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spk03: Standing by and welcome to the Laird Superfood, Inc. Fourth Quarter and Full Year 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to Ms. Ashley DeSimone, Managing Director at ICR, to begin.
spk01: Thank you. Good afternoon, and welcome to Laird Superfoods' fourth quarter and full year 2020 earnings conference call and webcast. On today's call are Paul Hodge, Chief Executive Officer, Valerie Els, Chief Financial Officer, and Scott McGuire, Chief Operating Officer. By now, everyone should have access to the company's fourth quarter earnings press release, released today after market closed. This is available on the Investor Relations section of Laird Superfood's website at www.lairdsuperfood.com. Before we begin, please note that all of the financial information presented on today's call is unaudited, and during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs, and they involve 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 risk that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. And now I'd like to turn the call over to Paul Hodge, Chief Executive Officer of Laird Superfoods. Paul?
spk06: Paul Hodge Thank you, Ashley, and aloha, everybody. It's a pleasure to be speaking with you in regards to our fourth quarter and full year earnings report. To start with, I want to congratulate our team for amazing 2020 results. In spite of COVID challenges, we saw net sales growth of 98% over 2019. We executed a successful IPO and we launched innovative new products and entered new categories, including our liquid creamer, several snack products, our functional copies, as well as activate and renew products to round out our daily ritual of healthy living, as we believe better food leads to a better world. 2020 was truly an epic and amazing year, and trust that this team is committed to working hard every day to also make 2021 another amazing year. On today's call, I'm going to hit on the main drivers of our business we think that we'll probably be most interested in. To start, for all of our new investors, I'll give you a two-minute summary of who we are and what we do. We will then jump into our growth drivers and looking creamer. Then I'll hand over to Scott McGuire, our COO, to discuss his work on operational efficiencies before Valerie Ells, our CFO, discusses the financials. As always, we want plenty of time for Q&A. So to start off our new investors to the company, Laird Superfood is a high growth plant-based natural food manufacturer with an open-ended growth opportunity in the $759 billion grocery industry. We believe Laird Superfood is going to be a leader among the consumer industry's better free brands. And we're mission driven with global TAM appeal on trends and with an outsized e-commerce revenue contribution. At Laird, we believe better food leads to a better world because when people are healthier and feel good, they make better decisions. Our products provide daily sustained energy, nutrition, and hydration that we need to excel throughout our days from sunup to sundown. as part of our daily ritual, starting with our superfood coffee and creamer. Our mission is simple. We make products that deliver great taste and great quality. We want our products to be convenient, easy to use, affordable, and available to all. It's important for us to be able to provide these high-quality natural products at accessible pricing when you look at the price per serving. And we can do this while providing trusted, authentic products to the mass market. We accomplished this by vertically integrating self-manufacturing and direct sourcing whenever possible to eliminate the middlemen, but also the vertical integration gives us oversight to ensure sustainable and ethical practices through all phases of our supply chain from farm to fork. We have an online channel sales approach, and I'm constantly impressed by our leadership online as a native digital platform. In the fourth quarter, 61% of our business was online. We also sell wholesale and grocery mass and drug as well as food service where we are in the early innings. But our products are a natural fit and we see tremendous long term opportunity. The first we'll talk about growth drivers. Overall sales remain very strong. In 2020 we saw 98% net sales growth year over year, including 108% growth in wholesale and 90% growth in online sales. So there's four topics here in growth I'm going to touch on. One, the crown jewel of this business is our online sales. We saw new customer acquisition growth of 192% in 2020 over 2019 and 201% in Q4 alone over Q4 of the prior year. This proves that early 2020 COVID-led pantry stocking was not just a bubble for large superfood. The online growth has been sustained and we don't foresee any slowdown in the near future. Our retention metrics further demonstrate this. We saw a 33% reorder rate increase for our 2020 cohort compared to our 2019 cohort, taking our already strong retention to even greater levels. And our subscription business is strong and increasing as well, continuing to represent a third of our online business. Even more impressive, we grew new subscriptions 184% in 2020 versus 2019, further demonstrating the inherently recurring nature of our revenues and customer loyalty. The list of achievements of our online business is a long one. The health and revenue generation of our email list continues to multiply, our conversion rates are twice those of the industry average, and our customer acquisition costs continue to demonstrate the effectiveness and efficiency of our organic customer acquisition strategy. All in all, our online business is best in class and on fire. We consider ourselves to be leading the way in the food industry and anticipate that our online business will always be more than