Vita Coco (COCO) Q3 2025 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Wednesday, Oct. 29, 2025, at 8:30 a.m. ET

CALL PARTICIPANTS

• Executive Chairman — Michael Kirban
• Chief Executive Officer — Martin Roper
• Chief Financial Officer — Corey Baker

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

• Corey Baker noted, The impact of U.S. tariffs announced in April and August has increased through the year. We expect our cost of goods to increase by $14 million to $16 million for the full year 2025 compared to the prior year.
• Gross margin fell approximately 110 basis points to 38% from 39% due to higher finished goods costs and new import tariffs.

TAKEAWAYS

• Net Sales -- $182 million in Q3 2025, up $49 million or 37% year-over-year, driven by a 42% increase in Vita Coco Coconut Water and 6% growth in private label.
• Gross Profit -- $69 million, up $17 million over the prior year.
• Gross Margin -- 38% gross margin, down approximately 110 basis points from the previous year, impacted by a $6 million tariff hit and higher product costs, partially offset by price increases and lower ocean freight expenses.
• Net Income Attributable to Shareholders -- $24 million or $0.40 per diluted share, versus $19 million or $0.32 per diluted share last year.
• Adjusted EBITDA -- $32 million (18% of net sales) adjusted EBITDA, up from $23 million (17% of net sales) in Q3 2024, primarily from growth in net sales and gross profit.
• Cash Position -- $204 million in cash and no debt under the revolving credit facility as of September 30, 2025.
• U.S. Tariffs -- Weighted average tariff rate at quarter-end was ~23%, applying to approximately 60% of global cost of goods. Total 2025 cost of goods is forecasted to rise $14 million to $16 million from tariffs.
• Americas Segment Performance -- Vita Coco Coconut Water net sales grew 41% to $132 million. Private label fell 13% to $14 million. Volume increased 30% with an 8% positive price mix.
• International Segment -- Net sales up 48% and 47% across major markets; Private label sales increased 70%.
• Other Category Growth -- 182% growth, mainly from the national launch of Vita Coco Treats.
• Full-Year Guidance (2025) -- Net sales now guided to $580 million-$595 million for 2025; Gross margin expected at ~36% for 2025; SG&A to increase high single digits; Adjusted EBITDA expected at $90 million-$95 million for 2025.
• Pricing Actions -- Two U.S. price increases in 2025, in mid-May (cost inflation) and mid-July (tariffs), resulting in a cumulative on-shelf increase of about 7% over two years.
• Inventory & Distribution -- Walmart set reset expected in mid-November to significantly increase points of distribution versus both current and prior levels.
• Private Label Outlook -- Lost regions are being regained in 2026, but management expects private label to remain a net headwind.

SUMMARY

Vita Coco (COCO 6.60%) delivered significant net sales growth and raised its 2025 net sales and adjusted EBITDA guidance, citing robust international demand and improved execution. Management outlined detailed tariff impacts and mitigation strategies, including ongoing price actions, supply chain shifts, and expectations regarding future tariff rates and potential waivers. Retail scan data confirms strong U.S. and international category momentum, with Europe and especially Germany cited as early-stage but rapidly expanding markets. The company maintains a sizable cash balance and articulated clear capital allocation priorities, with a focus on core business growth and measured M&A activity.

• Martin Roper said, Our current weighted average tariff rate on coconut water shipped to the U.S. from the source country at the end of Q3 2025 is estimated at a blended rate of approximately 23%, which is
• Private label regions previously lost are expected to be partially regained beginning in early 2026, but management indicated the net effect would likely still be a drag next year.
• The launch of Vita Coco Treats contributed 182% growth in the “other” category and has shown a high proportion of new-to-brand consumers, with planned distribution gains targeted for 2026.
• Management stated that in the UK, the brand holds over 80% market share, while in Germany, distribution is early-stage yet accelerating via both branded and private label routes.
• SG&A increased $10 million to $41 million, primarily due to people-related and marketing costs.
• Management expects full-year gross margin compression to 36% for 2025 as the impact of Q4 tariffs and higher finished goods costs flows through the inventory cycle.
• Martin Roper said, "We have started preparations for this diversion, but may choose, for service and responsiveness reasons, to source some production from the U.S. from Brazil on an ongoing basis."
• Corey Baker said, The decrease in gross margin resulted from higher year-over-year finished goods product costs and the baseline 10% import tariffs announced in April, plus a very minor impact from the August tariffs, which collectively created a $6 million tariff impact.

INDUSTRY GLOSSARY

• Points of Distribution: Unique retail locations or shelf placements where a product is carried, reflecting breadth of retail availability.
• Private Label: Products manufactured by one company for sale under another company’s retailer or distributor brand, often at lower price points.
• Tariff Mitigation: Strategic actions to reduce the financial effects of import tariffs, including supply chain rerouting or selective price increases.
• Scan Data: Retail point-of-sale tracking showing sales volumes and values, often used for monitoring category and brand-level momentum.
• Branded Price Mix: The effect on sales growth due to changes in product price and product mix for the company’s owned brands.
• SG&A: Selling, general, and administrative expenses, which include marketing, salaries, and other corporate overhead costs.

Full Conference Call Transcript

Operator: Hello, and welcome to The Vita Coco Company's Third Quarter 2025 Earnings Conference Call. My name is Daniel, I will be coordinating your call today. Following prepared remarks, we will open the call to your questions with instructions to be given at that time. I will now hand the call over to John Mills with ICR. Thank you, and welcome to The Vita Coco Company's

John Mills: Third Quarter 2025 Earnings Results Conference Call. Today's call is being recorded. With us are Mr. Michael Kirban, Executive Chairman, Martin Roper, Chief Executive Officer, and Corey Baker, Chief Financial Officer. By now, everyone should have access to the company's third quarter earnings release issued earlier today. This information is available on the Investor Relations section of The Vita Coco Company's website at investors.thevitacococompany.com. Also on the website, there is an accompanying presentation of our commercial and financial performance results. 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.

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 our business performance. Our 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, which are available on our website as well. And with that, it is my pleasure to now turn the call over to Michael Kirban, our co-founder and Executive Chairman.

