Q4 2020 Lancaster Colony Corp Earnings Call

Conducting today's call will be Dave says and ski President CEO and Tom <unk> CFO all lines have been placed on mute to prevent any background noise. After the speakers have completed their prepared remarks, there will be a question and answer period. If you would like to ask a question. During this time simply press star and the number one on your telephone keypad and questions we'll.

Be taken in the order that their received.

I would like to withdraw your question. Please press the pound Keith Thank you and now to begin the conference call. His Dale can unfold.

Vice President of Investor Relations and Treasurer for Lancaster Colony Corporation.

Thank you Meghan good morning, everyone and thank you for joining us today for Lancaster colony's fiscal year, 2024th quarter Conference call. Our discussion. This morning May include forward looking statements, which are subject to the safe Harbor provisions of the private Securities Litigation Reform Act 1995. These statements are subject to a number of risks and uncertainties that could cause actual results.

Differ materially and the company undertakes no obligation to update these statements based upon subsequent events.

The detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC.

Also note that the audio replay of this call will be archived and available at our company's website Lancaster colony outcome. Later this afternoon.

For todays call dates is NCR, president and CEO will begin with the business update and highlights for the quarter.

Tom figures, our CFO will then provide an overview of the financial results. Dave will then share some comments regarding our outlook for fiscal <unk> 21.

At the conclusion of our prepared remarks, we'll be happy to and respond to any questions you may have.

Once again, we appreciate your participation. This morning, I'll now turn the call over to Lancaster, colony's President and CEO Dave.

Dave.

Thanks, stale and good morning, everyone. It's a pleasure to be here with you today as we review our fourth quarter results first fiscal year 2020.

I'd like to begin by extending a sincere. Thank you to the entire Lancaster colony team for their tremendous effort during the past five months as we can breast fronted the impact of the cobot 19 pandemic.

From the frontline workers at our plants and distribution centers to all the associates and leaders throughout our business I'm extremely proud of how we pulled together and worked in business.

From the onset of the krona virus pandemic, we remain steadfast that our mission is fixed first to provide for the health safety and welfare of our teammates and second to ensure that we continue to play our role and our country's vital food supply chain.

Despite all the uncertainty and obstacles that co bid 19 has imposed on our business. We completed fiscal year 2020 with record net sales of over $1.3 billion and record gross profit of 300, taking sales consolidated.

Net sales grew 70 basis points.

Net sales in our Reek Tales segment grew 24.5%.

While our foodservice segments reported net sales declined 24.1%.

Retail net sales benefited from higher.

Higher demand as the Mpeg impacts of Cobot 19 drove increased at home food consumption.

We were pleased.

Q4 sales growth.

Notable contributors to growth included our.

When sauces and separately.

Chick Fil a sauces that we are.

In Florida.

Both the Buffalo Wild wings, and should flay sauces are being sold under exclusive.

License agreements.

Strong third quarter retail sales trends remained robust in the fourth.

Garlic bread sister, Schubert birds frozen dinner rolls and all.

Hold garden dressings.

Yes, all omni baking sales.

Fourth quarter net sales declined 22.2% firstly impacted by co bid 19, particularly in the month of April but recovered notably in May and June led by the quick service restaurant customers within.

Despite the unfavorable influences of cobot 19.

Consolidated gross profit by 10.9 million or.

To a fourth quarter record 89.

The gross profit improvement was driven.

By the favorable sales mix, our cost savings programs and improved net price realization in retail.

Notable offsets to gross profit attributed to Cobot 19 includes rate increases for our front line employees.

And in keeping with our top priority invest plants to promote safe operations.

At all of our facilities I'll now turn the call over to Tom taken our.

CFO for his commentary on our Q4 financial results.

First results exceeded our expectations after a challenging.

While the business recovered strongly.

The performance was reflective of the me any actions taken by our employees to address the impacts of the covered 19 outbreak and the focus payment.

Contained in our key objectives.

Fourth quarter consolidated net sales decreased 90 basis points to $320.9 million.

Moving omni baking sales of $2.8 million in the current year quarter and $7.7 million in the prior year quarter consolidated net sales increased by 70 basis points.

The supply agreement comes to an end.

During our fiscal second quarter gross profit increased 10.9.

Million dollars or 13.9 per se.

$89.1 million and gross margins grew by 306 basis points decrease was driven by the strong revenue growth in the retail segment, our cost savings programs improved net price realization in retail and lower commodity costs. These favorable impacts were partially offset by the co. Good night.

