Zevia PBC (ZVIA) Earnings Call Transcript & Summary

All right. I think we're going to get started. Hi, everyone. Good morning, and thank you so much for joining us. I'm Bonnie Herzog. I'm the beverage and tobacco and convenience store equity research analyst at Goldman Sachs. I'm really excited to kick off our conference today with our first speakers from Zevia. We have CEO Paddy Spence; and President, Amy Taylor, joining us. Welcome. And as many of you know, Zevia is an emergent nonalcoholic beverage company that went public only last July. The company, which generated $140 million in sales in 2021, has a full and great portfolio of products that includes carbonated soft drinks, energy drinks, mixers and teas, and they're all naturally sweetened with stevia. So with that, I'm going to take a seat. Welcome again, Paddy and Amy. It's so nice see you both.

Great to see you. Thank you for having us.

I want to kick things off this morning with sort of your top line growth outlook. You maintained your FY '22 net sales growth guidance of 28% to 30% when you guys just reported last week. It's broadly in line with your long-term growth targets. So could you break down the key drivers of this and how much contribution you expect from whether it's velocity, increased space or making distribution gains? And then really what gives you the confidence that you'll be able to sustain this level of top line growth going forward?

Sure. Well, in the first quarter of 2022, a little more than half of our growth actually came from velocity. And so the primary drivers of that have been a shift to larger pack sizes that are higher velocity, improved in-store presence, equipment -- supported by equipment, racks and coolers, some taste improvements on legacy flavors including orange, lemon lime and Mountain Zevia and then increased promotional effectiveness. So when you look at those building blocks, I think we're very comfortable that that's going in the future. And then on the distribution side, that's where we have tremendous white space. And so our core channels are really food, drug, mass and natural. We're well penetrated there but still significant upside. When you look at the at-home consumption channel of warehouse club, that's one where we've had great success but really just starting to enter. And then in immediate consumption, whether it's convenience or foodservice, those are really channels we have not yet penetrated. And then more broadly, the global market outside of the U.S. and Canada, where our categories are about 4x the size as they are in the United States. So when you look at that distribution upside, the velocity growth that we've continued to achieve, I think that's what gives us confidence in that long-term growth outlook.

No, that's perfect. And then any insight as I think about that going forward, so much has been driven by distribution gains. Do you expect that to maybe accelerate? [ Or be ] larger portion of your growth going forward is coming from distribution?

Amy, I don't know if you have any thoughts on that.

Yes. It's pretty clear where the immediate distribution opportunities are. So in the first quarter, we gained a little over 650 new stores just in grocery, and they were pretty mature. And then as Paddy was mentioning, we have opportunity to fill out the rest of club to be truly national in both national operators, but the other thing is we're not 100% national in all mass merch operators either. We still have over 3,000 stores to close out there, and that's just in the United States. So distribution growth is certainly a driver for us. But I don't want to neglect the fact that just organic growth as we increase household penetration, and thus, our velocity figures will also be -- continue to be a contributor. So we gained -- just as an example, if we look at it through more consumer metrics, we gained, over the last 12 months, about 1.3 million new households. And so there's material opportunity for us even through same-store sales to continue to chip away at new households and new consumers. So we see growth coming from both opportunities, channel expansion, geographical expansion in the long run and then velocity at same-store outlets.

Okay. Perfect. And then when you think about your total addressable market, can you help size that for us? How big is that for you? And then as I think about your business, how much disruption do you think that you can continue to create? Because when I think about it from the perspective of some of the larger companies and what they are or aren't doing, how big of a risk do you see from them?

