Q3 2024 Utz Brands Inc Earnings Call - Q&A

The

Speaker Change: Hello and welcome to the U.S. 3rd quarter of 2004 earnings call, as a reminder his call is being recorded. I will now turn the call over to Kevin Powers, head of investor relations. Please go ahead.

Kevin Powers: Thank you, operator and good morning everyone. Thank you for joining today for a lot to an session on our third court results. With me on today's call, Howard Freeman, CEO, Ajay Kataria, CFO, and Caritivore, CLO, and Chief Transformation Officer.

Kevin Powers: I hope everyone had a chance to listen or read a prepared remarks this morning and also your presentation, all of which are available on our Investor Relations website.

Kevin Powers: Before we get a Q&A session, just a few housekeeping items to review.

Kevin Powers: Please note that some of our comments today will contain forward-looking statements based in our current view of our business and the actual future results made differently. Please see our recent SEC filings which identify their principal risk and uncertainties that could affect future performance.

Kevin Powers: Today we will discuss certain adjusted or non-gap financial measures which are described in more detail in this morning's earnings materials.

Kevin Powers: Reconciliation of non-gap financial measures and other associated closures are contained in our earnings materials and posted on our website. Now operator, we are ready to open up the line for questions.

Speaker Change: Thank you. As a reminder, all you have to do to ask a question is breast R1 on your telephone keypad. Your first question comes from the line of Andrew Lezard from Barclays. Please go ahead.

Andrew Lezard: Great, thanks for morning Howard, Ajay and Kary.

Speaker Change: Good morning. Good morning.

Speaker Change: Tony, maybe start off.

Andrew Lezard: You reaffirmed your full-year organic growth outlook of 2 to 2 and a half percent.

Andrew Lezard: and it suggests a pretty significant sequential acceleration in 4Q.

Andrew Lezard: to at least about 3.5% from the 1.9% you reported in 3.2. And that's just to get to the low end of the full year.

Speaker Change: So, I guess how much visibility do you have to this acceleration and how do we square that expectation with consumption data that at least through the first couple weeks of October?

Andrew Lezard: at least based on our data seems to be running more flat-ish or so. And particularly in light of the fact that as we know, shipments were ahead of takeaway in three-cube.

Speaker Change: Thanks for the question Andrew. I think there are a couple things. The first thing I had kind of pointed out is we've always anticipated that the entire evening that we were going to continue to sort of see momentum build.

Speaker Change: and that's really driven by a couple of things that are under our control.

Speaker Change: First is that the marketing step-up continues as we go through the rest of the year.

Speaker Change: We have innovation that is also building, you mentioned seasonal shipments and there is a little bit of that in the third quarter, but we do see an incremental execution on seasonal through the rest of the year.

Speaker Change: are distribution has been gaining and so he kind of saw that in third quarters, especially in our expansion geographies and kind of bringing our on the border brand into our core. So the distribution gains and then the last while.

Speaker Change: Not something that I particularly like to hang our hat on is, our last do get significantly easier in the fourth quarter. So we have pretty good visibility to all the things that are under our control that would suggest us that we should see.

Speaker Change: Momentum continue to build over time.

Speaker Change: The last thing I'd offer you is you do see the difference between measured and unmeasured in this quarter. So you saw a little bit of that in the second quarter, you see a little bit more of it in the third quarter, and we would anticipate as somewhat similar gap between measured and unmeasured channels in the fourth quarter.

Speaker Change: and that's helpful. And it sounds like outside of potato chips which I've had its own sort of videos in credit competitive issues during the quarter.

Speaker Change: The other sub-segment held up a reasonably well in three queue. A key competitor recently made some comments about sort of stepping up competitive activity on tortilla chips going forward as well. And I'm just very tired of taking that into sort of consideration in your outlook.

Speaker Change: Yes, so certainly we saw a much more heightened competitive environment in the third quarter, which

Speaker Change: which I obviously impacted potato chips. I think the rest of our portfolio to your point continue to perform well and kind of is a strength of our portfolio strategy and becoming more focused on our power brands.

