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Good afternoon, everyone. Welcome to the Jamieson Wellness conference call to discuss the financial results for the first quarter of 2021. [Operator Instructions] Please be advised that the reproduction of this call in whole or in part is not permitted without written authorization from the company. As a reminder, today's call is being recorded. On the call today from management are Mark Hornick, President and Chief Executive Officer; Mike Pilato, President of Jamieson Canada; and Chris Snowden, Chief Financial Officer and Corporate Secretary. Before I turn the call over to Mr. Hornick, please note that a press release covering the company's first quarter 2021 financial results was issued this afternoon and a copy of that press release can be found in the Investor Relations section of the company's website. Please note that the prepared remarks, which will follow, contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. We refer you to all risk factors contained in Jamieson's press release issued this afternoon and in filings with the Canadian Securities Administrators for more detailed discussion of the factors that could cause actual results to differ materially from those projections in any forward-looking statements. The company undertakes no obligation to publicly correct or update the forward-looking statements made during the presentation to reflect future events or circumstances, except as it may be required under applicable security laws. Finally, we would like to remind listeners that the company may refer to certain non-IFRS financial measures during this teleconference. A reconciliation of these non-IFRS financial measures was included with the company's press release issued earlier today. Also, please note that unless otherwise stated, all figures discussed today are in Canadian dollars and are occasionally rounded to the nearest million. I will now turn the call over to Mr. Hornick to get started. Please go ahead, sir.
Well, thanks, Cody, and good afternoon, everyone. We appreciate you taking the time to join us to discuss our first quarter 2021 financial results. On the call with me, as Cody said, we have Mike Pilato who, as you all know, will become President and Chief Executive of Jamieson Wellness upon my retirement at the end of the month. Now of course, that being said, he's been running the business since the beginning of January as part of our transition. And as you all know, he is doing a phenomenal job. Chris Snowden, our Chief Financial Officer, will then provide an in-depth review of our financial results after I share some high-level comments. Mike will then take over and conclude with a discussion of our guidance as well as handle most of the Q&A. Let me start by sharing some highlights from the first quarter. We saw consumers continue to prioritize health and wellness, driving demand for both immunity and general health supplements. Jamieson's strong brands and reputation for innovative high-quality products are enabling us to continue a very solid pathway to growth, both domestically and internationally. Revenue exceeded $98 million in the quarter, an increase of 16% versus Q1 2020, and adjusted EBITDA increased 11% to $18.5 million. We'll give you some detail on the segments. Jamieson Brands segment revenue increased nearly 9%, reflecting continued strength in the VMS market and strong execution by our team. We are very pleased to report that domestic revenue increased 3%, reflecting both volume and pricing. And to give you some color, in order to grow 3% in the quarter, we had to cycle against an enormous Q1 2020, where we had the volume impact of panic buying happening towards the end of the quarter. And that started, of course, at the very beginning of the pandemic. And so the 3% growth that we're seeing in Q1 is just a great indication of the health and momentum of our business. Likewise, international revenue increased 55% in the first quarter, driven by order timing of nonimmunity products, as we prioritized immunity-based products for fulfillment as we exited 2020. We continue to experience strong demand across all geographies. Strategic Partner revenue increased 52% to over $22 million, reflecting the timing of orders as we work with our customers to more evenly smooth Strategic Partner demand by quarter throughout the year. Before I turn the call over to Chris to discuss our financials, I want to remind everyone that the health and wellness and the safety of our employees, customers and community remains our top priority here at Jamieson. The COVID-19 pandemic has continued to impact businesses globally throughout the first quarter of 2021, while we are encouraged by recent vaccination efforts, and we continue to proactively manage the situation to mitigate any impact on our people and on our business. With that, let me turn the call over to Chris to discuss the first quarter's financial results. Go ahead, sir.