half of our revenues, which we love as it gives us that direct connection to our customers and provides a highly valuable test platform for new products before we take those products and invest in wholesale rollouts. Second, when it comes to growth drivers, let's look at wholesale. We have a first step goal to get to 20,000 doors and are now a third of the way there. And when you look at all the future opportunities in drug, grocery, masks, convenience stores, the future potential is far larger than that. To help achieve our goal of getting our products in $20,000, we have just finished building out a world-class wholesale sales team with a hire of two sales directors who each bring senior-level CPG experience to our organization. And both individuals have an extensive track record of building emerging brands and accelerating white space closures. We've also just upgraded our broker team by adding a new national broker network to cover natural, conventional, mass, and drug. We've aligned ourselves with the industry's top brokers who bring significant experience building natural food brands, and this network better positions us for long-term growth across all these channels. We're also happy to announce some important recent wholesale wins for March that demonstrate our continued growth momentum. We're launching our liquid creamer in 290 target stores this month, as well as in Harris Teeter and Wakeburn. We're starting to get solid traction for functional coffee and we're launching into 400 new stores this month alone. Additionally, we're discussing our international strategy internally now. And while there remains low hanging fruit in the US, we are aware of international opportunities as well. And recently we launched our superfood shelf stable creamers into 220 Loblaws stores in Canada. There are a lot of grocery resets happening in the back half this year, which we intend to be part of as well. We're very excited about wholesale growth for this year. Next time Growth Drivers would like to talk about platform expansion. As you know, we're building a brand platform, which enables us to continually find innovative products with large TAMs, test online, and take those winners to the wholesale channels. To name a few in testing, functional coffee. I believe this is going to be a multi-billion dollar market in the next five years. In the fourth quarter, we launched our second functional coffee, Boost Coffee, the first ever coffee with vitamin D from plant-based whole food sources. This complimented our initial functional mushroom coffee released mid 2020. And in January of 2021, we further expanded this product set with our third functional coffee focus coffee, which includes functional mushroom extracts and botanical adaptogens for cognitive support. We're working on a deep pipeline of highly innovative functional coffee products, which we will continue to release in the coming quarters. And we're excited to be leading the charge when it comes to innovation and creating functionality in this category. We launched Peeling Nets and Harvest States in Q4, the first test into the massive healthy, better for you, whole food snack category. Peeling Nets, which launched first, was a huge success. We saw impressive immediate demand. And since the launch of Peeling Nets, Himalayan sold with our seventh best-selling SKU and Cacao is our 11th best-selling .com and Amazon SKU. This is especially impressive considering we sold out on day one of inventory on hand and we're out of stock for a full month after launch. Additionally, after spending years of formulating to get it just right, we have launched our newest Activate product, our prebiotic daily greens. This product includes 18 superfoods, functional mushrooms, prebiotics, and shilajit, which is an amazing superfood from high in the Himalayan mountains. This product not only provides your needed daily micronutrients, but also is developed to support your microbiome, which is an incredibly important element for our overall health. that researchers are just beginning to fully understand. And finally on growth drivers, I'd like to touch on M&A. We are seeing a lot of M&A activity in the marketplace and opportunities are coming our way, but we have a deliberate and measured approach here. We look for a number of things that could be innovative products, manufacturing capability, unique talent, or supply chain opportunities. But we're in the early stages of our corporate development strategy and it's our intention to prove out the power of this growth opportunity. We believe we can rapidly plug new products into our platform while not distracting from our current mission and our critical internal growth projects. Now, gross margins in liquid creamer. As everyone knows, as we've been talking about, we are facing some temporary compression of margins due to higher shipping costs in our online channel and due to our new liquid creamer launch, which is due to short shelf life and associated distribution efficiency issues we're dealing with there. Specifically to liquid creamer, we set a goal to have these issues resolved in the first half of this year, and we believe we're still on track to hit that goal. In the meantime, we've started to get some wins by optimizing the supply chain and working to make significant improvements to our fresh products. By midway through the year, we expect to reduce waste issues, which are contributing to margin depression, and will give distributors plenty of time to manage inventories, enabling them to keep larger quantities on hand. This also gives our customers plenty of time to consume, as well as providing additional efficiencies in shipping, logistics, and warehousing. It's taken longer than we would like, and the truth is that we could have had it resolved faster if we were willing