Michael Kirban: Thanks, John. Good morning, everyone. Thank you for joining us today to discuss our third quarter financial results and our expectations for the balance of 2025. I want to start by thanking all of our colleagues across the globe for our continued strong performance, particularly in a very fluid environment, and for their commitment to The Vita Coco Company and advancing our mission of creating ethical, sustainable, better-for-you beverages that uplift our communities and do right by our planet. Although I am incredibly pleased with our third quarter performance, I am even more excited by the underlying momentum in our category and our very high execution levels, which bode well for our future.

Coconut water remains one of the fastest-growing categories in the beverage aisle, growing 22% year-to-date in the U.S., and 32% in the UK based on data, and over 100% in Germany based on Nielsen data. This, coupled with our significantly improved inventory position versus last year, has resulted in very strong retail growth for our brand. Year-to-date, according to our retail data, Vita Coco Coconut Water, excluding our coconut milk-based products like treats, is growing 21% in retail dollars in the U.S., 32% in the UK, and over 200% in Germany. This has led to similarly strong global net sales, gross profit, net income, and adjusted EBITDA performance for our third quarter.

Year-to-date, our international business is accelerating, driven by strong performance in Europe. Our increased investment this year in the UK, Germany, and other select European markets is paying off with healthy growth and brand share wins. The acceleration of the category that we saw in late 2024 has continued through 2025, which, combined with improved inventory and strong execution, is producing exceptional year-to-date results. Looking forward, we expect to maintain strong growth trends as we invest in and develop the coconut water category in our priority markets. Our asset-light model and strong cash generation position us well to take advantage of the opportunities ahead.

Big picture, I believe that the coconut water category is in the very early stages of gaining mainstream appeal on a global level. Coconut Water looks to be transitioning from niche to mainstream, and we are at the forefront of that trend. If we can continue the household penetration and consumption gains that we are seeing, I am confident that coconut water will one day be as large as some of the major beverage categories across the beverage aisle. And now I will turn the call over to our Chief Executive Officer, Martin Roper.

Martin Roper: Thanks, Michael, and good morning, everyone. I am pleased to report that thanks to Vita Coco's continued strong performance in the third quarter, net sales in the quarter were up 37%, driven by growth of Vita Coco Coconut Water of 42%, benefiting from strong growth in the coconut water category and improvement in our available inventory and service levels. Our branded scan results in the United States were very strong, even with a slight drag in our scans created by the changes in the Walmart set late last year, which we estimated was a mid-single-digit drag to our total U.S. branded scans in the third quarter.

We are benefiting from strong volume growth and the impact of the two price increases taken in the U.S. this year, the first in mid-May to cover our normal inflationary cost of goods increase, and the second in mid-July to cover the dollar impact of the 10% baseline tariffs announced in April. The cumulative effect of these price increases on the shelf in the U.S. is best viewed on a two-year basis, which is showing as approximately 7% in the last quarter, according to Sukana.

Today, we think the price elasticity impacts from these increases are within expectations, but we need more time to understand the impact of the July increase and to see competitor moves before thinking about any further price increases to cover the additional tariffs announced in August. Since November, we have been in the juice set at Walmart with significantly reduced assortment. We currently expect this juice set to be reset in mid-November. We have been told that our current total points of distribution will grow significantly compared to the current sets, and also above levels we had before the move to the juice aisle.

We are optimistic that we do not have complete visibility to understand the competitive dynamics of the new set and the actual shelf space allocated for our SKUs beyond the expected distribution gains. The private label business remains strategically important to us. With greater uncertainty on costs, particularly due to the announced tariffs and some intermittent service issues from some of our competitors, as the category accelerates, there have been more inquiries than normal about our private label services. In addition to the new U.S. private label relationship announced last quarter, we now expect to regain in early 2026 some private label service regions with key retailers that we had previously lost.

We view this as a positive signal on our quality, service, and pricing, and it reinforces our belief in the competitive advantage of our supply chain. Other than increasing tariffs and slightly soft ocean freight, our cost of goods has been pretty stable since we last spoke to you. We believe ocean freight rates during the quarter were still elevated relative to historical levels, but we saw rates soften through the quarter and since quarter-end. We are operating primarily on spot rates with some fixed price arrangements on certain lanes to secure capacity, which allow any lower rates to benefit our P&L, probably early next year depending on the timing of inventory flows.

Corey will cover our outlook for the balance of the year. For 2026, the most difficult element to predict is the applicable U.S. tariffs we will be operating under. During the quarter, there were signals that the administration is willing to offer exemptions for products related to natural resources not available at scale domestically to meet U.S. demand, which gives us more optimism that coconut water could potentially receive waivers. If we do not receive any waivers and tariffs are upheld, we will continue our mitigation efforts and ultimately, if significant tariffs remain and other offsets like ocean freight are not sufficient, we will evaluate the potential to take more pricing next year to further mitigate the impact of tariffs.

We have a global diversified supply chain, which positions us well to deal with a dynamic U.S. tariff situation. The majority of our supply comes from The Philippines and Brazil, with the remainder principally coming from Thailand, Vietnam, Malaysia, and Sri Lanka. Our current weighted average tariff rate on coconut water shipping to the U.S. from the source country at the end of the quarter is estimated at a blended rate of approximately 23%, which is before any significant moves to mitigate the 50% tariff on coconut water from Brazil.

We are currently seeing tariffs into the U.S. apply to approximately 60% of our global cost of goods and believe that this is a good approximation for the cost of goods that U.S. tariffs are applied to. We are developing and executing plans to shift some of our Brazil production to Canada and Europe and to cover U.S. demand more completely from Asia, which could help further mitigate our average tariff rate. We have started preparations for this diversion but may choose for service and responsiveness reasons to source some production from the U.S. from Brazil on an ongoing basis. As the applicable tariffs rate change in the future, we will adapt our plans.

To summarize, our category is very healthy, our brand is performing well, and our supply chain is supporting very strong growth. Together with potential future pricing, we believe that we will be able to mitigate the potential tariff impact long-term and remain very competitive in our markets. We are confident in our team's ability to execute and deliver our plans for the balance of 2025 and 2026, and our confidence in the category and Vita Coco brand trends remains very high.

Longer term, we believe that we will benefit when ocean freight rates return to historical levels, and that when all of our tariff mitigation efforts are in place, this should allow us to achieve or beat our long-term financial targets. 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 third quarter 2025 financial results and our outlook for the full year. Net sales were very strong for the third quarter, increasing $49 million or 37% year-over-year to $182 million. Vita Coco Coconut Water grew 42% and private label grew 6%. Our quarterly results benefited from the continued strong category growth, the restoration of a key club retailer promotion in the U.S., as well as a depressed third quarter reported last year when we were significantly inventory challenged.

