Q4 2020 Bellring Brands Inc Earnings Call
During the call today from Bell <unk> brands are Darcy Davenport, President and Chief Executive Officer, and toll Road Chief Financial Officer.
Today's call is being recorded and will be available for replay beginning at 130 P.M. eastern time.
The dial in number is 808 58367 and the passcode is 4971167.
At this time all participants have been placed on it listen only mode. It is now my pleasure to turn the floor, but the Jennifer Meyer Investor Relations of building brands for introductions you may begin.
Good morning, and thank you for joining us today for Bell rings brands fourth quarter fiscal 2020 earnings call with me today are Darcy Davenport, our president and CEO of Paul Rudd, Our CFO Darcy on Paul will begin with prepared remarks, and afterwards, we'll have a free question and answer session the price.
It's really the supplemental slide presentation that supports these remarks are posted on our website in both the Investor relations and the FCC filing sections at the gallery in Dot Com. In addition, the released on slides are available on the of Tt's website.
Before we continue I would like to remind you. The this call will contain forward looking statements, which are subject to risks and uncertainties that should be carefully considered by investors at the actual results could differ materially from these statements. These.
These forward looking statements are current as of the date of this call and management undertakes no obligation to update the statements.
The reminder, the 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 on posted on our website with that I will turn the call over to Darcy.
Thanks, Jennifer and thank you all for joining us this morning.
On the evening, we reported our fourth quarter and fiscal 2020 result, as well the posted a supplemental presentation to our website <unk>.
This presentation provides more insight into our business consumption and key metrics.
We finished 2020 strong with record net sales for the quarter of 283 million of 32 per cent and adjusted EBITDA of 57 million free.
The year net sales grew to 988 million slightly exceeding our revised sales guidance with adjusted EBITDA of 197 million debt.
Despite the challenges that covert created we exceeded our long term algorithm and delivered net sales growth of 16%.
Adjusted EBITDA came in at the midpoint of our original guidance and we delivered strong cash flow generation, reducing our net leverage.
I'm proud of our accomplishments in our first year, the public company and specifically for the resilience our employees demonstrated throughout the challenging year.
This morning, I'll review the category brand highlights growth strategies and end with our fiscal 21 outlook.
The convenient nutrition category has been stable since mid June although below pre cobot levels as the result of less on the go you said, mainly due to nutrition bars of.
Across the category, we're seeing fewer shopping trip higher basket sizes, and the category continues to shift to E Commerce and food channel.
Our main segment liquids and powders have rebounded to their pre Kobe growth rate. However, the virus has impacted the category segments differently.
Adult in everyday nutrition brands continue to gain share driven by higher in home usage.
The management has suffered as consumers moved the comfort foods, while sports nutrition brands are primarily flat as consumers figure out new ways to exercise outside of the Jim.
Premier protein shake consumption improved this quarter up 20% of cross tracked and on track channels.
Growth was strong across all of our key channel club Mer food and ecommerce.
Effective promotional programs, along with distribution gains and help people off of these drove the consumption growth.
On track Channel continue continued to outpace track at 38% while tracked returned to growth this quarter.
The strong momentum has continued into one with the first six weeks showing 21% growth across tracking on track channel with impressive gains in food Mer and ecommerce.
We made great progress against our growth strategies. This year Premier Protein's household penetration reached 6.8% getting one percentage point this year.
Our distribution continues to increase with brand Tdps up 9% sequentially and 26 per cent for the year.
We now have an average of 6.7 items on shelf.
We're pleased with the effectiveness of our sales and marketing activities and look forward to building on our success in 21.
Our new products continue debt to excite the consumers and retailers are seasonal offering pumpkin spice drove strong velocity of the crops across the E commerce and retail outlet on.
Our newest 30 Graham flavor cinnamon roll shipped at the end of the fourth quarter and quickly so about across the ecommerce platforms.
We also started to ship a new pack size 12 cash to the mass channel at the end of the quarter. This is a major 21 initiative for us because the larger pack sizes, representing a quarter of the f. the M. category.
