Q4 2023 Vita Coco Company Inc Earnings Call
Participants
John Mills; IR; ICR
Mike Kirban; Co-Founder & Executive Chairman; Vita Coco Company Inc
Martin Roper; Chief Executive Officer; Vita Coco Company Inc
Corey Baker; Chief Financial Officer; Vita Coco Company Inc
Bonnie Herzog; Analyst; Goldman Sachs
Chris Carey; Analyst; Wells Fargo
Michael Lavery; Analyst; Piper Sandler
Eric Des Lauriers; Analyst; Craig-Hallum
Jon Andersen; Analyst; William Blair
Jim Salera; Analyst; Stephens
Eric Serotta; Analyst; Morgan Stanley
Bryan Spillane; Analyst; Bank of America
Presentation
Operator
Thank you for standing by, and welcome to the Vita Coco Company fourth quarter and fiscal year 2023 earnings conference call. (Operator Instructions) 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.
John Mills
Thank you, and welcome to the Vodacom Group Company Fourth Quarter and Full Year 2023 earnings results conference call. Today's call is being recorded. With us are Mr. Mike carbon, Executive Chairman, Martin Roper, Chief Executive Officer, and Cory 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 vital cocoa company's website at investors dot De Vita, Coco company.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 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. 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 Kirban, our Co-Founder and Executive Chairman.
Mike Kirban
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 wanted 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 verticals, the 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've solidified our category leadership in coconut water over the last 20 years, which enters 2024 as the fastest growing category in beverages in the U.S. and the U.K. market. And although coconut water is still a nascent category, representing just 3% of the sales in the U.S. 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 Vita Coco coconut water net sales growing at a 20% kegger in 2023. Our flagship Vita, Coco 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 store economy, we continue to gain share finishing the year with 51% value share on a 52-week basis, total coconut water catagory retail sales grew 16% in 2023, with Vale cocoa growing 19% for the full year in value and 14% and volumes our 15% net sales growth in 2023 exceeded our expectations and partially benefited from an extra vertical co-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 we've been 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 nonrepeating 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 Vita Coco brand across all demographics end markets as we continue to expect the category to develop into a household stable 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 scan 45% in the U.S. in 2023 to gain share of shelf space and increased basket size for our US retailers. Multipacks in coconut water remains 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 multipacks are three 30 ML. 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. cans. Coconut Water represented approximately 31% of the coconut water category volume in retail tracked channels. So gaining share in this segment will enable us to further gain share in the broader category. In 2023, we expanded distribution of Vita Coco coconut juice in cans with a focus on convenience stores, achieving USACV. 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 provider, cocoa farmers organic, which is priced at a premium to our regular schemes and offers organic coconut water in an attractive shelf-stable package farmers organic allows us to trade up consumers and price while keeping them in our brand family. In 2023, we achieved U.S. ACV distribution in new low 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 power lift our protein infused isotonic to include the New York area where our distributor relationships and street activities. 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 Econo 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 vertical brand be as big across Western Europe as it is in North America and 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 FiberCote community project as a charitable organization, which will allow us to involve more partners and accelerate our impact more than ever before. And it's 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 complementary 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.
Martin Roper
Thanks, Mike, and good morning, everyone. I'd like to start by thanking our team across the globe for an outstanding year in 2023. I'm very pleased with the performance we delivered this year and the momentum we carry into 2024. We achieved net sales growth of 15% in 2023, driven by strong vital cocoa coconut water, which grew 14%. This total Company net sales performance represents our third consecutive year of double-digit growth. Overall, we achieved 74% net sales growth since 2019. Our fourth quarter 2023, net sales were up 15%, with Vita Coco coconut water up 8% and private label up 36% in 2023. We delivered strong growth in both the Americas, while Vita Coco coconut water net sales grew 15% for the full year with 12% volume growth, reflecting strong consumer demand and internationally, our net sales grew 17%, benefiting from the branded growth in Europe and some key private label wins, partially offset by some volume softness in Asia in the fourth quarter of 2023, the cocoa coconut water net sales grew 8% versus Q4 of 2022, slower than our full year trend, which benefited from an incremental branded promotion at a club customer in the spring. We also saw an acceleration of private-label coconut water sales driven by a combination of distribution gains, soft prior-year performance and consumer shifting resulting from lower year-on-year private label pricing we continue to see strong overall consumer demand for our category. We believe the strong functional benefits of coconut water, combined with our marketing efforts, communicating the numerous usage occasions for our products is leading to this growth within the growth. We have seen similar consumer behavior that other CPG companies have talked about. There is a segment of consumers who are seeking value either through through value in multipacks, all private label. While another segment is less impacted and is still willing to pay for premium brands and functionality. We believe our dual prong strategy of being a strong premium brand with expanding multipack availability and being a major private label supplier positions us well to benefit from both effects.
