Philip Morris International Inc. (PM) Management Presents at 2022 Goldman Sachs Global Staples Forum Conference ()
Philip Morris International Inc. (NYSE:PM) 2022 Goldman Sachs Global Staples Forum Conference May 17, 2022 9:35 AM ET
Company Participants
Emmanuel Babeau - Chief Financial Officer
Conference Call Participants
Bonnie Herzog - Goldman Sachs
Bonnie Herzog
All right. Good morning, everyone. Thanks so much for joining us today. So, it's a pleasure to introduce the next speaker of our conference this year, Emmanuel Babeau, the CFO of Philip Morris International.
It's been an exciting time for Philip Morris as the Company continues to make great strides and progress on a smoke-free transformation, which is over 30% of its revenues now coming from reduced-risk products. Despite a challenging geopolitic environment, IQOS continues to gain traction globally, fueled by the enormous compounding effect of new user acquisition strong innovation and a powerful digital marketing model that continues to set Philip Morris apart from the pack.
Now with that, there's a lot to discuss this morning. So I'm going to turn it over to Emmanuel for some opening remarks. I think you have a slide, Emmanuel, and then we're going to go right into our fireside chat. And I just want to make one quick comment to our firm's involvement with Swedish Match transaction. I'm not going to be asking any questions about that.
So thank you, Emmanuel.
Emmanuel Babeau
Thank you, Bonnie. Thank you for welcoming us and good morning, everyone. Great to be here back in New York. It has been two years since the last time I came, so super pleased and excited to be with you.
Just a few preliminary comments after the usual forward-looking and cautionary statement that, please, you should read carefully.
We all know that this Q1 has been, of course, exceptional by the terrible events that are happening in Ukraine. And of course, we've been impacted by that. Of course, Bonnie, if you want, I will come back on that, but we clearly signal the fact that our intention was to leave Russia in an orderly manner.
For the time being, we cannot really plan what's going to happen in Ukraine, even if we hope really that Ukraine is going to be back to normal as soon as possible, but we're not in a position for the coming quarter to give any kind of guidance, I would say, including Russia and Ukraine. So, that's why now we're going to report and give guidance on a pro forma basis for the coming quarters.
Now I think what has been really important is that beyond this terrible events, we managed in Q1 to really show a nice acceleration and really great performance for the business, excluding Russia and Ukraine. If you look at our Q1, we've been coming with a 1 million user acquisition for our IQOS business, signaling a very nice reacceleration after the difficulty of H2 2021 because of shortages on the supply chain for IC.
We are very pleased with the successes that we are meeting with IQOS ILUMA everywhere where we've been launching. In Japan, it's a tremendous success. In Switzerland, we've been dramatically accelerating our market share gain, thanks to ILUMA. And the first news coming from Spain are also excellent. So that really is bringing a lot of dynamism and a great outlook for ILUMA and IQOS.
But it's not the end of the game. I think one of the great, I would say, additional element that we have seen in Q1 is the fact that we are confirming quarter-after-quarter the great potential from emerging countries. And you have a few countries already, if you look at Egypt, we've been launching IQOS. With the current divide that we have, which are relatively premium, as you know, we've been launching it in Cairo City. And after five months, we're already almost at 5% market share, which shows that even today, that's a proposal that is relevant for these countries.
And in the pipe for the end of the year, we have a new innovation coming in, another big exciting moment for us, where we're going to come with something that will be more, I would say, tailored design for new economies and corresponding to purchasing power in this country to really make sure that we extend and we segment our offer from premium to medium- and low-price positioning and to be able to offer IQOS and heat-not-burn product to all population in the world.
We've been doing some good progress on our vaping offer on VEEV. I am pleased to report that we also did a good performance. It's important because that is really financing the journey to become smoke-free, good performance on combustible.
And last but not least, of course, after this Q1, this exciting event of us announcing an offer for Swedish Match, which has been approved by the Swedish Match Board, and just maybe a few thoughts about it, but I think everybody should understand that this is really a major milestone in our journey to become a global smoke-free company because through Swedish Match, we are doing a number of things.
First of all, we are teaming up, and we would be combining with another leader in smoke-free product with a leadership position in another reduced-risk product category, which are overall tobacco and nicotine and nicotine patches here in the U.S. in doing so well. So, really two companies, same culture, some objective coming together and, of course, being stronger together.
