanks, guys. I'll hop back in the queue. Thank you. One moment, please. Our next question comes from the line of Eric Serotta. Morgan Stanley, your line is open. 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 bottled water, sports drinks, or even CSDs, which I realize don't directly compete. It 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 against that backdrop? 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 is 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. 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 is going to keep pace with the category or your underlying share is going to keep pace with the category or even exceed it? Yeah. So I think our plan or hope is that our branded business tracks the category as a minimum expectation, right? 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 there's obviously, as you said, all this other stuff going on. I think our long-term goal remains mid-teens branded growth. We've delivered that the last four, five years. This year, 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. Great. Thanks so much. Thank you. Thank you. One moment, please. Our next question comes from the line of Bryan Spillane, Bank of America. Your line is open. Hey. Thanks, operator. Good morning, everybody. I just had one question. 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? This isn't the COVID boat supply-demand imbalance. It's tough to navigate traditional trade routes right now and may for a while. I mean, the Barbary Wars, right, impacted trade and freight rates for years, right? 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 concentrators, there are ways 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. 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 a few in Miami. That guy with the push cart in Miami that is on the beach. 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. Then 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. Thank you. Okay. Ladies and gentlemen, showing no further questions. This does conclude today's conference. Thank you all for participating. You may now disconnect.