The Calmer Co International Limited (CCO) Earnings Call Transcript

[indiscernible] you for the first time with the webinar. Again, welcome to our Q4 FY '26 webinar. My name is Zane Yoshida, Founder and CEO of The Calmer Co; and Matthew Kowal, our Chief Commercial Officer, is also joining me to cover any topics today. If we can, Matt, let's move to the second slide. We will be talking about a range of topics, starting with the strategic pillars in the business, which we speak to consistently our regional sourcing, manufacturing and innovation followed by direct-to-consumer, including Amazon, a scalable, profitable retail followed by wholesale. I'll go through some of the quarterly highlights, discuss revenue performance, I hand over to Matt at that stage for him to update on the revenue for the quarter, where that's come from, where the shift has been followed by cash costs and funding and regulatory and outlook for FY '27. Let's move to the next slide. Thank you, Matt. Apologies again for the technical issues earlier on. So I guess from a strategic pillar perspective, the objective for The Calmer Co is to continue to expand its sourcing capability outside of Fiji. We've been very comfortable building a pipeline of supply with direct relationships that we've had with farmers across Fiji. We have established relationships out of Vanuatu as well as Papua New Guinea. We are also talking to exporters out of some more and looking to finalize something there Solomon Islands has been a bit of a challenge in that we don't have the commercial volume for exports in a meaningful way out of the Solomons just yet. So really focused on beyond Fiji supply chain, strengthening sourcing out of Vanuatu and Papua New Guinea. And I'm happy to say that just yesterday, we have announced comprehensive supply agreement around strengthening this strategic pillar, particularly with PNG and Vanuatu to source [indiscernible]. The other thing is testing capability and strengthening quality assurance. One of the focuses for the business and a key value proposition and differentiator really is traceability and transparency. And given the fact that we are sending our trucks out to remote locations and bringing Cava back to the factory filling in the associated forms right through to completion of lot numbers, which form batch numbers and being able to trace that right back to individual pharma or a region or province is a big advantage for us with our ongoing quality control. In addition to that, we'll touch on testing. And at the moment, for example, when we look to Tescava, we use something called high-performance liquid promotography, or gas chromatograph free and mass spectrometry. Now these tools are very valuable. When you analyze cover from a scientific lens, you typically look at the total kavalectone concentration in your raw material, but you also look at something called chemotype profiles. And in addition to chemotype profiles, you look at other kavalectones such as flavor carven. And given some of the concerns historically in Western markets, flavor carven, tracking is an essential part of our quality control with the raw materials that we process and put into finished products or sell as in our wholesale channel, either as a water extract or a CO2 extract format. So we are happy to announce that we are moving forward with the commissioning of our GCMS equipment and the competitive advantage for us in that regard is currently when exporters are looking to test carven in Fiji right now. It's either done out of the University of the South Pacific or it's done at Douglas Pharmaceuticals. These are the only 2 accredited labs that are testing Kava. The frustration, I guess, from a lot of exporters is the time lines to receive these results. And they typically are between 5 to 7 weeks turnaround from submission of samples, but also cost for each individual sample is $750 up to $950 as well. So the advantage that we have with the commissioning of our GCMS equipment is, we work with a lab in the United States based out of Utah. We feed in the sample preparation of raw material the subsequent analysis and interpretation of results is done at an accredited laboratory in Utah and turnaround times typically 24 to 48 hours. So this is a huge advantage for a company like us, particularly as we move beyond Fiji to ensure that the quality and the integrity of the material is compliant and is usable with our finished products. With the supply agreement that we've just announced as well, to expand into PNG as well as Vanuatu, Noble Kava materials. We also have an agreement to ensure that the materials that this company is bringing into the country is quality assured without testing through GCMS as well. So it's a win-win situation, much condensed lead times for analysis and interpretation of results particularly as we look to develop formulas for consistency with potency and chemotype formats for different