Lancaster Colony (LANC) 2 May 242024 Q3 Earnings call transcript

Good morning. My name is Towanda, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Lancaster Colony Corporation Fiscal Year 2024 Third Quarter Conference Call.

Conducting today's call will be Dave Ciesinski, President and CEO; and Tom Pigott, CFO. All lines have been placed on mute to prevent any background noise. completed remarks, have a will speakers period. question-and-answer the their there prepared be After

like a Vice Lancaster to to time, would here Relations now you If ask for conference the Corporate -- start Thank call, you Finance to question, Investor begin simply Dale question if would of your Colony like Ganobsik, Corporation. withdraw is again. you. And President press this during and

You may begin.

Quarter Fiscal Conference for you joining today Year thank XXXX and Colony's Third everyone, morning, Good Call. for us Lancaster

these this Private discussion this will statements in forward-looking XXXX. undertakes no which is uncertainties Reform materially, upon Our that lancastercolony.com, Also to may note morning statements, audio based risks uncertainties cause company's harbor of and our A subject that could are include with differ SEC. later subsequent and safe contained these and of the website, this actual a detailed the call the to provisions afternoon. subject risks the obligation be of to update archived number discussion available and These Act Securities company at to statements are the of filings of the company's events. Litigation results replay

CEO, Lancaster we'll may CEO, Dave turn will then our Pigott, for share of now your and remarks, have. some will over call, this appreciate conclusion be President we the questions call to again, regarding participation and Dave results. the At the then President prepared current Dave outlook. and to of Once answer financial CFO, with Ciesinski, happy Dave? strategy any you today's Ciesinski. provide update our Colony's morning. I'll will the the business For our begin Tom and highlights quarter. an our overview comments

lines, and Chick-fil-A income decision In operating by quarter, to Roadhouse that gains as our perimeter-of-the-store gross licensing sales pleasure quarter third good and profit to to It's $XXX.X profit $XXX.X million, sandwich business. In everyone. volume driven newly shipped performance ended dressings growth Subway consolidated review X.X%, were by our investments gross the increased charges growth X.X% in gains pleased record drove and and XX.X% for million, the pounds you our with net Dale, impact was $XX.X dressings, our penetration exit by net household volume trade March and underlying and partially growth by the portfolio. to Thanks, Garden segment, solid report successful sales reduced XX.X% today, spending sauces to points of our sauces net our and we from income arising Flatout results across was Texas fiscal licensed Bakehouse, as introduced Olive fiscal and product the segment we from measured which This steak the $XX.X grew XXXX. XX, Angelic for million. driven sales which to XX offset items our led by retail basis by increased be sauces. Retail year third driven a increased program, of here of specifically morning, million. Operating in in

consumption items, ending primary sales Flatout retail X.X%. Circana impact measured volume the data product to we was growing The initiatives license the and consumption Excluding scanner including that pounds very down X.X%. for Bakehouse X performed sales increased well, QX of our in and XX-week driven lines product by increased retail XX exited, factors. weighting attributed period shows brands, Angelic March with

of across successfully the trial and we range household promotional to penetration in invested activity brands. our drive First,

shift Sister in Subway the Garden And retail dressings, launches a new in modest the we brands Chick-fil-A from timing $XX.X were finally, sauces. and the to our Wings to sauces, dressings for for last a consumer-relevant Olive Second, notable Texas sales up quarter favorites showed $XX.X compared licensed to experienced X.X% to up Chick-fil-A holiday Garden rolls Marzetti contributions down such to Roadhouse X.X% quarter but sauces data deliver strong Easter dressings Wild as million. and Buffalo and sauces million. and of to benefit million, consumption increased for continued scanner retail year behind X.X% strong gains dips. Circana's consumption addition Schubert when to $XX.X attributed Olive XX.X%.

$XX frozen X.X% with bread volume The to share from continue has in When were resulting and of New $XX.X share Sister was accounts finally, May, up we category. for combined to of XX.X%. we data Schubert's our category. And XX% with branded demand pounds national launched York products. X.X% million, a extended in perform of X.X%. Bakery salad refrigerated to sales in $XX.X the our increased sales over which million by share measured leading nationally several category-leading percentage the chain Marzetti showing brand growth points its general a sales our share and of salad foodservice category-leading dressings, market led to well was market of to X Circana's gains sales refrigerated Foodservice segment, garlic brand volume Foodservice to the shipped up Chick-fil-A net last the million dressings, grown a addressing pleased share our of higher and was restaurant XX.X% X.X% that XX.X%. In

