GURU Organic Energy Corp.

Welcome to the Guru Organic Energy First Quarter 2023 Results Conference Call and Webcast, being recorded today, March 16, 2023, at 10 a.m. Eastern Time. At this time, all participants are in a listen-only mode. Following management's presentation, there will be a question and answer session with financial analysts. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star followed by zero for operator assistance at any time. The Roos Press release, MD&A, and financial statements are available in the investor section of its website and on CDAR. During the call, the company may refer to certain non-GAAP measures. Reconciliations are available in its MD&A. Also note that all financial figures are expressed in Canadian dollars unless otherwise indicated. I would also like to remind you that today's presentation may contain forward-looking statements about GURU's current and future plans, expectations and intentions, results, level of activity, performance, goals or achievements, or other future events or developments. As such, please take a moment to read the disclaimer on forward-looking statements on slide two of the presentation. I would now like to turn the call over to Carl Goya, GURU's Chief Executive Officer.

Carl Goya Thank you, Operator. Bonjour à tous. Good morning, everyone, and welcome to our earnings call. Joining me this morning is our CFO, Indy Seraf. For those who are following the webcast, you will be able to turn the pages of the presentation on your own. Let's now turn to slide four. Q1 2023 marked the last quarter of our Canadian distribution model transition period and was mainly impacted by two non-recurring factors, the remaining balance of the pipeline sale recorded in Q1 of 2022, and the inventory reduction initiated at PepsiCo Hubs in Q1 of 2023. In the current context, we continue to manage our business efficiently and in a prudent manner, protecting our gross margin and optimizing our marketing investments, which resulted in a lower net loss compared to Q1 of 2022. During the quarter, we put into motion our Winter of Good Energy campaign, especially tailored to winter sports, where our presence was felt at ski centres and other winter sports centres across Canada to promote our good energy. Over the last year, with the help of PepsiCo, we continued to make our energy drinks more available to retailers and consumers in Canada in preparation for our 2023 product launch and national marketing campaigns. As a result, Our Better For You energy drinks are now distributed in more than 95% of convenience stores and 77% of grocery stores and drugstores across Canada. The national marketing campaign in support of the launch of our new 2023 innovation called Guru Theanine Food Punch will officially start at the end of the month. We are excited by this launch since this was the first time in the last three years that we didn't launch a new product in the fall in Quebec. The C&A Fruit Punch launch comes on the heels of our last innovation, Guru Guayusa Tropical Punch, which has performed very well, becoming Guru's number two SKU in Canada and the category's number one flavored energy drink SKU in Quebec. Our upcoming campaign is based on the learnings of our 2022 activities and will target key urban areas where our brand positioning resonates best with consumers and where our marketing spend gained the most traction last year. The campaign will showcase the functional benefits of our new ingredient, thiamine, which is proven to improve focus and mental performance. With the current inflation, we are starting to see an impact on consumer behavior, with the consumers continuing to drink their energy drinks while buying in bulk or on promotion as a tactic to fight back inflation. For example, in Quebec grocery stores during the month of December, Red Bull gained market share by reducing their four-pack price by more than $0.50 versus last year, while our price increase resulted in a four-pack price point that was $1 higher than the previous year. We have not historically been aggressive on promotional pricing. However, we will ensure that our historical market share growth trend continues, and we will adjust our promotional pricing tactics, if required, over the coming weeks. Turning to slide five. In the U.S., consumer scan data grew 20% in California natural food stores in the last 52 weeks compared to previous year, which reinforces our number one energy drink position in the natural channel. Guayusa Tropical Punch also continues to deliver strong results, reaching the number two best-selling SKU in California natural stores only four months after its launch. Lower Q1 revenues were mainly the result of delistings at less profitable locations and the turning of orders. This short-term noise aside, we're continuing to make inroads in California. Following our successful roadshow in 2022, we will start a new 12-week rotational program in over 40 POSCO locations in Los Angeles in June. This win would allow us to showcase Guru Gwayusa to our larger market of better-for-you consumers. Turning now to online sales. These also continue to show strong top-line performance, with improved profitability in Q1 driven by optimized investments. Over the past several months, we have achieved better return on investment and will continue to grow this segment's profitability. As mentioned before, this channel is complementary to our retail presence and distribution, which remains our core focus for growth. I will now turn the call to NG, who will provide you with more details on our financial results for the first quarter. NG, over to you.

