Laird Superfood (LSF) Q3 2020 Earnings Call Transcript

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 (NYSEMKT:LSF)
Q3 2020 Earnings Call
Nov 12, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for standing by, and welcome to the fiscal third-quarter 2020 conference call and webcast for Laird Superfood Inc. I would now like to turn the call over to Ms. Ashley DeSimone, managing director at ICR to begin.

Ashley DeSimoneManaging Director

Thank you. Good afternoon everyone, and welcome to Laird Superfood third-quarter 2020 earnings conference call and webcast. On today’s call are Paul Hodge, chief executive officer; and Valerie Ells, chief financial officer. By now everyone should have access to the company’s third-quarter earnings press release filed today after markets closed.

This is available on the investor relations section of Laird Superfoods’ website at www.lairdsuperfood.com. Before we begin, please note that all the financial information presented on today’s call is unaudited and during the course of the call, management may make forward-looking statements within the meaning of the Federal Securities Laws. These statements are based on management’s current expectations and beliefs, and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today’s press release, the company’s quarterly report on Form 10-Q for the quarter ended September 30th, 2020 filed with the SEC and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

And now I’d like to turn the call over to Paul Hodge, chief executive officer of Laird Superfoods. Paul?

Paul HodgeChief Executive Officer

Thank you, Ashley, and aloha, everyone. It’s a pleasure to be speaking with you on our first earnings call as a public company. On today’s call, I’ll briefly provide an overview of who we are and our business models and review some highlights from our third quarter and discuss the reasons why we believe Laird Superfood is well-positioned for long-term growth. Valerie Ells, our chief financial officer will then review our third-quarter financial results in more detail before we open the call the Q&A.

Laird Superfood is a high growth plant-based natural food manufacturer with an open-ended growth opportunity in the $695 billion grocery industry. At Laird Superfood, we believe better food leads to a better world because when people are healthier and feel good, they make better decisions. Our products provide daily sustained energy, nutrition, and hydration that we need to excel throughout our days, from sunup to sundown as part of our daily rituals starting with our superfood creamer and coffee. Our mission is simple.

We make products that deliver great taste and great quality. We want our products to be convenient, easy to use, affordable, and available for all. We are proud to have to known as an investor. They’re known as a global leader in the food industry who shares our vision of a world of healthy and sustainable foods and provides this incredible expertise.

Our flagship product line is our line of functional superfood coffee creamers, where in a short amount of time, we established a No.1 natural powdered creamer in the United States. Our products are designed around daily use and we’re building a broad-based natural food platform, reflecting the authenticity of our founders and that authenticity and trust in our brand is a critical differentiator driving our revenue growth. Our omni-channel sales strategy allows us to reach our customers where they are. We primarily sell online and wholesale.

We also have a young foodservice division with tremendous promise for the long-term. We are native digital and our online business accounts for around half of our total revenue today. The online presence is a powerful customer engagement tools. And the online revenue is highly recurring, with approximately two-thirds of our direct website sales coming from repeat or subscription orders, despite our significant new customer growth all indicating a unique level of trust in our brand.

In wholesale, our customers spanned major grocery chains, as well as, Costco and CBS, and we expect our presence to grow to multiples of the 7,200 retail doors we are in today. In our wholesale channel this quarter, we witnessed better-than-expected shelf turns in our beta launch of liquid creamer, up to six turns per week for vanilla creamer. And we really consider this to be outstanding, especially in the early trajectory for that product and it’s a further nod to the resonance of the Laird brand. Consumers love our brand for its authenticity, synonymous with high performance and healthy living and combined with a great taste for our products.

And it’s no surprise that we continue to see evidence of this across, both the online and wholesale channels. Then in wholesale, we grew 223% Q3 this year over Q3 of 2019, a growth impact in both adding total door accounts, as well as, adding more SKUs in the existing doors with our valued wholesale customers. Online, our Q3 new customer acquisition rate increased to 149% year over year. We’re really pleased with the improvement year over year to converting first-time customers to repeat customers.

