Greetings welcome to The Boston Beer Company Fourth Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce to you Mike Andrews, Associate General Counsel and Corporate Secretary. Thank you, Mike. You may begin. Thank you good afternoon and welcome this is Mike Andrews, Associate General Counsel and Corporate Secretary of The Boston Beer Company. I'm pleased to kick off our 2022 fourth quarter earnings call. Joining the call from Boston Beer are Jim Koch, Founder and Chairman, Dave Burwick, our CEO, and Frank Smalla, our CFO. Before we discuss our business, I'll start with our disclaimer. As we state in our earnings release, some of the information we discuss and that may come up on this call reflects the company's or management's expectations or predictions of the future. Such predictions are forward-looking statements. It's important to note that the company's actual results could differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's most recent 10-Q and 10-K. The company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. I will now pass over to Jim for some introductory comments. Thanks Mike I'll begin my remarks with a few introductory comments and then hand over to Dave, who will provide an overview of our business and our 2023 plans. Dave will then turn the call over to Frank, who will focus on the financial details of our fourth quarter results as well as our outlook for 2023. Immediately following Frank's comments, we'll open the line for questions. Over the last few years, our company has experienced rapid growth, ending 2022 with a revenue base of $2.1 billion, which is almost double the $1.2 billion in revenue generated in 2019. A large portion of this increase is attributable to the outsized growth of the hard seltzer category. We mentioned on previous calls, the hard seltzer category dynamics have been challenging as the economy reopened, and it's been difficult to predict where consumer demand will ultimately fall. We'd expected Truly trends to improve in the second half of 2022 against easier prior year comparisons. Truly performance has not yet turned around, Dave will take you through additional plans we have for Truly, which we expect to help improve the brand performance in the second half of this year. Looking back on 2022, our projections for Truly and some of our new brands were too high, we produced and sourced materials at the upper end of our projections to avoid out of stocks. We've also had an expansion of product offerings that has introduced more complexity into our supply chain, we planned our cost structure at higher levels of volume. This has resulted in financial performance that is below our expectations. In 2023, we are working to simplify our business to reduce complexity and improve margins, as well as adjusting our cost structure in line with our current volume expectations. We believe the actions we are taking will benefit the company over the long term, and that the beyond beer category, where we have an advantage position, will grow over the next several years. We expect the operational and supply chain changes we are making this year, combined with our history of innovation, strong brands, and our top-ranked sales force, will lead us to long-term success. A strong balance sheet enables us to continue to invest in our brands, and today we announced that we'd repurchased $8.9 million in stock thus far in 2023. We released our first ever environmental, social, and governance report, which established a baseline of data that we will work to improve over the long term. We now have a more standardized approach for understanding our energy use and our water use. The ESG report also allowed us to highlight our focus and continued progress against our efforts to cultivate a culture of inclusion through awareness, engagement, and accountability across the company. As shared in this report, our coworkers gave Boston Beer high scores on questions related to pride in working for the company, belief in our values, our concern for their safety and well-being, and their confidence in the future of Boston Beer. To close out my remarks, I would like to thank our outstanding coworkers, distributors, and retailers who continue to support our business. Now I'll pass the call to Dave for a more detailed overview of our business. Hey thanks Jim hello everyone our 2022 full year volumes and revenue came in at the higher end of our financial guidance. However, the mix of volume came in differently than planned, and we also produced and sourced to ensure we would not have out of stocks at retail. This resulted in supply chain inefficiencies, particularly outsized scrap on Truly, which impacted our margins and earnings. For the 2022 full year, we generated very strong operating cash flow of about $200 million, which gives us financial flexibility to invest in our brands for the long term. Importantly, we've learned much in the past year, understand where opportunities exist, and have new plans in place to improve overall performance with an emphasis on getting Truly back to share growth. We operate in attractive categories as the beyond beer category grew 4% in dollars over the last 52 weeks and had a CAGR of over 25% over the last five years. Our plans include reducing the complexity in our supply chain while allowing us to better focus our resources on our top two priorities: sustaining Twisted Tea's industry-leading growth and gaining share with Truly. We've also evaluated all our operating expenses to ensure we spend in a more disciplined manner while continuing to invest in advertising and other initiatives to support our brands. In 2023, we expect overall volumes to decline, with strong growth in Twisted Tea offset by our expectation for continued negative Truly volume growth as the hard seltzer category likely will decline between 10% and 15%. We also believe we have opportunities to be more focused on our product offering. We expect this to strengthen the underlying health of our business and contribute to future margin improvement. Additionally, we're lapping against the 53-week fiscal year in 2022, which will lead to a headwind of approximately 100 basis points on our volume and top line growth performance in 2023. I'll now provide some color on our brands. Twisted Tea was the number one growth brand in all of beer in 2022 and increased its lead as the number one FMB by more than eight volume share points, gaining 3.4 share points in 2022 in off-premise measured channels. As evidence of its durability, the brand's fourth quarter dollar sales growth in off-premise measured channels accelerated to 33% versus the full year's 31%, and Twisted Tea's 2023 year to date growth rate has further accelerated to 36%. This is a result of an effective brand building campaign, our growing annual college football tailgate program to extend the season, improved distribution of 12 packs, and improved service levels. In 2023, we'll continue to increase our brand spend to advance Twisted Tea's position within beyond beer. We remain confident that Twisted Tea will sustain a strong double-digit growth in 2023 for a number of reasons. First, we see a significant upside to introducing Twisted Tea to a much wider audience and growing the base of Twisted Tea drinkers. While household penetration and brand awareness is lower than its competitors, its brand consideration and purchase intent remain the highest in the category. Household penetration grew by 20% in 2022, and the buy rate was up 7%. We'll continue to invest in our top quintile ad campaign to drive awareness and expect increased trial and adoption to follow. Second, there's still room to grow through increased distribution. While we've achieved 50% ACV distribution on our original 12-pack, we have two other 12-packs, half and half, and party pack with much distribution upside. 