Laird Superfood, Inc.

Thank you for standing by and welcome to the second quarter 2022 earnings conference call and webcast for Laird Superfood Incorporated. I would now like to turn the call over to Mr. Reed Anderson of ICR to begin. Mr. Anderson, please proceed.

Thank you. Good afternoon and welcome to Laird Superfood's second quarter 2022 earnings conference call and webcast. On today's call are Jason V, Chief Executive Officer, Anya Hamel, Interim Chief Financial Officer, and Andy Judd, Chief Commercial Officer. By now, everyone should have access to the company's second quarter earnings press release filed today after market close. This is available on the investor relations section of Laird Superfood's website at www.lairdsuperfood.com. Before we begin, please note that all the financial information presented on today's call is unaudited. 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 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 risks 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 Jason Deeth, Chief Executive Officer of Laird Superberg.

Thanks, Reid. Welcome, everyone, and thank you for joining us today. I'm going to begin today's meeting by providing a high-level overview of our second quarter results and an update on our key strategic initiatives. I'll then turn it over to Andy for a deeper dive into sales, channels, and products, followed by Anya, who will cover the financials in detail. We'll then open up the call to your questions. But before I jump into our quarterly results, I want to take a moment to recognize and thank the Laird Superfood Leadership Team, most of whom are still within the first few months of their new roles. This team has taken the reins during a challenging time for both Laird Superfood and the broader economy and market, and are doing a phenomenal job of reorienting the business and company to our biggest opportunities across both the commercial and operational aspects of the business. In just a few short months, we've been able to completely overhaul our sales and marketing organizations and agency ecosystems and to streamline our operations to deliver meaningful cost and cash savings. The fruits of much of this labor are yet to be realized, and I'm as excited as ever for the prospects of expanding the reach of our Laird Superfood daily ritual and doing so with a much better cost structure than in the past. Our second quarter results reflect some early progress on cost savings initiatives and efforts to drive wholesale channel growth against the backdrop of what has become a challenging operating environment. We continue to face headwinds to our online business due to the ongoing impact from changes in Apple's security features, the result being that we are seeing less consumer engagement on our site, especially at the lower order values. We also incurred greater promotional expenses than forecast in support of our DTC business. On the positive side, we continue to see customer metrics improve and made further inroads to expanding our presence on Amazon.com, which is a significant piece of our long-term growth strategy. Our NPS score in Q2 was an 82, and both our customer lifetime value and average order value continued to rise. I'm also pleased to share that we were able to deliver growth in the wholesale channel, and we made solid progress activating new retail customers which Andy will cover in more detail in a few minutes. Because many of our products are self-manufactured in our Oregon facility, a slowdown in our sales creates pressure on our gross margin. We experienced that in the second quarter, as slowing DTC sales led to more than two points of deleverage at fixed costs in our facility versus Q221. This deleveraging would have been significantly more severe had we not already moved to reorganize our operations team earlier in the year. On the distribution side, we were able to offset an increase in our shipping rates through increased internal efficiency in our warehouse and shipping operations. For a company of our size in the current market situation, there is no doubt that protecting cash is the paramount strategic initiative. As I shared on the first quarter call, we are taking aggressive steps to moderate our own cash burn, including cost improvement initiatives and balance sheet management activities. To this end, I am pleased to share that we were able to improve our Q2 free cash flow burn by 38% versus both prior period and prior year to just $2.7 million for the quarter, leaving our cash balance at $24.5 million as we began Q3. As I mentioned earlier, our new leadership team is making significant progress in executing our strategic plan. Recall that at the time of the first quarter call, we had just completed a review of our new three-year strategic plan, which created a strong alignment between our goals, tactics, and strategies for re-accelerating growth and right-sizing our cost structure. While it's still very early, we have a solid start on this plan, and over the near term, we will remain focused on the following key areas. One, re-accelerating growth by targeting and retaining online customers while expanding retail customers to drive our wholesale channel expansion And two, improving our gross margin through strict cost reductions in our product and processes. Three, enhancing core capabilities within our commercial and operation teams. And four, reducing cash burn by optimizing working capital accounts and implementing operational efficiencies. We made significant headway against these strategic imperatives in Q2, including the elimination of free shipping on orders below $40. the implementation of a list price increase that just recently went into effect, the addition of more than 1,600 doors of new distribution in wholesale, the launch of four new items, and the overhaul of our entire wholesale brokerage team across every channel of trade, just to name a few activities. As we go forward, we will continue to take the steps necessary to improve the business and lay the track for further improvement across our P&L and our balance sheet. In summary, despite a challenging environment, we are executing our plan and I am pleased by the early progress that this team is making to structure our business for restored sales growth and improved profitability. But we are still only at the beginning of this journey. In future quarters, I expect to be able to discuss our continued build out of a true omnichannel business with a more balanced revenue mix, emphasizing the daily ritual. I'm excited about the foundational marketing insights and branding and packaging work that is underway, and we expect that this will help us to better target, engage, and convert consumers into layered superfood customers as we go forward in the second half of 2022. And as I mentioned previously, we will continue to attack costs and simplify all aspects of our business to improve our competitiveness and our profitability and to sell our cash burn rates. We remain confident in our direction and growth outlook and continue to believe that we are poised to capture significant market share and achieve our long-term vision to become one of the leading players in the natural food and beverage space. With that, I will hand it over to our Chief Commercial Officer, Andy Jett.