We saw a 40% improvement there, which we attribute to a number of things including effective marketing. We’re using our trusted brand platform to rollout new products and plenty of these new products addressing large total addressable markets or TAMS. So this includes coffee in $89 billion total addressable market, where we’ve been working on a deep pipeline of highly innovative functional coffee products, which we’ll continue to release in the coming quarters. We have solid data from wholesale partners and online sales supporting this expanded functional coffee launch and the early read on our initial blend is very strong.

Functional coffee is an adjacent line to our already established presence in creamer. Expanding our reach out to consumers who don’t use whitener and so we’re really excited about the opportunity to address and innovate even larger coffee market. And also, Better You snacks, addressing the $101 billion snack category. In early fourth quarter, we released her first ever snack product, Pili Nuts.

This was an intentionally limited launch and the result was very eye opening. We quickly sold out at the day of launch and we think the sultry results and adoption by our customers were indicators of how we can eventually expand sell the food products in the overall platform. The third quarter was another record quarter for us. Net sales increased 118% to $7.6 million relative to last year.

We drove a significant expansion of our customer base in both online and traditional wholesale channels. We were and remain hyperfocused on the launch of our liquid creamer, which contributed more than $0.5 million of [Inaudible] in the quarter. Our liquid creamers are now in more than 1,200 retail locations and our initial read is our highly differentiated liquid creamers are on trend and selling up to our expectations. We are hearing from customers that this product is a game changer for them.

You know they love the added functionality, the uniqueness, and the true clean label. There is great shelf, obviously, here, customers love it, stores love it. So we talked during the roadshow about the supply demand mismatch that we’re solving to increase margins and since, we have also learned that the shelf life in our current packaging is just too short for the distributors to manage effectively. And this ultimately means high spoilage rates, which in the quarter, undermine our gross margins.

So the good news is, we believe we have a solution for packaging change that’ll extend our shelf life from 45 days to four to six months to solve this issue. And we anticipate having the updated version on shelf by mid 2021, as pilot runs are under way currently. The much longer shelf life has many advantages. It makes it far easier to manage supply and demand.

It gives the distributors ample time to deal with the logistics and it also improves the customer experience by giving them longer to use the product before spoilage. Though the same solution with some minor tweaks will also enable us to sell the creamer on a shelf-stable format, which gives us the upside next year for DTC and Amazon sale to further balance margins. This is a really exciting solution for Laird Superfood. We are learning all the time and in real time, how to optimize our business and particularly, the liquid creamer business.

That said, this was a record breaking revenue quarter and we could not be more excited about what lies ahead for us. And we have strong confidence that the Laird brand can operate at world-class margins profitability and we’re constantly analyzing, evaluating, and executing the path to get us there. Helping us on that path, I’m delighted announce our new chief operating officer, Scott McGuire. He joins our team next Monday and brings many years of operating, manufacturing, and supply chain experience to Laird.

He got his lead operating roles in CPG and fresh food companies, including Nestle, PepsiCo, and Bonduelle Fresh Americas. We’re so excited to welcome Scott to the Laird team. In summary, our third quarter was record breaking. Revenues in all channels are up and we’ve made great strides in identifying specifically, where we can continue to improve our operating efficiencies and a project in motion and take Laird Superfood to the next level.

I want to give a huge [Inaudible] to our amazing team who remain focused and true to our mission. And I’d like to now turn the call over to Val, who will walk you through our financial highlights.

Valerie EllsChief Financial Officer

Thank you, Paul, and good afternoon everyone. It’s great to be speaking with you on our first earnings call as a public company. As Paul noted, we are very pleased with our third-quarter financial results. Our net sales increased 118% to $7.6 million relative to the third quarter of 2019, reflecting a combination of growth in online and wholesale channels.

For online, grew 57% year over year for our direct website sales, up 122% and wholesale grew 223%, reflecting continued success with key partners, as well as, our strong liquid creamer performance and ongoing success of our shelf stable business. We saw 135% growth in our coffee creamers platform, 278% growth in coffee, tea, and hot chocolate products, and 63% growth in hydration and beverage enhancing supplements. Gross margins was 24.7% during the third quarter. Although a slight increase over Q2, the sequential decline in margin from the last year were results of the following: Spoilage and waste related to our liquid creamer launch and process refinement, elevated co-packing related to our liquid creamer line as that product launch continues to grow.

