All right. Good morning, everyone. I am Andrew Strelzik. I'm BMO's beverage analyst, and it's my pleasure to introduce Zevia for our next discussion. Zevia is a producer of zero-calorie, naturally sweetened plant-based beverages. We're joined by CEO, Amy Taylor, and CFO, Girish Satya. Amy has been with the company for 3 years, including almost 2 years now in the CEO role, and during that time, Zevia has navigated a volatile operating environment while executing a brand refresh, expanding into new channels, improving its margin structure, and positioning the business for DSD rollout. Girish joined as Zevia's CFO in February, bringing more than 20 years of experience as a finance executive, with a focus on continued operational improvements and support of Zevia's growth objectives. So thank you both for being here today.
Thanks for having us.
Yeah, thanks for having us.
Absolutely. Maybe I guess where I wanted to start is, maybe where we've come from-
Mm-hmm
... I suppose. 2024 was set up to be a very exciting year, coming off some of the supply chain issues. You had the brand refresh in market. Sales trends have maybe been a little more challenged here at the first part of the year than at least we had initially expected.
Sure.
Can you maybe talk about how the year has started off relative to your expectations? What's gone right, what's gone wrong, and where are we now?
Sure. Yeah, I think that's a great way to frame it. Thanks. So, to be clear, the start to the year from a volume perspective, super disappointing, not at all what we expected, and at the core of that, was that the volume impact of SKU level distribution losses, temporary, from the supply chain failures of 2023, was greater than we expected. So that created the circumstances that you see in the first half of the year, with the softness from a volume perspective. What's gone well is really the strategic piece. So we have evolved, as we shared on the last earnings call, evolved our route to market such that we've launched our first DSD, or direct store delivery operator.
We're really pleased with the fact that we've signed some best-in-class operators across the Northwest, inclusive of key account footprints across five states, that can really help to step change our performance in that existing footprint, but critically, also launch us into convenience and drive the all-critical trial through singles distribution. So we're really pleased with that evolution. We're really pleased with early look at marketing effectiveness. So for the first time, Zevia is investing in omni-channel marketing outside of store versus just retail activation, which is historically how the brand has been supported at very low levels. And early indicators is that the marketing efficacy is really exciting about the future. So what I mean by that is lift, so increased scan results well above and beyond rest of market and control markets in the instances in which we've made those investments.
And then thirdly, and probably most importantly, brand health. So each of the last four-week reads in scan data, so retail scan data, volume continues to accelerate. In the last four-week read, so April, we were growing at 9.5%, at 23% in grocery, and critically, we're back to unit growth. So we're growing in dollars, and we're growing in units, and in both of those measures, leading the CSD category, and growing faster than diet/z ero. So the fundamentals of what has gone well, the volume, we expect to follow in the back half of the year, as you can sort of back into based on our guidance.
Sure. So I guess before we get to some of the more-
Sure
... fun stuff, you know, is there... what, what exactly are those lingering issues? Kind of, can you frame how much that is weighing on the performance, and the resolution of that as the year progresses?
Sure. Well, first, let me clarify: I think the most important thing is that we are back to industry standard or just above fulfillment levels. So supply chain is stable, and the fix on that is behind us. The next opportunity with supply chain is increased efficiency, and as you'll hear more from Girish, our productivity initiatives will continue to drive efficiency and release funds to be able to invest them in growth rather than logistics. So supply chain woes are behind us. The headwinds we experienced in volume growth at the start of the year are really almost entirely the hangover from exactly that. And when I say hangover, we don't have direct store delivery, as you know. We ship directly to retailers, so we rely on retailers to merchandise the product.
As we were out of stock at the back half of last year, many of our in-store sets kind of deteriorated at a per-SKU basis, no longer reflecting the planogram. In the spring resets, as the retailers reset shelves to reflect the planogram, we regained that distribution, and we're pleased to share that in recent weeks, literally just in the last few weeks, we've started to step change some in-store presence with some pretty key customers. In one national customer, as example, we gained 33% of space. These are some of the things that build our confidence and give us very clear, let's call it visibility, into the back half of the year, as to why these spring resets are a step change that'll start to show up in net sales in the back half.
