Q1 2025 Farmer Bros Co Earnings Call
Earlier today the company filed its Form 10-Q and issued its first quarter results press release, which is available on the Investor Relations section of farmer Brothers' website at farmer Bros. Dot com.
The release is also included as an exhibit on the company's Form 10-Q and is available on its website and the securities and exchange Commission's website at <unk> Dot Gov.
A replay of this audio only webcast will also be available on the company's website approximately two hours. After the conclusion of this call.
Before we begin the call. Please note all of the financial information presented is on audited and various remarks made by management. During this call about the company's future expectations plans and prospects may constitute forward looking statements for the purposes of the safe Harbor.
Visions under the federal Securities laws and regulations. These.
These forward looking statements represent the company's views as of today and should not be relied upon as representing the company's views as of any subsequent date.
Results could differ materially from those forward looking statements additional information on factors, which could cause actual results and other events to differ materially from those forward looking statements is available in the company's release and public filings on today's call management will also.
Certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin.
Assessing the company's operating performance Rec.
A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures is also included in the Companys release and SEC filings.
I will now turn the call over to Farmer brothers, President and Chief Executive Officer, John Moore.
John Moore: Mr. Moore. Please go ahead.
John Moore: Good afternoon, everyone and thank you for joining us.
John Moore: The first quarter showed steady improvement for farmer brothers, we saw solid sales growth and meaningful gains in both gross margin and adjusted EBITDA on a year over year and quarter over quarter basis.
John Moore: These results underscore the positive progress we have made recently.
John Moore: There are also the result of efforts related to our brand pyramid and SKU rationalization initiatives enhancements with our inventory management processes proactive and favorable pricing updates and realignments within our sales team.
John Moore: During the quarter, we achieved another milestone related to our brand pyramid initiative with the refresh of our premium Boyd's coffee brand.
John Moore: This includes a diverse range of classic light medium and dark roast and addition to single origin and flavored offerings.
John Moore: Alright, specifically geared toward our C store casual dining restaurants, hospitality health care entertainment and gaming customers.
Historically voice has been predominantly a west coast brand. However, as part of our brand Pyramid initiative that will now be our premier premium nationwide coffee offering.
We will be announcing our new specialty tier brand in the next few months and we'll have more details on our next call. We're incredibly excited about the addition of this brand as it marks the final phase of our brand pyramid initiatives and a reintroduction of farmer brothers into the specialty coffee space.
John Moore: By simplifying our brands and product offerings, we have been able to remove redundancies optimize our roasting streamline operational facilities and enhance the overall customer experience.
John Moore: We have achieved all of this while aggressively managing our working capital and costs. Once complete our customers will have options across multiple flavor profiles and up and down the value chain, allowing them to participate at the level and price structure, which works best for them. This is something we believe will help us drive customer growth and retention.
John Moore: Additionally, we have been working to optimize and add density to our existing DSD routes as part of our commitment to having the right products in the right place at the right time and at the right value proposition for our customers.
John Moore: This mantra is one of the most important aspects of our business and plays a crucial role in customer service growth and retention.
John Moore: We believe customer retention has continued to stabilize thanks to these efforts and improved execution by our restructured sales force.
We are also proactively working to navigate the volatility the industry is seeing in coffee markets and changes in consumer behaviors.
John Moore: To mitigate these impacts we're being nimble and commodity purchasing and inventory management. We are also utilizing our customer data as a way to gain a deeper understanding and further insight into the impact of macroeconomic trends have on our customer base and their ordering habits to that end, we piloted a short term customer focused sales incentives with.
John Moore: Positive results during the recent quarter, we will continue these efforts and explore additional opportunities to offset potential headwinds, while also continuing to focus on selling and additional products to existing customers.
John Moore: Overall, we are confident the initiatives, we put in place and the operational improvements we made throughout fiscal 2024 are helping us navigate the challenges posed by macroeconomic headwinds and a volatile commodity pricing environment.
John Moore: Strategic pricing initiatives to enhanced operational efficiency to our focus on the value proposition. We can provide our customers as a true specialty goods provider. We feel farmer brothers has fundamentally better positioned to meet ongoing market demands than it has been in many years.
