Swedencare AB (publ)

STO:SECARE

Earnings Call Analysis

Earnings Call Transcript 2024-Q1

[Operator]

Hi, and welcome to the presentation of Swedencare's Q1 Reports led by our CEO, Hakan Lagerberg and CFO, Jenny Graflind. And we are pleased to have Geoff Granger with us today, the CEO of Garmon and Naturvet, who will be joining us for our presentation. [Operator Instructions]

Over to you, Jenny and Hakan.

[Hakan Lagerberg, executive]

Thank you so much. A warm welcome to everyone. We're having the Q1 report and today, later on, we also have the annual meeting with all shareholders at 1:00 in Malmo, so looking forward to that as well.

Yes, Q1 2024 highlights. It's been a very hectic and energizing quarter. We started off 2nd of January, acquiring the rest of Riley’s that we have -- we represent in the last report. So it's a completely new category for us, and we have started or continued selling online, and we have presented the full range at Global Pet, the largest pet show in the U.S. So we are in dialogue with big box retailers and also have started to or will, in Q2, start to ship out to distributors for brick-and-mortar stores. So excited about that.

And the numbers as such, Jenny will go through them in detail, of course. But we did have a growth of 14%, of which organic growth was 12% and stronger margins that we did indicate for the year that -- last year that we will focus this year to keep on improving our margins. Very happy to be over 23% in operational EBITDA and accomplishing that without having all of the factors that will contribute to an increased margin. So expecting to keep on improving the margin throughout the year.

When it comes to the organic growth, a bit under our yearly target. I did communicate that I expect to be around 15% and closer to 20% than 10%. And first quarter 12%, but we're happy with that. Last year was 10%, and we ended up full year at 15%, as you remember. And there were some issues related to the sales just around the quarter end at start of the second quarter. So very happy with the quarter, even though the organic growth was 12%.

And you remember that we are basically growing twice as much as the pet markets as a whole. New sales strategy, we've been working very hard with that, especially Geoff Granger, who will -- you will meet later on. A very, very exciting year, this year and in the years to come for NaturVet where we have laid down a new strategy, how we will grow that brand and take the full position in the market.

Has been lots of business development, I'm really happy with the integration process and the synergies within the group, a lot more, let's say, collaborations between individuals in the group and also between group companies, both -- on both sides of the pond. So really thrilled about that.

And many new group opportunities, we're expanding the product ranges for a couple of our brands. We are also going to present a couple of U.S. brands at Interzoo in May, the largest pet show in the world. So excited to be presenting that -- those brands for an international market. Have also had lots of preparations for product launches. Some were launched already in Q1, but the main bulk of the product launches will come in Q2 and presented at Interzoo. So very excited about that.

And then as we grow and keep on changing and wanting to improve, we are -- have added key staff as I write here, industry champions to the group, we are in a very lucky position that we do attract the top-tier competencies. So when we do choose to expand our team, we have a very, very extensive list to choose from. So excited to what all of those new people will deliver to the group. And Geoff will present, especially in the NaturVet team, there are some key changes that he will present.

Concerning M&A, looking at the market as a whole, definitely more activity and not so many completed deals, but definitely more activity, especially in the U.S. and Europe, not so much in Asia and Pacific. But definitely, it is picking up. And as you know, we are an M&A-driven company. So we do have dialogues ongoing that we have had for several years, and we also have some new ones in discussions. But we will come back to that if and when it happens.

[Jenny Graflind, executive]

Some KPIs. I will go through them in a little bit more detail on the coming slides, but it's great to see that all major KPIs with the exception of our operating cash flow has really improved compared to the corresponding period last year. We now have double-digit growth. We have improved gross margin and our EBITDA margin. And of course, we continue to decrease our debt levels.

Okay. So we have growth in all segments and in all regions, except for the Rest of the World. In addition, there's also growth in all that one product group, which is great. And there was a few things that impacted growth this quarter. As Hakan said, it was 14% in total and 12% in organic growth.

We have moved our U.K. Amazon in-house, and this has, of course, made the sales lower because we have to sell out from the Amazon warehouse. However, now we are fully up and running from the end of April.

There was a shortage of a component. So production was impacted. Some of the products could not be finalized and delivered at the end of the quarter and that sales has, of course, been moved to this quarter. We are also building out our soft chew production, which we have talked about many times. It's building out in the U.K., and we are also increasing capacity of the soft chew production in Ireland.