Speaker Change: and as we go forward, Torchee Hips is a little bit of a different...

Speaker Change: and Adam Olden, Potato Chips for us. First of all, we already have made decisions through the course of the year.

Speaker Change: and have historically had a wider price gap between on the border and some other competitors. And so we would anticipate that while the gaps may narrow some that we like where we are competitively.

Speaker Change: Second of all the distribution gains that we're getting again in our core, which has always been part of our thesis, was that we could bring on the border into sort of our outscore and drive distribution gains has been working.

Speaker Change: and then the third is I think as you look at some of the merchandising.

Speaker Change: that we are looking at for the rest of the year and as you turn into the next year on the border does benefit from some of that support. Obviously we'll evaluate price gaps as we go and if we need to be...

Speaker Change: and more competitive or sharp and where we are will take that decision when we need to, but we feel pretty comfortable with where we are on towards the Ajay Tricks right now.

Speaker Change: Thank you very much for your time. Thank you.

Speaker Change: Our next question comes from the line of Peter Galbow with Bank of America. Please go ahead.

Peter Galbow: Hey guys, good morning. Maybe just to start if I can follow up on an injury's question.

Peter Galbow: is we think about the 4Q exit rate and that, you know, for 4% of the start range at least at the midpoint.

Peter Galbow: and that kind of sets you up for exiting and algorithm, or at least the well end of the algorithm into 25. I'm sure you don't want to give any kind of form of commentary there, but just want to understand if that's kind of how we should be thinking about it at a high level.

Speaker Change: and then in addition to that, you know, you had some commentary in their senua, so as we get into 25 that I was hoping you'd remind us of, I think you mentioned, you know, kettle production's going to start up in one queue maybe you have some laps on Golden plate, but anything else we should be aware of is we start to kind of think about 25. Thanks.

Speaker Change: Thanks, Pete. You're right. We're not going to be 25 guidance at this point.

Speaker Change: But I would offer you a couple things. I think first of all, if you look at our, what we had said at our 2023 investor day, the conversation was that we had laid out our volume share expectations.

Speaker Change: for both our core and for our expansion geographies. And at the moment what has been true and you can see year to date, we are delivering a whole-the-core volume share and an expansion market volume share around that 0.2 percent point.

Speaker Change: So I think we feel pretty good that our distribution gains strategy and our whole, the core strategy are kind of yielding the fruit that we would expect.

Speaker Change: I think we've been a little bit different year to date is the translation from volume to value and certainly with competitive pricing being a near term conversion question that I think remains the thing that we are working our way through.

Speaker Change: I think I would offer is, you know, we are feeling very good about our non-measure channels. They continue to grow and step up. We are gaining momentum. You know, there and, you know, we do expect that the category and category participants remain rational, which is great for everybody.

Speaker Change: So, you know, I think we will continue to see what we control.

Speaker Change: Come through in our results and then the translation I think is the wild card but I think we feel pretty good about where we are for the fourth quarter of this year and we'll address 25 as we have kind of laughed a year.

Speaker Change: and the first question is Iraq. Yeah, you said questions around Kings Mountain and Kettle.

Speaker Change: Yeah, any other nuances we should be aware of in 25, you know, Kings Mountain, I think you're going to have to laugh on Golden's way to anything else we should kind of.

Speaker Change: Don't take so much.

Speaker Change: Yeah, you know, so if you're point our productivity program and our automation and capital installation is going on as planned and we are expecting for King's Mountain to start up to add incremental capacities to support our kettle business, which is.

Speaker Change: You know, a lot of older canning growth and a lot of on-trend performance there.

Speaker Change: But there's not a lot of labs to talk about. I think probably the two biggest ones, one is our C-store, Lack gets better. Remember, we actually saw our step down and C-store business in the back half of last year, really.

