Q3 2024 Zevia PBC Earnings Call

Thomson Reuters StreetEvents11-07

Participants Reed Anderson; Speaker; ICR Amy Taylor; CEO; Zevia PBC Girish Satya; CFO; Zevia PBC Bonnie Hazo; Analyst; Goldman Sachs Andrew Strelzik; Analyst; BMO capital markets Jim Celeo; Analyst; ...

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At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Reed Anderson from ICR. Please go ahead, sir.Thank you for joining our third quarter conference call particularly on the morning after the highly anticipated election. We are pleased with the vast improvement we delivered in Q3 adjusted even illustrating strong execution of our productivity initiative. While Q3 net sales were slightly below our expectations. We anticipate a return to growth in the fourth quarter, largely driven by our expansion in the 4,300 Walmart stores nationwide. We're excited about the rollout in Walmart and we remain confident in our long term potential. We","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":["earning"],"viewcount":null,"language":"en","relate_stocks":{"PBC":"Prospect Capital Corp","WMT":"沃尔玛","ZVIA":"Zevia PBC"},"translate_title":"2024年第三季度Zevia PBC收益看涨期权","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"PBC":1,"ZVIA":1,"WMT":0.9},"content_text":"Participants\nReed Anderson; Speaker; ICR\nAmy Taylor; CEO; Zevia PBC\nGirish Satya; CFO; Zevia PBC\nBonnie Hazo; Analyst; Goldman Sachs\nAndrew Strelzik; Analyst; BMO capital markets\nJim Celeo; Analyst; Stevens Inc\nPresentation\nOperator\n Greetings and welcome to the ZAP BC Q3 2024 earning school. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Reed Anderson from ICR. Please go ahead, sir.\nReed Anderson\n Thank you and welcome to Zvi's third quarter, 2024 earnings conference call and webcast on today's call are Amy Taylor, President and Chief Executive Officer and Gas Satia, Chief Financial Officer. By now, everyone should have access to the company's third quarter, 2024 earnings press release and investor presentation made available this morning. This information is available on the investor relations section of Z B's website at investors.za dotcom. Before we begin, please note that all the financial information presented on today's call is unaudited. Certain comments made on this call include forward-looking statements which are subject to the safe harbor provisions of the private securities litigation Reform Act of 1,995 these forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made. Today. During the call, we will use some non-GAAP financial measures as we describe business performance, the SEC filings as well as the press release presentation slides that accompany today's comments and reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investors dot Zevia dotcom. And now I'd like to turn the call over to Amy Taylor.\nAmy Taylor\n Thank you for joining our third quarter conference call particularly on the morning after the highly anticipated election. We are pleased with the vast improvement we delivered in Q3 adjusted even illustrating strong execution of our productivity initiative. While Q3 net sales were slightly below our expectations. We anticipate a return to growth in the fourth quarter, largely driven by our expansion in the 4,300 Walmart stores nationwide. We're excited about the rollout in Walmart and we remain confident in our long term potential. We believe that we are uniquely positioned to capitalize on the growing demand for healthier alternatives of traditional soda. We offer a distinctive blend of great taste, zero sugar, clean label products and exceptional value. And so to seize this opportunity, we will execute a robust frame marketing strategy, expand our distribution and drive unparalleled product innovation. Additionally, our progress and cost savings initiatives will enable us to reinvest in our growth while enhancing long term profitability. Before I provide an update on our strategic plan, I'll share some highlights in the third quarter. As I mentioned, we've made significant strides in our productivity initiative, improving our adjusted ebita loss to $1.5 million down from $9.1 million in the third quarter of last year. This also marks a substantial improvement in the first half of 2024. We achieved this through enhanced efficiencies, cost savings and better product costing which allowed us to deliver a record growth margin of 49% as a result of our progress, we now expect annual cost savings of $15 million an increase from our previous estimate of 12 million. With respect to net sales. In the third quarter, we came in slightly below our expectations. At 36.4 million, the 16% net sales decline versus Q3 of last year was largely a function of the expected reduction in club distribution and at one of our mass customers. And to a lesser degree, our strategic decisions, exit the kids and mixers categories to focus on set up as we look forward, we plan to expand distribution in a very intentional way. Our confidence is underpinned by the strong sales we saw in key strategic channels during the third quarter for the third quarter. Scan data in the grocery channel indicated dollar growth of 8% and unit growth of 9% for the four weeks ending October 6th scan data showed dollar growth accelerating to 14% and unit growth at 17% reflecting the positive impact of our adapted promotional schedule. We are also making strong progress in our direct store delivery or DS D initiative focused in the Pacific Northwest grocery Store stand. Data reflected stronger performance in the Pac North wet market versus our other market which we attribute to increased service levels and enhanced merchandizing. We are also