It's also, of course, PMI getting back in the U.S. You all know the story of the split in 2008. And through this combination, if it happens, where we would be back with a very successful platform here in the country. You've seen the success of Zen. The Company Swedish Match is very successful in the U.S.
And our ambition is to become a leading player in smoke-free product here in the U.S. And of course, Swedish Match would provide us a growing and efficient platform to which our ambition on the long term would be to add, of course, our other RRP product in order to really cover all the possibility of this market.
Maybe it's not always obvious, but to be very clear, U.S. is already by far the biggest reduced-risk product market in the world. Actually, it's 60% of the rest of the old world, I exclude China here. So that means that if we conclude this acquisition of Swedish Match, in one go, we would increase by 60% versus what we have today, the reachable market of Swedish Match product and smoke-free product. So that's really something that would be for us a major step forward.
And last, but I would say not least, of course, Swedish Match would join us with their great portfolio of product. And we could bring to the service of this product the strength of the PMI distribution network. They have a good position in the Nordic country, but that's about it, outside the U.S. And really, we would come with the whole power of PMI with the capacity to increase quite dramatically the speed at which their product in oral nicotine could grow globally.
I think in Europe, we see a number of countries where the category is growing nicely. We see great potential, but it's not just about Europe. I think in Asia and you have a number of countries where you have a tradition of oral consumption for nicotine where we see great potential. So I would say in kind of easy wordplay on words, it's a perfect match for us. And we are very, very excited, of course, by the perspective that this combination would mean for us.
So great Q1, where we have shown that outside Ukraine and Russia, we have a lot of dynamism. We have on top of that now this perspective of combining with Swedish Match, which is really fantastic. We know that for Q2, and we've been flying that, so you can look at our communication, will be impacted by the event in Russia and Ukraine.
You will have a number of one-off notably due to the adjustment that is triggering Japan. So a number of shipments will be pushed to H2 and therefore, having some impact on Q2. We'll be impacted as well by the sale of devices that are going to be very important in order to catch up with the shortages of H2 last year in Q2, and that will have an impact on the margin.
We're going to be facing probably the highest point in terms of air freight in order to cope with the difficulty on the supply chain. So, all that is going together in Q2. So it will have an impact on our Q2, but all the one-off impact will be recovered in H2.
And we have a very exciting outlook ahead of us for the reason I mentioned: great dynamism, great pipe for our business of innovation coming in and then the perspective of combining with Swedish Match.
I think with that, Bonnie, that's really what I wanted to share with the last word on the fact that we're very proud today because we are coming with our integrated report for 2021. I think it's an amazing document, plenty of very, very important information.
And I think that epitomize and I think illustrates very well all the effort that we do to become a role model, I would say a leading player when it comes to ESG and sustainability. So please go through it, spend some time. You will learn a lot about what we're doing in that respect.
Bonnie Herzog
There's a lot of initiatives there as well. Well, thank you for all of that. There's a lot to discuss today and exciting.
Question-and-Answer Session
Q - Bonnie Herzog
And I want to maybe kick things off with your transition to the smoke-free future. You've made tremendous progress, 30% line of sight to 50% or more. But I know in your most recent quarter, you sort of indicated that to hit your goal of, I think, it was 140 billion to 160 billion units by FY '23, I think that's going to take maybe an additional year. And if I'm understanding, it's really due to the wind-down in Russia.
Emmanuel Babeau
Well, that's exactly right. Bonnie, in fact, Russia in a nutshell is Russia and Ukraine together are a bit more than 20% of our smoke-free volume. So if we put that aside, and we've done 95 billion stick in 2021, well, we are left with a business that is, as I said, extremely dynamic, and will more or less given the growth rate that we are facing a year to compensate for losing this volume.
So let's say exactly how many quarters we need to get to the 140, 160, but clearly, the objective has not changed. It's just that we will achieve that without Russia and Ukraine when initially we are counting on these two countries.
But fundamentally, interestingly for the reason I mentioned, great dynamism, innovation with ILUMA that is fantastic, more innovation coming, there is I would say, even increased momentum, I would say, on the IQOS business for the coming quarters.
Bonnie Herzog
Yes, underlying strength. And so, you see several other factors that could help you get to some of those goalposts, as you mentioned, this full innovation pipeline, other RRP products, all contributing may be enough to offset some of the setback, if you will, in Russia? Or do you think again...