price commodity Foodservice sales to the due by impacted growth the deflation. adversely pass-through cost during quarter net segment decreases As was anticipated,

of QX, saving beneficial was initiatives X of margin last gross were During our growth. volume basis as our pleased profit as versus PNOC, pricing XXX million we unprecedented net points to by increase and the favorability increase commodities, and inflation cost impacts gross This of of in record of year. driven following well a $XXX.X years deliver or

core value elements productivity, and revenue management improve financial chain to remain supply all on engineering focus Our performance. further our

were during we on plant support the sincere additional deli perimeter-of-the-store decision provided exit and over the lack commitment of specifically and section would to our Colony's comments our the in Since it Angelic exit turn direct-to-store focused time direct complete, grocery their of focus us. With turn I with them have XX, and third Bakehouse few strategic Both to lines store. Before to scale product we've closures lines, assistance capabilities, regarding for able his a now extend our commentary to achieve the closures announcement with quarter Bakehouse. due business by we were these and now difficult lines, such I Wisconsin. dedication assure from were CFO, frozen my Lancaster call Saline, brands or typically of bakery. I'll facility the outplacement dressings Michigan, impacted for facility a employees Flatout like thanks and sold recent even all results. unsuccessful. I operational of Angelic our as and Tom? share of to to can employees. financial was these to product the sauces the to on bakery and we for we for required towards performance impacted sell very believe intend not and in over I subsequent to Tom our a you Flatout these in decision as scale such of to the Cudahy, the Tom, XX financial greater categories Pigott, Unfortunately, this March product lines, where their distribution scale our our efforts

Dave. Thanks,

line operating This mentioned. The and and of results achieve the improved the quarter income company sales product that third able set was gross net impacts discontinuations, to quarter, top growth, despite line fiscal records. gross the Dave higher profit margin performance

growth. $X.X resulting administrative prior These million. for decision million but reduced from PNOC offset ERP spending related to was Costs Third and down Project X.X% volume the initiative. the revenue partially $XXX.X increased X.X through our $XXX.X mix. million. XXX quarter prior in were Retail versus to decomposing in by of in versus lines. Commodity in XX.X% initiatives, by versus Foodservice drivers approximately or increased basis savings growth year by exit Gross totaling by historical gross our year million, quarter to The in sales performance, revenue recorded cost driven million to $X.X levels. Selling, the cost remained investments Angelic primarily by company's consolidated $X.X to $XX.X elevated partially This million expenditures goods driven The versus and profit deflationary commodity Ascent, percentage trade the million were pricing input or current segments. were expenses offset segment growth margins the our our profit prior in expanded wind net to sold funded inventory XX.X% year decrease the by reflects volume points general costs reductions promotional XX.X%. write-down quarter our million favorability. Consolidated cost was decreased was gross to product the These performance, $XX.X and a Flatout the continued year by and project $X.X points deflationary quarter. favorable

a the In addition, quarter prior year expenditures we legal in this had versus level quarter. lower heightened

lines Angelic chose mentioned, the Dave As product during and to the the company quarter. exit Flatout

we result, restructuring write-down a $XX.X as exits related million of charges recorded to As recorded as sales. in of inventories million cost $X.X well the these of our impairment

by and their consisted charges, recorded due termination $XX.X whereas costs $X.X these and inventories previously and totaled through our fixed of intangible for did million totaled write-down Flatout the of in nature, SG&A improvement noncash charges first or charges in other have due not impairment to a partially million not segment. on product which and benefits X The and costs segments Consolidated restructuring significant the mentioned, sales our unusual allocated the year reportable onetime $XX.X were retail reduction, was X which impairment Angelic portion million. assets The closing quarters assets, XX.X% profitability. offset million. The to increased gross of I lines operating combined the $XX.X the impact of to $X.X exit million reported income profit the net

quarter the rate be our rate was at tax QX We tax to XX%. Our XX.X%. estimate for fiscal

reduction by EPS cost in the and underlying increase share $X.XX to which quarter remaining was The in decline goods a XX.X% costs growth increased of $X.XX restructuring business. driven performance or Project $X.XX in $X.XX. a exit was diluted charged remaining to EPS, charged earnings $X.XX drove was $X.XX The of sold. Ascent Third per The the impairment costs EPS. of drove to the $X.XX of

regard year-to-date property capital additions million. expenditures, totaled for With $XX to our payments

complete. our 'XX, year previous forecasted reflects fiscal decline with estimated Horse now For This are expansion Cave $XX forecast expenditures the million. to a versus be spending total the capital approximately

shareholders. to we In funds business, returned addition also to in investing our