So this limit our soft chew output for the quarter. Online was very strong, super strong channel this quarter. Pharma, which is then development and manufacturing was lower this quarter, but that was expected as there's more development plan for the remaining quarters this year.

Gross margin, as you can see, has increased as expected and it's now at the level, which we have communicated we wanted to be at. And of course, as the external cost has not increased with our growth. In fact, it's actually the lowest level, this has been since Q1 '23, and that gives us the leverage, which we have expected to grow our EBITDA. So that's why you see a growth of the EBITDA of 31%, and is the margin is now at 23.2% this quarter.

Some highlights when it comes to cash. As I mentioned, the operating cash flow did not improve. We had a negative change in working capital this quarter with SEK 42 million. This was linked to the fact that we had higher inventory levels this -- at the end of the quarter because we are preparing for the spring and summer sales. In addition, this component shortage that I mentioned has, of course, impacted this.

We also have a higher level of receivables this quarter. This is mainly linked to one specific customer, which had cash flow challenges during this quarter. However, we have received a large payment in the beginning of this -- the current quarter, and there's also a payment plan in place.

In addition to that, we did pay the Riley's acquisition, SEK 53 million, but still we have also been able to amortize on our loans, SEK 25 million, and we have kept our CapEx quite low, 1.4% of net sales.

Our rolling 4 quarters continues to look nice. We are almost at SEK 2.4 billion now for the rolling 12 months and SEK 527 million for operational EBITDA for 12-month.

A few comments on the product and the brand split. Being a new year, we have changed the categories a little bit. With the Riley's acquisition, we have added a category called Treats, had organic treat ones, which is mainly Riley's and we have also changed the ProDen PlaqueOff to a Dental, which you can see it's 50% of the total revenue. Of this Dental category, it's about 94%, which is ProDen PlaqueOff. So it's not that change, but it's also adds a few toothpaste and other dental products.

Nutraceutical has continued to grow to 16% for the quarter, and it's our biggest category. Pharma, I already spoke about Topicals/Dermatology is one of the products that were impacted by this component shortage.

[Hakan Lagerberg, executive]

Yes, looking at the different regions. So North America, almost SEK 470 million in sales, 11% growth, and that's 79% of our total revenue. As Jenny said, very strong online sales. Pet Retail also very good quarter. A couple of product launches one important one was, of course, speaking about ProDen PlaqueOff was that we, for the first time, are now into PetSmart with 3 products, and the launch has been really good, so better than expected, very happy about that.

The net sales were affected primarily by the component shortage. So there were a couple of big orders that came on the other side of Easter. But -- so we expect it to pick up in Q2. And I would like to say also there that concerning the vet sales, it was -- yes, let's say, a mixed message. A couple of our big customers were really strong, and then there were a couple that were affected by this component shortage.

So we -- they are significantly lower comparing quarter-by-quarter because Q1 last year was strong for a couple of customers. But as I said, that will pick up in Q2. We have already delivered some of those orders.

And pharma, as Jenny said, we knew from the start with our budget that Q1 came actually on target, a bit better than budget, but still, it will be the weakest quarter for the year, very excited about the pharma development team. They have done an excellent job. A couple of projects has been actually concluded faster than the time frame, and that's not so often that happens when it comes to pharma development, and the manufacturing has picked up and will be a lot more even this year.

And then when it comes to product sales, FlavorPal, that is a flavoring enhancer, a quite unique product and a very strong competitor when we -- now when we've launched it on the market, we have really strong interest from big pharma companies, and we have started to deliver out. So expecting more from that in the years to come.

And then we have added a completely new customer with a multiproduct suite and multimillion development agreement that will be linked to manufacturing as well. So happy about that. And those -- a couple of those new product developments will actually start already in Q2.

Looking at the production as a whole and predominantly Vetio South, we did have to use Vetio South for some European shipments due to capacity limitations in U.K. since we're shutting down, we had a complete shutdown in March, and it will be up and running again in, let's say, May, I would say. But we will still utilize some U.S. capacity for Europe, and I expect that until the end of this year.