Speaker Change: in 4Q, so that while we're not expecting for C-Store to become a significant positive, it becomes significantly less negative in the year. And then the second is really around ZAPS and some of the challenges we've had on that business. I think goes to the two biggest.

Speaker Change: and material drivers that might change next year.

Speaker Change: Thanks for watching. Thanks, Steve.

Speaker Change: Your next question comes from the line of Michael Lavry from Pipe for Sensor. Please go ahead.

Speaker Change: Thank you, Gmonic. More.

Michael Lavry: Just I was wondering if you could talk about the promotional environment a little bit more, you gain volume share in the stepped up promotional environment, but lost a bit of dollar share.

Speaker Change: is thinking about the optimal balance between praise and volume, and maybe specifically too, bye.

Speaker Change: and the portfolio segment. It looks like you promoted foundation brands quite a bit more, even though the volume lift was there. It would be some of how you think about that role in the portfolio, and especially in the environment here now.

Speaker Change: Yeah, I appreciate the question Mike. Look, I certainly in the quarter we saw a much more promotional environment and actually saw that overall promotions kind of coming back in line.

Speaker Change: with what we used to see in 2019. So where we had been lagging.

Speaker Change: and emotionally across the category up until then. Q3 of this year was the first time that we kind of saw that step up. And then for us specifically, we sort of followed similarly, but we stepped up a little bit further driven by the customer mix.

Speaker Change: that we have which was fundamentally different in inverse of 2019. Remember that pre-dates a lot of the public schemes and some of the other expansion geographies where we have a little more high low than we had.

Speaker Change: The promotional environment has gotten more competitive for sure. Obviously potato chips was the big story on the quarter as a variety of competitors and a variety of channels actually wound up becoming more competitive. We're more promotional.

Speaker Change: So, as we go forward, I think we will, I think, be category-oriented rational, and I think that we will see sort of some of the stabilization of that. I think category, household penetration remains strong.

Speaker Change: and so it certainly shows that consumers are engaging when we bring promotions and marketing and innovation forward.

Speaker Change: As for us on foundation brands, just a couple of things. You'll remember last year we spent a lot of time talking about vittiners and kitchen cooked and some of our other businesses, HK Anderson that hadn't.

Speaker Change: Struggle a little bit more, and what you saw in the quarter is as we've been doing the price back architecture work.

Speaker Change: Those are some of the businesses where you also wind up putting some pricing against.

Speaker Change: to get the absolute price point down. And that's I think a little bit of what you're seeing there as well. And then we do have on HK Anderson we had a promotional shift into the third quarter from the second quarter at one of our retailers. So...

Speaker Change: You know, we'll always be a volume value story, I think, volume obviously driven by expansion. And you know, we do expect that pricing will be somewhat thing that will continue to look at as all the category participants do. We'll maintain our price gaps and be rational.

Speaker Change: Okay, thanks for that. And just wondering how much you could give an update on distribution progressing. You've had some smaller wins recently that I think we're just...

Speaker Change: ramping up in the second half of this year. But how do we think about maybe how that continues to go or, you know, is there capacity in place for bigger wins, maybe especially in the western Midwest and how does DFT play a role on that?

Speaker Change: Yeah, so...

Speaker Change: To your point, we felt very good about what our expansion geographies have been doing. You certainly saw that in the quarter, as we continue to gain distribution with both.

Speaker Change: and the National Re-Killers that have local banners as well as we start thinking about some of our alternative channels, club and the sort.

Speaker Change: So, you know, we would expect to continue to gain distribution there. We are ongoing conversations for next year or already as you can imagine and expect that will continue.

Speaker Change: As far as capacity is concerned, what we feel very good about our overall capacity utilization, as well as the investments that we have been making to be able to get a supply chain that is both resilient and responsive and efficient in as we gain.

Speaker Change: and we have those games. So we don't see any foreseeable issues with capacity as we go forward, even if there were sort of a, you know.

Speaker Change: and a larger than average distribution gain that we have visibility. And then in terms of DST, you know what we're a hybrid model, so we will service.