March quarterly share on of cash paid X% year's prior dividend from $X.XX increase represented a the Our amount. XX, per

$XX.X years. Net provided by streak activities increase the of at dividend annual stands year enduring cash was million the Our for prior third increases XX quarter. $XX.X quarter million, a operating versus

with a debt-free remains cash. and Our million balance sheet position financial in strong $XXX.X

more provide record the despite to charges also nicely for So gross growth. I commentary, performance. profit our quarter grew product and offerings streamline to third to income took line top and reflected mentioned, my focus action our wrap results up we future Operating

I'll now Dave turn it you. back remarks. his for Thank closing to over

Thanks, Tom.

As of we accelerate Lancaster continue focused our of core in support margins; and to one, chain ahead, will licensing. our business and of strength look growth strategy to pillars and our team, Colony to sheet X grow three, simple plan: our operating expand and cost combined our leverage core simplify our the to two, supply balance growth; reduce our with M&A our strategic

sales deflation ongoing to sincere our commodity to as entire the to compared QX fiscal less closing, Looking when continue respect select like benefit cost net continue becomes and Gross I QSR extend sequentially program, incremental my sales. With volume retail to additions will would from remain profit ahead savings of pronounced. our and we Deflationary segment from anticipate projected the foodservice gross our we segment, to to past program. In Lancaster thanks expanding ongoing PNOC for in we'd answer headwind including branded this profit, questions licensing commitment our Foodservice contributions concludes remarks prepared In benefit for quarter. This Texas be operational and you the and fiscal from our favorability and team our Colony to products. improved growth growth our fourth continued Subway any Roadhouse to to from happy their sauces. a today, might we to recent is project quarter, have. net and pricing expect Foodservice reduced will for customers performance financial QX

from first of with question line comes Davidson. the Holland Instructions] D.A. Our [Operator Brian

PNOC typically you costs release, Dave, there made that's or just of the commodity below and whether in favorability press to reference inflation. kind the the line, top

year going So on 'XX. that And an But the balance me somewhere. of calendar maybe you I broadly, kind missed just see not, maybe forgive that if where XQ? more update into if of

Okay.

So I asking the understand our the I question, want Are to through QX make your on for view you sure calendar just year? and PNOC remainder Brian. then of

yes. Yes,

Yes.

lapping we and of PNOC but we're to diminishing quarter, seeing and be in So price recent most and increases, contributor an QX, more as you important out. those QX, ultimately contributor PNOC to flatten as the into we're expect noticed a was more in it's commodities going be

provide Tom, I to know want don't that? on if [indiscernible] you

-- that we this as from do We some think quarter, favorability. That said, cost our the expect I out don't drive -- the you so get deflation nice expect into saw savings also expect PNOC help you Brian, as contributions nice we to QX. future. driving margin our initiatives, as into the is continue that growth we to in margin us which we and get quarter, saw much be

the like these M&A do we into focused sort from of helpful. this you takeaway. pipeline from picture an an I talked increased something, take this -- thing bakery kind That's of question, of I I this But of kind exit which Okay. coming of bigger that capital to on that clearing and about the announce curious right would but you pair disclosed standpoint? and is, period heavy are then the beforehand. mean, kind resources, my just looks that's update I reallocating And maybe a understand elsewhere. Maybe one investment. skipping you're of out refocusing, morning, what I if perimeter deck guess guys can't

right a look for know don't M&A throw all? what I challenging like not obviously maybe it's possibly want or something cold So for sense on, backdrop if just And you that's pipeline related and the is a what of to you food environment now. water

Yes.

a more bit about providing texture question. I'll by Angelic regarding maybe, just Brian, start Bakehouse that and decision the little Flatout. appreciate I So

sort to the capabilities you're store, purchased businesses, scale. way part we cat what on assumptions perimeter our that; lack next that supposed where played efforts, spite the in the those your and two, on really looks in of distribution found were win growth be, of businesses one, of through from to And very near you our believe is, capabilities. we reality XXXX direct-to-store out the respectively, we of So items we litter. is which two XXXX, predicated period they And in is lack store. The worked those need that are as exactly in best And some you're day, of day, it awesome. to one period, it the and display as

really lack is of combination for tightly capabilities businesses discretion right grocery versus we lot frozen trial. a it the our scale, in example, they more And the good tough the or that in was given even we have of looked as valor. that didn't situation. view right are better those of part just dry others, made or the the So at We've planogram it fact in produce, a a our

and Let's on back away from our this really focus move and on core. let's

of two a but as on. wasn't us couldn't as and moved our much this liked just at get review lot, a What we was to these whole work. looking grand that it we just portfolio we was businesses

our where as to intend M&A, you a if we go-forward it want about Tom, Tom. focus to view far basis. over on on turn talk So as to maybe I'll