to compromise on our values by adding stabilizers and emulsifiers that we don't believe in. But we are taking the longer-term solution, which is doing something new with a completely new, ultra-clean label product, a formula that has never been done before. We're unique in our commitment to authenticity and trust for our brand and will not compromise by simply adding ingredients we don't believe in. Having said that, we believe it's worth the wait. We feel the early launch, even with the packaging challenges, was worth it as we had the time to test the products in the market where we have seen very strong consumer adoption and repeat purchasing where we have been selling liquid creamer. We've seen strong shelf losses we didn't expect to see until the end of this year that's continually growing. And keep in mind, these strong shelf losses are in spite of lower shelf fill rates than we would have liked due to distributor challenges, which we know are artificially lowering these numbers. This is a powerful sign as to how buyers and customers are loving your innovative functional liquid creamers. With the strong sales data emerging, we are also accelerating our efforts for a liquid creamer shelf stable product. We're starting to pilot this product with a new co-packer and expect to have this out in the second half of this year. We're excited for this liquid shelf-stable line to supplement our shelf-stable powder products for the conventional channels, as with the sub-$5 price point, it's a great price fit for many of these more value-conscious grocery chains. And this also opens up the amazing opportunity with Amazon and our DVC channels to sell at full retail, which will balance margins and increase revenues for the entire liquid creamer line. Now I'd like to turn it over to Scott McGuire, our COO, to discuss operations.
spk07: Thank you, Paul. Three months into this role as Chief Operating Officer, it is so great to be a part of this team that has built an amazing platform and one with so much potential. I'm grateful to help take this work to new levels of execution and innovation and be given the responsibility to ensure these great products be available to everyone, everywhere, very fast, safe, and delicious. Regarding the fourth quarter, the pandemic presented us with common production and supply challenges. Our top priority was and is keeping people safe, securing the timely delivery of equipment and raw materials, and lining up the supply chain to make sure every consumer has access to our products. Very challenging. But despite these pandemic complexities, we are hyper-focused on building a world-class operational business and have been making strides in efficiencies, something we will never let up on. I'd like to share some specific fourth quarter developments in three key areas, including throughput, production, and direct-to-consumer capacity, parcel costs, and people and talent. On throughput, our first production line improved significantly Q4 versus Q3. Leveraging a total team effort, these results were driven by the implementation of a new sales and operations planning process, execution of a production master scheduling and sequencing algorithm, continued enhancements to our preventive maintenance and the installation process, of automated controls creating visibility to real-time results. In the midst of all this, and something we are very proud of, we installed, tested, and began ramp-up of our second production line. This production line helps us on four critical levels. It provides redundancy. It more than doubles capacity. It increases our ability to vertically integrate current COPAX SKUs, and finally provides the critical flexibility by building our inventories in smart ways for new products, preventive maintenance, and major peak revenue timeframes. And as a result of this throughput and capacity progress, we achieved our targeted safety stocks two months sooner than anticipated. On parcel costs, this has provided us challenges in direct-to-consumer. Freight rate increases from parcel companies have been passed down. It's a delicate balance and one that requires surgical real-time attention. We saw an instantaneous rate hike mid-fourth quarter, It takes several solutions to chip away at this, and we are working on all of them, including subscription consolidations, packaging and mode optimization, and strategic bundling of our offerings. Finally, regarding our people and our talent for the fourth quarter, we made investments to strengthen our engineering and procurement teams. This is already paying dividends in automation, reliability, sourcing, and certainty of supply of our raw materials. Moving forward, I'd like to share a few key priorities on fiscal year 2021. We have three M's that provide the template for all we do. Manufacture more ourselves, make it more efficiently, move it smarter and faster. For manufacturing more ourselves, we have already converted two products this year from our co-packer to our production facility, and we will convert more. Making it more efficiently, we will make investments in continuous improvement, lean practices, and automation. We strive to provide real-time efficiency feedback, and we strive to eliminate tedious, redundant, hard-to-staff tasks. We will do automation right, and we hope to build the flexibility to support the variety of packaging innovations we expect in all channels. Our engineering team is literally all over this, moving it smarter and faster. And what is very exciting news, we broke ground last month at our sister's campus for a new customer fulfillment center. We strive to optimize the layout for velocity, storage cost reductions, direct-to-consumer enhancements, and most importantly, amazing our customers how well we move product to them. Let me now hand it over to Val.