Thank you, Carl, and good morning, everyone. Turning to slide 7. For the last 12 months, consumer stamp data in Canada showed a 24% year-over-year sales increase over the same period last year. reflecting continued demand at the consumer level. Because we are still overlapping our transition year, this growth in consumer sales has not yet translated into revenue growth. Net revenue for the first quarter was $5 million compared to $7 million for the same period in 2022, mainly due to the remaining balance of the initial PepsiCo pipeline fill in Q1 2022 and the reduction in inventory on hand by PepsiCo in Q1 2023. which together had a $1.5 million impact on net revenue. U.S. sales decreased to $0.8 million from $1.2 million in Q1 2022, mainly due to the delisting and the timing of orders. In Q1 2023, gross profit totaled $2.7 million compared to $3.8 million for Q1 2022. Gross margin remained strong, at 53.7% in Q1 2023 versus 54.5% for the same quarter last year. SG&E was $5.7 million for Q1 2023 compared to $7.1 million for Q1 2022. Selling and marketing expenses accounting for $2.9 million of the $5.7 million in SG&E in Q1 2023. That went towards targeted sales and marketing activities including the Winter of Good Energy campaign. In Q1, adjusted EBITDA amounted to a loss of $2.6 million, a $0.4 million improvement from a loss of $3 million for the same period last year, mainly due to the lower selling and marketing expenses. Net loss for the first quarter was $2.6 million, or $0.08 for basic and diluted shares, compared to a net loss of $3 million for the first quarter last year, or $0.10. per basic and diluted share. The decrease in net loss reflects the decrease in costs associated with brand sales and trade marketing activities. As of January 31st, 2023, we had cash and cash equivalents and short-term investments of $42.5 million and unused credit facilities totaling about $10 million. Our prudent balance sheet management puts us in a strong financial position to continue self-funding our growth with the ability to deploy the right investments aimed at our eventual return to generating sustained profitability. Carl, back to you for concluding remarks.

Thank you, Ingi. Turning to slide eight. The next quarter will mark the beginning of a new chapter for Guru with the end of the transition period with PepsiCo and the launch of Guru's T&E Fruit Punch, Canada's first mental performance energy drink, and the hiring of our new Chief Revenue Officer, Raja Graar. Raja brings with her an impressive track record in brand and digital marketing, most recently with C4 Energy, where she doubled the company's digital and total revenue over a two-year period. Her expertise and extensive knowledge of the U.S. energy market makes her a strong asset in our drive to increase brand awareness, market share, and revenue. She will no doubt play a key role in our growth strategy, to drive our expansion in Canada and in the US, and we couldn't be more excited to have you on board. We are now in a much stronger position than we were last year when we undertook the same annual planning and marketing initiatives. Our energy drinks are now available in almost all convenience and gas stores and the vast majority of grocery drug mass retailers in Canada. The significant changes in our business models and the related transition process are now behind us. and we have over a full year of working in partnership with PepsiCo under our belt. We have a strong and motivated team eager to share good energy, and we have a strong balance sheet to invest in our growth for the years ahead. In short, the remainder of 2023 will serve as a launchpad for our long-term growth, and we will remain strategic in the investments we make to increase Guru's brand awareness and capture market shares. We are confident that we have all the right elements to succeed and meet the objective of cleaning up the energy drink industry and for Guru to become the undisputed leader of organic, better-for-you energy drinks in North America. This concludes our formal remarks. I will now turn the call over to the operator for the Q&A.

