Item 1A. Risk Factors
Item
1A. Risk Factors
The
following risks, some of which have occurred and any of which may occur in the future, can have a material adverse effect on our business
or financial performance, which in turn can affect the price of our publicly traded securities. These are not the only risks we face.
There may be other risks we are not currently aware of or that we currently deem not to be material but that may become material in the
future.
Our
disclosure controls and procedures may not prevent or detect all errors or acts of frau d.
We
are subject to the periodic reporting requirements of the Exchange Act. We have designed our disclosure controls and procedures to reasonably
assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management,
and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
However,
any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system will be met. These inherent limitations include the realities
that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the
controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not
be detected.
Global
economic uncertainty and unfavorable global economic conditions caused by political instability, changes in trade agreements and conflicts,
such as the Russia-Ukraine conflict and the conflict in the Middle East, could adversely affect our business, financial condition, results
of operations or prospects .
Our
business, financial condition, results of operations or prospects could be adversely affected by unstable economic and political conditions
within the United States and foreign jurisdictions, including as a result of an economic downturn and geopolitical events, such as changes
in U.S. federal policy that affect the geopolitical landscape. Changes to policy implemented by the U.S. Congress, the Trump administration
or any new administration have impacted and may in the future impact, among other things, the U.S. and global economy, international
trade relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas. For example,
during the prior Trump administration, increased tariffs were implemented on goods imported into the United States, particularly from
China, Canada, and Mexico. On February 1, 2025, the United States imposed a 25% tariff on imports from Canada and Mexico, which were
subsequently suspended for a period of one month, and a 10% additional tariff on imports from China. Historically, tariffs have led to
increased trade and political tensions, between not only the United States and China, but also between the United States and other countries
in the international community. In response to tariffs, other countries have implemented retaliatory tariffs on U.S. goods. Political
tensions as a result of trade policies could reduce trade volume, investment, technological exchange and other economic activities between
major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial
markets. Any changes in political, trade, regulatory, and economic conditions, including U.S. trade policies, could have a material adverse
effect on our financial condition or results of operations. Until we know what policy changes are made, whether those policy changes
are challenged and subsequently upheld by the court system and how those changes impact our business and the business of our competitors
over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them.
In
addition, the current military conflict between Russia and Ukraine and the armed conflict in Israel and the Gaza Strip could disrupt
or otherwise adversely impact our operations and those of third parties upon which we rely. Related sanctions, export controls or other
actions that may be initiated by nations including the United States, the EU or Russia (e.g., potential cyberattacks, disruption of energy
flows, etc.), which could adversely affect our business and/or our supply chain and other third parties with which we conduct business.
A severe or prolonged economic downturn or political unrest could result in a variety of risks to our business, including but not limited
to weakened demand for our product candidates and our ability to raise additional capital when needed on acceptable terms, if at all.
A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay
making payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the
current political and economic climate and financial market conditions could adversely impact our business.
We
are a “smaller reporting company” and we cannot be certain if the reduced reporting requirements applicable to “smaller
reporting companies” will make our common stock less attractive to investors .
We
are a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700.0
million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a “smaller
reporting company” until (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual
revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates
is less than $700.0 million as of the prior June 30.
Our
designation as a “smaller reporting company,” allows us to take advantage of many of the same exemptions from disclosure
requirements, including presenting only the two most recent fiscal years of audited financial statements in our Annual Report on Form
10-K not being required to comply with the independent auditor attestation requirements of Section 404 and reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock
less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may
be a less active trading market for our common stock and our share price may be more volatile.
The
following risks, some of which have occurred and any of which may occur in the future, can have a material adverse effect on our business
or financial performance, which in turn can affect the price of our publicly traded securities. These are not the only risks we face.
There may be other risks we are not currently aware of or that we currently deem not to be material but that may become material in the
future.
Business
and Operational Risks
Failure
to realize benefits from our productivity initiatives can adversely affect our financial performance.
Our
future growth depends, in part, on our ability to continue to reduce costs and improve efficiencies. We continue to identify and implement
initiatives that we believe will position our business for long-term sustainable growth by allowing us to achieve a lower cost structure,
improve decision-making and operate more efficiently. If we are unable to successfully implement our productivity initiatives as planned
or do not achieve expected savings as a result of these initiatives, we may not realize all or any of the anticipated benefits, resulting
in adverse effects on our financial performance.