I mean related items, including nearly $3 million, an incremental frontline worker pay.

Census increased $8.9 million or 22% there were to me.

Yeah drivers behind the increase.

First was the investment we're making in our our ERP program entitled Project.

Which accounted for 3.81 main driver was a $3.2 million or write off of previously capitalized.

Well the horse cave expansion project.

As we discussed in our Q3 call we elected to camp.

This will this project in reassess our longer term capacity needs given the rapid change in demand we are seeing.

Note that expansion project with a different design remains a strong Pos.

Possibility for the future and we'll have more to share on these plants at an upcoming call.

Consolidated operating income declined $3.1 million versus the prior year full adjustment to contingent consideration.

And the current year results include the incremental 3.8 million and the cobot 19 items mentioned.

And above key drivers is strong operating income growth.

Favorable mix and cost saving.

Thanks programs.

Our effective tax rate was 24.6% this quarter versus the tax rate.

25.4% in the fourth quarter fiscal 2019, we estimate our tax rate for fiscal 2001 to be 24%.

Fourth quarter diluted earnings per share just expenditures for project to San accounted for 10 cents of the decline the prior year fourth quarter benefited from a change in contingent consideration which totaled 21.

One cents per share.

With regards to capital expenditures, our fiscal 21 payment for property additions totaled $82.6 million.

Our investment in fiscal 2000 included expenditures for our frozen dinner rolls capacity expansion project.

Forecasting total capital expenditures between 65 and $85 million based on plans currently in place.

During the process of evaluating additional and potentially significant investments to meet the rapid.

These projects will be additive to this forecast will provide you with future updates.

They are more fully developed.

In addition to investing in the business. We also so return funds to shareholders.

Our quarterly cash dividend paid on June Thirtyth was 70 cents per share and 8% increase from the prior year amount.

57 years this past December.

Despite the higher level investments and increased dividend payments, our financial position remains very strong as we finished the quarter debt free with $198 million to cash on the balance sheet.

So to wrap up my commentary this quarter featured strong underlying performance.

It's highlighted by increased consumer demand for our retail products and improving sales trends in our foodservice segment the business continues.

The news to monitor and adjust to the impacts of the cobot 19 outbreak, while investing for longer term growth.

Ill now turn it back over to Dave for his.

Service segments will remain subject to the shifts in demand, resulting from cobot 19.

The extend and duration of the pandemic related impacts are unpredictable and contingent upon the future spread to the virus and the resulting effect.

Next on consumer behavior.

That said, we anticipate continued.

Topline growth and the retailed segment from shelf stable dressings, and sauces sold under license agreements, most notably chip lay sauces, Buffalo Wild wings sauces.

And olive garden dressings.

In foodservice the heavier mix of our business towards quick service restaurants, which represents over 60% of our foodservice segment foodservice segments total sales will remain a positive in the current environment.

On the commodity front, we're projecting a moderate rise in the coming year following a favorable year end.

At the design and build phase as planned and are now into the tech space. We expect to finish that test phase near the end of fiscal 2021, followed by the deployment phase.

Strategically as we look ahead fiscal 2021, we will continue to leverage the combined strength of our team our operating strategy and our balance sheet in support of the three simple pillars of our growth plans.

Number one to accelerate our base business growth number two to simplify our supply chain to reduce our cost and grow our margins and number three to identifying execute complimentary M&A to grow our core.

Before opening up to call to questions I'd like to take a few moments now to share with you. Some information regarding discrete actions that wheat in keeping with our vision to be the better food company have underway here Lancaster colony to do our part to eradicate racism and commit to diversity and inclusion and belonging both in the workplace and in the case.

Communities, where we operate.

First we established a new position within the organization Vice President of corporate Affairs, and government relations to provide leadership and developing and executing plans to drive our company's engagement and state and local government corporate citizenship, social responsibility and sustainability initiatives I'm pleased to announce the hiring of.

Clarence Mango to this position effective August 17th.

Clearances role will also include oversight of our diversity and inclusion programs.

Second I'm happy to share that Lancaster colony has formally adopted a diversity hiring statement otherwise known as the Rooney rule, which reinforces our commitment to including highly qualified women and minority candidates as well as highly qualified candidates with other diverse backgrounds skills and experiences and the.

Dates we consider for new leadership positions.

Third I'm excited to announce that we've entered into a partnership with Christo Ray High School here in Columbus, Ohio, Christo Ray provides a work study model of education.

He's whereby corporate partners provide tuition support and works debt.

