Q4 2020 Post Holdings Inc Earnings Call
Welcome to post holdings fourth quarter, and full year 2020 earnings conference call and webcast post.
Hosting the call today from post are Rob Vitale, President and Chief Executive Officer, and Jeff said, Aucs Chief Financial Officer.
Today's call is being recorded and will be available for replay beginning and 12 PM Eastern time.
The dial in number is 805 858367.
And the pass code is 3039636.
At this time all participants have been placed in a listen only mode. It is now my pleasure to turn the floor over to Jennifer Meyer of post holdings for introductions, you may begin and.
Good morning, and thank you for joining us today per post fourth quarter. This full 2020 earnings call with me today are Rob Vitale, our president and CEO and Jeff data from our CFO Robynne, Jeff will begin with prepared remarks, and afterwards, we'll have a brief question and answer session.
The press release and supports these remarks is posted on our website and both the Investor relations and the FCC filing sections and post holdings Dot com and additions the releases are available on the Fccs website.
Before we continue I would like to remind you that this call will contain forward looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements.
These forward looking statements are current as of the day to this call and management undertakes no obligation to update these statements are.
There and minor this call is being recorded and an audio replay will be available on our website and finally this call will discuss certain non-GAAP measures for a reconciliation of these non-GAAP measures to the nearest GAAP measure see our press release issued yesterday and posted on our website with that I will turn the call over to Rob.
Good morning.
Thank you Jennifer Thank you all for joining us.
Oh and store and comments this morning by and goes I can share many colleagues who each day from other commitments, we have two retail alone.
Through our customers and to our consumer.
This quarter of our fiscal year and as its certainly been extraordinary.
I am proud of the way this organization navigated the extreme shocks created by the global and.
From a full year or year and what your key channel shutdown and always fully reopened our sales were flat and EBITDA declined 5.8%.
I believe this evidence is the resilience of our business.
Fourth quarter result delivered largely as expected.
We saw the initial signs of recovery and foodservice and we saw some moderation and be outside profitability and our segments and service retail channels.
Across the board or retail channel businesses continue to perform well.
Well post consumer brands declined and total volume, Jeff will provide details explaining that this overall decline masks strong growth and the premium branded portfolio offset by intentional declines and lower margin business plus some channel shifting impacting the Bombay portfolio.
Isolating bid business only.
We price down of approximately $15 million and revenue.
And contributed only approximately $2 million and profit.
We also saw the anticipated reversal and share trends from early summer as we return to modest levels and merchandising.
Within our refrigerated retail platform, we likewise prioritized and higher margin branded product over lower margin private label and managing through tight capacity.
Bob Evans brand and drive continues to grow and principally with net sales up 24%.
Both segments on meaningful margin expansion and.
Additionally, both weetabix and borrowing had quite strong quarters.
Our foodservice business returned to positive EBITDA this quarter and continues to recover. However, this was a slow build and ultimate recovery to pre pandemic levels will not occur quickly. We continue to see per from weakness and key channels, such as education, and education and travel and lodging.
At the same time, we are quite encouraged by the annotations and all sectors of the restaurant industry and have led to impressive volume recovery.
You have seen that we provided guidance for only the first half of fiscal 2021.
Based on the recent vaccine news, we're cautiously optimistic with and pandemic will have weighted by the midpoint of our fiscal 2021.
Meanwhile, we have growing concern that the ensuing months will bring new challenges with respect to managing our supply chains without some degree of interruption as cold and pass or workforce.
Well, we have clusters of operating across our business. This is a generalized concern from.
And then a reaction to anything specific.
We have made substantial investments and plant redesign.
Protective equipment and additional training and we believe our work environments are well protected nonetheless.
Nonetheless, we will continue to be affected by operating from these communities in which our factories are located.
Our first half guidance is roughly in line with the results from the second half of fiscal 2020 and.
Timeline impacted by the pandemic.
However, we expect greater contribution from foodservice and less from our retail channel businesses.
And provide a bit more context, we expect to continue to see performance and our retail channel businesses at levels ahead of pre pandemic metrics, but.
But we do not expect to repeat the surge demand results that occurred in April and May.