John Moore: With that I'll turn it over to Vince to discuss our financials in more detail.
Vince: Thanks, John and good afternoon, everyone. Our first quarter results represent a solid start to our fiscal year and reflect meaningful progress in positioning farmer brothers on a more solid foundation for future growth.
Adjusted EBITDA for the quarter was positive at $1 4 million, an improvement of $1 9 million on a year over year basis, when compared to a 500000 loss in the first quarter of last year.
Vince: This was also a quarter over quarter improvement of almost $3 million when compared to a $1 6 million loss in the fourth quarter of fiscal 'twenty four.
Vince: Our improved adjusted EBITDA was largely driven by gross margin expansion for the first quarter. Our gross margin increased 630 basis points year over year to 43, 9% compared to 37, 6% in the first quarter of last year.
Vince: Andy increased 510 basis points sequentially compared to 38, 8% last quarter.
Vince: Our gross margin results, primarily reflect our continued price optimization efforts as well as actions taken to address elevating coffee commodity market.
Vince: For the first quarter net sales increased $85 1 million, a $3 2 million or nearly 4% increase compared to the first quarter of last year.
Vince: This sales growth along with margin expansion resulted in a gross profit increase of $6 5 million to $37 3 million for the quarter compared to $30 8 million in the same period last year.
Vince: Operating expenses were $40 1 million or <unk> 47, 2% of net sales in the first quarter compared to $32 9 million or <unk>, 41% of net sales in the first quarter of last year.
Vince: This year over year increase was driven by an $8 5 million difference in net gains on asset sales as there were no branch sales during the first quarter of this fiscal year.
Vince: When adjusted for asset sales.
Welcome to the Conference Center. Please hold for the next available operator. Please wait for the next available operator.
Vince: Operating expenses declined by $1 2 million or three 2% of net sales year over year, reflecting the operational efficiencies, which have been accomplished and our continued progress in optimizing our cost structure.
Speaker Change: Hello, good afternoon ma'am. Please have your first and last name.
Vince: Our net loss for the quarter was $5 million compared to a net loss of $1 6 million in the first quarter of last year.
Yes, David Brown.
David, and you say Brown for the last name?
Vince: You should note that last year included $6 8 million of net gains related to asset disposals by this quarter included a $1 7 million net loss related to asset disposals.
Yes, like the color.
Cool, and is your company AIERA?
Yeah, that's correct.
Speaker Change: Wonderful. Please stand by sir and we will get you into your call.
Vince: Looking at the balance sheet as of September 32024, we had $3 3 million of unrestricted cash and cash equivalents $1 9 million in restricted cash and $23 3 million in outstanding borrowings under our credit facility with $27 1 million of additional borrowing capacity.
Speaker Change: Operating expenses declined by 1.2 million or 3.2 percent of net sales year over year, reflecting the operational efficiencies which have been accomplished and our continued progress in optimizing our cost structure.
Speaker Change: Our net loss for the quarter was $5 million compared to a net loss of $1.6 million in the first quarter of last year. You should note that last year included $6.8 million of net gains related to asset disposals while this quarter included a $1.7 million net loss related to asset disposals.
We're making solid progress towards our goal of positive free cash flow as demonstrated in our improved cash flow from operating activities, which improved to positive $2 5 million in the first quarter of this year.
Vince: This represents a $9 $6 million improvement compared to negative $7 1 million in the first quarter of last year, and a $3 5 million improvement compared to negative $1 million last quarter. This marks five consecutive quarters of improved cash from operating activities.
Speaker Change: Looking at the balance sheet, as of September 30, 2024, we had $3.3 million of unrestricted cash and cash equivalents, $1.9 million in restricted cash, and $23.3 million in outstanding borrowings under our credit facility, with $27.1 million of additional borrowing capacity.
Vince: We are encouraged by the solid quarter and the significant improvements we have achieved in gross margin adjusted EBITDA and cash flow.
Speaker Change: We're making solid progress towards our goal of positive free cash flow, as demonstrated in our improved cash flow from operating activities, which improved to positive $2.5 million in the first quarter of this year.