Absolutely.

last Brian, focus our on evolved I So core few over think years, really sauces. in M&A in competencies our the strategy and dressings we've to

do So good better right opportunities -- on feel Horse with really to a us. culinary that in like space certainly, arm we M&A really in got selling us expansion retail to good enable should we've to and to come strong Cave manufacturing expertise the that then space, to the

phase continue labor In cost continue as growth opportunistically reduce reliance growth, us a how we're With sites opportunities initiatives, And look be good of there that Horse expansion. as can behind savings algorithm. shareholders. well to kind of deployment other our continued us, or look support of the addition, from we support to at we the brownfield for could to potential starting to things next to capital, Cave can returns on at providing

comes of with next from Loop question Our Stump line the Capital. Alton

I and how quarter? mention as I did far as missed your much down apologize basket guess I to first, ask, overall want the if time, but were I they this what during the commodities, you

to down but the single were Yes, didn't digits basis. they mid- in they -- a on percentage it, I mention were high

Great. mean, go? kind you quarter as next fourth that overall your far look Okay. year, guess, that range where of ahead I any I as I still then And into of kind to think commodity even ballpark or

Yes.

now, QX, QX. it So right do in -- it as we expect not but don't deflationary deflationary we as to in be was

we fiscal outlook, PNOC in about the into said, focus driving looking So we the to commodity contribution as on pipeline 'XX future, feel continue don't a we now a profile. flattish big initiatives, margins we're at a our expect That mentioned, there. through good From as productivity we and right QX.

Okay. months. about to last open then and -- for the Horse guess, I it's Great. X ask plant, the X, I And just obviously, here now, facility want running Cave up

process further going there? been quarters Are to that of facility. now learning -- kind that the you curve what So kind has couple yet? that -- things that capabilities your you of Or along opening full in just operational over of up how since last are

Yes.

So Alton, two things. really

go you than a installed facility, as you more but a not to at remember. SAP, the ago, back stand only year did we If up little we also

the We're facility magnitude volumes our facility, just that that report affords we us. running to from very and seeing employees. be period promise the engagement pleased our factory continues that very the an that, of we're chain we big put supply would because focus change, we're through is really leadership run It of a So that well, team from to see. to like through high flagship seeing the area of that the there of intense

the bakery ginger around scale, mentioned have areas. where to I like couple script, rolls toast. believe focus the and of we I focused against players a our we and have it the our ship where during many particularly focus our center-of-the-store business strategic in to ability comments earlier by my and idea exiting us source in would One, of we where very also allowed on things some garlic manufacture scale, put perimeter-of-the-store, biggest In the areas But CPG. capabilities, of that

it's that talk we we deliver believe call, categories, in plant future. we That talk our are ability So really expectations. those scale, with for of a strategic them relevant across and little into and in can't which about you board, line a on later lots maybe compete sauces, cornerstone the along the the really could dressings reasons and our of against obviously. But very bit today is when to much coming about

comes question with next Our Edge. from line Consumer Connor Rattigan the of

Yes.

So I traffic. what guess as I'm to curious -- you're it seeing relates foodservice

restaurant you you we've the suppose continue just the the commentary guys traffic thing may are I heard of Chick-fil-A your what guess, volume are, business? no, same that And be deliver your if and driven across in like foodservice growth quarters? if you confidence that seems I you really And board. down in even that gives guess, your the over reporters. So peers by exposure? I It can the was to seeing coming

an I'm It's question. glad Connor. important asked this, you

range different the it you And So weeks, syndicated industry to across sources. we weeks, whole of board. XX data subscribe XX a at at a see look slowdown. you and very it's you And modest can weeks, the broadly, X when look

is really what we're driving full see of modestly. our back It's it modestly. it's being by restaurants And that's kind this. looking pulled of here. single-digit Everybody mix You pulled These in pullbacks impacting all say, the QSR that this? impacted are have customers. has is service and step back at back

buying their rates, an transition, consumers way but in of which or are buy -- combined whether bite. And the continuing effects start They into continuing consequently, to and bought by view because Our times they retail these the importantly, but that's instead always somebody choices. they not sometimes else. because might they've these food pulling higher to through of work off bought consider of might restaurant the always consumers inflation, interest and store sometimes go What that happens they've driven you're they gone. period going the are of about autopilot, they've always just really is inflection place to talking really that period service. or what transition a is that to is think grabbing And