Thank you very much, Mark, and good afternoon, everyone. As Mark discussed, consumers around the world remain focused on their physical health and mental wellness through this pandemic. As a result, we continue to see strong demand for our general health and wellness products in addition to our immunity-focused products. In the first quarter, revenue increased 16.3% to $98.3 million, driven by continued growth across all of our business segments and geographies. Revenue for the Jamieson Brands segment increased 8.7% to $75.9 million, consisting of 3% growth in domestic revenue and 55.2% growth internationally. This growth offsets initial panic buy that accompanied the first wave of the pandemic in March 2020 and reflects the timing of product availability and continued increase in base demand for our vitamins and supplements and confidence in the Jamieson Brand. Domestically, we experienced volume gains to support continued demand, inventory replenishment for our retailers and distributor partners. Growth also includes the initial implementation of our 2021 price increase, all while comping against a very strong increase of 22% in last year's first quarter, due to the initial surge in COVID-19 related demand. International growth was driven by the timing of nonimmunity-based product orders in the quarter as we prioritized immunity-based products exiting 2020. Revenue in our Strategic Partners segment grew 51.9% to $22.4 million, reflecting the timing of orders and expanded programs with our customers as we work to balance Strategic Partner demand more evenly throughout the year. Gross profit increased 8.4% to $33.9 million, and gross margin decreased by 250 basis points to 34.5%. The decrease in gross margin percentage was expected and primarily due to segment mix, costs related to COVID-19 safety and costs to complete our transition to a third-party logistics distribution model and a onetime payment associated with the renewal of our collective bargaining agreement with our unionized hourly employees. Normalized gross margin would exclude the impact of our transition to third-party -- to a third-party distribution model, was 35% in Q1, a 200 basis point decline here versus the prior year. This reflects 150 basis points due to segment mix, more specifically, the timing of proportionately higher Strategic Partner revenues in the quarter, and 50 basis points from incremental COVID-19 operating costs. In the Jamieson Brands segment, normalized gross margins declined by 40 basis points to 41.5% due to the unionized signing bonus plus COVID-19 safety and business continuity measures, partially offset by volume-related efficiency, pricing and the timing of consumer promotions. Our strategic partner segment gross margin declined by 70 basis points year-over-year, largely due to the impact of COVID-19 safety and business continuity measures. Selling, general and administrative expenses increased by $3.1 million to $20.8 million in Q1. Excluding the impact of specific items related to COVID-19 and business integration costs, normalized SG&A expenses increased by $1.8 million or 10.7% in the quarter. These increases were due to additional resources to support our strategic initiatives and the timing of marketing-related investments. Our share-based compensation expense increased by $1.3 million in the quarter, mainly due to the acceleration of $1.5 million of stock compensation recognized in relation to our CEO transition. First quarter operating income declined $1.8 million to $10.5 million, reflecting the timing of fixed costs, the transition to third-party logistics distribution and the acceleration of expense in relation to our CEO transition. Adjusted EBITDA increased $1.9 million or 11% to $18.5 million, and adjusted EBITDA margin was 18.9% compared to 19.7% in the prior period. The decline in adjusted EBITDA margin is mainly due to the higher proportion of strategic partner segment sales and the impact of COVID-19 safety and business continuity measures, affecting our operating margins. Interest expense and financing costs were $1.4 million, down $0.5 million on a year-over-year basis due to lower interest rates and lower average borrowings year-over-year. Our reported net income was $6.1 million in the first quarter compared to $8 million in the prior year due to factors noted previously impacting fixed costs and the transition to a third-party logistics provider and the acceleration of share-based compensation. On an adjusted basis, net income increased 18.2% year-over-year to $9.2 million or $0.22 per diluted share. All of the adjustments to net income are described in today's press release and included in adjustment -- adjusted net income reconciliation table at the end of the release. Turning to the balance sheet and cash flow. We used $5.1 million of cash from operations during the first quarter compared to $2.9 million of cash generated by operations in the year earlier period. Cash from operating activities before working capital considerations of $11.9 million were slightly lower than prior year due to the transition costs discussed impacting our reported GAAP earnings. Cash invested in working capital increased by $7.3 million, reflecting the timing of sales within the quarter and the proportionately higher international branded and strategic partner sales, which carry longer trade terms. Capital expenditures during the first quarter were $3.3 million, and we paid $5 million in dividends. We ended the quarter with over $114 million in available cash and operating lines. Now with that, let me turn the call over to Mike to discuss our guidance.