We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw a question, please press star, then two. At this time, we will take our first question. Our first question comes from John Zamparo with CIBC.

Please go ahead. Thank you. Good morning.

Good morning, John.

Hi, John.

Hi. I wonder if you can give us a sense of the current inventory position at PepsiCo versus say last year or a year ago. I'm not sure how you measure it, whether it's in typical days or week sales, but any color would be helpful there and would like to get a sense of what the replenishment pattern will be moving forward and if you think it'll be smoother than over the past year or so.

Of course.

Yes, over the course of the last year, we obviously established more reporting, better ways of working with PepsiCo, so we now have visibility of inventory at PepsiCo hubs, which stands, if we want to speak in weeks, around six weeks. And our estimates, we didn't have full visibility last year, but we estimate that it was around nine to ten weeks last year. So there was a reduction that happened in December, like we mentioned in our remarks. So they did reduce their inventory. But based on the ways of working and the discussions we have with them, this is now the level of inventory which is normal for them. So we don't expect big changes on that side. It could always fluctuate, obviously, because we don't control that. But we don't expect any big fluctuations. Now in the second part of your question, which is relating to shipments versus inventory, obviously we expect shipments to exceed scan data in some periods. For example, we have an upcoming launch that's coming and there's a first focus in the month of April. So we expect PepsiCo to ship more product than there would be scanned. And we want actually retailers to increase their inventory prior to the summer. So we've been looking forward to these months, right? This is the spring, this summer's coming up. So yes, we expect that we will be shipping more over the coming weeks than in the past weeks, for example.

Okay. That's very helpful. Thank you. One housekeeping question. You shared the 52-week scan data growth in Canada of 24%. I wonder if you have a figure just for the latest quarter.

The latest quarter was lower. I don't remember top of mind. It was lower because you saw a decrease. I think we were around in the 30 range for the last year, and now the latest numbers decrease that to around 25, 24. The main reason for this is we spoke about this in Alaska. We now have better visibility, but we had two months where we were more flattish around growth around 2% or 3% in December and January, 5% in January. I don't have the exact number, but almost flat, which was the first time in several years. In fact, I think since COVID, since the beginning of COVID, that we were flat. And obviously, we took a deep dive to better understand this, and this is why we mentioned this on our last call, and we're mentioning it again in our remarks today. There was more pricing activity from our competitors in December and in January than And it seems like based on what we're looking, the bulk of the movement was done in multi-packs. Consumers are more sensitive to price based on what we're seeing. And they tend to buy in bulk or in four-packs and multi-packs. For example, buying in four-packs today is pretty much the only way you can get your energy drinks at what I would call the old price or the pre-inflation price. So, For example, the traditional price for a 250 ml energy drink was two for four, so $2 per can. Now, you can't get two for four for 250 ml anymore in convenience stores unless you buy a four-pack at $8. So if you're buying a four-pack at $8, then you're still getting your energy drinks at the old price. So consumers are getting smarter. They're buying a little bit more so they can avoid inflation. And Red Bull benefited significantly from those price promotions in December, continued into January. And Monster's been also aggressive in January around that. And that's why we're saying we're looking at this. We better understand. And if we need to be more aggressive on price, we will, just to make sure that we continue our momentum on scan and market share growth.

Okay, that's very interesting. And is that mostly, your comment, is that mostly specific to grocery rather than C-stores?

For multi-packs, it is in grocery, but it did happen. There was a big push, especially in December, in convenience for four-packs. Four-packs, you know, around Christmas, four-packs are big occasions, all the family gatherings, the parties. the parties. So this is, uh, we spoke about that again in, in our, in our last call, but it was mainly, uh, mainly in, it's really in both channels. Although the contribution of four packs is higher in grocery stores, obviously, because there's more of a take home, uh, place there. Yeah. And again, most of what I'm taking, I'm talking about here is it happened across the country, but it was, there was more impact in, in our, in our home market where we have a bigger market share in Quebec. Right.

