Q3 2022 J & J Snack Foods Corp Earnings Call
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Okay.
Walking to the J&J snack foods fiscal.
Third quarter 2022 earnings Conference call. My name is Cheryl and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. During the question and answer session. If he ever question. Please press zero one on your Touchtone phone.
As a reminder, this conference is being recorded I will now turn the call over to no virtual Investor Relations for J&J snack foods, Sir you may begin.
Thank you operator, and good morning, everyone. Thank you for joining the J&J snack foods fiscal 2022 third quarter conference call.
Started in just a minute with management's comments and your questions, but before doing so let me take a minute to read the safe Harbor language.
This call will contain forward looking statements within the meaning of the private Securities Litigation Act of $19 95.
All statements made on this call that do not relate to matters of historical facts should be considered forward looking statements, including statements regarding management's plans strategies goals and objectives.
And anticipated financial performance industry wide supply constraints.
And the expected impact of COVID-19 on our business.
These statements are neither promises nor guarantees, but involve known and unknown risks uncertainties and other important factors that may cause our actual results.
<unk> or achievements to be materially different from any future results performance or achievements expressed or implied by the forward looking statements.
As discussed in our annual report on Form 10-K for the year ended September 25, 2021, and other filings with the Securities and Exchange Commission.
Could cause actual results to differ materially from those indicated by the forward looking statements made on this call.
Any such forward looking statements represent managements estimates as of the date of this call August three 2022, while we may elect to update such forward looking statements at some point in the future. We disclaim any obligation to do so even if subsequent events cause our views to change. In addition, we may also reference certain non-GAAP .
Metrics, including adjusted EBITDA operating income and earnings per share, which is reconciled to the nearest GAAP metric in the company's earnings release, which can be found in the Investor Relations section of our website at J J snack dot com.
With us on the call today are Dan <unk>, our Chief Executive Officer, Ken Plunk, our Chief Financial Officer, and joining US remotely we have lynnwood Mallard, our chief marketing officer.
Rob Op Cranmer, our senior Vice President of operations, Steve <unk>, Our senior Vice President and Chief operating officer of ICEE.
Joern Leiser senior Vice President of sales, James Hamill, VP, corporate controller, and Michael Palmer, our SVP and General counsel.
Following managements prepared remarks, we will open the call for a question and answer session.
With that I would now like to turn our call over to Dan passionate J&J snack foods Chief Executive Officer. Please go ahead Dan.
Thank you Norberto and good morning, everyone. We appreciate you joining us this morning to discuss our third quarter results. We are pleased with our overall performance, which extends the topline growth we are seeing across our business. This fiscal year and further reflects the ongoing recovery of our customer.
It is evident from our results that we have addressed the headwinds we encountered during our new ERP system launch in February which temporarily impacted the fiscal Q2 performance of our foodservice and retail segments.
I wanted to give a special thanks and recognition to the enormous effort of our team members who work tirelessly to quickly resolve this issue. Thank you for that.
Taking a look at the third quarter revenue of $382 million was an all time quarterly record, representing a 17, 2% growth versus the prior year period and in over 35% increase versus our second quarter revenue when.
When compared to third quarter of 2019 revenue was up over 16%.
On a year to date basis revenue for the first nine months of fiscal 2022 totaled $980 2 million or 19, 3% increase versus the first nine months of fiscal 2021.
These top line results were led by market growth across all three business segments and across just about every product line sale.
Sales were consistently strong across each month of the quarter.
Starting with foodservice, we saw continued growth in this segment across the board, including soft pretzels frozen novelties.
Handhelds and bakery.
Our business continues to leverage strong core products and innovation to capture new customer opportunities in channels like convenience.
Our enemies man.
Our retail segment also enjoyed strong growth posting $61 billion in sales and growing 13% compared to the same quarter last year and over 46% compared to the same period in fiscal 2019.
As was the case with foodservice sales were strong across all categories, including handhelds frozen novelties this goods and soft pretzel.
Frozen novelties is a great story this year as we add skus and gain additional placement and leading retailer led by Luigi doctors and ICEE.
Our frozen beverages segment also saw strong growth with sales, increasing 23, 5% versus Q3, 2021 led by beverages growing 37% and equipment up 17%.
Volume in restaurants in amusements were up double digits versus the prior year and theaters, while still down compared to pre Covid performance is improving as consumers go back to the movies. The seed top box office releases, such as top gun minions and Jurassic World.