Thank you, Chris, and good evening, everyone. I hope everyone is well. We are reiterating the 2021 outlook we first shared with you on the Q4 call in early March, and we continue to anticipate the following: net revenue in the range of $421 million to $438 million, representing top line growth in the range of 4.3% to 8.6%. Adjusted EBITDA in the range of $95 million to $100 million or 8% to 13.6% growth over fiscal 2020 and adjusted diluted earnings per share of between $1.24 and $1.32. Revenue in the Jamieson Brands segment is expected to increase between 4% and 8% compared to a very strong fiscal 2020. Domestic branded revenues are expected to grow between 2% and 5%, and we expect our international growth to continue to be strong at plus 20% to plus 30%, excluding an approximate 5% headwind resulting from a strengthening Canadian dollar. Revenue in the Strategic Partners segment is expected to increase between 5% and 10%. Normalized SG&A expenses are expected to increase by approximately 9% to 13%. Our revenue growth and cost increases will not be linear throughout fiscal 2020, with the following factors impacting growth in the second quarter. We expect domestic Jamieson Brands segment to grow by at least 5% in the second quarter of 2021 compared to the panic-related demand that accompanied the first wave of COVID-19 in the second quarter of 2020, reflecting a higher level of inventory replenishment at retail and distributors and the impact of pricing. Our international branded business is expected to increase between 5% and 10% in the second quarter, including an approximately 5% reduction for the impact of foreign exchange. Revenue in the second quarter reflects the timing of customer replenishments made throughout the first quarter of 2021 and the surge in demand from our international customers and consumers, which occurred in the second quarter of 2020. We expect strategic partners revenue in the second quarter of 2021 to increase by between 40% to 50%, reflecting the timing of new customer programs, which temporarily shifted seasonal volume from the first half of 2020 into the second half of 2020. Normalized SG&A expenses will increase by approximately 15% to [ 70% ] as we increase our resources to support our strategic initiatives and timing of our expanded international marketing efforts. A complete discussion of our outlook and factors impacting our expected performance in 2020 is included in the outlook section of our MD&A that will be filed today. With that, I'm going to turn the call back over to Cody for Q&A. Cody?
[Operator Instructions] We'll take our first question from George Doumet with Scotia Bank.
I just want to talk a little bit about -- Mike, last conference call, you were pretty comfortable about volume -- growing volumes for the year as well as this top line of [ that ]. Is that still the case, number one? Can you maybe give us a sense of what you expect pricing to be? I think there was an announcement that there's a mid-quarter price increase. So can you maybe talk to that a little bit?
Yes, sure. Yes, I appreciate the question. Yes, we still expect to deliver growth on the year in all of our segments. We have more confidence, I would say, than we even have had in previous quarters. And as we continue to go through quarter through quarter of this pandemic, we gain more confidence. And the reason is we continue to see those new consumers that we talked about all through the last year stay in the category. And we've continued to see consumers that increase their use of vitamins, minerals and supplements in their compliance levels through the pandemic. We've seen that stick in Q1. And what gives us confidence is, as we got through Q1, we saw continued growth versus 2020 in the first 2 months of the quarter. When we got into March, we started cycling what we've been calling the panic buying period of 2020, which is about 8 weeks of panic buying we saw in the category. As we got into that period, we did see some consumption declines as we expected, most notably in the immunity-based side of the business. But when we compare it to 2019, pre-pandemic levels, it also came in at our expected levels of showing very high baseline business and very strong compliance and a very high level of these new consumers sticking in the category, which we expect we will continue to see for the rest of the year and into the long term. So our confidence through the quarter actually has grown in our ability to deliver growth on the year. When it comes to pricing, you're correct, we announced that we did take some pricing, we put it into market mid-quarter. It will be in our business moving forward, and it is reflected in our guidance that we have given both on quarter 2 and on a full year basis. We're not disclosing the pricing and all of the details around that for competitive reasons. But what I can tell you is, in quarter 1, we did see a combination of some volume growth and some pricing growth, and we expect to continue to see that for some time. Also to note is pricing that we put in the market was put in to reflect and offset increases in commodities and some different expenses we're seeing on our P&L is a complete offset and was a responsible price increase to both offset prices and [ make sure ] we were being responsible to the consumers in the marketplace.
Okay. And in the past, you gave us the annual growth expected for JB domestic, would you be prepared to maybe give us that number for Q2?
For Q2?
Yes.
Sorry, did you say for Q2?
Yes, I did.
George? Yes, sorry. Yes. So we are guiding right now for Q2. Growth of our domestic business of at least plus 5%.
Okay, that's for Jamieson Brands all around. Got it.That's Jamieson Brands domestic.
That's Jamieson Brands Domestic.
Yes. And that includes Specialty Brands as well, George, just to clarify.
Yes, that's right. Perfect. Got it. And just one last one, if I may, on just, general inventory of inputs. I mean obviously, there's been a lot of volatility. There's been a lot of input cost inflation. The expectation is that, that's going to continue across the spectrum. Can you talk to any amount that we've secured, how long we secured it for? And how you expect that to kind of to play out in terms of this coming year?