Emmanuel Babeau
Well, the setback in Russia is there. I mean when you are representing with Ukraine close to, as I said, 20% of the heat-not-burn volume is there. So when it's going to go away. But for what remains, it's -- as I said, the dynamism is there.
And of course, -- we have, in addition to IQOS and heat-not-burn, we are vaping. And now if we combine with Swedish Match, we have another, I would say, leg to run even faster. So, we see, as you said, the underlying dynamism remains extremely strong, and we'll just have to do without Russia.
Bonnie Herzog
And what about some of the device supply constraints that you discussed in Q1? Do you expect those to start to ease? Could you give us an update on the semiconductor chip situation?
Emmanuel Babeau
Yes, I would not say -- and I think we all realize with what is happening in China and all the uncertainty it creates on supply chain and the difficulty that the world is facing in terms of availability that we are out of the wood. I would say the last months have been much better. And while I can say we are back to normal, I think to a large extent, we've been getting what we needed in the past months, and that's what we see for the coming months for the time being.
I have to stay cautious, obviously, because it's such a volatile and fluid situation. But that's what we see for the time being. So, the disruptions today on the supply chain are certainly coming from the volume that we are losing in Russia and Ukraine. We need to find other way to produce them. We need to find new channels to ship them to where we sell them. But today, on device, while as I said, we're not fully back to normal, that is not the most, I would say, worrying situation that we are facing on the supply chain.
Bonnie Herzog
And Emmanuel, you mentioned you have a couple of months of visibility on this? Or do you have visibility on the supply?
Emmanuel Babeau
Well, I would love to say that we have many months. The reality is that our key providers sometimes just give us a call and say, Well, you know what, what you are supposed to receive in a few weeks, you're not going to get it? So yes, normally, we have a bit more visibility, I would say, a kind of two to three months. But as I said, it remains incredibly fluid and volatile.
Bonnie Herzog
Okay. And then as I think about your growth outlook, I guess one of the things that we've talked about this before is with the wind down of Russia and your ability to hit these growth targets, my understanding was that Russia was a key component of the acceleration for your business just in terms of how important that market is.
So what I'm still trying to understand the building blocks from everything else that you mentioned. I mean you definitely mentioned some great success in some of these emerging markets. You're coming out with some new innovation. That's what I'm trying -- with Russia kind of removed from the equation.
Emmanuel Babeau
Russia was a good market. Actually, it doesn't necessarily mean the most dynamic market in terms of growth. We have been making extremely good inroad at the beginning and then probably the next -- given the situation of the country, the next, I would say, layer of smoker to be converted is a bit more challenging. So, it's a growth market, but it's not necessarily the most dynamic market when it comes to heat-not-burn.
So outside Russia, there is a lot of dynamism and sometimes, on average, more dynamism than what we are seeing in Russia. So, it's obviously a pity to see Russia going on because it was in terms of volume, a great market. That was not, I would say, the strongest contributor in term of dynamism overall for the growth.
Bonnie Herzog
Okay. And then as I think about the new user acquisition, it was impressive in the quarter, given everything and sort of back to historical levels at 1 million new users acquired. But when you look forward and think about your targets, based on my math, I think you're going to have to start acquiring 1.5 million, maybe 2 million new users each quarter to kind of hit some of those benchmarks. So is that something you feel is doable? And is it a result of the innovation, price segmenting?
Emmanuel Babeau
Yes. Look, Bonnie, obviously, 1 million is great, and I think it's good dynamism, but we cannot be happy with that saying that's enough. We believe that there is capacity to do faster. And certainly, as I said, emerging countries will play an important role in accelerating. So, that's why it's really important that we are successful with ILUMA, of course, that's one important milestone.
But it's also important that we manage to come with an offer that is going to cover in a broader manner the full spectrum of the consumer. And that is going to include certainly other type of devices, consumable coming cheaper. And when we are there, we have a collection of market of 100 million people plus.
I mean, Egypt is one of them. But if you want to cover them, and I could mention Mexico, Brazil, Pakistan, Vietnam, Indonesia, Philippines, I mean, all these countries where we think heat-not-burn, in general, and IQOS in particular, has a huge potential and it's an untapped potential so far.
So the rollout of heat-not-burn and IQOS there is just starting. So you see and you measure the potential that we have there. So to increase and to go beyond the 1 million, that will have to contribute in addition to Western markets where we expect the continuation of a very nice dynamism.
Bonnie Herzog
Right. And so that, just to be clear, that's second half this year that we're going to see some of that? Or is it a '23?