Speaker Change: Customers, how they want to be service. So if you want to be in DST, we have the routes, we also have relationships to make sure that that happens if you want to direct a warehouse. We can ship a T. That way as well.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Rob Dickerson from Jeffrey. Please go ahead.

Speaker Change: Grace, thanks so much.

Rob Dickerson: So the first question is on compare that capability and just the geographic expansion play and I'm just curious and I'm not sure if you kind of touched on this little bit or later. But is there like a component because...

Rob Dickerson: the close and competitive activity impacting the distribution gains you've seen for your respect or is it kind of more of a post distribution velocity translation dynamic.

Rob Dickerson: and the Jeff to keep her eyes on. I mean, basically what I'm asking is like, is anything to change to be able to expand a new geography if there is more competitive activity within the category?

Speaker Change: I think the short answer is no, we don't anticipate a change in our geographic expansion strategy and the discussions that we have with retailers.

Speaker Change: I think you have to remember that part of why retailers like us is because we tend to be incremental to the category we are not.

Speaker Change: Suffolamental. The data is fairly clear and compelling that when we come in, there are more buyers in the category and obviously some investment comes along.

Speaker Change: with that. So the first thing I think for us is that we remain incremental.

Speaker Change: and I think the second thing is we are highly supportive of a retailer's individual strategy, because if you are a...

Speaker Change: If you are appealing to different consumer segments, it's nice to have a portfolio of brands to choose from, so that you can actually curate your assortment and, you know, the breadth of our portfolio actually allows that to happen.

Speaker Change: pushing forward with them to make sure that we are meeting our obligations to support a healthy and growing category that consumers want to be a part of.

Speaker Change: I think in terms of the overall promotional environment, I think to your point it's really a question of what does that impact velocity in the category overall and that's a little bit of that volume-to-value translation as well. I think those are the biggest drivers.

Speaker Change: Super MMA just...

Speaker Change: Quickly, you know, excuse me, you said an appropriate remarks, right?

Speaker Change: there's a shouldn't benefit in the quarter kind of head of some of the holiday merchandise in plans.

Speaker Change: I'm just curious, like so far, right? Have you seen fairly good customer reaction or consumer reaction with some of the merchandising plans you've already put in place? Let's say even over the past few weeks.

Speaker Change: Yeah, so to your point, we had always planned a seasonal shipment in and I think everybody is seeing colleagues.

Speaker Change: getting earlier and you know certainly we saw that it was planning the impact beyond that was very small.

Speaker Change: and then in terms of the consumer and customer response that merchandising what we feel good about where we are. Our promotional lists are improving in our elasticity.

Speaker Change: are fairly consistent with what we would have anticipated. And so, you know, we think that our business is exactly where we would have anticipated it right now.

Speaker Change: and I'm Robert. Thank you. Thank you.

Speaker Change: Our next question comes from the line of NAID Modi from our BC Capital Market. Please go ahead.

Speaker Change: Thank you, good morning everyone. How would I, hey, I wanted to go back to the promotional list.

Speaker Change: Question, I mean, you know, you're talking about feeling good about that, but you know, probably speaking in the channel, it just seems like

Speaker Change: It's not matching kind of what the lift has been historically not. I'm not talking about specifically, I'm just talking about Broadway's grocery.

Speaker Change: promotional lesson.

Speaker Change: I don't know if that's a function of the consumer's feeling so much inflation that maybe 50 sets off on a bag of chips may not be affected as it used to be or maybe it's that people aren't trafficking as much in store because they're doing more online shopping. So just wanted to kind of get your reaction and thoughts to that.

Speaker Change: and then I have a quick follow-up.

Speaker Change: Yeah, so look at, I think.

Speaker Change: The observation I think is fair that consumers have certainly been responding differently in seeking value, whether they're shopping on promotion, or a channel shifting to try and find either absolute price points or value as they define it. We always talk about the latter.

Speaker Change: and being up and down so if you can afford the pantry inventory, you may lean into a larger pack size if you prefer an absolute price point you can do that as well. And so some of that.