Well, it's a great question. I think what's fascinating about the broader category shifts is that we are actually swimming with the tide of the category. And so when you look at the success the category leaders have had in the last couple of years, a lot of it has been zero-sugar offerings resonating with consumers. And that's true, certainly in CSD, but we're starting to see zero- and low-sugar formulations in adjacent categories like isotonics. And so that broad perspective on the category is a shift to zero sugar. Our categories, from a quantitative standpoint, are about $800 billion globally across soda, energy, tea, kids and mixers. And so when we look at that macro shift to zero sugar, I think that's a tailwind, not just for the category, but for our brand specifically. What's fascinating when you then drill down is that the category leaders have done a tremendous job with zero-sugar offerings that appeal to their core consumer base. From a demographic standpoint, that's Gen X and baby boomers. Zevia also has zero-sugar offerings that skew younger, though, and they were bringing millennials and Gen Z consumers to the category. So the macro shift we're seeing in beverage broadly is a move to low- and zero-sugar formulations. We're very complementary with the shifts that the category leaders are achieving. And so I think that's what gives us confidence in this massive global TAM. Is it $800 billion? Well, what's fascinating is when you actually look at source of volume, for Zevia, we're bringing folks from zero sugar, but we're also bringing them from sugary adjacent categories. And so calorie soda drinkers are migrating to Zevia. Full-calorie isotonic drinkers are migrating to Zevia. And so I think that's what gives us confidence in that huge global TAM.

Right. And I think about the opportunity being so large, it's not going to take much for your sales to continue to accelerate. I mean even 1 share point, for you, is tremendous growth.

Well, exactly. And I think that's one thing that's sometimes lost on emerging brand investors. It's just the scale of this category. So an interesting metric that we talk about in the office, there's so much discussion about emerging beverage segments. Orange soda, as a flavor, is larger than the entire categories of kombucha plus cold brew coffee plus coconut water combined. So as we say at Zevia, let's just sell more orange soda.

Yes, that should work. That sounds good. And then when you think about awareness because, I think, we've talked about this in the past, and you mentioned household penetration. What are you doing to increase awareness for your product? Because the taste is great, ultimately, you need consumers to just sample it. So talk just about some of the initiatives that you might be implementing to try and increase awareness for your brand.

I mean there was an excellent description of our marketing priorities right there. The product proposition is right on time for sort of where the zeitgeist is going, where today's consumers and tomorrow's. The taste is great. And even in some of the core flavors, we've put new and improved taste out there, and the velocity in the first quarter demonstrates that as we continue to do that, we gain more households, and we upsell more existing households with higher buy rates. So the table is set in that regard. But the critical thing for us is to drive trial, as you mentioned. And strangely, though, a lot of beverage operators spend a lot of money in advertising. Generally speaking, what's the #1 driver of awareness? It's in-store. So we have a very specific and efficient focus in expanding our space and our visibility and our presence in store. And so yes, some of that is distribution, meaning new stores. But in other instances, it's going from knee-level SA to eye-level in-store. It's increasing our penetration within existing outlets. It's driving display and new portions of the store that capture the intention of the new shopper. And then out in the market, where consumers live, work and play. So out of the shopping environment, it's driving trial sort of hand-in-hand cold can sampling, digital sampling, unlocking communities that already follow Zevia to reach out to their communities to drive more trial, more brand awareness. So you have very much grassroots marketing initiatives out where consumers live, work and play but a very practical drive to increase in-store presence to drive awareness and trial there. That's our #1 mandate, is top-of-funnel awareness driving and trial driving in the coming 18 months.

And to be honest, I thought firsthand last night when I snuck into Whole Foods after work, you guys had your products on display on one of the end caps. So that was good job, whoever -- who's [indiscernible] of that.

We're seeing more and more of that.

What's fascinating about it is, when you look at the need state, 99% of American households purchase our categories. The average American, as you know, drinks almost 40 gallons of soda a year. And yet when you ask 100 people, who's looking to consume more sugar, more artificial sweeteners? Very few folks. They love the taste of CSD, but really, they're looking for great taste, zero-sugar and clean-label formulations. And really, that's what we bring.

Okay. I want to pivot a little bit to the consumer and your thoughts on the health of the consumer. A couple of things. First, they're dealing with a lot of inflation. Gas prices are going up and up, pressures on this consumer. So from your perspective, talk through how you think that may impact your business or sales. And then I'd be curious about whether or not you're seeing any changes in consumer behavior. And I want to say, as we're coming out of COVID, I'm not sure I can yet say that...