Relative to pre pandemic levels we.
We expect the first half and foodservice to materially underperform and.
However, we expect it to materially improve from the most recent six months.
While we have seen solid volume recovery and several channels and we are better able to manage costs at this demand level. We do continue to see anemic performance and a handful of key channel.
Last foodservice contains from first half headwind related to timing of commodity changes versus the automatic timing of repricing of its grain based contracts.
It tends to be a three month lag.
We believe we have been approached us appropriately cautious with respect to our volume and profit assumptions.
Relative to this midyear outlook would be supply interruptions for retail channel and businesses and food service demand sensitivity to mobility restrictions.
If our assumptions regarding the virus trajectory prove accurate.
We would expect the second half to accelerate over the first.
If you participate and the Bell and call you will hear that we expect attractive profit growth and bell range to be skewed to the latter half of the year.
Food service recovery would be the second material driver.
Our outlook on the first half is sufficiently cautious for consumer brands Weetabix and refrigerated retail that we do not expect across decline despite greater consumer mobility.
One comment specific and Weetabix, we're well prepared for the final Brexit departure from December 30 Onest.
Our primary preparations for on a working capital build up to protect against delays and inbound raw materials.
We do not expect us to have a material impact on our operations, but it could cause from currency fluctuations and short term.
We did provide full year guidance with respect to capital expenditures, we are investing aggressively in our business to drive productivity and better leverage the recovery.
In terms of capital allocation recall that in March we were single mindedly focused on liquidity as we learn from each day, how to operate and this new environment. Today, we are much better equipped to manage challenges and we are being more aggressive with respect to our share repurchases and our consideration of M&A opportunities.
While we can never be assured of success, we are actively evaluating opportunities where we may find value.
The market for such opportunities seems more rich that and has been in quite some time.
I want to return to where I began to bid and extraordinary here all of us have been tested.
Together, we have risen to the challenge.
While we can now see some light at the end of this or deal our resolve must and will remain as we navigate where we hope to be the final stretch.
And deeply grateful to all my colleagues for the efforts large and small across the world at age community we serve.
And last before turning the call over to Jeff.
I want to specifically, thank Jay Brown, who decided to retire from the board this year.
Jay was one of the initial directors from post separated from Ralcorp and 2012.
Over the years and support his challenges to us and his counsel.
Ill make post a better company and a better investment.
We thank him for his contributions.
Jeff.
Thanks, Rob and good morning, everyone.
Adjusted EBITDA for the fourth quarter was $274.8 million and consolidated net sales were $1.4 billion.
Although the COVID-19 of debt was less pronounced when compared to the second and third quarters.
Each of our businesses continued to be impacted by changes in consumer and customer behaviors.
Starting with post consumer brands, and net sales and volume decreased 3.2% and 6.3% respectively.
Legacy post branded cereals, and such as Honey bunches of oats, Pebbles and great grains continued to show strong volume growth of 5% in the aggregate this quarter.
This strong performance was outweighed by declines and private label and government bid business multimodal bacterial.
And licensed brands cereal.
Surge demand from Ulta meal bags cereals products and prior periods cost challenges in our supply chain and impacted our bill rates this quarter.
Moreover, we saw a channel shift in category demand from mass to your good traditional grocery.
And these products over index to mass.
Partially offsetting these volume declines was a 3.3% improvement and average net pricing.
Operating from reduced promotional activity and favorable product mix.
Gross profit margin meaningfully improved over the prior year debt.
Driven by improved net pricing and $5 million and cost savings from implementing our new integrated business planning process.
These benefits were only partially offset by input cost inflation incur.
Increased compensation and costs for health screening and personal protective equipment.
The net result of these factors with segment adjusted EBITDA of $121 million, which is relatively flat with the prior year.
Weetabix net sales increased 8.5% over the prior year.
Volume growth of 5% was driven by extruded products as we lap the prior year capacity constraint.
And cereal biscuits.
This growth was partially offset by lower volumes per on the go breakfast drinks.
A stronger British pound to US dollar exchange rate resulted in approximately 450 basis point tailwind to the net sales and adjusted EBITDA growth rates.