But also from outsourcing, some of our shelf stable business while we awaited our recently installed second in-house production line to become fully operational and the combination of elevated shipping expenses and reduced shipping income for our direct online business, where we have continued the free shipping initiative. And on an absolute basis, outbound shipping costs also increased approximately 10% during the quarter. Regarding liquid creamer spoilage. As Paul alluded to, we have two key steps to create a clear and realistic path to a more optimized operation for a quarter-to-quarter spoilage should be less of a concern.

We are planning a new package design that will dramatically increase the shelf life of our products, extending out from 45 days to four to six months. And this gives us a line of sight to spoilage rate in line with industry standards in the single digits. We are also evaluating a separate shelf stable liquid option to launch at some point in 2021, which would enable us to sell our liquid product online and through Amazon, which as we see with our other products, can provide a higher blended gross margin between direct retail and wholesale. Regarding co-packaging of our shelf label products.

Our second production line now installed and operational, so it is still ramping up to running at full speed. Between our two production lines, we are working hard to build up our safety stock of finished goods on hand ahead of any potential impacts from COVID-19 resurgence. We have been very fortunate to avoid any material production impact thus far due to COVID, but we do not want to take any chances to ramp up or missed opportunities for growth. So we will be building our inventory on hand over the coming months.

And as a result, we will likely continue to use the co-packing into 2021 until we feel we have adequate safety stock on hand. So to summarize, sometime after the first half of 2021, expect margins to improve as we plan to revamp our liquid creamer packaging to extend our shelf life and cut down on our spoilage rates, ramp up our second production line, and simultaneously increase our inventory on hand. After that point, if all goes as planned, we would be looking to reduce the outsource work and ship back to supporting our growth with our existing infrastructure and reap the benefits of the fixed cost leverage available to us via our vertical integration. Regarding shipping.

After testing the removal of free shipping in the third quarter, we reviewed the data and decided to keep free shipping turned on for now. This is a margin impact, but we believe the investment is justified by the top line at this stage of aggressive market share growth. However, shipping rates have increased. In fact, we received notice of an additional 15% increase in shipping costs in October.

So this is an important area focus for us we optimize the fulfillment part of our business, but we can’t control shipping rates. We certainly hope that post-COVID and post-holidays, with some changes in our fulfillment process, we can identify a more optimal solution for this cost. Moving further down the income statement, opex remains firmly in our control. And as we have done historically, we continue to show very effective management on these expenses across the board.

We have significant fixed cost leverage in the business, particularly in opex and the efficiency and effectiveness of our teams continue to show here as we make progress toward our long-term goal metrics as a percent of sales. With an eye on high growth, of course, we anticipate the opportunity to invest capital on growth, whether it be an online spends or other forms of marketing and advertising, so long as the returns justify the spend, and that will always be the biggest delta here, the sales and marketing numbers. But across the board, we have very solid numbers outside of the nonrecurring go public costs and we expect this to be the case moving forward. We believe we have sailed this company to be public and this will continue to be a source of leverage for us.

Now on the capex. We would like to reiterate how minimally capital intensive our core business is as it stands right now. Our capex remains low even now with our second line in place. We have tremendous fixed cost leverage and excess capacity once our second line is running at full speed.

As many of you know from our roadshow, we do not believe this is a business to guide quarterly. We intend to issue annual guidance in 2021 and we operate with long-term targets in mind. Those long-term targets, which we discussed on the roadshow, have not changed over the next three to five years. In 2023 to 2025, we believe this business can run with annual revenue growth in the double-digit gross margins north of 40% and even the margins in the mid-teens.