11
Demand
for our products can fluctuate significantly and our management’s estimates of future product demand may be inaccurate, particularly
with new products. Further, we may be subject to a variety of other factors that impact timely production and shipment of our products.
Our business and results of operations are impacted by product shortages as well as product surplus.
Management’s
estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess
and obsolete inventory. At December 31, 2024, and 2023, inventory has been reduced by cumulative write-downs for inventory aggregating
$277 and $1,848, respectively.
When
we underestimate demand for our products, are unable to secure sufficient ingredients or raw materials or procure adequate packing arrangements
to obtain adequate or timely shipment of our products, we are not able to satisfy demand on a short-term basis.
It
is difficult to predict the timing and amount of our sales because our distributors are not required to place minimum orders with us.
Our independent distributors and national accounts are not required to place minimum monthly or annual orders for our products. In order
to reduce their inventory costs, independent distributors typically order products from us on a “just in time” basis in quantities
and at such times based on the demand for the products in a particular distribution area. Accordingly, we cannot predict the timing or
quantity of purchases by any of our independent distributors or whether any of our distributors will continue to purchase products from
us in the same frequencies and volumes as they may have done in the past. Additionally, our larger distributors and partners may make
orders that are larger than we have historically been required to fill.
Further,
all of our products are produced by our co-pack partners. For most of our products there are limited co-packing facilities in our markets
with adequate capacity and/or suitable equipment to package our products. If a co-packer terminates its relationship with us, we have in the past, and will likely in the future, experience a delay finding a suitable replacement, which will negatively impact or business
and financial results.
Our
reliance on distributors, retailers and brokers could affect our ability to efficiently and profitably distribute and market our products,
maintain our existing markets and expand our business into other geographic markets.
Our
ability to maintain and expand our existing markets for our products, and to establish markets in new geographic distribution areas,
is dependent on our ability to establish and maintain successful relationships with reliable distributors, retailers and brokers strategically
positioned to serve those areas. Most of our distributors, retailers and brokers sell and distribute competing products and our products
may represent a small portion of their businesses. The success of this network will depend on the performance of the distributors, retailers
and brokers of this network. Our ability to incentivize and motivate distributors to manage and sell our products is affected by competition
from other beverage companies who have greater resources than we do. To the extent that our distributors, retailers and brokers are distracted
from selling our products or do not employ sufficient efforts in managing and selling our products, including re-stocking the retail
shelves with our products, our sales and results of operations could be adversely affected. Furthermore, such third parties’ financial
position or market share may deteriorate, which could adversely affect our distribution, marketing and sales activities. Our ability
to maintain and expand our distribution network and attract additional distributors, retailers and brokers will depend on a number of
factors, some of which are outside our control. Some of these factors include: (i) the level of demand for our brands and products in
a particular distribution area; (ii) our ability to price our products at levels competitive with those of competing products; and (iii)
our ability to deliver products in the quantity and at the time ordered by distributors, retailers and brokers. We may not be able to
successfully manage all or any of these factors in any of our current or prospective geographic areas of distribution. Our inability
to achieve success with regards to any of these factors in a geographic distribution area will have a material adverse effect on our
relationships in that particular geographic area, thus limiting our ability to maintain or expand our market, which will likely adversely
affect our revenues and financial results.
12
Supply chain challenges have impacted our ability
to benefit from strong demand for, and increased sales of our products and adversely impacted our business. Supply chain constraints could
cause a disruption in our ability to obtain raw materials required to manufacture our products and adversely affect our operations.
We have experienced supply chain challenges, including
increased lead times, as well as inflation of raw materials, logistics and labor costs due to availability constraints and high demand.
During the year ended December 31, 2024, the average cost of shipping and handling was $2.75 per case, as compared to $3.07 per case for
the year ended December 31, 2023. Although the company has experienced decreases in freight costs, in the company’s opinion there
remains a volatile environment and the company will continue to monitor pricing and availability in transportation. Mitigation plans have
been implemented to manage this risk. The disruption caused by labor shortages, significant raw material cost inflation, logistics issues
and increased freight costs, and ongoing port congestion, has resulted in suppressed margins. Although we regularly monitor companies
in our supply chain and use alternative suppliers when necessary and available, supply chain constraints could cause a disruption in our
ability to obtain raw materials required to manufacture our products and adversely affect our operations.
Reduction
in future demand for our products would adversely affect our business.