Understood.

Less of an impact, obviously, in the rest of Canada.

Right. Okay. Just one more, and then I'll pass it on. On sales and marketing, that's been pretty volatile over the past year. I wonder what you see as a sustainable level for sales and marketing spending over the next year or two, and is there any direction you can give on seasonality of that spend? Yeah.

I'll start, and I want to add to this, but for us, it's... 2023 is still an investment year. We still believe that there is a lot of room for growth for this brand. So we will continue investing in sales and marketing to grow this brand. But in terms of direction, maybe NG, you can jump in on how you see the rest of the year.

Yeah. So I think it goes with our marketing campaigns and with the seasonality also of the energy drink. So we will be investing much more in that. I would say in the coming months, right, spring and summer, like Carl said, to get us ready for the new launch and for the big summer campaigns that we have going. And then it levels off a bit in Q4. So, of course, like you saw even last year, Q1 is always the lowest, and then it goes back up in the future quarters.

Yeah. And Q1 was especially lower, John, this year because we did not launch an innovation in Q1. Last year, we were launching Guayusan Q1. There was extensive marketing support because it made sense. Now, we saved a little bit of that money to make sure we can support aggressively the launch of our new innovation in the next few weeks. So less marketing investment obviously impacted sales, but we're very optimistic about T&E in the upcoming weeks.

Okay, that's great.

I'll pass it on. Thank you very much.

Thanks, John.

Thank you, John.

Our next question will come from Martin Landry with GMP. Please go ahead.

Hi, good morning, Carl and Angie. Good morning. My first question is on your new product, the peening fruit punch. Carl, I was wondering if you can discuss your new planograms for this spring. So is that product helping you gain market share or is this product replacing some of your existing SKUs and you're maintaining your shelf space? So just trying to get a little bit of an understanding on what we should expect in terms of your planograms for the spring and moving forward.

Yeah. Well, the goal is always to gain space. The reality is it's sometimes difficult. But we've been growing market share. So when we grow market share, usually retailers apply a rule that's called fair share with space. When you gain market share, you get incremental facings. But it really does vary from retailer to retailer. So it's hard to give you a precise answer on this. But the guideline is really obviously incremental space, incremental activities and stores for sure. It will vary. In Quebec, I'm very confident that this will result in a gain of space, except in banners where, for example, if we already have, let's say we have 30% of the space and 20% of market share in that banner, then it might be more difficult for us. But if we have 10% of the space and we have 16% market share in that banner, then it gives us every reason to convince retailers to give us incremental space, right? In the rest of Canada, we usually have more space than our market share. So in that case, it might be a bit more difficult. It makes it more difficult. So in a lot of instances, for example, T&E will replace our lower selling SKU, which is Matcha. So I think in the broad spectrum, that's what I can give you.

Yeah, that's helpful. And then, like... How many doors are we going to be able to find this spring and summer? Is it going to be mostly in all your retailers? Can you break down Canada versus U.S. just to get a sense of the rollout?

It's launching in Canada for now. It's not launching in the U.S., but it will be everywhere in Canada. Everywhere GU is sold, the gold is if GU is sold. see any food punches sold as well. Right. And, uh, what you saw was such a success. We have, uh, PepsiCo's full commitment on this. PepsiCo is extremely strong at launching innovations very fast. So expect this to see this, uh, expect people to, to be a routine and food punch to be everywhere.

Okay. Um, and then just, um, try to get a sense of, um, You know, how's, you know, last fall, last summer, last fall, you've had out-of-stock items. Just trying to get a sense of how's that going right now. Do you still have some out-of-stocks at retail or not at all?