So that was going to be my next question, actually, is kind of comparing and contrasting the front half and the back half-
Sure
... and the confidence in that acceleration. So you mentioned a little bit of it. You have, you know, maybe some contributions from the DSD rollout and kind of the expansions there. Can you just give us kind of the build on that and that drives that confidence in an acceleration in the back part of the year?
Yeah. So I think there's several things that give us a lot of confidence, and of course, from a year-over-year basis, as Amy mentioned, you know, greater in-stock rates, greater fill rates, will be a natural tailwind. I think on top of that, we have a more robust, promotional plan in the back half of the year. We have incremental, you know, space, that we've gained at several of our biggest customers, and then increased velocity trends that we're seeing. So all of those... and, and of course, that we're also taking a, a small price increase. And so, couple all those together, I think we're pretty confident that we'll be able to return the business back to, you know, back to growth, and, and then use that as a launching point for, you know, 2025.
So when you think about some of the underlying brand health metrics that you started to talk about, I know it goes beyond even the scanner data. Can you just elaborate on what you're seeing that gives you the confidence and kind of the positioning of the brand, and where your ability to drive the growth on a go-forward basis, kind of longer term?
Sure. So scan data, as you know, just a measure of scan through the retail, through the register. We grew it about 9.5% last four weeks, but I think most importantly, that has accelerated every four weeks this year. Then you hone in on our largest channel, which is food or conventional grocery. We grew at 23% there in the last four weeks, again, improving every four weeks and leading the category. We're back to growth in natural, which is sort of our home turf, if you will. And then we have tremendous momentum on a small base in channels like drug, where we're sold now nationally in two of the three, national operators. So we still have distribution upside there, but exciting growth on a small base. So we're seeing a lot of, positives in sort of our core retail.
And then the other notable, I suppose, is we've really just started, as I mentioned, marketing out-of-store, and so specifically just in these last eight weeks at fairly low investment levels. We gained a lot of learnings on just directional indicators of what growth looks like when we invest outside of store and omni-channel marketing focused on key metros, and efforts and budgets against that, coinciding with the gained distribution, and with the increased promotional support that Girish was just mentioning, give us tremendous confidence in the summer. And so on top of the scan data, gain distribution, incremental marketing, we're also seeing increased velocity trends. So in essence, the consumer continues to pull Zevia.
In the last 12 months rolling, Zevia shopper spends 41% more than your average beverage shopper, and the spend on Zevia per household and per trip, and then the number of trips made to buy Zevia have all increased. So a lot of really good sort of consumer and shopper health indicators. You put marketing on top of that and start to step change distribution. That one example that I gave, where we're gaining 33% of space, and we can just see all the tailwinds that give us confidence for the summer, and then specifically in the back half.
Okay, that's helpful. And maybe pivoting to DSD c- stores, obviously could be a very exciting opportunity.
Mm-hmm.
Can you kind of lay out the plan in the near term, the strategy over the longer term, and how we should think about growth contributions, whether that's in the back half of this year, 2025, how does that build on a go-forward basis?
Yeah, I'll let me just tell you about the Northwest, and maybe Girish can talk about the go forward. So we, there's many different ways to go to market for beverage, right? You can ship directly, you can go through brokers, and ultimately, if you really want to be competitive with singles, you have to run through a direct store delivery system. And so we have opted to roll that out regionally first to complement our and continue to grow in our existing footprint, and then critically, to be able to merchandise competitively our singles business. Notably, our mix is about 90/10. We sell about 90% multi-packs and only about 10% singles. Most beverage companies do the exact opposite. They drive trial, trial, trial with singles and are kind of 90/10 to multi-packs, slowly building a multi-pack business to trade up.