Moving on to margins, gross margins maintained the improvement seen in prior quarters, has transportation costs normalize during the year and our supply chain operated efficiently and effectively is perhaps also best seen by our year end inventory levels which was significantly down versus year end 2022 positions. Supply chain operated largely without disruption in 2023, which was not true in 2020. It was a great year for revenue margins and cash flow driven by improved profitability and inventory correction. We believe that our year-end inventory levels were slightly lower than optimum, partially due to stronger sales finish to the year than we expected. We are working to build inventory to acceptable levels to support our key summer selling and promotional period.
Reiterating what Mike said, we are confident in our underlying business, and we believe we are well positioned for a strong 2024, despite the headwinds we face with multiple commercial initiatives, reduced strong branded top line growth and improved profitability and our long-term commitment to grow the category and our share year to date in the Kona U.S. scan data provider, cocoa brand is up 9% in retail sales dollars through February 18th, 2020, for demonstrating that we are starting the year with good momentum. We believe our commercial plans for this year should produce net sales in 2024 between 495 and $505 million, with expected final cocoa coconut water growth in the high single digits and strong private label coconut water net sales expected to offset the drags Mike spoke about that collectively represent six to eight percentage points revenue headwind on 2020 for cost of goods outside of transportation, we are confident in our ability to manage our inflation through scale and productivity as we have done in recent years.
On the transportation front, we entered the year with some contract coverage on key lanes, but at significantly lower levels of commitment than prior years as the contract rates that we were offered was significantly higher than spot rates available to us starting around the new year, we saw some spot cost increases for all ocean freight rates from Asia and then more significant cost increases when carriers started to route away from the Suez Canal, we intend to monitor how spot rates move relative to any contract offers that we receive and enter into contracts early when we think the office makes sense for us.
As of today, rates remain elevated but remained significantly below those that we experienced in 2021 and 2022. Obviously, the disruption to ocean freight markets as it relates to shipments from Asia to Europe and the East Coast of America is quite recent, and that's still evolving based on rates. We are currently being challenged and our assumptions on the duration of this disruption. We are comfortable we can manage this pressure with a combination of market pricing and cost discipline and deliver on the full year guidance for Corey will detail.
With that, I will turn the call over to Corey Baker, our Chief Financial Officer.
Corey Baker
Thanks, Martin, and good morning, everyone. I will now provide you with some additional details on the full year 2023 financial results. I will then discuss the drivers of our outlook for the 2024 full fiscal year. For the full year 2023, net sales increased $66 million or 15% year over year to $494 million, driven by the cocoa coconut water growth of 14% in net sales and private label growth of 21% on a segment basis within the Americas by the CoCo coconut water, strong performance at retail increased net sales 15% to $317 million while private label increased 17% to $103 million. Lighter cocoa coconut water benefited from 12% volume growth and 3% net price mix benefit of private label increased 25% of volume, which was partially offset by price mix changes driving full year net sales growth 17% for the full year, our International segment net sales were up 17%, led by the CoCo coconut water growth of 8%, where strong growth in Europe was partially offset by volume softness in Asia. Private label revenue grew 46%, which was a result of new business gains and a large European retailers for the year. The international segment represented 13% of total company net sales, which were flat to prior year. On a full-year basis, consolidated gross profit was $181 million, up $77 million versus prior year. On a percentage basis, gross margins were 37% for the full year improvement of approximately 1,300 basis points over the 24% reported in full year 2022. The increase resulted mainly from decreased global transportation costs, increased volumes and improved branded pricing, which was partially offset by price mix effects within private label products.
Gross margins in the fourth quarter were 37.5% versus 24.4% in the prior year quarter. The quarter performance is representative of the improvement of global transportation costs and branded pricing we've seen throughout the year.
Moving on to operating expenses. Full year 2023, SG&A costs increased 24% to $124 million, primarily reflecting investments in sales and marketing expenses and increased people expenses, including incentive compensation.
Net income attributable to shareholders of full year 2023 was 47 million or $0.79 per diluted share compared to $8 million or $0.14 per diluted share for the prior year. Net income for the year benefited from increased gross profit, partially offset by SG&A costs for the full year, a lower year on year impact from unrealized FX derivatives and higher year on year tax expense. Our effective tax rate for 2023 was 19.5%. First, 28% for the prior year full year adjusted EBITDA, our non-GAAP measure, which is defined and reconciled in our press release, was $68 million or 13.8% of net sales in 2023, up from $20 million or 4.7% of net sales in 2022. The increase was primarily due to the gross profit improvements previously discussed, partially offset by the planned investments in SG&A.