We are however, mindful of the current volatility coffee commodity markets and the macroeconomic environment.
Vince: While we are proactively working to address these conditions, we do not expect our financial results to be linear quarter to quarter. We remain confident we are on the right path and building the right foundation to generate sustainable value creation.
Speaker Change: This represents a $9.6 million improvement compared to $-7.1 million in the first quarter of last year, and a $3.5 million improvement compared to $-1 million last quarter. This marks five consecutive quarters of improved cash from operating activities.
Speaker Change: With that I'll turn it back to John John.
John Moore: Thanks Vince.
Speaker Change: Overall, we believe this quarter provides a glimpse of the long term potential of farmer brothers and what we can achieve.
With gross margins, reaching a level not seen since March of 2022 and positive adjusted EBITDA performance. We believe we're on the right track at.
Speaker Change: It appears our internal initiatives are starting to gain traction, which should allow us to realize additional efficiency working capital and operational gains throughout this fiscal year and beyond.
Speaker Change: We remain confident we are on the right path in building the right foundation to generate sustainable value creation. With that, I'll turn it back to John. John? Thanks, Vance.
We do however, recognize we are not seeing the top line results. We know we need to drive significant scale and long term growth.
Speaker Change: This will be a continued point of emphasis for us in fiscal 2025, as we focus on customer growth, adding density across our existing DSD routes and selling additional products into our existing customer base as a means to generate additional revenue and protect our margins were.
John: Overall, we believe this quarter provides a glimpse of the long-term potential of Farmer Brothers and what we can achieve. With gross margins reaching a level not seen since March of 2022 and positive adjusted EBITDA performance, we believe we're on the right track.
Speaker Change: We are confident we will continue to build on this positive momentum as we remain focused on providing outstanding customer service strong operational execution fundamental performance and proactively mitigating market factors to drive sustainable growth and long term value for our shareholders.
John: It appears our internal initiatives are starting to gain traction, which should allow us to realize additional efficiency, working capital, and operational gains throughout this fiscal year and beyond.
John: We do, however, recognize we are not seeing the top-line results we know we need to drive significant scale and long-term growth.
Speaker Change: Before we open it up for questions I would like to take a moment to thank our team for their tremendous work their entrepreneurial spirit and commitment to continuous improvement is evident in our recent results.
John: This will be a continued point of emphasis for us in fiscal 2025 as we focus on customer growth, adding density across our existing DSD routes, and selling additional products into our existing customer base as a means to generate additional revenue and protect our margins.
Speaker Change: Our success, both in the near and long term would not be possible without them.
Speaker Change: With that I want to thank you all for joining us on the call today, operator, we will now open it up for questions.
John: We are confident we will continue to build on this positive momentum as we remain focused on providing outstanding customer service, strong operational execution, fundamental performance, and proactively mitigating market factors to drive sustainable growth and long-term value for our shareholders.
Speaker Change: At this time, we will conduct a question and answer session.
Speaker Change: I would like to ask a question. Please press star one on your phone now and you will be placed into the queue. In the order received once again to ask a question press star one on your phone now.
John: Before we open it up for questions, I would like to take a moment to thank our team for their tremendous work. Their entrepreneurial spirit and commitment to continuous improvement is evident in our recent results.
And our first question comes from Gerry Sweeney of Roth capital.
John: Our success, both in the near and long term, would not be possible without them. With that, I want to thank you all for joining us on the call today. Operator, we will now open it up for questions.
John: With that I want to thank you all for joining us on the call today, operator, we will now open it up for questions.
Gerry Sweeney: Good afternoon, John and Dan Thanks for taking my call.
Speaker Change: Hi, Jerry how are you Hey, Gerry.
Speaker Change: At this time, we will conduct a question and answer session.
Speaker Change: I'm wondering if we could start with growth.
Speaker Change: At this time we will conduct the question and answer session. If you would like to ask a question please press star 1 on your phone now and you'll be placed into the queue in the order received. Once again to ask a question press star 1 on your phone now.
Speaker Change: I'd like to ask a question. Please press star one on your phone now and Youll be placed into the queue. In the order received once again to ask a question press star one on your phone now.
