Q4 2023 Zevia PBC Earnings Call

Participants

Reed Anderson; MD, IR; Zevia PBC

Amy Taylor; President & CEO; Zevia PBC

Florence Neubauer; SVP of Finance and Business Transformation; Zevia PBC

Girish Satya; CFO; Zevia PBC

Ethan Huntley; Analyst; Goldman Sachs

Andrew Strelzik; Analyst; BMO Capital Markets

Jim Salera; Analyst; Stephens

Presentation

Operator

Ladies and gentlemen, good morning, and welcome to the Zevia Fourth Quarter 2023 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Reed Anderson, Managing Director, Investor Relations. Please go ahead.

Reed Anderson

Thank you, and welcome to Zevia's Fourth Quarter 2023 Earnings Conference Call and Webcast. On today's call are Amy Taylor, President and Chief Executive Officer; Girish Satya, Chief Financial Officer; and Florence Neubauer, SVP, Finance and Business Transformation.
By now, everyone should have access to the company's fourth quarter 2023 earnings press release and investor presentation made available this morning. This information is available on the Investor Relations section of Zevia's website at investors dot zovio.com.
Before we begin, please note that all financial information presented on today's call is unaudited and 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 a number of risks and uncertainties which 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.
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 Presentation slides that accompany today's comments and reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investors dot zero.com. And now I'd like to turn the call over to Amy Taylor.

Amy Taylor

Thanks, Reid, and good morning, everyone. Welcome to the Q4 2023 earnings call for Zevia. Before I walk us through fourth quarter results, I'd like to introduce our new Chief Financial Officer, Girish Satya is a 20-year veteran of high-growth consumer that doesn't bring various skill set across finance, operations, technology and strategic planning. His track record of success in driving growth and profitability will make him an excellent partner for me for our leadership team and our Board as we chart the course to the future.
I'm also thrilled that Florence Navarre, who has served as our interim CFO will continue in a key leadership role as Dhivya now as SVP Finance and Business Transformation. The entire Xavier organization and the Board join me in thanking her for a remarkable contribution overall, but especially in these last several months and now on to cover fourth quarter results and to provide an update on foundational initiatives that set us up for accelerating growth during exciting times for Better For You beverages.
I'm pleased to announce that video returned to volume growth and net sales growth in the fourth quarter as the remediation of customer fulfillment issues in the midst of a supply chain transformation was implemented on time. And as the brand refresh came to life on shelf, I'm grateful for the remarkable effort put forth for veteran and new GBS team members in 2023. And I'm proud of their well executed initiatives not only to restore service levels, but also to ensure supply chain scalability for the future. This business has growing tailwinds as consumers across demographics continue to move away from sugar and increasingly toward clean label products.
Diet and zero calorie carbonated soft drinks continue to lead the growth in the broader soda category and natural sodas outpace even further video is the number one consumer choice in natural soda. Consumer spending on brand is up per household and per trip. And over the past 18 months, we have increased price with strong consumer acceptance. This demonstrates brand strength and supports unit economics and a strong gross margin, which enable our ability to invest in growth going forward. Our brand refresh improved on-shelf visibility and continues to position Z as a beacon for this growing category within CSD, it is a natural soda brand with a strong foundation at scale at store across natural and conventional grocery with a loyal consumer base.
And now we have the opportunity to expand our base through a launch into immediate consumption and cold single distribution in new and existing channel. Biggest focus remain taking our Better For You beverages mainstream. Our competitive advantages include great taste, limitless enjoyment across usage occasions, our Zero Sugar clean label and our affordability relative to other Better For You beverages, our mission focuses on global health for people in the planet. And in Q4, we removed another [2,700] metric tons of sugar from consumers diet never having sold a plastic bottle.