Please note that the key retailer promotion that ran in late Q3 and early Q4 this year has created unusually healthy scan trends in the U.S., and I would suggest that you look at a two-year growth rate for an appropriate reading on the underlying momentum. On a segment basis within The Americas, Vita Coco Coconut Water increased net sales 41% to $132 million, and private label decreased 13% to $14 million. Vita Coco Coconut Water saw a 30% volume increase and a price mix benefit of 8%. The branded price mix benefit was driven by the cumulative effect of our two price increases in 2025. Other product categories grew 182%, primarily reflecting the national launch of Vita Coco Treats.

Our International segment continued to deliver exceptionally strong results in the third quarter, with net sales up 48% and 47%, driven by strong growth across our major markets. Private label sales increased 70% due to strong sales of private label coconut water within our current customer base. For the quarter, consolidated gross profit was $69 million, an increase of $17 million versus the prior year. On a percentage basis, gross margin was set at 38% for the quarter. This was down approximately 110 basis points from the 39% reported in 2024.

This decrease in gross margin resulted from higher year-on-year finished goods product costs and the baseline 10% import tariffs announced in April, plus a very minor impact from the August tariffs that collectively created a $6 million tariff impact in the quarter. This was partially offset by our combined pricing actions and lower year-on-year ocean freight expense, as well as the recovery of a reserve for private label packaging. Moving on to operating expenses, SG&A costs increased $10 million to $41 million within the quarter, driven primarily by higher people-related costs and increased marketing expenses.

Net income attributable to shareholders for the quarter was $24 million or $0.40 per diluted share, compared to $19 million or $0.32 per diluted share for the prior year. Net income benefited from higher gross profit and the lower year-on-year tax rate, partially offset by higher SG&A spending and the lower gain on derivatives than in the prior year. Our effective tax rate for 2025 was 22% versus 25% last year, which is primarily driven by discrete tax benefits and a favorable geographic mix of pre-tax profits. Third quarter 2025 adjusted EBITDA was $32 million or 18% of net sales, compared to $23 million or 17% of net sales in 2024.

The increase in adjusted EBITDA was primarily due to higher net sales and gross profit, partially offset by higher SG&A expenses. Turning to our balance sheet and cash flow, as of September 30, 2025, our balance sheet remained very strong, with total cash on hand of $204 million and no debt under our revolving credit facility. We have generated $39 million of cash year-to-date, driven by our strong net income, partially offset by increases in working capital growth capital, primarily due to increased accounts receivable. Our updated guidance reflects our current best assumptions on marketplace trends and timing of our shipments, as well as the continuation of the U.S. tariff levels announced in August.

Based on our current trends, we are raising our full-year net sales guidance to between $580 million and $595 million. We expect full-year gross margins of approximately 36%, with higher finished good costs, including tariffs relative to last year, being partially offset by our increased pricing and slightly lower logistics costs. The impact of U.S. tariffs announced in April and August has increased through the year. For the full year, we expect to see an increase in our cost of goods of between $14 million and $16 million versus the prior year.

We expect our average tariff rate on imported U.S. goods to peak at the previously mentioned rate of 23%, and this should start hitting our P&L late in the fourth quarter, depending on actual sales and inventory usage. Our sales expectation is based on a tougher Q4 net sales comparable to last year when we benefited from distributor and retail inventory rebuild. We expect full-year SG&A expenses to increase high single digits versus 2024. This, combined with our expected higher net sales, is resulting in a higher adjusted EBITDA guidance of $90 million to $95 million.

Our full-year SG&A increase is due to increased people costs, including increased incentive and stock compensation, and higher year-on-year sales and marketing expenses, and other focused investments to support the delivery of our growth objectives as we aim to maintain a strong branded growth momentum into 2026. We look forward to providing additional updates and formal 2026 guidance on our next earnings call. And with that, I would like to turn the call back to Martin for his closing remarks.

Martin Roper: Thank you, Corey. To close, I would like to reiterate our confidence in the long-term potential of The Vita Coco Company, our ability to build a better beverage platform, and the strength of our Vita Coco brand and the coconut water category. We are confident in our ability to navigate the current environment and are excited about our key initiatives to drive growth. We have strong brands and a solid balance sheet, and believe that we are well-positioned to drive category and brand growth both domestically and internationally. Thank you for joining us today, and thank you for your interest in The Vita Coco Company. That concludes our third quarter 2025 prepared remarks, and we will now take your questions.

Operator: And wait for your name to be announced. To withdraw your question, please press 11 again. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from Bonnie Herzog with Goldman Sachs. Your line is open.

Bonnie Herzog: Good morning. I had a couple of questions on your guidance. First, you raised your top-line growth guidance, but it does imply a sharp decline of about 15% in Q4 at the midpoint. So I understand you have a tough comp in the prior year to lap, but I guess I wanted to better understand this expectation. Was there a pull forward of shipments from Q4 into Q3, for instance? Is there anything, I guess, in particular expected in Q4 as it relates to private label? And then on EBITDA, your new guidance implies a big ramp in growth in Q4. So could you give us some more color on the drivers of that expected acceleration?

Corey Baker: Thanks. Good morning, Bonnie. So from a top-line perspective, as we have talked about, we have been focused on the full year. And the quarters, especially around Q3, Q4, are quite hard to tell. We would ask you to take a look at the two-year stack, which in the underlying base business is still very, very strong. Quarter on quarter is showing double-digit growth on a two-year CAGR in the underlying business. And we do have the current trends of the private label business, which as we talked about in Q2, I believe Q2 was down in the mid-30s. We would expect that trend to continue. Martin referenced new private label business starting in 2026.

At this point, we do not expect any impact from that, but we may get some as you know, the timing of private label is quite challenging. So at the midpoint, we feel there are still strong underlying growth trends embedded in there offset with the private label. And then from an EBITDA perspective, we have embedded the tariffs at the 23%. We currently see them impeding to the country, those will gradually increase through the quarter, peaking at that 23% roughly at the end of the quarter. And then it is the current level of pricing.

Bonnie Herzog: Okay. Thank you. And just want to verify, there is nothing that we should think about as it relates to inventory levels? You know, to try you know, in terms of Q3 versus Q4? Nothing to call out there.