Turning to our balance sheet and cash flow. As of December 31, 2023, we had total cash on hand of $133 million and no debt under our revolving credit facility compared to $20 million of cash and no debt as of December 31st, 2022. Strong cash generation in the year was driven by the increased net income of $47 million in the year, and strong working capital management provided $15 million, primarily from reduced inventory, which Martin discussed earlier late in December, we began a share repurchase program in connection with the previously announced $40 million authorization. As of December 31st, 2023, we have repurchased 30,000 shares for $773,000. As of February 28th, 2024, the Company has repurchased a total of 421,544 shares under the programs had an aggregate value of approximately 10 million. As we turn to 2024, we expect net sales between 495 and $505 million, which is based on category growth of mid to high single digits with our coconut water business, growing in line with the category, partially offset by the impact of the previously announced decision on our private label oil business and the cycling of temporary private label distribution and the opportunistic commodity sales. We are continuing to build additional commercial initiatives to improve our top-line performance. We expect gross margins on the full year of 36% to 38% based on our current assumptions for ocean freight costs, reflecting margin improvement over 2023, offset slightly by the impact of the current ocean freight market, which will begin impacting our P&L in Q2.
We expect disciplined SG&A spending throughout 2024, with SG&A roughly flat to slightly declining year on year, producing our guidance of adjusted EBITDA of $74 million to $78 million. We may adjust our SG&A spending if we see improvements in ocean freight quicker than expected or if we see productive investment opportunities to strengthen the business for the long term, we anticipate our cash balance will remain healthy through the year, allowing us to fund any potential M&A opportunities that emerge from further share buyback activity or to invest in our business for the long term growth and with that, I'd like to turn the call back to Martin for his closing remarks.
Martin Roper
Thank you, Corey. To close, I'd like to reiterate our confidence in the long-term potential of the vital cocoa company, our ability to build a better beverage platform and the strength of our Vita Coco brand. We are confident in our ability to navigate the current environment and excited about our key initiatives to drive growth. We have strong brands and a solid balance sheet, and we are well positioned to compete domestically and internationally. Thank you for joining us today.
And thank you for your interest in the vital cocoa company. That concludes our fourth-quarter prepared remarks, and we will now take your questions.
Question and Answer Session
Operator
(Operator Instructions) Bonnie Herzog, Goldman Sachs.
Bonnie Herzog
Hi. I just had a my first question. It's quick just on your top line, which came in much stronger in the quarter than what your guidance implied. So I was just wanting to get a sense of the drivers of this and then really if any, any of that was pulled forward from Q1? And the reason I'm asking it, it maybe sounds like that just based on your comments that it sounds like you guys are trying to build some inventory at retail ahead of the summer.
Martin Roper
Yes, Bonnie, I'll take that and Corey or Mike can can come in. I think our Q4 surprised us a little bit, obviously very happy. And we did benefit in 23 from some sort of opportunistic commodity sales, bulk sales that also helped that number. And I think we feel that we finished the year with wholesaler inventories, distributor inventories pretty much in line, maybe a little heavier than a year ago. And so certainly that could potentially correct a little bit in Q1 on a shipment side of we don't think that retailers are heavy or light. We think retail stock position is good.
So I think it did exceed our expectations a little bit, and obviously we're happy with that. Obviously makes the growth more challenging this year to go up against that last year. But we feel good, and I think as we sort of said in our comments, year-to-date scan data is healthy, reflecting, we think the strength of the category and the brand. And so we feel good about the core business for the year.
Bonnie Herzog
Okay. That's helpful. And then maybe on the gross margins, you guys walk through that pretty thoroughly. And maybe just a little more color on the puts and takes. And I guess my question, Vito, just trying to get a sense of how much visibility you really have and you feel pretty good about sort of your gross margin guidance you know, and I guess in the context of that, where do you see I don't know, maybe the biggest potential upside or downside on your gross margin, if there's any thing you could call out there, that would be helpful. Thank you.
Martin Roper
Sure. I want to obviously we feel good about the guidance that we're giving on. I think it goes without saying it sitting when we sit when we look at our cost of goods side, the cost of goods of the product, ignoring the transportation cost issues, we have pretty good visibility to obviously, there are inflationary pressures. But I think as we have done in prior years, we're trying to offset those through supply chain optimization and negotiation and efficiencies. And I think as we've mentioned before, we have a team of engineers that work with our partners to sort of trying to deliver cost improvements each year. So we feel pretty good about that as it relates to the transportation environment.