We haven't done that, so we have this opportunity now to launch singles and introduce the brand to a much larger consumer base. So that effort, we will pilot in the Northwest across five states with three really excellent operators, and I think we'll have a good feel within 90 days or in the next following, the months following, of just what the learnings are there and how to build really excellence in distribution management for Zevia nationwide. So maybe Girish could talk about-
Yeah
... the way forward.
So I think, you know, as Amy mentioned, we are piloting in the, you know, Pacific Northwest, but really, this is sort of phase one of a much broader rollout. And so, you know, in the background, of course, we're looking to understand how we can phase it as sort of a west to east rollout. And so you'll continue to see, you know, us signing up DSD partners throughout the year as we look to, you know, really build out that business in the, on the West Coast. And I think there's sort of two ways to kind of think about it, and one is, what are the immediate impacts? And so the immediate impacts is really gonna be in our largest channel, which is our grocery channel. And so, you know, where we'll be able to close out- of- stocks, you know, have better merchandising.
We should expect to see some benefit there. But really, you know, as we think about the bigger opportunity, it's that c- store and singles opportunity, both in, you know, singles both in c- store and grocery. And so that likely won't be much of an impact until 2025. Like, it's gonna take a little bit of time to ramp that up. So my expectation is that it will be relatively immaterial contributor to growth in the back half of 2024, with a much, you know, bigger impact in 2025 and beyond.
So when you think about the rollout, both initially and kind of over the broader rollout, what are maybe the hurdles or the challenges? What are the checkpoints that you're watching as you move forward or when you decide to move forward, as in terms of like a cadence perspective?
Yeah, let me hit the second one first.
Sure.
So what are we looking for? We're looking for increased velocity in existing distribution. Just to bring that to life quickly, in grocery today, we ship to the back of the store, the retailer merchandise is out on the warm shelf and good to go for until the next shipment comes, until you run out of stock if you have high-velocity items. With DSD, you have folks in the store on a regular basis making sure you're in stock on shelf, but they can also advocate for increased display in multiple parts of the store and then put singles in the deli cold box. Then you start to really penetrate different shoppers, and you start to increase the promotional effectiveness in your promo periods because you're getting display during the discount, right? We expect increased velocity in existing footprint.
We also look for increased distribution in new channels, so specifically convenience, and then across independent, and then finally, just there's a number of efficiencies, right? Through going DSD that we look to realize. And so I mentioned promo effectiveness. There's also an extension of our sales force through the distributor partners, local reach, etc. So those are a little bit more qualitative, but increased velocity and existing footprint, and then increased distribution are the simplest metrics of what we would look for. What are the hurdles? I mean, we intend to be a great partner, and I think what I've learned in my old life and what I know still to be true, is that when you're working with a third-party distributor, you've got to fight for share of mind for your brand within that distributor.
So how you frame the agreement from the beginning, how each party is motivated to execute with excellence, getting really clear on measurable expected outcomes, making sure your brand is a part of management by objectives, so making sure that at-risk compensation dollars for sales people are pointed at your brand. These are some of the examples of where our focus will lie to ensure excellence in execution.
You guys have done a lot of work on the margin side broadly, over the last 12 months or more. We'll talk more about that in a minute, but just margin implications related to-
Yeah
... this initiative specifically.
Yeah, I think, again, immaterial for 2024. I mean, there's enough, there's enough that we're working on in the P&L right now to, you know, continue to maintain that sort of mid-forties margin that we've communicated. My expectation is that, you know, we'll be able to continue to maintain that, until DSD becomes a much bigger, the convenience channel and DSD becomes a much bigger portion of our, you know, P&L.
Got it. Okay, and so sticking on this topic, you guys just announced a, and this is on top of all the efficiency work you've done in the supply chain, etc. Unit economics, just announced, a cost savings program, $8 million-$12 million. Can you talk about where those savings are coming from, the cadence to which you would expect to realize those? How much is gonna get reinvested versus falling to the bottom line?
Yeah, and so, you know, as you didn't mention necessarily, but so been in the seat 90 days. Not even 90 days yet.
We're gonna do a group 90-day review-
Yeah,
together now for you.
And so-
I agree. I agree.