We continue to see strong growth opportunities in <unk> fast casual and convenience for both beverages and service.
We are winning new customers, bringing new products to market continuing to find ways to leverage our brand.
Finding our go to market strategy.
And working to satisfy our customers each and everyday.
Our Q3 top line results only reinforce our confidence in our strategies and the potential we see for added growth.
Our business is strong.
We have made significant progress improving gross margins to 28, 7% this quarter, but we continue to experience inflationary pressures across many areas of our business from sourcing key ingredients such as flour eggs.
Dairy oils chocolates and beats.
Marketing and distribution costs.
Cost of these key raw ingredients increased almost 10% versus the prior quarter continuing to put pressure on our manufacturing.
We've responded by implementing our second price increase early in the quarter and have already communicated a third high single digit increase that will take effect late in the fourth quarter. These.
These actions combined with our focus on improved margin mix and cost initiatives led to higher gross margins. This quarter and are expected to drive further margin improvements as we close the year.
We also continued to face historic cost pressures in our supply chain, where we saw both sequential and year over year increases driven by higher truck driver wages and rising carrier storage and fuel costs.
In order to offset these pressures we have a number of cost reduction initiatives underway in R&D procurement plant operations and distribution that we expect to offset some of these cost pressures over the next few months and into the next year.
Our team is focused on reducing costs across the business as we transform how we operate and improve efficiencies across the business.
As it relates to customer when we can.
Continue to cultivate a healthy pipeline of new business, including our new recently launched churro LCBO at Sonic.
ICEE expansion with new customers, such as mode and Peter Piper Pizza.
Our new pretzel stick with kwik trip in the convenience channel.
And an introduction of a fantastic new pretzel dog and Mcallister as Delhi.
Additionally, as we move through the back to school time of year, we're optimistic about recapturing business in the K through 12 channel in core snack categories that softened a bit during COVID-19.
On our service side of our business, we are targeting new opportunities leveraging our ICT service network and continuing to see strong demand and growth opportunities with existing customers, including America's leading coffee retailers convenience stores and movie theaters.
Regarding product launches and innovation, we are leveraging the ICEE brand in sugar cookies and both in store bakery and an individually rapped single serve packaging.
And we remain highly focused on our Super Pretzel brand as we expand winning products at retail, while introducing new build pretzel bites and filled pretzel nuts in fiscal Q1 of 2023.
Our <unk> brand continues to see strong profitable growth as we expand the brand with key retailers.
Our marketing team is focused on strengthening the brands positioning and will launch an entirely new campaign in 2023 celebrating the special relationship that dog lovers have with their dogs and reminding them not to forget their best friend when shopping then all of the aisle.
We're anticipating continued strong growth driven by further expansion at retail and this new fully integrated marketing campaign.
We will also launch our new brand or lot gyros, starting in fiscal Q4 after day viewing the new brand at the National Restaurant Association in May.
Excited to rollout the new brand with a full suite of marketing and sales.
Sure. This is a significant opportunity for us having grown 38% in just the past four years across the American menu and according to data essential growth will continue in every segment within foodservice, including a projected eight 5% within casual dining restaurants.
Four 5% in fast casual.
And nearly 4% in <unk>.
J&J is already the largest domestic producer of Churros and creating a new branded product provides us with a unique and valuable opportunity to grow share shred.
Strengthening at 78% awareness in the U S. The offer strong margins are easy to prepare for operators such as quick serve restaurants movie theaters and adventure parks.
Regarding the operating a consumer backdrop from our vantage point, all indications point to consumers seeing value in our products, while spending more time outdoors, including lease at leisure and entertainment venues.
As our results indicate consumers are visiting restaurants.
<unk> parks, my venues theaters and convenience stores travel venues and public spaces in great numbers. For example, same park attendance remains resilient. Despite recent macro volatility as domestic and international consumers are vacationing more with their families.
Major live event organizers are reporting attendance above pre pandemic levels as well as higher spending on food and beverage.
And in theaters.
Significant revenue segment for US we are seeing levels approaching 75% of pre pandemic attendance levels, while thing Marc upticks.
New cat her spending and moviegoers indulge in their favorite snacks.
As it relates to M&A, we could not be more excited to have completed the $223 million acquisition of different dots.
We believe the combination of the two companies will be a game changer, given the almost seamless alignment.
