ZVIA - NYSE

Greetings, and welcome to the

Thank you, and welcome to

Thank you, Jean. Good afternoon, everyone, and thank you for joining our fourth quarter and full year 2025 earnings conference call. We are proud of the transformation progress we delivered in 2025. Through a series of high-impact initiatives spanning product innovation, marketing, distribution and supply chain, we not only significantly improved our financial performance, but also strengthened

Thank you, Amy. Good afternoon, everyone, and thanks for joining our call today. 2025 marked a year of transformation for

[Operator Instructions] Our first question comes from Sarang Vora with Telsey Advisory Group.

I wanted to start with the Costco rotation program. It's great to see that you guys are nationally up from regionally before. So how does the program work? Can you help us understand, is it nationally, but it is still rotational or you guys --

Sure. No problem. Yes, we're excited about the fact that we are able to kick off nationally at Costco through what is a rotation that took place at the beginning of the year, stronger visibility for the brand and almost most importantly, penetration into regions where we haven't had Costco distribution before. So what we expect going forward is in a couple of regions, if you think Texas and some across the South, the Southwest, there's a number of regions where they've never carry

Okay. That's great. And then second question I had was about the tariffs. Can you talk a little bit about exposure to tariff? I know you called it out about $5 million, but how are you mitigating that in some ways? It seems like there's a price increase coming up or trying to offset that. There's also some COGS initiatives you have. So walk us through how are you mitigating that tariff exposure and how long it should last in the P&L? I know we started lapping it this year, so that would be helpful.

Sure. So what we'll see in the P&L, of course, is increased exposure to increased aluminum costs, which is reflected in our guide. There's 2 things that we are doing to mitigate it. One, of course, as you mentioned, is the price increase, which we have taken and we will begin to see or have communicated rather, and we'll begin to see the impact of it in Q2. Secondly, we have the incremental $5 million, which is the last tranche of the savings from the productivity initiative, which again will also start hitting the P&L in Q2 as well. And so those 2 items, price and incremental costs are the main factors that we are leveraging to mitigate the increased aluminum exposure.

Our next question comes from Jim Salera with Stephens.

To start off, maybe just a quick housekeeping on food. Is the $1 million or so that you guys came up short of the 4Q top line guide that you provided in 3Q, is that just by virtue of the Costco timing shift? Or is there anything else in there that we should be aware of?

It's primarily due to the Costco timing shift where we had planned -- we had planned regional rotations in Q4. We moved those into a broader national rotation in Q1. So the volume shifted from Q4 to Q1.

Got it. And then on the -- as we think about better visibility, obviously, more locations in Costco and some other retailers, when is all of the new packaging going to be in market? And do you guys have any marketing programs kind of around having the kind of fully implemented new packaging to help drive some visibility and maybe call attention to that?

Absolutely. Thanks, Jim. So first of all, the packaging is starting to show up on shelf now, and it looks amazing. It really pops. It looks delicious. It screens the specific reasons to believe in

Great. And if I can just sneak one in real quick. I think you guys finished with marketing spend for 2025 at like $20 million, maybe a little shy of that. Can you just give us a sense for what overall marketing spending looks like in 2026 as we think about kind of the balance between flowing through some of the cost savings versus reinvesting in visibility for the brand?

Yes. Thanks, Jim. We will continue to increase investment in marketing. And as a percentage of revenue, it will range between, let's call it, 12% and 13% of revenue in 2026. So a slight increase over 2025 as a percentage of revenue.

Our next question comes from Eric Des Lauriers with Craig-Hallum.

First one for me, another follow-up on Costco. So wondering how many of these regions are new? And are any of these regions -- are you also underpenetrated in other channels in these regions? Or is it sort of just club or just Costco where you've been relatively underpenetrated here?

Sure, Eric. So about a little bit of each. So the regions that have never carried

That's great to hear. And do any of the flavors in that variety pack contain either any of your new flavors or the new improved formulation?

New flavors as of now, yes, new as of 2025 and new taste profile for the classic flavors, not yet. And so think about the pack design, the increase in marketing spend sort of seasonally and the improved taste profile, all ramping up during peak beverage season, so late spring.

That's great to hear. And then just last one for me. Just wondering if you could expand a bit on the DSD market, Pacific Northwest, and I believe it was Arizona, just how the trends there continue.

Sure. So we are learning that time in market with a DSD operator yields some stronger results, meaning we are really starting to crack through distribution of display in grocery from our DSD partners. And so we see grocery in our DSD markets outperforming rest of market. And very new news, we're starting to see some of our singles programs perform better than they have in the past because of what we're able to execute, again, in grocery with our DSD partners help. And so we're leveraging some of those insights when we think about how do we drive trial and specifically how do we drive singles success through the spring and summer with the marketing and packaging rollout that you and I were just discussing. Convenience is more of a long-term opportunity. I believe that, that's true for the category in general as we think about the fit of the shopper in the convenience environment to the category and its promise. It will just take a little more time. But our DSD partners are able to help us to test and learn in some regional pilots, and we continue to do that with a few success stories that help us to learn what exactly sets the brand up for success at these early stages in the channel.