So, you know, when I first arrived, I think the objectives were pretty clear, right? One is, how do you reinvigorate growth, right? And how do you reinvigorate growth by investing in promotions, investing in marketing, building the brand? How do you drive this evolution in route to market? We knew that that was imperative to, you know, really not only drive trial, but also penetrate channels where we had, you know, almost no distribution. Then lastly, it was just really how do we sort of build a path to profitability? Because, you know, that's obviously something that's top of mind to everybody.
And so we really scrutinized the P&L, and unlike maybe the prior sort of productivity initiatives that were announced, I think we really took that as the major framework and said: "Okay, now what do we do, right? We focus on unit economics. Where can we drive COGS improvement? Where can we drive improvement in fulfillment expense, which, you know, is selling and warehousing? And are there just unproductive dollars in SG&A that, you know, aren't laddering up to any growth initiatives or aren't really driving any productivity or margin accretion?" And so we sort of took a very hard look at every single dollar.
And we're able to come up with, you know, a myriad of levers that we could pull, both, you know, COGS as a for instance. There's—we've just never gone and done an RFP on any of our major input costs, which we, you know, did almost a week in, 'cause I was like: "This is insane. Like, we have to get this done." And so, you know, that's one example. I think there's an opportunity to further consolidate our warehouse partners. You know, there's a lot of SG&A efficiencies that we're able to find really through sort of reimagining processes, leveraging technology, automation.
And so that is sort of the, you know, there's obviously a laundry list of other things that we're working on, but, you know, I think we begin to see those benefits in Q3, and then that will sort of leak into the P&L over the next four to six quarters. I would expect it to be sort of a third, a third, a third, as sort of I've mentioned before, which is a third of it will hit COGS, a third of it will hit selling expense, and then a third of it will impact SG&A. We do expect to reinvest. I can't tell you an exact number, because it'll be sort of dependent on where we're seeing return, whether that's in promotional dollars, marketing spend, etc.
And so it's really gonna be dependent on, you know, the metrics that we have in front of us. But again, all of that should ladder up to if we can, you know, reinvigorate growth, which I think we're very confident of, you know, our ability to get to Adjusted EBITDA profitability in 2026.
That's just its first 90 days.
And in the first 90 days, I would say the gross margins in the first quarter, which are part of that 90 days, were better than we had anticipated, kind of on the higher end, I guess, of that mid-40s.
Yeah
... that you talked about. Now, I don't know if this is just consistency or if there are specific dynamics at play, which is really the question, but I think the first quarter is usually not your best-
Right
... seasonally best gross margin. So why is mid-forties the right way to think about the year?
Yeah. So I think, you know, so from a mix perspective, you know, we're really focused on driving the soda business right now, and it's not to suggest that we're not supporting, you know, the energy or tea business, but soda margins are higher. And so just pushing that mix will, will have a natural tailwind to driving margins. I think secondly, we continue to optimize and really focus on optimizing our co-manufacturing partners, and really understanding where are the most efficient places to produce and ship. 'Cause, again, there are some minor variances between co-manufacturing partners, but if we optimize it correctly, it has major impacts on the, on the gross margin line. And then really just, again, laser-focused on the team.
We have a great supply chain team, and we're just laser-focused on, you know, bringing out each and every dollar that we can. So I think mid-40s is still a very healthy margin. Our promotional levels are gonna be closer to 2022, which we think is sort of the right calibration of being competitive and healthy from a promotional dollar perspective. So we will be investing in that. And then, again, DSD will eventually have an impact on gross margins, and so we're really looking to sort of mitigate that vis-à-vis all the productivity initiatives that we've outlined.
Is there anything from a cost dynamic that we should keep in mind? I mean, obviously, aluminum prices have been all over the place.
Yeah
The last couple of years.
Yeah.
I just can you kinda give us a rundown of the like?