Foods look the you than it single-digit broadly, if slowdown seeing portfolio. board. the very very, So more that quick at modest -- full across across impacted are service, service we but

they as far about we've view, our hedges it as built as home, has the times and consumers in concerned these inures our typically benefit in. seen really is at portfolio. become eat our business of two One Now to what is, away-from-home dining

traffic do back with they look to prologue, drive get of from I stores. we our these operators share importantly, our see and the moderate an to that store. a activity calls operators. And starting at concepts into to into of what happen sorts operators. engaged in period at already they and off we discussions innovation typically already really those we're home, you, for if What that signature we're items, is creates is that the happening those traffic away can back period, advertise need of As past on work would though sauces with what's to traffic Connor, signature really to them say, with lot starts of any any as and will one And we it concept or intense do drive we back

to So we that, positioned true to true business have to always the that is that believe the to going we what I peer of that's believe would group. on believe And forward. tell perform you, we're X.X we going ago, the chance quartile and years continue top our in our be view it's

And just gears to it. pricing. then Got guess I changing

was pricing in the down like and same looks Foodservice Retail. at roughly it So

[indiscernible] But too So the I give up think color pricing we're much? is that to to be could going and what's dialing so mean, on us I promos. is Retail understand down I guess, I maybe on in year-over-year. much some pass-through Foodservice drive, maybe Because and you like that data expected primarily look down you're

to sense expect trend the Foodservice quarters? prices Retail of coming in over guess just trying a to and I we where should So get

but PNOC into you them We was question. amount, glad consumer I to a have the to They seeing off say, firepower the step look pointed that part I didn't the going themselves business, with up. A No, couple it necessarily incremental we'll that you. we and to consumers are coincidence, the buying. do autopilot down it out nicely as that commodities Tom, of asked about of I'm the these a business, given share think us backed in back couple favorable plan. same were things. was what more That's we're Yes. things this they and start and they're Retail the to of mentioned fact times, take off. a at more carefully okay,

a cases, some PNOC that it to choices, as even back seeing might consumers from they're the the that converted we're or cases, invest point. basket. we're make autopilot sure And into versus label and deflation come price strategically we're up getting to private In point. still benefit making these In it's a is what gap doing the a other price using promoted be

both So other really and is more of as think that longer great some you own the opportunity in was brands the really, we core spend. But to drive household portfolio, have one that our have thing term, licensed brands brands penetration. our component significantly our we the look

the others and this and basket, household get like range consumers of include try some to to because at investment it penetration driving of into home to behind drive and get help Chick-fil-A the we us period if we're it. it intended we can can So things that brands get were a

are our drive to on rates best interest products high. we continue strategic these in extremely Our think And repeat process. that to it's

we we're let's invest points. just right, opportunity, the price second about So [indiscernible] we drive because our to -- really it components PNOC once we what them doing treat funded converted, ultimately it know being them deflation. really if two get an becomes part But of is annuity. the becomes while managing penetration is by we have that One

line Our Andrew Wolf from CL with next the King. of question comes

Follow-ups here.

the Subway Roadhouse distribution, distributed -- On the fully quarter? the was in fully and is Texas it distributed that

was It not.

distribution? [indiscernible] us give you Could

it on ship started to It in the quarter. early

still it's So building.

Okay. Chick-fil-A get Garden And to Olive licensed as like or? similar it going the the ACV is other products and

It be it to they're same. occasions, really different There different are -- it's to so either remains be brands. remains

can that more if give we for to, we compared that others an Roadhouse, in know let's have. I occasion, Texas like -- plays narrow necessarily sauce, a don't I don't in some you say, a So of answer much example, firm all-purpose steak sauces the there

some that generate I impact the behind at they'll to probably we're So able certainly, items, TDPs level. that think these important. will but be

mentioned of you've And engineering your the of saves of know reviewing cost just And in times. things. I couple talked other and a value about some you sort past,

yourselves, savings were? on -- you these strategic procurement -- out. are I savings sense many think give runway the companies, what's focused how including importantly, Probably Could types cost like that. for just cost impactful a us more of efforts going them

how I So broadly about more Tom, if it. about the you can quarter, and the thinking -- outlook we're maybe if you about can talk talk

Sure.

then the at look driver forward to the driven maybe were talk split, was outlook. by let key savings I we margin more evenly experienced a PNOC, a quarter. Dave we as but the the So fairly cost I'll growth well. And think in It slightly as