Chris storey high school was established in 2013 and it has been nourishing the growth of students and sponsors alike since its inception.

They in support of our team members here length caster, Connie we will be establishing an employee relief fund. The purpose of this program will be to assist our employees that encountered tragic life events that result in financial hardship.

While the company plans to make an annual contribution to this fund our employees will also have the opportunity to support.

The fund through their personal donations.

In closing I would again like to thank the entire team here Lancaster colony for all they have done to help make fiscal 2020, a success. Despite all of the unprecedented challenges I would also like to thank our shareholders and other stakeholders, including our customers and suppliers for their ongoing support we look for.

Forward to partnering with them to pursue the opportunities that lie ahead in fiscal 2021 and beyond this concludes our prepared remarks for the date and we'd be happy to answer any questions you might have.

Thanks.

At this time I would like to remind everyone in order to ask a question. Please press star one on your telephone keypad. Our first question is from Brian Holland with D.A. Davidson. Your line is open.

Thanks, Good morning, and congratulations good morning, right, Hey, Ryan good morning.

So quickly on food service to start down 24% for Q.

Can you provide some context around.

Where that segmented sort of trending today, yes, that's a great question. So.

Brian If you look at April across all of our away from home dining April was a very very tough month.

If you look across all all segments QSR mid scale casual dining it was probably down 40% as may and June progressed, it improved notably probably coming out in June we were looking at transaction volumes from NPD crest that.

We're down somewhere in the or.

As we've continued to March through the remainder of June and into.

Now is is transaction volume again from end NPD, Chris is running probably down around 10%.

If you know if you you layer onto that Thats transactions that doesn't include the size of that check what we're looking at a sales are slightly better than that and there are some customers, notably pizza QSR chip delay any.

Posting positive comps and in some cases record sales so.

That was sort of the continuum started very very low in April and then rebounded nicely thereafter, but we're still pacing on the transaction level.

Were in the in the single digits.

High single digits.

Okay. So so downhill.

Slightly better than that and then if I'm thinking about your bill.

One of the key things that I think it's been clear evidence today is you've got more favorable exposure that.

You look at the broader.

Yes, our mix and more notably the national chain, So fair to us.

Sooner than what you're just referring to from an industry level, you know maybe ever so slightly better than that I think the stats that I give you also provides for the fact that QSR is just over development within foodservice at large and that already have included a lot of that benefit.

Okay perfect I appreciate the color on the retail.

4% to 5% contribution from new products I, just want to be clear because.

Your myriad new products come expansion initiatives et cetera, so that does that comment refer specifically to the license.

As products as most notably Buffalo Wild wings, and Chick Fil light or are there other.

Contributors to that mix that your reference Buffalo Wild wings its took place.

Sauce, and then smaller contribution maybe Bob and some of our.

Okay, and maybe what I'll do as even then kind of step that.

And provide just a little broader context on the same period of time as we saw the.

The foodservice segment really back off the retail.

Really recognize a spike we enjoy.

Part of proceed forward, what we're seeing now.

The data for all food categories in Iraq. So again all food. This would include food retail.

Plus Saab mass merchants as seen is food. These days is.

Running plus about 10% and given the category.

Is that we're playing and we're performing better than that.

And you saw that in our scanner data I don't I don't have to necessarily take.

Get through that as we look forward and one of the great questions that were trying to sort of predict and so our appears in the industry is.

When an end to end.

What we expect is the strength of our.

Our new items, particularly behind.

To fillet sauces, VW, Doug view and honestly just continued organic growth of Olive garden is going to continue to give us a nice tailwind as.

As we look out across the next year.

Okay I appreciate that left the last one for me and then I'll hop back into queue.

Good picture here because it.

There's been a lot of conversation.

The market around.

Circulated Buffalo Wild wings that particular.

I know there are other items there the context thats always out there is olive garden's $100 million brand, which I think.

Progressed over.

For period of about eight years and folks are wondering.

Pace at which you can maybe replicate that as you talk through to both of these brands have potential to be as bigger bigger than olive garden, given the category characteristics. The brand awareness et cetera. So can you just kind of walk through the please.

Puts and takes.

Behind specifically the pace at which you think fees can go.

Or continue to build using maybe that $100 million marker reasons that it would happen faster or materially faster at about the same paces alsgaard.

Sure I'd say, it's a great question and year to tackle right. Maybe you just building on Olive garden. It was $100 million business, it's actually the larger than that with the benefits of of co bid. We're finding that we're continuing to capture new users in that business is growing very nice.

So a strong double digits.

