Company: IPST
Filing Date: 2025-11-18
Form Type: 10-Q
Source: 0001788230-25-000175
Chunk: 326

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-11-18
Form: 10-Q
Item: Part I, Item 2
Chunk 326
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 industry markets in partnership with our distributors across states and geographic regions and direct to consumers via third-party fulfillment partners. Pricing may vary by region due to market-specific dynamics and various layers of taxes applied by the states at the different steps of distribution and retail sales. As a result, our financial performance will depend, in part, on the mix of our sales in different markets during a given period and our ability to scale efficiently.

We have experienced modest inflation in some of our raw inputs, particularly in grains, bottles, cans and barrels over the last four years. During the summer of 2025, we re-evaluated our sourcing practices for raw inputs given the current tariff landscape and determined to maintain our current practices. This was in light of the fact that we import few inputs from other countries, and those items we do import (glass bottles and labels) are relatively low-cost items compared to the premium we can charge for our products. Any tariff on a raw input that costs less than $1 will have minimal impact on our pricing or gross margins, and any tariffs we do incur would be relatively small compared to the disruption of switching suppliers and the potential impact out-of-stocks would have on our production plan and revenue. We remain firm that our exposure to the cost of tariffs on our direct inputs remains low, and retaliatory tariffs on American products has no impact on our current customer base or revenue as we do not export. It is too soon to tell what the trickle down or secondary cost impacts will be for our general business operations as a result of the changing tariff landscape. 

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While constraints in the freight market caused historically high shipping rates during and after the COVID-19 supply chain disruption, shipping rates have largely returned to their previous levels, even including recent bankruptcy announcements by several freight companies in the U.S. announced over the last two quarters. Employees have been facing financial stress as inflation over the last several years has increased the cost of living across the board, and in the markets in which we operate, annual minimum wage increases for hourly retail and production staff are higher than other parts of the U.S. Unlike singular commodity spikes in the recent past due to an isolated incident, or short-term supply chain issues, the confluences of these factors created pressure across all parts of our operations, requiring us to manage each aspect carefully. Finally, we have begun to see a change in the buying habits of consumers who are looking for “experiences” rather than buying “things,” and we believe consumers are electing to buy fewer, but more premium items