<unk> with our frozen novelty in our frozen beverage businesses.
We have already begun to leverage our relationships and key foodservice and entertainment channels identifying opportunities to expand distribution of the different dots brand.
Operationally, we've already started working with <unk> team on integrating the two companies and I am pleased to report that everything is working just as planned as.
As we move further and further along the integration process. We are confident in our ability to gain meaningful revenue and cost synergies and create value for our shareholders.
In closing, we remain extremely optimistic about our future given the resilience of our products and brands.
Strength across our core products.
Success of our new product offerings, our ability to expand our customer footprint.
And a terrific addition to the J&J family with the acquisition of <unk>.
I'd now like to turn the call over to Ken Plunk CFO to review our financial performance Ken.
Thank you Dan and good morning, everyone.
Taking a look at the results for the third quarter of fiscal 2022, we are pleased with the continued strength and resiliency of the business, surpassing pre COVID-19 levels for the fourth consecutive quarter.
Net sales of $382 million grew by 17, 2% versus the prior year.
And by over 35% sequentially.
Paired with the third quarter of 2019.
Revenue was up 16%.
Our growth trend is further reflected on a year to date performance with revenue for the first nine months.
2022, totaling $980 2 million.
19, 3% increase versus the first nine months of fiscal 2021.
Starting with foodservice, which continues to be our largest segment representing 60% of tumor cells.
Revenue of $227 8 million grew by 16% versus Q3, 2021 and <unk>.
Most 18%.
Third to Q3 of fiscal 2019.
Strong performance in June .
Services was driven by a 35, 7% increase in handheld cells.
27, 5% increase in insurance sales and a.
23, 2% increase in frozen novelty cells.
We also saw great momentum in our bakery in soft pretzels.
Year over year growth of 11, 4% and 99% perspective.
The retail segment also posted a strong quarter was $61 million in sales compared to $53 9 million.
Year period, and growing by over 46%.
Compared to the same period in fiscal 2019.
<unk> led the way with a 33, 4% growth compared to Q3 of 2021.
This gives them the soft pretzel sales growth of 33% four 5% respectively.
Frozen beverages sales were $91 4 million and grew 23, 5% versus Q3 2021 led by beverage sales growth of 36, 7%.
In machine sales growth of 17, 4%.
Machine service revenues were flat versus Q3 2021.
Gross profit for the quarter was $109 1 million an increase of over 13, 4%.
Compared to the previous year period, and a gross margin of 28, 7%.
The slight drop compared to 29, 7% in Q3 of fiscal 2021.
Have a margin improvement on a sequential basis. Despite the ongoing inflationary challenges we are confident in our plans to resolve and manage these headwinds as we move forward, we expect gross margins to continue to improve.
Moving down the income statement total operating expenses increased from $58 million to $87 8 million, representing 23, 1% of sales for the quarter.
Paired to 17, 9% in Q3 of 2021.
These results largely reflect inflationary pressures across all of our expense line items in particular and distribution expenses, which was 12, 7% of sales.
Third to eight 4% of sales in fiscal 2021.
Distribution expenses were driven by rising carrier driver wage storage and fuel costs.
As supply chains remain constrained.
Also impacting operating expenses was approximately $3 1 million in one time transaction closing fees related to the <unk> acquisition.
Which were captured in administrative expense.
This led to an operating income decline of 44, 3% to $21 3 million for the quarter compared to prior year, excluding the one time charges.
Adjusted operating income was $24 3 million adjusted earnings per share for diluted share was <unk> 93 per share and adjusted EBITDA was $38 4 million.
After considering income taxes of.
$5 6 million compared to $9 7 million in Q3 of fiscal 2021.
Net earnings decreased to $15 6 million for the quarter, resulting in.
Ported diluted earnings per share of <unk> 81.
Compared to $1 51 in the prior year period.
Our effective tax rate was 26, 6% for the third quarter.
And on an adjusted EBITDA basis, we saw a decline to $38 4 million.
50 to $52 2 million in the prior year period on the back of the decrease in earnings.
Year to date, adjusted EBITDA totaled $84 million.
Compared to $89 5 million for the first nine months of fiscal 2021.
Taking a look at our liquidity position, even with the recent <unk> acquisition. We continue have a healthy balance sheet and overall strong liquidity position with $91 4 million in cash and marketable securities and.
And approximately $25 million in debt and.