underway in building our presence in the convenience channel where we have begun distribution in a number of independent outlets and set the stage to expand in the convenience chain with upcoming spring. From a brand perspective, we tested new marketing campaigns and reflecting a sharpened brand character to the select metros to the summer and into the fall. These elevated campaigns reinforced our differentiated position as a great tasting zero sugar, clean labeled soda in a world awash with fake and artificial. We were pleased to see our message resonating with consumers. The 10 key markets where we ran the campaign yielded growth, an average of 5% points higher than that of control markets across 20 weeks. In 2025 we will leverage these insights along with our recent breakthroughs in taste and flavor innovation to continue building our brand. And so, with that, let's turn our attention to the product portfolio. We are pleased to see that each new Zia flavor continues to outperform the last with the success of creamy root beer and vanilla Cola followed by our summer 2024 innovation, Cran Raspberry, which has become the top contributor to growth in the natural channel. Most recently, we saw a very strong response to our limited time e-commerce, exclusive salted caramel flavor which is tracking the sell out well ahead of expectations. Looking ahead, we are optimistic on the path forward. There's a growing movement in better for you. So a category which is expected to go three times faster than CSD over the next five years. And we are at the forefront of that movement through amplified marketing focused distribution expansion and product innovation. We believe we are well positioned to be the long run leader in natural soda. We are building a clear path to both re accelerate growth and deliver significant improvement in adjusted EBITA. I will speak to our top line strategies. While here we'll speak to margin expansion initiatives. The evolution of our growth strategy is underpinned in building our brand marketing muscle. We have shifted our focus to a more compelling, emotionally driven storytelling. Our relatable content inspires brand trust and love with media consumers by owning the real in a never ending battle against the fake. We're building relationships with relevant tiktokers, youtubers and podcasters to build reach and relevant. The overhaul of our social content contributed to a 55% sequential increase in engagement versus the second quarter and a more than 500% increase in oriented views. We also plan to focus our marketing investments on broad reaching campaigns spanning digital and out of home to drive awareness. Our sharp new creative can be seen across Los Angeles in the company's largest out of home campaign yet. We are leaning our marketing strategy to introducing new consumers to Zevia. And once they try it, we see that they stay, and they spend more. Zevia shoppers brand spend is 57% higher than that of all other better for use soda brand spend. And Zevia holds repeat grades at 40%. While we anticipate it'll take time for brand building investments to support pull through qualitative and quantitative indicators, give us confidence that we are on the right path. Our marketing efforts are also expected to help fuel distribution expansion across channels. But we know again it'll take time to build that momentum. This week marks an important step forward in strategic distribution gains for the brand. We are rolling out Zia to over 4,300 Walmart locations this month. Thanks to the strong sell through we experienced in our initial 800 schools we believe our presence in Walmart will be instrumental in increasing brand awareness nationwide, especially in under penetrated regions such as the Southeast where we are seeing the fastest growth. Additionally, za singles that the value channel retailer Aldi performs well in 2025 will feature new distribution of Zia six pack at several 100 stores. We are well on our way to better penetrating shoppers at all income levels who have been significantly underserved in better for you affordable zero sugar beverage options with respect to our DS D or direct store delivery strategy. We are still in the early stages of execution. We are focused on magnifying our presence in the grocery channel through better placement and it's working based on improved grocery velocity in the BS D footprint in the convenience channel. We will look to accelerate brand discovery and increase conversion of single distribution and the help of our brand building. We are expanding our DS D footprint into the Southwest with Crescent Brown in Arizona on board and we'll pursue adjacent geographies in the coming months. Touching on product, we've made strides in product development, innovation and taste evolution. We are creating a more sugar like taste experience and this will be evident in the exciting new flavors. We are rolling out in spring 2025 in addition to the creamy and indulgent flavors, we've become famous for creamy root beer. And more recently, the salted caramel, we have an accelerated Cola business from straight Cola to caffeine free cola to cherry cola and most recently, vanilla Cola, a top growth driver. And now we will be able to expand the zero sugar, clean label gray pain into new major flavor segments. In addition to introducing new flavors, we're also introducing an eight can variety pack at Walmart this month and for the first time, a 12 can variety pack across retail in 2025 with a focus on driving trial. Before I turn the call over to Girish, I want to briefly address our near term revenue expectations. As we have stated in the past, the emerging natural soda business is dynamic and we have faced channel specific distribution challenges that have impacted our sales performance with that recos position. We realign our strategy with a focus on marketing on portfolio strength and on quality sustainable distribution, highly encouraging early signs. We expect that our growth path will be gradual at first as we build sustainable momentum and pave the path to strong profitability. With that. I will turn the call over to Girish.