Now to the second and more important question that you had on the table around chicks placed Austin Buffalo Wild wings, we absolutely everything that we've seen in our fiscal fourth quarter. It and today. The first quarter continued first in club then have moved into <unk>.

Detail expanded through retail and now we're taking it into.

Some of the dollar channels and drug channels in places like that I think what you can expect is now that we understand the opportunity more completely we're going to look to capitalize on that growth more quickly I think the other thing Thats played out is that it's really twofold. One foodservice operators are seeing the power.

Our of their brands and retailers to generate another source of revenue, but the other is our retail partners are seeing the strength in the relevance that these brands have and the way that they move off the shelf and Brian I know your big into data and wanted that points that I would point to is if you.

Look at the velocity on those items. They are considerably all of them are considerably higher than the other items in the in the category, which gives us out a lot of optimism about the potential if we can execute on it.

Thanks appreciate it best of luck.

Thanks, Thank you Brian.

Your next question is from Ryan bout with consumer Edge Research. Your line is open.

Good morning, everyone Ryan Good morning, Ryan.

I appreciate that there are a lot of moving parts right now, but could you speak a bit more about your fiscal plenty high 21 outlook.

What your expectations of the for the retail business.

The cadence as the foodservice recovery and then could you could you highlight and a little bit more details some of the negative commodity pressures that you're expecting.

No Wonder I take the first part I'll turn pivot to Tom for the second part on the commodity outlook. So Ryan you know in keeping with our tradition, we don't provide guidance, but maybe what I'll share with you is just anecdotally some of what we're seeing right now.

I know you're tracking the same scanner data a lot of the same scanner data that we are and you'll note that multi outlet for all food is running around plus 10, it's been running there for quite some time.

Yes, a little bit higher it's sort of moderated into about 10, you know we've been running stronger than that and our view is as long as we continue to see.

The cobot outlook the way it is.

With people continuing to eat more at home, we continue to see those those trends that we've seen to date to continue the big thing that we just quite simply can't predict is is when do we start to see something like a therapeutic or a vaccine that allows people to return to the workplace more aggressively returned to eating out more aggressively.

And do we began to see the retail trends.

Start to moderate.

Our belief is though as they do start to moderate just given the strength of the new items and the size of the opportunity of those new items, it's going to continue to provide us a very nice tailwind for topline growth and retail.

Maybe I'll turn it over to her home and yes. So how do you have in about the margin outlook. So Q4.

The certainly benefited from the mix shift to retail, which was a key driver of the of that margin growth, we experienced and certainly the outlook a lot depends on on how long.

That growth continues and the retail segment.

Certainly we feel really good about the new product pipeline, we've got and the some of the spending we're doing to try to convert.

Some of the new users to repeat users.

You know in terms of the had lot wins, we do have we do expect modest to be more inflationary.

We see it in oil a little bit in sweeteners.

Based on kind of some of the hedging positions. We took previously where we did not feel a lot of the on favorability that other companies Foulkes last in last fiscal year.

That coverage wears off we do expect higher cost there.

That said, we do have some cost savings programs in revenue management initiatives to help offset the impact to the those commodities.

And then going forward. The other piece I mentioned is we do expect to have some kind of higher covered related expenses continuing into into this fiscal year.

Hi, Thanks for the color and maybe drilling a little bit more into the foodservice business.

Better recovery of QSR is using the exposed pretty heavily onto the QSR is with the business.

Can you talk about the percentage of your sales in the foodservice business that come from QSR and maybe what the margin differences might be between the QSR portion of your business and the other parts that might be recovering a little bit slower sure well why don't we just talk about.

The foodservice business in general and that trend. So if you look at our foodservice segment, which coming up in coming into this period was roughly half of the business.

60% of that is in QSR and that would include traditional QSR as well as pizza QSR.

And most of those concepts are performing quite well some of which are posting record numbers. The pizza QSR chains a lot of Amar.

As well as folks like like Chick Fil a.

And that really is a significant Doug.

Sort of benefit for our foodservice business as we look at the other pieces there there is about.

20% of our our let me back up Theres about another 15% of our business. That's in other national accounts, which would include Midscale and casual dining.

Casual dining actually is is rebounding pretty nicely as well as you look at folks like Buffalo Wild wings in a range of others.

There are also performing quite well under the circumstances and really it's an amazing Testament to the to the leaders in those organization and the managers that run their local sites that they're figuring out how to operate and deliver food or to provide pickup and to do in in a way where they can keep their their businesses not.

As floating but in many cases now growing.