Speaker Change: And density of the routes.
Speaker Change: It was something that I pay particular attention to.
Speaker Change: Yes.
Speaker Change: I wanted to understand.
Speaker Change: Churn, how thats coming along.
<unk>.
Speaker Change: Some of the growth initiatives have taken place and then maybe we can talk about the route density.
Speaker Change: And our first question comes from Gerry Sweeney of Roth capital.
Speaker Change: And our first question comes from Jerry Sweeney of Roth Capital.
Speaker Change: Yes.
Speaker Change: Sure.
Gerry Sweeney: Good afternoon, John and Dan Thanks for taking my call.
Speaker Change: <unk>.
Speaker Change: Even since our last call. We're seeing continued positive trend when it comes to churn.
Good afternoon, John and Vance. Thanks for taking my call.
Speaker Change: Hi, Jerry how are you Hey, Gerry.
Speaker Change: Hi Jerry, how are you? Hi Jerry. I'm doing well. I'm wondering if we could start with the growth and density in the routes.
Good.
Speaker Change: Wondering if we could start with the growth.
Speaker Change: Theres no question within the industry.
Speaker Change: And density of the routes and.
Speaker Change: There are some headwinds that are.
Speaker Change: It was something that I pay particular attention to.
Speaker Change: But are there youre seeing some single digit to low double digit declines comparable year on year unit sales and degradation of the frequency of visits average consumer spend and consumer spend in general is relatively soft having said that we're seeing that our levels of retention or even better than me.
it was something that I paid particular attention to but
Speaker Change: Okay.
Speaker Change: Wanted to understand.
Speaker Change: Turn how that's coming along.
Speaker Change: And some of the growth initiatives have taken place and then maybe we can talk about the route density.
Speaker Change: some of the growth initiatives and how they've taken place and then maybe we can talk about the route density.
Speaker Change: Sure.
Speaker Change: So.
Speaker Change: Even since our last call. We're seeing continued positive trend when it comes to churn.
Speaker Change: Had anticipated.
Speaker Change: Given some of the necessary price actions that we've taken over the last quarters.
There is no question within the industry.
Speaker Change: Given the coffee markets. So at this point, where we're reaching pretty much an inflection point there and you can imagine we look at this weekly.
Speaker Change: There are some headwinds that are.
Speaker Change: But are there youre seeing some single digit to low double digit declines comparable year on year end unit sales and degradation in frequency of visits average consumer spend and consumer spend in general is relatively soft having said that we're seeing that our levels of retention or even better than we are.
Speaker Change: And some weeks are positive somewhat some weeks are negative a little bit somewhat but we're talking about the values that in some cases are under.
Speaker Change: That are single digits and in a state of 30000, approximately 30000 customers. So we're feeling like we're in a very good space, there and getting better.
Speaker Change: As anticipated.
Speaker Change: Given some of the necessary price actions that we've taken over the last quarters.
Speaker Change: When it comes to then flipping into a growth trajectory I think that's where we're really doubling down on our need to two.
Speaker Change: Given the coffee markets. So at this point, where we're reaching pretty much an inflection point there and you can imagine we look at this weekly.
Speaker Change: Two outstanding customer service, keeping in mind that commitment to right place right time right product right value.
Speaker Change: And some weeks are positive somewhat some weeks are negative a little bit somewhat but we're talking about the values that in some cases are under.
Speaker Change: We feel as though we have taken significant strides over the last year and resolving what were some of those out of stock issues not having the stock where we needed it when we needed it.
Speaker Change: That are single digits and in a state of 30000, approximately 30000 customers. So we're feeling like we're in a very good space, there and getting better.
Speaker Change: With pretty much resolved all of those issues.
Speaker Change: The other major theme was equipment again, where we needed it and win again, there we had a rapid deployment system. We've now got equipment, where we need it we've leveraged our referred capability. So we've managed to do all of this and having a finished goods.
Speaker Change: When it comes to then flipping into a growth trajectory I think that's where we're really doubling down on our need to two <unk>.
Speaker Change: To outstanding customer service, keeping in mind that commitment to right place right time right product right value.