Our break even EBITDA margin target coincides with total revenue of $67 million. But today, it is the nature of the business at this early high stage of growth to be choppy in both directions, quarter to quarter, as we experienced changes in the timing of orders and a variable cost environment. In the days following our IPO, our sell-side analysts published 2020 revenue consensus at $23.4 million and we continue to feel comfortable with that initial revenue expectation. On the gross margin side.

Expectation should take shipping factors into account as we navigate the optimal balance of free shipping and increasing shipping expenses for our DTC business, including increased shipping costs beginning in the fourth quarter. And should also take spoilage into account, potentially through the first six months of 2021 following which, our margin should begin to slowly slope upward. We intend to discuss full-year 2021 expectations when we report our fourth quarter early next year. Paul?

Paul HodgeChief Executive Officer

Thanks, Val. So before we go to questions, I just want to let you know our number one priority today is to optimize the fast growing business we have before us. We feel confident about the plans and plays to optimize the liquid creamer business and we feel this effort is worth the time and resources because the consumers are there, the brand is traction, our customers love the laird products, and we know we can take a meaningful share of the multi-billion dollar creamer opportunity in front of us. All in all, this quarter was huge for us and for the brand, and we are hyperfocused on the market opportunity in front of us.

We are so delighted with the expanded team we have in place and now let’s go to questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] And your first question comes from the line of Bobby Burleson from Canaccord. Your line is open.

Bobby BurlesonCanaccord Genuity — Analyst

Yeah. Good afternoon. Thanks for taking my questions.

Valerie EllsChief Financial Officer

First, hi, Bobby.

Bobby BurlesonCanaccord Genuity — Analyst

Hi, guys. Hey, Valerie and Paul. So you know, I think my first one is just on the spoilage impact on gross margins. Just curious if you guys can kind of zero in on what that was in terms of basis points.

Valerie EllsChief Financial Officer

Yeah. Sure, of course. So the overall liquid creamer spoilage, I mean over the past two quarters and each quarter has been in between 100 and 300 basis points in margin. But again, like we’ve mentioned on the call, we’re pretty excited and confident about this solution we have in place and it comes with a lot of upside potential.

It has potential e-comm option down the road.

Bobby BurlesonCanaccord Genuity — Analyst

OK. Great. And so just the kind of incremental spoilage I guess versus expectations. I don’t think we’ve talked much — too much about this before.

Is there a way to kind of isolate what that was in terms of how it weighed on margins?

Valerie EllsChief Financial Officer

Yeah. You know so historically, when we when we talked on the road show and in those conversations, you know, really we initially attributed it really to a mismatch in supply and demand. If you recall, we had a minimum run quantity with our co-packers and we were initially launching in the second quarter and that was — that was the main driver. And Paul I’ll let you speak to the subsequent.

Paul HodgeChief Executive Officer

Yeah. I mean what we’ve realized just in the past really, over the past month as that sort of mismatch was corrected for the most part is, that we’re still having spoilage. So as we dug in with the distributors to see what’s going on, what we’ve really learned was just that the servers themselves were not able to really handle the product in an efficient enough manner with a 45-day shelf life to get it from where we co-pack to the stores. Let’s say, East Coast to West Coast and get on the shelves with enough shelf life to do any good.

And in some cases, for example, the servers might pick up a shipment late, as much as like a week late from our factory after we produce it. And then by the time it gets to their warehouses on the West Coast, they can’t accept it because it has less than the 75% shelf life capability. So it was kind of surprising when we dug in to really look at what was going on there. So you know, with the help of Danone, we’ve done a great solution for this extended shelf life and it’s going to completely pretty much eliminate that problem.

We’re taking it from 45 days to four to six months. We’re pretty comfortable in those ranges and that just basically eliminates this sort of logistics issue so to speak with the distributors and it was a bit of a surprise. So you know the spoilage was continuing to happen even after we kind of corrected that mismatch and we are making some strides in the meantime to reduce that in some ways, but it’s never really going to be completely fixed until we go this new solution. So we are in trial runs already with the new packaging and we’re basically driving this as quick as we possibly can without sacrificing quality.

Bobby BurlesonCanaccord Genuity — Analyst

OK. Great. Great. And then just a quick follow up there.