strategic pillars that I'll touch on in the business. So the second 1 is direct-to-consumer, which includes Amazon U.S.A. and looking backwards from the 30th of June for the quarter, we were still maintaining direct-to-consumer via a salesforce platform. We've made the decision to move back to a shopper platform and using our internal team manage this part of the business versus using external resource or agency to manage direct-to-consumer. Amazon for us is still a big part of our revenue generation on a quarter-to-quarter basis. And that part of our business is still managed by Andy Burger, who, for those of you that aren't aware of Andy, spent 20 years in Amazon prior to joining other e-commerce companies and has supported our growth with Amazon U.S.A. over the last 12 months or so. So e-commerce is up, generating 30% of revenue for the quarter. Amazon U.S.A. was $457,000 of that whilst maintaining or not maintaining, but showing a saving with marketing spend associated with direct-to-consumer, particularly down 31% quarter-on-quarter. The other strategic pillar we speak to is profitable, scalable retail. And of course, we have relationships in Australia with both Coles and Woolworths. We are still maintaining the #1 and #3 position in coal, supermarkets, Australia wide with our unflavored Kava formats such as this, we sell a 150-gram as well as a 50-gram pack in Coles, Australia-wide. Similarly, with Woolworths, we sell a 50-gram pack across Woolworths supermarkets Australia-wide. We have put out an announcement around the expansion of that product range with Coles, particularly, and Matt will speak to that in the upcoming slides. But the excitement for us is this we have been able to, over the last 4 years since the Kava commercial pilot trial was announced, moved to number 1 and #3 position, respectively, for the stress and vitamin category across all core supermarkets. Now we know that Kava certainly works. We know that Kava has a long history in Western markets as a prescription medicine for solving for anxiety alongside pharmaceutical medicines such as Zynex, Valium and Prozacs. So certainly, if you consider the correlation between stress, anxiety and sleep. That continues to be a key driver with the Australian consumers who are warming to cave and who are repeatedly using Kava to aid with these elements, but also helping with a better night sleep. The other key driver for us, like we've communicated previously is Gen Zs. Gen Zs are interesting demographic, whereby 30% of them are estimated not to consume alcohol anymore and are looking to safer healthy alternatives to alcohol. So certainly, in that sense, we've seen an increase for demand for Cava.still niche, of course, but increasing adoption by Gen Zs with Kava products and Kava ingredients as well. The exciting piece, of course, is the fact that we will be first to market in Australia via a TGA pathway regulated as a complementary medicine. And I'll show you a brief demo of what these look like. They certainly taste fantastic. It is a pineapple coconut flavor and given the convenience of sachet or stick pack formats, we are really excited to see how the product is going to perform. We're looking at launching in Coles Supermarkets in Q2 FY '27. But I believe having consumed traditional covers and now tasted this with the R&D process, they should do really well, Matt. So the retail revenue was up 24% quarter-on-quarter. It's our largest channel for Q4 FY '26. And of course, we are buoyed by the new FZZR formats that we're looking to launch in Q2 FY '27. The fourth strategic pillar is our wholesale bulk ingredient channel. And we continue to make very strong progress with existing relationships that we have with Network Nutrition, IMCD with water extract formats that we've been selling through this channel for some years now. but also with the expansion into higher potency formats, we have standardized 30% Kavolactone formats. Historically, we've only had a 10% potency as well as an 8.5% potency. This now expands to a 65% Kavolactone paste as well as a 30% Kavalectone powder that we are selling through direct relationships as well as proposing to sell through distribution relationships that we're working on right now in the company. And again, Matt will touch on that and the progress thereof with the upcoming slides. So wholesale for the quarter, we reached $305,000 worth of wholesale revenue for the quarter which contributed 18% towards total group revenue and 76% of that was generated from the U.S.A. Let's move to the next slide, please, Matt. So the key highlights for the quarter, whilst we may have been down marginally with the wholesale channel, particularly given the lumpiness of sales whilst we continue to build this pipeline of relationships for our extract formats. We concluded the quarter at $1.72 million revenue. Retail growth was up 24%. And Australia revenue quarter-on-quarter was again up 22%. Cash