Demand
for our products depends in part on our ability to innovate and anticipate and effectively respond to shifts in consumer trends and preferences,
including the types of products our consumers want and how they browse for, purchase and consume them. Consumer preferences continuously
evolve due to a variety of factors, including: changes in consumer demographics, consumption patterns, diet (whether due to changes in
consumer behavior and eating habits, the use of weight-loss drugs or other factors) and channel preferences (including continued increases
in the e-commerce and online-to-offline channels); pricing; product quality; concerns or perceptions regarding packaging and its environmental
impact (such as single-use and other plastic packaging); and concerns or perceptions regarding the nutrition profile and health effects
of, or location of origin of, ingredients or substances in our products or packaging, including due to the results of third-party studies
(whether or not scientifically valid). Concerns with any of the foregoing could lead consumers to reduce or publicly boycott the purchase
or consumption of our products. Pandemics, epidemics or other disease outbreaks, such as COVID-19, and geopolitical events, wars and
other military conflicts have also impacted and could continue to impact consumer preferences and demand for our products. Consumer preferences
are also influenced by perception of our brand image or the brand images of our products, the success of our advertising and marketing
campaigns, our ability to engage with our consumers in the manner they prefer, including through the use of digital media or assets,
and the perception of our use of social media and our response to political and social issues, geopolitical events, wars and other military
conflicts or catastrophic events. These and other factors have reduced and could continue to reduce consumers’ willingness to purchase
certain of our products, including as a result of public boycotts. Any inability on our part to anticipate or react to changes in consumer
preferences and trends, or make the right strategic investments to do so, including investments in data analytics to understand consumer
trends, can lead to reduced demand for our products, lead to inventory write-offs or erode our competitive and financial position, thereby
adversely affecting our business. In addition, our business operations, including our supply chain, are subject to disruption by geopolitical
events, wars and other military conflicts, natural disasters, pandemics, epidemics or other events beyond our control that could negatively
impact product availability and decrease demand for our products.
13
Damage
to our reputation or brand image can adversely affect our business.
Maintaining
a positive reputation is critical to selling our products. Our reputation or brand image could be adversely impacted by a variety of
factors, including: particular ingredients in our products, including concerns regarding whether certain of our products contribute to
obesity and other health conditions; any product quality or safety issues, including the recall of any of our products; any failure to
comply with laws and regulations; marketing programs, use of social media; or any failure to effectively respond to negative or inaccurate
comments about us on social media or otherwise regarding any of the foregoing. Damage to our reputation or brand image could decrease
demand for our products, thereby adversely affecting our business.
Product
recalls or other issues or concerns with respect to product quality and safety can adversely affect our business.
We
have recalled, and could in the future recall, products due to product quality or safety issues, such as mislabelling, spoilage or malfunction.
Product quality or safety issues could reduce consumer confidence and demand for our products, cause production and delivery disruptions,
and result in increased costs (including payment of fines, judgments and legal fees, and costs associated with alternative sources of
production) and damage our reputation, all of which can adversely affect our business. Any perception or allegation (whether or not valid)
of failure to maintain adequate oversight over product quality or safety can result in product recalls, litigation, government investigations
or inquiries or civil, all of which may result in fines, penalties and damages. In addition, while we currently maintain insurance coverage
that, subject to its terms and conditions, is intended to address costs associated with certain aspects of product recalls, this insurance
coverage may not, depending on the specific facts and circumstances surrounding an incident, cover all losses or all types of claims
that arise from an incident, or the damage to our reputation or brands that may result from an incident.
Any
inability to compete effectively can adversely affect our business.
Our
products compete against products of international beverage companies as well as regional, local and private label and economy brand
manufacturers and other competitors, including smaller companies developing and selling micro brands directly to consumers through e-commerce
platforms or through retailers focused on locally sourced products. Our products compete primarily on the basis of brand recognition
and loyalty, taste, quality, innovation, distribution, shelf space, advertising, and promotional activity, packaging, convenience, and
the ability to anticipate and effectively respond to consumer preferences and trends. Our business can be adversely affected if we are
unable to effectively promote or develop our existing products or introduce and effectively market new products, if we are unable to
improve operating efficiencies, if we are unable to effectively respond to supply disruptions, pricing pressure (including as a result
of commodity inflation) or otherwise compete effectively, and we may be unable to grow or maintain sales or category share or we may
need to increase capital, marketing or other expenditures. It is possible that our competitors may either respond to industry conditions
or consumer trends more rapidly or effectively or resort to price competition to sustain market share, which could adversely affect our
sales and profitability.