You guys mentioned the extremely high turns for your vanilla flavor liquid creamer and I noticed at my local store and said that vanilla bookings like almost sold out, but the unflavored wasn’t. I’m just wondering, are you guys making adjustments in real time in terms of your inventory planning? Becasue it seemed like it was incredibly lopsided toward lots of demand for vanilla.

Paul HodgeChief Executive Officer

Yeah. Yeah. Absolutely. We’re currently analyzing that and producing the product as it needs.

But don’t — don’t underestimate the — actually the unsweetened and the original are also turning very well. There’s some great turn on that product. Yes, vanilla is the highest, but the others are — all three of those flavors are performing well by kind of standards, and especially being that it’s brand new in the marketplace. And the good sign that I look at is, you know the the weekly turns are actually increasing still, which is a really good sign.

It basically means that people are getting — using the product and coming back for more and we’re building a customer base in the stores. So we’re still seeing those rates ramp up which is really exciting. So I think we’re growing on to you know — and we get the feedback from consumers through our customer service portal. People just love the product.

Bobby BurlesonCanaccord Genuity — Analyst

Yeah. It seemed like I had some conversations with the checkout people at the stores that I shop at and they were saying — and they were aware of the product, so there was kind of a buzz building it seems like. Good. And then I just guess, you know, the last one just on online.

Curious, you tried to shut off free shipping a little bit. I thought you guys were always kind of planning on keeping that turned on a little bit longer. Was that — was there a change in strategy there? Or was this an experiment that you’ve been planning all along?

Paul HodgeChief Executive Officer

You know we’re going to constantly be testing the free shipping initiative and it’s hard to measure the effectiveness of it, unless you do have those times where you can measure the opposite. So we want to turn off to really get kind of get a new measurement of returns. And then there’s also a lot of different new creative ideas that we’re implementing to test various different versions of it that — to really look at ways that we can reduce our shipping cost, but also provide that really solid customer experience and be able to, in essence, compete with Amazon with the free shipping initiatives. And so we’re really excited about a whole number of tests that we’re actually going to be running over the next, say, three to four months to look at how we fully optimize that initiative.

So it is important to continue to play with it and to be able to measure the data I think.

Bobby BurlesonCanaccord Genuity — Analyst

And you said that shipping costs were up 15% in October. Is that correct?

Paul HodgeChief Executive Officer

Yeah. We received notice from — actually a couple of our primary carriers that there is a rate increase. And so we are going to be hyperfocused on the [Inaudible] of the business because we feel that there’s a lot of room here to really find some improvements. And by the way, Scott McGuire, our new COO is highly experienced in the supply chain fulfillment logistics area.

He’s what I consider a global expert in this arena and you know, he starts on Monday. So we’re really excited to get him on board and one of his first initiatives is going to be to dig deep into this area of the business.

Bobby BurlesonCanaccord Genuity — Analyst

Sounds like a great hire. Congratulations on the upside, the quarter, and thanks for taking the questions.

Paul HodgeChief Executive Officer

Thank you.

Operator

Your next question comes from the line of Alex Furman from Craig-Hallum Capital. Your line is open.

Alex FurmanCraig-Hallum Capital Group LLC — Analyst

All right. Thanks very much for taking my question and congratulations on a really nice quarter here. You know I wanted to ask about the subscription that you have on lairdsuperfood.com. I know that’s been a pretty meaningful contributor of revenue for you historically.

Can you share how much of the third-quarter online sales were generated by subscriptions? Or you know any color you can give up on how your number of subscriptions has been trending throughout the year would be really helpful.

Valerie EllsChief Financial Officer

Yeah, of course. So subscription and repeat business continues to make up about two-thirds of our direct online business. Despite that strong new customer growth in the third quarter that was still around 31%, repeat we’re still slightly north of that, 32%, 33%. And then in terms of just subscription subscription counts, I mean that continues to grow overall as well.