receipts increased by 15%. And if you consider where this rebalances the quarter in Q3 FY '26, we reported the bulk of our revenue was generated in the United States. I think that was circa 56%. And the largest contributor to that was wholesale for the period or evenly balanced across all our revenue-generating pillars at circa 33% from retail, 33% from direct-to-consumer, including Amazon and circa 33% from wholesale. So we still remain very encouraged by the positive momentum with our wholesale channel more recently over the last couple of weeks. We've been able to formalize a heads of agreement with timing agro processing out of Fiji and some background there timing has operated in manufacturing in the ginger industry for the last 40 years now in Fiji. He is certainly the largest process and exporter of ginger and turmeric formats. With the heads of agreement, what that means is beyond Kava extracts in our growth processing is looking to invest in supercritical CO2 equipment manufacturing with a brand-new facility outside of Navu and Fiji. And he's looking to move into ginger and turmeric extract formats using CO2 extraction as well. So the relationship is very complementary in the sense that we've been able to move from R&D through to commercialization with our CO2 extract Kava format, particularly we have a take-or-pay contract that we announced with a functional beverage company earlier this year to the tune of AUD 2 million revenue over the 24-month period. And to complement that, I guess, given the existing relationships that we have with the likes of IMCD, who already sell ginger, tumor extract formats, we see the plug and fit very well here in that sense. Not only that, but we're looking to simplify operations out of Fiji. And given the success with what Kelvin has been doing to support other companies in the U.S.A. with ginger production. We're looking to have Kelvin manage the production of Fiji Kava, Takumi, authentic Kava branded products that we currently produce out of F we will still maintain control over supply chain though, and we continue to strengthen supply of raw materials as it relates to Kava to ensure that we have the volumes, the sustainable volumes and the quality going into that facility for conversion into finished goods. So I think we are very strongly positioned in that sense to really accelerate the wholesale interest around the table and move to realize a very strong meaningful revenue in the upcoming quarters. Thank you, Matt. We'll move to the next slide.

Yes, I'll take over here. So look, I think looking at what's happened in the last quarter and sort of extending on what Zane just mentioned, it's been a really strong quarter for retail in Australia. That's sort of come off some working around category events, a price increase, but just generally also an actual growth in interest in the whole category, which has sort of really given us a great base, which I'll talk about later on in terms of what that means, both in Australia with future growth and opportunity in that retail broader market, but also in terms of how we consider that for overseas. After quite a strong Q3, there's sort of an elevated Q3 in the wholesale space. Wholesale interest has really continued to grow in that pipeline we keep building. But the timing of orders is what you sort of see in reflective of those numbers in that gap of sort of smaller customer base in terms of that cyclical timing of those large bulk orders. Well, when you look at sort of that third channel and we talk about online, again, a real cornerstone for us is Australia -- sorry, is it Amazon U.S. and Australia, contributing near $0.5 million. And just off the evidence of what we've seen in this past quarter with improvements in logistics and opportunities in that market, we're expecting to be able to have that another strong focus for our growth across the 3 channels. Moving on to how things look across the different markets. As we sort of said, we've been a fantastic quarter here in Australia and really driven by that retail growth. What it's done again is reflected what that means to the region, but also overall business, 45% of sales coming from retail for the whole business. but also then how we take that blueprint, how we take that learning, not only to keep growing Australia, but where do we put it into application overseas, which brings me to the United States still very much the key growth market that we see. When you take into the fact that it's contributed a strong 41% to total revenue. And that's based on e-commerce and what is quite an early-stage wholesale business and customer base that we've built. Given the blueprint that I just spoke about with Fiji Kava in Australia, we've taken those first steps into U.S. retail development. We've aligned with an experienced retail broker who's specifically got experience with Kava and Kava brands. And we'll be looking to sort of put that into full