Corey Baker: Yeah. It is quite hard for us. We do not have complete visibility of inventory, which is why we, you know, stay focused on the full year. Q3 had the large promotion. So the timing of that may have been a little heavier in Q3. And as you know, we have talked about, we expect improved distribution at Walmart, how that shifts to distributors and exactly when that inventory will pull is hard to call as well. So I would stay focused on the two-year second-half trends maybe, and you will see very strong growth.

I would just add that I think we think distributor inventory at the end of the quarter was healthy and were sort of ready to support the Walmart set process. And, obviously, how those adjust through the end of the year, as you know, can produce a little bit of noise at the end of the year. But we currently think inventory levels are appropriate based on the activity we see in Q4.

Bonnie Herzog: Okay. Super helpful. If I may just squeeze in a quick question on private label because it certainly has been a focus and you touched on this hoping for maybe just a little bit more color on what you touched on the recent private label customer wins. How do we think about these wins, meaning offsetting some of the prior losses, if at all? And then, as you think about your private label business, you know, how do you believe it is advantaged maybe versus peers? And how do we think about your approach to private label next year and beyond? Is this something you are going to aggressively pursue? Thanks.

Corey Baker: Yeah. I think as we have said all along, Bonnie, we view the private label business as one that is complementary to our brand on a number of factors, both on the supply chain side and the retailer relationship side. And so we intend to continue to seek private label business or regain private label business and be competitive in it. As it relates to how we think about our competitive position, we believe that we are uniquely placed to provide large private label programs with diversified supply of private label across multiple countries, multiple factories, and we also believe that some of our sourcing leads to a cost advantage and a service advantage and a quality advantage.

Now that does not always play out in how those, you know, bids are awarded. And so, you know, it has not all been wins, but we certainly believe that we are strategically well-positioned to compete going forward. As it relates to your question, we are obviously not providing any sort of 2026 guidance here. What I would say is that we recovered some of the regions that we lost, but not all of them. So we still have some headwinds next year, which may or may not be offset by some of the wins on the new customer front.

But it is sort of, you know, to us, we lost regions early in the year, and we were gaining some of them. To us, that shows that our sort of supply position is competitive. On a quality service and price perspective. And it gives us hope that we can recover more. But obviously, there are no guarantees and nor have any anything been announced or, you know, there is more expectations and hopes over, let us say, a multiple-year period as opposed to a single-year period. So I think next year, private label probably will still be a slight drag for us. But, obviously, the category on a lost business basis. But the category is very healthy.

It is growing. The private label business that is retained is growing because private label business is healthy too, similar to the category. So, again, I would just say we are optimistic for a good 2026, but we are not in a position to provide guidance.

Bonnie Herzog: Okay. Super helpful. I will pass it on. Thank you.

Corey Baker: Thank you.

Operator: Our next question comes from Chris Carey with Wells Fargo Securities. Your line is open.

Chris Carey: Hey, good morning everyone.

Corey Baker: Hey, Chris.

Chris Carey: The implied Q4 gross margin, a couple of questions there. So the first is just the Brazil tariffs. Is it reasonable to assume that Q3 did not include, you know, much of those and those will be, you know, heavily concentrated in Q4? And so I would love some perspective on that because Q4 has some seasonality that is lower than Q3. But there is also this new cost factor. So I would love maybe a bit more detail on how you see that impact. The second thing is, you know, how are you thinking about some of the headlines around, you know, tariffs?

What are some of the, you know, key markers that you are looking for as it pertains to Brazil? The reason I ask is because, you know, at what point do we start thinking that, you know, you may need to take some pricing going into the front half of the year? You know, how long will you assess the tariff backdrop before making that decision?

Martin Roper: I think for starters, the headlines are definitely worth looking into. I mean, you know, the numbers that we have given in terms of what tariffs look like for us as of the end of the quarter, you know, could change. And this is what we are dealing with is the uncertainty around it. I mean, if you look at the headlines over the weekend, obviously, Trump and Brazil's president, Lula, had a good meeting and have committed to getting a trade deal done. And Brazil has asked for relief on the 40% reciprocal tariff. It has not been denied.

It has not yet been approved, but we, you know, we are hopeful that we will see some changes on a positive level as it relates to Brazil. Even as you look at some of the other, you know, trade deals that are getting done, if you even look at Cambodia and Malaysia, which happened this weekend, coconuts are listed as excluded from the tariffs in those trade deals. Coconut water is not yet. This is something, obviously, we are hopeful for and working on. But I think it is pretty clear that the administration is looking, you know, to exclude unavailable natural resources. Just got to make sure that coconut water is recognized.

And so as these trade deals continue to get done with different countries, which we source from, we are hopeful that we will see some improvement to the tariff numbers that we have talked about. But as of now, that is where we stand.

Corey Baker: And, Chris, going back to the start of your question, which was, you know, did the increased tariffs from early August hit Q2 P&L? Maybe Corey you could take that.

Corey Baker: Yeah, Chris, it was a small amount. If we think of the tariffs of April and August, August tariffs had very little impact on Q3. But, you know, a slight bit at the end, and that will ramp up towards that 23% rate. And we anticipate that would hit late in the quarter, November, December timeframe. And then be at that steady rate through next year, you know, barring any of these changes, we are hopeful for.

Martin Roper: And then, Chris, relative to your pricing question, you know, we took pricing in July to mitigate the 10% base tariff from April on a dollar basis. Right? And I think we indicated in the call that was showing up as a 7% pricing on Sukana on a two-year basis comparisons two years ago is how it is showing up. And that would be, I suppose, also include the May. So that is the impact of both pricing. We are still monitoring the impact. There has certainly been a slight volume decline with the pricing, but in line with our expectations. We do want to monitor it.

We are also monitoring competitive actions and movements on private label pricing where we expect private label pricing to follow the tariffs. Right? Because it is a cost-plus business model for our retailers. And so we are monitoring that to see what happens. We do not feel in a rush to sort of mitigate further the tariffs. And while we wait for that, we are also working on the mitigation strategies, particularly as it relates to Brazil, which is the outlier in our tariff environment at 50%. And those mitigation activities, you know, revolve around taking Brazil production to other countries other than the U.S.

It is not as simple as just a switch because you have to get packaging in place. You have to get approvals in place. So we are working to be able to do that over the next few months and certainly complete that if the Brazil tariffs stay in place, you know, by the end of next year. So we want to see how those mitigation efforts go. You said the tariffs are, you know, very fluid. It is obviously very fluid. We do not want to take price if we, you know, effectively have to give it back.