Thanks, Jason. Despite marketplace and consumer volatility, we remain optimistic that our mission to help consumers take the next step in their health and wellness journey by providing functional plant-based foods and beverages is powerful and scalable. We are making progress towards building a sustainable long-term and profitable growth agenda across all channels. Our online business was challenged in Q2, down 16%. We significantly reduced insufficient spending with direct media down 48% for DTC business versus a year ago. in order to reset to a more sustainable and profitable marketing mix across all digital channels. We instead made investments to create new content in support of an alternative media approach and began the process of redesigning our packaging and brand to be more relevant and create a compelling design that speaks to the benefits of our value proposition at the first moment of truth. Online sales were also impacted by consumer spending pressure due to inflation. This was primarily reflected in declines in new customer orders less than $40, while we did maintain plus 25% growth in AOV, or average order value, versus a year ago, and plus 14% versus prior quarter. This was a result of the broader marketplace inflation consumers are experiencing and structural changes impacting digital advertising models industry-wide, as shown in a plus 78% increase in tax or consumer acquisition costs year over year. Despite these factors, we did see momentum driven by changes we are making with regard to our approach on Amazon. On Amazon, we saw a plus 25% increase in new consumers versus the same period a year ago, and we are seeing a much lower CAC compared to our DTC business. From a retail perspective, we have several new activations that should drive momentum in Q3 Q4, and beyond. We have been working diligently to enhance our selling network, including new sales brokers across every class of trade. We sold nearly 5,000 new points of distribution across several channels, including natural, conventional, drug, and club outlets. We are excited to see the engagement we are having with retailers as we talk about the consumer momentum behind functional plant-based food and beverage and the Laird Superfood brand. As most of you are aware, garnering additional retail shelf space takes time due to the cadence of customer product reviews and resets. So being able to show meaningful progress with key retailers underscores the strength of our brand and product lineup. Overall, our retail sales in Q2 had mixed results. We are seeing positive trends in our core categories of creamers and coffee as consumers are purely migrating to in-home consumption and away from coffee houses. Both creamer and coffee category growth in the 12 weeks ending 6-12-2022 outpaced growth in prior periods. Our retail dollar velocities in refrigerated creamers continues to increase, plus 35% and plus 17%, and natural and new low, respectively, for the 12 weeks ending 6-12-2022. This is consistent with recent research showing our dollar sales are over 85% incremental to the category. including bringing 35% of dollars from new consumers to the creamer category, an indicator that consumers are willing to trade up for added functional benefits and a clean ingredient statement. In the natural channel, we still have significant opportunity to match the distribution level of our plant-based peers as we have 44% ACV versus 70% for the top five plant-based and non-dairy share leaders. We have even a greater gap in LULO, However, this success in refrigerated creamers was offset by a drop in sales in our shelf-stable creamer business, where we experienced some distribution losses as a result of retailer in-store assortment changes, out-of-stock issues, and gaps between authorized items and shipments. Consistent with our build-out of our sales team and brokers, we have initiated retail operations coverage to gain back these crucial points of distribution. For our shelf-stable creamers, We also have slowing velocities on our premium value proposition and a largely value-oriented set. As consumers shift to in-home consumption for coffee to save money, we are providing a more functional option to make every cup even better to help fuel their day. We did see solid growth in our coffee businesses in the natural channel, up 45% in a 12-week period ending 6-12-2022. And we were the fastest-growing brand and the top 25 brands for the category in the same period. Despite the headwinds in the quarter, our consumer loyalty metrics reached an all-time high, with our NPS, or Net Promoter Score, reaching 82 in Q2, and our consumer satisfaction was at 4.92 on a five-point scale. Consumers believe in the daily ritual, and our bundles have grown over 97% year over year, as consumers see the benefit from sunrise to sunset on the range of products we offer. When combined with the new innovation on the horizon for the second half of the year, including our recently launched plant-based protein bars and upcoming new creamer offerings, the return of pumpkin spice, and new single-serve instant coffee sachets, we remain excited about our leadership in plant-based functional beverages and foods. Now let me turn the call over to Anya Handel, our CFO, to further discuss second quarter results.