spk02: Thanks, Scott. To round out our conversation on the P&L, operating expenses remained firmly in our control in the fourth quarter, and as we have done historically, we continued to effectively manage these expenses across the board. General and administrative expenses were 44% of net sales for Q4 2020 compared to 36% in the prior year, which reflects incremental and expected public company costs. On an apples-to-apples basis, if we excluded those public company costs, our DNA expense would have been only 32% of net sales down approximately 400 basis points. At 2% of net sales, research and development remains highly efficient with a rapid cash payback, And sales and marketing expenses were 37% of net sales for Q4 2020 compared to 49% of sales in the prior year period, reflecting the continued effectiveness and efficiency of our organic customer acquisition strategy and the modest fixed cost leverage available to us in this category. And now to look ahead to the coming year. Our 2021 net sales goal remains at least $42 million, representing year-over-year growth of at least 60%. We feel confident in these numbers as our business is inherently set on a path for strong growth with our core product lines and existing direct and wholesale relationships. But the slope of the growth curve will be determined by the success of a number of initiatives in the coming year, including a liquid creamer packaging revamp in the first half, as well as launching a liquid shelf stable option in the second half of 2021, timely and innovative new product introductions with continued strong online performance, The addition of wholesale doors, specifically some larger chains utilizing our liquid creamer as an entry point for these opportunities, and continuing to earn more product placements on shelf at larger partners and increasing the value of each one of those doors, while also fostering increased brand awareness. Keep in mind that on the cost side, expectations should continue to take shipping factors into account as we navigate the optimal balance of free shipping and increasing shipping expenses for our DTC business, including the increased shipping costs that began in the fourth quarter, and further take liquid creamer spoilage into account during the first six months of 2021, following which our margins should begin to slowly slope upward. With those first half headwinds in mind, we expect 2021 margins of 28% to 30%, which we plan to achieve via the liquid packaging update, optimizing of our DTC shipping, and maximizing the fixed cost leverage available to us via vertical integration. And similar to the top line expectations, the slope of improvement in our margins will be dependent on the execution of these key initiatives as well. I would like to reiterate, however, that this coming year is just the first step toward our long-term target. We came to the public markets with very clear set of long-term goals, and we're happy to say that we remain confident in our abilities to achieve them. Over the next two to four years, in 2023 to 2025, we believe this business can run with significant annual revenue growth as we begin to leverage our brand platform with growth margins north of 40% and EBITDA margins in the mid-teens. I'll now turn it back to Paul.
spk06: Thanks, Val. We're building large superfoods for significant scale. We want to be a multibillion-dollar brand platform. We are not making decisions for the quarter or even the year. The decisions we're making now, the investments in infrastructure, top-notch offering talent, strategy and supply chain, product segments, these are all investments into this long-term plan. We have the arsenal and team to develop or acquire innovative, better-for-you products that have large TAM opportunities. And we're building an authentic, trusted brand platform with the ability to have massive scale and growth into the future for decades to come. Thanks so much to our team and to our shareholders. Now let's open the call to Q&A. Operator?
spk03: Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone keypad. If you wish to withdraw a question, simply press the pound key. Your first question will come from Bobby Burleson of Canaccord. Please go ahead.
spk08: Hey, everybody. Thanks for taking my questions. So, yeah, congratulations on the revenue upside and the EBITDA number. Curious question. Paul, you talked about M&A, and I'm curious, how about partnerships? What are your thoughts there with big CPG, big QSR guys? We've heard announcements from other plant-based guys that are partnering with large players. Any potential there this year?
spk06: We're looking at all the opportunities. We're if there's an opportunity that basically enables us to build this brand, that's what it's all about. You know, we're not making acquisitions and buying other brands that we're going to, we're going to, you know, put a lot of our own marketing efforts into those brands. And it would be sort of the same concept with a, with a partnership. You know, we're not going to spend a lot of energy promoting other brands, but if there is, if there is a deal that just is a win-win for everybody, uh, we're certainly look at it and there has been opportunities we've been looking at. So, You know, we're excited about, you know, these potentials, but I can't say whether something will happen here or not.