Well, we typically lock our pricing in the fall for the following at least 12 months. So from our perspective, we are very confident about our margin projections and our guidance for 2021. If outside of that, vitamin ingredient costs do continue to rise or persist, then we'll obviously assess the need to continue to take pricing to maintain our long-term margin aspirations.
We'll take our next question from Peter Sklar with BMO Capital Markets.
Like as I listen to you talk about the quarter, the -- like you had to overcome a bunch of headwinds. There was COVID costs, the costs involved to third-party logistics conversion, this onetime payment to unionized employees, the CEO transition. Like, can you -- if you don't want to talk about each of these items individually, can you tell us, Chris, in aggregate, like what this -- what all these headwinds amounted to?
So when you look at the -- what we adjusted from a gross margin perspective, there was about a 250 basis point decline in gross margins. So the cost to transition to our third-party logistics provider in the cost of sales line was about 50 basis points. And then when you look at the rest, another 50 basis points related to what we would include in operating cost as a COVID impact, and that's the impact of efficiency in our manufacturing environment due to shift gaps, PP&E, all of those things that are taking place in the plant within the COVID environment to ensure the health and safety of our employees. From an SG&A perspective, we added back transition costs, and that really relates to shift premiums and donations in the quarter that wouldn't be something that we would continue outside of COVID. Okay. I guess, sorry, the other -- yes, go ahead.
Like, Chris, on the -- so the gross margin was down 250 basis points. So you explained 100 of it. Where is the other 150?
The other 150 is entirely related to segment mix, with strategic partners growing 50% in the quarter, it's really the proportionate. And obviously, that will normalize throughout the year as the increases in strategic partner volume in the first half will penalize margins exiting the front half and will be beneficial as that proportionate amount lowers in the back half. So you'll see that trend out throughout the year.
Okay. And then, Mike, if I could ask you, like, in your guidance, you're talking about for full year 2021, that domestic Jamieson Brand, your guidance is for it to grow 2% to 5%. Like particularly at the low end of the range, like it seems a bit muted given consumer demand for the product now. I'm just wondering like why that like low end of the range of 2%, I would assume that would practically just be your -- the price that you got and so why is there that conservative end? It's just you're up against such a strong comp in 2020? Or are there production issues or you're putting your production into the international market? Maybe just talk a little bit about that.
Yes. I think at this point, Peter, it's just us trying to put forward a responsible guidance, knowing that there's still so much uncertainty out there around COVID, where is COVID going. Like we talked about all through last year, we're going to see some lumpiness this year in terms of comps. And we right now are coming out of the heart of the panic-buying period. And it really is just a guidance -- an indication of us being responsible at this point and not trying to get too far ahead of ourselves as we come out of this quarter, and we see some good momentum in the business.
Okay. And then lastly, could you talk about -- like you have this very high-growth rate in SG&A, like most consumer companies kind of grow their SG&A at about 2%. And like you're growing at much higher rates and it's in your guidance as well. So obviously, you're investing in the business. So maybe you could talk a little bit more about where those dollars are going.
Do you want me to take that, Mike? Or do you want to get it?
No, go ahead. Go ahead, Chris.
Yes. So it's really about resources and focusing our resources around our big bets. So we've talked in the last couple of years around strengthening our e-commerce efforts. We've added people on the ground in China. And as our business grows, it's really about ensuring we've got best-in-class talent across all of our functions. So it's really allowing kind of some of those back-office costs to catch up. And then obviously, in our guidance, we talked about -- about $3 million in incremental marketing that we're putting in to invest in our international business throughout the year. So those are all both key factors. And then obviously, our guidance includes if we end up at the top end of our guidance, that includes incremental variable compensation. So the closer we are to the top end of our guidance, the closer we would be to the top end of that SG&A expectation. If we're at the bottom end from an EBITDA perspective, we'd be at the bottom end of the SG&A just based on that variable nature.
Your next question comes from Endri Leno with National Bank.
A couple for me. First, I just wanted to ask if you can talk a little bit about China, what kind of trends are you seeing there? Any feedback from your partners especially given that they are ahead of us in terms of that pandemic control. And lastly, on China, the promotional activity that you just touched on, Chris, have you put that in motion already? And any initial feedback from that?
Yes. So everything is on track for China, both from a distribution and a cross-border e-commerce perspective. Growth in the quarter continued to be very strong. When we talked about the marketing investments, that's more designated for later in the year as you get to some of the big promotional calendars in China, [ 6 18 ] and [ 11 11, ] those types of things. So I think most of that will go later in the year. But to the point earlier on, we did have some marketing investment in the first quarter, and that's why you saw the 11% growth in SG&A.