It is more affordable than 64% of nonalcoholic beverages in North America and more accessible than recent functional entrants in adjacent carbonated beverage categories. I'll share a few important shopper metrics. Tv households increased their annual brand spend by 9% and their spend per trip by 7% over the past 12 months. As of the fourth quarter, we are home stocking brand and are relevant across all usage occasions and dayparts.
Either shoppers spend 39% more on beverages versus total nonalcoholic beverage shoppers. It makes 32% more trips to stores to purchase beverages. Medium shoppers continue to differentiate themselves even further from average of every shoppers year over year and versus prior period as they continue to spend more on the brand. And overall, I'll provide a few channel and category insights before moving on to address some of our new initiatives here at the start of the year. Our growth for the quarter was led by continued exciting progress at the world's largest retailer who doubled video space in 2023, as mentioned last quarter and is testing the brand in the mainstream carbonated soft drink aisle. The test continues to outperform expectations.
Video service is up 94% same store sales. This evolution is one of the few examples of our opportunity to lead the exciting growth that mainstream better-for-you soda represents. Similarly, one of the three national drug chains took the view to the mainstream CSD aisle across 100% of its stores in Q4, posting double digit growth. Media Center delivered growth in the food channel in the quarter outpacing the category food here at the start of the year, our newest flavors, creamy Revere and vanilla cola continue as number one and number two in EBIT dollar growth across the quarter and both have ample room to expand distribution further as we expect their performance to support increased brand presence in upcoming spring resets at retail.
This new soda items we introduced into our portfolio performs better than the last and as e-commerce, maybe a return to growth in the quarter. Our top e-commerce customer posted 30% growth in December, indicative of supply chain recovery and continued demand in one of our strongest channel. I'll provide some insights on Q1. We are experiencing a delay in the recovery of on-shelf stock levels at retail, a lag effect of last year's customer fulfillment issue amid supply chain transition and as some initial volume softness, we expect a recovery in various points of distribution and the return to normal promotional support at retail following spring resets and thus a return to growth for spring and summer.
It turns the corner into 2024 with a sharp brand refresh and market, a stable and scalable supply chain momentum in critical new market segments and strong pricing. These factors underscore brand strength and bolster gross margins, indicating the ability to invest in accelerating growth going forward.
On that foundation, we are focused on the following initiatives. Firstly, we are prepared to launch a regional approach to direct store delivery or DSD, which we believe will present an excellent case study what DSD can do for our well-established high-potential brand in our current distribution footprint and yet underpenetrated market segments.
Secondly, we have gained distribution in a limited number of regional convenience chains in the US and Canada to test and learn the right assortment, merchandising price points and service levels received to be successful in this critical media consumption trial driving change.
Thirdly, we have stabilized and strengthened our supply chain in the following manner. We have shifted contract manufacturers ownership over raw materials that we manage only finished goods, and we have outsourced freight to an excellent partner who will help reduce costs and deliver efficiency as we ready the VA to scale.
And finally, we are introducing marketing beyond retail now that the brand refresh is fully in market ramping up after spring reset season with a nationwide focus on the spring and summer beverage season. In short, it is critical. We invest in consumer marketing outside the store and in route to market to drive growth in 2024 and beyond with a focus on the long-term opportunity following a broader category. We've also announced a price increase effective May first, 3%, 4.5% and 5% across selected packages as video continues to demonstrate brand strength. And as we maintain the same relative price position as premium to mainstream soda, but materially more accessible and affordable than other natural and better-for-you beverages from a unit and per ounce basis.
I'll turn it over to Florence for additional color on our financial results, and I'll come back to speak about our broader opportunity, especially in light of the addition of an experienced strategic CFO to our leadership team.