Obviously, it is significantly more stable than two years ago on the '22, '23 time period. And it's more stable, both for how the product is flowing and then also the cost side of that. And we obviously have recent visibility to cost increases on certain ocean freight rates that might be affected by the active activities in the Gulf and some of guidance sort of takes into account what we currently know and with some assumptions that's going to continue for a little bit. And I know we feel pretty good about that. We think we have other levers we can play on the gross margin side, obviously, with potential pricing action if things were to deteriorate or be very prolonged. And so we have actions we can take. So that sort of supports the guidance we're giving and why we're comfortable in that. And I think the point I would make about the ocean freight is the rate.
The spot rates that everyone is looking at are obviously significantly lower, and they were in that 22, 23 time period. So that's the first point multiples lower. So this increase, while it is a blip on the spot rate indexes is not nearly as big as the sort of life threatening events of 22. And then the other thing is those are spot rates and they don't necessarily reflect what we are paying. And so I wouldn't want people to draw conclusions from that I think it's indicative of the pressures, but not necessarily indicative of the rate. And so net-net, we're totally comfortable at this point in time in our gross margin guidance for the year.
Bonnie Herzog
Super helpful. And I just maybe want to clarify something I might have missed it. Can you share how much that is locked in? Is that the visibility that you mentioned that you have you feel good.
Martin Roper
So I think as we said in prior quarters, we were going to sort of rest on the commitments a little bit and sort of take advantage of the spot markets. And as in prior quarter communication, we did enter into some short-term contracts for certain lanes where we needed to guarantee capacity, but we remain significantly lower contracted than we were in 2020. When I think we've talked historically, we would perhaps be 75% contracted. We are very much significantly below that. And we still believe our current strategy of basically taking the spot market and working with relationships we have is the best thing right now. So no, the comments that I just made were not reflective of a significant change in that strategy.
Bonnie Herzog
Okay. Much appreciated. Thank you. I'll pass it on.
Martin Roper
Yes, excellent.
Operator
Chris Carey, Wells Fargo.
Chris Carey
Regarding credit growth. Hey, good morning. Just one follow up on the on the Q1. So when you gave that year to date, your kind of number are you indicating that you would expect to ship below consumption for the quarter? Are you just saying it's kind of unclear one way or the other we'll see how it goes just wanted to.
Martin Roper
Yes, just wanted to I would just say it's unclear that the kind of number only tracks a certain part of the business on those other timing issues that could affect the quarter. So I don't think we're implying anything. I just think what we were merely stating was the Q4 shipments were pretty good and maybe a little ahead of our expectations. And obviously when that happens, you always scratch your head as to what that prevents presents headwinds Q1, but we're not implying anything as it relates to how stuff would trend. I think we would say that Econo data is pretty good indicative of what's going on in the category, not necessarily on a monthly basis or even up from totally, but on a full-year basis, it is. And so we would just direct you to think about it like that.
Chris Carey
Okay, great. On the question around if freight changes and the ability to cover that. They think there's quite a bit of volume. I don't know if concern is the right word, but given the experience of the last freight cycle, there's certainly a lot of focus on your ability to protect your gross margins. Right. And so I just I guess, I guess the way that I kind of want to attack this if it does happen and you take pricing, can you just talk about the attention of some of the private label seems to be giving back some pricing and perhaps there's some shift into private label volume as a result. I don't know if that's happening, but it sounds like that's kind of what you're implying. And so just the pricing power on the branded offerings should should that happen? And if pricing isn't the right lever, what else is at your disposal?
Martin Roper
So let me just start with the freight situation and make another comment, I think some of the analysts who follow the ocean freight companies have made the point, but the spot rate increases that they've seen do not necessarily reflect the costs that the ocean carriers are experiencing from bypassing suites. And so it appears that there was some opportunistic pricing taken on. And so as we look at it, and this is one of the reasons that we're in the spot side of this, we think those are artificially high on a temporary temporary basis and the rates that we're seeing while certainly they pressure gross margin. We believe we can handle them through the offsetting measures that we have on our P&L on the pricing, maybe incremental volume, whatever to basically deliver growth of sort of gross profit sort of goal. So we're currently feeling pretty good about that at the current levels that we're currently experiencing.