So we believe we’re up about 24% over the second quarter, but when you look back a year and we’re up to 277% over Q3 of last year. So continued strength in that part of the business and subscriptions is always going to be a focus for us. Because again, that the LTV of a subscriber is dramatically improved and enhanced over a one-time purchaser or repeat for experience. We’re going to put a lot of attention there.

Alex FurmanCraig-Hallum Capital Group LLC — Analyst

That’s really helpful. Thanks, Val. And then just trying to kind of put it all together. I mean it seems like you’re seeing really nice continued momentum on the online sale.

Wholesale, obviously, is going to be a little bit choppier and you had the big sell-in with the liquid launch here in the third quarter. It looks like you guys have grown revenue quarter over quarter pretty consistently for a long time here. Is it reasonable to think that given the magnitude of the liquid creamer sell-ins for retail in Q3 that Q4 is probably going to take a step back before resuming growth next year?

Paul HodgeChief Executive Officer

Yeah. You know, I’ll just say that this business at this stage that we’re at, it’s very hard to predict quarter to quarter, which is why we’re guiding annually. And you know, it’s — we obviously, we’ve got some great programs in place we’re hoping to make an impact on Black Friday, but we don’t know how to forecast out exactly. You know there’s a big wholesale order to come in or you know it could get pushed into Q1, and those are hugely impactful in those numbers.

So you know, what we would just say, is just we gave the annual guidance and we just — we’d stick to that and the end of the next quarter we’ll provide our guidance for next year, and you know, we’re definitely not trying to hide anything from anybody. This is just a very high growth dynamic business and it’s very, very hard to predict quarter to quarter right now. Once the company matures down the road in a couple of years, I’m sure that will change and we can change that sort of process. But in the meantime, I would just stick with that and we’re happy to talk through every little business as you in great detail and share everything that we know.

In the meantime, happy to keep those discussions going.

Alex FurmanCraig-Hallum Capital Group LLC — Analyst

I appreciate that Paul. That’s really helpful. And then lastly, if I could just that on the the Pili Nuts that you mentioned you know sold out quickly in the trial. You know, it seems like that’s an exciting new area, just the category snacking in general.

I’m curious, was that mostly your existing customers that that quickly reacted to that product? Just curious who’s buying it and what was the timeline to get that product back out there?

Paul HodgeChief Executive Officer

Yeah. We — well, assuming shipments are all happening as it should be because they’re there can be delays. We should hopefully have those back and stocked in by the end next week. I will say, yes, we — our existing customers really responded well to that.

But they were also some of our biggest customer acquisition days we’ve had a long time for new customers with our marketing programs getting out there. So it was really quite an eye opener for us honestly. It far exceeded our expectations as far as how quickly those — that the product would move and we thought incredible response from our customers that did receive the product. They were lucky enough to get it.

In the meantime, and we’ve got a huge waiting lists for people wanting more. So we’re excited about the snacking category. It was our first jump into that field. We’ve got some other snacking, healthy snacking products coming out in the near future and it just kind of shows the power of the brand platform that we have here.

So we’re building this trusted customer base and building this company based on this authenticity. The customers that get it, they’re going to be here, and this shows the power of this brand platform, in my opinion.

Alex FurmanCraig-Hallum Capital Group LLC — Analyst

Great. That’s really helpful. Thank you very much.

Paul HodgeChief Executive Officer

Thank you.

Operator

And your next question comes from the line of George Kelly from ROTH Capital Partners. Your line is open.

George KellyROTH Capital Partners — Analyst

Hi, everybody. Thanks for taking my questions. So I just have a few for you. I guess to start through continuing the dialogue you were just talking about Pili Nuts.

What — can you maybe more broadly talk about your new product pipeline and I’m curious if there’s more still coming this year. And then I guess, just not sure what you want to tell us or what you can’t tell us. But what’s next year and like what should we kind of expect as far as new products for next year?

Paul HodgeChief Executive Officer

I mean I will frame it in just saying that we are probably more excited about our new product pipeline for 2021 than we’ve ever been. We’ve got a really solid line of what we consider really exciting and really innovative products. For the rest of this year, these product launches kind of moved because some of the things are out of our control for printing and packaging timelines. Kind of busy time of year for printers and things like that, but we do — and we talked about on the roadshow having some additional functional coffee products coming out that we’re really excited about.