24 ounce single serve offerings that are sold primarily in convenience stores have made Twisted Tea the number three selling single serve brand in all of beer. We also see the opportunity for increased distribution across all of our single serve flavors. Third, Twisted Tea Light has proven to bring in new drinkers and prior brand rejecters. We've received an encouraging early response to our new Twisted Tea Light 110 calorie product that we launched in high developed markets last year. It only has 9% ACV distribution as we start 2023. Twisted Tea Light is bringing new drinkers into the brand family who are looking for lower calories but big flavor. Fourth, there's much opportunity to increase brand awareness and availability in Twisted Tea's underdeveloped markets. We still have many historically underdeveloped geographies, such as Texas and California, where the brand's awareness is 10 points lower than the national average, and it's just now starting to catch fire. For example, in 2022, we increased investment in Texas, in one year it became our largest volume state, accounting for 10% of total Twisted Tea volume while growing 50%. Lastly, we also have underdeveloped consumer demographics such as Latinos and African Americans who represent an opportunity to grow the brand. Only 24% of Twisted Tea households are multicultural, they're growing 18%. We have plans to continue to grow Twisted Tea with a diverse audience through investment in awareness-driving media and increased product availability. As Jim mentioned in his remarks, we're disappointed that the reformulation of Truly has yet to improve trends and are planning a major refresh of the Truly brand in the second quarter of 2023 that includes new easier to navigate packaging, more emotive versus product-centric brand communication, elevated media spend across all channels, especially digital and social media, and aggressive marketplace execution to improve product availability and visibility, especially with our lightly flavored variety packs. We've learned a lot and are putting that learning into action this year. We realized in last year's second quarter after launching Truly Margarita that adding further bold flavor variety pack innovation was not going to be as successful as we had experienced with prior innovations, as consumers were clearly overwhelmed with category news. Further, despite Truly Margarita's very good performance, it was the number one new brand launched in beer in 2022, it was not as incremental to the Truly trademark as prior launches. It also became clear that consumers, in their confusion, were going back to the category basics and seeking more lightly flavored hard seltzers, and we had put too much executional attention towards our bolder flavor lineup to the detriment of our lightly flavored variety packs. The reformulated Truly products that we launched in the fourth quarter have been well received by those consumers who know about the change, but we did not do a good enough job communicating those improvements on our packaging and in our advertising so that more people will learn about the change. Our upcoming package redesign will present a cleaner, easier to shop look, and forcefully communicate that we have a now more refreshing taste that includes real fruit juice. Our internal consumer testing work validated that we've made big product improvements. We need to better communicate it to consumers to trigger trial and win back lapsed drinkers. We sharpened our advertising communication in January to reinforce that point, and the new packaging and more emotive ad campaign will hit the market at the start of the second quarter. Based on this new work and stepped up brand investment, we're expecting to gain share this year, although the first quarter will be more challenging as we lap last year's Truly Margarita launch. We deliberately did not add new permanent flavor innovation in the first quarter of 2023, so we could focus on the reformulated lightly flavored core lineup and build the brand more sustainably without adding new permanent product offerings. Lastly, we launched Truly Vodka Seltzer in the fall ahead of 2023 to gain consumer learning, and our experience with that launch has informed our approach with two new variety packs and updated packaging design and branding that will also hit the market in the second quarter. Without question, sustaining Twisted Tea's double-digit growth and Truly's trajectory are our top priorities for the year and will have our full attention and significant investment. Having said that, we have an excellent portfolio of brands, and we'll continue to broaden their shoulders and build them out. Sam Adams started the year with another buzz-worthy Super Bowl spot announcing our remastered Boston Lager that utilizes the same Koch family recipe, but through enhanced brewing techniques, provides a smoother finish. We also are investing more behind our seasonals portfolio, which is the only national seasonal craft beer and showcases Summer Ale and OktoberFest. Lastly, we've added a new non-alc beer called Gold Rush to go with Sam Adams Just the Haze, recently named the number one non-alc beer in the country at the Great American Beer Festival. We'll continue to support other innovations, including the expansion of Dogfish Head canned cocktails, the launch of Jim Beam Kentucky Coolers FMB, and the continued rollout of Hard Mountain Dew. Expect these to be smaller volume contributors in 2023 as they ramp distribution and find their audience. Turning to our supply chain. As we previously discussed, we're in the process of modernizing our supply chain through investments in equipment, capacity, and improved systems and processes. Our product portfolio has expanded over the last several years. This expansion and the volatility of the hard seltzer category has increased complexity. We're working hard on our supply chain transformation initiatives to improve line efficiencies in our internal breweries and better manage our inventory. The disciplined portfolio management I mentioned earlier, as well as our new supply chain systems and processes, should lead to better operational performance over time. It will take time for these initiatives to take hold, and as we previously disclosed, we expect to pay some shortfall fees to contract manufacturers in 2023 because of the lower Truly volumes. Given our expectation for lower volumes, we're closely reviewing and adjusting our operating expenses while continuing to invest in our brands. We expect to use these cost savings to support increased brand spend, and within brand spend, we're both converting non-working to working dollars and increasing the effectiveness of our spend through greater investment in digital and social versus traditional media. Despite near-term headwinds, we continue to believe that our business has significant margin improvement potential. In summary we believe the investments we're making this year in enhancing our marketing plans and packaging for Truly, continuing to fuel Twisted Tea's momentum, reducing supply chain complexity, and lowering our cost base should drive operational effectiveness and improve top line growth, market share, and margin performance over the next few years. Now I'll hand it over to Frank to discuss fourth quarter financials as well as our detailed outlook for 2023. All right. Thank you, Dave. Good afternoon, everyone. The fourth quarter continued to show sequential shipment and revenue improvements. However, as mentioned earlier, our gross margin was lower than expected, primarily due to higher than expected inventory obsolescence and lower internal brewery volume. Shipment volume for the quarter was approximately 1.71 million barrels, a 16.7% increase from the prior year, partly due to an additional week in 2022 compared to 2021, reflecting increases in our Truly Hard Seltzer, Twisted Tea, Hard Mountain Dew, and Angry Orchard and Dogfish Head brands, partially offset by decreases in the Samuel Adams brand. We believe distributor inventory as of December 31st, 2022 averaged approximately five weeks on hand and was at an appropriate level for each of our brands. Our fourth quarter 2022 gross margin of 37% increased from the 28.7% margin realized in the fourth quarter of 2021, primarily due to lapping prior year costs related to the 2021 Hard Seltzer slowdown, partially offset by higher brewery processing and inventory obsolescence costs. The higher obsolescence costs were primarily related to our adjusted volume projections for Truly shipments as the Truly brand transitioned to real fruit. Inflationary cost increases, primarily due to increased packaging, ingredient, and energy costs, were offset by increased pricing with a net neutral impact on gross margin. Our fourth quarter advertising, promotional, and selling expenses increased $1.5 million or 1.1% from the fourth quarter of 2021, primarily due to higher media spend and higher salaries and benefits costs, partially offset by lower local marketing investments. Freight to distributors was flat as higher volumes were offset by lower rates. General and administrative expenses increased by $5 million or 13.5% from the fourth quarter of 2021, primarily due to increased salaries and benefits costs. For the fourth quarter, we reported a net loss of $11.4 million or $0.93 per diluted share. Compared to a net loss of $51.8 million or $4.20 per diluted share in the fourth quarter of 2021. This decrease in the net loss of $40.4 million or $3.29 per diluted share was due to lapping the 2021 combined direct and indirect costs related to the 2021 slowdown in hard seltzer category growth, as well as higher net revenue in the current quarter, which were partially offset by increased supply chain costs and slightly higher operating expenses. Turning to guidance. Our depletions for the first six weeks of 2023 have declined 4% from the comparable periods in 2022. Our 2023 fiscal year includes 52 weeks compared to the 2022 fiscal year, which included 53 weeks. We are currently planning 2023 depletions