Florence Neubauer

Good morning, and thanks for joining the call today. I will now provide an overview of our fourth quarter and full year financial results, discuss guidance and then pass it.
Back to Amy for final remarks. In the fourth quarter of 2023, we delivered net sales of $37.8 million, up 6.9% versus same time prior year, we saw positive impacts from our price increase midyear, which deliver a sizable impact of $1.5 million as well as an increase in volumes of 3.7% or $0.9 million, reflecting a return to volume growth after previous quarters were impacted by short term supply chain fulfillment challenges.
Gross margin was 40.7%, down 3.6%points versus the same quarter a year ago. The decrease was driven by the decision to accelerate our supply chain transition, which included the write-off of some legacy branded materials, discontinuation of long tail SKUs as we focus on our highest potential products and the write-off of some raw materials as we transition our supply chain to a new model. All of this temporary inventory losses had a four percentage point impact to the quarter.
Selling and marketing expenses increased by 38.1% to $13.8 million entirely due to freight and warehouse expenses, given the supply chain logistic challenges, which are now remediated freight to customers and freight transfer costs were temporarily elevated as expected, but translated into a lower impact compared to the previous quarter. Our increased inventory level also impacted our warehouses cost as we continue to manage our inventory back to optimal levels.
G&A expenses were $8.4 million or 22.2% of net sales, which is essentially flat compared to $8.5 million or 24.1% of net sales versus same time prior year. Stock-based compensation and non-cash expense was $1.7 million as compared to $3.1 million same period in the prior year. Net loss was $9.2 million compared to a net loss of $6.2 million last year decline of $3 million or 48.3%, primarily driven by the supply chain logistics challenges and inventory losses.
Loss per share was $0.14 per diluted share to this year's class A. common shareholders compared to $0.09 same time prior year. Adjusted EBITDA loss was $6.8 million compared to an adjusted EBITDA loss of $2.9 million the same time prior year due to continued expenses from Chart two supply chain recovery efforts through the back half of the year. As expected, more than half of the losses are attributed to this recovery effort, which was better mitigated than in the previous quarter. And stabilize going forward.
Our balance sheet remains strong, with $32 million in cash and cash equivalents and no outstanding debt as of the end of the fourth quarter of 2023 as well as an unused credit line of $20 million full year results. For full year 2023, Zevia achieved net sales of $166.4 million, an increase of 2% versus 2022. Our effective price increase during the year resulted in $11.5 million higher net sales, which mitigated the volume loss from shorten supply chain disruptions. We realized healthy gross margins of 44.9% versus 42.9% in 2022, indicating strength in our business model, which allows us to invest in future growth.
Net losses were $28.3 million as compared to net losses of $47.6 million in 2022 and adjusted EBITDA loss was $19 million for the year compared to an adjusted EBITDA losses of $19.6 million for the full year of 2022.
Turning to guidance, the company expects net sales for the first quarter of 2024 to be in the range of $38 to $40 million, reflecting a delay in the recovery of on-shelf stock level and display activity at retail at the start of the year, given the current transition in financial leadership and as we look ahead to spring resets along with our overall route-to-market evolution, we are delaying providing full year guidance until our Q1 earnings call under Rich's leadership.
Turning the call back to Amy, thank you for us.

Amy Taylor

Before we wrap up, I'd like to introduce Girish and have him speak about his view and the Zenvia brand and the opportunity ahead here in his first four weeks.

Girish Satya

Thanks again for the kind words, I'm really excited to join the team. Really a strong consumer value proposition and leading brand position are incredibly well positioned to take advantage of the accelerating tailwinds in the natural soda category. I look forward to partnering you and the rest of the executive team to help unlock the brand's true potential and accelerate this next phase of growth.
Lastly, I'd like to thank Barrantes for her efforts over the last few months, and I look forward to partnering with her in her new role.

Amy Taylor

Thanks, Gary, and welcome. We are excited to have you join and we look forward to the impact you will make your.
Yes, these are exciting times and better for you. Beverages Zevia is the number one consumer choice in natural soda and media is accelerating initiatives to expand into new market segments with a category captains mindset and a growing portion of a massive category, our business can deliver mid 40s gross margin, which allow us to invest in growth. We launch marketing out of store this spring and summer, and we are evolving our route to market with an advantage in taste across the usage occasions with proven broad distribution and in relative affordability, we aim to step up as a beacon brand in the category that we pioneered. We continue to have strong demand.
And now we have new scalability in our supply chain, pricing upside in a step change organizational capability amid a rising tide of excitement around natural soda and a seismic consumer shift away from sugar. We spent a few years building a strong foundation, and this business is now ready to scale. We are bullish on the years ahead. Thank you for your time this morning and we are prepared to take your questions. Operator?

Question and Answer Session

Operator

Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. (Operator Instructions)
Bonnie Herzog, Goldman Sachs.

Ethan Huntley

Hi, good morning. This is Ethan Huntely on for Bonnie. Thanks for taking our questions. I guess my first one here would be sort of your thoughts on not providing full year guidance. I recognize you're going to provide it on Q1 and then also sort of the Q1 guidance being a bit softer than expected. I guess we're just trying to any color you can provide on sort of full year sales, recognizing things should return to growth and the spring and summer. But just maybe any sort of qualitative commentary you can provide on how we should should we be thinking about net sales growth for the full year here?