As it relates to your second question on private label pricing in the market tends to track COGS and obviously, we're on the back end of it, cost of goods turn cycle on with. And so you're seeing some private label price gap start to it reemerge back to maybe historical levels relative to brand. And so we are seeing that and you are seeing some volume gains because of that in on the private label volume side, right? And we and we're obviously monitoring that, right? And we firmly believe we have a great brand that can command a premium and nothing really is happening that isn't back to where the price gaps were in 2020. So maybe that system normalization and if there is an effect, it's probably a one year effect. I also think as we sort of said on the call, we're sort of uniquely positioned to play both sides of this. We're one of the most significant private label suppliers, certainly in the US And we also have the primary multi-pack strategy in the category and also to take advantage to well positioned to take advantage of consumers looking for value. So for playing both sides of it. And there certainly will be some interplay and that can sometimes make our total net revenue look a little odd as the volume moves on between private label and branded, but we're well positioned and we feel very good about it. And it's just going to be a year of sort of that transition because these gaps are and have emerged and it will take a year for it to shake out.
Chris Carey
Okay. Thank you.
Operator
Michael Lavery, Piper Sandler.
Michael Lavery
Thank you. Good morning, Michael Martin, I'm sure Tom start on multipacks. I like the sales bridge, you show the slide that just shows how big a contributor that's been to the growth. Can you maybe just give a sense of how much of that might have been pipeline fill that we should be aware of or just contextualize it a little bit, and I know you gave some color on this, but a little more maybe kind of the runway ahead and just how to think about how big that opportunity could be yes.
Martin Roper
So one, it's not really pipeline because these are retail scans, the data on slide 9 in the investor deck as retail scan data. So it reflects consumer consumption and we're seeing really good velocity on these items. And um, you know, obviously, there's a little bit of cannibalization with singles, but singles has held up remarkably well on. And so the total brand is growing. The growth happens to be mostly in the multipacks, but the singles have held on. I think it's still early innings, right up some of these multipacks. I've only been in market for eight, nine months, some a little longer, maybe 12 to 18 or two years. It's still early innings, still consumer adjustment to them. We still have distribution gains and that opportunity is, again laid out in a slide in oh nine. And so what I would just say is I think when we talked about this a year ago, we said, it was like a two year acceleration of our business or to you a program and to reach fruition. And we were one year end and obviously very happy of both with the results and also the fact that we sort of have proven that we're the only brand that can really carry these multipacks in food, right? So it's a nice competitive position to be in going back to the previous comments to Chris. And so we feel good, and we think it's going to fuel growth this year.
Corey Baker
And we think it has at least another year to run, as you think about it on our line of credit would be shipment load. And in my view, one of Michael's, but on the full year and would be immaterial to the revenue.
Michael Lavery
Okay. That's helpful. And you touched on some of the flex in SG&A, obviously, depending on what freight does that could go either way, but you mentioned potentially opportunistic on increases in investments if freight gets more favorable, which you seem to obviously make a case for the possibility of at least. Is that the right way we should think about it in terms of if we see favorability in spot rates where you have more exposure than usual, if you're more likely to reinvested or that you might or can you just help us understand as we see some of the rate moves up, how to think about flowing that through and what how you might manage that.
Mike Kirban
If we see opportunity to invest it on productively. We'll invest. That's the primary objective. If there is favorability.
Martin Roper
I hope we've demonstrated discipline top P&L discipline over the last two, three years. Um, and we would continue to do so. And we're not we're not the sort of company that spend money just because we have a right, but we also reserve the right to spend it if we thought something would work.
Michael Lavery
It's not like you've got a waiting list of things on deck that are kind of simply teed up. If there's favorability, it's just that you would evaluate as it progresses and see what might make sense?
Martin Roper
Yes, I'd say our approach to marketing is we do a lot of things and things that work we trying to spend more money on. So other things that my marketing team will tell me are going to work and my marketing team will tell me that they want more money for? Absolutely. Obviously, the proof is do we see what we like the results and then we can ramp it up. So yes, there's always opportunities. There's always things we can. We could do more of on, but it's not like we're sitting here sort of not wanting to do what we want to do with doing what we want to do. And we could do more of it if it works.
Mike Kirban
Yes, there's always opportunities to amplify long term initiative.
Michael Lavery
Okay. Very helpful. Thanks so much.
Operator
Eric Des Lauriers, Craig-Hallum.
Eric Des Lauriers
Great. Thanks for taking my questions for me. Just a bit more on the ocean freight and transportation cost here. Could you provide just a bit more color on some of the different shipping lanes that you're exposed to. I would imagine the vast majority of your shipments don't go really anywhere near the Red Sea. So could you give us a sense of the sort of geographic mix of your shipping lanes? And then if there are any material differences in pricing amongst those Yes.
Martin Roper
So the way I would think about it and obviously we haven't disclosed it fully, but the way if I was an analyst, I would approach this is to identify that one major market is North America with a West Coast and an East Coast port and one major market is Europe. And you can sort of get to those numbers from a breakout of international and Americas business.
