Q3 2021 Chefs' Warehouse Inc Earnings Call
[music].
Greetings and welcome to the chefs warehouse third quarter 2021 earnings conference call.
As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Alex Aldous General Counsel Corporate Secretary and Chief Government Relations Officer. Please go ahead Sir.
Thank you operator, good morning, everyone with me on today's call are Chris Pappas, founder, Chairman and CEO and Jim Leddy, our CFO by now you should have access to our third quarter 2021 earnings press release. It can also be found at www dot chefs warehouse dot com under the Investor Relations section.
Throughout this conference call, we will be presenting non-GAAP financial measures, including among others historical and estimated EBITDA and adjusted EBITDA as well as both historical and estimated adjusted net income and adjusted earnings per share. These measurements are not calculated in accordance with GAAP and may be calculated differently and Sim.
Literally titled non-GAAP financial measures used by other companies quantitative reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures appear in today's press release.
Before we begin our formal remarks I need to remind everyone that part of our discussion today will include forward looking statements, including statements regarding our estimated financial performance such forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual.
Our results to differ materially from what we expect some.
Some of these risks are mentioned in todays release, others are discussed in our annual report on Form 10-K, and quarterly reports on Form 10-Q, which are available on the SEC website. Today, we are going to provide a business update and go over our third quarter results. In detail. Then we will open up the call for questions with that I will turn the call over to Chris Pappas.
Yes, Chris.
Thank you Alex and thank you all for joining our third quarter 2021 earnings call.
Revenue trends remained strong as momentum from second quarter customer.
Demand continued into the third quarter.
In September limited growth and return to offices and hospitality related activity contributed to a moderate increase in sales trends sequentially over August and July.
And we exited the quarter at approximately 103% of 2019 sales.
<unk> to our previous reporting I will compare our sales and gross margin results of the current quarter sequentially to the second quarter of 2021.
Jim will provide the comparison to prior year in his comments later in the call.
During the quarter net sales increased approximately 14, 5% versus the second quarter of 2021.
Specialty sales increased approximately 18, 1% sequentially versus the second quarter of 2021 with average unique customers, increasing seven 1% and we saw higher placements of approximately 8%.
Specialty cases increased 12, 8% versus the second quarter of 2021, while center of the plate pounds sold were approximately $2, 8% higher sequentially versus the second quarter of 2021.
The impact of acquisitions.
While gross profit margins were relatively unchanged compared to the second quarter of 2021 total gross profit dollars increased <unk>.
14, 7% versus the second quarter.
Gross margin in the specialty category increased 70 basis points as compared to the second quarter of 2021, while gross margin in the center of the plate category decreased 97 basis points.
Jim will provide more detail on gross margin and inflation in a few minutes.
During October we completed two acquisitions that will contribute to our continued growth as the provider of choice for high end center of the plate product lines to our customers nationally.
On the West Coast, we added silver state meets the premier provider of specialty proteins in the greater Las Vegas Metro area.
Outside it's a partner with the Silversea team as their high touch high quality service model will serve as a great complement to our existing specialty business in Las Vegas. This acquisition will also provide us with a bridge to growing our southern California specialty proteins cells until we implement.
Center of the play processing and our new L. A facility, which we currently expect to be opening in 2022.
In Texas, we acquired certain assets of Martin preferred foods.
This will facilitate accelerated growth of our premium Allen brothers brands to our growing customer base and the Lone Star State.
Regarding recent business activity.
Recent sales trends have continued in excess of 2019 sales consistent with the final weeks of the third quarter.
Continued modest growth in travel office building in college related markets combined with favorable fall weather led to moderate week over week sales progress during October.
Despite the ongoing challenges in the labor and supply chain environment Art's team chefs warehouse continues to focus on sourcing marketing and delivering.
High quality product and high touch service model to our customers.
If anything the last few months have strengthened our confidence in both the future growth of the culinary or industry at large and the investments we had chefs I'm making in market.
Category expansion, and adding key talent and partners as we look forward to returning to above average industry growth.
I would like to thank all of our CW team members for their dedication and resilience as we move forward towards achieving our medium term and long term goals with that I'll turn it over to Jim to discuss more detailed financial information for the quarter, an update on our liquidity Jim.