Overall Weetabix segment, adjusted EBITDA increased 12%.
Our foodservice business continued to be significantly impacted this quarter with net sales and volumes both declining 23%.
Our recently completed acquisition of hitting some foods was a slight benefit to this to these results.
These declines reflect lower away from home demand in reaction to COVID-19.
Particularly in the morning day part within the full service restaurant quick service restaurant education, and travel and lodging channels.
Foodservice volume recovery remains highly correlated with the degree and restrictions imposed on mobility and gathering we continue to anticipate a full recovery will likely take through fiscal 2021.
Adjusted EBITDA declined 69% to $23.7 million from.
Merrily, resulting from loss contribution margin and reduced volumes and.
Favorable customer product and channel mix and favorable fixed cost absorption with significantly reduced production volumes and lower net pricing.
The lower net pricing was caused by unfavorable mix lower market based pricing and temporary price reductions to move excess and short dated inventory.
Moving to refrigerated retail net sales increased 2%.
James decreased 5.5% as growth and sausage was offset by declines and egg and cheese products.
Side dish volumes were relatively flat overall, as 9% growth and Bob Evans branded products was offset by declines and exited private label side dish business.
Overall, net pricing improved reflecting favorable mix targeted side dish price increases and higher branded cheese pricing.
Segment, adjusted EBITDA grew up below 11.6%.
Benefiting from higher net pricing and an improved price cost relationship for sausage products.
Higher side dish manufacturing costs, and lower profitability for cheese products offset this growth.
[noise] lowering net sales increased nearly 32%, while adjusted EBITDA increased 21%.
Sales of Premier protein branded products increased 37% benefiting from RTD shake distribution gains for both existing and new products incremental incremental promotional activity and lapping prior year reductions and customer trade inventory levels.
Dymatize and Powerbar and net sales grew 15% and 1% respectively.
You can hear further details about buildings results on their conference call later this morning.
Turning to cash flow, we had a very strong quarter generating $217 million from operations, including $70 million from Bell range.
To reduce working capital was a key contributor to this quarter's performance.
For the full year, we generated $626 million and cash flow from operations, netting $391 million and free cash flow after deducting capital expenditures.
Solid working capital management, lower cash taxes, and reduced capital expenditures largely offset the negative cash flow impact cobot head on our adjusted EBITDA.
As a reminder, we reported leverage statistics for post independent of Bel Ray net debt and adjusted EBITDA.
Post pro forma net leverage on this basis was approximately 5.5 times as of September Thirtyth.
Turning to share repurchases during the quarter, we purchased approximately 1.5 million shares at an average price of $86.69 per share.
For the full year, we purchased approximately 6.1 million shares at an average price of $97.65 per share.
Since year end, we have acquired approximately 700000 additional shares at.
At $90.51 per share.
Our remaining share repurchase authorization is currently approximately $230 million.
In closing, we continue to maintain significant liquidity for strategic actions and remain focus excuse me and remain confident and our ability to continue to generate strong cash flow during the pandemic.
With that I'm going to turn the call back over to the operator for questions.
Thank you at this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number one on your telephone keypad and your question has been answered and you wish to remove yourself from the queue press the pound key once again to ask a question. Please press star one.
Our first question comes from the line and Andrew low Saar of Barclays.
Good morning, everybody.
And Andrew.
Moving to start with you mentioned the decision to exit some low margin business some of which was private label and I guess, both PCB and refrigerated segments and guess what drove the decision to start doing this and what seems like more significantly. This quarter was it was it primarily just managing limited capacity or is there something.
More sort of structural behind that and do you expect or should we expect another three quarters of this sort of negative impact and these segments until that dynamic is lapped.
It's predominantly around managing tight capacity and defer.
Different lines and different segments to make sure that we have a day.
Supply chain that can be resilient through what were anticipating is a challenging period upcoming so it's entirely about supply chain management.
Okay.
And Rob you mentioned.
And some M&A opportunities are in the pipeline and that seems more rich.
I think the word you used and and you've seen and sometimes is that it would you say that's a broad statement across the various segments or do you think those opportunities are really coming about and what are your specific segments of your business.