In addition, we have ample availability under our revolver with.
With $91 2 million of additional borrowing capacity.
Confident with their financial position.
Our ability to adequately invest and support our business, while continuing to return.
Value to our shareholders.
The quarterly.
Dividends.
In closing our third quarter results reflect the ongoing resiliency and health.
Of our business as sales continue to grow.
Margins continue to improve we have a disciplined focus on executing.
Initiatives to reduce costs improve margins and.
Continue to build on our sales momentum.
I would now like to open the call to questions operator.
Thank you we will now begin the question and answer session.
Like to ask a question you can do so by pressing zero one on your Touchtone phone again to ask a question. Please press zero one on.
And you touched home phone. Our first question comes from Andrew Wolf. Your line is now open.
Thank you and good morning.
Good morning on the sales.
Thanks, Good morning, guys.
Could you tell us how much of that yourselves was.
It was volume versus price.
Yes.
We increased both volume and pricing during the quarter.
As far as percentages, a little over 50% somewhere in that.
60% to 70% probably range is pricing the rest is volume.
Yes.
Andrew I would just add to that every segment.
Sales were up in both volume as well as price obviously is we took pricing.
Okay, great and.
Can you give us a flavor for how July is trending given what's gone on with the economy and some some parts some foodservice at least.
Softening, we continue to see strong sales as we did in the third quarter.
As we enter into the fourth quarter.
So we're encouraged by what we're seeing so far.
Great to hear and just last follow up kind of related to pricing.
Kind of two part.
The second price increase I think you said was during the quarter. So is there as we look at modeling the fourth quarter or is there a little more pricing from them.
The pricing action you instituted in the quarter and the.
Fiscal third quarter two.
To comment to the fourth quarter, that's part one and part two is the high single digit pricing Youre going to institute late in the fourth quarter, which.
I assume.
Mainly.
Fiscal 2023 event for modeling purposes.
Given.
A little deflation.
<unk> and some of the ingredients costs and so on.
How do you think about.
Recovery in price realization in your gross margin.
As we look into 2023, obviously I'm not asking you to guide specifically, but just you think there's a normalization coming there.
The ingredient cost side of things.
Cooperates.
All great questions, Andrew I'm going to let Ken address some of those first.
Yes, Andrew I would answer it this way again remember with.
With the price increases like most of your to announce them.
Youre, playing catch up so even from Q2 to.
Q3.
Cost of our key raw materials went up another $10 million. So that price increase that we took in April certainly helped but costs continue to go up in the quarter.
These projections are certain commodities are starting to come down a little bit being one of those.
Fuel a little bit.
Our experts still kind of call out, it's a wait and see but youre right. Some of that is stable.
Stabilized some come down, but then it's a bit.
At a time for that all flows through.
So the pricing that we took in April .
<unk> tried to catch up but we need to take the other one was already yet.
Communications with customers until like where.
Sure.
<unk> ready to start executing that over the next few weeks.
That will probably take effect kind of late August .
September then yes to your point will benefit 2023.
Okay. So it sounds like you are are you cautiously optimistic on gross margins are you or is it more of a two too soon to call kind of view as you.
As you start to you know.
As you look at your budgeting process and so on yes, I know Andrew I think we're absolutely cautiously optimistic we like the position that we're in.
Like where do we land at even ending the third quarter and as you put it we're very cautiously optimistic as we move into the next quarter.
And beyond.
I think the other thing I'm optimistic.
We'll do a better job Andrew.
As we drive sales drive.
Driving it in higher margin areas. So.
Mix is getting better and then we've got a number of key.
Cost of goods initiatives.
The waste plant and we're starting to see that.
Benefits and some of that so all of that combined with.
Inflation that seems to be slowing down in the is it a little bit with the price increase we've taken.
I agree with Dan I think we're cautiously optimistic as we move forward.
Thanks, just one follow up on your last comment Ken.
On the positive mix shift is that.
Just what.
Sort of related to foodservice recovering in those margins being higher.
Overall or are you doing some kind of skew rationalization of lower margin skus as well.
Will last beyond.
The recovery in foodservice.
Yes, Andrew Great question, and we've done a little bit of both of that we've done some SKU rationalization.
Our focus on our core products, which were being able to drive growth in that.
Our higher margin.
And so we felt good about the direction that our company is heading and the great work that our sales team is doing out there addressing those kinds of issues and feel like that will.