Yes.

future, into the a focusing look Andrew, of we areas. couple as on So we're

are around We that to opportunities there continue big believe automation.

business. stock our bakery we season on line For those the line of that of have you following for business. and automation of in our today automation investing we're the years back a went we the you front behind dressing of And a in where while, know invested been where to we're period that a of

contributor the probably year some. and So an really important for be that's then next going to

areas our leveraging SAP, as savings are then, further which where well. little savings a is packaging, to lot think primary in what we information like are plants downtime opportunities at drive fortunately and the cost As to we areas and being other move looking waste that a at of and on power And we such there out us we beyond secondary the focused affords to moving of materials, things opportunities, with of are there but believe opportunities where But we mirror. need rearview make be unplanned SAP continue effective sort reducing bit as more efficiently. to I into to do our think, seek sure running also more utilizing

resources put after automation, better believe the business. utilization the of continue better cost to So labor go those a for the multiyear and you that. and there's combination if to Really, together, savings in opportunity us the of plants, utilization we of

just fourth you bit quick. the have I what may impact a and And did the quarter I the the of going there? it's Easter it a this, Dave, to a quarter? of assume was be shift, missed for for drag quantify

this fiscal, had prior as you QX think of look as I we the year some year. it in So last consumption, was the -- fiscal, the got the of in this we look QX in consumption at -- all this all we where year and for in quarter, shipments

So neutral. standpoint, we from a were shipment

as know, Yes, it a was shift. X you week

that more to of shipments terms going wasn't just So be on side. the in of big consumption a difference

Our next with the line question Stephens. Salera of Jim comes from

I drill down more on wanted to a bit Foodservice little the volume.

of of of you're like some your encouraged disaggregate of how think it gains I versus maybe just that operators larger servicing much the share backdrop exposure amounts see you to Chick-fil-A Can existing given all customers? up where is to restaurants. your best-in-class some

are branded which down are we I'll and the picking street. items I the sold Maybe question. where large start the how up period, And chain we on share. restaurant growth be Jim, the answer I setting own -- About business think our up side, would Marzetti both is in our context. XX% would of by This products, national accounts. that enjoyed

than average the we As portfolio what it. today. tell grow to restaurant allowing we of favorable we you that's driving look what's have us better believe that on continue that side, really to is That's I what's the a customers at happening can

As not? we we are changes basis, an are up really far account-by-account been there. share, as many picking of sort There haven't

And that moment. I the point seeing about bigger its think, think really, then, believe we're is chicken this an to forward to going important it Jim, we way and having that continue is that is

a Chick-fil-A, number XXXX of That today, the of is. it's that's selling operators. mix the any has that growth well seems other enormously of it's around really one it at look You whether concepts and chicken where are since or in growth focused which been be doing to QSR happening

data, year. you and you to the have burgers within chicken share and look even -- and pizza of the looked you drive chicken, share if of XX-week,XX-week and we continues apart sort and we at even If sort pull X-weeks, of the

of chicken. One the did reports, trends even that continuing a good believe more nice a play out little to spot. a challenging job environment, you in a towards long-term sit bit pointing of your And that of we we out. seeing We're in

they are want consumer to to items can their We and have relevant offer operators with we leverage those the to capabilities, capabilities customers. so right those continue

or restaurant the ties Great. on partners streams the to royalty partners your either given And the the think the Do are the, get much then that more receptive they helping find around That's uncertainty side? of some I say, heightened that of given that to let's of and portfolio, environment it or helpful. piece licensed expanding as license new restaurants potential reliability uncertainty the offerings traffic revenue you given business, sauce check their back their licensing the diversify in business.

mean much take that this. I I'd it I you, think -- tell of partners decisions don't view to like as can if our -- Well, as like know I that because was a true. say strategic necessarily think I I

advertising traffic Head come and and we've Officer, as slow together, Chief the the and uptick tell the to an figure maybe in on you it's head focusing usually it that. What is we've out talk ideas, of diversify down, that to you what to seen a So help the business. about is out, this here what Marketing I and operators traffic doing consistently, the starts concept a in rather usually the I revenue. of and they're and that their in the is pressure, their happens they can't together to can them ideas drive been all to is menu while going than they yes. to pretty that figure grow development, seen menu season, can on the work others And in tell answer business going take near-end longer-term we've view this is, stores.