We have expanded the cooperation with a couple of the major distributors, including new brands. So for example, Vet Classics have been introduced a couple of new distributors in the U.S. Rx Vitamins for the first time, we have a national distributor in place for that brand. It was strategically decided many years ago that they wouldn't like to be as a national distributor. It's just the kind of different sales approach.

But we have now strategized and worked with that and really happy that we now have a partner for national distribution, and we've already seen that the interest from -- for many smaller veterinarian practices are really happy that we will be offering Rx Vitamins through a national distributor.

Looking at Europe, continuing the, let's say, trend from last year with really strong 37% growth, SEK 115 million in sales, 19% of our total net revenue and it could actually be even stronger if we had delivered on all of the -- predominantly the soft chew customers that we have.

And also keep in mind that we are -- as Jenny said, we have built up some supply for product launches in Q2 and Q3 of our internal brands. So we've actually been preparing for that.

So all group companies had growth, except Swedencare UK, as Jenny spoke about with Amazon change and also a very small deficit in France, but they have started Q2 really well. So that was more of a timing issue.

The most astonishing was probably Innovet. Our Italian company had the best quarter ever, and that was actually -- that is actually one of the a few markets where we have very detailed information about market performance. And the Italian pet health market actually declined by 2% in Q1 and Innovet had a record quarter. We grew around 40% year-on-year. So fantastic performance there.

Strong growth with Soft Chews despite capacity limitation, as I said, both from internal but predominantly from external customers. We could have done a lot more, but we will do it the quarters to come.

We've launched a completely new brand called WelliChews focusing on Europe, range of 5 Soft Chews covering the most important therapy areas being launched in Pet Retail and Online. And then NaturVet had a -- that's a good example of a group initiative.

NaturVet has launched a dermatology line with 4 or 5 products with existing products from sister companies in the U.S. and launching was basically done in less than 3 months. So a really good example of collaboration.

And then we are preparing for launching NaturVet, our biggest pet retail brand, and that will be launch at [indiscernible] in Germany. So we're very excited about that has been lots of hard work by the team here in Europe and also with assistance from the U.S.

And we're very happy also for Europe to have signed a major customer for a big product range, exclusive agreement for 3 years for a fast-growing customers. So that will be as a base -- a very important base together with our internal brands for our build-out in the Soft Chew capacity.

And then Rest of the World, let's say, a decent quarter, a bit down, but as you know, international sales are normally a bit lumpy. But a solid quarter, South Korea continues to be the strongest export market for us, Japan good. South America has picked up a lot over the years, the last year.

So with Chile as the most important market and Brazil -- together with Brazil, Australia is also solid year after year with growth. China is still slow, but signs have come back. So we expect definitely that 2024 will be the year when we pick back up to growth.

We will also be launching new products into China. We have received a license for our Irish plant manufacturing. We are now officially granted the export license for starting off with 5 products, but there will be more. So happy about that because that has been an issue that it is complicated getting products into China.

Our pet food collaborations with ProDen PlaqueOff as an ingredient keeps on going, have delivered to all 4 partners in Q1. One major new global customer signed last year, and we will start delivering there in Q2, and that will actually be our biggest partner within a year.

Just mentioning a new market, we started selling in Mexico last year, a complicated regulatory market, but got ProDen PlaqueOff in there. And already, we are now -- have now signed an agreement with Petco Mexico. So we'll launch ProDen PlaqueOff in all -- I think around 160 stores in Mexico in Q2.

Looking ahead, 2024, nothing different from the priorities that we laid down and presented at the last call. So really keep on growing with stronger profitability and lowering our debt level, that will be focused every quarter to come, delivering on a strong pipeline.

We have many opportunities within the group, and we have prepared a strong product launch from most of our brands. So really excited about that. And the move -- continue to move from external suppliers to internal. We are at a good level already, but definitely more opportunities and we have a long list of products where we focus on the bigger impact products that we will move in-house.

Yes, product launches development, that will continue. We have an exciting research in the group as well. So coming back on that one. And then one important thing that we are working more diligently with now is really solidifying and developing relationship with major customers. That's one focus area where we will improve and are really happy the response we get from major customers in the U.S. and in Europe. So I expect more from that.

And then as I said, corporations and M&A opportunities, always a focus from us. And especially for me, I'm working a lot with that and have dialogues and it is always astonishing to see the width of opportunities there is in this sector because there are so many great companies out there that shows good growth, interesting and innovative products and linked with profitability. So there are lots of good targets for us, definitely.