spk08: Sure. Fair enough. And then just quickly, this is for Valerie, I guess, on the gross margin guidance, and you made the comment of a slow slope upward. It seems like it would be more of a step function upward in the second half unless there's some margin expansion potential here in the first half. Is that fair?
spk02: You know, step function, I don't like to speak to it that way too much because, like Scott mentioned in his comments, there isn't just one solution to the shipping side of the issues that we're facing today, for example. So, yes, when we make an improvement and we start to see some of those improvements play out, we're going to head in the right direction. But huge steps with every single one of those, I mean, I think you have gotten to know me well enough that I'd like to be a little bit more conservative than to overpromise on that one.
spk08: Sure. I was just thinking about the shape of the year for gross margins, though, to get to that kind of 29%. Are you thinking that maybe we get some expansion here in the first half? It's not all dependent. It's not all kind of a mid-year and then forward improvement?
spk02: I think we've been pretty explicit on the shelf life improvement on liquid creamer, most likely happening mid-year and then targeting a shelf-stable liquid creamer to be in the second half of the year. So I'd say for those two, that's probably the most likely timing to see the improvement. On the free shipping coupled with the DTC parcel cost challenges we're facing, I think that one will be more gradual over the course of the year, yes. Because real time, and we're working on a lot of different solutions on that issue specifically right now. And Scott's reading the charge there.
spk08: Great. And then just last one from me, if we think about the impact, on shipping costs, the gross margin impact there. Is there a split that you can kind of allude to between the free shipping impact and the higher cost of freight in general, just the higher shipping costs in terms of how they impacted margins in Q4?
spk02: No, not a problem. So when we're thinking about the compression related to the free shipping and DTC parcel cost challenge, that one's actually pretty split down the middle for looking back to Q4 of last year when free shipping wasn't in play. So that's about 900 basis points from Q4 of last year to Q4 of this year. And again, pretty split evenly down the middle there. And then the remainder of the compression we're seeing from Q4 of 2019 is liquid creamer, and that's the other 500 basis points right now.
spk06: Great. Well, thanks for taking our questions, guys. Oh, yeah, Paul. I was just going to add a little bit on to the free shipping as we're talking about that. Just kind of a reminder, you know, the free shipping is one of the most powerful use of capital investments we've ever seen. When we look at 2020, our new customer cohort three-year LTV is $17.37 million versus our 2019 three-year new customer LTV of $8.78 million. So we've increased our LTV value $8.5 million over while we sacrificed basically $800,000 shipping income. So it's just an incredible investment. When we look at, you know, that spend, it makes everything more efficient as we, you know, we've doubled our conversion rates on the website. So that means that all the ads and all the other traffic that we're bringing to the site is going to be more effective. So where we're at at this stage in the game, it's just a really, really powerful tool that we need to keep going on.
spk08: Fantastic. Appreciate that additional color.
spk03: You bet. Your next question will come from Alex Furman of Craig Hill. Please go ahead.
spk05: Great. Thanks very much for taking my question, and congratulations on a very nice quarter and a very nice year. I wanted to ask about the long-term strategy in terms of grocery stores and other opportunities in food, mass, and drug, because it certainly sounds like you're continuing to pursue grocery and making some nice hires on the sales side of things there. I just wanted to ask Paul about your comment that you envision Laird Superfood always having more than 50% of its sales coming online. Does that kind of suggest that as you look out over the next couple of years, maybe there'll be a little bit of a less emphasis on traditional grocery, or is it just that your online business is growing so fast that that grocery will never really have the chance to fully catch up?