Interestingly, it's a fairly broad.
Commentary I think there's two buckets there food service opportunities that have been under stress and there are.
Branded opportunities that.
Hello naturally seen what has happened that are seeking to capitalize on it. So I think it's two very different buckets and quite a bit in between.
From a company's joint pruning and portfolios and so I think it's a wide range.
What I would characterize.
And drives as modest sized opportunities, but potentially.
Good value.
And I think I would think it would be.
It's tough you have to balance sort of what what cultivated benefit is to some of these businesses that you may ultimately look at versus what more normalized would be and then and then what you sort of pay for that I guess how are you. This is the last thing how do you how do you balance and how do you manage and internally when you think about those offsets and as you should think about valuation for some of these assets.
Well I would think everybody on the phone is doing that exercise.
That we are trying to make some assessments as to what the volume lift at retail have been with respect to coded and try to adjust for them and adjusted the financial impacts from more of our pro forma normalized and I think frankly.
Our expectation is that there will be a covert stick tried.
Try and do Jointech category by care categories more the are you.
Okay. Thanks very much.
Thank you.
Our next question comes from the line of John Baumgartner and Wells Fargo.
Hi, good morning, Thanks for the question.
Okay.
Yes, I guess I wanted to come back to the Bob and business heading into F 21, yeah.
This point you have the visibility into household penetration and retail and at the time of the deal one of the opportunities look to sort of build out from that core Midwest and you sort of notable data at this point on trial or repeat purchases across those new emerging geographies.
Yeah, we have been adding about a percentage point to household penetration and our repeat buyer rate is north of 50%, so very attractive repeat buys and decent household penetration growth. So we feel very good about.
Bob Evans as you saw.
We had really quite substantial growth on the side dish business solid growth as well on the sausage business.
Which combine both good volume growth at attractive pricing.
Okay, and then maybe a follow up for Jeff on the field service margin and light of the sequential.
Yes and lot of it.
Consumer recovery and the foodservice margin, presumably there was some benefit from reduction of obsolescent caught there, but can you walk through any other contributors specifically.
And the related impact from more permanent cost adjustments in that business model. Thank you.
Hey, John there really wasn't that much and the way a permanent cost reductions as we've talked about before we.
We're trying to be reserved and our approach to that so we are taking actions to minimize the amount of.
Idle work force to the extent possible well, while maintaining the workforce.
Really probably the thing I would comment most debt debt hitting and when we talk about the top level volumes.
Is the impact of mix on that business. So as we've talked about before within that business, we have a food ingredient component and a food service component to.
The food ingredient component is actually up year over year.
And that's.
The low margin business generally, but during cold even more low margin business as we have to price to move product. So.
So that's the biggest thing I would highlight to you as the don't don't necessarily stop at the headline number of of volume down 23%.
There is some margin pressures that are more into the details and as you decompose the components of the of that business.
Okay, and so if I.
Thank you Jen.
Our next question comes from the line of credit growth of Stifel.
Hi, good morning.
Hi, just one last question if I could first on.
Oh, and PCB and refrigerated retail.
And your as you're kind of getting production.
Pared back to the or your brands and turning away from going good business or private label and those kinds of things.
And then and ongoing drag the volume and say the first after 21 I assume this incorporate your guidance. If so do you have any frame of reference for how big that could be and and just to keep in mind that the limitation to growth and those divisions.
Well, we called out of approximately $50 million of revenue contributing about $2 million of EBITDA.
For the closing PCB and.
Okay and PCB.
The numbers are smaller dollar wise, the pounds or more like about 7 million pounds and.
Bob Evans.
And the average per pound is lower so it was more like four or $5 million and.
The refrigerated retail platform.
Okay, and then should continue in the first half of the year, and so interesting and room and the and it's baked into the guidance got it yes. Okay.
And then and.
And of that profit net debt.
Okay.
And then just a second question on the phasing of EBITDA and through the first half of the year for post and I think you said, a little higher and first quarter second quarter is that a function of comparisons and I see PCB and some shifting around the profitability of the year ago period, I, just want to get a sense and what can be different as the cobi cost or anything related to that or is it more about the comps year over.