And then as it relates to the America business, Eastern West, you can sort of make some assumptions based on population east and west of the Rockies to get to percentage of business going into east-west. And so our primary routes are Asia to East West America and to the UK. And there is just one wrinkle I think we've previously disclosed that about a third of our supplier of quarter by supply comes from Brazil, and that would come into the East Coast. So the way up again, we haven't provided the data because we prefer not to put if you wanted to model it, you would do your model based on population and then assume that roughly a quarter of third of the business is coming from Brazil as it relates to rates on. If you look at historic rates and I'd go back to before 2020 on Asia to Europe, was pretty cheap. Um, I'm going to quote a number, but please don't hold me to it. I'm going to throw out a container turbine at that level. And then Asia into the West Coast was more expensive than Asia to East Coast was more expensive than that on obviously, Brazil and East Coast is a much shorter lane and you would conclude was cheaper then take share in the East Coast.
Eric Des Lauriers
Okay. That's very helpful. I appreciate that. And then just I guess, excluding ocean freight costs, I'm just kind of thinking with these comparisons back to the sort of COVID era here. Can you comment on some of the other transportation warehousing inventory cost that you experienced during that COVID time? And sort of how those compare to what you're experiencing?
Martin Roper
Yes. So during that period of time, we saw very significant costs related to port demurrage fees, warehousing, congestion charges just because of the supply chain around the ports was basically a bit of a mess. And I don't think we were alone in that. And I think what we said was that when we talked about the 65 million on that we experienced we absorbed an excess transportation cost. I think we said roughly a third with domestic up. The other part of the domestic stuff was also there was a lot of inflation on over the road transportation and in warehousing costs and particularly at the end of my years, right at the end of 22 because of how all the global supply chains have reacted. There was a shortage of warehouse space in the US, which drastically increased costs for everybody. And you basically wasn't space and you're ending up with multiple warehouses instead of single warehouses. So that's the background. I would say that during a by the end of a maybe by the middle of the second quarter last year, all of that anticipated over the road rates were back to competitive rates.
Now obviously, a lot of this is also partly what the consumer demand is and that obviously that was reduced as people started going back out and eating out and et cetera, et cetera, warehouses freed up. It was possible to get everything back into one warehouse where you only wanted one warehouse and the ports have largely been congestion free from a largely because there's always occasional instances, whether it's a strike or something happens that blocks that have caught up. So domestic transportation costs have largely mitigated back to what I would call normal. I think the other indicator of that is also our inventory levels where obviously was supporting a very solid sales with significantly lower inventory than on a year and a half ago. And so for all those reasons, the domestic costs have significantly subsided.
Eric Des Lauriers
That's very helpful color on my last question here on private label. So obviously, much of the discussion in recent quarters has been on the relationship with your largest private label customer. But could you just kind of comment on what you're seeing with your other private label customers on maybe comment on some of the growth between sort of new and existing accounts and just kind of how to think about this section of private label going forward? Thank you.
Mike Kirban
Yes, I would say overall, the relationship with all of our private label customers is quite strong. We've continued to deliver strong service and value to them. And you can see it in our private label results that there is a strong balance of growth coming from new customers with some big ones in Western Europe as well as in the U. S as well as incremental distribution, some of which was temporary or is temporary as we've been able to provide better service than others so we picked up incremental distribution. And then so overall, we see very strong private label performance that we expect will continue depending on those price gaps that Mark talked about earlier.
Eric Des Lauriers
What's great for taking my questions.
Operator
Jon Andersen, William Blair.
Jon Andersen
Morning, everybody. Thanks for the questions. And congrats on a strong 2023. I wanted to ask first about just the category, the coconut water category. As you pointed out, it's been a terrific category over the past several years and up 16%. You've indicated in dollars in 2023. But it sounds like you're expecting that to moderate fairly materially in 2024, I think you mentioned are category growth in the mid to upper single digits in 24. Could you just talk about is this just kind of a return to normal after an unusual 2023, what some of the assumptions are that you're making that lead to that kind of outlook for the category?
Martin Roper
Yes. No, great question one, I think when we looked at Tata data, we see category volume growth last year around 13%. Tom, I think if you look at like a four, five year average, the volume growth has been high single digits. And I think we prudently sort of do our budgeting and planning around assuming that that's a good a good catagory number. And so does that imply a slowdown from last year, maybe, but I'm not sure whether we have any great crystal ball on this. We just have to do some estimates for planning purposes. What I would say is I think the category benefited last year, both from our introduction of multipacks and probably from some competitors returning to full inventory. And so probably there was some maximization of demand, I suppose and and that maybe helped those numbers a little bit. So I don't think our assumptions are unreasonable. Obviously, we'll be prepared for better. And obviously, we're prepared for worse, too, but I don't think those assumptions are unreasonable, but that's what sort of goes into it. I wouldn't say we have a great crystal ball. We have to pick a number and then build plans around that and make sure that our supply chain planning can deal with a variance in those outcomes.