Great. And since we're on international, can you touch a little bit in terms of how do you expect the lumpiness for that part of the business in 2021?
So we had a big amount of demand ship in the first quarter. The rest of the year will normalize. So I think we're calling for between 5% and 10% in Q2. That will kind of take care of kind of inventories in the year. And then as we get to Q3 and Q4, we expect our shipments to be more closely in line with incremental consumer demand in those quarters.
Okay. Great. And just one more for me on the cost side. Well, actually, a 2-part question. But the first one, do you expect any sort of cost inflation after that union -- that bargaining agreement that you signed? Then the other part of that question is COVID-related costs. How do you see them developing for the rest of the year?
Yes. So from a negotiation perspective, we had a very successful negotiation, absolutely great support by the union. We got to a collective bargaining position where both parties were immensely satisfied with the outcome. So we have a -- happy collective unit for the next 3 years. And the cost impact is included in our guidance. So absolutely no problems there. Sorry, oh the COVID costs, so Q1 was really the big lap from a COVID cost perspective. Because as we started those COVID measures in Q1 2020, that inventory actually didn't start to get sold through until the second quarter. So when you compare kind of COVID cost to COVID cost, the first quarter was certainly the key driver year-on-year. As we move forward, it's going to be COVID cost environment to COVID cost environment. So you shouldn't hear me talking about any significant margin erosion through the remainder of the year. And if we get lucky and things subside and people get vaccinated, you might even see some favorability in Q4. But I'm not -- I'm crossing my fingers at this point in time.
We'll hear next from Sabahat Khan, excuse me, from RBC Capital Markets. We'll move on to our next question from Graeme Kreindler with Eight Capital.
With respect to the growth seen domestically in Q1 and expected into Q2, wondering if we just dig a layer deeper here. In terms of like the customer, has that stayed the same since the peak panic-buying period? Or have there been any changes in overall demographics or socioeconomic groups that are fueling this continued demand? I'd be interested if there's any trends you can share with us.
Yes. Thanks, Graham. We -- from a channel perspective, we continue to see channel growth across all channels, with e-comm really continuing to show an acceleration of growth across all those pillars. From a consumer perspective, a demographic perspective, again, we saw strong growth across the board over 2020 and into 2021. I would say the one shift we have really seen is what we refer to as the fresh face of wellness internally, but that is a younger demographic of consumer getting more involved in the category and also getting more involved in longer-standing historic or strong heritage brands like Jamieson, as consumers turn more and more to brands that they know and they trust through this pandemic period. So we have seen a bit of a younger demographic come into the category and most notably come into the Jamieson brand over this time.
Great. And then one other question for me. We've seen some recent M&A activity happen within the VMS space here. I'm wondering, the past discussion has been about quite elevated multiples in the sector. I'm wondering if you could provide any commentary regarding what you're seeing right now. Have things -- have things level off a bit as the world is trying to approach closer to reopening? Or what do the opportunities look like for Jamieson right now? I would appreciate any thoughts.
Chris, do you want to take that?
Yes. Yes. So from an M&A activity perspective, obviously, the opportunities continue to be plentiful. We have a very, very high bar in terms of threshold and need. So we haven't seen anything that really kind of hits the center of the target in terms of what we're looking for, both from a multiple and a quality asset perspective. As we've mentioned in previous quarters, we're really focused right now on delivering in this really elevated risk environment called the pandemic. And we're very much focused on growing our business in China. So that's where we're going to focus for the next 12 to 24 months. Obviously, if something very interesting that meets our needs comes along, we'll certainly assess it, but we remain very focused on internal growth at this point.
Yes. Can I just add to that a little bit? I would -- I would say that we're in a very fortunate position in that we have some very clear organic growth opportunities in front of us that we really want to and need to focus on. We will keep M&A in our view, and we will look for opportunities as they arise. And to Chris' point, when the right time with the right deal comes in, we'll make that move. But we have 2 very unique situations in that we are the market leader that has expanded their leadership during the last 14 months. In the market of Canada, our domestic market that is really showing an elevated level of consumer demand and this new baseline that we keep talking about is now showing that it is real, and we have to stay on the offense here, and we have to keep grabbing onto that new basin growing from there. We see a big opportunity there. And the second part to Chris' point is our opportunities in our worldwide growth with all of these new consumers that have now prioritized health and wellness as their #1 priority. And our brand is showing some strength and growth in these countries, led by China. We again need to stay on the offense in that country and in some of the other countries we play and really grab that opportunity right now where those consumers are engaged and our brand is growing. So we're very confident in those bets. We're very, very focused on them, and we will keep M&A in our view for the right opportunity, but we are focused where those organic growth opportunities are right now.