and shipments to decline 2%-8% inclusive of an approximately one percentage point negative impact from the comparison against the fifty-third week in 2022. We expect price increases of between 1% and 3%. Full year 2023 gross margins are expected to be between 41% and 43%. We continue to expect to cover inflationary cost increases with pricing. Our full year 2023 investments in advertising, promotional and selling expenses are expected to change between a decrease of $5 million and an increase of $15 million. This does not include any increases in freight costs or the shipment of products to our distributors. In 2023, we expect non-brand savings to be largely offset by an increase in incentive compensation, which did not fully pay out in 2022. We estimate our full year 2023 effective tax rate to be approximately 28%, up approximately under 60 basis points versus 2022. We're currently targeting full year 2023 earnings per diluted share of between $6 and $10. This projection is highly sensitive to changes in volume projections, particularly related to the hard seltzer category, supply chain performance and inflationary impact on consumer spending. As we model out the year, please keep in mind a couple of factors. We currently expect first quarter shipments to be at the low end of our full year guidance range as we lap the launch of Truly Margarita that mostly impacted the first quarter of last year. We also expect hard seltzer trends to remain challenging. Margin improvement will be weighted to the second half of the year based on volume trends, the expected timing of our cost reduction efforts and the phasing of obsolescence expense in the prior year. We're expecting a net loss in the first quarter. Turning to capital allocation. We ended the year with a cash balance of $182 million and an unused credit line of $150 million, which allows us to invest in our base business, fund future growth initiatives and return cash to shareholders. In 2023, we expect CapEx of $100 million-$140 million. These investments will be primarily related to our goal to build capabilities and improve efficiencies. During the 2022 fiscal year, we did not repurchase any shares of our Class A Common Stock. During the period from January third, 2023 through February 10th, 2023, the company purchased 25,000 shares at a cost of $8.9 million. As of February 10th, 2023, we had approximately $81.5 million remaining on the $931 million share repurchase authorization. We will now open up the call for questions. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from the line of Nik Modi with RBC. Please proceed with your question. Great thanks good evening everyone Dave maybe you could just kind of opine. I mean, I'm sure you could appreciate skepticism around forecasts since it's been pretty tough the last year and a half. What really gives you the confidence in, you know, what you're predicting right now in terms of the budgets and also on the market share gains, you know, you know, why do you have the confidence that you think you can gain share after, you know, 2022, where it was, you know, pretty much, you know, a year of share losses for Truly? In terms of the market share gains, where do you think it's gonna come from? Thanks. Hey thanks Nick I think look we've learned a lot over the last, you know, three to six months, I'd say, with the category. I think, remember last year, we had significant innovation overlaps with tea and fruit punch, and now we're facing the same thing with margarita. In fact, margarita in the first quarter is about 60% of our losses is margarita. We're trying to work through this growth through innovation and go to a more balanced approach to growing our brands. It will be innovation. It's gonna be replacing tea with sort of a rotator of three trimester seasonals that come in and then they go out. We're really focusing, as we announced today, a lot of it is on our lightly flavored SKUs. Really, you know, we learned that, look, we built the business through building this bold flavor portfolio, and it did very well, put us in a very strong number two position. We did that to some extent neglecting reinforcing the refreshment characteristics of the lightly flavored portfolio. When we did make the change last year, I think you noted it actually in one of, in one of your notes, consumers Who noticed a change, actually reacted very favorably. We didn't do a very good job explaining that to consumers. Again, we're gonna be communicating that much more vigorously and aggressively on our new packaging and in our advertising. In addition, I think we're seeing some of the volume move to the convenience channel where honestly, we're much, much less advantaged than we are in other channels, and we're making you know, a lot more activity and a lot more moves to grow our share in single-serve. In convenience was also is another way to get there. I'd say it's kind of a long answer, but I would say we've relied a lot on innovation, particularly with permanent SKUs. We're kind of weaning off of that. We're gonna spend more on our base business. We're gonna look much better in store. We're gonna deliver that message very strongly. The last thing I'll say is, if you look at the. Again, I know you're a Numerator fan. If you look at Numerator, we're still within the 21-34-year-old age group, which is the group that's really stuck behind hard seltzer. We still have the highest household penetration there among all beer brands. We still have a big audience that's there awaiting us to deliver some news and excitement to them. We feel through all of those, we can get there. Again, it's not gonna happen in the first quarter. It's gonna build over, I'd say the second and third quarter, we'll start to see, hopefully see, shares grow for Truly. By the way, it's not-- that's in the guidance that Frank mentioned, we're not expecting Truly to grow share as part of that guidance. This is called maybe a little bit more aspirational, but we exist to grow share. That's our intent, that's our goal, and we think all the things that we put in-- that we now say that we're putting in place in the marketplace get there. If I could just quickly follow up on that, Dave, from a market share standpoint, I mean, is this a function of you getting clarity from retailers that they're cutting off the tail of the hard seltzer category, so maybe you'll benefit somewhat there? Or are you expecting to close the gap with White Claw? Can you just give any context on where you think those share gains would be sourced from? I mean, the share, I think the share gains will come. First of all, there's a long tail. For perspective, I mean, Truly is the number two brand. The next 46 brands equal the share that Truly has, including Bud Light Seltzer. There's a lot of brands to steal share from, and a number of them will be going away. Of course, you're gonna steal share from the number one player as well. We expect to source, you know, from anybody, from all consumers who are interested in the seltzer category and are buying any other brand within that space. Great thanks a lot I'll pass it on. Sure. Our next question comes from the line of Nadine Sarwat with Bernstein. Please proceed with your question. Hi everybody two questions from me. The first one, on your 2023 shipment and depletion guidance is a decline of 2%-8%. Can you run us through your volume growth assumptions that are baked into that for each of your major brand families? My second question, your announcement earlier today demonstrates how you're leaning into the spirits RTD space. You know, this continues to grow strongly as a segment, although it's already dominated by a few brands. What makes you confident that Truly Vodka Soda has what it takes to win in that space? Thank you. Okay hi Nadine this is Frank let me take the first one on the guidance. Maybe to preface the assumptions, we've taken, I'd say a, you know, a somewhat conservative approach because of the uncertainty that we see around the consumer and the entire consumer environment and the hard seltzer category in particular. We believe it'll stabilize at a point in time, but we have seen significant declines, so we've taken that into consideration. The guidance of 2% - 8% decline is really on a reported basis. You know, it, as we've mentioned, we have one fewer week in 2023 compared to 2022, so the comparable range is actually -7% to -1%. At the low end, we have, for Truly, we have, we've not modeled an improvement in the trends that we have seen in 2022. This is just, you know, what we believe, okay, if we don't see anything, this is where it lands. For Twisted Tea, which had a stellar year in 2022, we moderated last year's growth rates. You know, we believe we're gonna have strong growth rates in 2023. You know, they will moderate probably during the middle of the year when we had really high growth rates last year. That's kind of what we have on the low end. On the high end at the -2, we keep, you know, Twisted Tea moderated, and didn't model really significant improvement in there. Growth rates below last year. For Truly, we still don't model share gains, but we have modeled that the relaunch that we announced today and that Dave mentioned is successful. Those two brands are really the main drivers. They will make or break the volume number that we're gonna see in 2023. Okay Nadine I'll take up the second question about how can Truly succeed in that space. I'd say first of all, our consumers have asked us for a long time to get into the vodka seltzer or vodka soda space. When you look at the category, if you look at RTDs, it's about $1.6 share of total beer. Half of it is the vodka seltzer space, so that would be, you know, High Noon and NÜTRL would be the top two brands. There's clear overlap in the high end of hard seltzer and the other brands. We have a large consumer base. They want us to go. We develop great product. Actually, it is a different approach because if you look at You know, the channel distribution, it's really driven by the liquor class of trade. That's about 45% or so of the total hard seltzer goes through the liquor class of trade, which is a little bit different. A lot of it's mostly independent. 