And with that, I would like to introduce Geoff Granger. He will introduce himself, but I can say that I'm really happy with the contributions that Geoff has had to the group since he joined in last August. And you will be excited to hear of all the things that's happening in NaturVet.

[Geoff Granger]

So yes, just hanging on this slide for a second, then we'll roll to the next one. So yes, good morning. I really appreciate this opportunity to present to all of you today.

As a quick introduction, been the CEO of Garmon Corp., as Hakan said, since August of last year. Prior to that, I spent time with national retailers for almost 30 years, most recently with Petco for over 10 years. It was during my last 6-plus years with Petco, but I had the opportunity to work directly with Garmon Corp and aggressively grow the NaturVet brand in the pet supplement space.

I'm very passionate about this category. I'm very passionate about this company. So I could not pass on the opportunity to join Garmon Corp and become part of the Swedencare family.

For today, I'm going to cover a quick overview of the U.S. pet supplements market. NaturVet's position within the market, key opportunities for NaturVet and the strategic imperatives that we're putting in place to drive meaningful and sustained NaturVet's share growth. If we go to the next slide. All right.

Okay. So the U.S. pet supplements category, it's quickly approaching $2 billion in annual sales. With e-commerce pure play, so Amazon, Chewy, [ PetMDs ], driving 2/3 of that. So now Food, Drug, Mass and Club share is essentially aligned with the pet specialty and ag share. But the FDMC is really prime for explosive growth as traditional retailers are showing a strong appetite and significant interest in expanding into the supplements category.

So if you go to the next slide. However, the $2 billion is just the start as pet supplements is very much still an emerging category with the continued expansion of humanization in the pet space. It's just a matter of time before the supplements usage gap that you see here on this slide starts to close.

How can it be that almost 80% of humans are taking supplements compared to less than 20% of pets. Why are pet parents taking a proactive approach for themselves, but only being reactive with their pet's health. This is a big opportunity for someone to step in as a category thought leader to educate and guide retailers and end consumers alike.

If you go to the next slide. So NaturVet has a long history of dominating the pet specialty in ag space. So on the 2 slides ago, the pet specialty in ag space was only about 16% of the total market. It's almost 48 -- it's pretty much 48% for NaturVet. So it's 3x the penetration of the market. But what is that created then? Well, we continue to be underpenetrated in the e-com pure play space. That's due to lack of capabilities and that stuff we're working on right now to fix.

In the Food, Drug, Mass and Club space, that's remained unexplored to date, and that was also by choice. The big opportunity and the big balancing act lies within the ability to strengthen existing partnerships, right, protect the current business, while also making solutions available to consumers wherever they choose to find them.

This balance is key as imperative that any type of expansion benefits all of that are investing in the brand. We don't want to go backwards as we push to go forward. It's a very delicate balance.

So if we go to the next slide, right? Now did you know that NaturVet is the #1 volume brand in the pet specialty ag segment. This includes pet big box of Petco and PetSmart, big-box ag, [ Tractor ] Supply, regional pet chains like Pet Supplies Plus and independent pet retailers.

And even with NaturVet, not currently -- I say not currently, a lot of aspiration there, not currently having an expansive presence at PetSmart, our share in the channel is still over 500 basis points above the next closest brand which is Zesty Paws. And that's a mature brand. It's been in PetSmart for a while. So even with not having significant expansion into PetSmart, we still are sitting at the #1 volume spot.

Let's take a look at this another way in the next slide. So NaturVet is also the #1 volume brand of what we would define is what we call bricks and clicks space. This includes retailers that have a brick-and-mortar, have a storefront plus their applicable e-com volume. Now this does exclude Costco.

Walmart is actually included in these numbers. So that means that even without being in Walmart, or any other major FDMC chain. And again, currently not having an expansive presence in PetSmart, our brand is still driving the #1 volume in the segment.

Now this one is very -- this one concerns me more than the other one. Competition is closing fast due to FDMC expansion. And this view will likely look different in the short-term. I could show this to you in a couple of months and it might not look as good. But the long-term, we anticipate holding -- regaining and holding the #1 position as we implement our strategic imperatives.