Thank you, Chris and good morning, everyone I'll now provide a comparison of our current quarter operating results versus the prior year quarter and provide an update on our balance sheet and liquidity.
Our net sales for the quarter ended September 24th 2021 increased approximately 97% to $484 3 million from $254 million in the third quarter of 2020.
The increase in net sales was the result of an increase in organic sales of approximately 84, 2% as well as the contribution of sales from acquisitions, which added approximately six 5% to sales growth for the quarter net.
Net inflation was 18, 7% in the third quarter, consisting of 10, 9% inflation in our specialty category and inflation of 28% in our center of the plate category versus the prior year quarter. Please.
Please note that center of the plate prices were only four 2% higher sequentially versus the second quarter of 2021.
Gross profit increased 82, 2% to a $110 million for the third quarter of 2021 versus $60 4 million for the third quarter of 2020 gross profit margins decreased approximately 105 basis points to 22, 7%.
Although gross profit margins declined year over year strong gross profit dollar growth was driven by increased sales, while maintaining a strong gross profit margin profile and an extreme inflationary environment.
Specialty inflation was driven by broad based inflation across most specialty product lines inflation in the center of the plate category was driven by higher prices across most categories, especially in the higher end prime categories.
Total operating expense increased approximately 37, 7% to $99 5 million for the third quarter of 2021 from $72 3 million for the third quarter of 2020.
Primary drivers of higher operating expenses were higher compensation and transportation costs associated with year over year volume growth in route expansion adjust.
Adjusted operating expenses increased 33, 3% versus the prior year third quarter and as a percentage of net sales adjusted operating expense was 17, 9% for the third quarter of 2021 compared to 25, 7% for the third quarter of 2020.
Operating income for the third quarter of 2021 was $10 4 million compared to operating loss of $11 9 million for the third quarter of 2020. The increase in operating income was driven primarily by higher gross profit, partially offset by higher operating costs.
Income tax expense was $2 8 million for the third quarter of 2021 compared to income tax benefit of $5 2 million for the third quarter of 2020.
Our GAAP net income was $3 5 million or nine cents income per diluted share for the third quarter of 2021 compared to a net loss of $11 4 million or <unk> 31 cents loss per diluted share for the third quarter of 2020.
On a non-GAAP basis, we had positive adjusted EBITDA of $23 4 million for the third quarter of 2021 compared to negative adjusted EBITDA of $4 9 million for the prior year third quarter. Adjusted net income was $4 5 million or 12 cents per diluted share for the third quarter of <unk>.
2021, compared to adjusted net loss of $13 7 million or <unk> 38 loss per diluted share for the prior year third quarter.
Turning to the balance sheet and an update on our liquidity at the end of the third quarter. We had total liquidity of $243 7 million comprised of $134 2 million in cash and $109 5 million of availability under our ABL facility and net debt as of September 24.
2021 was approximately $266 4 million inclusive of all cash and cash equivalents.
At this time due to the continued uncertainty regarding the pace of broader economic recovery and the timing of events and travel related business activity, we will not be providing guidance for 2021.
Thank you and at this point, we will open it up to questions operator.
Thank you.
At this time will be conducting a question and answer session.
If you'd like to ask a question. Please press star one on your telephone keypad.
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Our first question comes from Fred Wightman with Wolfe Research. Please proceed with your question.
Hey, guys. Good morning, Thanks for taking the question.
Really helpful color on sort of the September exit rate and how that continued into October but I'm wondering if you could just give a little bit more color as far as when you saw the delta impact how that sort of progressed throughout the quarter and then.
The comments that you made about business travel returning a little bit how you see those progressing going forward.
Yes sure. Thanks for the question Greg.
Yes, the cadence through the quarter.
I guess.
The headline is we didn't really see much impact from the Delta variant that all.
July is.
Seasonally generally a little weaker than June, but we had very consistent.
Revenue trends throughout July and then August is seasonally a little bit better.
And then July and that that played out as we had incrementally.
Higher week over week revenue trends.
In August and then as we mentioned in the prepared remarks in September we started to see the impact of.
Some of the college markets opening up.
We saw.
Very limited incremental business in the segments of our markets better.
Yes.
Do better when offices are full.
Theater district things like that so not not a leap.