We'll hear next from Justin Keywood from Stifel GMP.
For the new consumers you mentioned experiencing Jamieson's Brand, what's the ability to convert these consumers to additional Jamieson products? I assume they're trying out the brand for the first time in the immune boosting category, if I'm correct.
Yes. So we saw this trend. We typically, in our categories, see the trend where a new consumer will enter the market. If they stay in the category for, call it, 3 to 4 months, we know that they will stay in the category for the long term. And from there, we have this long-term build where they add products or different categories to their usage or to their daily habits. In the last year and continuing to this year, we saw an acceleration of new consumers. The most amount of new consumers ever to enter the category at one given time entered in 2020. We saw the acceleration of those new consumers and of consumers we had pre pandemic, expanding usage across multi categories as health and wellness became the #1 consumer priority and really the top priority for consumers day in and day out. So we saw strong growth across almost every category we played in as consumers not only came into the market, but then spread their usage out across multiple categories. We continue to see that today. Our entire strategy is built on getting new consumers in, getting them to take their vitamins, minerals and supplements and then to expand them across other subsegments of the category to meet their various health and wellness needs. We have seen that. We believe that will continue to accelerate. And that is one of the organic growth opportunities that I just referred to a minute ago in the last question that we are on the offense with right now. We are spending our marketing dollars. We are innovating. And we are bringing news to the consumer so we can get them to take more products and spread across those categories for growth.
That's helpful. And are you seeing that in the international markets right now? I believe there is some mention that the nonimmune boosting products are seeing an uptick in demand. So assuming beyond the pandemic, there could be tailwinds in other products, if I'm reading that correctly.
Absolutely. The trends we are seeing in Canada are trends that the category industry, we are seeing globally. When we talk about immunity versus nonimmunity based SKUs, it really is referring to what we just talked about. Last year at this time, we saw this massive influx of panic buying around immunity-based SKUs. As the year continued on the growth in immunity-based SKUs, the growth levels slowed while the other categories grew around it. And as we've turned into 2021, and we started to comp some of those panic-buying periods, we've continued to see challenges on comps on the immunity-based product, but we've seen other subsegments around the category grow. So we're seeing strength in sleep. We're seeing strength in natural energy, in stress relief and digestion in a lot of general health categories that really focus on making -- on building the consumers' health at the core. And also on things, if you think about some of those categories I just mentioned, subcategories that deal with some issues post pandemic around stress relief, sleep, things like that. So we're seeing the strengthening across multiple categories, and we expect that to continue for some time.
That's very helpful. I just had one other question. If there was an update on the U.S. pilot and any metrics you can share around that?
Yes. The U.S. pilot is still, as we talked about coming out of 2020, we went into it very early in 2020 in a test mode. We put it on hold during the pandemic as the pandemic hit early in 2020. We've reinvigorated late in 2020. It is still in test mode in the U.S. We will continue to be in test mode through 2021. We're currently looking for some opportunities to expand that test. But there's really nothing that we want to report at this time, and there is nothing material built in on that test in terms of our guidance for the year as it continues to be in test mode, and we figure out what we want to do into the U.S. longer term.
[Operator Instructions] We'll hear next from John Zamparo from CIBC.
I wanted to follow up on the answer to Graeme's question and ask about the e-commerce side of the business, and in particular, the online subscription business. Can you give any color on how these performed in the quarter and whether you're seeing increased uptake from consumers through the subscription channel?
Yes. So we continue to see strong growth across all channels, led by e-comm and the way we talk about digital commerce as we talked about it down 3 paths. So we talk about growth in traditional e-comm platforms like the Amazon.ca or the well.cas or different platforms internationally. And we continue to see very strong growth in traditional e-comm platforms. We also talk about partnerships that we have with our various brick-and-mortar or traditional retailers that have really started to emphasize and invest in e-commerce capabilities and business, and we're continuing to partner with all of our retailers and continue to see very strong growth there. We also have a direct-to-consumer pillar that we have in market that has also seen strong growth. In that piece of business, we have 2 things. We have our regular bottle service that you can order our bottles of products, and then we have our subscription business as you refer to. The bottle service definitely has continued to outpace the subscription business. It continues to grow at a very strong pace. With that being said, we also have seen growth in our subscription business throughout the year and into 2021. We do see, though, that it is not as quickly or it's being fastly adopted in terms of subscription services overall by Canadians that you see in other parts of the world. But we do continue to offer that service, and we do continue to see levels of growth there. And we believe in the long term, we will continue to see that turn into more and more of a material part of the business and of the category.