Now there's a portion of a smaller portion of our business, it's probably somewhere in the 20% range that we would sort of cat categorize this branded that tends to be schools universities non commercial stuff like that that's a part of the business that honestly just has not really began to recover.

And then the last pieces industrial where we're selling products.

Likely other food manufacturers in the industry and Thats remain quite robust so theres, 80% of our business in probably simply said, maybe even a little higher 85% that's doing very very well there is 15% that's not but you put that together. It continues to again leave us relatively bullish about even foodservice we're going to.

Continue to see headwinds.

But not nearly at the rate that we did Bakken and April or even early may.

Thanks, that's very helpful and on that sort of branded portion. The smaller part is there any way you could give a little bit of detail about the magnitude of the declines were still seeing I think that's the part that we would have a little bit less visibility from other data that's out in the market.

Yes, there is still up double digits, I would say probably somewhere in that did 20% range and the big X factor is.

You know when and if do schools began to open on how do those mom and pop operators.

Begin to be affected but Brian I'll share with you. What we're also seeing anecdotally, which is interesting as those mom and pop operators are affected and then some places some cases struggling to open what we're finding is that their demand is actually flowing back out to national chains, one of the hypotheses.

We have as well as we're digging into the data.

Is that you know just as we're seeing in retail as consumers go back to trusted brands, we're finding that a lot of away from home diners. If in the event there their neighborhood places struggling to stay open are going back to bigger change and as a consequence, we're seeing that as a tailwind into places like Olive garden Buffalo Wild.

While the wings.

Yeah, Applebee's and a range of other so as you look at that I would maybe caution you against looking at that segment as static and what you're likely to see is that the demand is somewhat fungible and it's moving back into chains.

Thanks, I appreciate the color on the foodservice business.

For me.

Okay.

Thank you.

Your next question is from Todd Breakfast C.L., King and Associates. Your line is open.

Hey, good morning, guys, congratulations on a quarter and thank you talk about.

A few few questions for you first of all if we talk about.

Gross margin performance in the quarter, which was well above our expectations and I know, there's a mix element to that with retail versus food service, but.

At the same time, I guess I would've expected friction in the quarters you were balancing production between the rising retail business in the maybe the temporarily impaired foodservice business.

Just trying to service that spike in retail if we can talk.

About what's the what's the right way to think about Lancaster's gross gross margin potential.

In fiscal 2001, as we're not dealing with that sort of friction.

As mix and we have to make an assumption proud normalizes between retail and foodservice, but then you also just structurally keep delivering cost savings and.

Just want to understand really where you think if we've taken a step up in the gross margin potential for this business.

Yeah, Hi, So this is Tom excellent question. So you mentioned, the we talked about on the Zorba overheads in our Q3 call and certainly at that point, we were seeing.

Outsized demand reductions in foodservice and in the month of April we felt that it was a and item in April but then as is the foodservice begin business began to recover and then foodservice and retail revenue growth remained strong that friction kind of went away towards the ended the quarter.

And we don't we don't really see the Unabsorbed overheads being an item going into our next fiscal year.

So then you're the key items to look at really as you projected out into fiscal 2001, it's really how the retail growth.

Because of the margin differential between retail and foodservice is a key driver.

And then in terms of cost savings initiatives yet the teams have done an outstanding job in that we expect that to continue at consistent levels into into the next fiscal year commodities as I mentioned do become more inflationary, but we're certainly focused on offset offsetting that with revenue management. So so over.

Overall, we feel very good about our margin prospects going forward.

Really driven by the retail revenue growth and the new items, Dave mentioned.

That's great that's great secondly on.

Fruits or I mean on the retail category more broadly you talked about.

Yes from partners wanting to develop.

Alternate revenue streams from about that desire as maybe magnified as of the pandemic you did add the insight during the call today that.

Retailers want these products as well the philosophy is better.

The brands to some extent promote themselves with with customer awareness can you talk about your pipeline from a development standpoint are you seeing.

They're either existing kind of.

Foodservice partners coming to you to build a retail type of of offering or potentially are you seeing outside customers that you're not doing business with now kind of recognizing the.

The expertise that lancaster's develop and bringing these products to market and expectations for this growth engine going forward.

But I guess the short answer is yes, and yes.

We are seeing bolt.

New concepts that have reached out to us over the course over the last quarter to express interest and and looking at opportunities.

But then as we look closer end just at the brands that we have these partnerships with you can think of them as being able to grow sort of laterally and vertically.

Laterally the opportunity exists for us to move into other channels of trade.

