The Vita Coco Company, Inc.

Thank you, and welcome to the Vitacoco Company fourth quarter and full year 2021 earnings results conference call. Today's call is being recorded. With us today are Mr. Mike Kerbin, co-chief executive officer and chairman, Martin Roper, co-chief executive officer, and Kevin Benmusa, chief financial officer of the Vitacoco Company. By now, everyone should have access to the company's fourth quarter earnings press release issued earlier today. This information is available on the investor relations section of the Vitacoco Company's website at investors.thevitacococompany.com. Also on the website is an accompanying presentation of our commercial and financial performance results. 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 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several 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 more detailed discussion of the risk factors 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 earnings press release and supplementary earnings presentation providing reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures are available on our website. And now, I will turn the call over to Mike, our Chairman and Co-Chief Executive Officer.

Thank you, John. Hello, everyone. We're super excited to share our fourth quarter and full year 2021 results and provide our outlook for fiscal year 2022. Before we start, I would just like to thank everyone in the organization for their efforts in 2021 to successfully take the Vitacookle company public, secure B Corp certification, and most impressively deliver record net sales results in the face of the most challenging supply chain environment we've ever experienced as a company. On today's call, I'll provide an overview of our business and reiterate the key reasons why I believe that the Vitacoco Company is uniquely positioned for long-term growth. I'll then turn the call over to our co-CEO, Martin Roper, who will briefly review our business performance, supply chain position, and key 2022 initiatives. And then our CFO, Kevin Ben-Moussa, will discuss our fourth quarter and full-year financial results in more detail and provide you with our fiscal year 2022 guidance. Our mission is to deliver our consumers great-tasting, functional beverages, while at the same time helping to uplift the communities in which we produce and sell our products. We believe that today's and future generations demand better products from better companies, and we endeavor to deliver that every day. This past year, we were designated as a certified B Corporation. Embedding purpose into our corporate culture, we hired a head of sustainability and social impacts, and plan to release our inaugural ESG report later this month. We've made great progress over the last two years, prioritizing growth and investing in our commercial capabilities to make the Vitagoco Company a leading healthy beverage company. Our primary focus is to compete in the growing premium natural beverage segment as consumers look for better for you products. We aim to do this by continuing to expand consumption of coconut water in our core markets while at the same time introducing and potentially acquiring new brands that can help us to further accelerate our growth in this space. Over the past 12 months, led by the Vitacoco brand, the growth of the coconut water category in North America accelerated significantly faster than beverages generally, as we brought in new consumers and increased consumption by existing drinkers. The strength of the coconut water category and the strength of the Vitacoco brand allowed us to achieve record net sales in fiscal year 2021, growing by 22% to $380 million. Vitacoco branded coconut water alone grew net sales by 39% in fiscal year 2021. Our investments in commercial capabilities have included expanding our national accounting, increasing category management capabilities, improving our sales and operational planning processes, and enhancing our product and brand innovation team to deliver on consumer needs and develop a pipeline of innovation. These investments, have helped grow our business and positioned us well to further scale through innovations and potential M&A. Martin will provide updates on our internal innovation initiatives shortly. But as it relates to M&A, we believe that there is a great opportunity to consolidate mid-sized, healthy, independent beverage brands in an effort to gain further scale and over time be a true competitor to the beverage industry giants. Looking forward, I believe we can continue to grow our business with great execution and the momentum of consumer interest that we're seeing across our current portfolio of brands in our core markets. I will reiterate, we are focused on growth and believe that once the global transportation cost pressures recede, we will emerge in a significantly stronger competitive and financial position with great consumer and retail relationships and a stronger margin structure to further accelerate our prospects and profits. We're proud to be a financially sound company that has many growth opportunities ahead. We have an industry-renowned sales team, an easily scalable asset-light global supply chain, access to capacity, and a pipeline of innovation to support our long-term growth. Additionally, we have an organization and an infrastructure that we believe can greatly help other independent healthy beverage brands scale at an accelerated pace, and this is why we are selectively exploring M&A opportunities. While we are pleased with everything we've accomplished thus far, we are determined not to be complacent, and we are working hard to accelerate our growth trajectory even further. We believe we're positioned to build one of the most exciting and dynamic high-growth consumer goods companies in the market. Now, it's my pleasure to transfer to our co-CEO, Martin Roper.