Thanks, Andy. Met sales decreased 6% to $8.7 million in the second quarter of 2022, compared to $9.2 million in the second quarter of 2021, primarily due to lower sales in our direct-to-consumer business. Year-over-year sales decline in GCC business appears to be driven by an overall pullback in consumer spending due to inflationary concerns, combined with online traffic shifting back to stores with the end of COVID. As well as these key factors, our reduced marketing spend as we optimize marketing mix between all digital channels towards more profitable programs, elevated promotional spend, and changes in our free shipping offerings to improve our gross margins. Despite this challenging economic environment, we saw year-over-year growth in our wholesale channel, which grew 4%, driven by distribution fees in grocery and clubs. Amazon business grew 3%, reflecting the focus that we have placed in this channel due to its relative profitability and ability to reach a large installed consumer base. Gross margins declined 560 basis points to 18.2% versus the same period last year. Margin compression was driven primarily by inflation in raw materials, packaging, and inbound freight, driven by increased costs of ocean freight to bring raw materials to our production facilities. Outbound freight was nearly flat year over year, as our teams were able to offset higher freight rates through efficiency improvements in GTC parcel shipments. Other drivers included fixed cost of leverage in our internal manufacturing facilities due to lower production volume and elevated promotional activity, partially offset by lower labor costs due to gain efficiency and organizational right sizing earlier in the second quarter. Moving down to the PML to OPEX, operating expenses totaled $6.5 million, an improvement of $2 million compared to $8.5 million in the year-ago period. The biggest driver was the reduction of $1.5 million in general and administrative expenses to $2.6 million, reflecting the gain on sale of land and a reversal of stock-based compensation, driven by the four features of equity awards by former executive officers. Research and development expenses declined $260,000 to $116,000 due to new product introduction costs incurred last year that were not repeated this year. Sales and marketing expenses also decreased approximately $170,000 to $3.8 million due to lower advertising expenses and marketing fees. Net loss, as reported, was $4.9 million, an improvement of 22.2% versus the same period a year ago. On an adjusted basis, net loss was $6.3 million. A detailed reconciliation of non-GAAP adjusted net loss is included in our earnings release. Turning to our balance sheet and cash flow highlights. We ended the quarter with approximately $24.5 million of cash in investments and no debt. We are taking a number of steps to reduce cash consumption to position the company for sustainable growth. We saw results of these actions in the second quarter, as total cash burn was $2.7 million, or 38% improvement versus a year ago, reflecting benefit from the sale of real estate assets. Cash use and operating activities also improved 33%, to $3.9 million versus $5.8 million in the year-ago period, primarily driven by improvement in working capital, specifically decreasing inventory balances. We expect to continue to reduce our inventory balances by the end of the year, although it will be lumpy quarter by quarter, through improving inventory returns while balancing the level of our investment to support growth and mitigate supply chain disruptions. Next. I will provide some commentary about our 2022 outlook. We are operating in an unusually uncertain economic environment with the highest inflation rates in decades, particularly in food and fuel, which negatively impacts consumer buying power and creates more pressure on margin mix and operating costs than we had anticipated in the beginning of the year. We expect this macroeconomic environment to continue in the second half of the year, and are accordingly updating our guidance for the full year 2022. We estimate net sales will be in the range of $36 million to $38 million, and gross margin for the full year 2022 is forecasted to be approximately 20%. Note that our gross margin estimate of 20% includes outbound distribution expenses of approximately 13 points. We remain confident in the strength of our brand and the effectiveness of the strategies that Jason and Andy talked about to deliver our growth agenda. We are focused on improving growth margins and reducing cash consumption to position the company for sustainable growth. It will require time to ramp up this initiative, leading to more visible progress in late 2022 and building on in early 2023. With that, I'll turn the call back to Jason for any closing remarks. Thank you.