We feel as though we've taken significant strides over the last year and resolving what were some of those out of stock issues not having the stock where we needed it when we needed it.
Speaker Change: Portfolio in the right place right time with no increase in fact that decrease in.
Speaker Change: Days on hand inventory with our finished goods and a decrease in our capex related to bring equipment. So very very pleased with where all of that is going in and looking to improve that going forward.
Speaker Change: With pretty much resolved all of those issues.
Speaker Change: The other major theme was equipment again, where we needed it and win again, there we had a rapid deployment system. We've now got equipment, where we need it we've leveraged our referred capability. So we've managed to do all of this and having a finished goods.
Speaker Change: Got you and then the out of stock issues.
Speaker Change: That's addressed by.
Speaker Change: SKU rationalization on brand pyramid collapsed with everything so you can have.
Speaker Change: Part of the right product.
Place right time et cetera is that correct.
Speaker Change: Portfolio in the right place right time.
Speaker Change: I think it's a congruence of a number of things that it is most definitely those things in addition to taking a real careful look at.
Speaker Change: With no increase in fact that decrease in.
Speaker Change: Days on hand inventory with our finished goods and a decrease in our capex related to drilling equipment. So very very pleased with where all of that is going and looking to improve that going forward.
Speaker Change: How are we converting customer by customer from one SKU set into another and really being deliberate about that process and making sure that the.
Speaker Change: Got you and then the out of stock issues.
Speaker Change: The communication to all of the team members in the field is done in a very deliberate and thoughtful fashion and number of customers who were treated.
Speaker Change: That's addressed by.
Speaker Change: SKU rationalization and Fran pyramid collapsed with everything so you can have.
Again with that White glove service and coached through the transition to mitigate any potential attrition related to that.
Speaker Change: Part of the right product at the right place right time et cetera is that correct.
Speaker Change: I think it's a it's a congruence of a number of things that it is most definitely those things in addition to taking a real careful look at.
Speaker Change: Got it.
Speaker Change: And then obviously growth growth part of it is limiting churn and growing customers, but how much of growth comes from maybe adding new routes or adjusting routes and then.
Speaker Change: How are we converting customer by customer from one SKU set into another and really being deliberate about that process and making sure that the.
Speaker Change: And obviously like I said.
Speaker Change: More stops more product sales per style.
Speaker Change: The communication to all of the team members in the field is done in a very deliberate and thoughtful fashion and then that the customers were treated.
Speaker Change: Sure I think that's a great question I think we are if anything looking to optimize our routes and get even more value out of the routes that we have I don't know that we need to add significantly to our route network.
Speaker Change: Again without white glove service and coached through the transition to mitigate any potential attrition related to that.
Speaker Change: We have another a number of routes, where we can improve utilization simply by focusing our business development efforts specific to those areas and that's one of the things that we're looking about getting a bit better with over the quarters ahead.
Speaker Change: Got it.
Speaker Change: Then obviously growth growth part of it is limiting churn.
Speaker Change: Okay, if not growing customers, but how much of growth comes from maybe adding new routes or adjusting routes and then.
Speaker Change: Making sure that our business development efforts are focused in a very deliberate way. So that that density is achieved or to really optimize that route structure and get as much value out of it as possible, but the other piece of that is really unlocking the potential value. That's there already within again out of state of approximately 30000 customers through better.
And obviously like I said.
Speaker Change: More stops more product sales per stop.
Speaker Change: Sure I think that's a great question I think we are if anything looking to optimize our routes and get even more value out of the routes that we have I don't know that we need to add significantly to our route network.
Speaker Change: We have another a number of routes, where we can improve utilization simply by focusing our business development efforts specific to those areas and that's one of the things that we're looking about getting a bit better with over the quarters ahead.
Speaker Change: Product penetration I mean, the best dollars to be had or in the existing accounts, where theres no additional deployment of capex or Brewers Youre, just basically selling in products that you already have on your truck and realizing the value of that.
Speaker Change: I'm sure that our business development efforts are focused in a very deliberate way. So that that density is achieved or to really optimize that route structure and get as much value out of it as possible, but the other piece of that is really unlocking the potential value. That's there already within again that is state of approximately 30000 customers through better.