I think you've said that a few times.

I know. And I keep saying it when. But yes, I mean, are you seeing that maybe in this environment? Are consumers trying to be healthier and this is an opportunity?

Yes. So maybe I can take that from a high level and then hand it off to Amy. So I think in an inflationary environment and in a COVID environment, folks are just looking for stability and continuity. From a COVID perspective, I think folks are looking to take control of their own health through self-care and a brand with a brand promise of literally cutting your household sugar in half overnight. Because half of added sugar comes from beverages, that's a really compelling proposition. Regarding inflation, we're clearly in a very inflationary environment. What's fascinating is though our affordability puts us in a very strong position. So we are literally at the 35th percentile on price per ounce across all liquid refreshment or nonalcoholic beverages. So 65% of products, including bulk still water, are more expensive than Zevia. That gives us tremendous value in an inflationary environment. And when you think about kind of a can of Zevia at less than $1, it is a -- it's premium, yet it's affordable. And so I think that's why we're -- we -- it's still early days, but I'd say we're seeing continued consumer response to our promotional activity. We're seeing continued velocity growth because this is one of those premium yet affordable products that you're going to gravitate to in an inflationary environment. Amy, I don't know if you had additional thoughts on that.

Yes. We were talking earlier about some of the ways in which we're similar to competition and then some of the ways in which, as a growth company that plays in a massive category, we're different. One of the very specific ways we're quite different is here we are 10, 11, 12 years in, 30% growth year over year over year, all in the back of the multipack business. So we are, hands down, for our existing consumer and as we're gaining new consumers as well, a take-home home stocking business. And so I'll point that out for a couple of different reasons, given the current economic environment. Number one, who's hit first right now? Fountain business in the form of the restaurant environment where folks are going out less. And then as people are backing off on discretionary spending and maybe filling up the gas tank but not running into the convenience store, beverage companies that are heavily reliant on the convenience business. And we're quite, at this stage, the opposite, right? Home business, heavily grocery, mass, increasingly club, always competitive in e-commerce. In fact, often, folks are surprised to learn we're the #1 carbonated soft drink on Amazon, right? So not just among better for you and low calorie but across the board. And so our position, as a real home stocking brand, and then remove the barrier of us also being better for you, we're actually in quite a good position going into economic headwinds because all the shopping habits are those that actually accelerate in the midst of an economic downturn. And then to your earlier point when you asked the question at the open, better-for-you shoppers are generally less price sensitive. And in today's environment, especially as folks are looking to take control of their own health, that's yet another tailwind for us. In economic downturns and times where health becomes more and more of a priority, you can start to see the opportunity for Zevia to build from the niche to the mainstream really cracking open.

Okay. And then taking that a little bit further because I know you guys are taking pricing. So I wanted to discuss that a little bit. So some of the pricing actions that you've announced, it's 6%, I believe, for soda, and then you're planning to take an additional 10% increase in soda. And that's expect -- and then further 2 -- I think it's 2 points from promotional efficiency. So talk to us about how you're going to be implementing that. I'm thinking about that in the context also of all the other beverage manufacturers really have already put in a lot of pricing. What are your thoughts on -- are you too late? You've taken it earlier? Do you think it will stick? Is there a way that you're going to do this across different pack sizes?