90% of it are independents. It's very cluttered. Sales per point is lower. Prices are higher. It's a different approach. We're going there. We don't expect it to be an overnight, you know, success, but it's something that, you know, other brands have five or six years head start on us, and we're going. If you look at the numbers, it's way early, but clearly, High Noon is number one. NÜTRL is just a smidge above us as number two, we're three in the vodka seltzer space. In just a few months, we really haven't even brought what we're gonna bring to the table yet. We think we can compete. Again, we're not expecting it to be something that's gonna be hugely material right away, but it's an area where our consumers want us to go, where consumers are sourcing their occasions from hard seltzer anyway, and we need to be there. The last thing I would say about this is that, you know, we're in with one variety pack right now. There are 1,100 SKUs in RTDs right now. That's more than hard seltzer has. RTDs are one-fifth the size of hard seltzer. They have more SKUs. They have more brands. You cannot stand out with one variety pack, which is why we announced today that we're gonna have two more variety packs. because you have to create presence on the shelf in order to compete in this space. We've learned over the last several months what we need to do to compete well, and we're gonna start to implement that more aggressively as we get into the second quarter. That's very helpful. Thank you. The next question comes from the line of Vivien Azer with Cowen. Please proceed with your question. Hi thank you so much and good evening. I was hoping just to pick up on the thought that you just offered in terms of what consumers are telling you about how far Truly can reach. If you could just touch on Truly Vodka versus Truly, you know, Vodka Soda. How much confidence do you have that the Truly brand can straddle so many different categories, hard seltzer, canned cocktails, and distilled spirits entirely? Thank you. Hey Vivienne thanks I think it can 'cause we look at, again, we split that category into two. The Cutwater version of that category, the RTDs and Dogfish Head canned cocktails, higher ABV, fewer occasions, lower buy rate, just less, you know, lower frequency of consumption. If you look at the other side, Obviously, it looks and acts just like a hard seltzer. Really, it's about refreshment, it's about sessionability, it's about variety. We think we were building a brand that could stand for those three things, refreshment, sessionability, and variety. Whether you take that in a traditional like sucral space hard seltzer marketed as Truly Hard Seltzer or within the vodka space, you know, we've already talked about getting into tequila as well, which to us are all kind of the same occasions. It's largely the same consumer. The spirit consumers tend to be a little more, a little older, you know, a little more, you know, a little more wealthy than the hard seltzer consumers. It's essentially the same, the same pool that we're playing in. We think the way the brand has been built, it can play, it can play in those spaces. Consumers, we've done a lot of consumer work, so we're not just kind of, you know, making it up as we go. Consumers have given us permission to go there. Now we're going there. We'll see how it goes, and we'll evolve accordingly. That's super helpful thank you so much just my follow-up for Frank. You know, you guys, before this like toward growth in hard seltzer, had a pretty clear formula for offering guidance. If I recall correctly, you were really extrapolating off of trailing 12-week trends. If I look at what we're seeing in the hard seltzer category today, in particular on the tier stack, it seems like you've reverted back to that methodology. Can you just comment on whether that's accurate or not? Thank you. Yeah. Certainly for Truly, as I said, like at the low end, the -8 or -7 on a like-for-like basis, we've just looked at the trends that we've achieved in 2023 and in 2022 and assumed that there's no change to that. We've reverted back a little bit to that. We've looked at trends that we have achieved. You know, what did we really realize, and then use that as a basis and build it up. We believe we have, you know, really strong plans in place for 2023. One component is what we announced today is the relaunch of Truly. We wanna see how much traction in actuality we're gonna get. We have been carefully modeling that. That's helpful. Thank you so much. All right. The next question comes from the line of Kevin Grundy with Jefferies. Please proceed with your question. Hey great good evening guys boy, a few for me. Let me peck through these quickly. Dave, just the down 10%-15% for the seltzer category that you're expecting, just in the interest of clarity, that's the malt-based seltzer category. You're not talking seltzers broadly. Is that fair? Yeah, that's right. I think the rule of thumb that we're using, Kevin Grundy, is if you throw in the spirit-based seltzers, you're probably gonna add about three points of growth to that. Okay. All right. That's helpful. Thank you. - 10 to 15, but yeah, it would be - 7 to 12. Yep. Got it okay thank you for that Dave. I wanted to step back, maybe ask you a little bit differently to Nik Modi's question, just around the systems and the processes around FP&A and then, you know, ostensibly your guidance. Look, we can appreciate the volatility of the environment. It has not been easy, cost, and then in your case, of course, you know, sympathetic to the fact that, you know, we're still trying to find a bottom here with seltzers. That said, I mean, forecasting even in the near term, particularly around gross margins. It's been really difficult. Where are we with the investments around your systems to improve clarity around KPI and processes? How would you characterize where we are? How would you characterize your visibility? How would you characterize your conservatism around your outlook? Yeah. Kevin let me take that. I think there are multiple reasons where we are with the gross margins, where we are. Part of it is visibility. Part of it is also the relatively low volume level that we have reached and the declines, and given the limited reactivity that we have in the supply chain. I'll get there in a second. Let me first cover the systems implementation. The systems implementation, which is really a process change, it's implementing an end-to-end process support by the systems. We're well unaware and well underway. The three main components I would say is a warehouse management system, which is SAP. We have a planning system, which is a complete planning suite that not only covers demand planning, but it's demand planning, supply planning, production planning, inventory planning. The third major component is order management within SAP. We have started the implementations. We have implemented the warehouse management system in one facility in Ohio. The two other ones in Delaware and in Pennsylvania will follow later this year. The planning system, we have started with the demand planning module that has gone live, and we will during the middle of the year, we'll implement the supply planning module as well. You know, kind of in parallel, we'll also do the order management. There are some side modules that we're also working on, like MRP. This is going, and, you know, we should be when it comes to systems and visibility, much better in a much better place by the end of the year. I wanna caution one is, yeah, implementing the systems, and the second thing is there's a huge change management effort that comes with it because you need to be able to run those systems. You know, when