No, no out-of-stocks at retail right now, unless on a few, you know, there could be hit and miss, right? But there is no out-of-stock that, you know, in the beverage industry, out-of-stock are kind of, limited auto stock, I would say, are normal. What we saw last summer really wasn't normal. This was way beyond what we expect. And that's why this is a hot topic in preparation for the summer. This is why we're talking about increasing inventory levels at retail, establishing ways of working with PepsiCo to make sure that we win the summer, having some incentives for retailers to buy a little bit more in the summer to make sure that they have enough and that they go through more of a replenishment mode in the summer instead of struggling to get their main orders. It's a hot topic for us, working very collaboratively with PepsiCo to get ready for the summer.

Okay, and then maybe just last question on the competitive dynamics. You're talking about some of your competitors being more aggressive on price. But you've also historically talked about your customer base being more white collar and maybe being a little bit more affluent than some of your competitors. So would you say that your customer base is less price sensitive than some of your competitors? Or how do you see the need to react on pricing and And how do you analyze or what would make you pull the trigger to maybe be a bit more promotional?

Yeah. Well, historically, our consumers have been very loyal, but they're also smart. And they're also smart. And our price strategy has always been Parity with market leader, right? We never want our consumers to pay more for better-for-you energy drinks. We think this should be an easy transition on price. We think it should be an easy transition on taste. And that's been a big part of our success. Now consumers are smart, and in some instances, for example, if Red Bull is significantly cheaper than Guru, unfortunately, some consumers might decide to go back to an artificial energy drink, right, if the price gap is big enough. We obviously want to keep them in an organic plant-based energy drink, and that's why we're going to be aggressive. We've been more of a follower on price. As you know, we've never been the ones who have initiated the promotion because this is not how we build this brand. This is a brand that's built on the quality of its ingredients and the brand, not pricing. But we're not going to let our competitors just eat our market share if we need to react.

We will. Okay. All right. That's it for me. Thank you. Thank you, Matthew.

Our next question will come from Amir Azad with Echelon Wealth Partners. Please go ahead.

Good morning. Thanks for taking my questions. Good morning, Amir. Just on that last point you were making about market share, do you have like updated market share data that you could share with us?

Yes, we could. We could. We could give you the numbers. If you want, we can have a follow-up meeting. We've never shied away from our market share. The reality is because of month-to-month fluctuations, we do believe that the 52-week market share is a better indication of how our brand is going because then otherwise, if you look at month-to-month and reactive promotions, I don't think it's the right indication to look at month-to-month market share in a small province. But in the follow-up call, we can share those numbers.

No problem, Master. Understood. Then I know your Q1 is seasonally weaker and there's obviously the noise with the pipeline fill last year as well as the inventory that you guys spoke to. But you guys gave an adjusted number to accounts for the distribution partner noise. And there you guys mentioned that shipments were actually down 2% year-on-year on an adjusted basis. um then i'm just thinking to last year's quarter i know that was impacted by omicron i believe um so i expected the adjusted year-on-year print to be positive as opposed to negative um any any color you could provide me uh there to help reconcile what's happening yeah 100 we also expected uh growth right but then

This is what we're trying to communicate. There is some pricing dynamics that did impact us in Canada. The fact that we did not have a launch this quarter did have an impact versus last year. And in the U.S., there was an impact of some delisting and non-productive banners where the cost to play was too high and we did not invest because we didn't feel it made sense and we exited those banners. So I think it really is a combination of many things. Obviously, the bigger one being the pipeline fill of last year and the inventory reduction. But then as a secondary piece, there's obviously the fact that we did not launch an innovation this year, and we had a full-on, extremely well-performing Guayusa last year in Q1. And we did have some additional banners, not very high-volume banners in the U.S., but enough to make a difference of a few hundred thousand dollars in the U.S.

Okay, and were you more impacted by the competitive dynamics or the lack of launch like the Guayusa launch last year? Just trying to get a sense of magnitude.