But more of a very gradual incremental build.
So from a delta very perspective.
Yes, we didn't really see much at all.
In terms of looking forward.
We have.
Since this.
<unk> began internally modeled very gradual build back in the hospitality travel business travel.
And.
That type of business activity, whether it's cruise lines are.
International travel coming back to the big cities and so we still model internally a very gradual build back through the end of this year and into 'twenty, two I think New York.
The United States, obviously is opening up traveled to vaccinated.
People internationally in mid November and so we'll see how that plays out.
Great and then just broadly a little bit more detail on the staffing outlook are you still super constrained to the extent that you are having to turn away new customers or new business did you see any change as some of the federal programs rolled off in the late summer early fall.
Okay.
Yeah Yeah.
Go ahead, Chris.
Sure.
Yes, some staffing staffing has been a challenge.
The positive side that made us.
Have to operate.
Much more strategically.
Efficiently, we kind of knew staffing was the problem before COVID-19.
No.
It was always a issue trying to find enough.
CDL drivers and especially in light crudes so.
Really for us a new discipline on what customers, we would take on obviously servicing our existing good customers was the number one priority so.
It did it did limit us from a I would say past behavior of maybe taking on too many customers in different regions that weren't as profitable. So I think we learned a lot it was kind of like a forced discipline.
As staffing comes back I mean, we are seeing more and more people coming back into the workforce, which is really a great positive sign.
We're still we're still looking at the business differently than we did.
Pre pandemic and I think we've learned a few things so if anything positive from the pandemic as we understand our business, even better than before and are operating more efficiently.
Okay. Thank you.
Okay.
Thanks.
Our next question comes from Alex Slagle with Jefferies. Please proceed with your question.
Hey, Thanks, good morning.
Just wanted to follow up more on that previous previous question.
If you could just provide some more color on the magnitude of overtime and incremental training and incentive payments just to get some color. There where you are maybe in terms of the slope.
These cost headwinds.
Do you guys see them continuing to increase through the fourth quarter and then maybe moderate at some point as you know given where you are on hiring.
Yes, Alex Thanks for the question, just kind of adding onto Chris' chris's comments.
The biggest impact that we saw during.
During covia done labor has been in the kind of larger markets, where there was a lot more competition for that labor pool and.
In September and early October we started to see more applicants more better applicants a better flow of labor now it's still challenging there's no doubt about that we think obviously the world has changed as it relates to the labor market.
And so that's why we're investing in.
Technology, where we can to offset.
That impact to the extent that we can.
So.
<unk>.
That's basically.
What played out.
As we move forward.
It's leveled off a little bit.
I think there's always going to be challenges around.
Labor in given our business model, we hired drivers we hire night cruise as Chris mentioned.
But our teams have done a great job of of.
Adjusting our operations to the current labor market and we're pretty pleased with what what they're what they have been delivering.
Thanks for that and one question on the inflationary cost pressures that you could provide a little bit extra perspectives and how effectively you have been able to pass along those higher costs relative to your expectations.
Maybe thoughts on pricing flexibility in the current environment, obviously very strong, but I wonder if you're seeing any changes there more recently.
Yes.
Yeah.
Yeah, I'm sorry, it's.
Correct that it's Jim first cutting you could opine, but.
I don't think.
Anyone has ever seen.
Our market.
Not my generation.
Of inflation.
Due to a lot.
Logistics a lot of it it's great.
Many many obviously the proteins have seen the greatest inflation, especially in our in our prime category.
Lot of it is because there's so much demand as well.
I don't think anybody.
We really thought that the demand will come back.
Curiously.
As it has so.
We've always ran the business with a limited amount of contracts.
Primary customers are.
Independent restaurants, or big shops or caterers.
And the price really floats so the floats with the market. So we try pretty much never to get locked into a situation where.
You can pass it on there there are some larger customers that we do have some agreements with but even even those contracts in today's environment.
I think everything is negotiable.
The most important factor in today's market is.
I actually being able to execute.
And to deliver and I think.
Our industry everyone's cooperating understanding.
Probably once in a lifetime kind of environment and everybody has to be flexible so.
It is allowing us to move price as.
As you can see from our results.
We're able to pass on if.
If not exactly the total margin increase we're able to keep our gross profit dollars, which is the most important.