Thanks, Anya. With the attention-grabbing headlines of inflation and recession, there's no doubt that we are now operating in a less certain moment for consumers, and it has clearly become more challenging to gain their attention and consideration for premium health and wellness products. Yet our Q2 results demonstrate that Leonard's Superfood has strong staying power amongst its followers, and in fact, continues to grow across many key metrics with our consumers. Our continued growth in average order value lifetime sales value, and net promoter score demonstrate that despite the headwinds facing today's consumer, they continue to value the Laird Superfood proposition and live to us as a high quality food source for their health and wellness journeys. Our dedicated team remains committed to our brand positioning and core strategies, and we are as excited as ever for the potential for Laird Superfood to become a leading name in healthy functional foods. This concludes our prepared remarks. Operator, We are now ready to open the call to questions.

Yes, thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to submit for a question, that's star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. Our first question comes from Alex Furman with Craig Hallam. Alex, your line is now open.

Great. Thanks everyone for taking my question. I wanted to ask about the shortfall in your guidance. You mentioned a number of different headwinds that I think a lot of other e-commerce companies are seeing as well, and in particular, some of the marketing challenges related to the IOS changes. Curious, is that mostly impacting your ability to get new customers to come into the brand? As inflation has been weighing on consumers, have you seen your long-term core customers start to behave any differently as well, or is it really more about marketing challenges and reaching new customers?

Hey, Alex, this is Jason, and I'm going to give you a couple of thoughts, and then I'm going to hand it over to Andy to give a little bit more detail. It's a really great question, and obviously, to your point, it isn't just a layered issue. It is an industry issue right now, especially amongst the DTC-focused companies like ours. So we started to see this about a year ago. You'll remember we talked about it for a couple of quarters, but we've taken some of that into consideration. you know, through our own action as well. We, as we talked about, as we took price increase, we also pulled back on the free shipping that we were offering. And so for any orders under $40 now, other than new orders, we've pulled back on the free shipping aspect. And as a result of that, you're seeing a change of activity. You're seeing our longest standing consumers largely migrate to larger orders. and very little drop off of any in that space. And I'll let Andy speak to that in a moment. But what you are seeing is some attrition that took place, especially right after that change with new consumers. And we have modified that action. Just really in the last few days, we put free shipping back on for new orders for new consumers that are coming in. So to entice them to make that first order, what we found is that we weren't getting the same conversion that we expected. And So the drop-off has really been amongst consumers that would come into Laird as opposed to our current subscriptions and subscribers where we've seen really positive staying power as I referred to in my earlier discussion. But Andy, why don't you, if you want to put a little bit more of a wrapper around that, that'd be great.