We are excited to give consumers the option to buy larger packs anywhere they shop and early results are promising.
Dimetapp had a fantastic quarter of 57 per cent domestically with growth across all channels.
Our new products I used the 100, fruity and cocoa pebbles have vastly exceeded our expectations, becoming the number three and number five flavor is within the ISO 100 line. We are quickly gaining distribution across all channels on these exciting new products.
Our international business was relatively flat due to coal bed.
But showed strong sequential improvement up 50 per cent versus last quarter per.
On your shakes in Canada drove most of the gains well diameter eyes on Powerbar continue to be challenged within the global specialty channel.
Our supply chain performed well all year executing the best in class service in the midst of unexpected volatility.
Our front line employees, and our Germany plant and within our logistics income manufacturing network were invaluable to our six day.
Our fifth and newest co manufacturer is performing well and are on shake network remains well positioned to support our growth plans.
Now to our outlook.
At least on Yesterdays press release, we expect fiscal 21, net sales to grow 8% to 13% and adjusted EBITDA to grow between five and 10%.
This guidance is consistent with our long term algorithm of 10% to 12% net sales growth at 18 to 20 per cent EBITDA margin.
EBITDA growth lagged sales growth because we're choosing to invest in brand building and our commodity on logistics costs are running higher year over year.
Despite the higher cost we are prioritizing driving share in of growing market.
We believe now is the time to bring new households into the category rather than maximizing immediate margin.
We will do that through increased strategic media and promotional spending stronger creative execution of premier protein upsize initiatives and continued flavor expansion.
As a result of the increased investments, we expect the timing of EBITDA growth to be entirely in the back half.
This is due to strong Q2 media spend raw material and logistics headwinds in the front half and lapping co the demand share.
Overall, I'm very confident in our expansion plans for 2021, as we increase investments grow our brand awareness and continue to generate strong cash flow.
The RTD and powder categories of stabilized and are growing at pre cobot levels.
Our household penetration is increasing.
We are gaining significant distribution on both existing and new products.
Our marketing and promotional strategy during the strategies are working on our supply chain is well positioned to support our growth.
Although we continue to face challenges with Covance I continue to be energized by our potential and our long runway for growth.
I will now turn the call over the Paul.
Thanks, Stuart and good morning, everyone.
Net sales for the quarter was 282.6 million of 32%.
Adjusted EBITDA was 56.7 million up 22.5% EBITDA margin was 20.1%.
I'm approaching net sales decreased 37%, what's the RTD shake net sales up 40%.
Fourth quarter results benefited from favorable trade inventory changes and both 2019 of 2020.
Moving these items, our underlying growth largely tracked consumption growth of 20% driven by the distribution gains for both existing and new products and the incremental promotional activity.
The kitchen matrix, but this brand of grow double digits aided by getting the distribution investments on promotions the mark.
On the Tories net sales grew 15% this quarter for the by strong increases in E Commerce club and mass.
National sales from both on the towards the power of our improved sequentially, but remained challenged as a result of Cowen.
Turning back the consolidated results gross profit of 90 million increased 17% this quarter gross profit margin declining 400 basis points to 31.8%.
The margin decline was it was related to anticipated higher input costs, primarily book based proteins and incremental promotional activity.
That's true the expenses were flat compared to prior year the decline for non 90 basis points as a percentage of net sales of 12.5%.
On an employee related expenses of 3 million incremental public company costs of 1.8 million were partially offset by lower IP on cost of 2.7 million.
Marketing spend was flat compared to prior year.
Turning to the full year 2020 of results net sales of 988 million grew 16% over the prior year. The gross profit of 338 million growing 8%.
Gross profit margins declined 230 basis points, the 34.2%, reflecting higher input costs and the incremental promotional activity.
I see it as a percentage of net sales was 15.4%.
Adjusted EBITDA of 197.2 million was relatively flat compared to prior year with margins declining 320 basis points to 20% and.
And included 8.7 million of incremental public company costs.
Before reviewing our outlook I would like to make a few comments on cash flow on liquidity.