Your and your business.
No.
No. It's just a really very interesting forecasting dynamic right now and that obviously, we have the most visibility into the quarter. We are in and then we have.
In some respects greater visibility as we go out and anticipate.
Vaccine and distribution.
The whole and that don't really is second early third quarter, because we we don't know whats going to happen with stimulus as it relates to.
Impacting particularly restaurants and the food service channel.
We don't know what's going to happen with the pace of distribution and cash accounts, where they are now and the potential for mobility restrictions. So we're taking a fairly cautious.
Well I hope, but its at a cautious outlook with.
With respect to the impact on food service and we have not taken a particularly aggressive stance on there being a similar repeat and certify so.
The trend line that you're referring to is more just a matter of trying to mask.
And not masterbatch uncertainty with cautious outlook.
That makes sense. Thank you for that.
Thank you.
Our next question comes from the line of David Palmer and Evercore ISI.
Thanks, Good morning.
I wanted to talk about EBITDA on a day.
Looking out and.
Moving to look out past, who bid and.
Look and try to find a year free co bid and might be a good discussion point per part if you will if you look back to 2019.
EBITDA was 1.2 billion ish.
And then if we were to look out to fiscal 2002 to.
And just pick a year that might be somewhat more clean and Kobe and in terms of your business how.
How would you think about that versus the power that is fiscal 19 and that 1.2 billion in terms of each of your businesses earnings power I.
I would imagine the refrigerated retail bell ring weetabix could be sued it significantly higher maybe.
Maybe foodservice still a touch lower so how are you thinking about that and then I have a quick follow up.
Well I think that's a good question of the day.
The question of the year and.
The way, we think about it is.
Very much in line with the way you referred me answer which is that we expect that there will be a stickiness with the retail products as a result of the trial experience. So we have all endured and we may see additional sticky and us because of some lifestyle changes around.
Spending more time and homes. So for the 70 percentage of the business that serves retail channels, we feel very bullish.
We believe that there will be a substantial recovery off current levels in foodservice and whether that gets back to bright and.
Are the first day of our fiscal year, 22, which is October onest or whether it takes more time than that much harder to answer because it requires us to understand exactly the trajectory of the distribution how people's psyches respond.
People's behavior accommodates the new realities of technology and how they react to what we expect to be pretty significant pent up demand to get the hell out of their houses for a while so.
It goes back to what I responded to criticism that we're in is very strange.
Shape of our.
Forecasting visibility and that the longer you give us to answer that question the more bullish we're going to be.
And we think that foodservice recovers, we think the retail.
Continues to benefit from the trial experiment.
But trying to put a fine tune on exactly when that occurs is more of a challenge.
Yeah, I guess, yeah, no I don't mean to badger to witness on this one but there's not just macro stuff that's going on around you, which are all fair and good and create lower visibility but.
And then you have some things internally that you've been doing obviously, you've been under pressure from a cost perspective, you probably bounce and efficiencies you have the weetabix and integration and efficiencies Bell rings growth from the refrigerated retail does seem like it is and not just a cyclical upturn, but on a multi year one two and three years, we'll have passed from 19 to 22.
So I guess I'm trying to and framework and out to think about how you might be thinking about your two earnings power versus that par you know aside from the trial and repeat stuff that we all have to kind of and you know take on ourselves from and from an analytical risk standpoint, we all have to make around mines, and but internally and transit generation per.
Profit what are your thoughts there.
Well and I am.
Shying away from being too precise around giving what would accommodate to at least what would result in some directional guidance for years beyond 2021, when we're not even give a full year 21, but I think broadly I would tell you.
That we're quite bullish on the macro and we're quite bullish on the internal micro activities that were taken to drive leverage and that recovery as I called out in my script, where.
Well, we're not withholding investment spending behind each category of our business, including foodservice.
It might be an intuitive response to cut back capital spending into a business that right now appears to be as we could as it is but we think the more appropriate activity is to lean into it and make sure that as we come out we come out and say.
A stronger position and across our supply chain, which has been under pressure.