Jon Andersen
Okay. That's helpful. Makes makes perfect sense with respect to your own sales guidance. I just want to make sure I understand the puts and takes. It sounds like you know, again, correct me if I'm wrong, but you're looking for Vita Coco branded growth in line with the category in 2024. And could you talk a little bit about your volume and price assumptions?
I'm not sure if you you've already taken some pricing on the branded part of the portfolio or if maybe that's expected in 2024? And then what some of those offsets are, if you can kind of quantify those for us to a greater extent. I think you mentioned the oils business, perhaps some one-time bulk volume. And I think even that trigger a promotion that might not repeat? Thanks.
Martin Roper
Yes, I love that. Let me take the sort of drag to audit all the headwinds. First, I think we've shown and I'll be honest, we've chosen not to sort of I'd categorize the size of each, partly because the private label pieces of C. proprietary information to a certain retailer and were uncomfortable breaking out that private label all business just listing them and may be in order of magnitude or maybe not as the case may be. Obviously, the loss of the private-label coconut oil business is a is the biggest factor on there is some reduction in promotional activity that we know won't repeat because it was a little opportunistic last year because we had inventory and the retailers wanted it. So that's a little bit of a drag on. We have, as I mentioned, the nonrepeating commodity sales, which were two on commodity sales for us is coconut water concentrates and stuff like and we just don't expect that to reoccur. It was sort of again opportunistic. That was another I've got a customer who needed it and we had it. So we sold it right sort of thing.
And then I also think you know, our growth rate is challenging in 23. We said, as we talked about in Q1, Q2, we had a major promotion with a major club retailer, and that was incremental promotion follow ups. It's hard to duplicate that growth again, right? So that's also a little bit of of the headwinds, but we're going to more than offset all of those headwinds with the core business growth, as you noted, plus the private label growth, it's going to more than offset that. So yes, it's a little bit of a reset year for us, but we feel really also the businesses that can emerge from it stronger. And now I've completely forgotten the other part of the other part of your question, but I do apologize.
Corey Baker
I think pricing. Yes, pricing, John, in our guidance, we didn't assume a lot of incremental pricing over where we currently are obviously, there's a lot of stuff going on in the macro environment. But at right now, we haven't assumed significant pricing. So broadly, it would be volume based growth within our guidance super-helpful assumption.
Jon Andersen
Thank you.
Operator
Jim Salera, Stephens.
Jim Salera
Yes, good morning. Thanks for taking our question, Martin, I appreciate all the color on the ocean freight rate. And if you'll indulge me on just one real quick question on that. Maybe kind of tie the loop there on you. It sounds like you're expecting and I appreciate that you guys pay rates lower than the current spot rate, but it sounds like you're expecting current spot rates to decline as the year goes on. If I'm wrong on that, please correct me, but if spot rates stay where they're at currently, would that provide or would that yield a headwind to the gross margin guidance as it's currently put together?
Martin Roper
So yes, I think if you look at the indexes, Ali, lots, one that we'd look at was published last Thursday, you can see that the increase in spot rates sort of peaked about three, four weeks ago, and it started to decline and decline to different by market. But the sort of weakening there, as you noted, and as we indicated earlier on the call, what we're not paying spot prices were paying prices that we think better than that. And so we see we see this happening, right. And what I would say is our guidance assumes that what we're currently paying, it continues for a reasonable period of time given what's causing it. And yes, we have optimism that the rate should continue to soften, but that's a little bit of the crystal ball question.
Jim Salera
Okay. That's helpful. And then if we can shift back to the category growth side of things. You talked about growth in line with with the overall category up, given the uplift you guys have seen for multipacks and some of the innovations can we think about there being upside to branded as some of those things continue to perform well in the market. And presumably you guys gain some more shelf space as the resets go through?
Martin Roper
Yes, absolutely. You can think about it and we think about it a lot, right. And our Mike, it's very challenging to us. Okay, guys, we need crusher, right? It's obviously a lot harder to grow share from where we are than where we were three years ago, but we're committed to trying to do so.
And Mike talked about the initiative with the juice cans. Obviously, the multipacks gives us an advantage in food and mass in the mainstream part of the section. We need to find ways to win in the current section in food, a massive that's on a multiyear sort of goal rate. But yes, our goal is to continued to gain share. And if we do so then obviously there's upside.