Pay benefits as we move into 2023.
Great. Thank you very much.
Thank you. Thank you.
Thank you. Our next question comes from Rob Dickerson. Your line is now open.
Great. Thanks, so much NIM.
Hey, guys.
Quick question I guess to ask you a different way.
A little more sense frankly, it's just I think.
Ken.
Additionally that.
Given the pricing that was coming through and where the costs were coming out of Q2 that.
You're you're hopeful at that point, maybe you could.
Get back to that pre COVID-19 marginal by Q2 'twenty three.
It doesn't seem like that's necessarily off the table given the.
The flow through of the <unk>.
Third.
Third round of pricing.
Just wanted to kind of make sure that's still the case and if not it just sounds like maybe that gets pushed forward a little bit so any color on that would be helpful. Just the first question.
Yeah, I feel better sitting here today than I did come out of Q2, that's for sure.
But.
The market, we're in and then still on <unk>.
Going into a recession or not.
Yes.
Still kind of.
I'd say in Q2, but I, probably would answer it this way rather sell a little bit more optimistic.
How about getting there maybe getting there a little earlier than I did three months ago.
Okay Super.
And then just on the distribution side obviously.
Obviously.
Material step up in the quarter.
For all the obvious reasons.
Do you even think through into Q4, and then 23.
<unk> is what's helpful to all of that line item.
Maybe that at.
At least as a percent of revenue hopefully that starts to kind of.
Trail off.
Through Q4 or is there just some stickiness in the cost and the supply side outside of stay.
Third issue.
Fuel cost.
Well, we're certainly hoping that it's peaked at this point Rob.
We have a lot of initiatives, we have extra eyes on it.
We're looking at it really really closely it's affected by fuel storage and outbound carriers, but we're watching it really closely we hope that it's Pete.
<unk>.
And our.
That's down as it relates to a percent sale.
Okay, Okay Super.
And then just last question for me.
On the segments.
Operating margin Delta between let's say foodservice.
And retail I guess relative to frozen beverages frozen beverages came in.
I think it may be the highest we've seen historically so very strong right. So demand is coming back you are back in line with.
Pandemic revenues.
While at the same time, you're getting pricing.
The margins doing very well while at the same time foodservice is still struggling a little bit just retail. So I'm just curious with zoom like was there some lag effects on the pricing side or relative to frozen beverages or is there maybe not as much.
Operating leverage in that part of the business I'm, just trying to get some better understanding as to.
Why those segments seem to be kind of dragging a little bit relative to where you are in frozen.
That's it.
Yeah.
Well again on frozen the price increases were taken annually every January so we get the benefit of that pricing action in January .
Head of.
Kind of what we were doing on the foodservice and retail side moving to <unk>.
Mall in late last year.
Then the other one didn't go into effect most of that until April . So you have a little bit of that going on.
Rob do you also have the cost of the acquisition of three one is shared between those retail and foodservice.
Numbers and then the bulk of the distribution expenses and challenges there.
In our retail and foodservice business.
Different business model yet.
16 plants 30 simply pick up location so.
You can imagine managing that from a distribution standpoint is much different than on the.
On the frozen beverages side. So those are some distinct differences between the property you see in frozen.
And the <unk>.
Youre seeing go down to the bottom line foodservice and retail.
Okay Cool makes sense. Thank you.
Thank you. Our next question comes from Connor Rab again your line is now open.
Alright, good morning, I think I heard the question.
Thanks, and thanks, everyone. So just to start I was just wondering if you could comment on your thoughts on just to.
The health of the health of the consumer going forward. It sounds like your business isn't really seeing much of an impact, but we're hearing a lot about pressure on lower income consumers, specifically and with a large portion of the business revolving around experiences like theme parks with stadiums and such do you expect any real volume west the city or maybe <unk>.
<unk> being priced out of those experiences going forward.
But we're going to have the discipline to watch it really closely.
At this point, we have not seen that happen we've done historically as a company we've done pretty well during.
Times like these in the past we have great products that are kind of a snack and street and a reward that people will still buy during recessionary periods.
Again to date, we're not seeing that drop in sales, but we're going to watch it really closely.
And <unk>.
React if we see something like that.
Okay, great. Thanks that was helpful.
And also just as far as the topline goes could you just sort of maybe just share some color on sort of how that trended over the quarter was there may be still somewhat of a hangover early in the quarter from that ERP system implementation.
