The Vita Coco Company, Inc.

Thank you for standing by and welcome to the Vita Coca Company fourth quarter and fiscal year 2023 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentations, there'll be a question and answer session. To ask a question at that time, please press star 11 on your telephone. Please be advised that today's call is being recorded. I will now turn the conference to your host, John Mills, managing partner at ICR. Please go ahead.

Thank you, and welcome to the Vitacoco Company fourth quarter and full year 2023 earnings results conference call. Today's call is being recorded. With us are Mr. Mike Curbin, Executive Chairman, Martin Roper, Chief Executive Officer, and Corey Baker, Chief Financial Officer. By now, everyone should have access to the company's fourth quarter earnings 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, there is an accompanying presentation of our commercial and financial performance results. Certain comments made on this call, including forward-looking statements, which are subject to 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. Also, during the call, we will use some non-GAAP financial measures as we describe the business performance. The SEC filings, as well as the earnings press release and supplementary earnings presentation, provide reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures and are available on the website as well. And with that, it is my pleasure to turn the call over to Mr. Mike Kerbin, our co-founder and executive chairman. Thanks, John.

Good morning, everyone. Thank you for joining us today to discuss our fourth quarter and full year 2023 financial results and our commercial plans and performance expectations for 2024. I want to start by thanking all of our colleagues across the globe for the record year they delivered in 2023 and their continued commitment to the Vitacoco Company and their dedication to our mission of creating ethical, sustainable, better-for-you beverages that uplift our communities and do right by our planet. 2024 marks our 20th year in business, and although I'm super proud of all we've accomplished in these 20 years, I have never felt more excited and energized for what lies ahead. We have solidified our category leadership in coconut water over the last 20 years, which enters 2024 as the fastest growing category in beverages in the US and the UK markets. And although coconut water is still a nascent category, representing just 3% of the sales in the US water aisle, Over the last 13 weeks, it has driven 20% of the dollar growth. I believe our recent success is confirmation that our current strategies are working. Our focus on growing the coconut water category and our focus on consumer conversion and retention, supported by the strength of our coconut water supply chain, has grown our overall sales at a 15% CAGR for the last four years, with our Vitacoco coconut water net sales growing at a 20% CAGR. In 2023, our flagship VitaCoco coconut water remained the major driver of consolidated net sales, producing 14% full-year growth against the prior year. Importantly, this growth was driven by full-year volume growth of 11%, demonstrating that consumer demand for our brand is very healthy. In the United States, according to Sarkana, we continue to gain share, finishing the year with 51% value share on a 52-week basis. Total coconut water category retail sales grew 16% in 2023, with Vitacoco growing 19% for the full year in value and 14% in volume. Our 15% net sales growth in 2023 exceeded our expectations and partially benefited from an extra Vitacoco promotion with a club retailer in the spring, some temporary distribution gains for private label product, and some bulk commodity sales that were opportunistic. Even without these effects, our growth was still very strong. Our priorities for 2024 remain very similar to what we prioritized last year, and we will double down on the initiatives that have been driving our growth. Our coconut water business remains very strong and we expect it to grow volume in line with category growth of mid to high single digits. We estimate the impact of the previously announced decision on our private label oil business and the non-repeating gains in 2023 that I just mentioned to create a current year drag on our business, which mostly offsets the strong core business health. While we expect to grow net sales at a slower rate in 2024, I remain excited about the EBITDA growth potential and believe that we should return to healthier net sales growth rates in 2025 once these drags to our business performance are behind us. We're focused on what we can impact to drive category and brand growth, and the primary focus is on expanding occasions for coconut water and the appeal of our VitaCoco brand across all demographics, and markets as we continue to expect the category to develop into a household staple across both North America and Western Europe. Our efforts will focus on consumer education around the many usage occasions for coconut water, whether it be at the breakfast table, after a workout, in a cocktail, or after a few too many cocktails. Coconut water is one of the very few beverages that have such broad and diverse usage occasions. Expanding