Dependence on Key Personnel
Our performance significantly depends on the contributions
of our executive officers and key employees, both individually and as a group and our ability to retain and motivate them. Certain of
our officers and key personnel have many years of experience with us and in our industry and it may be difficult to replace them. If we
lose key personnel, our operations and ability to manage our business may be affected.
Failure
to attract, develop and maintain a highly skilled and diverse workforce or effectively manage changes in our workforce can have an adverse
effect on our business.
Our
business requires that we attract, develop and maintain a highly skilled and diverse workforce. Our employees are highly sought after
by our competitors and other companies and our continued ability to compete effectively depends on our ability to attract, retain, develop
and motivate highly skilled personnel for all areas of our organization. Our ability to do so has been and may continue to be impacted
by challenges in the labor market, which has experienced and may continue to experience wage inflation, labor shortages, increased employee
turnover, changes in availability of our workforce and changing worker expectations regarding flexible work models. Any unplanned turnover
or failure to attract, develop and maintain a highly skilled and diverse workforce, can erode our competitive advantage or result in
increased costs due to increased competition for employees or increased employee benefit costs.
Changes
in the retail landscape or in sales to any key customer can adversely affect our business.
The retail industry is impacted by the actions and
increasing power of retailers, including as a result of increased consolidation of ownership resulting in large retailers or buying groups
with increased purchasing power, particularly in North America, Europe and Latin America. In this changing retail landscape, retailers
and buying groups have impacted and may continue to impact our ability to compete in these jurisdictions by demanding lower prices or
increased promotional programs. Our inability to resolve a significant dispute with customers, a change in the business conditions (financial
or otherwise) of either of these customers, even if unrelated to us, a significant reduction in sales to either of them, or the loss
of either of them could adversely affect our business.
14
The
beverage industry is highly competitive. We compete with other beverage companies not only for consumer acceptance but also for shelf
space in retail outlets and for marketing focus by our distributors, all of whom also distribute other beverage brands. Our products
compete with all non-alcoholic beverages, most of which are marketed by companies with substantially greater financial resources than
ours. Some of these competitors are placing severe pressure on independent distributors not to carry competitive sparkling brands such
as ours. We also compete with regional beverage producers and “private label” soft drink suppliers.
Our
direct competitors in the sparkling beverage category include traditional large beverage companies and distributors, and regional premium
soft drink companies. These national and international competitors have advantages such as lower production costs, larger marketing budgets,
greater financial and other resources and more developed and extensive distribution networks than ours. We may not be able to grow our
volumes or maintain our selling prices, whether in existing markets or as we enter new markets.
Increased
competitor consolidations, market-place competition, particularly among branded beverage products, and competitive product and pricing
pressures could impact our earnings, market share and volume growth. If, due to such pressure or other competitive threats, we are unable
to sufficiently maintain or develop our distribution channels, we may be unable to achieve our current revenue and financial targets.
As a means of maintaining and expanding our distribution network, we intend to introduce product extensions and additional brands.
We may not be successful in doing this, or it may take us longer than anticipated to achieve market acceptance of these new products
and brands, if at all. Other companies may be more successful in this regard over the long term. Competition, particularly from companies
with greater financial and marketing resources than ours, could have a material adverse effect on our existing markets, as well as on
our ability to expand the market for our products.
We
compete in an industry characterized by rapid changes in consumer preferences and public perception, so our ability to continue developing
new products to satisfy the changing preferences of consumers will determine our long-term success.
Failure
to introduce new brands, products or product extensions into the marketplace as current ones mature and to meet the changing preferences
of consumers could prevent us from gaining market share and achieving long-term profitability. Product lifecycles can vary and consumer
preferences and loyalties change over time. Although we try to anticipate these shifts and innovate new products to introduce to our
consumers, we may not succeed. Consumer preferences also are affected by factors other than taste, such as health and nutrition considerations
and obesity concerns, shifting consumer needs, changes in consumer lifestyles, increased consumer information and competitive product
and pricing pressures. Sales of our products may be adversely affected by the negative publicity associated with these issues. If
we do not adequately anticipate or adjust to respond to these and other changes in consumer preferences, we may not be able to maintain
and grow our brand image and our sales may be adversely affected.
We
may experience a reduced demand for some of our products due to health concerns (including obesity) and legislative initiatives against
sweetened beverages.