Yeah, I think right now I don't see a... Well, and again, you know, if aluminum goes crazy like cocoa does, then, you know, it's a different story. But, you know, part of the supply chain transition was to allow us to sort of consolidate amongst all of our co-manufacturing partners and really leverage much bigger co-manufacturing relationships. And so right now, we have the tailwinds of being able to piggyback on much bigger buys and much bigger purchase orders, and so we're getting the benefit of that now. That may have some headwinds, but I don't think they're material right now.
Okay. Okay. And I guess kinda longer term, a couple of years ago, you guys put out some longer-term gross margin targets. Now, we're talking- and, maybe this was all contemplated at the time, but we're talking about DSD, we're talking about cost saves, we're talking about-
Yeah
some unit economics improvements that have been made already. Has your thinking changed internally about the long-term gross margin potential of the business, or are we still on track for the same kind of longer-term trajectory?
Yeah, I mean, I think right now it's still, you know, mid-40s, and then we'll have to sort of reevaluate as we see how effective and how fast we go with DSD.
Got it. Okay. Maybe one last one on supply chain. Can you talk about what you learned?
Yeah.
Kind of some of the checks and balances in place, not only for that specifically, but just more broadly within the organization, kind of coming off and reflecting on the experience of the last 12 months?
Absolutely.
Yeah.
Absolutely. I think there's a tactical and there's a strategic answer. Tactically, too much, too fast. We tried to drive too much change, too fast, and without a sufficient safety net. And so as we went from 27 warehouses down to 7, which we will benefit, it was the right finish line, right? We will benefit from those changes from an efficiency perspective in the long run, and it will support this mid-40s gross margin and beyond, and it will enable us to be able to invest in growth. It was the right finish line to aim for. We went through too fast. That was one tactical thing. And then secondly, no safety net. So as you make changes, you have to know that things are not gonna go perfectly, and then when they don't, what's your plan B?
How do you just very tactically, how do you provide sufficient inventories in legacy operating warehouses, for an example, before you move to a new one, to make sure that if you have failure in the new one, you've got a backup plan. These are the very simple tactical things. I think the bigger issue, though, comes down to just people leadership capabilities, right? And so, I'm joking about a 90-day review, but it's very helpful to have a sharp, capable, and highly engaged, highly detailed, and operational CFO who's both strategic and very close to every single person in our small organization to ensure we can execute on our plans. And then I would make the same comment about our supply chain team. So we have a mix of Zevia veterans and a lot of sharp new talent in supply chain.
These are the folks that rallied together to stabilize what went wrong last year. But most importantly, they now have a long-range plan to step change supply chain and deliver savings over the next several years, very closely working with the finance team against this broader productivity initiative. So on this foundation, as a person who's a sales and marketing professional in my background, we can now get to work on investing in growth, standing on stable ground, and this we did not have. And it's sort of a long-winded way of saying, in the end, it's really all about people, and that's, you know, trusted leadership, highly engaged with the people that touch everything that you do in execution, but also with the long-term view that can build the very clear path to profitability, and then to the inflection point that we believe we are approaching.
Got it. Okay, that's great context. Okay, for some of the more fun stuff.
Let's do it.
The brand refresh, you know, is a really exciting opportunity that was kind of obscured, masked-
Yeah
by some of the challenges. But what have you guys seen internally, in terms of the receptivity to it, from retailers, from consumers? And I guess, how is that better positioning the business on a go-forward basis? And yes, we have a nice example.
Yeah, so for those webcasts at home, please go to Zevia.com. But we're really pleased with the brand refresh. And you're right, its full impact has not been realized in the market, because when you don't have full shelves and you don't have active marketing out where people live, work, and play, then you're not really having a brand refresh. You have a visual ID evolution, and that's great. But brand, full brand work is forthcoming in the investment, so you'll start to see come to life this summer. But specifically, what have we learned in the meantime? Our brand refresh, especially putting a cardboard wrap, no plastic, around the six-pack, has created a real billboard in-store.