we did the warehouse management system in Ohio, we're actually pretty happy with it because that's a massive change. You've might have heard that, you know, with other companies. The main focus was to keep on or being able to keep on receiving materials and to ship so that there's no disruption of the supply chain. We've accomplished that, and now we start leveraging all the benefits. Okay. So- Thanks very quick. Go ahead. Yeah. This is underway. I think, the other thing is, and that's partly why we have the, you know, the gross margin miss I'd say, because of the scrap is we, you know, we have our supply chain at the moment is with the volumes that we're taking. We have declining volumes and the reactivity is not relatively high, to be honest, because where we can react on short-term is only with the internal breweries. Externally, you have to give lead time. It's a 60-day notice period. You have to commit to certain volumes. If you have a volume change or a mix change, it's really hard to change that with our external comms. What you can only do is adjust the volume. If the volume doesn't come through, adjust it internally. What that, you know, results in is that you have this, you know, lower fixed cost absorption and results in higher cost per case, and that's really impacting directly the margin. Then the other piece is of course the scrap. You know, the combination of better systems, better processes, better integrating of the supply chain should address those issues. I will tell you that relatively the declining volume environment is makes it a little bit more challenging to navigate that as opposed to a growth environment where you will sell through things quicker. No, of course. We can appreciate that challenge. One last one, just because it's important and sort of, you know, the bull case I'd say is sort of largely pegged to it to some degree. The elusive low to mid-50s gross margin target, I know it's sort of difficult to call and you're kind of drinking out of a fire hose at the moment, but where would you reasonably peg the market in terms of when you think you can achieve that? Yeah. I think the way I would answer that is the target has not changed because the building blocks are, you know, exactly the same building blocks. We are behind from a timeline perspective. You know, there are a couple of factors, why we are behind. One is the volume has impacted us clearly. We have the network of anchor breweries is in place. With the current volume that we have and the declining volume, we can't allocate it in an optimal way. We would have liked to have a little bit more volume in the West Coast. We don't have that. That's not, we're not getting to optimal. We need a little bit more volume to get there. On the brewery efficiencies, we've talked about that, in the last two earnings calls, we have this variety packing line that is, you know, takes a little longer to get to the target efficiencies. We are seeing progress, and we're putting, we believe, the right measures in place, but it will take a little longer to get to the target efficiencies, and that will have a, a significant impact on the cost structure. One is that you get, you know, a much better fixed cost absorption. Part of that we'll both see this year because Ohio was only online last year for part of the year. There's gonna be a carry, over impact that, where we get additional 30%-40% more volume out of that facility. We'll get that benefit, and then we're increasing the line benefits or the efficiency of the line benefits. All these items and the waste reduction, especially the scrap that we would consider one-time, especially in the fourth quarter, we're working to, of course, not repeat that and not have that result in a string of one-timers. The timelines have extended and will take a couple of years to get there. The last thing that I would mention to that is also we have invested in our co-manufacturers, and, yeah, those investments amortize. They're amortizing now over a small amount of volume, and that's driving the cost per case up as well. Those costs will largely go away in 2025, and that will also be a significant improvement in gross margin. That's why we believe, yeah, the target has not changed, but the timeline has extended. Okay. Thanks for all the time, guys. I do appreciate it. Good luck. Thank you. The next question comes from the line of Robert Ottenstein with Evercore ISI. Please proceed with your question. Great. I think most of my questions actually were ticked off so far, but still have a couple left. I guess the question is around shelf space and obviously Twisted Tea deserves more shelf space. It's doing phenomenally well and obviously has a long run rate. I guess my concern is whether you can maintain or gain shelf space on Truly given, you know, the outlook that you have for hard seltzers, you know, the category being down 10%-15%. Given, you know, the fact that, you know, based on, you know, what some well-known consultants have told us, that there's just gonna be this tsunami of spirits-based RTDs hitting the shelves this year, and gaining, you know, something like 20% shelf space in total beverage alcohol granted, so not just here, but in total beverage alcohol. You know, with those sorts of drivers going on, how, you know, do you think you will be able to gain or at least maintain shelf space for Truly in the new shelf set changes gonna be coming in the next couple of months? Yeah. Hey, Rob, it's Dave. I'll talk to both of them. First of all, the easy one, Twisted Tea. We think we'll get 25%-30% more shelf space on Twisted Tea this year. Remember, the shelf resets start March 1. Generally, they end around mid-May, but obviously before Memorial Day weekend. Twisted Tea locked and loaded. It would still be under-spaced, by the way, relative to its share of FMBs, but we'll take it. We'll take that space. On hard seltzer, what's happening is the category is being cut back, and this is based on what our sales team is seeing. At the end of last year, called like 11% of total space went to hard seltzer. It's gonna cut back to, like, maybe 9%-10%, it's gonna lose some of that space. Within that space, really the top five brands deliver on, like, 98.5% of all the needs that consumers have. There'll be a lot of brands that are, that go away. While the hard seltzer category where space will shrink, Truly's space within hard seltzer, based on our, what we know now, would increase slightly. Therefore, Truly's total space of beer is gonna be about the same. To be really precise, like 2.7%. We think the category loses, Truly wins a little bit because it's the strong number two. Again, as I said before, the number three is whatever. It's like 20, you know, or 15 share points behind. We think we'll be able to do that. We honestly do. We think not adding permanent SKUs is probably a good thing as well. We just have to... We've innovated arguably a little bit too much and not built the core business enough. That's really the focus this year. The last thing I just wanted to say, 'cause Rob, you brought up the whole thing RTDs, and what's interesting is that the number of brands that have increased, there's like 70 or so more brands than there are hard seltzer brands. There's 150 more SKUs than there are hard seltzer SKUs right now. When you look at the consumer overlap, there is some consumer overlap. About 8% of hard seltzer. This is Numerator. About 8% of hard seltzer volume drifted to RTDs last year. So it's not... It's, you know, maybe of the 15 points it lost, maybe two of those points were went to RTDs. It over-indexed with RTDs 'cause they're so small. It is having a bit of an effect on the hard seltzer category. The RTD wave, I think, personally, I think is three-quarters driven by retailers jumping on it and pushing it, and one-quarter by consumers saying this is where it should be. We'll see where it nets out this year. Obviously, it is going there. We'll see where it nets out, we, I think. You know, we're gonna compete very aggressively there with Dogfish Head canned cocktails, with Truly Vodka Soda. We talked about that. This wave could come crashing down a lot faster than hard seltzer, in my opinion, 'cause I think it's being propped up by wishful thinking to a larger extent. Some consumer trends, no question, that would require RTDs to get more, but what they're getting seems extreme, and they're gonna have to pay the rent. We'll see what happens. Great. No, that makes a tremendous amount of sense. Just a question for maybe for Jim or you. You know, there appears to be, you know, a little bit of a trend perhaps for the wine and spirits, and particularly spirits and, you know, there's one big one certainly going over to beer distributors. You know, if that trend continues, does that have any effect on you at all in your sense? What does that trend mean to you? What does that say about, you know, the industry, maybe convergence between spirits