Way, we run the business the spread between our Opex and gross profit dollars and more expensive boxes really give us a little leverage on opex because.
They don't really cost more to move and I think you've heard me say many times over the past 10 years, I'd, rather sell expensive boxes and inexpensive boxes, because they don't really cost more to move and that's really our more of our business model with you.
Higher end restaurants.
We don't sell many many customers.
<unk> three 400 boxes of French fries at one time, we sell a customer maybe 40 different line items.
But it's one of each and that allows us to get the margin.
To be able to deliver to these high touch.
<unk> provides the value.
For them and for Us and I think that we saw the model pretty much play out in the last quarter.
That's helpful. Thank you.
Thank you.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
Our next question comes from the line of Kelly Bania with BMO capital. Please proceed with your question.
Hi, good morning, Thanks for taking our questions.
I wanted to just ask the comment about sales <unk>.
At 103% of pro forma 2019 levels is very helpful.
I think ahead of expectations, but I guess the question.
I think on a lot of investors' minds is just on the expense side and just wondering if you could kind of put the same color around operating expenses on a pro forma basis.
Just how how do you think this quarter came in relative to what you think pro forma expenses would be.
Yeah. Thanks for the question Kelly.
I think it.
It's coming in.
As we expected I mean, obviously the less.
Two quarters, Q2, and Q3 really.
When we started to.
Business came back end market is open we have started to leverage our fixed cost base of fixed asset base.
That was obviously escaping us during the depths of Covid. So that's gradually improved I mean I think.
I'll go back to Chris's comments about growing gross profit dollars above adjusted Opex.
Our gross profit margins are lower than 2020, and 2019, but our adjusted Opex as a percent of revenue.
He is better as well and so youre seeing youre seeing a shift because of the.
Normal inflationary environment.
<unk>.
Or on the commercial side, our balances managing price such that we are partnering with our customers and passing on market related costs, but.
But also just making sure that we're growing gross profit dollars in creating.
Operating leverage as we did.
A few consistent years prior to COVID-19 hitting.
Obviously, the comps to 2020 are creating a lot of extreme numbers, but when you break it down.
Our adjusted EBITDA margins in Q3, we're very close to what we delivered in Q3 of 2019.
If you normalize for the addition of Sid Wainer, which we were very upfront that is a lower EBIT margin business, but.
We have a multiyear plan to grow that EBIT.
EBIT margin over time.
We're actually very close so I think.
Even with the wage increases.
The things that our operating teams have done in terms of investing in technology process improvement.
The things, Chris talked about about prioritizing commercial business.
Based on the environment.
All those things have come together and giving us an opex profile Thats in line with what we would expect.
That's that's very helpful.
I guess just in terms of hiring.
Maybe can you just give us an update on the extent to which you still do need to hire either drivers or warehouse employees.
Or any labor hiring that you still need to do across the board.
Sure.
Yes, again, Kelly I think we've talked about this a daily in our ops ops calls.
Hiring hiring people in warehouse jobs and drivers Cdls.
For the larger truck was a challenge before the pandemic. So it's not something that's new to us. So we worked really hard to try to recruit.
We've actually broken up a lot of our a.
Sure.
You know the way, we look at HR and responsibility as required.
A talent officer to work with all of our leaders to basic.
Basically you know.
It's not only hiring it's keeping people in these jobs that you read about in the paper all the time, it's too quick.
Quitting generation and.
Unfortunately, it is much harder to get people to stay. These are some of them are really hard job right, you're lifting heavy boxes, you're driving big trucks.
It's a tough job and we really appreciate that and that's why we got.
We want to make sure that we have great packages.
For these jobs. So they are compensated for the hard work.
I don't think that's going to change much like I said it was tough before the pandemic. So.
We work at it.
<unk> day.
Good.
I'm almost afraid to say that it is getting better.
Over the last few weeks you know our calls it seems like we are starting to get more people showing up for our job fairs.
And we're constantly everybody full time recruiters of recruiting.
But.
This industry forces you to be resourceful.
You have to find ways to do more with less and I don't think that it's going to change drastically I think that there are more candidates and but we're being really careful as we add trucks back.
We are doing the business with less trucks. So we do have more efficiencies.