Speaker Change: So I think we have a tremendous opportunity there.
Speaker Change: How do you how do we unlock that.
Speaker Change: The follow up.
Speaker Change: Sure I think.
Speaker Change: With deliberate and thoughtful planning and execution I think we're getting better and better about.
Speaker Change: Product penetration I mean, the best dollars to be had or in the existing accounts, where theres no additional deployment of capex or Brewers Youre, just basically selling in products that you already have on your truck and realizing the value of them. So I think we have a tremendous opportunity there.
Speaker Change: Approaching our customers.
With the with the totality of product mix, enabling our route sales representatives to be.
Better equipped to get into those conversations with our customers and then also enabling our account executives with the tools that they need to go out and make more profitable.
Speaker Change: How do you how do we unlock that.
Just a follow up.
Speaker Change: Sure I think.
Speaker Change: More comprehensive customers, so what I mean by that they can go and now with a tool that they have and if there again, telling pancake mix they should be selling this year, if that goes right along with that pancake mix clearly they should be selling orange juice, they should be selling coffee there should be its LNG. So.
Speaker Change: With deliberate and thoughtful planning and execution.
Speaker Change: We're getting better and better about.
Speaker Change: Approaching our customers with the with the totality.
Speaker Change: Mix, enabling our route sales representatives to be.
Speaker Change: Got it okay.
Speaker Change: Better equipped to get into those conversations with our customers and then also enabling our account executives with the tools that they need to go out and make more profitable.
Speaker Change: That is it for me I will jump back in line I appreciate it.
Speaker Change: Thank you Jerry.
Speaker Change: And our next question comes from Eric <unk> of <unk>.
More comprehensive customers, so what I mean by that they can go and now with a tool that they have and if there again selling pancake mix they should be selling this year, if that goes right along with that pancake mix clearly they should be selling orange juice.
Speaker Change: <unk> Hallum capital group.
Speaker Change: Alright, Thank you for taking my questions and congrats on the strong quarter here.
Speaker Change: Thank you my first.
Sure.
Speaker Change: My first question.
Speaker Change: Kelly Coffey, they should be selling T cell.
In regards to.
Speaker Change: Got it okay.
Speaker Change: Getting back into specialty coffee with this new brand that's to be announced in the coming months here.
Speaker Change: That is it for me I will jump back in line I appreciate it.
Speaker Change: Thank you Jerry.
Speaker Change: Okay.
Speaker Change: How should we think about that impacting financials and I guess, we can start with just kind of the revenue side of things should we think of it as essentially as re entering a new category and thats, mostly incremental sales opportunities or is there any sort of cannibalization of existing revenues, maybe your customers buying premium we're at.
Speaker Change: And our next question comes from Eric <unk> of Craig Hallum Capital Group.
Speaker Change: Great. Thank you for taking my questions and congrats on the strong quarter here.
Speaker Change: Thank you my first.
Speaker Change: Sure.
Speaker Change: My first question.
Speaker Change: More premium while they can.
Speaker Change: As in regards to.
Speaker Change: Specialty I'm just kind of wondering how we should think about the impact on revenues.
Speaker Change: Getting back into specialty coffee with this new brand thats to be announced in the coming months here.
That's a great question, Eric I think in the short term it would be optimization on sourcing and manufacturing and distribution side.
Speaker Change: How should we think about that impacting financials and I guess, we can start with just kind of the revenue side of things should we think of it as essentially as re entering a new category and that's mostly incremental sales opportunities or is there any sort of cannibalization of existing revenues, maybe your customers buying premium whereas.
Speaker Change: In that we already have built into our network a significant number of pounds in the specialty space.
Speaker Change: We haven't had a unified brand message around any of that.
Speaker Change: For ever really in our history, and that's always been somewhat regional and so.
Speaker Change: More premium while they can't.
Speaker Change: Specialty I'm just kind of wondering how we should think about the impact on revenues.
Speaker Change: In launching this new brand expression.
Speaker Change: That's a great question, Eric I think in the short term it would be optimization on sourcing and manufacturing and distribution side.