So we are thinking we will make pricing decisions in Q1 that might take effect Q2 based on our view on where tariffs are and mitigation actions are in Q1. We are reserving the right to take pricing or not take pricing based on what we see in the market and what we think is right for the brand long term.

Chris Carey: Perfect. Quick follow-up or perhaps not, but international. Just give us a sense of where we are in the international journey. I suppose you are going to say early. But it is really starting to come through. So how are you thinking about the growth runway at international? And, you know, just remind us on your capacity to service that international market given your supply. So much.

Martin Roper: Yes. Let us start with the capacity. As we sort of have talked about for, like, the last eighteen months, we started adding capacity because we saw the category accelerating both in the U.S. and in our core markets internationally. And so we have been adding, you know, capacity to support growth rates in the mid-teens or a little bit higher, and that is progressing well. It is a lot of work, and, like, a big shout out to the team involved. We are adding one to two or more factories a year. And it is, you know, there is a lot of hard work going on in that.

So we do not see a capacity issue in supporting this over the next few years. And then as it relates to your international question, we view category development in our core markets internationally, which we would describe as, you know, the UK and Germany, as being underdeveloped versus the U.S. And I would refer you to our investor presentation from June where we provided an estimate of household consumption per population rate by different countries. So you will see that the UK is about a third of the U.S. Germany is, like, you know, 10% of the U.S. So it is pretty early. And, obviously, the U.S. is still growing.

So we see it as early innings, and I think big picture longer term, the way we think about it for in our five, ten, fifteen-year planning. I suppose I do ten-year planning. Michael does five-year planning. We want Europe to be as large as the U.S. Right? So is it possible that could happen? Absolutely. Populations are good. Demographics, income levels, health orientation are all good. We think coconut water is still in early innings in Europe.

Chris Carey: Thanks so much, guys.

Martin Roper: Thanks. Thanks, Chris.

Operator: Thank you. Our next question comes from Robert Ottenstein with Evercore ISI. Your line is open.

Robert Ottenstein: Great. Thank you very much and congratulations on another terrific quarter. Want to kind of double or triple click down on international, which just seems super exciting. So just to help us, you know, get a little bit more granularity on the business, can you give us a sense based on what you have learned today, how the international market in terms of Europe, is there significant difference in terms of, you know, the consumer occasions, how they look at the category? How would you compare the competitive intensity in Europe versus the U.S.? Margin profile and then just in terms of this quarter, was there anything unusual that perhaps flattered the results? Thank you.

Martin Roper: Yeah. Sure. I will try and get to all of these. Let us see. International is very exciting. International for us is sort of largely Europe. That is where the strength is. It is led by the UK, which was launched about eleven, twelve years ago. I am probably a little bit off on that. But effectively ten years behind the U.S. in its launch trajectory. In the UK, there is a healthy category, but our brand has over 80% share of it. It is largely cold in the stores, which is a, you know, a difference to, obviously, the U.S. where we are warm shelf.

And competitive players, you know, sort of really do not, you know, are not that strong. Because with over 80% share, there is not no one really to talk about. About five years ago, Innocent Juice had a coconut water brand that probably had 10, 15, 20% share, but that has largely been squeezed to low single digits. And so we have a very strong position, and we are focused on growing the category. And then obviously maintaining our share of the category. As the category growth continues, obviously, get excited and they could introduce new brands, etcetera, but it is largely small stuff. And I do not think we see any impact from that.

But would I expect the competitive environment to, you know, continue to be active? Yes. Of course. The rest of Europe, for the most part, has been small for us. Up until about two years ago. We put a commercial leader into Germany to try and open up the private label business. In a lot of the rest of Europe, private label was actually a very big player in coconut water, whereas in the UK, it is not as big a player. And in many of those countries, coconut private label is the largest, you know, sort of non-brand, but obviously, it is across multiple retailers. But it is very significant.

So we led with developing retail relationships with private label, and that then allowed us as coconut water growth started to take off. But we were asked whether we bring the brand in and we were able to do so. We are in very early innings in Germany. We have national authorizations. Germany retail is interesting in that a national authorization does not result in distribution. In many of the retailers, you have to then go get a regional approval. And then actually go store or store collective to get to build that out. So we are in pretty early innings there.

And, you know, as I look at the next two years, the blocking and tackling is actually delivering on the national distribution that we have been awarded by selling it at the regional and the local level. And that is probably a multiyear task. Interestingly, as we launched Vita Coco into Germany, we saw the category growth accelerate. I think that is partly because there are not strong brands there that are investing and have good, you know, brand recognition. And we have been able to gain a very significant piece of that growth. So we have gone from effectively 0% branded share to, you know, a healthy brand share by grabbing that growth.

That said, the private label business has also accelerated. So it has been good for the category. And, obviously, we try and compete in that. So we are trying to take some of the learnings from these markets that they are different than each other. Right? And they are different both on where the category is and the retail environment and think very carefully about which markets to prioritize next. Obviously, with a weight on maybe the larger markets like France and Spain, but we are also, you know, testing different routes to market in more fragmented markets like the Benelux, which is currently growing very healthily for us through a partnership with a distributor there.

So we have different models that are working, and I think we are happy to be patient, and we are not trying to blast it out and overstretch ourselves. We are trying to build it from the ground up and we feel, you know, pretty good about healthy international trends for the next few years based on that European business. You asked about margin. We mostly do not use distributors. We do have some reps. There are some distributors for small markets. So there is not a distribution layer. It is direct to retail. So pricing in the market is lower than in the U.S., pricing to consumer because of that. And margins are good.

It benefits from lower ocean freight costs from Asia to Europe mostly. So that can support a lower price structure. But the margins are perhaps, you know, maybe on a branded side, a little less than they are in the U.S., but they are still, you know, very nice and appealing. And I think I have touched on every one of your questions, but if I missed one, please re-ask.

Robert Ottenstein: Yeah. Just, was there anything in this quarter on the international that flattered results in any way?

Martin Roper: Just strong demand.

Robert Ottenstein: Good enough. Thank you very much.

Martin Roper: Thanks, Robert.

Operator: Thank you. Our next question comes from Christian Junquera with Bank of America. Your line is open.