action coming the next financial year or this current FY '27. Of Fiji in the Pacific still very much remains important to us from a visibility point of view, and that storytelling and that authenticity to our brands. And obviously, where we're based from a factory point of view. And I think reflecting on what Zane said, what would come out of this financial year, if there's 3 distinct channels now. And if you look at the revenue across the last 2 quarters, we've seen significant revenue in each of these channels. So now we've got a strength for costs that's going to allow us then to work into FY '27 with each of these with its own opportunities with significant growth. When you look at the 3 retail, again, led strongly by Australia, looking at that broader market access now when we talk about the piss or the basically vacant micro tablets as well as understanding how the category in itself is growing from powders through to the flavored version and how that will cycle back into creating its own sort of funnel and growth and then how we replicate that. So when you consider in this quarter, we've already signed up for -- we've got the success of Coles for the pavement tablet called FZZR, along with agreeing to brokerage partners both in New Zealand and the U.S. really sets a strong platform for where retail goes forward. Online, again, remains a really significant channel for us, both in engagement but is in volume and growth, particularly while the other 2 are kind of growing and looking to mature. What we're really focused on this quarter is driving those efficiencies and effectiveness, and that's underpinned that drop in overall spend while trying to maintain the revenue and also the look back to Shopify in early Q1 FY '27, as they are being identified where we're going to get better efficiencies and better effectiveness and conversions with our customers. Lastly, on the 3 channels, we're looking at wholesale all very excited about what we've already created here, but the amount of engagement that we're getting in market and building on those pipelines. There's a lot of focus in terms of building those what are long conversation, but long life partnerships. We've seen the revenue this quarter significant, but down. And a lot of that really is just straight reflected by the cyclical kind of orders that come with customers, which really just sort of means our focus is bringing in a broader range of customers and expanding that small but ongoing base. Spending a bit of time here on the retail. And I guess what we see in Australia is that jump recently based on the fact of just starting to get all those things in place that we want that mainstream adoption first of all, on the powders that we have in place, but also the agreement of the ranging of the effervescent tablets, creating not only an opportunity to sell the main powder product, but creating almost a funnel for people to come in and experience the benefits of Kava. And then as we see in a lot of our product purchase, both online and in retail, they will generally then move into buying a bigger bulker powder. So it's actually expanding the funnel opportunity we have in retail and really allowing retailer to do what a key job for us is that ability for people to trial our awareness and trial. Along with just constant improvements with our supply and really nailing down on finding the right price. And it's been reflected over the last 12 months where we've had 2 price rises in retail, yet continue to be a leader in that stress category as people see value in what Kava delivers to what their needs are. The key part here in what we're seeing in the U.S. and why we're excited with this blueprint but also spending some considered time and how we roll it out is the U.S. is starting to see significant brands move into that space. We talk about the lay lows, the Kava Havens and another range of 4 or 5 others that have already got penetration into retail. So there is a familiarity with Kava and now there's an opportunity for us to take our learnings from and execute in those bigger markets over in the U.S. The last part was just understanding here before I pass on to Zane, is the opportunity that comes with wholesale. And as I said, from a very early on channel for us and also very early on products. Our Kava extracts are already carving out a significant part in our revenue. This will only continue to grow and as well the value of their margin that they bring into the business. Our key alignments with businesses are climbing and our other processes allow us to expand that range and provide a range that the market is ever growing and ever wanting. We're seeing both U.S. and broader interest in extract products where Kava is seen as a product that is on growth, while other areas such in CBD and THC are seeing challenges in terms of how they're addressed and regulated, particularly in the U.S. Zane, I'll pass back over to you.