Speaker Change: I think.

Speaker Change: Muddles the math a bit. I do think what we are seeing is particularly the food channel.

Speaker Change: where promotions do tend to play a bigger role that we have seen some improvement in the overall promotional price elasticity versus the second quarter. And I think that is indicated by the incremental buyers that are coming in that's sort of a little bit of that value seeking that we're talking about.

Speaker Change: and I think you're seeing the category also testing different price constructs. So you see buy and get some you see absolute price points all I think in trying to find the right combination of things to keep the consumer and the shopper engaged. And the last thing I would say is

Speaker Change: We continue to be an affordable indulgence and an accessible price point, but really this category has always historically been about innovation.

Speaker Change: Marketing and then Price promotion. And I think that, you know, I would expect to start to see that also normalize. I think it's way too early to declare a victory, but I think we're cautiously optimistic that we're starting to see that come through.

Speaker Change: and then just kind of a longer-range question.

Speaker Change: I'm curious on your thoughts on, you know, new sub-scrapes within the snack and category, right? I mean, obviously we saw one of your biggest competitors just announced a deal for a different sub-scrapes to Sava. And I'm just curious, like...

Speaker Change: Do you have a capacity or the capability to actually make somebody's ultimate substrate like Holy Flower and Edemame and things like that? I just wanted to get your thoughts on that as a holistic strategy going forward.

Speaker Change: Yeah, so I think the short answer is so a green free alternative grains, other powders or other products. Yes, we can certainly make them because it really depends on the production asset.

Speaker Change: I think the bigger question is always around allergen.

Speaker Change: So whether our allergens you, that may cause for a different capital.

Speaker Change: Strategy, you may need to think about that I've had a couple of opportunities in my career to actually put peanut butter into manufacturing facilities, which you can imagine is a not a small decision for companies.

Speaker Change: I think the answer is yes we can do it, we certainly have the capability and the bigger question to me is always around the consumer insight and the addressable market and how big can you make it for people who are looking for those benefits.

Speaker Change: To that end, if you look at our Boulder Canyon business as an example, it's a great example of something where we have introduced an innovation.

Speaker Change: and that has continued to grow. Obviously Avocado oil remains a strong suit for us, but even things like Canyon Poppers, which is a traditional cheese ball that we have now moved.

Speaker Change: So we'll listen to the consumer and if there's a desire for that we can and then the last thing to an overly lengthy answer.

Speaker Change: This is also a benefit of a company that is investing in its supply chain and its production assets Because as those things happen, we have a lot more degrees of freedom to address consumer trends Because we are continuing to build out an invest in our production capabilities.

Speaker Change: Great, thanks so much for passing on. Thank you.

Speaker Change: Your next question comes from the line of Robert Musco from TV Cowan, please go ahead.

Speaker Change: Thanks for the question.

Robert Musco: I wanted to know if you're noticing the tactics for the promotional activities in the

Robert Musco: I thought a few months ago on potato chips it was more like traditional price discounting.

Speaker Change: But I think it's moving more towards bonus bags going forward. Have I got that right? And is it happening in a phasing approach or are these discounts on potato chips like still out there? Is it still very aggressive in that category?

Speaker Change: So I'll answer the second question first. I will answer the second part of it first. I think what you're starting to see in potato chips is the promotional environment is normalizing.

Speaker Change: So we're not seeing the discounting necessarily that you saw over the summer across the category. What you are seeing is different constructs showing up a buy-to-get-three or buy-to-get something different or an absolute price point of...

Speaker Change: as opposed to multiples. And I think you see that in different customers based on their strategy and different competitors based on their own.

Speaker Change: To your question around bonus packs, I think bonus packs are just a different way to drive consumers the value that they want at an absolute price point.

Speaker Change: We've definitely heard a competitor say that they were going to introduce bonus facts. We've seen early indications of those products out in the marketplace and the Tata chips is one of the segments where we're certainly seeing that come through and I would expect that you'll continue to see.