Okay. Understood. I appreciate the color. I'd also like to better understand your working capital investments. And it's been a drag on cash flow for a few years now. The language in the press release seems to suggest that, that may be the case this year as well. How should we think about that part of the business for the medium and longer term? Is there a reason to think that's structural? Is there anything you can do to reduce the amount of inventory you need to hold, particularly in raw materials? Or is that kind of a hedge against further cost inflation? Any commentary there would be helpful.
Well, the level of raw material that we're holding at this point in time is really about risk mitigation from a COVID perspective and managing through potential outbreaks within our supply chain and delays in freight and delays in production. So it's about us ensuring that we've got the product in the facility when we choose to produce it. That raw material component will significantly come down throughout 2021. That will be offset by higher levels of safety stock from a finished goods perspective. So you'll see a rightsizing of inventory as we get through the end of the year. But then you also have the added nuance that as we grow our international business, the nature of those sales are incremental from a working capital burden perspective, and that comes with a much longer trade term, 90 days as compared to 90 to 120 internationally compared to 30 days domestically. So as our international business grows, so will investments in working capital. At some point, that will normalize. We're being very conservative in terms of what we guide to from a working capital perspective. The good thing is that we've got tons of available capacity. And I think over long term, you'll see us returning to significantly cash from operation generation.
Okay, got it. And then my last question is on innovation of the product pipeline for this year. And without going into detail on what it is you're planning to launch, how would you characterize this year's new product pipeline versus a normal year? Is capacity an issue? Do you think more about just servicing the significant demand you have on existing products? Or might you launch some meaningful new products this year?
Yes. Thanks, John. So our innovation pipeline for this year is as strong as any year. We are fully launching a full assortment of products like we always do. Our new investment in capacity, which is now online, a good portion of it and allowing us to get a lot more product out the door to meet the demand as well as deliver on innovation, is great timing for us. And we are expecting a full launch of products this year. Some have already launched in early Q1. Some will continue to launch throughout the year and a very strong pipeline. The one I would call out for everyone, which I think is pretty key to call out, is we will be the first to market in this year, in this front half of the year with a vitamin D innovation, which is increasing the daily upper limits of vitamin D from 1,000 IUs a day to 2,500 IUs a day, which was a Health Canada change that we've been working on for some time. That Health Canada change got approved. We got issued the first in Canada license around that product, and we're proud to announce that we will be launching the first high-strength vitamin D product in the country, which is great timing with all the research going on around the world around the efficacy in terms of vitamin D, in terms of fighting COVID and also haloing back to any other viruses. So proud of that launch. We also continue to launch products in the immunity space, sleep space, stress base, energy space, all the trends that are trending up, we have innovations in, and we'll continue to monitor that quite closely. The other one I would just throw out there without getting into too much specifics as we also have our Apple Cider Vinegar gummy that has launched in the front half of this year, and you'll be seeing that on shelf soon, and we're quite excited about that one.
We'll hear next from Tania Gonsalves from Canaccord Genuity.
Just a couple for me here. So you mentioned shipping out more nonimmunity products in Q1 for the international segment. I know there was already some talk about just the demand shift that's occurred. If that was the reason why this happened, did we see the same kind of trend in the domestic business? Or was domestic immunity products still flat -- kind of flat quarter-over-quarter?
We've seen the demand -- we've seen the demand on immunity continue to be strong versus pre pandemic rates. We've seen -- versus the year ago, we've seen nonimmunity categories be stronger on the comps just because immunity right now is up against that panic-buying period of 2020. So it's a bit of a timing shift there. When we talk about shifting more sales to nonimmunity products in the international markets, it also has held true from a shipment perspective in the domestic market. And really, the reasons why we're -- in 2020 when we were having some high demand and some capacity constraints, we prioritized some high moving immunity-based products through the year to make sure that we were meeting the consumer at shelf on those products that they were really demanding. As our capacity limits have increased and as the demand on immunity-based products have stabilized, we've been able to produce more of the nonimmunity-based products and meet the needs that are out there on those products. So it's some timing shift mixed with some capacity opening up of capacity mixed with some manufacturing choices we had to make last year to maximize ourselves.