Once again, I’m personally very excited about this category. I think the future of the coffee space is functional and I think, we’ve got some products that are going to resonate really well. And we saw how well our first functional product coffee did, as a Performance Mushroom product and then I would say, you know, Performance Mushrooms are a little interesting. It’s like some people are concerned maybe it taste like mushrooms or what exactly do Performance Mushrooms do for me? But some of these other functional coffee launches are a little bit more clearer as to what those functions are, we’re excited about that.

That should be in Q4 here. We do have our daily Essential Greens plans, which is for sometime in the next 30 days to go into the marketplace and — do we have the schedule for this year for sure. You know I — there may be one other I can’t say exactly that’s going to hit this year or next year, but there’s some — there’s some continued product launches are happening this year. Of course, with the Pili, that’s coming back as well.

George KellyROTH Capital Partners — Analyst

OK. That’s great. And then maybe back to liquid creamer. I just want to try to understand — understand your commentary from your prepared remarks.

So it — are there any changes or will that — will the existing form continue being sold through mid 2021? And then secondly, can you talk more about these solutions? You know is it sort of ingredients or just packaging or anything else you can tell us about about the fix.

Paul HodgeChief Executive Officer

Yeah, happy to. The ingredients won’t change at all. Same ingredients, same formula where it’s going to taste exactly as it does. It’s really just a packaging change.

The package is still the same size, but it’s just the way the packaging itself is designed to better protect the product and it is what gives it the sort of extended shelf life sort of process. And there is a small tweak to the solution that uses, again, a slightly different version of the packaging, but through the same production line process. That will then also give us the ability to have a fully shelf stable aseptic product, which would give us a 12-month shelf life with — at room temperature storage conditions. And that’s really exciting for us, as we can then move the product on Amazon.

We can sell it DTC on our online business and feel like — we do with the rest of our products where we get this then blended margin approach. So we are — we’re excited about that. As far as timing, you know it’s a little bit tough to say. As I’ve mentioned, we’re doing trial runs now, everything’s looking really strong.

We’re going to move into the market as quick as we can. I would say definitely by the middle of the year, we’ll have it on the shelf and then start to see that the margin impacts and the improvements on that front.

Valerie EllsChief Financial Officer

And George, just around that, we definitely will keep the existing version on shelf until that solution is in place. And then we’ll swap it out because when it is on it’s shelf, it’s selling really well, as Paul mentioned earlier. The sell-through data is fantastic, especially for being this early on the launch. So we’re not going to impact that at all and we hope we continue to see that trend of weekly improvement in those turns.

But ultimately, you know, we think we found the right solution here and we’re looking forward to having it in place in 2021.

George KellyROTH Capital Partners — Analyst

OK. Great. And then last question for me. Just a modeling question.

Can you break down the online revenue between lairdsuperfood.com and then — and everything else?

Valerie EllsChief Financial Officer

Yeah. So overall channel mix for the quarter. I mean online sales was about 49% of that. It was about a 60-40 split this quarter between lairdsuperfood.com and Amazon.

And then, of course, with wholesale making it about 50% of the total sales in foodservice, rounding it out with that the remaining 1% to 2%.

George KellyROTH Capital Partners — Analyst

Great. Thank you so much and congrats on a strong first quarter out of the gate.

Paul HodgeChief Executive Officer

Thank you.

Valerie EllsChief Financial Officer

Thanks, George.

Operator

And your and your next question comes from the line of Bobby Burleson from Canaccord. Your line is open.

Bobby BurlesonCanaccord Genuity — Analyst

Hey, guys, I’m back.

Paul HodgeChief Executive Officer

Missed you.

Bobby BurlesonCanaccord Genuity — Analyst

It’s been a while. So I was just wondering on the new products you guys are talking about that are happening here for the — over the next 30 days. Are those all capable of being shipped direct? Or are some of them wholesale only at this point?