spk06: It's the latter. We are a true online channel sales company, so we're not putting a huge emphasis on one over the other. We love our wholesale customers. We love the wholesale business. We are, of course, take a very methodical approach to the wholesale business. We're going to test our products online and make sure that we've got those blockbuster products picked out, that we're going to make that bigger investment into the wholesale channels. Just because you're dealing with lower margins, you're dealing with a cost again on the shelves, you don't want to have a miss there as far as getting products on the shelf that aren't really turning. Our wholesale business is growing incredibly well. I mean, we doubled our door count last year. And, you know, we're over a third of our way, you know, to the goal that we set, 20,000 doors. And we think We're actually starting to rethink that number. We think that's a pretty conservative number, and there's a lot more opportunity when you start looking at drug and others. So we're charging hard. Getting an extended kind of shelf life on our liquid creamer is an important part of continuing the conventional rollout where a lot of the white space lies for us. And our shelf-stable liquid creamer is an incredibly important tool as well. to get on the shelves of those more conventional stores with that sub-$5 price point. So that's all coming this year, and we're just continuing to charge. It's a little bit of a longer life cycle with grocery. We're in category review meetings now that mean that you can then place your products on the shelves towards the end of the year. So we are really hoping for third, fourth quarter to get on a bunch of those shelves through that process. And we're excited for it. We just put in, as I mentioned earlier, a world-class team. We believe we've really now built out, as of this month, the dream team of brokers who specialize in each of the different channels, our new sales directors for East and West that have a lifetime experience filling white space and we feel really fit the values of the company and are going to be aggressive in that fashion. And of course, our VP sales, Josh, has done an incredible job of restructuring, getting us into a really strong position to sell into wholesale. We're very focused on it and excited about it, but the online business is just exploding. It's just an incredible, best-in-class business. We believe we've got the strongest online platform in this industry, period. With the team that we have in place that's driving it, the KPIs and the growth is even getting better. So it's extraordinary, and it's very unique for this industry that we're really excited about it, and we're not going to take our foot off the gas on the online business. And so as fast as wholesale grows, we just still believe online is going to grow faster. That's great.
spk05: Appreciate that, Paul. And then, you know, more on the online, I guess, you know, it sounds like from your comments, I mean, you're getting a really nice pick up from the free shipping promotion in terms of new customers. And, you know, it certainly sounds like you've, you know, even more so than that added a whole lot of new subscriptions. Can you talk a little bit about kind of the margin impact of having customers on that subscription model as opposed to just buying individually, you know, both today, I guess, you know, as long as you're offering free shipping. And then, you know, if you kind of think that at some point in the future, if purchase for free shipping, you know, like you had perhaps before the pandemic. I mean, what is the profitability of a subscription customer compared to just getting, you know, similar orders from customers just on their own?
spk06: I may let Val talk to a couple of those points, but I will say, you know, when you get somebody on a subscription, the lifetime value of that customer is incredible. We have very low churn, so getting them on that program, they do get, you know, a slight discount to encourage them to get on the subscription, but we've been doing a lot of work lately to really look at those subscriptions, and we've been condensing subscriptions. We've been talking about programs like hey, cut your carbon footprint in half, and we've got an 18-month shelf life in this product. So instead of getting it every month, one bag a month, let's get two bags every two months to make some more efficiencies on the shipping side. So we're doing a lot of work to really make those efficient, but those are very profitable. It's some of our most profitable business that we have.
spk02: I think you covered it perfectly. The only real difference is that a subscriber will earn a discount and it comes in a tier, but that's the major differentiating factor there.
spk05: That's terrific. Thanks very much.
spk03: And again, as a reminder, in order to ask the question, simply press star 1 on your telephone keypad. Your next question will come from George Kelly of Roth Capital. Please go ahead.
spk04: Hey, everybody. Thanks for taking my questions. So maybe just to start with the – I'm curious about this. So the shelf-stable liquid creamer that's launching in the back half of this year – When I think about that, I mean, you launching that through your own e-commerce and Amazon and other online channels seems to me like that could be a huge deal. But I don't know if that's a big product category online, or I don't have a lot of kind of industry data behind that. But could you help maybe just size, you know, how excited you are about that? Is that a big potential product category?