Emmanuel Babeau
Well, I was mentioning Egypt in a few countries you have already a nice acceleration. I think in order to really get to the next step in terms of growth. We will need to come with the right technology, again, design to cost, simpler value for money, and the consumables that are coming along with that. Som the launch is planned -- the beginning of the launch is planned in Q4 of this year. So, that will be probably more skewed towards 2023 for the acceleration.
Bonnie Herzog
And then how do we think about that on margins as you segment the market? I mean I assume initially dilutive and medium term?
Emmanuel Babeau
Not that obvious, Bonnie, because at the end of the day, we're going to replace in this emerging country the traditional combustible cigarette. And in many places, actually, the tax law means that we're going to enjoy as well some benefit on excise duties, so lower excise duty.
So that's the case today in Egypt, for instance, where our IQOS business is actually more profitable than our combustible business because the excise duty are lower. And you have a number of country where it's going to be the case as well.
So it's not what is the profitability of this country versus, I don't know, Japan or Germany, for instance, which obviously is lower, but it's rather what are they going to replace in terms of business today. And the combustible business in this country that they're going to replace is not necessarily more profitable.
Now there is one element that, nevertheless, we have to take into account is the fact that the more we're going to go in markets where we're going to tap the medium opportunity, the lower the cannibalization is going to be.
So it's going to be less replacement of existing business, and therefore, we need to see what is the net on the margin, but it's actually more additional business because we are not cannibalizing the same amount of premium business that we have in most of the Western country where a lot of IQOS users are actually going from Marlboro to IQOS.
In many emerging countries, they will be moving from local brands, medium minimum positioning to our heat-not-burn technology. And that is coming with a lower cannibalization. So that's probably better for the growth, and we'll see what is the total impact on the margin. But I would not be necessarily pessimistic on the margin.
Bonnie Herzog
Okay. That's good. And so it definitely sounds like much more incremental regardless if it's a little bit lower margin, point is it's going to accelerate the top line ultimately.
Emmanuel Babeau
Yes. Yes, absolutely.
Bonnie Herzog
Let's pivot and talk a little bit about the U.S. opportunity that you see for IQOS. The FDA recently authorized the MRTP designation for IQOS industry, and it's very encouraging. But obviously, the import ban, so you're not currently selling IQOS in the market. And I know you have plans to reenter the market. So maybe update us on what those plans are? And when I think it's early next year that you think you're going to be able to sell IQOS in the U.S. market again?
Emmanuel Babeau
Yes. But so the plan is to be back in the U.S. with local production in Q1 2023, okay? Now as I think we made it clear, we are also discussing with Altria, what should be the continuation of the contract because the one that we had, of course, has been interrupted by the ITC decision.
And we need to find the best possible solution for the two party for the way forward. So I cannot elaborate more at that stage on what it's going to be. I think it has to be, as I said, something that is in interest of the two parties, and we'll see what it is. But certainly in terms of availability of IQOS, the target today is Q1 2023.
Bonnie Herzog
And although, you can't discuss the outcome, do we have a timing of when we'll know the resolution between yourself and...
Emmanuel Babeau
No, no. I hope it won't take too much time, but I'm not able to come with the timing, unfortunately.
Bonnie Herzog
And then, a PMTA for ILUMA in the U.S., is that still something that you're considering despite this?
Emmanuel Babeau
Sure. In due course, so I don't think we've been giving yet a time line for that, but that will come in due course. That is obviously a product that we'll ask a PMTA in the U.S.
Bonnie Herzog
Okay. And then just in terms of the IQOS unit economics. You touched on this a little bit earlier. It's quite compelling, given not only the premium nature of the product, but also the benefits from the tax advantages. But could you highlight sort of the positive price mix impact of IQOS and especially as I'm thinking about as you scale, given the higher net revenue for IQOS and despite the decreasing volume that we're seeing in cigs?
Emmanuel Babeau
Yes. So the margin dynamic is indeed quite interesting on IQOS. First of all, as you rightly said, Bonnie, it's a premium product. So the positioning is premium. And I would say, even versus back to my comment on emerging country, what we're going to develop as consumable for these countries are going to be positioned on the kind of medium, medium minimum, but versus, again, business that can replace it can be interesting.
But you rightly said, what is attractive is the fact that in many countries, because of the tobacco harm reduction policy in this country, in many countries or because they are different products, they're going to enjoy a lower taxation. And that is, therefore, giving a nice advantage in terms of margin per stick, which you see already today.