Our next question comes from Andrew Strelzik with BMO Capital Markets.

My first one, I think I caught this right. You made a comment about Albertsons and some of the successes there and kind of insinuated that other retailers may follow suit. Can you just maybe elaborate a little on what you were talking about there? And is the implication that there are some potential sales opportunities out there that aren't at this point included in your guidance because you don't have full visibility to them?

Let me start with your second question, then I'll go backwards into the grocery channel dynamics and specifically Albertsons. Our guide does consider in some part that we have yet to receive final spring set communication from several retailers. And this is not atypical, right? February, the resets are March, April or May, depending on the retailer. So there could be some improvements in set. And of course, we guide just thoughtfully thinking about what we know and what we don't know, AKA, just visibility into the channel. The comment on Albertsons is really a significant learning for us around assortment, planograms and innovation. And the reason I say that is in Albertsons in the spring of last year, we increased our space by 30% by way of expansion of the category and by way of exciting new flavors. Albertsons took the majority of our flavors and most importantly, built out a brand block for

Got it. Okay. That was very clear. And then you gave some good color on some of the puts and takes through the year on the sales growth side. And so I was wondering about gross margins through the year, what you can share on that or how we should think about gross margins for the year, it sounds like maybe 1Q is the low point with Costco and then the pricing coming through in 2Q, but any color on that would be helpful.

Sure, Andrew. So as you noted, in Q1, we'll see a bit of a downtick from Q4 in terms of gross margin, particularly related to this national rotational program at Costco. Beginning in Q2, you'll begin to see the impact not only of the price increase, but some of the incremental mitigation factors around mitigating aluminum tariffs. And so we expect to see both of those things again, starting in Q2. So we expect in Q2 and thereafter, margins to return back to the upper 40s range.

Our next question comes from Eric Serotta with Morgan Stanley.

So a quick one for Girish in terms of the price increase. Can you give us some idea of the magnitude we're talking here, low single digits, mid-single digits? Okay. That's great. And then what are you assuming in terms of elasticity impact? It seems a little different than in the past when everyone is taking pricing at the same time. Some of the CSD players have moved already, moved late last year. So just wondering your thoughts on elasticity and then a question for Amy.

Yes. As a reminder, we did not take price last year. And so we are taking price this year beginning in Q2. Elasticity, I think, generally speaking, we've evaluated at around 1.1 or so, which is what we've seen historically, and that's kind of what's baked into our guidance.

Yes. And I think one of the most important things on the price increase and on the elasticity question is that we have been a fast follower on price, which I think is appropriate for our brand and its size. We do have room on price over the next few years as we continue to build brand. And we have been, I think, most importantly, successful in projecting the impact of price increases, AKA, our elasticity assumptions have been correct. So we feel pretty confident in our ability to implement price increase as planned and largely predict its impact on the business. That, in this case, to be a very positive one.

Great. And then, Amy, we're probably, what, 15 months or so into Walmart implementing the modern soda set, I guess, it was late 2024, if I remember correctly. How are you seeing that set evolve in the -- how have you seen it evolve in the interim? How are you expecting or seeing it evolve this year heading into and coming out of the spring resets? Is the overall space for modern soda increasing? And how is your space within that set trending?

Sure. So just to start with, I think it was pretty cool to see the world's largest retailer be a first mover and calling the set modern soda, which I think is very strong positioning and others follow food or slowly are doing so, and they are pleased with the performance of the set, not only in its literal performance from a velocity and incrementality perspective, but also in the shopper that it attracts. It's a very attractive shopper. It's a younger shopper. It's generally a higher income shopper. Now speaking to

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Amy for closing comments.

Thanks. Just briefly, I would just say that in 2025, we returned to growth. We cut adjusted EBITDA losses in half. We improved our gross margins even in the midst of a challenging macro, and we gained distribution. So we are proud of the foundation that we've set. But almost more importantly, we have in our pipeline powerful packaging changes, an accelerating pace of strong innovation and improved taste across much of our portfolio. And all of this is supported by a sharper brand, which is really resonating with the consumer. So our position as a clean label, clear liquid zero sugar affordable option that also tastes great and increasingly tastes the best among better-for-you sodas is more relevant than ever. The fundamental changes and increased investments that we're making in the business set us up for the long term. So thanks for joining us today, and we look forward to speaking to you again next quarter.