Q : Is there a risk that PepsiCo might become less engaged as the end of the distribution contract approaches, potentially affecting market share? A : No, there is no risk. PepsiCo has been professional, and the directive is "business as usual" until May 1. Their teams are commission-based and have every interest in selling more GURU products, as it is a profitable brand for them. They are legally obligated to maintain their duties as the exclusive distributor until the contract ends.

Q : Does the change in distributor accelerate GURU's path to profitability? A : Yes, the transition to a direct distribution model will accelerate our return to profitability due to higher gross margins. By eliminating the middleman, we can recapture margins previously taken by distributors. We aim to show a profitable quarter as soon as possible, although the exact timing is still being determined.

Q : Should we expect revenue from shipments to PepsiCo to decline as the transition date approaches? A : We anticipate some non-material inventory reductions as we transition, but our main goal is to avoid any out-of-stock situations at retail. We are working closely with PepsiCo on an inventory transition plan to ensure a smooth process.

Q : Are there any balance sheet implications of the transition to a new distribution model? A : At this point, we do not foresee any significant balance sheet implications. The transition is still in its early stages, but everything should remain stable.

Q : What are GURU's plans for expansion in the US market, and how are you preparing for potential tariffs? A : We have moved inventory to US warehouses to mitigate tariff impacts and are in discussions with US-based co-packers to potentially shift production. Our US strategy focuses on growing velocity in existing retailers and targeting health-conscious consumers. We continue to see strong performance on platforms like Amazon and in retailers like Whole Foods.

Q : With the distribution transition, will the US increase as a percentage of total revenue in 2025? A : It depends on our performance in Canada post-PepsiCo. We are optimistic about regaining direct relationships with retailers and improving our market share in Canada. However, it is too early to provide specific guidance on revenue distribution between Canada and the US.

Q : Is GURU considering adding more specific functional features to its energy drinks, such as mental focus or gut health benefits? A : Innovation is a focus for us, but we prioritize science-backed claims and natural ingredients. We already use prebiotic fibers in our Zero line for their natural sweetening properties, though we do not currently make prebiotic claims. The Zero Sugar trend remains a key focus, and we aim to offer natural, great-tasting products without sucralose or aspartame.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .

This article first appeared on GuruFocus .