And then beyond that vertically to introduce new flavors and one of the things that.

That's exciting, particularly about Buffalo wild wings and and.

To play sauce is just a range of different flavors that they can play it.

And as you think about it it allows us to move into different occasions.

So yes, it's an exciting time in into your plane I think.

You know a fair amount of credit for this goes to that team at Darden restaurants that saw this opportunity early on and was willing to lean forward Jen.

And take a chance that it wasn't going to cannibalize their business and they were open minded and we partner together we agreed on the data that we wanted to look at to make sure that it was beneficial to all of their business both are restaurant business and there.

And then this opportunity and retail in it and it played out and I think as it's continued to play out and the restaurants have benefited and the company at large has its given other operators out there more confidence to play in the space.

Okay, Great and then two more quick ones for me one you talked about.

Moving into the testing phase for project side.

Is there any color you can give us on what.

The costs.

During this kind of year long fares for fiscal 2001 should look like for European.

Sure. So maybe I'll start and just give you a couple of overview comments and I'll turn it over to Tom and he can give you a maybe a little bit more info about the financial outlook.

You know first what I would tell you. It's great credit is due to this team and to our integration partners cap Gemini because as you might expect.

They've had to go back to the drawing board and figure out how do you do an ERP designed and built into throws of up of a pandemic right ordinarily. These people would be cluster very closely together partnering within.

Functional verticals in our business designing the functionality and traveling regularly to our sites to make sure that they were ready to take on this technology. They had to step back and figure out how to do this work safely without being able to travel extensively or work very very closely.

And they've done exactly that so during the course of this past year in the choice of everything else. We did complete the design we did complete the build.

And now we've moved into the testing and.

And you can expect to see us take a couple of small pieces of the business that are related to the core that won't jeopardize the operations of the core lives during the that the the fiscal year itself. There are going to provide us a bit of up a test blueprint to see how that does the company at large handles it and then our plan is to go live on.

The system hole on order to cash.

Very closely after the beginning of the next fiscal year, but I really wanted to just say that the team deserves a great amount of credit for figuring out how to do this remotely and they're doing that same thing on testing now no time as far as the pacing at the spend maybe I'll, let you speak to that so so as you look at Q4, the gross spend was a little over 9 million.

In a portion of that was capitalized and 5.5 million.

Hit the piano as you go into the next fiscal year with what we capitalize sign of the system and with design work being done we won't be capitalizing as much the spend will go up slightly so you'll see a bigger.

Slightly higher.

Piano charge going into the next fiscal year on ERP as we've completed the design phase and we're we're going moving towards implementation.

Okay, Great. That's helpful. Thank you and the final question.

And this is maybe just so we can maybe expectations that as we look out the fiscal 21.

The obvious success of the of the pilot at the tricolor sauces, and the Florida market can we talk about.

How that program goes from here as far as regional Rollouts National timing, but then also you've talked about broadly touching more categories.

What about.

Launching in more points of distribution than the initial launch of Olive garden. So as we're starting to think about how meaningful this business can be kind of fiscal 21 fiscal 2002 anywhere anyway that you can.

Maybe help right size, a sudden or expectation for this launch would be great. Thank you here. So first I'll just talk about sort of the pacing of how we're going to go to market that maybe help you think about dimensionalizing. It.

So next month, we're going to begin a national rollout of a catering bottle that they're going to happen there restaurants in lot of the restaurants today they have tubs some locations they have bottles.

In partnership with them, we're converting their their takeaway business, there catering or offsite business to bottles. That's an initiative that they're very excited about.

In in towards the end of October were going to begin the first rollout in regions in the southeast.

And then on the heels of doubt about eight weeks later, what you can expect to see as that we're going to take a bigger swath of the southeast.

And roll it out there with our retail partners and then after the beginning of the calendar year, we're going to take it out across another swaps at the United States. So that by the end of that the fiscal year well habit in full national distribution.

Across all of retail so it's going to be a relatively fast ramp up on given what we're doing it.

Make the comparison with Olive Garden, we were in club for probably the first two to three years with Olive garden before we went into retail at least two years before we went into retail so we're going to be going after the bigger opportunity here, which is retail considerably faster and then looking at club another points of distribution thereafter.

Okay, great. Thanks for the colored congratulations again, thank you.

If there are no further questions, we'll now turn the call back to Mr. Smith.

For closing comments, thank you Megan and thank you everyone for participating. This morning, we look forward to sharing our first quarter results with you in early November.

This concludes today's conference call you may now disconnect.

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