XML 39 R29.htm IDEA: XBRL DOCUMENT v3.24.0.1
Licensing Agreements
12 Months Ended
Dec. 30, 2023
Licensing agreements [Abstract]  
Licensing Agreements

T. Licensing Agreements

 

Pepsi Licensing Agreement

 

On August 9, 2021, the Company signed a series of agreements with PepsiCo, Inc. (“Pepsi”) to develop, market, and sell alcohol beverages. Under the agreements, the Company is responsible for developing, manufacturing, and marketing a flavored malt beverage product under the HARD MTN DEW® brand. As part of the agreements, Pepsi provides certain proprietary ingredients and also licenses the Company the use of its HARD MTN DEW® trademark in connection with manufacturing, promoting, marketing, and distributing the developed product, primarily through the Pepsi distribution network.

 

During fiscal 2022 and 2023, distribution was primarily managed through the Pepsi Network per terms of the original agreements. Pursuant to these terms, the Company made payments to Pepsi for proprietary ingredients, freight costs to ship the product to Pepsi, and certain marketing services. The costs of the proprietary ingredients above fair market value are recorded within net revenue at the time revenue is recognized for the flavored malt beverages sold to Pepsi and were $2.0 million and $2.5 million during fiscal 2023 and 2022, respectively. Freight costs and marketing costs are recorded in advertising, promotional, and selling expenses. The excess costs over fair market value of proprietary ingredients on hand at the end of the period are classified within prepaid expenses and other current assets. The excess over fair market value for inventory on hand was $0.1 million and $0.4 million as of December 30, 2023 and December 31, 2022, respectively. During fiscal 2023 and 2022, total net revenue recognized under these agreements amounted to approximately 2% of the Company's total net revenues.

 

On February 24, 2024, the Company and Pepsi amended the terms of these agreements, most notably to change distribution from the Pepsi Distribution network to the Company’s distribution network. The transition of distributor networks is expected to begin in May of 2024 and extend into 2025. Under the agreements, the Company is responsible for developing, manufacturing, and marketing a flavored malt beverage product under Pepsi’s MTN DEW® brand. Pepsi provides certain proprietary ingredients and also licenses the Company the use of its HARD MTN DEW® trademark in connection with manufacturing, promoting, marketing, and distributing the developed product.