We had a strong fourth quarter for cash flow generating 70 million from operations and 97 million for the year.
The pay 25 million revolver borrowings in the quarter, leaving us with 49 million of cash on hand, and 170 million available under our revolver at quarter end.
As of September 30, net debt was six aren't the 5 million and the.
Leverage was 3.3 times.
Since the IPO, we reduced net debt by 82 million we.
We expect to reach net leverage of three times in fiscal 2021.
We recently announced the $60 million stock repurchase authorization.
On the to utilize our asset allocation decisions to enhance long term shareholder value.
Turning to our outlook, we expect fiscal 2020 net sales of 1.07 to 1.12 billion in.
The adjusted EBITDA of 207 to 217 million.
The midpoint of our outlook implies double digit topline growth and the EBITDA margins of up 19% both of which are in line with our long term algorithm.
Our EBITDA growth as expected the lag or topline growth as we invest behind our brands and experience input cost inflation, the latter which is expected to be most impactful in the first half and moderate in the second half.
Similar to 2020, we expect promotional activity of the advertising investments to peak in the second quarter and meaningfully pressure margins.
These timing items combined with cold in the impact on our fiscal 2020 quarterly cadence is expected result of high single digit sales growth in the first half and mid teens growth in the second half.
In addition, our EBITDA growth is expected to be entirely in the second half.
Heading into the first quarter, we expect our sales growth rate of moderate in line with our long term algorithm.
Consist of what the first.
Consistent with past first quarters, we expect the benefit from shipments occurring ahead of consumption per premier protein shakes as retailers build inventories to support January promotions.
We expect the first half of quarterly EBITDA pacing to closely track 20 Twond.
Last giving consideration of both the already Inc.'s taxes and distribution is the post holdings. The Bell rings total income tax cash outflows are expected to be approximately 34 million of 2021.
We expect cash interest expense to be approximately 40 million.
With that I would like to turn the call back over to the operator for questions.
As a reminder, if you would like to ask the question you may do so by pressing Star then the number one on your telephone keypad again that is star one of you would like to ask the question.
Your first question is from Ken Goldman of JP Morgan.
Hey, good morning, Thank you.
I'm wondering if you could explain.
Explain a little bit of.
The the reasoning behind the share buyback lately or that you authorize lately is there anything to read into that other than you know why companies do share buybacks in general because it's it's the sometimes the good use of capital on I think there's some speculation that maybe there's a you know you'd be looking to buy from a pretty much the particular holder of particularly the large holder of.
The only thing, but I'm just wondering if you could elaborate on a little bit the because it has created some pumps the market speculation.
Yeah. Good morning, Ken and this was simply a tactical move to give us flexibility in a volatile market. So we have great of you guys know, we have great organic growth and we generate strong cash flow. So it just seems prudent to keep all uses of cash okay.
Okay and then the thank you for that my follow up would be I just wanted to make sure I heard you correctly on the one Q sales growth number I think you said it should be within your long term range. So are you looking for somewhere between 10% to 12% in that first quarter and does that account for <unk> I'm sure. It does but just to make sure all of.
The puts and takes between difficult comparisons on shipments maybe any reversal of Fourq you ship in just one of the make sure I'm I'm getting all that correct.
Yet the context was that obviously, we had higher growth in this last quarter and yes, our Q1 will be more in line with our long term algorithm.
Expect that far out the on the higher side.
Perfect glad I asked thank you.
Your next question is from Andrew Lazaro of Barclays.
Morning, everybody.
Good morning.
I wanted to dig into the the sales guidance of a little bit further and the expected first half of sales growth high single digits second half mid teens.
If we take the low end of of both of those ranges.
On it gives us full year sales growth it kind of roughly the midpoint of your full year guidance. So I guess, what I'm getting at is the low end gets it just sort of the midpoint. So it would seem to build in.
Some level of conservatism, which I think in light of current.
Current dynamics and all the uncertainties makes sense. So just wanted to get a a sense from you Darcy on you know how you're thinking about the the sales growth rate for the year in sort of a prudent way and if that's what gives you a reason what gives you the confidence to provide a full year sales outlook given all the on certain <unk> would be the first one.