Sure. Yes. As a very consumer-centric person and a lifelong marketer, it might seem strange that I'm excited about pricing. It's just that I am. It's absolutely the strategically right thing for us to do. I'm going to [ generously ] call us a fast follower. You asked if we were too late. Of course, how would you fine-tune your actions, your strategy and your execution in the rearview mirror? There's always opportunity. But what's happening right now is that 6% increase on soda 6 packs is flowing through to the market now. In many instances, we have light-touch data from retailers where they had taken price ahead of ours with very limited impact on volume. We have tremendous pricing power in the outset. And I can speak in detail about the second increase because it has been communicated to retailers. So with activation in Q3, we'll take now another 10% increase across, in this case, all soda packages, all channels and geographies. And again, we see, as a brand with strong loyalty, strong pull-through and being a fast follower, a brand that's now simply moving with the market. The indices that Paddy mentioned earlier, so our general affordability remains, on a relative basis, the same. So what we're seeing, and you all have written about this, is really limited sensitivity to the consumer around consumer packaged goods and, specifically, beverage, especially in the take-home environment across multipacks. And what are consumers doing right now? They're actually trading up. They're taking home larger-pack sizes. That was a big driver of our velocity in Q1. So all these converging factors give us tremendous confidence about realizing our price increase, which, for us, is one of the most important initiatives of 2022 is to realize the increases all the way through to the shelf. With our accelerating velocity and our strong loyalty and increasing buy rate per household, we have a lot of confidence that we'll see all the way -- that all the way through. And that is really just an organizational focus and a matter of discipline.

And you bring up a good point about actually realizing the pricing. It's one thing to take it, pass it through, and then we have to see if the consumer is going to accept so far. I think everything I've seen it's holding up fairly well, the elasticities. But if those strengthen and you see a bigger impact, do you have the flexibility to promote behind that to kind of offset some of that if need be in the next quarter?

Yes, absolutely, and I'd say we're in a very promotional-intensive category. And so when you look at, would we sacrifice frequency, I don't think so. I think it's about driving promotional effectiveness. And one of the things that we talked about on the [ queue ] was the move to more feature and display activity from a promotional perspective, less TPRs. But those feature and display activities really drive tremendous pickup. They're driving loyalty for existing users, but they're also bringing new folks to the brand. So I think we've been quite happy with how the consumers responded to our promotions.

Okay. And now let's pivot a little bit further. I want to talk about this, which I'm holding. It's the single can. And you mentioned earlier the C-store channel. You're not quite there, but this is going to, I believe, allow you to really get into that store. So talk to me or all of us about the opportunity that you see for your new sleek, slim can. And I'm thinking about it driving trial and awareness. And then, yes, how big of a role it's going to play for you in the C-store channel?

Yes, I know you know this space as well as anyone. So we're really excited about this for strategic reasons, not just about driving volume, not just because it represents the potential for new channel distribution but when we look at it through the lens of the consumer. So it's pretty unusual, and I -- this is one of the first thing that I noticed when I joined the organization, which is about 10 months ago. It's pretty unusual to get this stage of development, whether it be retail presence, household penetration, et cetera, or the size of the business, the rate of growth all on the back of multipacks, especially in this particular industry. And we have a flavor and taste proposition. So there's nothing more important than having the consumer try the product because we've removed all the barriers, no sugar, naturally sweetened, no calories. But really, at the end of the day, what keeps the consumer coming back is the taste and the flavor. So for the first time ever, we're going to have a single-serve option within the soda category. So now whereas the consumer used to part with, let's say, $5 or $6 in order to buy 1 flavor, so a 6-pack, now they can spend that same amount and try 3 flavors in the form of a modernized pack, more premium presentation in a single serve. So what you'll see now and quite literally now as we're shipping is in the food channel, an open air and deli environment as well as some of our own equipment, you'll see food distribution initially. That gives us the opportunity to test merchandising, price points, promo, et cetera. But it also, to your point, gives us insights as we lay the groundwork to be in an immediate consumption business and the first priority and the biggest opportunity being convenience. So next step to sort of anticipate your next question would be to think about regional testing. This is a big priority for us. And once again, while it represents tremendous upside on volume and growth, most importantly, it puts us at arm's reach for more consumers from a trial standpoint.

And the phasing of the rollout. So this is being rolled out in your second quarter, and then it won't necessarily get into the C-store channel yet, correct? It's going to be in -- like you mentioned.

In future quarters, we'll be able to talk a little bit more about this, but we believe that the opportunity is really test and learn from a regional perspective. The great thing about the convenience channel, as you know, is there's a lot of really smart regional operators with great data, the flexibility and the willingness to try different merchandising strategies, a deep understanding of their shopper. And some of those operators, we can partner with to test and learn different merchandising strategies, which then also gives us time to address route to market to be competitive there.