and beer? Just, you know, this is more maybe a more philosophical question or long-term question, love to get Jim's thoughts on that. Yeah. It's an interesting phenomenon. Obviously, the movement of Sazerac was, you know, unprecedented. I think what you're seeing is a recognition that beer distributors are better at building brands in this beyond beer/fourth category. Because those products, and that includes the tsunami of, you know, RTD canned cocktails, those products kind of look more like beer than spirits. You know, they're in cans. You want them in the cold box. The dollar margins per case are relatively low relative to spirits. They're kind of mass-produced in levels that you're not, you know, bottling liquor. In fact, most of them are made in breweries like City and similar places. They have a lot of the characteristics of beer, and the beer system is just better at, you know, building brands there, gaining distribution, merchandising, all those activities. You've got some of the spirits people, you know, wanting the advantages of beer distributors. Because of that, then I think, you know, most of the liquor brands are gonna end up in liquor distributors. The Sazerac thing is not gonna be opening of floodgates to all these liquor brands moving over to beer distributors. Their primary volumes are still, you know, outside of the cold box. To me, and I think to us, we're always gonna be at a much higher level of priorities at our beer distributors. I think it's just a recognition that the liquor system of the route to market is disadvantaged in this fourth category. That's great. Thank you very much. The next question comes from the line of Steven Powers with Deutsche Bank. Proceed with your question. Great good evening everybody thank you I guess maybe Frank, you've mentioned scrap and obsolescence a couple times. Is there a way you can quantify what that was in the fourth quarter? Maybe also quantify what you've embedded, if any incremental obsolescence, in 2023. I'm trying to get, you know, I'm trying to get at sort of underlying gross margin, ex that obsolescence. Related to that, you obviously you're gonna start off the year with a lighter gross margin, presumably finish a lot stronger. Just, you know, relative to the full year average, like, how far? Is there a way you can frame how far below we are when we start the year and how far above we expect to be when we end? Okay. Let me start with the first question. Just ahead, I'm not intending to give you quarterly guidance, but I try to address your question. On the first one, so scrap and obsolescence, I'd say the easiest way to answer that, we would have come in without the scrap and obsolescence in Q4 would have come in, yeah, middle to higher end of our margin guidance. Yeah. That's kind of the impact. It was a sizable impact. The two drivers that we had that really were, as I said before, we resourced against higher volumes internally and for a different mix. You have to make a call early on and basically in the third quarter if, you know, for volume that you wanna sell in the fourth quarter. That has changed, okay? We need to adjust the volume. We took it out of the internal brewery, so there's a fixed cost absorption impact. That was one thing, and the second thing, which was actually the bigger one, was the scrap that we ran out of shelf life on 2 things because it was a little bit amplified by the fact that we also transitioned to the new fruit juice formula in Truly that we had cans and other ingredients that we had to write off. That's why this was a relatively big number. What you will see in the K is that total obsolescence was getting close to $40 million, and we're planning a substantial reduction in 2023. No incremental obsolescence because, you know, almost half of that number was really incurred in 2024 and was related to something that I would classify as one time in nature. Okay. Yep. Got it. Go ahead. Any help on 2023? 2023, I mean, it will follow our normal margin guide because we have, like, the majority of our volume sits just in Q2 and Q3. That's where you should see the highest volume. I, yeah, there's a range, I would say that is over the year is, like, four points roughly, and the lowest quarter will be Q1 because of the phasing of the savings initiatives. Yeah, the middle of the year has the higher ones, and then, yeah, in line with history... Yeah Q4 will be lower. Yeah. Okay. Okay. That's helpful. And then on Twisted, I guess two questions. You may have said this if so I missed it, and the transcript isn't updating for me. I don't know if you gave a growth rate for 2022 on Twisted or if you did size the expected growth in 2023. Yeah. If you could humor me and go back to that'd be great. My real question on Twisted- Yeah ... is on repeat rates. I'm just curious on newly acquired customers. Are you seeing similar repeat rates that, you know, to the historical? Any differences or is it too early to tell? Yeah. Let me take the first one quickly because I covered that partly earlier. What we did on the guidance, we went back to 2022 and used that as a base, like the trends that we have seen. We have for Twisted Tea, we have moderated the rate. We didn't take the growth rate that we achieved in 2022 and we've moderated that and we're more in the mid-teens there. Mid to high teens, that's broadly where we have the range. Actually, I do have a repeat rate, I mean, or an idea for you on that. I think last year our repeat rate was in the low thirties, which was about the same as it was the prior year. That's pretty significant given that we added like 20% more households. We think I mean, the repeat is holding up very strongly for this brand. Yeah. Okay. That's what I was getting at. Okay. Thank you very much. Yep. The next question comes from the line of Eric Serotta with Morgan Stanley. Please proceed with your question. Great thanks quick one for Frank and then one for Dave. For Frank, should the Truly, not reformulations, but repackaging for 2023, all the initiatives that Dave spoke about earlier result in any scrap or obsolescence charges? I know that was pretty substantial in the third quarter, related to the changeover, and you mentioned continued scrappage in the fourth quarter. Yeah. So what we have, I will not say there won't be any scrap whenever you have a change of that nature and that magnitude. There will be scrap and obsolescence. We have broadly modeled that in bearing any really change in plans, in terms of timing and the type of transition that we will do. So, there's scrap and there's some models in the guidance. Okay. Great Dave hoping you could talk a little bit about Twisted velocities. You know, it looks like overall velocities held up, you know, remarkably well last year, even when you added so much distribution. What do you see, you know, sort of at the individual account levels as you start to add second and third 12-packs? Are you seeing kind of diminishing returns or diminishing velocities or, you know, once you establish a certain level of scale and visibility within the account, is it actually a halo on the overall brand? It is. The more In fact, the more 12-pack SKUs we have in an account, the higher the velocity is. I would say generally, last year, we grew points of distribution pretty significantly. Our sales per point was up slightly. Actually, the sales per point is the highest in FMB. It's the second highest of all beyond beer. There's only one other brand that has a higher one. It's holding up well, but you would expect it. I mean, if it declines slightly, we would actually, we would expect it to decline slightly this year just because we're adding a lot of distribution. As you know, those new points of distribution are as efficient as the ones from where it started. Everything we're seeing points to very healthy brand with high repeat, high sales per point, and we have done the account level work where, you know, one 12-pack versus two versus three, you see sales per point actually increase when you have. A lot of it has to do just with purely with visibility in the account. Like on this brand, I know there's a lot of question, how long can it go? We don't know. I mean, it's gone double digits from the beginning of time. It's growing off a bigger base. Importantly, it's been built the right way. It's been built, you know, focusing on both, you know, the elements of driving physical availability and the mental availability, all the brand building piece, but hasn't been overheated. It's growing at a real good pace, and we think we really understand who the consumer is, where they shop. I think being, you know, a brand that when you think about the number three single serve SKU or single serve brand in convenience after like, you know, Bud Light and Budweiser, to me that's a source of strength for this brand, where you have a consumer that goes into a channel that is not being swayed by price or visibility necessarily, but just