Well, yeah. Honestly, I haven't quantified what it would have meant, like the market share loss that we saw in December and January. February is better. but back to more growth, but I could probably try and quantify. It's hard for me to say which one was the bigger ones. All I can say is that pipeline and inventory reductions obviously were the bigger ones, but if I had to compare impact of pricing versus Guaizo, I don't know top of mind, I'm sorry, but it's probably in the same range.

Okay. On the 12-week rotational program in the U.S., I just want to make sure I didn't miss that. You guys said it was Costco? Yeah. Okay.

We've mentioned in the past that we have a very successful rotational program with Costco in the L.A. division with Guayusa. Consumers love this product everywhere it goes, and it sold very well. Guayusa, all our products were available in that roadshow. But Guayusa was the star of the show. So together with the buyers at Costa, we decided to go ahead with a 12-pack of Guayusa.

Tropical punch there. Oh, okay. And any expectations you dare to share with us on this call on that? Would it be like the same magnitude as like Sam's Club last year?

No, it's not the size. There was some learnings. As you saw, we maybe were a little bit too optimistic last year in Sam's Club. Remember last quarter, we did have a promotional deduction because we went too hard, too heavy on loading the stores. So we're being a little bit more conservative on the quantity per store. And it's 40 stores and 40 Costco locations. They are the very best Costco locations in the LA division, in fact, right? But Sam's Club was more. Sam's Club was 200 locations. So it's probably a third or half. I think it's a third of the quantities of Sam's Club. Okay.

There may be one last one for me. Rajat joining SCRO, can you speak to the background behind this move? Then you spoke to a pretty impressive background, and we heard a lot of, I think it was like doubling sales in two years that you said. Can you speak to her role within the executive team? Yeah.

Well, first, you know, Rajat's been a, been a business contact for several months. Obviously, I love the human behind. From a culture fit, it works perfectly. She's full of good energy. She's passionate. She speaks French, which is a great asset for the team. From a cultural fit, it's great. What she does bring to the team is very strong experience in digital and social influencers, which was a gap for us. As much as we This is an area that's extremely important in the industry, but we wanted to have a true expert who's done this in several industries, including Amazon, including skincare, beverage. Really a mix of great experience. Her role is really Chief Revenue Officer. Obviously, in the short term, the main focus is marketing and building this brand, but working with the whole team on marketing strategy and sales strategy and how we win and how we grow this brand across North America. So, yeah, very excited about their arrival. It's only been a few days, few weeks, but it's great.

Fantastic. Thanks for taking my questions.

Thank you.

Our next question will come from Sean McDowell with Roth Capital Partners.

Please go ahead.

Thank you. Good morning, Carl. I have a couple of questions too. Could you give me a little bit more color on the Pepsi reduction? Is that the inventory reduction? Is that something where they just kind of wanted to get a feel for what the right number is or was there some other shift kind of in their thinking either around the brand or at their corporate level about inventories?

No, it's just applying a principle that they have, right? So they do have different principles on different brands and different velocities. And based on these principles, Guru's inventory, not knowing exactly at launch, it was a little bit higher than, from what we understand, it was higher than what their normal guidelines would be. And then towards the end of their fiscal year, they had to reset this to make sure that going into the new year, it would be at the level where they apply the guidelines. It's just as easy as that. There's nothing more to read into than just having the right level of inventory, which is around six weeks.

Right. So that sounds like it's like, well, they weren't really sure what the right level was at the beginning. Now they have a better idea because you have more experience. So that's the level.

Yeah, exactly.

It takes a while before you understand seasonality and variations and your new listings. And now once you've completed the new filling the pipeline, then you kind of know, okay, you're not going to be getting large initial pipeline orders from big retailers because you're pretty much everywhere at this point and It's easier to forecast on a second year versus on a first year.

Makes sense. And then shifting for a second to the U.S. banners where you say that these banners were less profitable. So where would that impact of that lower level of profitability show up? Is that primarily a gross margin thing? And is that a contributor to – I mean, the gross margin is actually better than I thought it would be, so it's Is the gross margin benefited then by that D listing or is it showing up in other expense lines?