Christian Junquera: Hey, guys. Thanks for the question. Just two questions. A quick clarification question. Just tariff impact for 2025, did you guys say $14 million to $16 million? And if so, that implies a blended tariff rate for this year about like 6% to 7%. And then the expectation, right, what you guys are expecting is it jumps to 23% in 2026. Did we catch that correctly?

Corey Baker: The $14 million to $16 million, Christian, is correct. The percentage, the 23% is of the applicable finished goods amount which we quantified as approximately 60% of our global cost of goods. So I am not sure if you the math you have on six. So you have to remember that the tariffs were imposed initially in April at a 10% rate. And what hits our P&L is delayed by when those tariffs flow through our inventory. So as an example, a 10% tariff applied on April 7 to a container leaving Asia would not arrive in the U.S. until maybe early June. And then would not get sold out of our inventory probably till July.

So our tariff impact in Q2 we did not really merit talking about. So we did not talk about it in Q2 as a dollar amount. We talked about a $6 million impact in Q3 which would largely reflect the 10% baseline tariff imposed in April because that would be the inventory flowing through our P&L in Q3. And as Corey indicated, the blended tariff rate based on our current sourcing at the end of the quarter is 23% of containers shipping at the end of the quarter from, you know, source. That rate will, which is the rate that effectively was put in place in early August, flows into our P&L in, you know, mid-late Q4.

But it is the rate that is applicable for next year. So that is the reason that the $14 million to $16 million looks small to you because effectively, it is on half a year, and effectively, at least half of that year is only at 10%. Sorry. Okay. Half of that six months is only at 10%. Does that make sense?

Christian Junquera: Yeah. Yeah. That is very, very helpful. Thank you for the clarification. And then if we just for can go into and, you know, you talked about it, but just the levers to offset the higher tariff rate for next year, right? You guys have the higher pricing that you took this year that is going to carry over and, I mean, potentially lower ocean freight. I mean, the, you know, looking at the chart, it looks like rates keep going down. Do you have any expectations for ocean freight next year? And I do not know if I am missing anything else, any other levers at your disposal.

Martin Roper: Thank you. I mean, that is the biggest benefit. That is the biggest benefit for the offset. You know, we are talking to suppliers and trying to work out things that we can do, but you know, this is not a particularly large margin business for them. Obviously, we are asking whether their governments can help as well. Right? We are trying to optimize our sourcing to, you know, take advantage of the different tariff rates, but really that means trying to avoid Brazil if we can. Right? For now. And the base pricing we took in July that was, again, incremental to our May pricing was designed to cover the dollar impact of the 10% baseline.

Obviously, we are evaluating the impact of that and, you know, if we think we have to take more pricing and it is prudent given the competitive environment, and our brand trends and everything else and all our mitigation efforts, then we will consider it. But we are a little reluctant to rush into pricing if indeed some of these tariffs may, you know, be waived under the trade agreements that Michael was talking about. We obviously have the Supreme Court case coming up next week, which may or may not also, you know, declare that the tariffs do not apply. So we are a little reluctant to rush into until we get a better feel for all these impacts.

Christian Junquera: Perfect. Thank you.

Operator: Thank you. Our next question comes from Jon Andersen with William Blair. Your line is open.

Jon Andersen: Hey, good morning, everybody.

Martin Roper: Hey, Jon.

Jon Andersen: Couple questions. We talked a lot on the call about headwinds from ocean freight. Not ocean freight tariffs, I am sorry. But I did want to ask a little bit more about ocean freight because, you know, the rates look like they have been cut in half year over year. And that started happening earlier this year. The decline year over year and down 50% starting in the midyear. And, you are operating off of, as you pointed out, a lot of spot situations right now. And, again, I do not know the exact kind of composition of your cost of goods, but the freight piece seems like a big piece of the cost of goods.

And if that has come down to that degree, it seems like that would be, you know, much more impactful than the tariff piece here. So we would be looking at a pretty good margin outlook gross margin outlook for 2026. How do you kind of think about that?

Martin Roper: So, you know, one way to think about that is we have indicated that, you know, the tariffs apply to 60% of our, you know, global cost structure. If you apply 23% to that, you come out at, like, 13% of our revenue is tax. That is a huge number. Right? And, you know, the last time ocean freight spiked, which was 2022, you know, really spiked. We talked about a total transportation impact of $65 million, which included domestic transportation. And we said two-thirds of it was ocean. So the ocean freight you can extrapolate an ocean freight number from that $65 million and you can get back into, you know, that was when rates were 10, 12, 14,000.

Right? So ocean freight is an important part of our cost structure. But I would caution you not to overestimate it. And to use those data points that we provided. And I am going to say, Corey, that we provided did we provide a percentage of transportation costs in one of our investors present a few times through the years we have in the range of a third, but it varies up and down. Apart from based on original price. We quantified that tariffs, obviously, change that equation. Yeah. So but is it fair? Said earlier that ocean freight is an important opportunity for mitigation. Obviously, you know, we are not actually doing anything. We are benefiting from market changes.

So it is a benefit from market change and it can be an offset. But the tariff impact, if it would stay, is pretty significant. You mentioned what is going on with ocean freight. If you look back a year on the indexes, you know, the indexes were in the lowest three thousands and they are currently sort of I am looking at the global index. It is currently in the low 2,000. So it is down 33%. But it went up last year, and it had a couple of peaks that, you know, cost us. Right? So yes, current ocean rates are lower than they have been for at least a year.

But the change is perhaps not as big as the 50% as you were talking about. Like, it is not down 50% versus a year ago?

Jon Andersen: I think I have in my notes that ocean well, freight in aggregate in COGS is 30, 35%. Is that with the balance being finished goods, is that a reasonable way to think about it?

Corey Baker: Transfer I have laid that number to transfer case. Transportation. And logistics. So it is warehousing, drayage, ocean freight, internal transportation, distribution, etcetera. So ocean freight is a subset of that. A component of that third of COGS or so.

Jon Andersen: Okay. The other question I had was just on sale on the guidance. You know, I have not I guess the guidance implies 4Q sales of around $105 million which, you know, looking at what you did in Q3, $182 million, you know, it is like a 42, 43% sequential decline in sales from Q3 to Q4. We have not seen anywhere near that kind of a seasonality or change in the past. Know there is a little bit of seasonality, but, again, a 45% decline is big. Any I just wanted to make sure I understand what is causing that. Thanks.

Martin Roper: Jon McMahon?