Consumers
are concerned about health and wellness; public health officials and government officials are increasingly vocal about obesity and its
consequences. There has been a trend among some public health advocates and dietary guidelines to recommend a reduction in sweetened
beverages, as well as increased public scrutiny, new taxes on sugar-sweetened beverages (as described below), and additional governmental
regulations concerning the marketing and labelling/packing of the beverage industry. Additional or revised regulatory requirements, whether
labelling, tax or otherwise, could have a material adverse effect on our financial condition and results of operations. Further, increasing
public concern with respect to sweetened beverages could reduce demand for our beverages and increase desire for more low-calorie soft
drinks, water, enhanced water, coffee-flavored beverages, tea, and beverages with natural sweeteners. We are continuously working to
reduce calories and sugar in our products while launching additional products, to pair with existing brand extensions that round
out our portfolio.
Changes
in economic conditions can adversely impact our business.
Many
of the jurisdictions in which our products are sold have experienced and could continue to experience uncertain or unfavorable economic
conditions, such as high inflation and adverse changes in interest rates, tax laws or tax rates, including as a result of geopolitical
events. These uncertain or unfavorable economic conditions have resulted in and could continue to result in recessions or economic slowdowns;
volatile commodity markets; labor shortages; highly inflationary economies; and stimulus measures. In 2024 we experienced moderate inflation.
In addition, we cannot predict how current or future economic conditions will affect our business partners, including financial institutions
with whom we do business, and any negative impact on any of the foregoing may also have an adverse impact on our business.
Future
cyber incidents and other disruptions to our information systems can adversely affect our business.
We
work with a third-party vendor, which has extensive cybersecurity expertise to help protect and defend against cybersecurity threats.
This vendor has advised us on material cybersecurity-related risks and is helping us establish controls designed to protect, detect,
respond to, and recover from cybersecurity incidents. These controls include firewall protection, antivirus software protection, two-factor
authentication enforced on all endpoints including Windows PCs and laptops, and intrusion prevention software designed to automatically
block any unauthorized access attempts on our servers. Our cybersecurity controls are embedded within our overall risk management processes
and technology, including a 24/7 threat monitoring system provided by the vendor.
Cyberattacks
and other cyber incidents are occurring more frequently, the techniques used to gain access to information technology systems and data,
disable or degrade service or sabotage systems are constantly evolving and becoming more sophisticated in nature and are being carried
out by groups and individuals with a wide range of expertise and motives. In addition, the rapid evolution and increased adoption of
artificial intelligence technologies may increase our cybersecurity risks, including generative artificial intelligence augmenting threat
actors’ technological sophistication to enhance existing or create new malware. We have not experienced a cyber security breach;
however, a breach could have a material adverse effect on us in the future.
The
company relies on its information technology, and potential cyber-attack, data breach or other failure or disruption of its information
technology could disrupt its operations and adversely affect its results of operations.
The
company’s business increasingly relies on the successful and uninterrupted functioning of its information technology systems to process,
transmit, and store electronic information. A significant portion of the communication between the company’s personnel, customers, and
suppliers depends on information technology. As with all large systems, the Company’s information technology systems may be susceptible
to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof,
power outages, hardware failures, telecommunication failures, user errors or catastrophic events. In addition, cybersecurity related
risks including security breaches and cyber-attacks such as computer viruses, denial-of-service attacks, malicious code (including ransomware),
social-engineering attacks (including phishing attacks) or other information security breaches could result in unauthorized disclosure
or misappropriation of the Company’s confidential information. These threats also may be further enhanced in frequency or
effectiveness through threat actors’ use of artificial intelligence.
While
the company has security measures in place designed to protect the integrity of customer information and prevent data loss, misappropriation,
and other security breaches, the Company’s information technology systems could nevertheless be penetrated by outside parties intent
on extracting information, corrupting information or disrupting business processes (including for purposes of ransom demands or other
forms of blackmail), particularly if the company’s information security training and compliance programs prove to be inadequate. In addition,
if the company’s information technology systems suffer severe damage, disruption or shutdown and the company’s business continuity plans
do not effectively resolve the issues in a timely manner, the company may lose customers and suppliers and revenue and profits as a result
of its inability to timely manufacture, distribute, invoice and collect payments from its customers, and could experience delays in reporting
its financial results, including with respect to the company’s operations in emerging markets. Furthermore, if the company is unable
to prevent security breaches, it may suffer financial and reputational damage because of lost or misappropriated confidential information
belonging to the company or to its customers or suppliers, and it may suffer indirect economic loss if its existing insurance policies
and coverage related to information security risks prove to be insufficient. Failure or disruption of the company’s information technology
systems, or the back-up systems, for any reason could disrupt the company’s operations and negatively impact the company’s cash flows
or financial condition.