Speaker Change: Competitors continuing to try all sorts of different ways to get the shopper, the values that they want, to be able to compete on, to be able to maintain their engagement in a category that they have historically loved and bought and participated in.

Speaker Change: So I guess my follow-up is, do you feel that you have to change your tactics in response to that or...

Speaker Change: Do you feel confident with the way you blame things out that you can just keep doing what you're doing?

Speaker Change: Yeah, so I think we feel pretty good about our plans. We feel clear on what we're executing, the marketing and innovation and execution that we plan for the fourth quarter and obviously as we go into next year, the distribution gains that are always going to be central to our thesis of how we drive our growth.

Speaker Change: and then a lab period. But that said, we work in a competitive environment, we will always look at our tactics and constantly revise them.

Speaker Change: If we need you, that's a lot of the capability building that we've been doing and so if

Speaker Change: There is a better way to address the consumer demand than we will make those changes as we need to. And the biggest thing for us is continue to be able to do it faster and at speed. And so we're in a good place, but with everybody else we can always be better. We'll always be pleased but not satisfied.

Speaker Change: Great, thank you, thank you.

Speaker Change: Your next question comes from the line of Brian Holden from the A Davidson. Please go ahead.

Brian Holden: Good morning. I wanted to ask the 25 question I guess kind of taking a theoretical approach.

Brian Holden: is outside your control as you referenced earlier what's happening there. Maybe just curious, you know...

Brian Holden: Given the extent to which your long-term algorithm incorporates some contribution from price.

Brian Holden: Do you think you can deliver and on algorithm year if there's no price and it's reliant solely on volume?

Speaker Change: Yeah, well, I think that is probably the biggest question. Let me give you what I think.

Speaker Change: How we have thought about it historically, I'll take you back to investor data start and then kind of how we think about our own growth over time.

Speaker Change: and I'm going to be a conservative approach where we have said that we thought that volume would be around 1% to 0 to 1% for the category and 2% in price, whether a combination of absolute or mixed.

Speaker Change: as we both. Obviously, that was a step down from the 4 to 5 percent category that we had seen historically.

Speaker Change: So I think we had already gone into it with what we thought was a more moderated approach. And you know, obviously the category has been a little bit softer than that this year, but is starting to inflict a little bit more positively as we've gone through the rest of the year. I don't know that we believe that we're going to get in a near term.

Speaker Change: Get back to that forecast because it will continue to be a little bit of a work in process.

Speaker Change: The things that we control and the things that we're doing which I think give us some confidence is we've always said that we are not solely reliant on the category of assumption in order to drive our growth because of the white space distribution opportunities we had.

Speaker Change: and because we believe that we can bring products from the expansion geographies into our core and our core products into our expansion. And that is largely going as we would have expected.

Speaker Change: So, and you can see that in our results.

Speaker Change: and so I think what we're controlling.

Speaker Change: is working for us non-metre channels continue to be a, which had been a headwind prior year, are building into a tailwind as we're gaining.

Speaker Change: and you know I do think that in the near term pricing is a challenge.

Speaker Change: and the law of return, I would suspect that the category will move back toward a rational place to occupy and continue its, you know, what makes it probably the best category in CPG.

Speaker Change: We have work to do for sure, but I do think that the things that we control actually should drive the results we are promising.

Speaker Change: Great thanks and then more recently we see on the EU reference.

Speaker Change: and the kind of the convenience channel pressures which we've seen for a while now. We'll read the presentation, gas prices come in. Just curious and I appreciate it's a more recent phenomenon, so certainly fewer of any data points.

Speaker Change: Behind this, but any lift in impulse purchases in the convenience channel concurrent with lower fuel prices.

Speaker Change: I'm not sure that we've seen that and to the point around convenience, the convenience channel has been a challenge for the category overall and us.

Speaker Change: Particularly, so a lot of the work that we've been doing that are yielding that are results we're feeling pretty good that where we fixed it, where we've changed, we're seeing an improvement trend. I'm not sure we could correlate that to gas per se. So I think I'm not really sure that we have a unique perspective on that.