Corey Baker: Do not see those levels of declines year on year, but maybe we are No. Sequentially. Sequential. So Q3 was very big. We benefited from the major promotion that we skipped last year. Right? And it erodes from the out of stock. So I would just know obviously, there are lots of moving pieces here, but on branded, you know, maybe you look at, you know, the decline in 2023, which would have been a comparable year on a promotional side. And then, obviously, we have the private label decline that we prefer to you to look at in Q2 rather than the Q3 number. So it is tough modeling Q4 for us.

And, you know, we are providing the best view that we can. And again, we have some uncertainty on exactly how the private label falls through the end of the year and into next year. So that is just that is one of the reasons for maintaining the ranges.

Jon Andersen: Yeah. Makes sense. Okay. Thanks, guys. That is my job. That feels like a that feels like maybe the bottom or below the guidance range. Is that so we could follow-up. Yep.

Martin Roper: Okay.

Operator: Thank you. Our next question comes from Michael Lavery with Piper Sandler. Your line is open.

Michael Lavery: Thank you. Good morning.

Martin Roper: Good morning, Michael.

Michael Lavery: Just wanted to touch on capital allocation. You mentioned now your cash balance over $200 million. I know in almost the same breath you point out the share buyback authorization, though it is a small piece of that even if, of course, you always reauthorize more. But what is the expectations for use of cash? I know you always had M&A on your kind of to-do list, but it has not been a big factor ostensibly because there has not been something interesting or at the right price. But how do we think about what the cash is meant to go for?

Martin Roper: So I think our priorities have not really changed. And the first one is growth of the core business. I would say that with the growth we are seeing and our planning for next year, we are probably building inventory as we finish this year into next year and obviously, we are a pretty inventory-intensive business given so much of it sits on the water. And so I would just draw your attention to that. While also recognizing that, you know, $200 million is a very healthy cash balance for a company of our size. So our next sort of priorities is innovation and supporting our innovation efforts.

Third priority is M&A for something that will deliver value to our shareholders. And I think we have talked about M&A lot in the three, four years we have been public, and obviously have not done anything. So we are prudent, and we are not looking to do M&A for M&A's sake. That is certainly not part of our mission statement. And then as we, you know, look at what is going on, in all those three areas, you know, growth, innovation, and M&A, if we believe we have excess cash, then our intentions would be to apply it to share buyback at stock prices that we think are fair for our long-term shareholders.

So that is how we think about it, and I do not think anything has really changed. And certainly, as the cash builds, it becomes more of a conversation, but I do not expect us to change our approach to it.

Michael Lavery: Okay. Thanks. And just on treats, a follow-up there. It seems like it would be a pretty nicely incremental part of the portfolio. Is that a fair characterization? And even if so, do you find it can be sort of a gateway to the coconut water part of the portfolio too? Or are you seeing any interplay there that it might be attracting new users who then also switch to the coconut water side of the business?

Martin Roper: Yeah. I mean, we are seeing a lot of consumers coming into the brand through treats, which is really nice to see. So exactly what you mentioned, they are coming into the family. And then kind of like what we have seen over the years with our pineapple flavor and our extra coconut flavor, those are kind of the entries for the category, and the hope is that they stay within the brand. And you see a lot of people then move to the original pure coconut water, the blue one. So treats, it is early, but we are not seeing cannibalization. We are seeing a lot of new consumers coming into the brand through treats.

So that is the idea. Hopefully, they stay with coconut water and drink for different occasions and different flavors and formats. And just a couple of comments on how treats gets reported. On a shipment basis, it is reported in other. So the coconut water reporting on a shipment basis does not include treats. Right? And it is indicative again of the health of the category. On a Nielsen Socata basis, treats gets reported sort of not necessarily in coconut water, but it might get reported in sort of milk-based products because it is a coconut milk-based product. And so I would just caution you to work out if it is being reported or not.

In our Socata data, it is not in the coconut water definition that we buy. And it was order of magnitude I am looking Corey would have added an incremental four percentage points to our Socata growth rates. So indeed, we report in our investor deck because our investor deck reports coconut water growth rates. That do not include treats.

Michael Lavery: Got it. Yep. Thank you.

Operator: Thank you. Our next question comes from Eric Serotta with Morgan Stanley. Your line is open.

Eric Serotta: Great. Thank you. First question would be in terms of pricing. I know you said that, you know, you are waiting on further pricing to see what the competitive environment looks like. What are you seeing in terms of have competitors moved on pricing in, you know, as we sit here today at the October, you guys moved early August. I know that some competitors were on a different kind of pricing cadence over the past few years. So what are you seeing in terms of pricing from your competitors today? I know you cannot speculate about the future there. And then just to follow-up briefly on treats. What does the repeat purchase look like on that?

And, you know, it looks like it was nicely incremental to this year. Do you see it, you know, building next year, or is that, you know, in some ways going to be a tougher comparison with the launch this year? Thanks.

Corey Baker: Let me take the pricing, Eric. Good morning. And then Martin can talk to the treats performance. But I would say from pricing, and we tend to use Surcana as our measure of what we are seeing in the market. We are seeing a few different things. Some competitors took pricing early and quite a bit and have maintained at that level and not moved incrementally in response to tariffs. Others have moved one or two times, and we are seeing some moves in some private label more recently. Up on a second tariff move. And then others have not moved at all. So there seems to be a differing strategy across the market.

Obviously, we lead the market by a wide margin. And we have moved, so we will continue to monitor closely on additional moves.

Martin Roper: I think we are also monitoring, you know, what tariffs actually could end up being. I think there are still so many moving parts. With between, you know, Brazil and trade deals getting done. I think there is a lot of questions to be answered. I think that is quite obvious. Yeah. Because of the timing of the August task, I am not sure we have seen anyone moving relative to that. But obviously, we would expect people to have to move quickly on the private label side. So that is sort of a good reason to sort of wait.

With regards to treats, I think as Mike said, it is providing a different gateway for consumers to come into the brand that is good. I would say we are seeing acceptable repeat rates, if not, you know, positive repeat rates and our challenge is to drive more trials. So more visibility of the brand. And so that, you know, probably requires a little bit more investment, etcetera. And so that is what we are planning for next year. I think, you know, you asked about next year. Obviously, very difficult to sort of project next year. We do think that we will get some treats to gains.