spk06: It's a big potential product category for a couple of reasons. It's not just the online Amazon. I'll talk about it in a second. The real driver with this was to really fill the white space with conventional for that sub-$5 price point, which is really important in many of those conventional stores to have an overall lower cost product. Yes, the powder product is actually a better value when you break it down on a per-serving basis, but the higher overall price point when you're not looking at per-serving of the product, $9.99, just doesn't do as well in more kind of conscious-minded, value-minded, I guess, conventional stores. So it opens up tens of thousands of doors for us to get into with a product, and so we really initially started for that. Having said that, liquid creamer can do very well on Amazon. Amazon, of course, is so efficient with their shipping methods that we're really, really excited about that channel for the product and also for our D2C. What we have found on the stores that are carrying both liquid creamer and our shelf-stable creamer is we haven't been seeing any sort of camelization to date. We've got still strong shelf velocities in the stores for both products in both categories, so you know, we kind of view it as a different consumer. But we are excited, and it's going to definitely move the needle. And so, you know, we were telling people, or we were telling you guys, you know, end of the year, and we're now really making a real concerted effort to accelerate that and try and get that done as quickly as we possibly can this year. There's, you know, a few challenges. We're doing some new things here, so we can't say exactly when, how it's going to happen as quickly Most of the shelf-stable products have ingredients in those that we're not good with. And when you go to the co-packers to manufacture this product, that's the automatic. Oh, yeah, let's just put this and this in there. We're not good with that. But we have done pilots that prove that our formula does work, and we're now working towards commercializing that product. And we're going to move as quickly as we possibly can, so we'll certainly give you updates every quarter as far as how we're progressing.
spk04: Okay, great. That's helpful. And then maybe shifting a bit a different topic, but, um, with your online business, what is it? Has, have you seen much change, um, in places that have opened up maybe soon? I'm talking about COVID kind of reopening sooner than others. I'm thinking some states in particular, are you seeing much of a change in the growth rate or any of the kind of repeat buying or any of the, the, uh, those, um, those things in those various states?
spk06: No, we're not seeing any sort of downside in the online business. We believe that people are still gravitating towards online and the people that move there are going to stay there. And we're actually still seeing growth in the whole online category and even improving KPIs. So we really haven't seen any of that sort of change. If there is a shift, of course, let's be with this business as an online channel platform. We'll be where they are. So if they want to buy in the grocery store, we'll be there. If they're going to go back to the office and start drinking coffee there, we've got our food service program in play and are making moves to start to bolster that side of the business. But we don't think the online business is going away. We've just now, because of our position, the strength that we have, how we're capitalized, we're now able to really start to reach out in the top of the funnel and do some incredible activations, such as the U.S. ski and snowboard team, among a host of other really strong top-of-the-funnel activations that are really, really looking like strong performers, bringing more people into the funnel. And we just don't see an end to it. We still think we're just scratching the surface. And, of course, when you look at the continuing sort of broadening of the platform outside of just coffee and creamers into healthy snack products and other categories that we're now in development, it's just going to continue. We don't see an end to it.
spk04: That's excellent. And then maybe last question for me. The functional coffees that you've launched, The comments in your prepared remarks, you seem really, really amped up about that whole category in general. So I guess the question is, could that be, do you think longer term that could be as big as Cramer for you? I mean, is that sort of a five-year big growth path or longer? Can you help sort of size again an opportunity? Yeah.
spk06: Yeah, I mean, we believe it is. I mean, just look at the size of the coffee can. You know, that's an indicator. There's a massive opportunity here. And we're in the belief that, you know, people are drinking coffee. And, you know, basically our theory with all of our products, you know, we want to make people healthier. But we're not telling them, hey, you need to go to the gym and work out for four hours. We're saying, you're drinking coffee? Just drink this coffee instead. You know, do the same thing that you're doing to make it easy. And we think this is a really perfect product to paint that sort of scenario. So a lot of coffee drinkers in the U.S., majority of adults, and now we're saying do this, and it's going to give you something additional. And so we're excited about the category, and we're innovating, and we're coming up with new products. We're going to have more releases to give people choices of the things that they feel they need, what type of boost in their body they need, what type of support they need. And they can get it just through drinking their coffee. And so to me it's a no-brainer that it's going to be a big category. We think we're really well positioned as one of the first movers here to – innovate, to tie in our functional benefits that we do with all of our products, bring it together, and then deliver it to the marketplace, first online, and then through the wholesale channels that we're building, because we'll have this infrastructure in place to do it. We think we can be a mover. I don't know how much of that market we're going to get. Nobody knows, but we're going to give it a go. Okay, great. Thank you.