Thank you, Matt. Yes, it's exciting. And let's touch on the U.S. opportunity. And I guess what we've seen as the key drivers for adoption of Kava versus THC, CBD in the Q&A. I think it's really important. So improving cash performance and disciplined spend. Our cash on hand was $633,000 for the end of June, $1.88 million, up 15% quarter-on-quarter with our cash receipts inventory maintained stable at $1.5 million, which include prepaid inventory. Net operating cash flow was down 9% for the quarter. Again, I touched on in the starting slide, the advertising marketing spend across the business was down circa 30% -- 31% quarter-on-quarter. Staff quarter costs remained stable for the quarter. We did report a decrease in staff costs of 5% last quarter. an additional 4% in the previous quarter as well. And of course, with the proposed arrangements out of Fiji, we should see additional savings in the coming months in relation to this as well. Thank you, Matt. The other 1 is really input cost recovery, and I can touch on this with Matt and what that meant in terms of decision-making at retail coming into January, we saw given the reliance on Fiji source material, predominantly given that we were selling Fiji Kava branded products across retail in Australia. Any increase in raw material prices out of Fiji. And of course, given the conversations that we need to have with retail partners such as Coles and Woolworths, the process for price review goes to a committee. They require a lot of supporting information both from Fed government and suppliers to arrive on a agreement to increase prices, we really ask that we have or come to a middle ground with that negotiation as well. That process typically takes 5 months or so. So we were, in fact, able to agree with both Coles and Woolworths to ensure we were able to increase prices at retail midway through May and subsequently also increased prices across the direct-to-consumer channels for price parity in that regard. So the recovery was really tied to retail. We now have price increases from mid-May right across our channels to support stronger margins through direct-to-consumer as well as retail. And of course, we've been able to secure additional regional supply, as I communicated earlier. Thank you, Matt. So I guess I always like to speak to the importance of the regulatory framework that we are working within, particularly here in Australia and the United States is our 2 key markets. In Australia, currently, we have 2 pathways to be able to sell Kava. The first pathway is through the commercial pilot trial. That has been ongoing since December 2021, whereby we are able to bring in Kava, we process in Fiji. It clears the border and is subsequently regulated through Food Standards Australia and New Zealand, stand at 2.6.3 as a food. The challenge with the food standard regulation is we are only able to sell traditional formats that we sell to Coles and in Woolworths, like communicated again earlier have done extremely well and are now #1 and #3, respectively, for the whole of Australia and stress category. The challenge with Kava, as most of you will know, is it is a very earthy unique taste. Certainly, I have no issues with the taste in Kava because I've been racking it for close to 40 years. But for avid consumers here in Australia, in the United States and beyond. It is a very challenging days. So the second pathway to bring Kava to Australia is as a complementary medicine, which simply means that it is regulated not by a food standard Australian, New Zealand, but it's regulated by the therapeutic goods administration. And the difference being that we need to -- well, let me talk about the format. So you can only sell tablet and capsule formats as well as tea bags as a complementary medicine. But it needs to be a standardized dose of the active constituents in Kava, which Kavalectones. And the recommended daily dose by the TGA and the FDA around 240 milligrams of the active constituents on a daily basis. And this is really supported by clinical trial evidence that was done here in Australia with the University of Melbourne, the University of Queensland, University of Western Sydney around the safety and efficacy of water extracts for targeting generalizing anxiety disorders, for instance. And given the success with these clinical trials, they arrived at the recommended daily dose levels. So the way we've been able to bring visits into the market is via the second pathway, which I discussed as a complementary medicine to the phases are in fact, micro tablets. If you're familiar with Berocca, for instance, as a format on the shelves of Coles or Chemist Warehouse. It is using the same concept. Those Berocca tablets are, in fact, complementary medicines with TGA oversight. So it would have a standardized dose of vitamin C or whatever else that Berocca put into that formula. And with the FZZRs, we have standardized dose per stick pack or per sachet equivalent to half the recommended daily dose with the TGA. However, I will do a little demonstration during our Q&A on what these look like from a dissolved mobility perspective, I won't be able to share with all of you the taste, but I can certainly assure you that based on the feedback received thus far, it is fantastic. The importance with Australia is given Australia is part of Pacific Island Forum