So today, when you look at our IQOS business per stick, we have a revenue per stick, which is on average 2.4x higher than on combustible. And then the gross margin rate on our combustible for IQOS is on average about 10 percentage points higher than on combustible. So it's a good business at the level of revenue growth and at the level of the gross margin evolution.
Then on top of that, in any country, you have the effort of building the platform, building the base in order to launch IQOS. And then as you reach certain critical mass in the market, where the investment has been done, so you have the digital customer experience that is in place, you have your channel that is organized, and then the increase in volume is not generating the same increase in terms of cost, and you also have a nice evolution of the margin. So that is a model that we want to roll out for IQOS in the coming years.
Bonnie Herzog
Okay. That makes sense. Obviously, let's talk about your combustible cig business. A lot of questions I get from investors is, how will that business perform -- well, actually both businesses as I think about the pressures facing the global consumer in terms of inflation. Can you talk through the impacts you see on volume and/or potential down-trading in some of these key markets of yours you can prevent?
Emmanuel Babeau
Yes, we've been actually a pretty good Q1 when it comes to combustible. We've been growing volume by about 3%, excluding Russia and Ukraine. So, good dynamism. We've been gaining share of the category. And we have the ambition to defend our leadership in this segment despite the cannibalization. So, we would like over time to stabilize our share of segment. And we started to do that very nicely since the beginning of the year.
It's a bit too early. I have to say, to report down trading. I'm not saying it's not going to happen. But when we look at Marlboro market share in Q1, it was actually up. We've seen a number of markets where the COVID crisis is easing, there is back to more social time and we know that it is more favorable for premium product when it comes to combustible.
So I think we should probably expect some down trading as inflation kick in, and we see affordability being a question for some of the customer. It was not that obvious in the Q1 numbers, I have to say. So let's see what's going to happen in the coming months.
Bonnie Herzog
No. It's -- I mean, across many CPG categories, we've seen things hold in, but the notion is as we look forward and pressures continue potentially, so your guidance does contemplate some level of down trading. And what about some of the levers that you have at your disposal to minimize down trading? How much will you pull on those levers? And I think I'm getting at is the pricing lever. I mean should we think about you pulling back on any net pricing that you're putting into the market on your cigarette business?
Emmanuel Babeau
Well, price is obviously a lever with which you can play in order to try to protect your market share and volume. And I think we have a kind of fine path that we want to follow where at the same time, we want to protect leadership and share of segment in combustible because that is really essential if we want to convert the smoker in the future to our reduced-risk product.
Otherwise, if we are losing big time share of segment in combustible, you are less relevant with the trade, losing impact, losing capacity to speak to the smokers. So, we want to maintain as much as we can in leadership and share of segment. But at the same time, we enjoy great brands that are giving us some nice pricing power. And if you look at our Q1, where without Indonesia, excluding Indonesia, around 6% price increase, so that was quite still significant.
So that's the kind of fine line we want to follow. I think we also can play with bending and with playing with extension of brands, and we've been doing that quite nicely with Marlboro, with L&M and with a number of brands that we have in our portfolio. So, it's going to be playing with all the levers that we have in a category which once again is not our [Technical Difficulty] but it's going to be essential to make a smooth future.
Bonnie Herzog
Yes. That makes sense. And what about operating leverage for you? Roughly 70% of your business or your costs are fixed and then obviously, therefore, 30% of variable. So could you talk about some of the levers you can pull on the COGS line and maybe the SG&A line?
Emmanuel Babeau
Yes. We want to be an excellent company when it comes to managing costs. And as you know, boy, we have this 2 billion cost efficiency program over the '21-'23 period. Actually, at the end of Q1, we have delivered a bit more than half of that already between manufacturing productivity and efficiency on our SG&A.
It is clear that we are a fast-growing company with volumes that were up in Q1. We are playing in a nicotine market that is maybe close to stability overall in volume and certainly growing in value, and we are growing our market share there.
So, we see a very promising future in terms of growing as we are moving towards this better product than the combustible cigarette. We are gaining share. And therefore, as we are already a global company, we talk about the U.S., so of course, including the U.S., we're going to be truly global, and I will let China maybe for further development.
Once we have this platform, we have this capacity to come with more innovation, more product, grow the business. And of course, we can grow revenue, gross profit at a much higher speed than SG&A and creating leverage. So that's the ambition for the coming years.