We've had hundreds of unfilled positions that we've been navigating around at the same time that we were navigating cobot. So we want to invest in projects that.
Result, and automation, we want to result in improved projects and results and better.
Late and capacity release, we think that there is an array of projects that weekend.
Invest and that will.
And prove the overall outcome of the business and again I am very bullish longer term.
But we are trying to temper that bullishness with the reality that we face challenging.
I'm going to say 90 days could be 60 days could be 120 days, who really knows.
But that we got to get through the next period of time and I think we will start to unlock some of these opportunities, which I think are.
Substantial and stacking.
Great. Thank you.
Thank you.
Your next question comes from the line of Bill Chappell true is security.
Thanks, Good morning.
Bill.
Hey, I, just just kind of a general question can you help us understand what if anything was a major surprise in the quarter or even kind of for the outlook and the understanding of everything would be surprising if we were talking a year ago and and to what actually happened, but it feels like a lot of things in terms and trends.
I've already been going for the past six months, and especially and last quarter and so just trying to see does anything and it.
Really run outside your expectations or is everything kind of what you what we saw in the prior quarter no I feel like this was a very highly controlled quarter and very much in line with our expectations.
You know I think Atlanta.
Damn air on.
Consensus expectations with respect to EBITDA, some different ways of getting there in terms of which business and margin versus revenue, but from our internal perspective. This is exactly what we expected the quarter and shape up to I think the.
She price is.
That we are heading into a very.
Challenging environment, just from a case count perspective because.
I think that while we all feel better about where we are on treatment and.
Mortality and those things what matters from a keeping their supply chains running is and number of case counts as a result and core teams.
So you start from a 200000 cases, a day and multiply that across the quarantine number you start affecting the overall work force of the.
Of the country and it's just something that were going to EPS navigate and be aware of and hopefully appropriately cautious and are.
Expectations management with respect to what could happen in the very short term, but and this particular quarter I would say it was a very Uh huh.
As of quarter that came out very much in line with how we expected and.
We're just making sure that we've been thoughtful with how we look at the quarter, where it and the upcoming.
Months thereafter.
Got it. Thanks, and then also just a follow up on Weetabix me any changes and kind of thoughts and.
No not just the branded business, but the sheer amount of like private label business, you do for with Weetabix and and as that market changes or have you seen and one of the migration to branded versus private label and UK any any independent and kind of change your outlook for debt total business not just the brand and either picks up.
It does not change our outlook of.
The business has been performing exceptionally well.
The GAAP.
There is a new day.
Current.
Thinking or perhaps consensus that.
As we went into locked down earlier in the year that consumers reengaged with and established brands and comfort food et cetera, I have somewhat a counter and thesis that.
The brands were able to flex production in a manner that private label is not simply as a result, and the greater SKU count.
Such that there was a.
Migration to brands because of a supply phenomenon and more than that the bad phenomenon and I think that is true and UK as well, we have been able simply by virtue of long run and been able to and to keep output of our base yellow box product and an easier manner than the array of skews required to support private label.
So there has been a migration and branded in the UK This and where there has been in the us.
Got it thank you.
Thank you.
Your next question comes from the line of Michael Lavery of Piper Sandler.
Good morning, Thank you.
Yeah, you called out a decline for the license cereal brands in the quarter.
I know there's been some new launches there that you get the initial boost and and it may be just lapping some of that but can you give us a sense of what that runway looks like and.
What we should expect looking and had a little bit.
Yes, so just to give you some perspective a couple of years ago. We were early and the introduction of a family of pre suite and licensed brands and there was a very rapid run up to a point, where we had about a full share.
The.
And so our competitors and followed suit with different families of similar oriented products and that demand pool got redistributed and I think what we have ultimately atlas and rented share that would really not our style and so we have surrendered a goodly portion of that share and.
And are seeking to replace it with some more fundamental innovation, including things like our more adult oriented products around Duncan.
Coffee based products and some they happened also be licensed brands, but they are more targeted and do winds brands debt launch has gone quite well.
We have at the same time launch day.
Tim or design and Canada. It has been one of the best launches in Canada and recent years. So we feel quite good about.