Secretariat as PIFS is based out of Suva and Fiji, but it represents all regional governments in the South Pacific. It also has participation by Australia and New Zealand alongside all Pacific Island countries. So in 2024 in Tonga, the Pacific heads of government committed to a regional Kava development strategy. And what that means is be growing the processing and subsequent export of Noble Kava grown right across the Pacific Island countries, will be harmonized. So we are working towards 1 common standard for Noble Cava right across the Pacific at the moment. So the progress with that is good in the sense that recognizing the commitment by the Pacific heads of government to regionalize and standardize Kava through the Department of Foreign Affairs and Trade and stand Australia. They have now supported the establishment of a technical committee to develop standards for Kava when mixed with water as well as some consideration for expansion beyond that to extract formats. We are part of the Technical Committee and we had our first inaugural meeting in Sydney in April this year. So it's very important in the sense that we need to have a quality framework. We need to have standards which again is recognized through potential expansion with existing regional quality standards such as codex elemetarius that has been in place now since 2017. And codex elementerius is the World Health Organization in the food and agricultural organization with an overarching umbrella to ensure that we work within a certain framework of recognizing what's Noble Kava, what's not Noble Kava and some of the quality parameters that exporters need to consider as it relates to foreign matter as it relates to moisture content, ash content, so on and so forth. So it's very good that the Australian government is now getting behind this in that sense to ensure that we are working towards a standard recognizing the commitment by Pacific government. In the United States, Kava when mixed with water is recognized as a food. We've seen the state of Hawaii in November 2024 also move to a recognized Kava and mix with water under grass, which is generally recognized as safe, which is the first state to do this in the United States. I was in the U.S. in May this year with our Chairman, James Dunkin, at the Natural Products Association Fly in day with meetings in Washington, and we had the opportunity to also present to the FDA during that time on the progress with the quality frameworks that have been put in place right across the South Pacific and what The Calmer Co is doing to support that initiative, but also lead that initiative in certain aspects. So again, the whole vertical integration the whole supply chain, the quality control associated with that is very important given the ongoing work to bring Kava back to the forefront and recognition, not just in the Pacific, not just in the U.S.A., Canada or New Zealand, but internationally. The other regulation for Kava in the United States, or category, I should say, is as a dietary supplement. So when you mix Kava with flavors, when you mix Kava with other ingredients it then is regulated as a dietary supplement in the U.S.A. Certainly, there's more modernization work that the FDA are considering particularly with the ongoing work that we're doing in Australia and the Pacific with the harmonization of Kava, the standards that we're looking to put in place the FDA a part of the quad member countries with Codex elementaries, which include Australia and New Zealand, Canada and the U.S. So they certainly have oversight and participation in that regard with the ongoing work that we continue to do there. And it's very important, like I've communicated previously, the importance of building a strong foundation for scale. Given the controversy historically with Kava, particularly out of Germany, given the successes and adoption as a prescription medicine in Germany over so many years and the subsequent ban that led to the carbon market collapsing in the South Pacific going back to 2002 and Kava being tarnished because of that the ongoing work to lobby governments based on a strong quality framework that we put in place now and continue to put in place across specific is rebuilding confidence on cargo's safety and efficacy and ensuring that we have traceability as well of that ingredient going into finished products and subsequent brands and onto shelves across various channels. The international work, I've touched on codex and that framework is the overarching umbrella from a regulatory perspective. Certainly, from a PIFS - Pacific Island Forum Secretariat perspective, they continue to work on 2 things. One is market access for Kava reentering and reopening borders in Europe and the United Kingdom. But they also continue to work on what's called geographical indication to ensure that Kava is recognized something unique to the South Pacific. Given its history, it's cultural importance to Pacific Island countries as well. And given the resurgence of interest and demand in areas in which we operate in the United States, particularly. It's important to have that recognition as Kava or pipometisticum as it's known as being unique to the South Pacific and protecting that. So similar to what campaign is, Champagne has provenance unique to champagne in France. So similar thing that we're doing. And