Amy Taylor

Sure. Thing is and you're right, we expect to return to growth in the spring and summer, given our healthy velocities. As an example, we're exceeding the category here at the start of the year versus CSD in the food channel, which is obviously massive for us and reflective of our potential and collectively, our performance in mainstream channels. And as we return to full presence on shelf, we can also return to more competitive promotional levels, promotional investments in display.
So add that to the impact of our brand refresh our fast growing innovation and forthcoming investments in marketing, we look to the spring recess as being a trigger to return to growth at more expected levels, ensure our Q1 was softer shipments than we expected as we're getting back to health on shelf at brick-and-mortar retailers, ensuring that the retailer merchandising is actually reflective of the space dedicated to Zenvia through planograms so that progression has been a little slower than expected in Q1. While we've invested in incremental merchandising top accounts to route to speed recovery there and the spring reset should really be a trigger going forward.
In terms of guidance, we're really excited to have you join us as our CFO and we want you've had now four days on the job. We want to give them just a little more time than that to get a point of view on full year. And so we come into the year bullish on full year growth with strong gross margins, which indicate our ability to invest in marketing or route to market and a new CFO at the helm. So more to come in greater clarity on the full year after the Q1 earnings call.

Ethan Huntley

Got it. That's helpful. And then maybe just as a follow-up, maybe sticking with gross margins. You know, we're under a bit of pressure here in Q4, as you mentioned, any sort of color on how we should be thinking about gross margins for the year or any sort of headwinds related to the inventory losses and your supply chain transitions. Are those sort of all behind you at the moment? Or might that bleed into Q1 and you don't maybe should gross margins expand this year from a from an improved cost environment. Any sort of guardrails you can provide on gross margins for the year would be helpful. Thank you.

Amy Taylor

Yes. So I mentioned before that we have the ability to deliver gross margins in the mid 40s. And that's that was reflected in the first three quarters of 2023. Obviously, Q4 was the exception given the choice to invest in some of the inventory write off. That really helped us start the year 2020 for clean from the standpoint of legacy branded materials or raw materials through our supply chain transition.
So let's call Q4 the anomaly. We have an outlook with the ability to deliver our mid 40s gross margins, but we will also take the opportunity to invest you know, we don't provide guidance on gross margin, but we expect a lagging impact of inventory into Q1 on some of our costs. The generally speaking, expect a return to the strong gross margins that we've had historically.

Ethan Huntley

Got it. Helpful. Thank you very much for taking our questions.

Amy Taylor

Thank you.

Operator

Andrew Strelzik, BMO Capital Markets.

Andrew Strelzik

Hey, good morning. Thanks for taking the questions. My first one, I guess, is just about the visibility that you have on to getting to that restocking time line with the delays that you're seeing right now and maybe just more broadly from from a volume perspective and a distribution gain perspective, can you talk about the visibility you have to return to that growth in the spring and summer and kind of some of the underpinnings of that bullishness?

Amy Taylor

Sure. So we saw the softness coming in kind of mid quarter. This first quarter here after a first round of scan data late January and with January shipments, and we can share that that is already improving. I mentioned one bullet point as to reasons to believe a faster recovery being the fact that we are leading CSD growth in the food channel and what our dynamics vary channel by channel, some of the biggest ones, including food and strong e-commerce business, et cetera, are reflective of demand, but also a faster clip to recovery.
Spring resets are obviously a moment in time, varying between February, March and April. Depending on the retailer. And we know that some of the degradation of our presence on shelf is really just in-store merchandising rather than true dedication of space to Xavier. So what we've done to get there faster is invested in some incremental merchandising across top accounts, especially in the grocery or food channel to help to sort of bridge to the time of spring resets with fast-growing innovation like creamy Revere and vanilla Cola.
We have a good story going into resets to ensure that we gain back not only the space we had dedicated prior, but that we make some strategic gains and presence on shelf as well. So combine this with strong velocity and for the first time marketing out of store, now that we have the brand refresh fully in market in-stocks back on shelf, a stable supply chain. And those are some of the accelerators of velocity and therefore, sales that we expect going forward.

Andrew Strelzik

Okay, that's helpful. Thank you. And then maybe I'll take the crack on the cost side as well. And I guess you talked about a couple of different pieces, some benefits on the supply chain side that you have in place now, but then you've got the route to market stuff and the marketing pieces as well. Is there any way to kind of frame the various pieces in terms of pluses and minuses through the year on an annual basis. I'm just trying to get a sense for it. I'd handicap each of the various pieces as that kind of comes into place? Thank you.

Amy Taylor

Yes. Let me let me ask for us to speak to that through the lens of 2023, and then we'll do our best to give you a look forward as well.

Florence Neubauer

So as you remember, Q3 was heavily impacted by selling costs, right? We still have some lingering selling costs in Q4 on. But as far as our supply chain remediation, we are definitely not in a better position for 2024 on the selling cost side. And as far as route to market, Amy, that that's more of a going forward.