Thank you, Mike. I will briefly summarize what we are seeing in retail scan data and our household penetration tracking. and then link that back to our fourth quarter results. Please also refer to our supplementary earnings presentation listed on our website for detailed retail scan data. I will also discuss how our supply chain is performing with the numerous challenges facing global and domestic transportation and how we are reacting to those challenges. And then I will provide some color for the basis of our 2022 commercial outlook with a brief update on innovation. Most of my comments will focus on the U.S. market, which represents the majority of our business. We estimate, based on our shipments, tracked channel data, and import data, that the coconut water category value grew mid-teen percent in 2021. In the tracked channels, IRI Moolah convenience suggests that the coconut water category grew approximately 15 percent in dollars. and 7% in volume for the 52 weeks ending December 26, 2021. Importantly, within the track channel, branded growth was faster than private label, with private label dollar growth approximately 8%. VitaCocoa Coconut Water grew approximately 35% in dollars for the 52-week period, 32% in volume, and finished the full year at 49% share of category versus 42% for the prior year. In our household tracking data, which we source from numerator, we saw total coconut water category penetration growth from 21.7% of households in 2020 to 22.4% in 2021. Our Vitacoco branded penetration outpaced the category and grew from 8.9% of households in 2020 to 10.7% in 2021. Within our households, we saw a 22% increase in dollars purchased per household versus prior year. We also saw faster increases in vitacoco-branded penetration in urban millennial and Gen Z households, with penetration growing from 16.1% in 2020 to 20.1% in 2021, while coconut water penetration grew from 38.1% to 39%. The strength of these trends with urban millennial and Gen Z households is, we believe, an encouraging indicator for the future growth of our brand and the coconut water category. As we shared in RS1, we believe our U.S. household penetration over-indexes with Asian American, Hispanic, and black households, so we should also benefit from the expected favorable demographic trends of these households. We are also pleased to say that the strong retail trends have continued into 2022 in both the Americas and in Europe. For the eight weeks through February 20th, we see coconut water category value growth of 19% for IRI MULOC in the U.S., with VitaCoco coconut water value growth of 37% and VitaCoco category market share of 51% in value. I also want to share that in the United Kingdom, in IRI track channels for chilled coconut water, For the 52 weeks ended January 1st, 2022, we grew Vitacoco retail sales 26.3%, while the category grew 14.4%, and we increased our share from 69% to 76.5%. In France, in IRI track channels in coconut water, for the 52 weeks ending 16th January, 2022, Vitacoco maintained its number one market share position at 39%. In our other Western European markets where we have access to consolidated market data, we grew and maintained our number one branded share position. Moving to the supply chain, we believe that we have one of the most efficient and unique global supply chains for coconut water, and this provides a competitive advantage and would be very hard to replicate and is a meaningful barrier to entry. Our geographically diversified model creates leverage to effectively manage total delivery costs and to shift volume between suppliers and countries in reaction to demand or supply chain challenges. This was demonstrated by a flexible reaction to the challenges of the last two years and allowed us to keep up with the accelerating growth we experienced in 2021, even with the supply chain disruptions in transportation. Our supply chain has operated reasonably smoothly, with the primary exception being increased transit times due to port delays, more limited availability of ocean shipping containers on most routes, And starting in the second quarter of 2021, greatly increased costs of ocean freight with additional inflation and other logistics costs, such as domestic transportation, demurrage, and port fees appearing later in the year. In the second half of 2021, we faced further challenges with availability and pricing of containers, especially into the US East Coast and Europe. Even as we built inventory, our inventory flow to major markets was not ideal. and our inventory is not yet where we would like it to be on a specific SKU coast perspective. This created inefficiencies in domestic logistics, such as transshipping between U.S. coasts and inefficient utilization of each outbound load, which coupled with the increased demurrage in port surcharges and the inflation in ocean shipping rates, increased our transportation costs materially in the fourth quarter. The cost pressures have continued into 2022, particularly our ability to source containers to the east coast of the U.S. and to Europe at acceptable costs, and our service levels continue to be impacted. Our inventory significantly grew year over year due to these cost increases, the increased volume, and to the increase in transit times. At year end, our inventory in transit on ships in port or awaiting shipping containers in source country was approximately half of our total inventory. In 2022, we intend to seek more of a balance between pursuing growth, service levels, and acceptable logistics costs, while preserving our market share and profitability. To help offset the gross margin pressures from transportation costs, we're looking to implement additional pricing actions, as well as potentially right-sizing our investment levels behind STNA across all projects. We're also looking at other operational efficiencies, such as portfolio SKU rationalization to help reduce complexity, and associated costs, and changes to our minimum order quantities and service levels to increase transportation efficiencies. Importantly, the majority