So if you go to the next slide. So while the emerging brands are driving growth in the category, they're also driving further confusion in the category. Retailers and pet parents are seeking out strategic partners to help them navigate the space. We just saw how big NaturVet could be when we focus on a particular segment. And this strength gives us license to play in Food, Drug, Mass and Club and get more credit in dot-com pure play. The 2 places were underpenetrated or don't exist at all really in FDMC.

Moreover, NaturVet has a unique proposition that the others generally don't have. We control our manufacturing and quality from A to Z. In fact, we've recently coined a slogan around here that I think could resonate. We care enough to make it ourselves. None of the other competition on this slide can say that, okay. So we go to the next slide, okay.

And this is a -- and we're starting to get in, what are we doing about this, right? So since January of this year, we've made tremendous progress on the journey toward positioning ourselves as the strategic partner and trusted adviser of choice in this category.

We overhauled our executive leadership structure to hire a Chief Commercial Officer, who is leading our sales and marketing teams, and a Chief Operations Officer to get our manufacturing operation ready for the anticipated increased volume with both being experienced industry veterans.

And we recently restructured our entire sales organization to align with the shopping chips, inclusive of dedicated directors for the e-commerce channel, in the Food, Drug, Mass and Club channels. We have never had dedicated resources for these channels. Those are the 2 underpenetrated channels, and we've got people that all they do is live, sleep and breathe these channels.

So with just a handful of new folks that we brought into the sales organization, we are adding nearly 200 years of collective experience in sales leadership, insights and analytics, marketing and beyond. Additionally, we are bringing on a new Director of Customer Marketing, who will lead our change in direction there, where we will be laser-focused on social, digital and influence our opportunities.

Lastly, our new Executive Director of Product Development, just started earlier this month and is already making progress on a multiyear innovation pipeline. And what's very important about that is taking in consideration life cycle management channel based, right? Because a big part of this is keeping the existing accounts, existing partners, happy, right?

And -- but also being able to successfully expand. So we'll be able to do that by creating innovation that starts in certain channels than it moves out to certain channels. And also, as we've had preliminary discussions with a lot of the existing partners, they understand that if we do the expansion -- any kind of expansion properly, it will float all boats, right? And everybody go win, okay?

And one more key piece is getting access to shopper insights and market data. We recently finalized an agreement with a proven third-party data analytics resource. This will make us the smartest person in the room, as we go to market and build relationships based on financial rigor and thought leadership with current and prospective partners.

In conclusion, the data and analytics piece and everything else that I've already touched on here sets us up to be a genuine thought leader in the space. Something that, honestly, no one is really doing well in the category. I know this firsthand from experience on the retailer side, managing pet supplement segment.

We had a tremendous relationship with partners like Garmon Corp and a few others when I was at Petco, but no one was truly helping us unlock the true potential of the category. And as our expansion strategy starts to become a reality, the financial impacts of those plans will be included in the go forward Swedencare forecast.

Thank you again for your time this morning. I look forward to checking in from time to time to speak to our growth journey. Have a great rest of your day. But thank you.

[Operator]

And by that, we are open for questions. And the first one comes from Rickard.

[Rickard Anderkrans, analyst]

So hopefully, you can hear me okay. So first one is on magnitude of the impact on growth from Swedencare, U.K., Amazon shift and the shift in the production segment of Soft Chews hampering Q1 growth. So essentially, I'm trying to figure out, if you could estimate the impact and sort of what the growth would have been excluding these effects in the quarter?

[Hakan Lagerberg, executive]

Yes. It's always difficult to say in detail, but I would say that we would have been on the other side of the 15%.

[Rickard Anderkrans, analyst]

All right. That's very clear. And maybe you could elaborate a bit more on some of the building blocks to achieving the -- and the visibility you have on the building blocks to achieving growth above this level going forward in the year? And are you still comfortable with the 15-plus percent organic growth outlook for the full year results?

[Hakan Lagerberg, executive]

Yes. As I said, the last year, we had -- or after half year, we were at 10% and we ended up at 15%. So I expect -- let's say, perhaps not exactly similar quarter-by-quarter, but definitely that the 15% plus target is definitely achievable and what we're working for.

And the visibility is always difficult because as we are working with, let's say, moving targets with lots of components. But the -- as the -- as we did explain, the demand is a lot higher than we have really supplied on this quarter.