Bonnie Herzog
And that's -- no, that makes sense. And then that's true as you think about the marketing spend with all of these different initiatives, will that step up, Emmanuel? Or are you able to -- with this...
Emmanuel Babeau
So, we love to invest in our future. So when you are playing in a growth category, you are leading the way in terms of innovation. We are making things that no other company is doing. Yes, you have to invest in your business.
So we do that. We are investing there in our business, and we're going to continue to pull a lot of, I mean, digital, marketing, advertising expenses behind our great smoke-free product. But then there is a moment where you are gaining in efficiency where you are learning on how to deliver an even bigger impact with lower cost.
If you look at the last three years, that has been quite visible. I mean, you may remember the time when we started with physical cultures, which was great to start, but that was quite inefficient in terms, of course, on how we could leverage that.
I think we are today building a unique digital customer experience, which we are rolling out in many countries, and that's exactly how you manage to grow the revenue much faster than your cost.
Bonnie Herzog
And as I think about the -- I think it's $8 billion you spent in terms of investment spend.
Emmanuel Babeau
Yes, rather $9 billion now which is really R&D, creating all the science, the capacity, the manufacturing capacity as well because we've been starting from scratch. So, these all the investment accumulated, yes.
Bonnie Herzog
Do you expect that to continue to be elevated as you look out over the next 5, 10 years to again transform your entire company? Or is this early spending going to be enough. if you can scale?
Emmanuel Babeau
Yes. Well, I believe even today, we are a truly super innovative company, and we are here to create developed products that are bringing well-being, lifestyle, way to enjoy a certain type of product in a much better manner. And we have a lot of innovation in the pipe. So, we're going to continue to invest on science, on technology.
And therefore, this is at the end of the journey in terms of coming with new things. As I said, we see a lot of exciting potential. We don't have the time to talk about our wellness business, but we see everything around maybe CBD, botanical, vitamin. I mean all that is going to complement very nicely what we have today. And that's a very exciting journey where we still need to bring innovation to the market.
Bonnie Herzog
I'm smiling because we're running out of time, and I have so many more things I do want to talk to you about, but maybe a closing question for you as we sit here and think about all of the exciting things that you have on the innovation side. Is there one or two in particular that you are most excited about over the next couple of years given your full portfolio? And then the second question on that is because I also know your company for a very long time, and you must admit the complexities are certainly increasing. And so, how do you sort of manage and execute during this period?
Emmanuel Babeau
So maybe starting with the question on the complexity, which is I can tell you for the management, it's a real topic, of course, because moving from being a relatively stable traditional combustible cigarette company to a company innovating, I would say, 360 degrees coming with new products with regular wave.
I mean it's every quarter was coming with innovation, especially in a world that is volatile and that's not making innovation easy. I'm not saying that we are having everything right. I can tell you we learn. We learn the hard way some time, but I think we're learning fast and making great progress.
So, we are organizing the Company now between category owners, between region in order to play in a very efficient manner, the long-term vision, the development of product, the innovation and then the quick efficient implementation of the strategy close to the consumer on the ground. So, I think we are really deeply adapting our organization to have this agility, speed, volatility, adaptation that we are looking for.
Now on your question on exciting thing, I'm really excited because I think I see deeply the nicotine consumption market evolving. I think people understand that at the end of the day, consuming nicotine is for many people around the world, a pleasure that is giving them less stress, less anxiety, better focus.
I mean as the people why they consume nicotine. And people -- and we start to have science pointing in a very clear manner understand that nicotine is not the primary reason for the disease attached to smoking. Combustion is. And that is opening up the, I would say, the way for a different way of developing new innovation, again, driving this well-being, feel-good sentiment.
And with that, I think we're coming tomorrow with, as I said, the cannabinoid space. We're not going to go for recreative cannabis, to be very clear, but CBD is a place that we're going to explore.
You have everything around botanical for better sleep, more energy, calm, and all the need that all of us with the life that we have we want to enjoy, and we have the expertise to develop great exciting product with that. So all that is going to come, I think, quite naturally together as we progress. So that makes the journey very exciting.
Bonnie Herzog
Very exciting. Well, thank you so much.
Emmanuel Babeau
Thank you, Bonnie. Thank you for having us.
Bonnie Herzog
Thank you for talking through everything. Appreciate it. Thank you. Thanks, everyone.