So yes, Scott that math is correct, so and that's where we see the year ending I think that we want to be conservative. Obviously, we have there's a lot of unknown, but we have a lot of things going for US. Obviously, we have expanded we have line of sight to reset.
On in major account.
On as long as well as we have new products that are hitting that or you know early look at are performing well we're off the lapping on distribution gains from last year on and we are increasing our brand building. The typically our advertising, which we saw work last year and now were just expanding extend.
During the time, so we're feeling good about on the top line and hitting on number.
Got it thanks for that and then it's a good segue into the next question, which is really just on I don't know how much or how specific you can get on you know some of the the outcome of some of the shelf resets and such but maybe any color on a little more detail on maybe how much space you've gained or whether you think that was incremental to the category or if it came from sort of.
The other players or other other subcategories, just trying to get a little more color on that.
Moving on what you can share thank you.
Sure Yeah.
Yeah, So and as I said last quarter, we gain in Q4, we gained about 9%.
Pdps and it was mostly food account on whereas coming into Q1 and there are more me, they're a major reset so a large mass account as well as club so on Endos. Their resetting now it started at the beginning of November on and so you can go into stores and see it.
We actually we were on from a category standpoint on the category space generally stayed the same it looks like there is some gains in liquid and powder is at the expense of bars.
On but it isn't nominal from a bell rings standpoint, we gained a fair amount. So we will.
On more than double our space at the major <unk> accounts, and that's pretty exciting on and that and we gained with.
Premier primarily but also with guy on the time what was also nice is we gained across the board. So predominantly we gained in shake as expected on but we also got powder in there, which is nice and we're seeing really good gains on our powder business across food account. So that's nice to see.
Great. Thanks, so much.
Your next question.
Question is from John Baumgartner of Wells Fargo.
Good morning, Thanks for the question.
Darcy just hoping you could expand the bit on the marketing plan for the fiscal 21 of your coming off the year of see the to get investment. So any thoughts on the ROI would be great and then looking ahead, what's sort of contemplated for F 21 year on year. It how are you expecting the spend to tilt between advertising promo or on the merchandising.
Sure. So we were really pleased with our 2020 I results from a net advertising standpoint, and we read our main goal of the advertising with increased penetration I and we hit our goal our annual goal, we actually hit it about mid year of.
On and then as well as brand awareness et cetera. So for 21 strategy as you know.
Basically do more of what was working so we're going to continue to spend in both debt TV and digital we're going to expand the time. So we felt like we had the right level of spend in Q2, which again as new year on new you for asset the big the the major time win win new households come into the category well.
And from form on till about seven months.
On the and then we'll be increasing spend in E. Commerce, and then add display in store. So promo and then obviously we'll be out. We're also expanding space. So I would say what is new is from a marketing standpoint is our focus on by right. So.
We are focused on both household as well as by rate. So that's where the upsizing comes in on and then the increased in promo. So at a simple I would say similar strategy from an advertising standpoint, but just more of it.
Okay. Thanks for that and then just to follow up on the innovation the fraud.
I guess on senses that your pipeline is already fairly substantial for the next few years. The you mentioned some of the new flavors, but you know as koby persists and you see consumers gravitating towards more functional products the ensure the boost Uh huh.
The other form of your views on the ability for premier to sort of go into different needs day to me kind of brand travel or do you think you have to growth through M&A, if you're going to kind of branch out the other functional types of of all the areas. Thank you.
Sure.
This is where I think premier has a kind of advantage I mean, one of the key differences about the premier protein brands versus I would say any other brand in the category is its ability to travel so whereas many of the other brands are strong within their needs.
Hey, they may be a weight management brands. They maybe I know adult nutrition brands or sports nutrition brands. What premiered does is it fits squarely in non everyday nutrition, but sources volume from all of the others. So it gives us tremendous room to innovate and kind of lean.
The into those spaces and those are some of the areas that we're looking into sales I mean, I think I talked about how cold. It is really uncovered a trend that was already in going on in the category around proactive health and I think you know you're starting to see on immunity, claiming a cry.