spk03: You bet. If you have any additional questions, please press star 1 on your telephone keypad. Your next question will come from Bobby Barrelton of Canaccord. Please go ahead.
spk08: Hey, guys. I'm back. My kids are misbehaving, so there might be some noise in the background. But just curious. You're talking about maybe having to revise that $20,000 goal, maybe higher. How much of that confidence is coming from that shelf-stable liquid creamer opportunity? Is that a big part of it? Are these completely new areas of wholesale that you guys can access and do those doors? You mentioned $10,000-plus doors.
spk06: could those come in big chunks given the price point yeah i mean you're absolutely right that's really the point of this product and as we're starting to understand these markets we of course came out strong in natural and we've got a decent acv and now we're starting to set our sights on these conventional channels we're not done with natural we've got a lot of new skus to you know continue to add across the aisles of the grocery store in natural But conventional is still the larger number of doors, and we're looking at places like drug. And we're seeing just how strong our refrigerated liquid creamer is performing. The shelf turns, the shelf velocity, the consumer adoption, people love it. And if we can get this sort of high-quality product into a lower-cost format into conventional shelf-stable stores, we just feel strongly we can really start to penetrate. And then once we do that, As we start to innovate new products, we're building certain products from the ground up, knowing that that's really going to be the destination. We'll still, of course, test them online, but the lower price point, better-for-you products that we think will do well in conventional will continue to fall so that we can then also add additional schemes there in the future, and the functional coffee being one of them as well. We are excited, and we're still sticking to that 20,000 number, but when you start to look at The natural stores, you look at the conventional that we're pursuing, you look at the opportunity in drug, there's a much bigger prize, probably closer to $40,000 or $45,000 total that we'd like to be able to access more of, and we think we can just through new product innovation.
spk08: Excellent. And then just on the online business, curious question. what the mix of direct online was there. Is that growing faster than overall online for you?
spk06: I'm sorry, Bobby, we broke up just one second. Can you ask the question again?
spk08: Oh, yeah, sorry. I'm just curious what the mix of direct was of the total online. Is that growing faster than total online and driving a bigger share of total online?
spk02: It definitely is, yes. So if we look at 2019 to 2020, DTC was up 143%. Amazon was up 40%. And some of that, of course, is very intentional. We want the consumers to be on our platform every time that we can get them there. That's where we create the greatest long-term value possible for the brand, where we have the ability to continue to engage with them, educate them, cross-sell to them. So that is the goal. But we are seeing that play out as well, yes.
spk08: It seems like online, 61% of sales. Is there any reason why this couldn't get to 70%? I know that you don't want to artificially allocate revenue through channels. You want it to happen naturally. From what you see, could this get north of 70%?
spk06: Well, it probably could. It's strong. But at the same time, we are really doing well in wholesale. You know, as we mentioned, we just rolled out in the Target and the Harris Teeter and a bunch of other chains this month, actually. So wholesale is going to be continuing to grow, especially as we, you know, in the next few months kind of continue to fix the shelf life issues with the refrigerated creamer. That just means more wholesale rollouts the rest of the year. So, yep. Online will continue to grow, and it's going to grow aggressively, but we believe we're going to get this wholesale growth to kind of probably keep pace for a while.
spk08: Okay. Thanks, guys. Sorry for all the questions. I appreciate all the answers.
spk06: That's what we're here for. If you have any more, fire away.
spk03: And if there are any additional questions, please press star 1 on your telephone keypad. There are no further questions at this time. I'll now turn the call back over to Mr. Hodge for closing the mic.
spk06: Thank you. So, yeah, thanks, everybody. We appreciate your support, you know, in sharing your long-term vision. You know, really, we just couldn't be more excited about where we are today. You know, we have the authentic and trusted brand. the ever-strengthening management team that's prepared to scale this company, the online channel distribution network with what we believe is the best econ platform in the business. And we have the marketing expertise and the capital to make Larry's Superfood the strongest and fastest-growing platform in the entire food and beverage industry with a realistic goal of achieving a billion dollars in revenues. We're a very young company. We don't manage quarter-to-quarter, so I encourage investors to look at the long term so we firmly believe we will meet or exceed our annual goals. So just thank you, everybody, for your support and sharing your long-term vision, and we're happy to talk. Thank you.
spk03: This concludes today's conference call. Thank you for joining.
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