You know there has to be a little bit of that it's hard to identify it but there had to be a little bit early in the quarter that we were able to benefit from that we did not get into the system in the second quarter, but really we saw strong sales in each month of the quarter.
So we feel like there's a great demand.
We like some of the new products that we've released.
I like the the action that our sales team is taken out there and getting our core products to the customer.
And feel really strong about our sales going into the future.
Okay, great great.
And then also just a little bit on the pricing side too. So I know you guys quantified that as about 60% to 70% of growth from pricing.
I know you typically don't really quantify mix, but any chance you can sort of guide us as to maybe how substantial of an impact that mix shift.
Alright.
Can you say that onetime kind of yes.
Yeah sure thing so I know you guys quantified about $60 to 70% of growth in pricing.
Any chance you can sort of guide us to about sort of how substantial the mix shift impact was just on the overall top line growth.
When you say mix you say in between price and volume is that what you mean, yes, that's correct.
Yeah.
Varied by segment I think the way I would answer that.
We're not really getting into this.
Any details on it is.
For every segment of our business.
Frozen food service retail.
All of them grew volume and also grew in price obviously.
So.
Dan just pointed out we study the elasticity very closely.
US and other competitors have raised prices.
And then you start to see the pressure on consumers you got to watch.
That decision is very closely what happens with volumes and we balance that very well and continue to see is growing both on the volume side as well.
Okay alright. Thanks. Thank you so much that's it for me.
Thank you.
Thank you. Our next question comes from Trevor to Saar. Your line is now open.
Good morning to ever pay guys, Hey, guys. This is Trevor on for Jon Andersen here, just one for me.
I wanted to ask.
Kind of fill rates and ability to meet demand in the quarter kind of where you guys were from that front, maybe you run into any challenges.
Specific channels or segments or if he left anything on the table throughout the quarter.
Well, our operational team did a fantastic job point as much capacity through the plants as we possibly can.
You know this because we've said it before we have seven new lines underway that will come into effect a couple of them came into effect. This year in the frozen novelty group, we have some coming into effect with both the pretzel and that's euros at the end of this year and into next year that will give us greater capacity.
But certainly with sales like this that $382 million being a record quarter of all time.
It's certainly stretched our abilities, but our team did a great job getting the products to the customer.
Great. Thanks.
Thank you.
Thank you. Our next question comes from Todd Brooks. Your line is now open.
Hey, good morning, everybody how.
How are you guys doing.
Great.
A few questions for you if I may one.
Youre starting to get a little bit.
The way and just kind of digging into the different thoughts opportunity here I think at the time of closure you had talked about it looking to be <unk>.
30% to 40.
Creatives pre synergies, but Dan you kind of hinted at.
Strong.
Interest from existing J&J customers to expand <unk> distribution, there I guess what are the early reads about the synergy opportunity.
With the different dots brand now under the J&J umbrella.
We think there is some significant synergies to be had.
But I think I've said this to you Todd.
I'll just repeat it again.
But this right in the middle of what I'll call harvest season, and so we really havent wanted to disrupt what <unk> does today and has done so well and to make sure that we get the product to the customers in the appropriate fashion our people are.
Working hand in hand, with the group there today I kind of identifying those synergies and we will start to see those probably late in the year early 2023 late in 2022.
As you talked about with the expansion, we're having we're having a lot of really good conversations with our customers out. There. This is one of the things that we saw such a big opportunity with them and that they do business in many of the same places we do or at least in many of the same channel.
This allows us to have a pretty open conversation with our customers right away and we have got to do some great relationships out there.
We're getting a lot of really good feedback and think that we are going to be able to grow those sales.
Pretty rapidly.
The next few years.
That's great to hear and following up on another opportunity that seems to be growing pretty rapidly can.
Can you talk through how big the <unk> business has gotten to be for you talk through maybe what would distribution doors look like this year versus last year future wins that could be there and then.
Any plans in conjunction with the new marketing campaign next year, maybe broaden out the product line as well.
You don't.
That brand as you know the pet industry has grown tremendously to during <unk>, but a lot of people bought pads and so we feel like we're in the right place at the right time with the right brand.
We just did some brand.
Understanding around that with a group who got together to really identify.
What the brand means and how to go to market with it and so putting together some terrific plans for 2023, I've got kind of a chance.