And about benefit. even chicken of to wings, we're that course, in more chicken, us, menu that that their I talk wings concepts start and think to spin haven't believe importantly up, We're [indiscernible] our we sauces. played the and like for seeing on seeing activity

license think our a So as driver for we it's partners, new to algorithm, opportunity work biggest our the be think Licensing, overall to big new about for us. around going is I the with continue sort of bullish to sauces Foodservice we our even activity business menu that items. be

The Brooks comes next line Todd with Company. Our Benchmark question from the of

on and expanded. multiple the to licensing, of the and questions. introduce as Digging Just looks kind a bandwidth follow-up it them support of in capability like products couple has

will the rollouts you're in new of as year, years now? partners X with window. recent be I in conjunction think launches, kind X handle X simultaneously Bandwidth supporting launches further RVs to this on X.X a

then have Horse on the that the is question Cave second side. And I

You a seen kind brownfield the Cave with of in of capacity hinted full kind starts that capital, business? use of What's next time potential a facility what's standpoint? being frame to your from again maybe the capacity a figuring out remaining at Horse growth you've or wise get until

Yes.

So Cave you about Tom, on Horse do maybe a to the talk first? view want

Yes.

So the it on Foodservice out. capacity standpoint, we're from running side, a full

improving on Now what what -- going is to you OEE tell to Foodservice continue to we manufacturing we adding are focus are today, I some and we the that side. it would on maybe have

Retail we grow On capacity have side, to the bottles. still

future. of we the -- think in good and feel drive lot that facility into certainly, we So can SAP production Cave. with been we're to implementation Horse Cave continue a the about change on And of expansion. both we stand out And with there's where Horse we focused more

us business begin think just next about the tailwinds for term, of prudent the terms phase, has. In to the longer to it's given I think

spot plans we're stage, consumer and have Dave [indiscernible]? we're As process you add certainly, to specific a but don't mentioned, from if front. I at no anything this in a standpoint Dave, know, that sweet starting on a

first would would Yes. partners handle have -- able to Horse incremental in partners? And multiple on lots are of And is we there. different part terms the Todd, I how make question products was go your nature XXpacity back the the we of that of and sauces Cave of and to we take I'll factory tell the/ and you that

manufacturing capability do to sourcing that. So the the we have and certainly would

sales And handles in items team, that strong in one we're think added points both sales is more trade outside and and just sales we've price it's our us are additional additional really extremely that and as areas more scale. giving of inside the partners, calling where we execution in on customers

us Columbus big come and they we're meet as We're these in because in where some having people view us at and with customers now and a excitement point categories. here of driving innovators these

we bring partners. our us relevance retail items, more gives more as more So it with scale and

and Our has well. retail up they're stepped team executing

that, them leadership So focus I in right Tom rest if comfortable to the partner and come would driving we had we and I on think growth team the on on of brands. and the continue could board, hey, existing feel our support

talking that I'm of the in I that the milestones this top is period list. Hellmann's is SKUs of XX, all mean And sauce recent the I'm that when we one entered in sauces top the talking hit most XX Chick-fil-A into category. on Mayonnaise

retail that about There's between [indiscernible] lot now million we still that, Some though items to sauces list. chicken sales there's that us that believe lot even for of of and brand, to room dressings in is and sales, on the a continue one. a Heinz ketchup $XXX are of on And grow.

in the quick if or any they you -- the side that in that -- would Or to show take up Foodservice? of were partners follow-ups. the Subway Well, And just back operation? is product restaurants? retail is of that -- doing that Are would two selling

running into Have to where to the we Cave meet need we that demand to that house. the pullout go you And of then Tom, about back started Horse of arrangements Horse Foodservice. those co-manufacturer on up side kind for talked Cave to had leading

Yes.

On What really. long-term X takes them X when I brownfield is investing, These not the decisions the a to front, time years. Tom a talking I it to we're things, think or was you're is, focused bring decision what fruition. and we're trying to on here co-packer is, think, or are share greenfield

And with as just begin lead you than you times about of to I are might that's trying keeping pace think that think. point think the So make. matter the to a he's these things earlier required,

trying government give These capacity impression like site, if place, decisions the not that way. up that like things sure it's to you just -- the make work So not that. incentives on to require we're that's it's designed a are they're right And time the get the pinched case. right and you we're with new because the stuff

for recent to think trying more another kind continue think that network about to was growth, in project as what to our we site, see So is Tom of necessitate going as continue but I to we growth also broadly. foreshadow to it's periods us

that of where it's make want In and to we that terms utility profit. to maximizing site be sure

Scott next Jefferies. Marx Our from question comes of the line with

launched retail. for This Subway to Texas wanted -- is you here Scott [indiscernible] to the Roadhouse items just on come at back and

are performing your to relative Just how expectations? initial wondering those

where they some to secondly are then performing brands other of And expectations how the cycle. licensed for to relative in are that, their life