purely they go in with they already know what they're gonna buy, and they're buying this brand. We're just trying to be very careful to make sure we understand what's making it successful, and we're enhancing it, but we're not changing it. Great. That's that's really helpful. Just to follow up with Frank, sorry to switch back and forth, but just to clarify, the $40 million in scrap and obsolete, was the $40 million that you quoted earlier, was that scrap and obsolescence together, and was that for the? Full year, I seem to remember like a- Yeah ... an $8 million number for the third quarter. Yeah. Any... That was full year. Okay. That's full year all in. Okay, great. That's helpful. Thank you so much. I'll pass it on. Okay. Thanks Eric. Thanks. The next question comes from the line of Kaumil Gajrawala with Credit Suisse. Please proceed with your question. Hey, guys. Good evening. Thanks for, I guess, squeezing me in. Frank, just to clarify, I think you said depletions were down 4% for the first six weeks of the year, but they'll be down close to the, I guess, the lowest end of your guidance, which is a down eight or a down seven. Is something meant to happen, I guess, in the second half of the quarter? Or just can you maybe just help square that for me? Two factors. The main factor is last year we launched the Margarita pack and Truly, and there was, you know, significant load in and demand for that in Q1, and a big chunk of that was in February. After the period that we have. We have some Margarita. We're lapping some Margarita in the year-to-date number, but there's more to come in the quarter to go. That is one thing. Then it's a little bit of, you know, comparability of events where you have the Super Bowl phasing that's in there as well. That's all we have, or just like wanted to give you that you don't overread the -4. Okay. Got it. Then, you provided a pretty detailed answer on some of the work you're doing to be able to better forecast and predict SAP, all the mix of other things. Is that complete, or are the expenses that flow through for building all of that infrastructure still pending as we go through 2023? No. I mean, there are two elements to it. There's a capital portion, which is the largest portion. As you know, systems go live, that's when the depreciation starts, and you'll see that. We've started that. Then there's an expense portion that's expense as we go along. And that's happening. I think we are in the middle of it. Okay. Got it. Thank you. All right. Thanks. The next question is from the line of Bonnie Herzog with Goldman Sachs. Please proceed with your question. All right. Thanks. Hi, everyone. I guess I have a question on your guidance. 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, you know, not only will you have the deleverage, but I assume there's an increased cost of adding, you know, the fruit juice for Truly. Then I guess I wanted to understand the volume targets with your contract manufacturers. You know, were you able to lower those targets this year, or are you still locked in at, you know, higher levels, so there could be risks there? I guess I'm just hoping to better understand all the puts and takes. Thanks. Yeah. We feel, you know, on the gross margin. I mean, the fruit juice that is all reflected that we have. With the 8%, we have reflected that in the lower margin. As I said, that's gonna come in below the average. We have. 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 was number one, and then also with the suboptimal volume allocation that we had between internal and external breweries, so we couldn't run. First of all, we had less volume available in our internal brewers because we didn't get to the efficiencies. What we had, we didn't fully use because we needed to use that as the adjustment for lower volume. Yeah, there was some progress made. It's just not, you know, shown in the numbers because it's masked by other impacts. We have very clear programs, the building blocks that I spoke about earlier. They are in place. People are working against it, and we're expecting real progress in 2023. Again, the guidance that we have of -2 to -8, the lower the volume, the higher the cost basically of the incremental decline that you have. That's what's masking the underlying positive impact that we have on gross margin. That was your first question on margin. What's the second? Co-packers. The co-packer, yes. We are discussing clearly with our two main co-packers because, I mean, it's pretty obvious we have, you know, we have our two main co-packers. We have significant volume commitments with them, which are much higher than what we need at the moment, okay? It'll cover us over the years to come. The flip side also is that the co-packers have to make sure that they have the capacity available to us. We are discussing with them ways to better balance, like, their needs and our needs in terms of they would like probably to use that capacity. We're discussing with them to finding a better balance in the short term and with hopefully a positive outcome for everybody. Just to clarify on that point, Frank, you've considered, you know, an outcome where you can't essentially renegotiate in terms of your, you know, gross margin guidance. That's factored in? Not everything is factored in. Like, we're discussing, but there are no benefits baked in that we haven't achieved. Okay. Then maybe just like a final second question for me, if I could switch gears. I might have missed your comments, but any update on Hard Mountain Dew and how the brand is performing? You know, maybe just remind us of your distribution plans for the brand this year in terms of number of states you expect to add. You know, I don't know if you still have plans to have the brand be available nationwide. Thank you. Yep. Right now it's finished the year in 11 states. We expect it to be maybe 25-30 this year, that's being driven by Blue Cloud. It's based on the approvals they get and how quickly they can get it to those states. That's sort of the plan. In terms of how it's performing in those 11 states, it's essentially in a 12-pack. There's some 24 ounce singles, but if you look at 12-pack, the sales per point is, in those states for the 12-pack, is number 1 in FMB. Ahead of Twisted Tea, ahead of Mike's, ahead of everything. It's turning. The repeat rates are about as high as anything we've seen in Beyond Beer launches in the last couple years. We feel like the consumer is there. The product isn't everywhere. We know that. It's generally in large format stores, right? It's not up and down the street. The distribution is still being built out. On a kind of a below average distribution footprint, the brand is performing well. Honestly, we're just It's gonna go where it goes this year. We're not You know, there could be upside there, but we're not planning for any of it. We're gonna It has to get distribution through Blue Cloud, and as it does, you know, we, you know, we do our thing and we do the marketing and we get good response on that. It's As you know, there's been a lot of resistance to that. As it works through, we'll see where it ends up at the end of the year. Again, there will be... You know, we're gonna go from 11 - 15 states in the next couple of months. We know we'll at least be in 15 and, pretty soon and hope to be 25-30 before the end of the year. Okay. Thank you. The next question comes from the line of Brett Cooper with Consumer Edge. Please proceed with your question. Thanks good evening just a question. You pushed Truly into bottled spirits and into vodka, and you've talked about going into tequila. Just if you step back and think about the long term, is that a model you think is applicable for other parts of Beyond Beer or the fourth category to grow household penetration, and consumer acceptance? Thanks. Hey Brett you mean taking other brands into a spirits place like? Yeah ... maybe non-hard seltzer brands into spirits? Yeah. I mean, I think it's TBD. I mean, Fresca's in there now. I'm not sure how that's doing. I think people will try because clearly there's interest in this space. You can mix vodka in pretty much anything. So there very well could be. I think at the end, I mean, right, at least at this moment, what seems to have the most promise is really vodka-based, not even tequila. I mean, vodka is like 80% or 90% of that space. So any kind of very clean, simple, vodka-based beverage that delivers crisp taste and, and variety of flavor is could be successful. Given the way things are converging now, nothing would surprise me. The question is ultimately what, you know, what's gonna be successful, I think. To go back on the Truly thing, I think, you know, for Truly, we really think Truly can, as a brand, and we're building the brand that way with that thought in mind, not just trying to bolt it on to a new idea, but we think it can play in the intersection of refreshment, sessionability, and variety. That works