\nGirish Satya\n Thank you, Amy, good morning everyone and thanks for joining our call today. And then we discussed, we are excited about the meaningful progress we've made on our productivity initiative by realigning our costs across the P&L we are able to reinvest in growth while strengthening our balance sheet. Zevia is uniquely positioned to win within the fast growing natural soda category with a great taste. Zero sugar and clean label products at price points. Significantly below that of other brands. We are confident that the foundational work we are doing now sets us up to capitalize on this tremendous opportunity and deliver long term profitable growth. As a reminder, our productivity initiative encompasses three pillars, brand maximization, margin, enhancement, and improved operational discipline. Since we commenced this initiative in the second quarter of 2024 we have made meaningful progress against our targets. With the focus on driving substantial and sustainable improvements in union economics. We continue to find significant opportunities to reduce our product costs while maintaining or even enhancing our product quality. We have also implemented cost savings via warehouse consolidation and network optimization. Lastly, we've made progress on eliminating unproductive SG&A spend from a margin enhancement standpoint. These efforts yielded a 370 basis point improvement in gross margin to 49.1% as well as reduced selling and warehousing expenses as a percentage of sales. We have also seen cash flow improvement from the prior quarter as a result of the changes we've implemented the progress we've made enabled us to increase our expected annual cost savings target to 15 million from the 12 million. We previously provided, we begin to see these cost savings. In Q2, we expect these savings to be more fully realized through year end 2025. Lastly, we continue to employ a philosophy that emphasizes returns across growth initiatives and discipline around working capital. I will now discuss our third quarter financial results. We delivered net sales of 36.4 million just shy of the low end of our guidance versus prior year, net sales were down 15.6% reflecting a decrease in volumes of 12% associated with the impact of the aforementioned loss of distribution at club and one math customer, as well as the exit of our kids and Mixers line on an equalized case basis. Our net ASP declined 3.9% reflecting our efforts to liquidate excess and obsolete inventory which is transitory and expected to be completed by the end of 2024. The slight miss in net sales was attributable to lower than expected response to one of our promotional tests as well as shipping challenges related to the hurricanes in the southeast. Gross margin was 49.1%. An increase of 370 basis points versus the third quarter of last year. This improvement reflects the impact of our productivity initiative previously discussed as well as the shift in channel mix and lower inventory losses versus prior year as we lack the transition to our current key manufacturing model. This is partially offset by investments in enhanced graphics to improve on shelf visibility and increased promotional activities which reflects a return to historical levels. In addition to the temporary increase in promotional spend to liquidate excess and obsolete inventory. We have also been testing a variety of new promotional strategies. Over the last several quarters, we've seen encouraging signs of effectiveness of this new approach with a 15% point increase in lift versus prior year. In select grocery customer test, we will continue to refine our promotional strategies and are encouraged by the returns we're beginning to see in our new approach. Selling and marketing expenses were 12 million or 32.9% of net sales in the third quarter of 2024. Compared to 20.5 million or 47.5% of net sales in the third quarter of 2023. The decrease was primarily due to a decline in freight transfers as a result of the impact of supply chain logistics challenges in the prior year, lower rate packing costs due to automation, a decrease in freight costs due to optimization of freight liens and favorable spot rates and a reduction in warehousing costs due to the consolidation of warehouses and reduction in inventory levels. These decreases were partially offset by investments made in marketing to drive brand awareness. General and administrative expenses were 7.4 million or 20.3% of net sales in the third quarter of 2024. Compared to 8.3 million or 19.1% of net sales in the third quarter of 2023. The decrease was primarily driven by a decline in cost as a result of our productivity. Initiative, net loss of 2.8 million compared to a net loss of 11.2 million last year. An improvement of 8.4 million. A justa was 1.5 million compared to an aest butal of 9.1 million in the prior year period. This improvement was primarily driven by the lapping of a number of expenses related to the supply chain transition from last year. As well as the impact of our productivity initiative. We anticipate that we will continue to achieve improvement in quarter losses as we balance business reinvestment and bolstering profitability. Turning to our balance sheet, we