We know now that travel is going to start to resume hopefully in a week or so.
We're going to start to get international travel, we're going to start to get our cities.
Active semi normal write more obviously the hotels have not had those travelers and haven't had a lot of business travels we havent had catered event. So we know that that volume will start to build and we're way ahead of it and the way we're out recruiting.
Planning putting routes back on but I think we're doing it under a microscope understanding that.
We wanted to do it much more efficiently than in the past.
Thank you and just one more from me.
Just on the two transactions announced this month I'm just curious if you could help us understand what stood out with those two acquisition opportunities I imagine, there's quite a bit of opportunity across the landscape and.
Just strategically.
Why those two.
And those locations, especially and just just.
General update on how some of those smaller competitors.
Are faring in this environment.
Sure well again, I think that you know a lot of the deals Youll see announced probably were in the works before the pandemic hit so.
We're constantly talking to people in different markets and you hear me talking about bolt ins all the time I I would do one a day.
If we could find them because they're so accretive because basically all you're taken really as sales in.
The customer base.
I think the one in Vegas was extremely strategic.
We have a.
Have a great business there in a regular specialty chefs warehouse facility.
You know we were lacking.
A protein solution to launch our Allen brothers steak and seafood business. So.
Service they provided that.
We like the people that ran the business and we thought it would complement well and it also gives us the opportunity to start to go in and build our southern California business.
It's close enough when we have trucks running back and forth that this allows us to start to build.
Volume because our new facility in La is opening hopefully fourth quarter first quarter.
Next year and.
This gives us the opportunity really to start supplying through our existing routes customers with protein products.
Allows us to build a run rate so when that cut shop does open in southern California.
We have we have enough business really to get it going and to get to a profitable level much quicker than starting.
From scratch.
I think.
If you again, if you're here.
Another acquisition.
It's something that we were planning you know before pandemic and it probably got delayed for.
Many obvious reasons.
And.
I think the pipeline is extremely frothy.
I think youll start to see a lot of M&A you know now that people have somewhat of a.
Uh huh.
Foreseeable forecast coming out you know, even six months ago with the Delta variant.
It was really hard to forecast it still is.
But I think now I think we know that we're not.
Adding back to a closed down.
And it's easier for us to pull the trigger.
Thank you.
Our next question comes from the line of Peter Saleh with BTG. Please proceed with your question.
Great. Thank you I think most of my questions were asked but I wanted to ask about the overall.
Industry.
For independence.
I know theres been.
A lot of talk about labor shortage and.
Hi, labor turnover and I know you guys mentioned that you think youre being more selective in terms of the customers in the restaurants that you.
Take on are you seeing.
I think what everybody was expecting was more of a surgeon and development coming out of the pandemic or do you feel like the.
Labor shortage and all the turnover has as a resulted in maybe independents being a little bit more cautious in terms of opening new concepts and new restaurants. Thank you.
No.
<unk>.
I think.
If there is another positive.
Positive thing that we've seen coming out of the pandemic.
You mean.
The sad thing is that we've seen a lot of customers close.
Not nearly as many as everybody predicted thank god.
There has been many small businesses that didn't make it in.
No.
I always thought maybe perhaps there was too many restaurants before the pandemic and maybe this was.
An opportunity to get out of leases and walk away from unprofitable locations, but I'm sure that there is many many clients that.
Just didn't have the wherewithal, but I think the PPP helped our industry tremendously I think it was a lifeline for many many customers.
And.
What we're seeing is many coming out now as volumes are returning.
Theyre looking for new locations and they are signing many leases.
As you can see once in a lifetime opportunity, where you can find a fully built out location.
Ready to go maybe with some minor cosmetic.
Adjustments you.
You can open a new restaurant.
Key location.
And I think.
What we're seeing with the customer accounts starting to go up.
And many customers.
New restaurants opening over the next six to 12 months.
As an outcome of that it's an outcome of that.
Found stability with P. P P.
Maybe they had many many good years before that so it's the kind of is a tale of two cities. Unfortunately.
My Crystal ball says that youre going to see a tremendous amount of new openings. This industry.
Restaurant tourists liked to open new restaurants.
I think that given an opportunity right now to accelerate.
You know that that desire to open up new concepts.
Our clientele is very creative.