Across categories in the store, but specifically in our area you'll see that.
Later in the year on on Premier, but we'll start leaning into those ways to innovate, but obviously M&A, we'll we'll lean into M&A in any area that we feel premier can't go.
Thanks Darcy Thanks for your time, thank you.
Your next question is from Brian Holland of D.A. Davidson.
Yeah. Thanks, good morning.
Want to ask the follow up on <unk> question about shelf space of how that's evolved and specifically looking at a private label on it.
Seen in the past the you know whether following some faster or after that Atkins more recent movies wondering if you're seeing the and sort of mimic you on the 30 grams shake side, how you're seeing that evolve the any new products, there and the Uh huh.
You're competing against that maybe more broadly how the claim out I wasn't what do you think that says about where you are as far as being on trend because I think you know it's fine of private labels coming in but if you if that's where the growth is in private label it probably speaks to the leadership.
Yeah. So private label represents about 8% of our Tds on and it's up about 9% that is a net.
That's pretty consistent it's up a little bit more this quarter, but nothing nothing dramatic on the vast majority of that in track channel because that's just on track channel.
On the vast majority of that is in Walmart and and so we really premier has pretty low interaction with overall private label, where about a 55% interaction index so pretty low.
You know the over the years.
So because equate is such a strong brand and private label. They have products that compete in every single need states. So about two years ago. They launched a premier fighter and it really has not affected our business very much on and so I think that's a good exam.
Sample of a strong private label, but has has really not affected our business and so I think that as we look Oh and knew you asked about new entrants on yeah. So Sams recently launched a a.
The 30 kind of the 30 grams fighter again, we're watching it but again based on equate at we really think that it.
You know, we don't think they don't have the big impact on our business.
I appreciate the color Darcy.
Separately, a fair amount of cost inflation, obviously hitting gross margin.
It would appear as though you're you're limited on the price as a total offset the.
Look the drives household penetration so I'm wondering what you're looking at or what you're currently doing on the supply chain side. The maybe help of manager smoothed out some of this raw material and logistics pressures that you're seeing going forward.
At the I mean, the I'll take the Paul and then you can add on and as you see fit so yeah. So yeah. It's a conscious decision on to not take price. We basically are seeing the increase is in the more in the front huh.
Then we are in the back half as were.
Hi, Ed we're seeing kind of the spike in in milk protein cost as well it's on logistic cost from co bid. So we are actively working on cost out programs. Both this year and.
Net as well as we started it last year and we're doing it this year and we're even expand it were already have line of sight to projects that we're working on for 22 and beyond.
But I think because we see the cost increases hitting mostly in the front half and and of subsiding in the back half and our focus on market share and brand building. We think you know we can weather events in kind of the first first half of the one thing I say.
Well I'll say is we're watching it you know I mean if.
If our calculus isn't correct and commodity prices increase more than expected and we took price February of 19 and on the organization executed well on elasticity was as expected. So we can always make that decision and we.
We are monitoring it closely.
Well go to our next question is Chris growth of Stifel.
Hi, good morning come on.
Morning.
Hi, Hi.
Just wanted to ask the question first on the on the gross margin fall a little bit on on Bryan's question, but just to understand you had two major factors weigh on the gross margin sequentially and year over year, I guess promotion, let's see of some promotional rebuild as well as input cost inflation is the possible to disaggregate that just on and more importantly on I'm just trying to understand is kind of how much is on.
Going and how much of it kind of pressure, especially from inflation, we could see in the first half of the year.
Yeah, Chris Your question I assume is on Q4 margin specifically in the us.
So from the Q4 perspective, you're right. There's two major there's two major items that I've ever impacting margins promotional activity and raw materials raw materials was a bit more impactful.
Other than promotion of effect the fourth quarter was our highest the impact from raw materials versus last year. So it's hitting a peak as we go into next year Darcy highlighted that we've highlighted obviously on our prepared remarks and orange release that.
We do expect raw material prices to impact of primarily on the first half what's the most impact first quarter keep in mind the.