For the Hood Mallard and team are doing great with it.
As far as sales.
In period 12, I think it was that we did around 5 million something like that somewhere in that range.
And just a wide open space for us, we're continuing to gain opportunities with retailers and we feel as we're starting to look at the packaging start look at the brand understand it better that Theres just a lot of room for growth there love that brand love what we're doing.
Our sales team likes it just felt like we have a lot of room for growth.
How substantial is the door growth on the distribution side currently versus a year ago have you opened up some of the bigger maybe pet concept swimwear mass concepts and you're adding meaningful doors for Doncaster.
Well I think if you're asking.
Many more skus I think there is retail outlets, where we've added two to three skus.
Retailer.
Todd.
Yes, Ken I was more asking number of doors that youre a distributor.
Upstream how much of that expanded I don't know if we have that handy Todd I'm not sure I can give you that in country today.
Okay Fair enough and then on back on frozen beverage, obviously very strong quarter.
Last call Dan you talked about some interest coming out at the NRA show anything you can share about.
Restaurant concepts that have come into the testing pipeline.
During the quarter or maybe the magnitude of those opportunities that are coming to fruition.
Yes, I think I've said this before I really really like the pipeline that we have going on with ICEE right now.
We have I mentioned by name we have mode, starting to roll out that was one and tests.
<unk> said this to you before with the ICEE product. It's a long testing period. There is a long incubation period, because it's a big commitment with a big machine to people.
But we have mode now starting to rollout we have Peter Piper Pizza Rolling out and two or three other <unk> type opportunities that are in test that I cant mentioned, yet, but but I like the momentum that we have in them and see some really good growth for ICEE as we move into 2023.
Okay, great. Thank you and I'll also say that not just in the Bev.
Beverage side of it but also have some really good momentum going on on the service side as well.
Okay, great. Thanks, Dan.
Thank you Todd.
Thank you. Our next question comes from Jonathan Mcgraw that Lee Your line is now open.
Hi, good morning.
<unk> acquisition did you guys also acquire their.
Our cryogenics business.
Cryogenics licensing business.
We did not.
<unk> that portion of it when I when I looked at it first I think I've talked about having.
An opportunity to meet with the owners and sit down to dinner and kind of get a firsthand view of this.
This purchase.
That was one of the areas that I just didn't think fit within our wheelhouse I guess is what I would say they had also had a couple.
Issues with that side of the business and it just didn't feel like it was the right thing for us.
And that we could take it grow and mature at the way that we can on the deposit side.
Okay, great. Thanks for the information.
Thank you.
Thank you we have a follow up question from Andrew Wolf. Your line is now open.
Hi.
So given the magnitude of the.
Inflation in the distribution costs.
Could you just unpack that a little bit.
We are the biggest drivers you mentioned a number of items.
How much of that is.
Controllable how much is third party, where let's say ship trucking business is tight there just raising pricing because.
Supply is tight versus.
You have some control it's your drivers.
Fuel coming down could help you and so on.
And then I have a follow up to that in regards to some of the initiatives you mentioned in the.
In your release.
Yeah, Andrew it kind of breaks out this way probably I'd say.
75% was from costs that we pay outbound carriers so.
<unk>.
To move the product obviously, we depend on.
Third parties for that so that is 75% of the cost increase.
Storage went up more than 100% year over year.
We got a number of situations, where <unk> product gave us price increases.
That was probably another.
15% to 20% and then fuel.
Fuel costs, just around direct fuel costs.
Went up over 100%.
Fuel costs have gone up 11% year over year.
Those are the three biggest buckets driving the increase year over year.
Okay and do you have an outlook on the outbound our you're.
Right.
Do you think theyre going to come down with the economy coming down are you getting are they are the rates coming down at all yet or what's going on but I can say is we are seeing I would.
I use the word stabilization and we're hearing.
And experts talk about search.
Rates coming down is kind of supply and demand demand of carriers.
<unk> got equal out a little bit from what it was a few months ago.
So it seems to be more promising but gosh, given everything we've gone through in the last year.
Cost.
I believe it when I see it.
So.
I think I think it's promising I think we're hearing things moving in a better direction, but.
We need to see that realized through the P&L.
Okay. Thank you.
Thank you Andrea Thank you Andrew.
And we have no further questions in queue at this time I'll turn the call back to Dan Fashioner for closing comments.
Thank you operator.
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Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.