Our
largest stockholder’s preemptive right could dissuade a strategic investor from making an investment in the Company.
Our
largest stockholder, D&D, holds a preemptive right to purchase its pro-rata share, based on the ratio of shares of the
Company’s common stock it owns to all the outstanding shares of the Company’s common stock, of any investment in the
equity securities or equity-linked securities of the Company. D&D beneficially owns approximately 59.5% of our common stock. As
such, D&D’s exercise of its right could serve to dissuade a new strategic investor from proposing an investment in the
Company or significantly decrease the size of a new investor’s investment.
Legal,
Tax and Regulatory Risks
Taxes
aimed at our products can adversely affect our business or financial performance.
Certain
jurisdictions in which our products are sold have either imposed, or are considering imposing, new or increased taxes on the manufacture,
distribution or sale of certain of our products, as a result of ingredients contained in our products. These taxes vary in scope and
form: some apply to all beverages, including non-caloric beverages, while others apply only to beverages with a caloric sweetener (e.g.,
sugar). Similarly, some measures apply a single tax rate per ounce/liter on beverages containing over a certain amount of added sugar
(or other sweetener), some apply a graduated tax rate depending upon the amount of added sugar (or other sweetener) in the beverage and
others apply a flat tax rate on beverages containing any amount of added sugar (or other sweetener). These tax measures, whatever their
scope or form, have in the past and could continue to increase the cost of certain of our products, reduce overall consumption of our
products or lead to negative publicity, resulting in an adverse effect on our business and financial performance.
15
Limitations
on the marketing or sale of our products can adversely affect our business and financial performance.
Certain
jurisdictions in which our products are sold or may be sold have either imposed, or are considering imposing, limitations on the marketing
or sale of our products as a result of ingredients or substances in our products or product packaging. These limitations require that
we highlight perceived concerns about a product or product packaging, warn consumers to avoid consumption of certain ingredients or substances
present in our products, restrict the age of consumers to whom products are marketed or sold, limit the location in which our products
may be available or discontinue the use of certain ingredients or packaging. Certain jurisdictions have imposed or are considering imposing
color-coded labelling requirements where colors such as red, yellow and green are used to indicate various levels of a particular ingredient,
such as sugar, sodium or saturated fat, in products. The imposition or proposed imposition of additional limitations on the marketing
or sale of our products has in the past reduced and could continue to reduce overall consumption of our products, lead to negative publicity
or leave consumers with the perception that our products do not meet their health and wellness needs, resulting in an adverse effect
on our business and financial performance.
Laws
and regulations related to the use or disposal of plastics or other packaging materials can adversely affect our business and financial
performance.
We
rely on diverse packaging solutions to safely deliver products to our customers and consumers. Certain of our products are sold in packaging
designed to be recyclable, commercially compostable, biodegradable or reusable. However, not all packaging is recovered, whether due
to lack of infrastructure, improper disposal or otherwise, and certain of our packaging is not currently recyclable, commercially compostable,
biodegradable or reusable. Packaging waste not properly disposed of that displays one or more of our brands has in the past resulted
in and could continue to result in negative publicity, litigation, government investigations or other action or reduced consumer demand
for our products, adversely affecting our financial performance. Many jurisdictions in which our products are sold have imposed or are
considering imposing laws, regulations or policies intended to encourage the use of sustainable packaging, waste reduction, increased
recycling rates or decreased use of single-use plastics or to restrict the sale of products utilizing certain packaging. These laws,
regulations and policies vary in form and scope and include extended producer responsibility policies, plastic or packaging taxes, minimum
recycled content requirements, restrictions on certain products and materials, restrictions or bans on the use of certain types of packaging,
including single-use plastics and packaging containing PFAS, restrictions on labelling related to recyclability, requirements to charge
deposit fees and requirements to scale reusable or refillable packaging. For example, the European Union and certain states in the United
States, among other jurisdictions, have imposed a minimum recycled content requirement for beverage bottle packaging and similar legislation
is under consideration in other jurisdictions. These laws and regulations have in the past increased and could continue to increase the
cost of our products, impact demand for our products, result in negative publicity and require us and our business partners, including
our independent co-packers, to increase capital expenditures to invest in reducing the amount of virgin plastic or other materials used
in our packaging, to develop alternative packaging or to revise product labelling, all of which can adversely affect our business and
financial performance.
Failure
to comply with personal data protection and privacy laws can adversely affect our business.