That makes sense. Especially if you develop some of that good testing, you can bring that to them, and that's going to encourage them to add it to their stacks.

That's right. And we've seen these trends of better-for-you options from snacks to beverage across the board in convenience over the last several years. So we think we're right on time to help the retailer continue to evolve what's in the cold box from a health and wellness perspective.

Okay. And now I want to shift the conversation to something maybe not as exciting. It's thinking about the commodity cost inflation. As you guys just reported last week, you had some significant COGS inflation. It was up 17%, with 12 points driven from commodities. So could you talk to us about the trend that you see for your COGS per unit for the rest of the year? And I'm thinking about it as aluminum has kind of finally rolled, should we expect to see even more of a headwind there? Or do you think that's a peak with Q1?

Yes. So I think let's start with aluminum. We'll talk about freight and then other inputs. So I think from an aluminum standpoint, we reported Q4 on February 24, the day of the Ukraine invasion. Subsequent to that, we saw the aluminum market spiked to almost $4,000 per metric ton on the London Metal Exchange. It has now receded to, call it, $2,800. In Q1, we paid north of $3,000 per metric ton. So we are seeing aluminum tick down. Similarly, and I would note that the futures market on the LME is inverted, noting -- indicating that the market does view floor pricing as negative. We're seeing the same thing on diesel, but I would tell you that we're being cautious on those. And so we're not leaning on the assumption of receiving inflation to drive margin optimization. So really, our margin optimization is coming from scale, it's coming from a mix shift to higher-margin items, and it's coming from cost optimization initiatives in our supply chain. So while we're encouraged by recent trends regarding specifically aluminum and freight, I would say we're remaining cautious for the balance of the year and really focusing on cost optimization to drive improvements.

Okay. And then remind us, I don't believe you hedge, correct?

That's correct.

And then aluminum, as a percentage of your mix, I don't know if you've been able to break that down or some of the other key commodities?

Well, so I think for us, really, that 12% that you noted in Q1 was driven -- 7 points of that was aluminum. Labor and co-packing cost was a significant portion as well. And so certainly, we're seeing co-packing costs driven by both labor expense and, to some extent, fuel prices. So yes, I think commodity inflation is not something that we're going to be able to predict or overcome. And so it's about leveraging aspects of our business that we can control internally on the cost optimization side.

Yes. And speaking of that, I mean you have an initiative, right, and some new leadership. So maybe talk to us a little bit about the opportunities that you see for -- or from some of these internal cost management initiatives.

Absolutely. Well, so to start with, we're thrilled that our new CFO, Denise Beckles, joined us a couple of weeks ago. And Denise brings not only deep experience as a CFO but also a strategy and operations background. And so Denise is really starting to focus on some of those internal cost optimization initiatives. Quincy Troupe joins us as COO on June 13. And similarly, Quincy, having held that SVP of Supply Chain position at Boston Beer, is intimately familiar with the beverage supply chain and how we can remove cost. Speaking specifically to those initiatives, we're seeing the opportunity to remove both inventory carrying costs and also internal freight transfers through inventory reduction. We're seeing an opportunity to remove freight miles as we scale. We're seeing an opportunity to reduce freight costs through full truck utilization. And then lastly, both our e-commerce and club businesses rely on variety packs to really drive consumer acceptance there. And so we're removing costs from our variety packs through our repack optimization program that Quincy and Denise will be working on. So we think that the combination of those initiatives really gives us confidence in our ability to return margins to historical levels in the back half of '22.

And it's the back half. Because then I think about near-term Q2, you're still expecting a fair amount of gross margin pressure or...

I'd say we are beginning to see yields from some of our internal initiatives as we needed. Some of those inflationary headwinds have receded. But I think it really is back half where we see that margin recovery, particularly as the second price increase begins to be realized in Q3.

Okay. So maybe Q1 is a little bit of the trough, gross margin maybe get a little bit better, but it's really the upside is in the second half.