for, you know, for sucrose-based. It works for vodka. It works for tequila. So we feel that's a good fit. Others. There might be other good fits too, but, you know, we'll have to. I guess we'll be seeing. I'm sure we'll be seeing everything this year. We'll get a sense of what might work. Great. Thank you. Okay. The next question comes from the line of Peter Grom with UBS. Please proceed with your question. Thanks, operator. Good evening, everyone. I guess I just wanted to ask about what's included in the outlook from a Truly share perspective. I know you're trying to embed some degree of conservatism, which is certainly fair. But I guess I'm just kind of confused as to why the high end of the guidance would really only embed kind of performance in line with category growth, just given the relaunch, the marketing push. I would imagine it's not a reflection of your confidence, but just, you know, maybe I would love to get some views on the reasoning. I guess, you know, building on that, like if the relaunch goes as you plan internally, what would that really look like from a growth perspective for Truly? Maybe on the flip side of it, I mean, if it doesn't go as well as you think and share losses kind of continue, you know, how do you think about the future of the brand? What can you really do differently, you know, down the road? Thanks. Okay. Thanks Peter I think, I mean, I think, again, we learned a lot. We learned, you know, we paid a lot of attention, we internalized, and we acted. I think the changes that we talked about today, we think are the right, exact right changes to get the brand back on track. Again, remember, this brand grew share every year until last year when we kind of. This whole idea of innovating and having to lap the innovation finally kind of collapsed on us, if you will. We're, you know, right now we're taking a step back. We're not innovating now, you know, behind margarita. By the way, margarita was a five share at this point exactly a year ago. It was a five share. It's a lot of a lot to overlap. We don't expect to be gaining share in the first quarter, and we think hopefully by the end of the second quarter it's gonna be looking better, and then that will carry on. I think if it meets our expectations, we will grow. It's not in the high end because we're being cautious. I think we've also learned in the last couple of years to be a little more cautious in how we predict the category and the brand. If it's successful, we think we can grow share again. We've been growing it up until last year. We think we're putting the brand on the right pathway to grow share again. If we do great and we're, you know, we might be beyond the high end of the range, if we grow share. If we don't, you know, maybe we hold share, and if we do worse, we'll lose a little share. Remember, it's still for perspective, and believe me, we're not gonna be happy if we lose share. For perspective, it's still, you know, 23%-25% share of the category, and the number three is a 6%. It's still we'll keep at it. If we don't grow share this year, we'll find another way to do it next year. We do feel like, you know, we don't wanna create up too much change either with this brand. We don't wanna confuse consumers. That's a risk if we do too much change. We feel like we're doing the right things and the right amount of change at the right time to put the brand in the, you know, in the right place to grow. That's our intent. Again, we're not letting any exuberance about our plans affect how we guide this year. Honestly, we're not. Okay. No, that's really helpful. Maybe just one last one following up on on Brett and Bonnie's question. Just, you know, any thoughts on on kind of Monster's new product, The Beast Unleashed? You know, it seems like it would compete directly with kind of, you know, Hard Mountain Dew. Just, you know, any thoughts on the competitive threat of that new category entry? Thanks. Yeah, I mean, it's, they're a great company. They've built a great brand, and I think the big, the big question that's looming out there is what non-alc brands can play an alc successfully. Right now, the answer is zero at this point. A year from now, there might be one or two that emerge. I think it's totally to be determined. I think we'll see how the consumer feels about it. It's very, you know. I think, honestly, I think if I think Hard Mountain Dew has a really good chance to be successful knowing the brand and the, and the cult following and how it plays. I mean, Monster has a chance too, but I think we haven't even really. The product hasn't appeared on the shelf yet. We haven't tried it yet, so we're not quite sure where it's gonna go, but it's gonna be interesting to see. I'll say that. Thank you so much. The next question comes from the line of Bill Kirk with Roth. Please proceed with your question. Hey everybody I'll be quick. It builds on some of the third-party conversations. Longer term, how much of your needs do you want to do in-house? I think that was a reason for, you know, getting to 50% over time is basically not paying someone else for some of the things they do today. Related, how much excess capacity do you have now that you would be using if not for extra fees on the volume commitments? I can answer the first question. The idea is that we use our own internal breweries to full capacity, and we use then our external co-mans for everything else that goes beyond that. The internal capacity, if you recall, will increase over time. That's part of the gross margin improvement. We put a number of new lines, and they're running at low efficiencies. If we can get them up, there's a sizable capacity increase that will happen internally in our breweries. With that, even with that, we intend to run them at full capacity and everything else goes external. Within external, we're also lowering the costs we have. In Roth, we have a partner on the West Coast that has very competitive prices. There's improved variety, packing capability that we will have in city that will lower the cost as well if the volume grows, we put more volume through the facility. Again, the strategy is to use our own breweries then use the external breweries, lower the cost in the external breweries. That's the high level strategy. The second question I didn't fully understand, to be honest, because, you know, if it was related to the open capacity that we had no internal breweries didn't use because of volume planning, I don't wanna specify that. I think I told you on the Q4 it would have been, you know, middle of the, you know, to high end of the gross margin range without, you know, those issues. Well, to clarify, the idea is, you know, would you be doing more in-house if not for the third party commitment? Meaning, would you bring some volume from those, the partners, but the fees, if you did that, are just too high and not worth it. No, I'm sorry, but thanks for clarification. No. The internally, that's the best incremental cost that we can get is in our internal facilities. Okay. Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. The next question comes from the line of Gerald Pascarelli with Wedbush Securities. Please proceed with your question. Hi thanks very much for the question. Mine is on the pricing outlook of +1 - 3 points. Just, maybe if you could, provide some more color on your decision to not take more pricing, in particular, you know, given the continued margin headwinds, and the increases that you were, able to successfully pass through in 2022. I guess, like, I know this is initial guidance, but as we look at it, just trying to understand if there's upside, you know, to the pricing as we look out over the course of the year. Thank you. Yeah. On the pricing guidance, you know, we have had really good pricing in 2022, and as we said in previous calls, we try to cover the commodities, the increased commodities, the inflation, which we did successfully. We're happy with the pricing. There's the additional pricing that you see is, to the largest extent, is really carryover pricing, that we implemented in 2022. At this point, we wanna be careful. We wanna, you know. We're planning to cover in 2023 any additional commodity increases. We see, if you look at the total cost, that we're exposed to, we see that environment moderating a little bit. I mean, there are parts that are going up, but there are other parts that are moderating. At this point, we believe, with the guidance that we have, we'll be able to cover the incremental commodity costs. If that changes, we will revisit. You know, given also the competitive nature and, like, the consumer environment, we don't wanna overextend that. Got it. Thanks very much. Appreciate it. All right. At this time, there are no further questions. I would like to turn the floor back over to Jim Koch for closing comments. Thank you, everybody, and, we'll speak in a few months. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.