We
are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding personal data
protection and privacy laws. These laws and regulations may be interpreted and applied differently from country to country or, within
the United States, from state to state, and can create inconsistent or conflicting requirements. For example. the California Consumer
Privacy Act, which was significantly modified by the California Privacy Rights Act, as well as comprehensive privacy legislation in Virginia,
Colorado, Utah and Connecticut that became effective in 2023, as well as the European Union’s General Data Protection Regulation
(GDPR), the U.K. General Data Protection Regulation (which implements the GDPR into U.K. law) and China’s Personal Information
Protection Act, impose significant costs and challenges that are likely to continue to increase over time, particularly as additional
jurisdictions continue to adopt similar regulations. Failure to comply with these laws and regulations or to otherwise protect personal
data from unauthorized access, use or other processing, have in the past and could in the future result in litigation, claims, legal
or regulatory proceedings, inquiries or investigations, damage to our reputation, fines or penalties, all of which can adversely affect
our business.
16
Our
manufacturing process is not patented.
None
of the manufacturing processes used in producing our products are subject to a patent or similar intellectual property protection. Our
only protection against a third party using our recipes and processes is confidentiality agreements with the companies that produce our
beverages and with our employees who have knowledge of such processes. If our competitors develop substantially equivalent proprietary
information or otherwise obtain access to our knowledge, we will have greater difficulty in competing with them for business, and our
market share could decline
If
we are unable to adequately protect our intellectual property rights, or if we are found to infringe on the intellectual property rights
of others, our business can be adversely affected.
We
possess intellectual property rights that are important to our business, including ingredient formulas, trademarks, copyrights, business
processes and other trade secrets. The laws of various jurisdictions in which we operate have differing levels of protection of intellectual
property. Our competitive position and the value of our products and brands can be reduced and our business adversely affected if we
fail to obtain or adequately protect our intellectual property, including our ingredient formulas, or if there is a change in law that
limits or removes the current legal protections afforded our intellectual property. Also, in the course of developing new products or
improving the quality of existing products, we could in the future infringe or be alleged to infringe, on the intellectual property rights
of others. Such infringement or allegations of infringement could result in expensive litigation and damages, damage to our reputation,
disruption to our operations, injunctions against development, manufacturing, use and/or sale of certain products, inventory write-offs
or other limitations on our ability to introduce new products or improve the quality of existing products, resulting in an adverse effect
on our business.
Failure
to comply with laws and regulations applicable to our business can adversely affect our business.
The
conduct of our business is subject to numerous laws and regulations relating to the production, storage, distribution, sale, display,
advertising, marketing, labelling, content (including whether a product contains genetically engineered ingredients), quality, safety,
transportation, supply chain, traceability, sourcing (including pesticide use), packaging, disposal, recycling and use of our products
or raw materials, employment and occupational health and safety, environmental, social and governance matters and reporting (including
climate change), machine learning and artificial intelligence and data privacy and protection. The imposition of new laws, changes in
laws or regulatory requirements or changing interpretations thereof, changes in the enforcement priorities of regulators, and differing
or competing regulations and standards across the markets where our products or raw materials are made, manufactured, distributed or
sold, have in the past and could continue to result in higher compliance costs, capital expenditures and higher production costs, resulting
in adverse effects on our business. For example, increasing governmental and societal attention to environmental, social and governance
matters has resulted and could continue to result in new laws or regulatory requirements, including expanded disclosure requirements
that are expected to continue to expand the nature, scope and complexity of matters on which we are required to report. In addition,
the entry into new markets or categories has resulted in and could continue to result in our business being subject to additional regulations
resulting in higher compliance costs. If one jurisdiction imposes or proposes to impose new laws or regulations that impact the manufacture,
distribution or sale of our products, other jurisdictions may follow. Failure to comply with such laws or regulations (or allegations
thereof) can subject us to criminal or civil investigations or enforcement actions, including voluntary and involuntary document requests,
fines, injunctions, product recalls, penalties, disgorgement of profits or activity restrictions, all of which can adversely affect our
business.
Potential
liabilities and costs from litigation, claims, legal or regulatory proceedings, inquiries or investigations inherent in our business
can have an adverse impact on our business.
We
have been party to a variety of litigation, claims, legal or regulatory proceedings, inquiries and investigations, including but not
limited to disputes with our contractors, matters related to our ingredients, personal injury and employment, matters. These matters
are uncertain and there is no guarantee that we will be successful in defending ourselves or that our assessment of the materiality of
these matters and the likely outcome or potential losses and established reserves will be consistent with the ultimate outcome of such
matters. Responding to these matters, even those that are ultimately non-meritorious, requires us to incur significant expense and devote
significant resources, and may generate adverse publicity that damages our reputation or brand image. Any of the foregoing can adversely
affect our business.