these occasions should be the main driver of expanding household and increased usage. We will continue to drive our multipack strategy, which grew scans 45% in the US in 2023, to gain share of shelf space and increase basket size for our US retailers. Multipacks in coconut water remain significantly underdeveloped versus other categories. And as the largest brand in the category, we firmly believe we are uniquely positioned to seize this opportunity. Currently, our top selling multi-packs, our 330ml 12 and 18 packs, have only reached 55% ACV, which leaves us considerable runway for growth. We also believe that we have a big opportunity to gain share of the coconut water category by improving our share of the canned segment. In 2023, In the U.S., canned coconut water represented approximately 31% of the coconut water category volume in retail tract channels, so gaining share in this segment will enable us to further gain share in the broader category. In 2023, we expanded distribution of VitaCoco coconut juice in cans with a focus on convenience stores, achieving U.S. ACV in this channel of 24%. In 2024, we intend to continue to gain distribution and convenience while expanding this product format to select mass and food retailers. We will also continue to focus on gaining additional distribution for Vitacoco Farmers Organic, which is priced at a premium to our regular SKUs and offers organic coconut water in an attractive, shelf-stable package. Farmers Organic allows us to trade up consumers in price while keeping them in our brand family. In 2023, we achieved U.S. ACV distribution in MULO of 50% for farmers organic, leaving us significant room to continue driving distribution. Additionally, we see an opportunity to continue gaining share in the private label coconut water segment at new and existing accounts. The 21% revenue growth in private label that we delivered in 2023 highlights the strength of our supply chain to compete in this segment. Although we expect near-term net sales headwinds from the decision affecting our private label oil business, we are confident in the long-term strategic value of private label coconut water to our business. Outside of the coconut water category, we're very excited about expanding the availability of PowerLift, our protein-infused isotonic, to include the New York area. where our distributor relationships and street activation strength should allow us to make significant progress in validating this opportunity. In 2023, we began to see real progress in our strategy to grow our international business. Our net sales increased 17% on the year, which was led by strong growth in Europe. In our largest market, the UK, we reached over 80% share of the coconut water category according to Sercana, and grew retail scans 23% on the year. The team across Europe has done an amazing job driving growth of the category in the UK and growing our business into Western Europe. I recently had the opportunity to spend time with the team in the market, and I was blown away by the strength of the brand and the consumer reaction that I saw, which highlighted the opportunity that we have. I asked myself, why can't the coconut water category and the Vitacoco brand be as big across Western Europe as it is in North America in five years? We believe that the category is underdeveloped in Europe, but has real momentum, giving us an opportunity to accelerate our growth. I believe with the right investments, we can deliver meaningful growth to the organization through our international businesses. Related to our environmental and social initiatives, we recently updated our investor web pages with greater detail on all of our ESG initiatives, and we're proud of the progress so far. We've continued to see great progress in our farming communities, where we support building schools and classrooms, training more coconut growers on sustainable practices, and investing in the distribution and planting of coconut trees. We're in the process of registering the Vitacoco Community Project as a charitable organization. which will allow us to involve more partners and accelerate our impact more than ever before. It is hard to believe that in this, our 20th year, that coconut water is the fastest growing category in beverage, growing volume 12% in a beverage category that is declining and growing approximately twice as fast as the energy drink category. I'm more excited than ever and believe that we are well positioned to take advantage of coconut water category tailwinds to continue our strong branded growth and to deliver on our long-term targets. We have stepped up investments in our brands and in the long-term health of our business, and we believe that we are uniquely positioned as one of the few fast-growing, profitable beverage companies of our size, with the talent and commercial capabilities to maintain growth, to execute on new opportunities, and to act as an acquirer of complimentary beverage brands that could benefit significantly from our relationships, capabilities, and financial resources. I believe that we are in a stronger position than we've ever been to accelerate our growth. And now, I will turn the call over to our Chief Executive Officer, Martin Roper.