of course, a more enabling regulatory environment across Australia, the U.S. and internationally, opens up our distribution opportunities, right? So I know for a fact with Europe, for instance, the Pacific Island Forum Secretariat and the working group behind market access have now been able to submit something called a novel food application for the EU government consideration on reentry of Kava into the European Union. Next slide. Thank you, Matt. So the key focuses for us really is continuing to build on the building blocks around supply, manufacturing excellence, innovation capability that I spoke at length about in strategic pillar I because that really supports the quality, the consistency of our Kava going into all our channels where we generate revenue for The Calmer Co. So I spoke to direct-to-consumer, including Amazon, and move back to Shopify as a platform and rebuilding the direct-to-consumer channel internally at The Calmer Co Amazon continues to be a very strong contribution to the revenue generating engine. The other one, of course, is retail Matt touched on the plans to expand given the success we've had here with Coles in Australia as well as Woolworths in Australia to the natural products channel potentially out of the U.S.A. And given the uptake of Kava there, it would be silly not to have a look at that. We've had brands that Matt mentioned, such as Lalo, for instance, now the #1 selling can beverage format in the nonalcoholic category in Sprout supermarkets, U.S. wide, for example. Just yesterday, I saw on DevNet who review beverages globally. There's another brand called Carvajal, who have a liquor style format in the 750-mil bottle that have been awarded for the second year running as the #1 alcohol alternatives in that entry. So we see a lot of strong momentum. We believe that there is still room to move in the Australian market. we are buoyed by the introduction of flavored Kava FZZR format shortly to complement the traditional drinking formats that we have there. and with the price increases in Q4 FY '26 right across our pillars. That certainly helps with the acceleration towards cash flow breakeven for CCO. Lot of work, but a lot more ongoing work for CCO as we take next steps with a lot of the change in strategic direction. But again, building revenue and managing risk along supply chain, but also where we generate revenue from in this business right across all the 3 pillars that I've spoken to. So in Q3 FY '26, you could see how wholesale has grown from a very small number in FY '25, for example, to now a meaningful contribution ongoing from a quarter-to-quarter perspective. It may have dropped off to 16% contribution or 18% contribution for the quarter. But again, as we continue to layer the cake, so to speak, we're building wholesale customers that Mac continues to work on, we should see wholesale come to the forefront and overtake retail and direct-to-consumer, including Amazon. And given the net contribution margin we're seeing through wholesale, the fact that we don't have any direct selling advertising costs. Again, that remains a key focus for CCO, particularly with some of the decisions we've been making around the partnership out and contract manufacturing partners that we have in Australia as well as India continuing to build strength and capability to support wholesale expansion in the coming months. Thank you, Matt. So like I touched on, it's really ensuring that we have a strong diversified base, right? We need to have strong foundations for scale. And I think we've been able to demonstrate that with the progress in wholesale but also contributing to the quality framework and foundations that we're putting in place, not just in Fiji, but right across the Pacific. That's important to ensure that the carve being exported out of the Pacific is the highest quality and ensuring that we have the traceability and transparency with that to support what we see as very strong demand. Certainly, from a CAGR compound annual growth rate perspective, it's estimated that carve is growing at 14% to 16% per annum right through until 2033. And that number now has shifted from what we've reported previously at $5.6 billion in 2023 to now around $7 billion. And it is exciting, but we need to ensure that we have a sustainable platform to draw from to support increasing demand across the business. I touched on the fact that the retail contribution for this quarter is very strong, it would have been even stronger if we had increased prices at retail earlier in the quarter, but certainly excited to see what's in store for Q1 FY '27. That's for sure, Matt. The cash management, the customer receipts had increased for the quarter as well. But most importantly, we've been able to achieve these numbers. Cutting marketing and advertising costs by 31% for the quarter. So yes. Thank you, Matt.

Let's move to Q&A. And I think we don't have too many questions today. You might want to just check quickly. But I think let's talk to where the market is at met from [indiscernible]. What's driving growth for Kava demand, what we're seeing? And then let's talk about the next steps in Australia with FZZRs, for example, right? And I said I'll do a little demo. So is what the FZZRs will look like.

There are a couple in your mouths as well because it's a nice unique [indiscernible].