Of course. Thanks, Alex, for the question. Yes, Jason's right. The largest portion of consumer kind of mix that we're seeing is definitely impacting new consumer orders, and in particular, new consumer orders at the lower value rings where we're seeing definitely compression through our, I would say, a less efficient media mix primarily anchored in our social media tactics where, you know, as noted in the prepared remarks, our CAC is still, you know, over 70% higher than it was a year ago. What we are also seeing is some consumer behavior trends in kind of a post-COVID reality that we're seeing migration back to retail, where we are seeing significant velocity increases in our fluid creamer business as well. So I think that the combination of the inefficiency in the marketing tools as well as some behavioral changes and the consumer inflation dynamics that are happening are really putting a pressure on that particular set. Where we see favorability is in some of our larger loyal returning subscription levels, where we're seeing increases in NAOV, our LTV is up and continuing to rise both sequentially and year over year, and orders in the $75 range plus have actually moderately increased in the quarter.

Okay, that's really helpful. Thanks. And then if we could talk about the cash burn for a minute. It was pretty significantly improved here in the second quarter relative to the rate that you'd been burning cash last year. You guys give a lot of great detail on your expenses in the press release, so it looks like maybe there were some non-sustainable offsets to gna this quarter like the gain on the sale and and the reversal of some stock-based comp but you know if you kind of strip out some of those non-sustainable items can you give us kind of a sense of what we should expect to see in terms of cash burn or ebitda or even just you know gna or sales and marketing expenses for the rest of the year um you know assuming results for the rest of the year come within your your updated guidance

Hi, Alex. This is Anya Hemel. Thanks for the question. So yes, you're correct. Cash burn was $2.7 million total and just under $4 million from operating activity. So they both improved relative to prior year and in line with the strategies that we've been focusing on to improve the cash burn and to get the company to sustainable growth. So as you mentioned, there was a one-time benefit in Q2 that we realized. It was part of our plan to improve our balance sheet. We sold some real estate assets, land specifically, and so that generated $1.5 million improvement to our cash flow. But overall, outside of that, we were able to achieve an improved cash flow primarily through working capital management, specifically around inventory balances. Our team is focused on driving the inventory down to sustainable and optimized levels that don't jeopardize supply chain interactions, but ensure that we have, you know, optimal level of inventory versus the cash that's tied up in that asset. So that is an initiative that's going to continue. And I expect to see further reductions by the end of the year. As I mentioned in the earnings release, it will change a little bit quarter by quarter because we still have obligations to our suppliers that we are fulfilling. But we are on track to get to the inventory position that we are targeting by the end of the year, which will free up additional cash. And then to the third thing, is overall operating expenses management. We've been doing a lot of work outside of HEP count, non-HEP count related, GMA expenses, and really focusing on optimizing fees, professional fees, and consultant fees to help us reduce that cash flow. And we're going to continue making progress towards the end of the year in that area.

Okay, that's really helpful. Thanks, Anya. And thanks, Jason.

Thank you. Our next question comes from Bobby Burleson with Tenaccord. Bobby, your line is now open.

Thanks for taking my questions. I'm curious about the distribution losses that you mentioned. I understand you're working to gain those back. Any sense on timing? This is Andy.

I can give you some perspective on that. Go ahead, Jason.

That's all right, Andy. You go ahead.

Yeah, so we've seen a few moderate declines, particularly that are affecting our shelf-stable creamer business in the natural channel area. That distribution loss is only resulting in about a 5% loss in distribution, so pretty moderate, largely due to a couple of things. One is we have seen some kind of store by store optimization that's taken place. One, two, we've got some out of stock issues that are definitely causing troubles like many partners and other brands are seeing where we've got staffing issues at retail. And then the third one is we've got some authorization to shipment challenges. We have recently brought in a new partner to help give us some retail coverage. They're actively already in stores starting this month, and we hope to see that stuff rectified over the balance of the second half of the year as we go forward. Okay, great.