Paul HodgeChief Executive Officer

Actually these products will initially be direct only and then we will gauge the performance and then look at the wholesale channels. I will say, we do fully expect the functional coffee blends that are coming to go into wholesale early next year just because we do — we’ve seen some really strong wholesale demand for these products and performance and we’d like to make sure we get those out. But our typical playbook does kind of reiterate with our products as we like to start the products online and we’re building this online. The sort of daily ritual products and we’re going to want to run those online for some amount of time and just really understand performance.

Customer feedback, understand if maybe we need a packaging changed or some tweaks and sizes or flavors before we make the big investment in going to the wholesale. The functional copy is sort of to be the one exception that we’re going to accelerate that process just because we already know it’s going to do well. We don’t need to do the testing. It’s going to perform, in our minds, and we’re wanting to go ahead and make that investment to get them in the wholesale channels as soon as possible.

Bobby BurlesonCanaccord Genuity — Analyst

Any feedback on how that is going with Costco?

Paul HodgeChief Executive Officer

Uh, yes. It’s been going good. Even with the Performance Mushroom blend, which we feel, of the three flavors, probably wouldn’t have as strong a resonance with the mass market consumer. But with that, Costco’s continuing to reorder and keep it in their eight stores and so we’re supporting that and it’s — it started out in one region and I think we’re selling in three regions now with the coffee.

So there’s been some regional expansion as well.

Bobby BurlesonCanaccord Genuity — Analyst

Great. And it sounds like you guys have a good pipeline of the products slated for 2021. I’m wondering if you think about the cadence of introductions this year versus 2021, I mean was there a deceleration in the number of SKUs coming out? And then are you also culling the portfolio up some stuff that’s underperforming? How’s that going to — what are the trade offs like there?

Paul HodgeChief Executive Officer

Absolutely, we’re going to be constantly looking for underperforming SKUs. There have been a few that we’re looking to replace and that’s just part of the process. You know it’s a little bit hard to talk about the future pipeline because it’s quite the process. There’s a — I would say for every 10 product ideas that come to mind, one of them makes it to this stage to where we’re actually planning to launch it and schedule it.

But there’s still a lot of variables that can really affect the timing of when those go out. But I will say, when we look at the number of products that we have next year, it’s — there’s probably, there’s more products that we’re insisting the launch next year than in any year prior.

Bobby BurlesonCanaccord Genuity — Analyst

Great. And then just in terms of retail distribution with your wholesale customers, that there’s opportunities obviously, at Target and others like that. I’m wondering, how about someone like a 7-Eleven? It seems like they’re building out there better for you sections of their food aisle. Is that a company that’s on your radar?

Paul HodgeChief Executive Officer

So part of that product, about building that pipeline, there’s some products that we have slated for next year, which are really kind of designed and engineered to be more in that sort of seed store environment. So that — it is something we’re thinking about and our [Inaudible] of sales are not, I guess, new in Q3. It has some great experience in that area and so we’re — we are anticipating eventually looking into those sales channels and having some products that fit and that are built from the ground up for that.

Bobby BurlesonCanaccord Genuity — Analyst

OK. Great. All right. Well, thanks again for answering my follow-ons.

Paul HodgeChief Executive Officer

Thank you.

Operator

There are no further questions at this time. Mr. Paul Hodge, I’d turn the call over to you for some closing remarks.

Paul HodgeChief Executive Officer

OK. Well, thank you everybody, and have a great holiday season. Be safe and we’re excited for the future. We’re excited to talk to you during our next call, and I guess we’ll see you then.

We’ll be giving 2021 guidance and kind of summarizing 2020. So really appreciate everybody in your support and going on this growth journey with Laird Superfood.

Operator

[Operator signoff]

Duration: 42 minutes

Call participants:

Ashley DeSimoneManaging Director

Paul HodgeChief Executive Officer

Valerie EllsChief Financial Officer

Bobby BurlesonCanaccord Genuity — Analyst

Alex FurmanCraig-Hallum Capital Group LLC — Analyst

George KellyROTH Capital Partners — Analyst

All earnings call transcripts

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