So yes, we are in a good place and feel very confident that the continued growth journey for Swedencare is definitely there. So lots of good things happening, and then we will be looking at some more structural changes when it comes to, let's say, online, as Geoff said, we will take back and have more control of online sales in basically all of our brands.

So that is a journey that will take place this year and even next year for some of our brands. But definitely, that we feel that we are in a good place.

[Rickard Anderkrans, analyst]

Okay, cool. And thank you for the presentation and a bit of a deep dive on the NaturVet. Maybe this is a question perhaps for Geoff, but maybe you can help me as well.

So in the presentation, we saw that on competition, we saw a roughly 15% brand share in the pet specialty ag channel. How is that brand share moved in recent years? And how many of the 14 competitors on the slide have emerged in the last 5 years or so? But it would be interesting to just get a sense of how the competitive landscape has evolved and how the share of NaturVet have moved.

[Geoff Granger]

Yes. So the share has declined. So we've made -- we've held the volume levels, but the share has gone a little backwards. And you have Zesty Paws kind of started about 4 or 5 years ago. Brands like PetHonesty that came in, a big one -- another one that came in was Native Pet. And then there's kind of a smattering of other brands that are out there as well.

But there are a lot of folks out there who want to get into the supplements business, but they're not manufacturing it. They see it as an opportunity, but we see -- ultimately, we see us as -- again, it happens to be, you see it on my thing, the 30-year badge, right? We're a 30-year-old brand and we've continued to survive.

So with a lot of the activity that's happened on e-com, we have a big opportunity to take share back on the e-com space as well.

[Rickard Anderkrans, analyst]

That's clear. And just -- maybe just a quick follow-up if I could. Could you add some commentary on how we should view the PetSmart commercial opportunity. You mentioned it, called it out a few times in the presentation, but maybe how we should think about that potential and the commercial potential you see there?

[Geoff Granger]

You're asking -- alluding to -- so again, we have a partnership with PetSmart. We've been in PetSmart for a while, but not in a big way in supplementation. So you ask -- are you asking for probabilities on PetSmart?

[Rickard Anderkrans, analyst]

Probabilities and the size of the channel opportunity, as you see, is it very meaningful for the NaturVet?

[Geoff Granger]

It would be very meaning -- I'll leave it at that. It would be very meaningful if we can make that happen. And it's -- and we have a tremendous relationship with them and the leader that we brought in, our Chief Commercial Officer, has a great partnership with them that exists. And so we are set up to figure something out with those guys.

[Hakan Lagerberg, executive]

Yes. We could also add on that, that as we said, we have made a different -- work through a different strategy now. Over the years, there has been interest also in the FD -- food market to have NaturVet there, but that wasn't -- that was an active choice not going into that.

But we have seen lots of brands going into that channel with perhaps different -- a bit different products, different sizes, perhaps or -- yes, different offering a bit. So that has been very successful. So that's really the biggest opportunities I see is really expanding into that channel because that is a huge channel for pet supplements and it's going to grow faster.

[Rickard Anderkrans, analyst]

All right, fantastic. And just to squeeze one final follow-up, maybe for Jenny, if I could. A question on Riley's. It seems to be like a quite low sales contribution in the quarter compared to expectations I had at least. Could you elaborate on how we should think about the sales contribution from Riley's going forward in the coming quarters, just so we could get for modeling purposes and understanding?

[Jenny Graflind, executive]

No, I think the sales with Riley's is going to increase quarter-by-quarter. There's a lot of opportunities within the group. We're going to expand Riley's as well. So I'm not going to give any numbers, but I think it's going to grow quarter-by-quarter.

[Hakan Lagerberg, executive]

Yes. And I can add to that. We are not manufacturing those products as of yet ourselves. So that has also had an impact on sales for this quarter. It's actually the first quarter we're taking -- we didn't take over an organization. We took over the brand and the product.

[Rickard Anderkrans, analyst]

Very clear.

[Operator]

Your next question comes from Christian. Christian, do you have a question? Okay. Let's go to Adela instead.

[Adela Dashian, analyst]

Yes, Adela here. A lot of good questions already asked and answered, but I do have one on the cash flow generation during the quarter and also the organic growth impact of the -- these large orders that were delayed due to the component shortages. Could you speak maybe a bit more, give us some more insight on what exactly these component shortages? What areas they refer to and what the expectations are for this in Q2?