Speaker Change: The first step will be transitioning the existing volume that's in the specialty space to this new brand experience.
Speaker Change: But from there we can we can start to think about how do we roll that out nationally.
Speaker Change: In that we already have built into our network.
Speaker Change: A significant number of pounds in the specialty space.
Speaker Change: As a new portfolio of goods to customers that have never been exposed to farmer brothers, a specialty coffee roaster before and I think thats, where youll start to see incremental revenue through the specialty brands and specialty as most people in the coffee business has seen is the.
Speaker Change: We haven't had a unified brand message around any of that.
Speaker Change: For ever really in our history, and that's always been somewhat regional.
Speaker Change: No.
Speaker Change: The fastest growing side of the coffee space. So we're really excited to think about what that might mean for us.
Speaker Change: In launching this new brand expression.
Speaker Change: First step will be transitioning the existing volume that's in the specialty space to this new brand experience.
Speaker Change: That makes sense and I guess that sort of brings up another question from me on Boyd's you mentioned that.
Speaker Change: But from there we can we can start to think about how do we roll that out nationally.
Speaker Change: It's been a west coast brands, you are now bringing it.
Speaker Change: As a new portfolio of goods to customers that have never been exposed to farmer brothers, a specialty coffee roaster before and I think thats, where youll start to see incremental revenue through the specialty brands and specialty as most people in the coffee business has seen is the.
Speaker Change: Nationally.
Speaker Change: Are there any sort of areas, where you are perhaps under indexed or it didn't have much exposure to.
Speaker Change: To premium coffee and nuts.
This boys brand can also represent some incremental opportunity or is it sort of a similar two disparate brands another unified brand approach.
Speaker Change: The fastest growing side of the coffee space. So we're really excited to think about what that might mean for us.
Speaker Change: That makes sense and I guess that sort of brings up another question from me on Boyd's you mentioned that.
Speaker Change: No I would say there are incremental opportunities with boyd's.
Speaker Change: And re launching it is a comprehensive program that comes with POS materials that comes with marketing that comes with.
Speaker Change: It's been a west coast brand you are now bringing it.
Speaker Change: Nationally.
Some some initiatives that will really build equity into that of the brand experience that will be relatively new for boyds. It's been mostly a west coast phenomenon to date, but is performing particularly well in the C store channel. It's also very strong as we had mentioned in health care Entertainment Casino gaming.
Are there any sort of areas, where you are perhaps under indexed or it didn't have much exposure to.
To premium coffee and nuts.
Speaker Change: This boys brand can also represent some incremental opportunity or is it sort of a similar two disparate brands another unified brand approach.
Speaker Change: <unk>.
Speaker Change: No I would say that there are incremental opportunities with boyd's.
Speaker Change: It really checks a lot of boxes for people that are looking for that somewhat better experience and a coffee better value proposition.
Speaker Change: And re launching it is a comprehensive program that comes with POS materials that comes with marketing that comes with.
Speaker Change: And we have not explored that comprehensively in other parts of the country with any kind of uniform brand messaging. So we definitely see an opportunity there.
Speaker Change: Some some initiatives that will really build equity into that as a brand experience that will be relatively new for boyds. It's been mostly a west coast phenomenon to date, but is performing particularly well in the C store channel. It's also very strong as we had mentioned in health care Entertainment Casino gaming.
Speaker Change: Alright, that's helpful.
Speaker Change: <unk>.
Speaker Change: And then I guess just margin wise so.
Speaker Change: Specialty is not just like a new incremental opportunity, but that there is opportunity for incremental sales. So as we just kind of think about that on the gross margin side can you help us understand.
Speaker Change: <unk>.
Speaker Change: It really checks a lot of boxes for people that are looking for that somewhat better experience and a coffee better value proposition.
Speaker Change: If there is much of a difference at all between.
Speaker Change: And we have not explored that comprehensively in other parts of the country with any kind of uniform brand messaging. So we definitely see an opportunity there.
Speaker Change: Yes.
Speaker Change: All three of these categories, just kind of help us understand how you.
Speaker Change: How you see margins.
Speaker Change: Between them.
Speaker Change: Okay.
Speaker Change: Alright Thats helpful.