Of Course. So you can chew -- these are what they look like, little micro tablets. You can chew them. [indiscernible], but also this. So that [indiscernible], and a lot Will you have flavored Kava beverage format that we will have available in the Australian market. So that's a very exciting development for working in concert with Ryan Gorman and IMCD, of course, with this project. So the U.S.A., Matt, was now appointed to be driven as our broker to expand retail presence out of the U.S.A. I guess what I'm seeing based on discussions that we continue to have with interest around the table is the farm build, for instance, where they've been able to develop a very strong category with CBD and THC formats. And a lot of brands have jumped onto that bandwagon and done really well. However, the constraint that's up ahead for a lot of these brands are this. The farm bill is likely to be reviewed unfavorably come November. And that's driving a lot of these companies to consider alternative ingredients. And what else can you put in a beverage where when you drink it, you feel it and you feel it almost immediately. That is Kava. You drink it, you feel it. So we're seeing a lot of formulators. A lot of companies now looking at Kava as in advance of its forbid review for input into these beverage formats, existing brands that have meaningful market share in the United States in the non-ALP category. Now knocking on the door considering how they can reformulate with Kava as the key ingredient. So that for me is exciting. In addition to what we spoke about with Gen Zs in addition to what we've spoken about, given the therapeutic benefits that we know about with Kava and what's driving that growth for CCO. So what else are you seeing there alongside all of these things?

Absolutely. I think 1 get forced by some regulatory changes. And even you can throw there where we see the appropriate pressures coming in around as well. So you've got multiple layers of the market. And actually, the retailers are looking for something to fill in a gap where they've had success with CBD or THC products. You've got brands looking to bring new alternatives are not straight swaps. And then you've actually got the manufacturers, the extractors, they're going, well, we need in other ingredients. We've got this whole setup that's been built on farms and processing CBD that is now potentially are they going to come to a very -- not a full grinding halt, but a massively restricted market or a completely patented way they take to market on what that means for CBD. So everyone is suddenly go, what's the alternative that can fit that? And I think Kava is in a great place to all those sets of motions. And it just happens to be when Kava's already naturally on an up as well, really see, I guess, the market leaders, the first market, the Lalo, the cover havens, the Kava you talk on the allows products that have identified Kava and how it can be used. And probably the biggest thing you're seeing in market, I think, is the move into non-op or the calming drink, ready to -- ready to drinks, whether it's in large-format spirits or small RTDs, but also the edibles. Again, that's space where CBD played a really strong part comes everyone looking at different types of gummies to bring out into that space as well. And the stick packs, a little bit like what we're doing with micro tablets here in Australia, but 1 in the U.S., where they're not restricted by the tablet format. There's a lot of powder-based pieces. So on the back of the culture of carrying a water bottle, when you're having in the morning, evening, all those kind of things, even to I think recently on the retail trip was really interesting that most retailers had a stick pack area on the way out of store. So that where they take it out of the box and they're putting it into where you normally get your thing and those kind of elements and people going impulse buy and out the door, whether it's from vitamins, hydration to functionals where Kava's now setting. So -- and the way we set the business up, we want to be able to try peak out of all of that. We want to take the advantage of the retail side, but the right way, smart way. We want to make sure that we're supplying all the people we can through wholesale. And then the overall growth that you naturally see in categories and markets that start to mature in retail, everything grows because there's a broader understanding of it. There's a broader engagement with it. So look, really hard work to get to this place now to set up for the year to come to have those 3 channels now, but we're now in a position where we're going to lean hard and sort of take the opportunity that's there in a market that is growing across multiple places.

Yes, indeed. And there's still constraints with where you can sell THC and CBD products. You can't sell them with Amazon, for example, at right, and you can sell Kava, right? So there lies a huge opportunity with the world's largest commerce -- e-commerce platform, ready to take advantage of with that expansion and those next steps.

Yes. Exactly. And I think similar in a different way, in Australia, obviously, with what we're doing with the pies and the microtablets and with the TGA and the flavored process. We've had to work within the framework there. But what that does, again, opens up a broader opportunity to people that might be hesitant to take the step into that 50 grams of Kava at powder with a very distinct taste. Here's a good way is to step in, trial that, get an understanding how it fits for them. And then as we've seen, time and time again, people who engage in trial Kava, there's a large percentage that come back because it is a truly functional ingredient you have it, you feel it.