The runway for each of those products, we feel equally good about some of our older innovation that we should be hopefully.
Hopefully speaking of in the not too distant future innovation that had been slated for 2020, but got delayed because of the.
And desire retailers to keep and more simplified merchandising assortment.
That's helpful color and.
Just to clarify I don't know if I heard this right I think when you were giving some sense from the first half adjusted.
But you were trying to take a conservative or just a little bit cautious approach, but but that you didn't think consumer brands.
EBITDA would be down year over year, and and so did I hear that right and would that be per each quarter or for the half in total.
No I think you heard and just a bit off what I was trying to suggest is that consumer brands and.
Weetabix true retail would not trail off.
And the second half compared to the first half because we think we've baked and sufficient caution that increased mobility, while it would drive some growth at our.
Food service businesses should not materially.
Draw from.
The base performance and our retail businesses.
Got it okay. Thanks for clarifying and thanks for the price.
Thank you.
Our next question comes from the line of Ken Zaslow of Bank of Montreal.
Hey, good morning, guys. Thanks.
Correct.
I guess my two questions. One is if you think that the supply chain is really the reason for the increase in demand rather than the affinity for for consumers to go to like.
Big brands, how do you assess the Kobe and sticking it.
For your.
CB and retail business.
Well I think the virtue of that move to brands is a trial, which would have been that level of trial would have been extremely expensive and challenging to obtain so it's very hard for me to accept that after all of that trial. The result will be a complete reversion to pre and that back.
Assumption patterns with none of it sticking so I am not going to try to quantify that stick because it's very challenging right now, but my expectation is that because we've had such significant trial that there will be some stick to it.
Okay and then my second question is and.
As you go through the Coke and experience what opportunities do you have or have you seen that UK and improve the efficiency of your your supply chain and how much debt of that in 2022, 2023, and B and I'd like how much have you done.
And can you rationalization so.
Streamlining you use your supply chain and older can you come in and say Hey look we have another $5 million, we didn't realize how do you assess that and how much is it.
Not prepared to put a number to it but qualitatively I'll answer the question and that we we have.
We've kind of joke that that anything that was still on a shelf on or about April thirtyth needs.
Needs to be immediately rationalized, because if it didnt help and it will ever so.
But.
What what we all did was take.
Take SKU rationalization to its ultimate extreme by trying to narrow our assortment to the longest from and we're actually now going the opposite direction and rebuilding the skews. So SKU assortment, which is a a natural ongoing process almost like a firefighter force our process.
Has this.
Non linear interruption by Cove, it such that we took a dramatic reduction will now rebuild and then.
Return to a normal process and assortment management I think with the greater insights around what the crop and impact of that or assortment and better velocities produces so I think that it will have a lingering impact how exactly it balances out I'm not sure.
I think the other area.
That we are able to focus on I think you asked about supply chain specifically.
Is in.
Automation.
And trying to drive productivity and we have for years had challenges with.
With labor obtaining not to share.
Clutches.
Managing and but just have we've had.
Problems with.
Turnover and retention.
Or recruiting I should say and.
And I think that as we go through this and invest more productivity. It will take some of the pressure off of that but these are multi year.
Trends, that's something that we'll just.
Be a binary outcome as we enter 2022.
You're not worried that the EPS to you we don't see proliferation. The return of that is similar to the merchandise anywhere and.
Everybody cut merchandising those seem to be some rational behavior and that they'd all this and that didnt actually last is that possible that could happen with EPS key or will you Buck that trend and I'll leave it there. Thank you, Dave and I would not say that we are not worried I would say that that is a you know these things.
And to behave a bit like a panel and and never exactly get the right equilibrium will probably go from a bit extreme narrow to wider and and you know.
Have a permanent effort of getting to the idealized mix the permit the perfect shelf we call it.
Huh.
But yes, I I expect there will be some overreaction and then there will be a correction.
Great. Thank you very much debt.
Thank you Tim.
Ladies and gentlemen, we have reached the allotted time for questions and answers. Thank you for participating in the post holdings fourth quarter and full year 2020 earnings conference call and webcast. You may now disconnect your lines and have a wonderful day.
Thank you all.
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