Amy Taylor

Sure. So with route to market, we're excited that we've talked about before. What would it require for Zovio to be ready to go DST. And we've talked about our merchandising capabilities and different merchandising setup in store for our singles lineup. We've talked about unit economics and therefore, price. We've talked about the brand refresh being complete and then, of course, now a stable supply chain. So with all those factors in place, we're ready to launch DSD on a regional basis and have some specific news on that forthcoming.
And with that, we'll obviously be investing on the foundation of strong gross margins to accelerate that launch. So I wouldn't anticipate the noise in our selling costs in 2024 to the same degree that we saw them in 2023. Instead, we have a solid gross margin that allows to invest in DSD and then ultimately as well in marketing to accelerate both expansion and growth. Does that answer your question, Andrew?

Andrew Strelzik

Yes. I mean, I know I guess I'm trying to get a sense of magnitudes of the various pieces, but also understand that you probably want to hold off on some of that until the next call bomb. But the color is helpful.

Amy Taylor

Yes, both qualitatively and numerically as we provide a full year outlook in net sales with our new CFO and seats with 90 days under the belt. Then we can also provide color on structure and margins at that time.

Andrew Strelzik

Perfect. Thank you.

Operator

[Salang] , [Telsey] Advisory Group. Please go ahead.

Thank you, and I'll continue the follow-up on the prior question on, can you help us understand the economics of the DSD model compared to your model of just at a high level, how does it impact your gross margin of P&L, what is the cost? And then end? And I know you will share details ahead, but any thought on like as you expand you expand with a customer nationally, the go region by region product by product. Just any early thoughts you can share on that of the expansion of the US dollar forward?

Amy Taylor

Absolutely. So so first of all, this will be a rolling launch so that we will be nowhere close to nationally distributed and DSD anytime soon we have a regional roll rollout, which will give us great Intel as to the case study for DSD. support for this brand, the impact that it will make. So to answer your last question first, this will be regional based on geography, not nationally based on customer. And that allows us to gain the full benefit of DSD across channel.
Which brings me to my next point, how does DSD impact the business as well as the P & L, where it impacts the businesses in our existing footprint, it's step changes our ability to compete in store through merchandising. That means fewer out-of-stocks. That means more displays. That means the ability to commit to certain programs that some retailers hold for only DSD. brands, whether that be incremental cold availability than merchandise by your DSD provider rather than retail staff or whether that be incremental coolers and permanency around the store. So those are some examples of how DSD helps you in your existing footprint.
Now, Brazilia, we also have upside in other channels. And the most important example of that is convenience and convenience is best serviced by a DSD model with frequency of visits and merchandising capabilities on a regular basis in a fast turn environment. This is a great place for us to drive trial and remember that we have a really healthy strong center store business as a multipack and home stocking brand. And this is now our upside to drive trial and significantly separates the size of our consumer base.
So how does one pull off DSD? There is a gross margin investment with the DSD operator. And while I can't detail that at this time, what we needed to do as a brand was be ready, both from an awareness and pull perspective, but also from a unit economic lens, having strong enough pricing to turn around and go DSD and be able to sustain our path to profitability and make sure that that model benefits us the DSD operator and the retailer.
And my final comment on this is one advantage that we have. And one of the reasons why there's a lot of interest in Zedia among DSD operators is that our healthy established grocery business is something they can pick up on and make an impact for their business. And for ours immediately and then also bring new channels to bear. And that level of development is unusual at first blush for a new DSD and supplier partnership. So Sara and hopefully that step you through how we expect the impact to play out by channel. We focus first on geography, and we will make investments through a gross margin lens to launch that effort albeit quite small out of the gates given the regional launch model.

Thanks for the color. And you know, I have one big picture question. Can you help us understand how the competitive landscape is right now. You know, for Zevia., I mean there were some losses on the volume and shelf side last year. If you are trying to get back some of that shelf space, you're also raising prices in conjunction with it.
So you're trying to raise volume, but you're also raising prices. I'm just trying to and you're competing with a lot of brands who are also expanding and you know whether it's TI or it's cola of natural zero-calorie. So I'm just trying to understand like the competitive landscape as you see today and how do you see that evolving in '24?