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Regulations
concerning our alcohol beverages may adversely affect our business, financial condition or results of operations.
Governmental
agencies heavily regulate the alcohol beverage industry. In particular, they monitor and regulate licensing, warehousing, trade and pricing
practices, permitted and required labelling, including warning labels, signage, advertising, relations with wholesalers and retailers,
and, in control states, product listings. There may also be a focus on companies with established non-alcohol beverages lines of business
that have expanded into the alcohol beverage industry, since marketing practices that are acceptable in the non-alcohol space may have
regulatory challenges in the alcohol space. In addition, other countries in which we may sell alcohol beverages could impose duties,
excise taxes and/or other related taxes. If, in the future, we are unable to comply with certain regulations, sales of our products could
decrease significantly. Additionally, if such agencies or jurisdictions, foreign or domestic, choose to implement new or revised laws,
regulations, fees, taxes, or other such requirements, our business could be adversely affected. If such governmental bodies require increased
additional product labelling, warning requirements, or limitations on the marketing or sale of our alcohol products due to their contents
or allegations concerning their potential to cause adverse health effects, our sales of alcohol beverages may be adversely affected.
Environmental
Risk Factors
Significant
changes to or failure to comply with various environmental laws may our co-packers to liability or cause them to close, relocate or operate
at reduced production levels, which could adversely affect our business, financial condition and results of operations.
Our
co-packers are subject to a wide and increasingly broad array of federal, state, regional, local, and international environmental laws,
including statutes and regulations, which aim to regulate emissions and impacts to air, land, and water. Their operations may result
in odors, noise, or other pollutants being emitted. Failure to comply with any environmental laws or any future changes to them could
result in alleged harm to employees or others near facilities. Significant costs to satisfy environmental compliance, remediation or
compensatory requirements, or the imposition of penalties or restrictions on operations by governmental agencies or courts may adversely
affect our business, financial condition, and results of operations. Increasing concern over sustainability matters, including climate
change, will likely result in new or revised laws and regulations aimed at reducing or mitigating the potential effects of greenhouse
gases, restricting or increasing the costs of commercial water use due to local water scarcity concerns, or increasing mandatory reporting
of certain sustainability metrics, such as recycling.
Water
scarcity and poor quality could negatively impact our costs and capacity.
Water
is a main ingredient in substantially all of our products, it is vital to the production of the agricultural ingredients on which our business
relies and is needed in our manufacturing process. Lack of available water of acceptable quality, actions by governmental and non-governmental
organizations, investors, customers and consumers on water scarcity and increasing pressure to conserve and replenish water in areas
of scarcity and stress, including due to the effects of climate change, can lead to: supply chain disruption; adverse effects on our
operations or the operations of our business partners; higher compliance costs; increased capital expenditures; higher production costs,
including less favorable pricing for water; perception of our failure to act responsibly with respect to water use or to effectively
respond to legal or regulatory requirements concerning water scarcity; or damage to our reputation, any of which can adversely affect
our business.
Climate
change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.
There
is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other
greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe and an increase in the frequency
and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather
patterns may limit the availability or increase the cost of key agricultural commodities, which are important sources of ingredients
for our products, and could impact the food security of communities around the world. Climate change may also exacerbate water scarcity
and cause a further deterioration of water quality in affected regions, which could limit water availability for our independent co-packers.
Increased frequency or duration of extreme weather conditions could also impair production capabilities, disrupt our supply chain or
impact demand for our products. Increasing concern over climate change also may result in additional legal or regulatory requirements
designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment. Increased energy
or compliance costs and expenses due to increased legal or regulatory requirements may cause disruptions in, or an increase in the costs
associated with, the manufacturing and distribution of our beverage products. There is an increased focus in many jurisdictions in which
our products are manufactured, distributed or sold regarding environmental policies relating to climate change, biodiversity loss, regulating
greenhouse gas emissions and energy policies and sustainability. This increased focus may result in new or increased legal and regulatory
requirements, such as potential carbon pricing programs or revised product labelling requirements or other regulatory measures, which
could result in significant increased costs. The effects of climate change and legal or regulatory initiatives to address climate change
could have a long-term adverse impact on our business and results of operations.
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