Speaker Change: I don't know that we see them as particularly different on a percentage point basis of course, given that the topline contribution on a dollars basis will be different just based on the value proposition from a topline perspective, you will see more contribution from our specialty then you might from a commercial or or premium.
Speaker Change: Yes.
Speaker Change: And then I guess just margin wise so.
Speaker Change: <unk> that specialty is not just like a new incremental opportunity, but there is opportunity for incremental sales. So I was just kind of think about that on the gross margin side can you help us understand.
Speaker Change: If there is much of a difference at all between I guess.
Speaker Change: He said that typically there are they are in.
Speaker Change: All three of these categories, just kind of help us understand how you how you see margins.
Speaker Change: Our system to date, there is more volume to be had in the commercial space and then a modicum of volume in the premier or premium space and then specialty really is truly the tip of the iceberg for us.
Speaker Change: Between them.
Speaker Change: I mean, I don't know that we see them, that's particularly different on a percentage point basis of course, given that the topline contribution on a dollars basis will be different just based on the value proposition from a topline perspective, you will see more contribution from the specialty then you might from a commercial or or Premia.
Speaker Change: We're excited to see where that goes in the future.
Speaker Change: Okay, that's awesome.
Speaker Change: Yes.
Speaker Change: Could you elaborate a bit more on the gross margin drag.
Speaker Change: Drivers I guess the drivers and.
Speaker Change: The improvement that we've seen besides your price optimization efforts, Vince you mentioned something else around commodity pricing, but I was just a little.
Speaker Change:
Speaker Change: Having said that typically there are they are in our system to date. There is more volume to be had in the commercial space and then a modicum of volume in the Premier premium space and then specialty really is truly the tip of the iceberg for us.
Speaker Change: I guess just confuse there.
Yes sure Eric.
Speaker Change: Yes, so as you know throughout.
Throughout the course of the last several quarters, we've been working on pricing optimization effort.
Speaker Change: We're excited to see where that goes in the future.
Speaker Change: That's awesome.
Speaker Change: In response to what we were seeing in terms of elevating commodity markets in the coffee markets.
Speaker Change: Could you elaborate a bit more on the gross margin.
Speaker Change: Drivers I guess the drivers in the improvement that we've seen besides your price optimization efforts Beth you mentioned something else around commodity pricing, but I was just I was a little.
Speaker Change: Wanted to make sure that we werent behind that curve and so we were taking pricing actions.
Speaker Change: In response to the rising market.
Speaker Change: And that was just obviously is to make sure that we're not following behind and so we're seeing a little bit that in first quarter.
Speaker Change: I guess just confused there.
Speaker Change: Yes sure Eric.
Speaker Change: Yes, so as you know we.
Speaker Change: Throughout the course of the last several quarters, we've been working on pricing optimization effort.
Speaker Change: We're still not clients quite seeing the full effect of that higher.
Speaker Change: Inventory.
Speaker Change: But realizing the pricing action is going to be necessary to offset that as it comes through over the next couple of quarters.
Speaker Change: Got it got it.
And then just last question for me.
Speaker Change: Can you comment on the prospect for potential further asset disposals, just kind of wondering.
Speaker Change: But this is something that we should think of as largely behind us now or if there's still some opportunities going forward.
Speaker Change: I mean, I think as we've said in the past.
Speaker Change: Or not.
Speaker Change: Relying on those as our business strategy in any way shape or form for us. It's truly it's looked at Opportunistically and in some cases, we have a network of branches dating back decades, and and as we all know urban centers have changed over that span and we may not have branches in an area that that matches the need.
Speaker Change: Any any longer so in some cases, we'll get we'll entertain offers for branches that are no longer.
Speaker Change: Perfectly suited for our needs, but it's not part of our ongoing business strategy.
That's helpful.
Speaker Change: Alright, Thank you for taking my questions and congrats again on the strong start to the year.
Speaker Change: Thank you very much thanks, Eric.
Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your phone now.
Speaker Change: And seeing no further questions. This concludes todays farmer brothers' first quarter fiscal 2002.
Speaker Change: 25 earnings call.
Speaker Change: Thank you for attending.