There's constantly new new ideas, new concepts are blending of new cuisines.
And everybody likes the new restaurant, and I think youre going to see an acceleration of that.
Great very helpful. And then just lastly on the recent acquisitions.
This month any sort of impact that we should expect on margins in 2022 from from these two acquisitions are they too small to really move the needle.
Yes, nothing significant there more.
Peter there more growth.
Investments.
Obviously, the one in Las Vegas will will contribute to our west coast P&L on operations, but.
It's a relatively smaller company that we were going to look to grow over the next.
2345 years, and then the acquisition in Texas.
It was a processing plant that's going to allow us to really accelerate our.
Our Allen brothers.
Product line growth in that region.
So that's a that's an investment that was going to pay off over the next couple of years, So nothing immediate to model in.
Great. Thank you very much.
Our next question comes from the line of Todd broke with C. L. King. Please proceed with your question.
Hey, good morning, guys I hope you're well.
A few follow ups.
Good morning.
Can we talk kind of looking forward.
Chris Crystal ball around inflation outlook, maybe Q4 going into.
Fiscal 'twenty two for specialty and center of the plate as some of these.
Maybe labor pressures that are driving some of the inflation from.
From producers, maybe those are starting to ease as well just thoughts on inflation.
Looking forward.
Sure. Thanks for the question Todd.
I'll just start and then Chris can add any any thoughts obviously, but.
Prices, obviously remain firm go.
Into.
Going into the fourth quarter.
You can see from the public data that.
Pricing sequentially versus what we're experiencing what we experienced in Q3 and Q2 is not.
Significantly changed some of the center of the plate categories have have come off a little bit but certain other categories have have remained.
Fairly deere in terms of pricing.
In terms of going forward.
Our own internal view is is that.
Labor.
Wages are not going to I'm not going to be resetting lower.
At least we think that.
That's that's going to be.
Kind of resetting higher.
I mean I think.
Year over year sequential and year over year changes will most likely moderate.
Maybe.
Slightly deflationary versus the extreme.
Pricing, we've seen in in 'twenty one.
<unk> to 'twenty.
But overall.
The comparisons should.
Should should be easier as you as you are comping to 'twenty one than you were 220 of course.
Great. Thanks, Chris.
Sorry, yes.
No I think that you know again, it's a it's a very unique environment.
In this industry for many many years.
I don't know if its the frog boiling water at this point that we're just we're all getting used to the new normal.
<unk> more expensive.
I think the.
The good part the good news is that.
There hasn't been a tremendous amount of pushback from the consumer.
When you really break down the cost of ingredients. So even if a case of pasta goes up $10. A case 20 pounds. When you really look at the <unk>.
Cost per play.
What is it adding 50 or $1.
Art.
We don't sell to.
To the mass mass market, we have 50000, plus customers, but they are catering to the top 10% of the world's earners.
Hopefully those earners are starting to travel internationally again in that business travel comes back so.
You can't help but get optimistic when you're seeing what we're be Ben what we've come through.
The kind of business that our restaurants are doing.
Without.
World travelers and business travelers and events so.
We're very very optimistic cautiously optimistic.
Eventually prices may moderate some it's really being driven a lot is being driven by key there's too much demand or.
The ports, which are on TV every day, you see the ships out there floating waiting to get unloaded so.
The shipping cost.
Driven the cost tremendously and I think my prediction is that that's pretty.
That's going to eventually.
Find supply demand type of pricing and it won't be 10000 or $20000 to ship of containers will come back down to maybe not the $500, but $3 $4000 and I think that will help everybody help everybody's margins, but.
I think our clientele is finding ways to pass that cost on.
And be very creative with their menus and I think that's why you're seeing restaurants are full and more and more openings. So.
We live in interesting times for sure.
That's really helpful. Thanks, Kristen just a follow up on that.
Talk about maybe <unk>.
Private label as a percent of sales and how thats changed in this inflationary environment, maybe what that means for <unk>.
For margins down the road when people when things do normalize now people are discovering the quality of some of that the private label offerings that are in that breadth of offering that you've always had.
Yeah, I mean, I don't think it's changed much with.
With our strategy I mean with all our protein private labels I think we're probably over 50% of what we sell is in some sort of a.
Chef warehouse box or.