Speaker Change: and I'll turn off thanks. Thank you.

Speaker Change: The End

Speaker Change: Your next question comes from the line of John Bum Garkehr from Bizuhot. We go ahead.

Speaker Change: Good morning. Thanks for the question. Hey, John.

Speaker Change: I wanted to ask just on the volume pressure in salty snacks. You know, sweet snacks volumes are also down. It's actually very good, so it's not just salty, but there's an elasticity impact obviously. But as the inflation does sort of settle and you look back.

Speaker Change: How much it is volume softness and salty, do you perceive as a function of just sort of an elevated base and over consumption in the years following COVID? I mean did frequency become overstretched?

Speaker Change: I'm curious how you think about based demand relative to trend and whether they're sort of a natural diminishing of returns from promo and lifts that sort of cultivates more price discipline going forward.

Speaker Change: and the other.

Speaker Change: Yeah, so I think a couple of things. I think it is fair to look at the last several years and say, boy, the category really ran strong and well ahead of its long-term algorithm. And therefore, it is the pause that we are seeing.

Speaker Change: Particularly surprising or end is a day, a broader question. I do think we believe that there is some normalizing in the growth rates.

Speaker Change: What I would also say.

Speaker Change: is that if you look at category household penetration, you'll have a category by rates and buyers, you do still see a step up.

Speaker Change: and you do see the category growing buyers and households. So there is certainly still consumer interest and desire to engage in the category more than it has historically. And we certainly see...

Speaker Change: We certainly see that the Captain of Schumer engages when innovation and marketing.

Speaker Change: comes through, you know, that's one of the reasons why we feel very good about

Speaker Change: for our own business if you look at our household penetration growth and the virus acquisition that we've had, that you're also seeing not only are you getting new virus but they're buying at a similar rate.

Speaker Change: as our historical date, which is as you know, not particularly easy to do as you gain distribution. So, you know, I don't think there's a long-term question on the category and the consumer and the consumer and the consumer and the consumer and the consumer and the consumer, I think those are all still strong. I do think there's a little bit of a, of a, of a little bit of normalization going on.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the law of the Mitch Spinhero from Sturodvent in Co. Please go ahead.

Speaker Change: has just two quick questions. One is probably a little bit more.

Speaker Change: is that having any impact on the Tetsuk category? Certainly anecdotally we're seeing a pick up in stores that we visit.

Speaker Change: Regulately and the quality of the private label, Petit Chipp, and even other sort of snacks has gotten me.

Speaker Change: and I have some pre-substantially so I'd love to hear your cake on that.

Speaker Change: Yeah, so I mean look, the category, I mean obviously overall this category has a fairly low presence of private label historically and sort of the usual actors who you know use private label as a as as central to their brand

Speaker Change: will continue to support it. And I think that that is not, and you should still are relatively small. Peace of the business, albeit grew as inflation took off.

Speaker Change: I think one of the things that's been sort of interesting is that when you look at the pricing that we saw in the third quarter and that in some cases we saw branded players going down to private label level pricing.

Speaker Change: You actually saw a private label struggle in those boxes over that period of time, which to me kind of continues to affirm that brands matter and that ultimately...

Speaker Change: As we think about as we go forward making sure that we have a healthy, rational pricing environment for the category, including an open and price point like a private label all makes sense to me. But I think in the third quarter, privately, I think struggles fairly significantly as pricing came down.

Speaker Change: and then this last question on the gross margin of the...

Speaker Change: Very good form of third quarter.

Speaker Change: Does that continue at that type of improvement rate because of the fixed cost leverage that you've been able to achieve or does the promotional environment at all? Put some of that.

Speaker Change: Strong Game at Risk.

Speaker Change: Yeah, so I'll take that. I think the short answer is yes. The gross margin performance that you're seeing will continue. You have delivered about.