ended the quarter with approximately 32 million in cash and cash equivalent and have an undrawn revolving credit line of 20 million. Turning to guidance, our revised 2024 and net sales outlook largely reflects the slightness in our third quarter performance. In addition, going forward, we will be providing adjusted even that guidance. Given greater visibility into our business for the fourth quarter, we expect sales of between 38 million to 40 million reflecting approximately 3% growth at the midpoint of the range as compared to the fourth quarter last year. This reflects the impact of the Walmart pipeline sale as well as more effective promotional programming at our key grocery customers. We expect Q4 adjusted EBIT to be in the range of negative 1.8 million to negative 2.2 million reflective of a shift in marketing spend from Q3 to Q4. This compares to a suggested ebita of negative 6.2 million in the fourth quarter of 2023 for the full year. This translates to a net sales outlook in the range of 154 to 156 million and adjusted ebida loss of approximately 13 million. While we do not provide formal guidance on gross margins. As mentioned previously, we expect to remain in the mid to upper 40s over the next several quarters. As we realize the benefits of the improvements we've made to our past structure. We expect that gross margins will also fluctuate based on our DS D mix. Looking beyond this year, we expect modest growth in 2025 as we focus on building brand momentum and expanding distribution across channels which we recognize will take time. We will continue to balance investing in growth with our goal of achieving positive adjusted EBITA in 2026. In closing, we believe that the work that we are doing positions us to deliver long term sustainable profitable growth. As we capitalize on the enormous opportunity within natural soda, I will now turn it over to the operator to begin Q&A operator.\nQuestion and Answer Session\nOperator\n Thank you. So, at this time, we will be conducting a question-and-answer session. (Operator Instructions) And then one, now the first question that we have comes from Bonnie Hazo of Goldman Sachs. Please go ahead.\nBonnie Hazo\n All right. Thank you. Good morning, everyone. I I was hoping for a little more color this morning on, I guess the lost distribution you called out in your club channel and then the one customer in your mass channel. I was wondering if you could, you know, give us a sense of maybe the impact from the soft distribution on your top and maybe bottom line and then, you know, the expanded distribution that you highlighted, you know, expanded distribution to Walmart that is, you mentioned you're expanding this month. So I guess I'm trying to reconcile that with, you know, your outlook for, I guess, modest 1 to 6% sales growth this quarter. Thanks.\nAmy Taylor\n Yeah, I think funny. Let me, let me talk a little bit about the retail side. And then when it comes to the impact on top and bottom line and the outlook, I'm going to turn that over to garish to make a few comments. So, you know, the softness in the quarter really came down to the volume impact of reduced store selling in club and a few promotional timing variances. And I'll just note that velocity remains strong. That's a cross channel and most especially in key channels like grocery and accelerated in the last four weeks, which is consistent with our growth expectations and the return. To growth for Q4 specific to club as we've mentioned in the past and especially for emerging brands, it can be a region by region or rotation by rotation business. And so we remain engaged with both the national Club operators and we're optimistic that we'll make progress in sustainable club distribution for 2025. But in the meantime, as you mentioned, throughout the month of November, we'll be rolling into 4,300 Walmart stores and that will include a variety pack. Variety pack is what's sold at club and we're also seeing strong growth in e-commerce. So we're targeting the shopper and making sure that a variety pack is available to continue to drive trial when consumers across channels. So again, I'll just remind us that velocity is the metric that tells us how demand is faring. And so we expect a return to growth based on our velocity performance in Q4. And I'll turn it over to gear just to talk a little bit about the top line and bottom line impact. We think about club and distribution and then the outlook.\nGirish Satya\n Yeah. So I would just add, you know, as Amy mentioned, most of the change in the outlook was really driven by distribution primarily at the club club level and, and is noted the lost distribution at the one in math customer from a bottom line per you know, really the change in ebida is really driven by incremental investments in marketing as we look to drive trial and, and support the launch of Walmart. So, you know, continues our approach to really balancing for long term growth, long term sustainable growth by mixing, you know, dropping savings to the bottom line as well as reinvesting into the business.\nBonnie Hazo\n All right. Thank you for that. And maybe just a second question if I may because, you know, as you talk through that, you know, I did also have a question on your marketing spend. So hoping you could give us a sense of what this will be as a percentage of sales over the next few years. And I guess I'm asking that in the context of, you know, profitability, I mean, you know, this has been a key focus for you and I know, you know, you, you've implemented a lot of different initiatives and I I'm recognizing you're not going to provide guidance next year, but could you maybe help us understand how realistic it might be for you to generate profitability in the next couple of years? Given all of the efforts that you know, you've kind of laid out for us. Thank You.