[indiscernible] 4, I think, is where we're going to see that pricing take hold as well as the cost optimization initiatives.

Okay. And then what about your marketing spend? I think you've improved some of the efficiencies that you're seeing with the marketing and promo dollars. You touched on this earlier. So what's your outlook for spend in FY '22? And I think, if I'm not mistaken, it's coming down as a percentage of sales, possibly. Or just trying to think -- are you at the right levels of spending?

Sure. Yes. So overall, when we think about marketing as a pure consumer marketing, we would expect continuity in terms of percent of net sales in the go-forward. But when we think about promo spend, there's a real opportunity to optimize there, and optimize can mean many different things, but we're seeing greater effectiveness by doubling down on promotions that work, that drive display activity, backing off of TPR, being smarter about negotiating what comes fit costs with the individual retailers. So all of these represent opportunities to optimize, meaning driving our dollars to accelerate velocity in a win-win. And so overall, we will optimize our spend balance of the year. But from a consumer marketing perspective, to answer your question, are we at the right levels? I think we are at the right levels given our growth rates. And what we look at for the balance of the year as we get on this path to profitability that Paddy has been describing, critical are cost-savings initiatives, both in how we run the company and then throughout our supply chain. And as we scale, there's tremendous opportunities right and left with new leadership, maturing our organization, bringing in new capabilities and operating with the future in mind. But when it comes to consumer marketing, we think about investment levels there. Given our growth rates and our anticipated growth rates, that flywheel that generates revenue once we get on our path to profitability in a clear fashion gives us ample resources to drive the type of awareness that we all know comes with expanded distribution and increased store presence. So we're really focused on more effective marketing, how have we shifted that in Q1. With -- when we think about the consumer, it's more effective and targeted segmentation. It's quick learnings within digital and then redirecting spend accordingly. So as an example, in Q1, we spent 1/3 the amount on digital marketing as we did in Q1 of last year with the same number of impressions delivered, which is all about targeting and effectiveness of one spend. So these are the types of initiatives we'll continue to iterate quarter over quarter over quarter to become more efficient and effective with every dollar spent, both in-store but also out with the consumer.

So shifting from where some of the dollars are being allocated but, as you just mentioned, being much more efficient with some of those dollars and not having to necessarily increase as a pivot to e-com.

We can increase consumer marketing by shifting out of retail spending through promo optimization and, thus, the percent of that spend on marketing overall continuity from a net sales perspective.

And how much do you see as some type of halo effect behind this one key brand being Zevia? As I think about the dollar spend, is that also...

That's one of the sort of efficiency propositions of this portfolio once it's fully realized because right now, we are predominantly a soda brand, right? And much of our energy drink business or tea business or even with our kids come from Zevia households. But as we scale distribution from the adjacent categories, what we expect to bring over to that new category is the trust from the Zevia brand and the halo effect that comes from the communication efforts in and around that, that started up with soda, but that gets [indiscernible] into categories that have generally lower trust like energy drinks. It used to be that the sort of Venn diagram of those that care about health and those that consume energy drinks had very little overlap. That's changing. There's new consumers coming into the energy category. And we're exactly the type of brand that could help change sort of the trust within the energy drink category through the platform brand that we bring.

No, that makes a lot of sense. And then as I think about the peak summer selling season around the corner, talk to us a little bit about your innovation pipeline. I know you've already come out with quite a bit, especially the can package innovation. Is there anything more that is planned for this year or for the summer?

There's 2 other initiatives that are super summer-relevant. You mentioned the single serve, which just gives us package innovation and puts all of our flavors within arm's reach of more consumers and gives them a chance to taste the cold at a lower price point. So that's the fundamental. But from a flavor standpoint, how are we infusing excitement into the retailer, which then gets display and pull-through from the consumer, 2 things. One is we put out a new and improved taste profile for orange, lemon lime twist and Mountain Zevia, very spring- and summer-friendly flavors. Also, a massive percentage of traditional CSD flavor mix. So for us, that's been an underleveraged part of the portfolio that, with some marketing support and critically increased distribution, including display, will generate incremental velocity and excitement around the brand through the summer. And then the second thing is we have 2 new limited-time-only flavors in the form of like nostalgic, fun summer and youthful flavors in fruit punch and orange cream. And those are not sold on shelf but rather display-only, shipped directly to store for end caps, like the one that you saw in Whole Foods the other day, as well as front of store like pallet displays, et cetera. So the summer LTO brings excitement around the brand for the retailer, which generates the same as well as incremental trial with the consumer.