[Hakan Lagerberg, executive]

Yes. I can take the component shortages, yes. That's solidly within the medicated liquids products. So veterinarian products that I'm waiting for a couple of actives that went from expected 3 months delivery time to 12 months. So the team has been working very hard at end of last year. But -- so they managed to get the ingredient, but not in time for really manufacturing. So we had to -- it will be delivered now in the beginning of Q2.

[Adela Dashian, analyst]

Okay. Got it. And then -- I'm sorry, if you probably already mentioned this, I joined late, but I saw that there's a new product category breakdown. You're now splitting Dental and I'm assuming Treats into 2 distinct categories. What remains in other from here on out in that case?

[Jenny Graflind, executive]

It's very small because, of course, part of the other last year was Treats, for example, so -- and also Dental products that have now moved out from other. It could be, for example, veterinary equipment is just very small things included in there now.

[Adela Dashian, analyst]

Do you still have the human sales of ProDen PlaqueOff within that...?

[Jenny Graflind, executive]

Yes.

[Operator]

I believe that concludes our -- one more question from Rickard.

[Rickard Anderkrans, analyst]

A follow-up if I could. I was just curious; it would be interesting to hear more on the reason why you're doing this restructuring and changing -- and changes implemented in NaturVet now. Is it sort of a reaction on rising competitive landscape? Or is it -- that would be interesting to hear a bit more on the background. And do you expect it to drive costs in a way that we should perhaps expect a bit lower operating margin contribution this year owing to some restructuring and increased OpEx base? Just trying to get a sense of this initiative.

[Hakan Lagerberg, executive]

I can start, Geoff, and then you can fill in.

[Geoff Granger]

Sure.

[Hakan Lagerberg, executive]

I would say that it's been an ongoing process since we acquired NaturVet. So I've been working with that with the Board from the beginning and then down and -- so it just has been a process. You know that we take slow when it comes to integration and NaturVet and Garmon, Watson is a great company, but you always have to start planning for taking it to the next level.

So really getting -- I mean, looking at year-over-year growth last year, I mean, NaturVet grew really, really well. So that wasn't the issue. But it's just adapting and looking at the sector as such and taking the opportunities that there is. So it's really just laying down how we could expand.

And the organization in NaturVet was from a, let's say, have been growing really fast entrepreneurial company and building a really good brand. But the structure wasn't really there for taking it to the next level and then looking at the different competencies and roles.

That wasn't there either because it was a really, really strong fantastically let's say, skilled top management that we're involved in basically everything and now taking it to the next level, you need to have a better structure just going forward. So that's really to be able to take it to the next level. That was the reason. And when it comes to cost and structure, that I'll leave it to Geoff, to give some indications.

[Geoff Granger]

Yes. In terms of -- the first thing I'll say is, and I kind of mentioned this when I spoke, is things are very different than they once were. And we have the right to -- the customer wants us to meet them where they want to be met. And we have -- and we should be heating that call.

And there is -- in terms of the traditional pet retailers, there's more of a receptivity towards brands in cases, there's more receptivity towards brands expanding if the belief it's going to float all boats. And that's going to create a critical mass for them as well, right, because that's going to create more marketing out there, more exposure for the brand, whereas even in my own experience being at Petco, I tended to want -- no, I want an exclusive brand. I don't want it everywhere. That perception has evolved.

In terms of cost structures, that's not something that I have in detail that I can speak to at this point in time. The bottom line is any decision we would make. It's obviously going to get fully vetted before we move forward. So we understand all elements of it. We would not do anything without understanding that.

[Rickard Anderkrans, analyst]

Very clear. And just a final follow-up. On the slide with the sales breakdown of NaturVet, it amounted to $90 million. Is that a 2023 full year sales?

[Geoff Granger]

Yes. That's a full -- yes, I'm sorry. All those numbers are full year '23.

[Rickard Anderkrans, analyst]

Perfect. Very clear.

[Operator]

Okay. Thank you. That concludes our Q&A. So back to you guys for any closing comments.

[Hakan Lagerberg, executive]

Thank you so much for the attendance and looking forward to the next call. And the next call, we will have Laszlo Varga, our Chief Operating Officer for Europe or Chief Commercial.