It's not, you know, honestly the, yeah, it's not gross margins in G feel free to add to this. It's not gross margins. It's the cost to play in some of those banners. I'll give you an example where you have a banner where you're selling, you're selling for a regional grocery banner outside of California and you're selling for, let's say $200,000 a year, right? And then the cost to play there, if you want, like you need to participate in flyers, right? And you need to pay, I don't know, $60,000 for a flyer, which is the normal price to pay, but it doesn't make sense, right? So we've declined to participate in some of those activities. It could be display activities. It could be flyers. It could be other marketing investments that we need to make. And obviously, as a brand, if you're more methodical in your spend, because we've been very focused on growing Canada, then If you're not making that investment and another brand is willing to make that investment, then you might end up being delisted. And this is something that we were comfortable because we've always said that we would be very methodical about how we grow in the U.S. and our focus would be California with the right banners and the right consumers. So when banners were outside of those principles, then obviously we can't spend our precious dollars everywhere and we need to focus them on Canada and California and online. We've been disciplined at doing this.

I don't know if you want to add to this or... No, I think this is exactly it for this.

Okay, so it wasn't a question of promotional pricing that would have hit the gross margin. It was more selling... Yeah, that's more the cost.

Yeah, and usually it's also sometimes... Yeah, and then it becomes a package deal, right? No, I'm just saying sometimes it's also a package deal, right? Cost of...

displaying and doing business and then the additional promotions and percentage of spend i would say it's overall as well or sometimes just deductions that really don't make sense yeah like you look at your business and there's deductions for this and deductions for this and you look at the bottom line at the end of that so it just doesn't make sense yeah if you're going growing at all costs and you're burning cash and you say well then you might want to do this but we've historically we've never been like this this is against our culture and we We refuse to do this, and sometimes it results in a delisting, and we're actually fine with that. Right.

Thank you for playing our game. We're out. Okay. Last question for me now is on the balance sheet, Angie, accounts receivable relative to sales seem a little higher than normal. What's going on? Is that strictly timing, or is there something else going on?

Yeah, honestly, it's strictly timing. Nothing else. Nothing for you to worry about. It's often the payment frequency. Often it's really PepsiCo, right? That's a larger portion of this. So it's really about, you know, the timing. It's really a timing thing. Nothing else. Okay. Thank you very much.

Sean, on the U.S., I want to add on the U.S. because, you know, obviously you're looking at this, but I want to share some data, like Whole Foods is, Whole Foods is up 25% in the last 52 weeks. Sprouts is up 55%. Mule-O in L.A. is up 72%. Herb One is up 25%. So in the banners where we focus in California, we're seeing momentum. So unfortunately, you're not seeing the benefit of that because it's being offset by the listings and some timing of orders. But where the right consumer is in the right banners, we're really seeing some success. And Graeusa is driving a portion of that success. We expect to get more listings on Guayusa because it's so successful. So the opportunity is really, really there when they're in the right banners with the right consumers.

And you don't expect that the program with Costco is going to have a negative impact on some of those numbers in the natural channel?

No. We actually expect that Costco is going to help us reach new consumers, right?

Yes.

So it's going to be in touch in Costco for a rotational program. And we think consumers are going to discover this product. And we know there's a lot of shoppers who do shop at Costco, but also shop, you know, they're the organic, better for you consumers, right? So they shop also at Whole Foods. They shop at Sprouts. So for us, it's a great way to make our brand available to more consumers in Southern California.

Just like you, Sean.

I know you're a big fan of what you sell.

Every day, every day. And I shop at Costco, so I'll be looking for it. I don't know if it's out of Orange County, but I'll be looking for it. We'll be there. Thank you. Thanks.

Thank you.

And this concludes our question and answer session. I'd like to turn the conference back over to Carl Goya for any closing remarks.

I just want to thank everyone for attending and have a great week. Thank you. The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.