The increase in visibility, I mean, of course, you can't disaggregate and really prove this, but we believe it has a lot to do with the increased velocities over the last several months in an environment where we invested very little marketing, and yet we see accelerating velocities. So that on-shelf billboard effect has been very helpful. Another thing the brand refresh has helped us to do is to sit down with retailers and think a little bit differently about what is this space that's evolving that we call natural soda. So we've been here for 15 years doing natural soda with no sugar, and there's some new players that have come in and invested a ton, bringing a spotlight to this idea that, oh, my gosh, I guess soda can be better- for- you, and that rising tide can float all boats.
And we are really the beacon brand for that category. So as we set a shelf with a really strong visual ID for Zevia, especially with advantage, price, and taste, and relevance across usage occasion, we can really help the retailer realize the full value of all the different shoppers that are looking for maybe a functional soda or a simple, clean, great tasting soda. And our visual ID has really helped us to communicate that on shelf with limited marketing budgets. So now, when we get to work in marketing and build brand outside of store, and we have those visual cues sort of embedded into the consumer's memory structure when they walk in store, our visual ID is working a lot harder for us.
And then anecdotally, Andrew, like, we have the influencers, you know, online, organically, and then some we have relationships with saying: "Hey, you know, Zevia fits my aesthetic now," right? So you also can see that this idea of being premium and aspirational through design has taken us much further than we were in our kind of legacy, old school design that had, let's call it, private label vibes, prior to the renovation. So we're really pleased with it so far.
So you hit on two things that I wanna, that I wanna ask about. First is on the marketing side. You've already talked about some of the early successes that you're seeing, and being more omni-channel, I guess, than the legacy. I guess, how much have you put that into market so far in terms of what your plans are? And I guess, can you just describe what that's gonna look like on a go-forward basis versus historically?
Sure. So we've done the... You could either call them boring basics or beautiful basics, but I'll put it into a little bit of finance language first. We've established the flywheel, right? So we've got simple omni-channel marketing and targeted metros that we can point to how it is lifting velocity, right? And it's the basics on digital advertising and then some in-store activation. And so those kind of beautiful basics are paying us back, and we're pleased with the very early results over the last 6-8 weeks. Forthcoming, though, is more real brand building. So beverage is an emotional category. You got to build momentum, you got to build brand heat. You have to be a part of what we would call the zeitgeist. For those of you that don't know, prior to Zevia, I was the Chief Marketing Officer at Red Bull.
Spent 20 years there, and when I left, I was the CMO and president. And it's, you know, it's cult of brand that builds sustained, iconic, and timeless status that allows you to continue to increase your user base, take price, and deliver on the promise that you make to the consumer from a value perspective. So what you're gonna see, that you haven't seen yet, this summer, is really more brand building, right? Building the crisp personality, the distinctive personality of the Zevia brand, and giving people a reason to love it and be a part of a broader community.
That really gets into effect this summer.
This summer, and as I said on the earnings call, we'll talk about it on the next earnings call, and some of that just with a sort of do and then say, and some of it's competitive, right? We wanna, we want for it to be in the market, and then we can share that creative and share some of those activations and talk about them in retrospect.
Perfect. And then the other one is on the competitive set. So there's really two questions that I had. One is: What are you seeing just-
Mm-hmm
... in the environment right now from a competitive dynamic? Obviously, we've been hearing about a more promotional environment. You know, how do you think about your brand being positioned for that? You have announced a price increase. You've already referenced that.
Yeah.
Maybe how does all of that play in? Then we'll get to the second piece of it.
Sure. So what's happening in the competitive set, the beverage is very fragmented. Innovation is coming right and left. Folks are talking about functional beverages, but let's remember that coffee is a functional beverage and has been for about 1,000 years. So there's not really anything all that new under the sun. 20 years ago, I remember there were 900 energy drinks launched in Florida, right? So this, this has... And that's a real stat. So this has always been the case, that there's clutter and noise. But here's the exciting things about what's changed in just the last few years, is that the sea change globally is away from sugar, and that younger shoppers want a clean label product. So we have fewer ingredients than any other soda. We are the number one choice for natural soda for the consumer.