Amy Taylor

It's a very dynamic environment right now in carbonated soft drinks. The driver of growth is DI and zero, as has been the case over the last few years. And then what's accelerating even faster is the subset of the category we refer to as natural soda and of course, that's a space where we are the pioneer and have the largest consumer base have sold by far the most cans. So we are the number one consumer choice as it relates to natural soda. And what's been exciting is that now there's a number of new brands in adjacent functional spaces, making significant investments to see that the consumer, the idea the soda can be better for you.
And as that idea is seeded with the consumer and they come to the shelf, they find when properly merchandised video sitting next to other fast-growing competitors and ZB., it is advantaged on taste advances on relevance across usage occasions we call it limitless enjoyment versus being limited to minimal consumption based on a functional promise but also on price. And so we're more affordable for a better-for-you product is more affordable across households and easier choice for both impulse purchase as well as home stocking. And so with that positioning, we're excited to see a rising tide of focus on better-for-you sodas, and we continue to focus on expansion to defend our number one position in that space from a consumer perspective.

That's great. Thank you.

Amy Taylor

Thanks, Sam.

Operator

Jim Salera, Stephens.

Jim Salera

Good morning, guys. I wanted to maybe step up by Amy wants to start off by maybe just closing the loop on the gross margin for the fourth quarter. That impact is primarily just flushing. The remainder of the old packaging out of system. Is that the right way to think about it?

Amy Taylor

It is that plus some raw materials write off as we transition our supply chain, our contract manufacturers to manage raw materials from this point forward while we as suppliers manage only the finished goods. So it is those two factors together.

Jim Salera

Okay. And I think in Ron's prepared remarks, you said it was like a 4% point impact. So if we back that out that 4Q gross margins are just under [45]. Is that kind of a fair number to think about on a go forward basis, maybe a little bit of headwind from the DSD, but moving forward, that's kind of in the ballpark of what we should think about?

Amy Taylor

Yes, absolutely, Jim, you have.

Jim Salera

Okay. Great. And then if I could maybe drill down on some of the C-store opportunity. Can you just give some color around which skews you guys have in the C-stores or are there any branded fridges and if possible, that you could kind of size and maybe store count or give us a range of what you think that opportunity is right now?

Amy Taylor

I can't guide to that quite yet. More color on that in the next quarter. But I can share with you that in each instance, in the limited number of regional players with whom we are launching in the coming months, we're featuring devious soda. And in a few instances, also energy drink in one instance key as well. We're testing different merchandising setups of the portfolio in the way that I just described. And then in one operator, we will be featuring branded barrels. So ice barrel's near the register to drive impulse purchase. So each of these scenarios will give us different datasets to test everything from price point to range to merchandising strategies in that footprint.

Jim Salera

Okay. Great. And how should we think about it the C-store opportunity as being kind of the full complement of Zenvia products? Or do you feel that there's a certain piece of the portfolio that you lead with and then start to soda & T's come down the road? Or is it do you have a thought?

Operator

(Operator Instructions)
Yes, Tim. And you know, we are because it's unbundled.

Amy Taylor

You mentioned sorry, we're having some technical difficulties. Can you repeat your question and we'll pick right back up.

Jim Salera

Yes, no problem. I was just asking is there a particular skew that you lead with, whether it's the traditional soda offering, airlines like citrus offerings? What would you lead with into C-stores? And then what does that look like as you expand the portfolio to offer?

Amy Taylor

Yes, the data, the soda is by far our number one priority. And so featuring our heroes skews our strongest flavors in the in the soda line is our top priority. But we all know that energy drinks is obviously a very relevant category within energy of within a convenience as well. So in a couple of instances, we're testing energy drinks and across four key flavors. That answer your question?

Jim Salera

Yes, Beatrice, our EPS.

Operator

Ladies and gentlemen, as there are no further questions, I would now hand the conference over to Amy Taylor for her closing comments.

Amy Taylor

Thank you and thanks for dialing in this morning, everyone. Apologies for the delay communication. Given our technical difficulties. We are excited to continue to accelerate top-line growth for the full year 2024 through mix of volume and price. We talked about a price increase effective May first, we've had strong consumer acceptance of that. We continue to drive gains in household penetration and execute the key initiatives we've discussed this morning whether that be investing in marketing or step-changing our route to market.
So with this route-to-market evolution and initial expansion into convenience and for the first time out of store marketing, we head into spring and summer beverage season very bullish with strong gross margins, indicative of our ability to invest, and we're excited to have Garrison seat as our new CFO. So we're excited about the future, and we appreciate your time this morning.

Operator

Thank you. The conference of Zevia has now concluded. Thank you for your participation. You may now disconnect your line.