Jim Salera
Okay, great. And then maybe if I can just sneak in one quick one on the the juice cans, you'd mentioned some offerings for that outside of convenience. Would that include a multi-bank offering of the cans? Or is that still going to be all one count add in mass and other outside of convenience.
Mike Kirban
Eventually likely, but for now it's single-serve units.
Jim Salera
Okay. Thanks. I'll hop back in the queue.
Operator
Eric Serotta, Morgan Stanley.
Eric Serotta
Morning. Thanks for taking the question. I'm hoping you could give some perspective on your price points relative to some competing beverage categories, whether it's a bottled water and sports drinks or even three of these areas don't directly compete, and we'll take you probably benefited from improved relative affordability over the past few years with pricing in alternative categories, clearly or price increases moderating not seeing any deflation to be clear on how are you thinking about the potential for further price increases and Vita Coco, coconut water?
Mike Kirban
Yes, against that backdrop, So Eric, you're correct over the last few years, there's been a significant compression in the relative price between us and other beverage categories going forward. Like I said, I don't expect much pricing at this point in our guidance for us this year. And I think what we've heard from most other beverage companies, there's not a lot of pricing probably in the overall LRB category. So we expect those relative price points stay the same at this point unless something changes. You know, we're always monitoring the market and we'll make adjustments competitively as as needed. But I would say we would assume at this point that those relative points would stay the same or relatively close.
Eric Serotta
And then lastly, I think, Martin, you joked last quarter in terms of giving your preliminary outlook that well, yes, Mike expects me to gain share each year. I think that was last quarter, Tom and me. So I know there's been a lot of back-and-forth about sort of the cycling some of these one-time benefits that you had in terms of coconut water or one-off sales last year. To be clear when you strip out those kind of onetime and cycling those one-time benefits, do you think your underlying growth or is going to keep pace with the category or your underlying share? Is going to keep pace with the category or or even I see that?
Martin Roper
Yes. So I think our plan or hope is that of our branded business made it tracks the category and as a minimum expectation rate. And yes, I think we think the private label at least this year could be a little faster than that just because of the breadth of the price gap issue. So that's the goal. It's a little hard to talk about one, your goals like that because obviously, as you said, all the other stuff going on, I think our long-term goal is remains mid teen branded growth, and we've delivered that the last four, five years this year, we have a little bit of a little more challenging for us to do with this year, which is why we're giving the guidance we're giving, but it doesn't take that long-term goal of today.
Eric Serotta
Great. Thanks so much. Thank you.
Operator
Bryan Spillane, Bank of America.
Bryan Spillane
Thanks, operator. Good morning, everybody. On my right I just had what I just have one question on, and I guess if we just step back and on make a scenario, I guess not make an assumption, but think about a scenario where all this discussion about freight and boats is really geo-political, right? Like this isn't the COVID boat, you know, supply demand imbalances, you know, it's tough to navigate traditional trade routes right now in May for a while. I mean, it's the Barbary wars, right, impacted trade and freight rates for a year's price. So I guess I have two questions related to that, right. One is is there a way to change the product form? Could you like like we do with natural gas milk, right, can be converted to powder. So if you were trying to reduce the incidence of freight and concentrators or way to concentrate the product to just at least reduce the number of ships that you actually have to procure one two, if it's just sourcing from Asia becomes more impractical over time on would it be possible to source more from Brazil? So I know it's kind of a big picture question. But again, it just seems like this could be a recurring theme as the world continues to be as unstable as it is. And just curious if there's other ways to sort of adjust the supply chain to adapt to that? Thanks.
Mike Kirban
I think I need less geopolitical and more opportunistic on the come for the freight carriers, too increase rates mean when you think about it, they're not going through the Suez anymore. They're going around Africa, which is not that much more expensive and does take a little bit longer. So it's an opportunity for them to trade to spike rates. That's how we look at it on.
Now, if you think about moving production from can boot kit can move supply to the U.S. because there's none of coconut. Clearly, there's like a few in Miami on that guy that push card in Miami. It is on the beach, but so it's going to be hard to get the coconut, right. But if we look at moving more supply to Brazil, that's clearly something that we're working on and something that we've been working on for quite some time. And it's a Brazil is a great location for us because it is a much shorter transit time and it's further diversification of our supply chain. So obviously, that's something that we're looking at. And then from if we think about concentrate, it's also an option, but it changes it changes the product that we're selling today. And so it's not the primary focus.
Operator
Thank you. Ladies and gentlemen, showing no further questions. This does conclude today's conference. Thank you all for participating. You may now disconnect and have a great day.