Speaker Change: 270 basis points of margin expansion here today and you will see that we will finish out about 250 basis points for the year.

Speaker Change: I would say, you know, productivity programs are running pretty strong.

Speaker Change: We are delivering more than 4% of EBITDA between 5.5% and 6% of cost of goods in productivity this year.

Speaker Change: and that is helping us offset.

Speaker Change: and the price mix investment that we are seeing on the top line. And you know, if you look at our PNL, a price investment is slightly negative, you know, 50 basis points in the quarter, so it's not much.

Speaker Change: Thank you so much, Howard.

Howard Freeman: Thank you.

Speaker Change: Your next question comes from the line of James Slerra from Spisen, please go ahead.

Speaker Change: and the next one.

James Slerra: and you're prepared remarks to talk about household penetration up like a hundred and eighty basis points. It gives you the offer some insight into which brands are funneling those new households to you and if you have any details on.

James Slerra: and the director was sick. They find the track with various hot springs and the value thing is the price gap, or unique flavors, or any color they would be helpful.

Speaker Change: So um...

Speaker Change: A couple of things Jim, I think one is not surprising as we are seeing distribution gains in expansion markets.

Speaker Change: that you would also see some household penetration gains across the portfolio because we're bringing our power for brands into those markets.

Speaker Change: I think the two shining stars I'm sure you won't surprise you one is on the border as we have.

Speaker Change: Increase our distribution in our core and the second is obviously Boulder Canyon, which is just continues to grow much faster than the market. Well, I would like much faster in...

Speaker Change: The class of the trade it's in certainly it's outpacing.

Speaker Change: in the Spin's channel and you can see that number and we're approaching $100 million in sales. So work.

Speaker Change: Feeling really good about where we are on Boulder Canyon. And so those two brands are obviously driving a lot of it, but it is not exclusively there because we're seeing expansion geographies overall gaining households. I think that's the...

Speaker Change: The biggest driver of it and then I think in terms of incites as to why.

Speaker Change: You know, listen, we feel very proud of the quality of our product, you know, we have recipes and end...

Speaker Change: A product that is as unique in the market. I think we're pretty proud of what we taste like. We don't taste like everybody else's product overall and I think we consume restraint. They repeat. We've always enjoyed historically high repeat rates and I think that, you know, that will continue to be the case.

Speaker Change: and then the magnified drill down a little bit on the border.

Speaker Change: is the bordergrace, especially around Odin Magin, they get a different football season, is encouraging to see. But at least in the standard night, it seems like I still see some softness in. When I review it's kind of a complimentary sauces and dips.

Speaker Change: and I would go alongside OTV. Is that something that as OTV continues to scale, we should see the turnaround in those or these still need to do some more work to kind of get them on shelf next to the to the chimps or semi-conps there.

Speaker Change: I appreciate the question. Obviously, on the board of Gipson salsa, are an important confinery product to the overall business because everybody who sits and watches the game wants to have both.

Speaker Change: We had a dissent, a contraction distribution last year. It was not a discontinuation but we went from two locations in a retailer to one. So we were in sort of the traditional salty aisle and we were also in the ethnic aisle and it consolidated to...

Speaker Change: the traditional salty aisle and we're still cycling through that. That's been a lot of the decline.

Speaker Change: That you're seeing, if the underlying health of that business is quite strong, we also had, like, everybody else does, from time to time, you launch an innovation that doesn't work, that we also have an in the, in the prior year that we're also cycling through, but I think the underlying health of...

Speaker Change: on the border non-soluities, so the Diffson Solce of Business is actually pretty healthy. We just have, we have to cycle through that work and we continue to look at ways to innovate the entire brand, not just the chip.

Speaker Change: [inaudible]

Speaker Change: As there are no further questions at this time, this concludes the Q&A session in Austin 3rd quarter, 20th and 4th early in the skull. Thank you all for attending today's meeting. You may now disconnect. Have a pleasant day, everyone.

Speaker Change: Peace out.

Speaker Change: and the