Yes.

in Texas had QX. sales Scott, in So we Subway very Roadhouse, maybe modest and the period, starting first with

early doesn't as to that one at you you, too build I one building would tell know. projecting way tell but certainly expectations, results in slow distribution overnight line So I QX look would from happen, it's of say it's to customer. another the a to tranche. data. off you And our or customer with It we're

team shelf. you, taking facings the I right with to place our and optimistic and right partners on aggressively items tell and the number sure our wait-and-see So retail an that make the of would the we're view working we're just sales is getting

we if a these around to. be at we look would the long-term bullish, just about across asked all mentioned opportunity license do one of feel as of points the to I you Now question, point really, bigger which that we continue performance items very of you partners. and is how our Chick-fil-A,

On a own New a penetration. bread Bakery Chick-fil-A's is only our garlic today, almost York basis XX% XX-week is household household XX.X% penetration

of to opportunity we feel continues to a there household drive be So lot penetration. like

If number not consumers if probably you look at Chick-fil-A I the is, that it's mean restaurants, what higher visit that. than of number that Xx

to on room continue plenty brand of taking we core. there's in, close that build believe to household the again, So just penetration

launch We big has that. think that there are behind and and brand dressings Chick-fil-A could sauces other the shoulders we

of You as ranch Really moved to entered Olive move about we improved facings talk behind Garden. we We We with which balsamic. launched into performed very, shelf, ranch, Italian for you days. portfolio around has into able and into the then we out came early with that get all the were items. velocity most the then recently more which Caesar well and on out very

So driving in just sizing it's right. penetration getting and some brands,

because with we case the brand brand like the that's Chick-fil-A you think the And Garden grow that case Olive example. to way well. In shoulders ketchup, manage more continue of a is think you that that the assortment. drive Olive room I to as Garden, for like have just brand Heinz big a an has continues to

larger items, Wild Wings, more think we're we're Buffalo out of the dimensions taking and two. We there's best-selling a converting some most it's that those now go we of With with. to their different of kind can recently, combination flavor But sizes.

worked or Tom bigger on spent and ketchup. of or like Kraft, and And Blue any Heinz team our from at Heinz the big I one brands. grew of our whether me all comes that. of companies Box number So people time team, most we managing up on and

brands to grow. in room plenty playbook these But help of think what continue to to our same existing partners, And tailored with we we're is we're using that grow. essence, more them doing each the sort uniquely of there's for

question, the helpful. just obviously for foodservice for outlook lot know of then a X the talk impacting macro just and about a second the of you balance could And if around That's as I general there's been maybe environment restaurants. Wondering months next year. your discussion

think be you would to some you little if later consumer little, the Wondering a a the kind of heard from pressure that in feel general same great. expect year. guys and feel I less may others have, any improve that they the thoughts we've

Yes.

deliver remain and with growth algorithm the sales growth same, the sides our to growth, essentially expect the line top both ability We business. of volumetric to both on

I other add? any Tom, want provide you to don't if to know texture And

Yes.

some we marketplace, the Dave there's hit sit certainly where as on consumer. think earlier, I concern the in about

at retail last grow portfolio, we as look broader marketplace, to we then think saw when Chick-fil-A, the drive the penetration. particularly in feel our bit quarter, on the with you position side, protect We a able of I reinvested we have our about were QSR growth volume trade. this very good that. And we more exposure

And of think folks continue do so softness positioned responding the that overall, I to and see, I think lot it. we're a well to to we're

where So through year. next and both and Dave think can QX algorithm into that's I I feel we continue the

key question equally focusing Maybe sort important. is to innovation more Consumer-relevant and great of the it's thing that that's that we're about on and important year, really in slightly things. it's I'll economy, an because fiscal three offer a the how thinking QX next challenging, it's in economy

consumer-relevant So innovation.

Second point is management. error. just and smart cost then good avoiding execution unforced And finally, just

those continue outlook. And bullish just the pretty execute, focused items. can team we if narrowly is we're about on the So to three

back questions for further showing now in no the queue. I'm I to you. Dave comments. his closing over Thank call the turn to like would

bit Well, thank our joined little of where thank forward year. call. hope you about the to and everybody you. results August through talk good. guys Very for we the We a in QX to our day. look being you And you the next you on We with outlook again rest fiscal a great that have take

call. conference and today's this for your gentlemen, Thank you concludes Ladies participation.

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