While we did very well on treats this year, we did not, for instance, get it into Walmart. And I think our expectation is that we would get it into Walmart in the resets and some other places as well. On sets next year. So I think we still have another year of growth for treats just based on the launch before getting, yeah, distribution growth. Before sort of, you know, and then obviously, we are trying to drive adoption on top of that. But it certainly should be a positive next year.

Eric Serotta: Great. Thanks so much.

Martin Roper: Thank you.

Operator: Our next question comes from James Salera with Stephens. Your line is open.

James Salera: Hey, good morning. Thanks for squeezing us in. I think I wanted to ask I first wanted to ask on just the kind of composition of the growth this year. If I look at the slide deck, it looks like multipacks have been kind of the biggest incremental driver, which I would kind of read as a proxy for the increased purchase with existing households. Please correct me if you think that is a wrong read there. But with the inclusion in Modern Hydration upcoming, do you view that as an opportunity to really introduce the brand to new households if it is more visible on the shelf?

Or is that a way to maybe pick up some lapsed opportunity with people that were buying it? You know, we get shuffled around in the store, they kind of lose track of it and do not follow-up with it.

Martin Roper: So we view the multipack strategy as a way of increasing value to our customer while also increasing velocity and potentially putting more product in their pantries. Right? Which potentially increases their own consumption. And I think that is what we are seeing. Some of the multipack strength is also a little bit driven by multipacks are much more predominant in club-type environments. And so if the club is strong as a channel, it obviously is in the current economic environment, you are seeing some growth from multipacks from that point to side.

As it relates to how is that all, you know, filling into total growth, we still see our growth as a nice balance of new households and increasing velocity per household. Our, you know, rough approximation is half of the growth is coming from new households and half is coming from increased consumption per household. And so that is what we think is currently going on. Obviously, numbers in this area are, you know, available but messy.

James Salera: Right. And I appreciate all the color around COGS and kind of the moving pieces next year. And you guys still have some stuff that you want to look at before you get 2026 guidance. But if I just take the 4Q exit rate on tariffs coupled with kind of running forward the ocean freight rate through into 2026 and blend that together, it would imply FY 2026 gross margins are kind of flat to down modestly. Is that a fair way to characterize it just as we are thinking about? And I appreciate, obviously, there are plenty of moving pieces on tariffs. But assuming no changes there, the gross margin will be down modestly next year?

Corey Baker: That sounds like 2026 guidance.

James Salera: It was a good try. It was a good try.

Corey Baker: James, I would say we think we have covered by very smart analysts with very smart support teams.

James Salera: Okay. Thank you.

Operator: One on your telephone and wait for your name to be announced. Our next question comes from Eric Des Lauriers with Craig Hallum Capital Group. Your line is open.

Eric Des Lauriers: Great. Thank you for taking my questions and congrats on a really impressive quarter. Thanks. My question is on tariffs. So, you know, you have outlined several levers you can pull to offset the impact of tariffs. But I am wondering sort of what levers you have to pull or what is in your power to do in terms of, you know, lobbying for coconut water to be excluded from tariffs like other coconut products are. Do you have any levers to pull here? Is there anything from the lobbying or even import classification perspective that you are able to do?

Martin Roper: Yeah. It is what we are working on. Been spending time in DC and doing exactly that and working from both the angle of the production producing countries in their negotiations and discussions and also on the U.S. administration side. We are making every effort that we can.

Eric Des Lauriers: That is great. And then just a question on the marketing spend outlook. Just overall, you know, should we expect a general increase in marketing spend as a percentage of sales going forward given balance sheet strength, investments in treats, consumer education efforts? Should we expect a general increase as a percentage of sales, or, you know, do we have enough kind of robust top-line growth that sort of, you know, this current level of marketing spend as a percentage of sales is a good guide going forward?

Corey Baker: Yes. As we think about the long term and there is variability year to year, but broadly, we would expect sales and marketing expenses to track net sales or branded net sales over the long term.

Eric Des Lauriers: Alrighty. That is helpful. Thanks for taking my questions, and congrats again.

Martin Roper: Thank you.

Operator: Our next question comes from Gerald Pascarelli with Needham and Company. Your line is open.

Gerald Pascarelli: I just had a going back to tariffs. If they remain in place as is, can you just speak about how long the process is should you choose to reroute shipments from Brazil to international markets? And then I guess, based on your current sourcing, is it possible to reroute all shipments from Brazil to international markets? Or is that just, you know, not practical based on your supply chain? Guess any color there would be helpful. Thank you.

Martin Roper: So to reroute, we need to, you know, develop packaging that fits the factory and the new market it is going to be servicing. And we also need to get any validations for that factory in that country or with that retailer that are required. So those processes might take three months, could take nine. So it is a, you know, a moving target. We started working on those things back in August, September.

But equally, the urgency on working on them, while it is urgent, we are also that once we stop buying that materials, if Brazil tariffs go away, then we have got this packaging in the wrong location for a non-optimized supply chain because Brazil is optimized to supply to the U.S. So onto your question is we are working on it. We are pulling triggers that we think are appropriate given the uncertainty around the 50% tariffs from Brazil. And, you know, if the 50% were to stay in place, our hope would be to have our weighted average tariff rate down from 23 to closer to 20% by the end of the year.

We may still choose to source some items from Brazil for certain markets and or customers and or for strategic reasons because it has got a much shorter lead time in service to the East Coast of the U.S. So we may not fully exit Brazil as it relates to U.S. demand, but that is where we would think we could get to by the end of the year. And end of next year.

Gerald Pascarelli: That is very helpful. Thank you. And then, I guess, going back to the prior question. In your trade discussions, are you hearing anything that maybe makes you more optimistic on the potential for a lower negotiated rate from the 50%? Specifically based on the significant inflation that the U.S. has seen from Brazil coffee? Is that playing a factor? Do you think that will play a factor as we look out over the near term here?

Martin Roper: Yeah. I think it is also things that we are hearing in meetings, but we are hearing publicly discussed from both sides. And they are looking to make progress in the very near term. So we are hopeful that something happens in the near term, specifically as it relates most specifically as it relates to this 40% reciprocal tariff. Hopefully being relieved, but we will see how that plays out.

Gerald Pascarelli: Got it. Thank you very much.

Martin Roper: Thanks.

Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to Martin Roper for closing remarks.

Martin Roper: Thank you, everyone, for joining the call today and we very much appreciate your interest in The Vita Coco Company, and we look forward to talking to you again in 2026.

Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.