And is this a little bit as you guys talk about the brand refresh, is this a portion of that? Or is that all encompassing?

It's not, Bonnie. That's then what's next, I'd say. So we're pleased with package improvement here when we talk about the single-serve soda in the sense that it's modernized, it's a matte design, it has a nice, as they call it, hand feel, and it has a matte finish and a sleeker look. So that's, let's say, somewhat modernized and premiumized. However, we have an opportunity from an end-to-end standpoint to do a full brand refresh, a new look and feel Zevia. And so we talked about this on the call, but our retailers will see that for the first time in the form of presentation late summer as we talk about 2023. So the new look and feel Zevia, categories across the board, end to end, both singles and multi-packs, will be rolling out in-store in Q1.

Okay. And as I think about that rollout, what level of investment will be required to some of this plan?

That's kind of what's beautiful about a brand refresh because pound per pound or dollar for dollar, it's probably the most efficient and effective spend that you can make in marketing. Because for a brand with strong retail presence and with strong sort of billboard effect in store, redoing what that billboard looks like, bringing new news to the retailer around that helps keep drive incremental space and, ultimately, share gains. And so when we're speaking with the retailer and showing them a modernized, premiumized look and feel Zevia and talking about getting at eye level and becoming, I think, critically, a beacon for a better-for-you option within a previously much maligned category, we know that a design that reinforces that proposition will make sense to a buyer and to a shopper. And so it's on the back of that refresh alone we anticipate gaining space, winning share and driving incremental velocity, with very limited marketing dollars behind it other than the cost of the design itself. So the refresh project will also give us new visual assets to take to social media and to editorial comms out to supported events again in the summer in high peak beverage season in 2023. We're excited about that. But most of the hard work is done at shelf with the brand refresh itself.

Okay. Well, all of this sounds really exciting, and I'm watching the clock. I know we just have a little bit of time left. And so maybe to end on this, given all of the initiatives, the excitement you have, some of the gains that you're seeing, the strong top line growth, what do you think is the biggest disconnect in terms of the stock performance and the valuation? Or what do you think that investors are really missing and you want to make sure is better understood?

Yes. Well, I think when you look at this business, the attributes are quite compelling: an $800 billion global TAM, a very compelling brand proposition that allows you to cut your household sugar in half overnight, great taste, an asset-light business with no long-term debt and significant cash. So I think that's clear. I think what the market is seeking is continued execution. And that's true whether we're talking about a brand refresh, establishing a price slope with single-serve, price realization through our pricing actions or removing costs from the system. I think we're very confident in those initiatives. I think the market is saying continue to execute, and I think we'll see a tighter correlation between business performance and stock performance. Is that...

Yes. I think that's spot on. We have a very strong brand, and we have exceptional sales velocity trends that are accelerating. So the outlook, from a sales and consumer perspectives, are very strong. But the question marks are the organizational capabilities, brand strength and discipline and then reality quarter-over-quarter [indiscernible] 2 things: realization of our price increase, as we discussed earlier, and cost optimization. And that's when we start to just improve the overall algorithm and the path to profitability and, frankly, accelerate that. So when I think about the disconnect between the stock price and business performance, it's really just a matter of execution quarter-over-quarter. And I think you'll see those 2 move in parallel for the balance of the year.

That's great. I know I said last question, but quickly on the cost optimization. Can you quantify that in terms of how much you're expecting to realize?

We haven't put a specific number on that material savings.

Okay. Realized in the next year.

Certainly.

Okay. Thank you so much.

Thank you so much for having us, Bonnie.

Appreciate it. Thank you.