\nGirish Satya\n Yeah, of course. And, and appreciate the question, you know, as noted, we're really focused on, you know, building a sustainable profitable and, you know, a consistent grower for the future and we are really bullish about the long-term growth opportunities ahead. And so, I think from our standpoint, you know, we're continued to be focused on driving profitability in 2026. As you know, really as we invest in marketing and brand building to really drive future sales growth. And so, you know, I think from our perspective, we're really going to continue to balance the, you know, dropping savings to the bottom line, but really re but with more of a focus on reinvesting so that we can drive future sales and future distribution gains which will in turn drive higher profit. So, you know, I think that as we alluded to, you know, we're really focused on hitting that sort of profitability marker in 2026 but, you know, continuing to balance until then between continued reduction and losses as well as investment in building this business.\nBonnie Hazo\n All right, thank you.\nAmy Taylor\n Bonnie I would just say in closing on marketing, critical to our ability to invest in marketing is our productivity initiative where we take cost out of operating expenses and put it into marketing. There is room for us to invest more in brand building we have very strong repeat rates and we have very high brand spend once consumers enter the funnel and we must invest in brand and drive awareness to continue that virtuous circle. So that's our expectation and the productivity initiative gives us a lot of confidence in our ability to execute that accordingly.\nBonnie Hazo\n All right, thanks again. I'll pass it on.\nOperator\n Thank you. The next question we have comes from Andrew Strelzik of BMO capital markets. Please go ahead.\nAndrew Strelzik\n Hey, good morning. Thanks for taking the questions. I wanted to ask about the gross margins which were much stronger than, than we and I believe you anticipated as well. Was there anything, you know, kind of one time or non-recurring in there? And maybe what was the biggest deviation relative to kind of what you had thought for the quarter? And I guess when A, as we kind of zoom out, I know you talked about some variability based on DS D and those types of things. But is there any change, kind of the way that you're thinking about the margin potential of the business, given some of the structural improvements you've made?\nGirish Satya\n Yeah. Thanks for the question. And you know, I think one of the, one of the biggest drivers is really improved inventory management and really what it comes down to the biggest driver on a year over year basis was the, you know, significant reduction in excess and obsolete inventory, you can see that in inventory balances, when you look at the balance sheet, but, you know, we've made a lot of progress on, you know, renegotiating core input costs, mar rationalizing and productive skews. And so, you know, going forward, you know, we do believe we've kind of reset the reset the bar here at a higher clip from a gross margin perspective, in that sort of upper, you know, mid, mid top or 40s. And as noted, there will be some variability depending on, you know, how quickly we add new DS D partners and, and you know, I think there's continues to be opportunity to enhance gross margin. I think, you know, similarly, we've balanced driving gross margin with also incremental DNA spend, which, you know, we've returned to historical levels inclusive of driving higher margin. So again, we're, we're balanced, we're creating this balancing act across the PNL to really, really with a focus on how do we drive. You know, how do we drive velocity and how do we drive value?\nAndrew Strelzik\n Okay. That's helpful. And then, I wanted to revisit the, the promotional activity, promotional strategies discussion that you referenced in the press release and then in some of the prepared remarks, you can, you talk about exactly what you've been testing, what's been working and kind of what the timing is to which you might settle on kind of how that's going to look and what that means for trade, spend over time on a go forward basis. Thanks.\nGirish Satya\n Yeah, absolutely. So, you know, I think we, we, you know, historically or over the last several years, the company had reduced DNA spend pretty dramatically. And so we've really been testing a variety of new strategies really around frequency depth and breadth of promotion. And so as we continue to sort of H1 and refine the these tests over the last several quarters, I think what we've really dialed in is, you know, the, the highest ro I has been and, and that mix of depth and frequency. And so, you know, I think we will be really settling in, I'd say in the first quarter of 2025. The particularly as we learn with this nationwide Walmart launch and testing a few new promotional strategies as well that we have yet to, that we haven't tried in the past. And so, we'll, we believe we've kind of settled from a dollar perspective on, on the appropriate amount and, and I think we'll be able to really dial that in, you know, by the first quarter of next year.\nAmy Taylor\n And Andrew just notes that we saw as mentioned in prepared remarks, a 15%-point increase in list all across all of grocery for the period. And we did that concurrently with significant improvements in margin. So it builds our confidence in the efficacy of our promotional strategies based on what we're learning. And what gears just described is driving hand in hand with the improving the path to profitability.