Allen brothers, and Michaels box or.
Exclusive label that we own so.
Customers are much more understanding today, when you have to substitute.
So there's not a lot of pushback.
They have no choice in a way.
When Heinz ketchup is out they have to use something.
But for the products that we sell.
Yeah, I think the I think what we are.
What we built over 35 plus years.
It was a model that was different than your average.
Foodservice supplier.
That.
We had 180 different olive oils.
We had 10 different types of Tomatoes from Italy in California in Spain. So we.
We already had a very robust.
Product offering you know, sometimes we thought maybe it was too wide.
We were carrying too many of like cleaning products because our clientele.
It's very specific.
Chefs to very specific on what they want to use.
And I think that it really.
Came to the rescue during the last year.
Year, where.
It was product.
Apply chain disruptions.
So what became what we thought was something that was costing us extra to carry.
Proved to be extremely beneficial because if we were out of.
Italian San Marzano Tomatoes, we had another it's something though that was very close.
Quality and the customer.
Happy to receive the half Tomatoes, and accepted the quality and.
It was a win win situation. So I think that was one of the things that really helped us over the past year.
That's great and a final one for me and you spoke to the October trends, but Chris.
Jim I'm wondering when you're talking to your customers.
What's the early outlook for for holiday as far as kind of pent up demand to get out and celebrate bookings. What are you. What are you hearing from customers about.
The early reads on the holiday and their potential excitement about the season. Thanks.
Sure.
Yes.
That's a great question.
Overall I think.
What we're hearing is optimism.
We're hearing a lot of parties are being booked they are smaller.
So I think people are people are really anxious to get back together I know I am we're hosting our first event.
In a very long time, where we have a lot of our leaders coming together, we haven't seen each other in almost two years and I think that.
That really goes throughout the whole industry.
It's Matt it's more events, they're just smaller and I think our operators are very excited to start having them putting them on the books you know we're hearing about Vegas.
The bookings are starting to go up I think if youre watching the playoffs or Sunday football stadiums are packed again so.
It's obvious people want to go out wanted to get back together and we're really starting to see that effect.
Okay, great. Thanks, Chris.
Yeah.
Thank you.
Our next question comes from Ben <unk> with Lake Street Capital Markets. Please proceed with your question.
Hi, Thanks for taking my question just one quick one from me on the direct to consumer business model here.
A couple a couple of markets that are included in that model on your website at this point I'm wondering if you can update us on kind of how youre thinking about this model.
Going forward is this something that kind of serve its purpose or is this something you are still kind of focused on especially as the world hopefully settled down here in coming quarters.
Jim.
I didn't catch that question.
Oh, sorry sure.
Sure. The question was about our direct to consumer business, So Ben Youre, asking about shop like a chef.
Yeah, and kind of how youre looking at that.
<unk> over the next year, if it's run its course or if Youre still this is still something you would like to focus on down the road.
Yeah, Yeah, no Jim I'll take this one.
And Hawaii question wasn't coming through so we've always had a strong direct to consumer business with our Allen brothers.
Consumer business.
Online it's catalog.
Sure.
It was a.
Solid small I would say small business compared to our overall business and that you know.
Quadruples over over the pandemic and now it's.
It's kind of leveled out et cetera, obviously, a much higher level than pre pandemic, but.
The dream really is to take that.
Direct to the consumer on their own trucks, which we did during that.
During the heart of the pandemic when everything was closed down.
We don't think Thats. The model, we think it's just too expensive number one it would have to be something different than operating throughout our existing warehouses.
Our business comes back to normal.
The warehousing system and the way we pick our trucks.
Not different than trying to service.
People's homes, So I think where we're pushing and where we're going to grow the shop like a chef is more with the Allen brothers model using a third party.
The build.
<unk> Division and our Gourmet Division, that's really where the demand comes when we see people searching the information we're getting back from our from our analysts is that people are looking to buy.
Truckload products, our olive oils are imported cheeses are.
Really extensive gourmet offerings and proteins and we think Thats, a real business and that's something that we are working on.
Yes.
Great that's very helpful.
That's it for me Thanks for taking my question I'll get back in queue.
Thank you.
Thank you ladies and gentlemen, we have reached the end of our question and answer session. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
Thank you.
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