Hey, Bob, the only thing I'd add, and that's super helpful by Andy. I mean, I just want to add for you, just give a little more context. So I mentioned this earlier, but we've changed over our broker coverage across every class of trade. And really, I think we've gotten to the premier broker in each one of those classes. And in this case, as you go through a transition, there's naturally going to be some attrition. You just, as you go from one team to the next, you can lose sight of some of those activities that need to be executed. And so we're working really diligently right now with our new broker to get everything restored, as Andy mentioned, through really those three factors or those three actions that we're undergoing right now. So we should see that we get that growth engine moving again as we go into the back half of the year.

Okay, great. Thanks for that additional color. In terms of cost savings, one of the things you mentioned, Jason, in your opening comments was you're still kind of early in benefiting from some of those actions you've taken. So just kind of curious what inning you're in in terms of order of magnitude, capturing those savings, and also, once again, the timing of how long it's going to take.

Yeah, that's good, Bobby. Good question. Thanks for that. The reality for us is we continue to understand the business better, obviously, as we dig through and get a little bit further down through some of the challenges we've been having. As we've seen volume pull back a bit, it's really helped us to understand where we're getting leverage, where we're not through our facility, and how we streamline and improve those processes. And so we made some of those moves early on, as we had mentioned, where we reorganized to be able to really be able to attack those costs. As we go forward, we have opportunities across our ingredients and how we think about what ingredients we're putting into what packages and how much of each one we're putting into the package. We have opportunities in our procurement and the buying that we're doing to restructure some of those agreements as well. And then, too, we have opportunities in our operations and really thinking about how we how we are most efficiently producing and distributing our goods today. And that's not only in-house, but with our co-packers as well. So we are reorganizing our co-pack network as we go through this, in addition to the work that we're doing internally. In terms of the inning, I'd say maybe we're in the third inning. If you use the baseball analogy, we've made some of those changes, but it's really going to play out over the course of the next few quarters. You know, some of the initiatives such as the list price increase that we took really just went into effect, and so we haven't seen the benefits of that flow through the P&L yet. Similarly, we have a number of cost reductions that are in a similar state. We'll continue to ramp up as we go through the second half of the year.

Okay, great. And if I can just sneak one more in, just looking through your PowerPoint, where you have almost a perfect offset in terms of hydration and beverage-enhancing supplements decline and the increase from Harvard snacks and other food items. And I'm wondering in the hydration category whether or not there's anything that you can call out there in terms of what's driving that decline and what your expectations are for that product segment going forward.

Sure, this is Andy again. I'll give some context to that. We have seen definitely an incremental level of competitiveness in that space. There's been a good amount of activity that took place in 2021 that's led to some competitors really getting active, particularly in paid media. That's risen the overall cost there. As we talked earlier about some of the cost rising and the platform levels, we are seeing, you know, some incremental scale of that at a category level as well. It's kind of creating some, I'll say, aggregate steepness in that curve. And as we've been working against trying to offset those advantages and fees, we've really focused in on some of our core categories, coffees and creamers. And then most recently, we've made some investments on the picky brand, which will be involved in that snack portfolio piece. So there's kind of a couple of components. One is some headwinds competitively, and that we're working to make sure that we're supporting our core categories as best we can. And then the second one is kind of a reinvigoration behind our picky brands. and spending back on that piece of the portfolio as well.

Thank you, Eddie. Thank you for taking my questions.

Thank you. Our next question comes from George Kelly with Roth. George, your line is now open.

Hey, everybody. Thanks for taking my questions. So just a few for you. The first on pricing, curious how much pricing did you take and was it the first time that you took significant pricing this year?

Yeah, George. Hey, this is Jason. Nice to hear from you again. We took pricing to the tune of about 10%, not on every product, but on a large portion of the portfolio. And we did it somewhat strategically in that regard. There are a couple of categories. such as liquid creamers, where we felt that there wasn't a market opportunity. So we put that through in our DTC channel first and have seen early results that seem to confirm that the elasticity impact isn't going to be as great as what you could fear. And that's just going to ripple through, begin to ripple through the retail channel here as it works its way through the various retailers that we support. all of which we passed it along to.

