00:00So talk to us a little bit about what it's felt like sitting in your seat as you see these tariffs come on, sometimes come off, then go on again,
00:07and how you're mitigating that when it comes to trying to actually produce and put out a product.
00:13Yeah, I think the first reaction was, oh no.
00:16And the second reaction was, okay, what can we do about this?
00:19And I think for a company our size, hedging is not necessarily an option, but we decided we want to go and hedge aluminum
00:24because for us, just getting predictability in our costs for the next year or so was really important.
00:30So we actually moved pretty fast just to hedge aluminum.
00:33Obviously, it impacts us for cans.
00:35We also source, we're actually the only sprocketing water that actually uses real fruit, so we source fruit as well.
00:41So we got hit a little bit with those tariffs, and we were able to work with our suppliers there
00:45and then look at our supply chain to find any kind of savings we could find to help cover the tariff costs.
00:52And once we did that, we just focused on the future versus worried about every day, what's going to happen every day,
00:57what announcement or where the price is going to go.
00:59Right, right.
01:00I have to imagine hedging takes out some of that day-to-day worry.
01:03But how have you handled the question of passing on some of those costs?
01:07When you think about the price that you're charging for your cans of spin drift, has that come up in the past few months?
01:13It has.
01:13I mean, it has with all the CPG companies that are looking at that.
01:16We've held off as long as we can.
01:17We are taking a little bit of pricing, actually, in the marketplace right now.
01:20But actually, we have planned this, interestingly, like a year ago because we actually believe we have a lot of pricing power with this brand.
01:27We hadn't taken any pricing in three or four years.
01:30We absorbed some costs for sure.
01:32But we really believe this is a brand that's a premium brand that, based on the work we've done, can command a little higher price.
01:38So we are taking a little bit of price.
01:40We're not the only ones, actually.
01:42Everybody's doing it.
01:43And we feel pretty confident that it's going to be accepted by our consumer, who really is such a unique product that you can't really – it's not very substitutable, so that helps.
01:53Well, I do want you to talk a little bit more about the consumer and the potential for a substitution, particularly if we do somehow end up in harder economic times.
02:03Is something like a sparkling water, is that something that people would sacrifice, or do they consider that to be sort of, you know, once they start buying it, that's just what we're always going to continue to buy?
02:12I think there's a lot of, like, tailwinds in that category.
02:15It's one of the few categories that's growing within beverages.
02:18And people are looking for just healthier, cleaner options, if you will.
02:23So they're moving from, like, you know, full-sugar soft drinks and other beverages that have artificial sweeteners.
02:28So they're looking from a health and wellness perspective.
02:30They're looking to go to that category.
02:33And what we're finding, interestingly, is that if you go back a few years ago, it was really more higher-income households that were really jumping on that health and wellness bandwagon
02:41and paying up for healthier beverages and food, now we see that actually as a more mainstream event happening.
02:50And so lower- and middle-income households are also willing to pay up a little bit if it's a better product.
02:55Well, on the health and wellness front, and just remind us, our viewers here, because Spindrift at one point, I mean, it did have, like, traditional soda pop with, you know, with sugar or whatever sweeteners in it.
03:05And my understanding that line doesn't exist anymore.
03:08It's all pretty much just sparkling beverages, right?
03:10That's correct.
03:11It's all sparkling water, real fruit, real squeezed fruit.
03:13That's it.
03:14What is the growth going to be, or where is that growth going to come from?
03:18Is it just increasing volume, or is it maybe moving into different types of products?
03:23Yeah, I mean, for the business as a whole, it's going to come from a bunch of different places.
03:27I'd say, first of all, we're not really readily available.
03:30We're in the total U.S., but there's a lot of distribution to be gained.
03:33So we call it physical availability, increasing physical availability, getting to more grocery stores, more mass merchants, more channels for folks.
03:41Where's your biggest concentration right now?
03:43I'd say the two coasts.
03:44The two coasts.
03:45Because most health and wellness things start on the coast, and they move inward.
03:47And now it's moving inward to southwest.
03:49Actually, where the population has moved since COVID, it's moving there.
03:52So getting more distribution.
03:54Actually, most people find the brand just by seeing it in the grocery store or word of mouth, which is the second thing we're doing, which is mental availability, which is really investing behind the brand.
04:02And advertising, which we've really never done before, very little, we're investing significantly now to do that.
04:08So you combine the making it more available and people have more top-of-mind awareness, that makes the connection for the consumer.
04:16I'd say the last thing we're doing is just trying to innovate more.
04:18We innovate.
04:18People want variety.
04:19It's a big health and wellness, number one trend without a doubt.
04:22Right.
04:23Flavor, variety.
04:24It's people who seek it.
04:25And I've worked in the soft drink business, the coffee business, the beer business.
04:29No matter what business it is in beverages, people want variety.
04:32So we're able to innovate really well using real fruit within our sparkling lineup.
04:37But also, we're looking at other categories where we can go in and bring new news, bring our health and wellness credentials and our great fruit taste and bring it to other categories.
04:45Well, to that last thing that you mentioned, Dave, when it comes to innovation, people like new flavors.
04:50People like to try new things.
04:51But, I mean, there's a lot of trends that come about in this space.
04:54I think about Starbucks, for example, introducing protein lattes and some of the other buzzy trends around there.
04:59Beyond just flavors, do you have any thoughts in those sort of directions?
05:04We do.
05:05I mean, we launched – actually, we're testing this year of like a better-for-you soda, if you will, which is basically twice the juice content.
05:12Nothing else added.
05:12Maybe 30 or 35 calories.
05:14That's a very adjacent area for us.
05:17We are looking at other categories we could go into.
05:20So we could go into still water.
05:21We could go into tea.
05:22We could go into healthy energy.
05:24The brand is really known for Real Fruit Plus.
05:28And right now, it's mostly Real Fruit Plus Spark and Water.
05:30But we really believe that we can go into other areas and be successful.
05:34I am curious about your partnerships with the retail channels.
05:38I mean, you mentioned – you kind of alluded to your past history, PepsiCo, Pete's, Boston Beer as well, which are behemoth brands that I would assume would have a lot of sway in the retail space.
05:51Spindrift.
05:52What's the conversation that you have to have with those folks who are acquiring your product to sort of make sure that it's on the shelf and it's prominent?
06:00Yeah, that's a good question.
06:00I think, first of all, we have a unique product.
06:03So we start with why are we different?
06:04Why do we exist?
06:05The Spark and Water, the Real Fruit, the only brand that does it, no added sugar.
06:10It's both refreshing like a typical Spark and Water would be, but it's also a little bit indulgent.
06:15It's got a little bit of a bolder flavor.
06:17It's got a complex flavor, so you can drink more of it and enjoy it.
06:20It's got a great variety of flavors, and it's all natural ingredients.
06:23So we start with the product.
06:25I think also for a retailer's perspective, what they see is there's not a lot of growth in a lot of beverage categories these days.
06:31You see it in energy for sure.
06:33You see it in protein drinks, coffee, ready-to-drink coffee.
06:36You see it here and there, but you don't see it in many places, and we're growing 30%.
06:39If the category itself is growing 9%, we're growing three times the category, which is good because that means we're gaining share.
06:48But I think retailers are looking for any growth they can get, and the category has become big enough.
06:51If it's over $5 billion, then it can actually have a meaningful impact on a retailer's business.
Be the first to comment