of inflationary pressures we are seeing to date are logistical costs that we think are outliers relative to historical norms. And our purchase finished goods costs at source have shown to date only normal annual increases. Our outlook is based on our best estimate of all these factors, but there is significant uncertainty on how the transportation markets will evolve this year, and it is the most challenging logistical market the company has seen. We have been able to secure acceptable ocean freight rates for a portion of our volume, but are still in the middle of contract season speaking to all major shipping lines. The additional pricing actions we plan include frontline price increases and reduction of promotional depth, length, and frequency above the levels we had initially contemplated during our 2022 planning season. Based on the pricing actions taken in 2021, we believe price elasticity may currently be lower than what we've seen historically. As we take more price, we intend to adjust our approach as we learn how consumers, competitors, and retailers react. We intend to implement the next round of price actions by the end of the first half of 2022. Based on our desire for long-term growth at acceptable profitability, we are focusing on top-line expansion and brand share gain at acceptable margins with the goal of returning our margins closer to historical levels once the global transportation and logistics situation improves. Before passing to Kevin, I wanted to cover some key initiatives to drive growth in 2022 and to create long-term shareholder value and give a short summary on what we are seeing on our emerging brand initiatives. Mike talked earlier that we are pleased with the growth of the coconut water category, our share gains within the category, and with the household penetration metrics we are seeing. To maintain our momentum with Vita Coco in America in 2022, we are adding multi-packs, adding a canned offering targeted at convenience channels, expanding our farmers' organic offering, and requesting more shelf space from retailers to support the healthy category trends and our brand velocity. While some of these discussions with retailers are still ongoing, based on our tracker, we are confident in 25,000 net new points of distribution in ROI MULOC track channels. although final results could vary based on execution, inventory availability, and retailers' reactions to our pricing plans. In context, if we secure these 25,000 net new points of distribution, it will represent more than 10% growth in our total American distribution points and track channels. Late in 2021, we started selling private label product to one of the key coconut water private label retailers in the Americas. This is the first time we have supplied this retailer, and we hope to build a strong partnership with them to build their coconut water category, where we currently do not have branded distribution. We intend to compete in private label requests for proposals where it makes sense as a way of building retailer relationships and potentially introducing our branded products. Our medium-term growth outlook is largely based on our expectations for growth of Vitacoco coconut water in our key markets. But as we have stated before, getting a breakout win of our emerging brands initiatives would significantly grow our business. So these are important areas for us to test and learn and find solutions to create long-term value. I will now briefly comment on these initiatives. As these initiatives collectively account for less than 3% of our 2021 America sales and are likely to contribute meaningful sales until 2023 at the earliest, I will be brief, and we will update you when we see promising developments. Vitacoco Coconut Milk is a shelf-stable dairy alternative that performed well in a couple of regions of club this year, and we received distribution at Walmart in late 2021. Initial scans are promising, with Vitacoco Coconut Milk performing better than the key coconut milk competitor, and we are hopeful that if this continues, we might convert to full distribution, and this win could lead to opportunities with other retailers. Late 2021, we launched RUNA in 16-ounce cans with a positive reaction in independent convenience stores. We have focused on San Diego and Denver to prove the concept and believe that RUNA could benefit from recent competitive beverage instructions who are also using the Guayusa leaf. It is too early to tell if the repositioning of the RUNA liquid and package will unlock this interesting opportunity in natural energy drinks, but the local teams are excited, which is the first step. Also late in 2021, we launched PowerLift in two test markets to follow on from our online test started earlier in the year. PowerLift is our protein-infused fitness drink and is receiving nice commentary online from those who've sampled it. Like Runo, we see 2022 as a test year to confirm that the proposition works, to understand how to improve pool and messaging, and if successful, to roll out more aggressively in 2023. Our initial test of Vitacoca hydration mix, a coconut water powder beverage mix, was through online platforms in mid-2021. After the first test, we addressed consumers' requests for improved packaging and product and relaunched late December to positive responses. We have interest from a few retailers to support retail distribution and hope to learn more from these retail tests this year to help us guide our product activation and development and the level of investment and prioritization for 2023. All of these initiatives are captured within our other product category and are not currently material to our financial performance. I'm excited because we're learning about new beverage segments that we believe are attractive and where we can compete with better for you offerings. And if successful, will be meaningfully beneficial to our business in the coming years. Now I will turn the call over to Kevin, who will discuss our financial results and full year outlook in more detail. Thanks, Martin.