We sell more cans than anybody else. But what's changing is exciting new players are kinda coming into the cultural conversation, spending a ton of money on marketing, to communicate to the consumer, "Hey, I think soda could be better for you after all." And there we sit at a lower price point, so more accessible. We taste great, and I think critically, we're relevant across usage occasions. So you can grab, you know, a 30-pack or a 24-pack in club, or you can grab multiple flavors of 6-packs and take it to the barbecue, or you can throw a fridge pack of 12 cans in your, in your fridge and drink them all through the day because it's just simply soda that tastes great.
And so in a rising tide with tremendous category tailwinds, with a lot of interest on better for you soda, we're really well positioned to step change the size of our user base, based on our positioning.
So, I guess it seems like you view this as again, rising tide kind of-
Sure
... situation, so it's more of a positive than a negative. But I guess, you know, is there a lens of, hey, I guess, do people differentiate between what is functional, and gut health, and better for you-
Not all that much.
... Better for you. So yeah.
You'll notice that gut health players aren't talking that much about gut health anymore.
Right.
Right? And so the job of differentiation is the marketer's job. And so when I talk about the work we're doing this summer, it is to communicate exactly what you're asking about. Andrew, is like, can folks say exactly off the top of their head why Zevia, right?
Mm.
And for those in the cult, yes. But we've got 5% or 6% household penetration. This brand should be 10%, 20%, 30%, 40%, 50% household penetration. We have to tell our story. So the brand refresh on shelf will help, but it's communication and driving trial, singles distribution, DSD, that enables it, that helps us to broaden the base.
What is the governor in terms of the degree to which you allocate capital to brand building, I guess. I mean, you see-
Let me turn to my capital allocation.
You, I mean—you didn't say it directly, but there was a Super Bowl ad for one of the peers. Not that I would suggest you should do a Super Bowl ad, but I guess-
I know
... how do you think about what is the right level to break through and achieve what you guys want to achieve?
Yeah, I mean, I think brand is important. I mean, I think, and especially in a category that is, you know, as emotional as beverage. And so as Amy articulated, we've just started doing that. And so I think it's gonna be a bit of an evolution. Like, we're really getting the basic fundamentals in place, you know, whether that's on social and digital, and now shortly out of home. And, you know, I think we just need to start tracking, how does that drive, NPS? How does that drive brand, you know, aided and unaided awareness? And really being able to, understand what levers are driving what, you know, metrics, and then we can kind of dial it in.
But, you know, again, so much of what we're doing right now is new for the brand, not necessarily new for,
the world
... for us, but new for the brand. And so I think as we, you know, build that playbook out, and really understand better what works and what doesn't, we'll be able to, you know, dial that in. But I think right now, we have a pretty... We're still probably underinvested, you know, overall from a marketing perspective. I mean, marketing is about 10% of our, you know, revenue. So we'll need to, you know, increase that over time. But again, part of what we're working on is really driving those unit economics to be able to unlock dollars to invest.
Exactly.
Before we go to a couple of my final things, I just wanted to ask about the price increase for a minute.
Mm-hmm.
Just given, you know, the desire to reaccelerate the growth and maybe some consumer puts and takes, I guess, why was that the right decision to make now?
Sure.
Yeah, any-
Yeah, I real simple, price has never been the barrier. So every time we've projected elasticity, the brand has outperformed our projections. We have been a fast follower, so we've just moved with the category. The index of our price relative to the rest of non-alcoholic beverage has remained in that 35 range, meaning 65% of beverages are more expensive than Zevia. And as a society, we've done a great job of making better for you products for rich people for a long time. And our idea is that, you know, folks across all income levels deserve a great-tasting soda with no sugar and clean ingredients at an affordable price. So we've, at a relative basis, remained in the same place. We're a couple cents an ounce more than conventional soda, and the benefit of that is clean ingredients, right?
We're significantly more affordable than some of these new entrants that we're talking about. On that foundation, taking a price increase to continue to prevent unit economics and just kind of keep pace with the category has made a lot of sense and hasn't been a barrier for us.
