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| Statement |
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| 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 |
| scan data, our Vita Coco brand is up 9% in retail sales dollars through February 18, 2024, demonstrating that we are starting the year with good momentum |
| To close, I'd like to reiterate our confidence in the long-term potential of The Vita Coco Company, our ability to build a better beverage platform, and the strength of our Vita Coco brand |
| 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 |
| 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 |
| 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 |
| Importantly, this growth was driven by full-year volume growth of 11%, demonstrating that consumer demand for our brand is very healthy |
| The quarter performance is representative of an improvement of global transportation cost and branded pricing we've seen throughout the 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 |
| 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 coconut water business remains very strong and we expect it to grow volume in-line with category growth of mid-to-high-single digits |
| 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 |
| Private label revenue grew 46%, which is a result of new business gains at large European retailers |
| 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 |
| And then so overall, we see very strong private label performance and we expect will continue depending on those price gaps that Martin talked about earlier |
| And as the largest brand in the category, we firmly believe we are uniquely positioned to seize this opportunity |
| On a segment basis within the Americas, Vita Coco Coconut Water's strong performance at retail increased net sales 15% to $317 million, while private label increased 17% to $103 million |
| 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 |
| 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 |
| 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 as well as in the U.S |
| We think retail stock position is good |
| 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 1.5 years ago |
| 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 |
| 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 |
| So, I think it did exceed our expectations a little bit, and obviously, we're happy with that |
| 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 |
| And, we're one year in and obviously very happy both with the results and also the fact that we've sort of proven that we're the only brand that can really carry these multi-packs and food, right? So, it's a nice competitive position to be in, going back the previous comments to, Chris |
| Statement |
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| And then, I also think our growth rate is challenged |
| 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 |
| 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 |
| We expect disciplined SG&A spending throughout 2024 with SG&A roughly flat to slightly declining year-on-year, reducing our guidance of adjusted EBITDA of $74 million to $78 million |
| 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 and etcetera, etcetera |
| And particularly at the end of, and I hope I have my years right, the end of ‘22, because of how all the global supply chains have reacted, there was a shortage of warehouse space in the U.S., which drastically increased costs for everybody |
| This year, we have a little bit of it's a little more challenging for us to do it this year, which is why we're giving the guidance we're giving, but it doesn't take that long-term goal off the table |
| This is it's tough to navigate traditional trade routes right now and may for a while |
| It's hard to duplicate that growth again, right? So, that's also a little bit of the headwinds |
| And, 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 '22 - '23 time period |
| 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 |
| 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 customer in the spring |
| But given the uplift you guys have seen from multipacks and some of the innovations, can we think about there as being upside to branded as some of those things continue to perform well in the market and presumably you guys gain some more shelf-spaces as the resets go through? Martin Roper Yes, absolutely, you can think about it and we think about it a lot, right? And our, Mike, it's very challenging to us to, okay, guys, we need to grow share, right? It's obviously a little harder to grow share from where we are than where we were three years ago, but we're committed to trying to do so |
| I would just say it's unclear |
| There's other timing issues that could affect the quarter |
| Declines are different by market, but there's sort of weakening there |
| Obviously, the disruption to ocean freight markets as it relates to shipments from Asia to Europe and East Coast of America is quite recent, and that's still evolving |
| But if spot rates stay where they're at currently, would that provide or would that yield a headwind to the gross margin guidance as it's currently put together? Martin Roper So yes, I think if you look at the indexes, at least last one that we look at was published last Thursday, you can see that the increase in spot rates sort of peaked about three, four weeks ago and has started to decline |
| 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 |
| Multi-packs in coconut water remain significantly underdeveloped versus other categories |
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