Okay, excellent. And then next question on, there were several comments in the prepared remarks just about momentum in the fluid, the refrigerated creamer business. So curious, I guess, two-part question. What was the contribution from fluid in the quarter? And then secondly... I believe that had been stable for several quarters. So if you're seeing momentum, just curious, what's really driving that?

Yeah, I can answer the momentum in the marketplace and then Anya and or Jason chime in on some of the contribution components. Yeah, as I mentioned, the prepared marks, we are seeing, I would say, sequential growth overall on coffee and creamers. The hypothesis here is that if consumers are migrating from some coffeehouse purchases, they are monitoring discretionary income, they're coming back. We've seen that pretty characteristically happening across both coffee, creamers, refrigerated fluid, as well as shelf-stable. And we're seeing some benefits of that. Obviously, the refrigerated portion of the category It's about 10 times the size of the shelf-stable portion from a market size perspective. And we're seeing some benefits there where we do have some benefits in distribution that are changing year over year. And then, as I mentioned in the prepared marks, our velocity levels have grown significantly, particularly in the latest 12 weeks year over year. We're up 35% in the natural channel on a dollars per TDP level and 17% and Mulo, respectively. So we're seeing that overall, that even though consumers are making some trade-offs in their pocketbooks for where and how they consume their coffee, that they are still looking for value-add where they can find it, and we're seeing those benefits largely in our refrigerated cream of business today.

And, George, you know, it's no secret. We talked this before that that we've been struggling to really get our economic model set correctly for that liquid creamer product. The demand for the product is greater than what we're willing to supply right now until we can get that fixed. We talked about the challenge we have in front of us and we need to get that fixed this year. We're still working our way through that and we need to get to a better cost solution for that business. But in terms of the demand for Laird to enter that as a premium product,

functional coffee creamer we have tremendous opportunity in front of us okay okay that's helpful and then last question for me um the the guidance uh the adjusted revenue guidance the takedown i think it was roughly five million bucks um is that primarily from the online it sounds like just in response to some of the earlier questions it sounded like uh you were saying it's primarily in the online business but just want to confirm that I heard that right or is there sort of is maybe some of the wholesale ramp you were optimistic about just taking a little longer to play out and it's more of a 2023 story at this point hey George it's Anya well it's primarily online you're correct as we've seen you know softening demand in online businesses and elevated discounts and

to motivate consumers to do repeat orders and attract new consumers. So that's the bigger part of the calling down the guidance. But wholesale business is also taking longer to get the new product distribution than we originally anticipated. And we're going to see those benefits towards the end of the year and, as you mentioned, in early 2023.

Okay, great. Thank you.

Thank you. I would now like to pass the conference back over to Jason Veith, CEO.

So thanks, everybody, for joining us again today. You know, I think in terms of this quarter, while we didn't hit everything as well as we expected to and as we hope to, I think there's a lot of great momentum. on the business right now. And it's very clear by looking at where the consumers are and how they're valuing the business that we can continue to build on that as we go forward. There's a bit of lumpiness in our business given the size of the business, both at retail, in grocery, in Costco, and then also on DTC as we run various promotions. And we're as excited and committed as ever as we go forward to being able to deliver against these numbers and to grow the business from here. I hope you guys are taking away from this all the excitement that we still have and the opportunity that we see. And with the primary focus, as I mentioned, on really locking down and conserving cash, I feel like we've really weathered this first quarter, this latest quarter rather, in a much better way than I know a number of others have as I've looked and seen what's going on in both public and private competitors in this space, especially if companies are sized. So We're excited for where we go from here and look forward to talking with all of you in the future. Thanks a lot.

Thank you. This concludes today's second quarter 2022 earnings call and webcast for Laird Superfood Incorporated. Thank you for your participation. You may now disconnect your lines.