Last year in the first quarter protein prices were just starting to rise. So we had some favorability that as the cost got higher in the <unk> and the rest of the year. So that's the little bit more of a headwind.
In the first quarter of it relates the first half the takes the brunt of the impact it's very modest in the rest of the year, but it starts off highest in first quarter.
The better as we go through the year.
Okay.
Just one other question pressed for Darcy based in relation to the category growth rate in particular, where you operate and I'm thinking specifically of the liquids. The do you expect to see a growth profile much like you saw in 2020 or do you think <unk>, although we've seen an uptick in the growth of the category because the more like kind of where we exited the fiscal 2000 of fiscal Twoq.
As we look into the fiscal 21, just trying to get the level southern kind of where the category shakes out for the year.
Yeah, So historical growth rates for the category bout five per cent and we're a little bit above that right now and obviously that debt during Q3 of last year, but yeah I expect it to go back to historical so about 5%.
It's been very steady so in the supplemental deck that we put out we added a slide on the category. The very clearly shows you the the Covidien stock at the deal flow and then just held steady the category has been on back to pre could level.
So I expect that to continue obviously, there can be some bumps depending on locked down the et cetera, but overall I think it will come back to it'll be consistent with where it had been for the lack of three non.
The chart was helpful. Thank you for the the thanks. Thanks for the time this morning income.
Yeah.
Your next question is from David Palmer of Evercore ISI.
Thanks, just a question on some of the dynamics, we can see just in the measured channels, which I know is highly of perfect, but just from some of the standpoint, the you're talking about with the immunity claims and the one player like ensure that is it.
It's doing well on the measured channels it seems to be positioned against certain claims, but also positioned against the older demographics and.
They may be benefiting from co bid in certain unique ways and perhaps you're going to go after those need states a little bit more with some of your messaging, but then with regard to some of your your coverage one of the beauties of your brands. It covers the different needs dates and the new market against those and postcode good weight management.
And on the go nutrition, particularly of breakfast will be back.
And I'm wondering how much of the headwind you think you have from koby. The on those need states such that you know frankly, you don't just get the easy wins in the second half of your fiscal year.
And I'll leave it there thanks.
Yeah. So if you.
It's a good point of making sure that we look at what was going on last year, because it was from quarter to quarter. It was very different so when we look at lapping Q2, you have to remember that in the last.
No.
A two week there with the massive spike in consumption, where and then Conversely in Q3 of the comps are easier and then Q4 sort of got back to back to normal. So those are exactly what we are expecting you're absolutely right that.
Sure had been benefiting benefiting probably the most in our category from from co bed and so I mean, they will obviously have some pretty hard comp.
But as you.
You know like I said in a day for the beauty of.
The Premier brand is first of all we market.
On more generally.
We talk about.
You know a quick easy and delicious healthy breakfast, which honestly can travel across all need state.
On and so we believe that our marketing, which we've tested on end market, obviously last year as well as tested the quantitatively on that it's hitting on all of those need states and and so we think we'll we'll make some make up some ground and sourcing volume from several of them.
And maybe just a follow up on that do you think you've lost a chunk of business because.
There's less of that you know time compressed on the go parent too maybe.
Is the or the worker that needs day grab something and go.
Have you done any consumer research that shows how much you've lost on that needs day.
[noise] Yeah, we we have locked on that needs day. So the the on the go the quick breakfast I think what's happening though is were over indexing on the at home. So it's making up for it and so weve. The when we returned to normal I think that.
It will be.
What I don't have.
On a perfect sense of [laughter] is.
Do we keep that over index at home on because people start getting used to having it add the snack in the middle of the day as well as breakfast and then do we add on the on the go. So then making it you know and so getting back that is the other needs state.
Or does it swap on what I'm confident on the is that you know we have new products. We have new distribution. We have all of these other building blocks that are working for us, but that's the piece that well on honestly have to just watch.
Great. Thank you thank.
Thank you.
Your next question is from Bill Chappell of true of Securities.
Thanks, Good morning.
Good morning.