Understood. That's great color. And could you confirm for me that transitioning to a third-party logistics provider, is that complete now? Is that correct? We won't see that gross margin impact going forward?
Yes. That -- we had guided to that impact, I think, entering the fourth quarter as something that would affect Q4 and Q1. So you will not see any more of those costs going forward.
Perfect. And are you able to quantify the impact that the signing of the new collective bargaining agreement had on gross margin in terms of basis points?
Well, when we talk about the normalized impact of gross margin year-on-year for brands, it's within that 40 basis points, and that 40 basis points includes the impact of COVID plus that signing bonus offset by pricing in the quarter. So we didn't really break it down from a public perspective. But if you can understand, those are the 3 main elements that make up that 40 basis point decline.
Okay. And then just last for me here. When you're thinking about getting the business back to normal and removing some of those COVID measures that you have in place at the facilities, do you have a plan yet for how you want to go about doing that in an expedient fashion? Are there going to be mandated vaccination programs in place? Are you going to be hosting pop-ups to get employees vaccinated as fast as possible? What is kind of -- what are the initiatives involved in that?
So we -- in terms of getting our facilities back up to -- in post-COVID period you're talking about, our manufacturing facilities?
Yes, yes.
Yes. So there's kind of a combination, I would say, of 2 things here. One, some safety measures will stay in place for the long term, and we'll see the benefits of that in the long term around less absentees and more efficiency to our facilities. So things like PPE, mandating masks throughout our manufacturing facility, encouraging more handwashing, some more separation of people where maybe they were tighter than they needed to be historically. We'll keep some of those safety measures in place. Both -- well, COVID is running hot, but also into the future because we do think it will reduce the spread of things like the flu and illness and drive down absenteeism in our facilities. So some of those will stay. In terms of COVID specifically, we are on a campaign to strongly encourage vaccination across our manufacturing base. We cannot mandate it at this time, so we are strongly encouraging it. We are working with employees daily to help them set up appointments, find appointments for where they're available for where they live or where they work, and really working with them every day to try to encourage vaccination. We also are offering some financial incentive in terms of time to go get vaccinated and make sure that we're encouraging people to do that, that way. We're also working with some of the public health units in the various locations. We are most notably in Windsor to work with them to see if it's possible to, in time, get an on-site vaccination clinic and ongoing, is it possible in terms of if we need boosters or top-ups, would we be in a position to be able to do that on site. So everything is open on the table at this point. Safety and the health of our team members continues to be our #1 priority, both currently and looking into the future. And we're quite confident that we can get everything back to normal and as safe as possible. The other thing I would just also stress is throughout this period and even through Q1, we've continued to enhance our confidence and compliance plan, as we call it, which is our COVID-safety plan. And in all of our facilities, all of our manufacturing and distribution facilities that we own and control, we now have rapid testing antigen programs at all of those facilities. It's just another level of safety and precaution that we're taking. So I hope that answers your question. There's a lot of moving pieces, as you can imagine, at all of these facilities in terms of COVID and what the future will look like.
Yes. No, it absolutely does it seems like you guys have really thought about this. So I appreciate that. And that's all for me.
And that does conclude today's question-and-answer session. I'd like to turn the conference back over to Mr. Pilato for any additional or closing remarks.
Yes. Thank you, Cody, and thank you, everyone, for joining us on this call this evening. I just do want to stress one thing and that is through 2020, we did talk a lot about our confidence and our abilities to grow this business in 2021 versus what was a very strong 2020. We feel really good. We've delivered a strong growth in Q1, and it has given us more confidence that we can deliver the growth that we're saying we can deliver on the full year and deliver to the guidance that we're giving in Q2. So if nothing else on the full year, Q1 just gave us more confidence in our ability to deliver growth up what was an unbelievable year in 2020. I also want to just take a moment and thank you, Mark, for your unwavering commitment to the company during your tenure. It has been an absolute pleasure working alongside you, and we wish you all the very best in retirement. I also want to personally thank you for your partnership through this leadership transition. It has been unbelievable to work with Mark throughout these last few months in this transition, and he is leaving this company in fantastic shape and in a position he should be very proud of. I do look forward to working with the entire Jamieson team to continue to drive profitable growth well into the future on all of the growth initiatives that we talk about, and we look forward to delivering those to everyone. Thanks again. I look forward to speaking with you all on our next earnings call, and have a great night.
Thank you. And that does conclude today's conference. We do thank you all for your participation. You may now disconnect.