\nAndrew Strelzik\n Makes sense. Thank you very much for the call. I appreciate.\nAmy Taylor\n Thanks.\nOperator\n Thank you. Just a reminder. (Operator Instructions) Now the next question we have comes from Jim Celeo of Stevens Inc. Please go ahead.\nJim Celeo\n Hi guys. Good morning. Thanks for taking our question. I, I'm going to start on the the Salted caramel LTO and just see. Do you guys have any insight if that's driving frequency among existing customers or trial with new customers? And, and I can maybe make that a two part question just in this new world of, of advertising, that's more and more digital. Just any learnings that you guys have from, from engagement on some of the, the digital ad spend and how that converts to whether it's frequency or trial.\nAmy Taylor\n Yeah. So to directly thanks Jim, to directly answer your question. It is too early for us to sort of disaggregate the excitement around salted caramel and tell you exactly whether that's coming from our existing base or new consumers. But directionally, we could tell you both because what we're seeing is that the reach that we have been able to extend through our scaled. Now, influencer network on third party channels. So now we're speaking to people that are not on Zia channels have the very effective and very engaging, far more so than the past. So we see our marketing initiatives, outperforming marketing initiatives of the past. And I think salted caramel is just an example of exactly that, but it's also in driving, driving engagement within our existing base. So our expectation is that salted caramel and other brand buzz building initiatives, does both things for us continues to engage our highly engaged base and reaches new consumers. And to your point on digital, our distinctive brand identity can be seen and heard across really an overhauled social media channels through new brand ambassadors of scale that I mentioned through supported events and partnerships. And then most recently through through some of our new out of home advertising, complementing the digital campaigns that we piloted in several cities. Reminder that the digital campaigns we piloted across a 20 week period, drove a 5% point increase in sales in those markets relative to the rest of market. So these are our brand marketing spends have been insufficient to support this brand. And now what we see especially over the summer and early fall in very limited and targeted initiatives are green shoots of what we need to scale going forward. And why are we confident that we're going to be able to do that? Because our productivity initiative is there to be able to fund it in a self sufficient way. So I would mark Salted Caramel campaign as an example of what good looks like for Zevia in both engaging our base as well as reaching new consumers and driving trial.\nJim Celeo\n That's great. And a and then maybe as a follow up to that, can you give us an update on the DS C network in, in Pacific Northwest? And I would imagine there's probably kind of a similar visibility dynamic with, with some of the in store activation if you guys can give any updates on like branded cooler placements. But, but really what I'm curious about is if you've seen any noticeable difference in those markets relative to kind of the broader Footprint?\nAmy Taylor\n Yes, that's a very important consideration, Jim, thank you. So we're pleased with the impact of Ds D so direct store delivery. You know, the service levels have had an impact on velocity in our base business in the footprint where Ds D is activated. So the Pacific Northwest and specifically grocery across all chains in that footprint outperforms the rest of market in the period of time where Ds D has been active. So grocery outperforming rest of market, thanks to Ds D, DS D partners have also started to penetrate independent convenience outlets and I outlined independent because of course, chains are reset next spring. So we're partnering with DS D operators to be ready for that kind of next big moment in in convenience, roll out which would be the spring. So that's, that's sort of early take on the impact of DS D in the Northwest. And then as mentioned in prepared remarks, our, our next target being the Southwest, we've signed with Crescent Crown in Arizona and adjacent geographies should follow in the coming months. And we expect a similar result again, increased velocities and core channels and then being enabled to start to drive distribution for convenience, which is, you know, drives against our most important initiative, which is single trial to expand the base hand in hand with our brand building.\nJim Celeo\n Great, appreciate all the thoughts. Jamie. I'll, I'll hop back in you.\nOperator\n Thank you, ladies and gentlemen, that concludes the question-and-answer session of the call, and I'll turn it back to Amy Taylor for closing remarks. Please go ahead.\nAmy Taylor\n Yes. Thank you. We appreciate everyone joining the call today. And as you can hear, we're confident that Z is well positioned within the growing natural soda category and our productivity initiative, which we've mentioned several times sets us up well, to capitalize on this opportunity while putting us on what we see is a very clear path to profitability. So we look forward to providing you an update on our progress on the fourth quarter call. Thank you very much, everyone.\nOperator\n Thank you, ladies and gentlemen, that then concludes today's conference. Thank you for joining us. 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