The Darcy just to.
Help us understand I I appreciate that you gave a full year guidance in a lot of on certainty, but the what did you have seen over the the past three months in terms of need states bouncing back or just trends and just trying to understand how you're looking or how you're building the guidance, especially as we get the April made.
June and there's so much of uncertainty of what's opened the not opened I mean, because the assuming some needs the bounce.
Bounce back is it <unk>.
And I guess, so two questions. One what did you see over the past three months in terms of progression of sales from the different need states and two how did you build out the the the forecast for next year with the assumption of the some of these states will come back at certain months.
Yeah. So we assumed that the category at U.S. day that kind of historical levels historic level. So that the category continues to grow around on you know low low single digits. So that was part of our assumptions regarding need states I would say that we don't necessarily.
All of our forecast like that so I think that we're we're covered because we sort of volume from from kind of all of them were obviously right in the everyday nutrition piece, but we source volume from the rest I think how we build our build our forecast is we take the assumption we use building blocks. So we take the assumption.
Of the category growth rate on then we add on new distribution, new product lapping the prior year on new distribution. So that's where we are getting a bulk of our growth and that's where we come up with.
What on guidance was.
Got it gets so just to clarify the have you looked at the July.
July August September was was the sale of the trends pretty similar throughout or I mean did you start to see if there has been some thought that as we're coming out of the pandemic.
People are tired of having the extra 10 pounds they want to be a little more active in so there should be no.
Migration.
More to active nutrition. So did you see things start to accelerate towards the end of the quarter.
On it was very stable.
So I mean again like I.
Kind of urge you to go to that slide on the supplemental because it is it is that is shockingly stable [laughter]. It throughout the entire so basically after we rebounded they had that do you load and Q3 Q4 on the category.
As was pretty flat I mean, the some small changes, but overall very flat.
Great. Thanks, so much of the color. Thank you.
Your next question is from Ken Zaslow of bank of Montreal.
Hey, good morning, everyone.
Good morning on it.
The different line of questioning what do you guys think about the co packing capacity out there is it the strengths to that it doesn't that limit the number of entrants and have you seen that change.
Oh, yes, there absolutely are constraints out there it has changed so they as supply and demand the co Packers have added capacity, mostly a line here or there obviously we.
Have a new co manufacturer on the east coast. So that added capacity on so I would say that it's not as limited as it once was however, other than the income manufacturer. We added there are no new players.
It's just a matter of the existing players, adding a line here or there.
Got it and then my second question is as you look through your supply chain. You know this is given a lot of people and examination of okay. What we can do differently. How would you do it. This is you know the the cool the shops. However, you want on call it.
What did you learn.
It from the supply chain is there opportunities for you to become more efficient.
Actually gain a.
A couple of margin when she was there a as you exit this or is this something you like.
I know you never did a real margin sort of the topline sort of but it can you give us any sense of that.
Yeah, we've been digging into our supply chain for sure as I know most companies are on the especially because we were facing commodity cost increases and we wanted to drive the top line. So we were doing whatever we can to offset some of those increases I mean, just think of in the past like you said we have been.
The topline story and so we haven't dug in deep. So we're looking at network designed to make that more efficient I mean, a big part of of expanding our co me on network with the put on a location on the East coast, which helped with our network design, but we're looking at everything from package.
Moving on to.
As to the way, we buy two where we buy to how we share I mean across the board, we're evaluating and we're making you know good inroads on that to offset some of these cost increases.
I think they're going to be permanent are we going to see a noticeable change <unk> age of any sort of the non flow not next year I'm just on the the next couple of years.
Yeah, I think that what right now its covered up by our cost by the commodity increases honestly, if we hadn't had some of these it would be larger and so but those will stay obviously these <unk>. These are the cost out initiatives will are permanent and so we'll see.
Knows and there will be more evident and as we as the commodity prices increase or decrease.
Good look forward to see thank you very much the safe.
Sure.
Ladies and gentlemen, we have reached the end of our a lot of time for questions. Thank you for joining this concludes today's conference call you may now disconnect.
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