Yeah.
Importantly, remember, we're growing units right now.
Mm-hmm.
We're not just growing on price.
A lot of the focus for good reason is on the soda business. Can you talk more broadly about the portfolio and how you think about the other components of that-
Sure
... and how that evolves kind of over the longer term?
Yeah, I can just briefly say that, you know, our focus, and we've both said it several times, is on soda, 'cause we need to be famous for soda.
Sure.
Right? And once you're famous for soda, then you can take that trusted brand, potentially into another category, and continue to generate revenue through other sources, increase your base, increase consumption. So our flanking other categories are tea and energy drinks, and there's tremendous potential in both. But, you know, we need to be focused, right? You think about the productivity initiatives, the degree to which we have limited resources. We're gonna put those into one of the most competitive categories of any branded space in the world, which is carbonated soft drinks. And then we'll be very focused about a great-tasting tea in the right channels, reducing its cost, keeping price about where it is, and winning new consumers there.
And then growing energy drinks in the right channels slowly, without overinvesting, 'cause we're competing with people who get up and think about nothing but energy every day.
Mm-hmm.
But in the natural channel and e-commerce, there's a real passion for Zevia Energy drink among those that know. And so let's continue to build that. It's margin accretive, and at the right time, once soda's really healthy, we can invest to expand that business as well.
How do you think about the right long-term growth rate for the business? There was previously a framework, velocity, distribution, et cetera.
Yeah.
I, you know, I don't know if there's a build that you have in mind now, but just more broadly, how you think about the right go forward growth?
Yeah, I mean, look, I mean, it's no secret that we're, you know, really focused on overcoming some of the past challenges and really reinvigorating growth. You know, I think as we think about all the different levers that we have at our disposal, you know, I still think the sort of teens growth rate, long-term growth rate, is the right growth rate. It's just gonna take us a little bit of time to get there. So, you know, I think restarting growth in the back half of the year is gonna be the start, and then really being able to leverage our DSD rollout on the West Coast in 2025. You know, and then again, setting that up for 2026 and beyond.
Teens growth rate and profitability in 2026?
Yeah.
Got it. And then I guess lastly here, as we wind down on the time, Zevia has reshaped the management team, the operational leadership here, recently. Can you just talk about how that's better positioning the business for the future? Are there other areas or capabilities that you'd be looking to reinforce or add-
Sure
... as we go forward?
Yeah, the one thing that's remained true at Zevia throughout all the change since I came and really sort of, the evolution, let's say, of our leadership team-
Sure
... is that, the product platform's incredible, and our superpower remains innovation, and we have a lot in the pipeline that we're excited about. We have talked about that a lot today, more to come. But, we have a superpower in being able to deliver a zero-sugar product that tastes great with only natural ingredients. And this is very-- it's actually kind of hard to do. This is something I think we do very well, and each product we bring, outperforms the last. So Creamy Root Beer and Vanilla Cola growing like crazy right now, still with tremendous distribution upside. So that remains. I'm really pleased with, and excited about our leadership team. We have a relatively new Chief Marketing Officer, who we haven't talked about a lot today.
But when we say about getting going this summer, she has added a lot of horsepower to her team in the last several months. So when you think about, hey, what's next, and what other capabilities do you need? I would mention that we have a new leader under her that's focusing on retail marketing and acceleration of velocity, and then another new leader under her, who's focused on brand building out in the world, everything creative, from advertising, to social, to editorial, and grassroots marketing. And then critically, just in the last few weeks, new people on content creation, social media, and influencers.
And so this is now, instead of just having a great plan on paper, have a lot of action on behalf of the brand out in the world, some of the most critical talent that we've added in recent months, and the reason that I feel so bullish about where we go from here, in addition to a very sound, platform strategically, and a very clear productivity initiative going forward.
Great. I think that's a perfect way to end.
Awesome.
We're out of time anyway. So, thank you very much. We really appreciate you guys.
Thank you so much.
Thanks so much.
Thanks for hosting us. Thanks, everyone.