Q3 2025 Utz Brands Inc Earnings Call
Speaker #1: Ladies and gentlemen , thank you for standing by . My name is Colby , and I'll be your conference operator today . At this time , I'd like to welcome you to the Utz Brands, Inc. third quarter 2020 earnings conference call .
Speaker #1: Question and answer session . All lines have been placed on mute to prevent any background noise . And there will be a question and answer session .
Speaker #1: And if you would like to ask a question at that time, please press star one on your telephone keypad. If you would like your question answered at any time, press star one.
Speaker #1: Again , I will now turn the call over to Trevor Martin , Senior President of Investor Relations .
Speaker #2: Thank you, operator, and good morning, everyone. Thank you for joining us today for our live Q&A session on our third quarter 2025 results.
Speaker #2: With me on today's call are Howard Friedman CEO Mark CFO . I hope everyone has had a chance to read our prepared remarks and give our presentation , all of which are available on our Investor Relations website .
Speaker #2: Before we begin our Q&A session , I just have a few administrative items to review . Please note that some of our comments today will contain forward looking statements based on our current view of the
Speaker #2: business and actual future to withdraw results may differ materially . Please see our recent SEC filings , which identify the principal risks and uncertainties that could affect future performance .
Speaker #2: Today, we will discuss certain adjusted or non-GAAP financial measures, which are described in more detail in this morning's earnings materials. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings material and posted on our website.
Speaker #2: Now, operator, we are ready to open the line for questions.
Speaker #1: Thank you . We'll now begin the question and answer session . If you would like to ask a question again , please press star .
Speaker #1: Then press the number one on your telephone keypad to raise your hand and enter the queue. If you'd like to withdraw your question at any time, please press star one again.
Speaker #1: Your first question comes from the line of Andrew Lazar from Barclays . Your line is open .
Speaker #3: Thanks so much . Good morning , Howard and Bill .
Speaker #2: Hey, Andrew, how are you? Good morning.
Speaker #3: Good . Thanks . Good . Maybe to start off , you know , your Investor Day a couple of years ago . I know you laid out a three year financial plan , and obviously the sales and consumer environment has changed dramatically since then .
Speaker #3: With us , though , continuing to obviously outperform the category pretty meaningfully . And the company has maintained its expectation for EBITDA margins of around 16% in 26 , or about about 100 basis points of expansion each year .
Speaker #3: You've delivered that right the last two years , and then prepared remarks . I need to make some comments around maybe some incremental investments in 26 , particularly to support the California expansion , per the the acquisition announced today , which is exciting .
Speaker #3: I'm just curious if like in terms of thinking through expectations for next year , if perhaps that that EBITDA margin expansion could be a bit less significant just in an effort to maintain the the strong top line momentum that you've been able to deliver over the last couple of quarters .
Speaker #4: Andrew I'll start . I'll hand it over to VK to continue . You know , look , I think if you went back to Investor Day , there were a few things that we had laid out .
Speaker #4: One, obviously, was that we had a meaningful top line, bottom line, and gross margin opportunity that we wanted to progressively address.
Speaker #4: And then that we believe that we could drive , we could drive accelerated top line growth above the category as we were able to hold our core geographies and expand , eventually getting coast to coast and funding that through a productivity program that would deliver a meaningful gross margin expansion .
Speaker #4: And obviously fall through to EBITDA . I think as you look at over the last couple of years , we're pretty pleased with our progress around all of those objectives .
Speaker #4: And one of the things that I think that has been important in our story has been the ability for us to drive expansion , market top line growth and enter into new geographies , which we have at this point , a pretty solid , proven playbook .
Speaker #4: And as you look at something like Florida , where we had entered a couple of years ago , and you were actually able to see progression where we made incremental investments to build out that business and start to accelerate our top line .
Speaker #4: You know , we look at that as a good example of kind of what we are looking at in California , although obviously California is a much greater scale .
Speaker #4: So, as we look at our building blocks in 2025, turning into 2026, I think we feel very good about the top-line momentum that we have and the opportunity to further accelerate it as we get into California in a more meaningful way.
Speaker #4: In 2026 . You know , we've said 2 to 300 basis points ahead of the category and obviously , by entering into California and making some incremental investments , there .
Speaker #4: We believe we should be at the higher end of that range . I'll hand it over to VK for the rest of the question .
Speaker #4: Yeah .
Speaker #2: Thanks , Andrew . Thanks , Howard . Good morning everyone . You know , the first thing I .
Speaker #4: Would say .
Speaker #2: Is there's nothing structural preventing us from getting to 16% EBITDA period .
Speaker #4: I think the .
Speaker #2: Building blocks that Howard talks about , undermining our financials , strong productivity , the ability to have good revenue growth management tools in place , those all are really , really strong .
Speaker #2: In 26 . As I said , we will have continue to have best in class productivity activity coming through as our supply chain transformation .
Speaker #2: That has been a heavy lift with potential CapEx . It kind of steps down . So when I talk to start talking about cash flow .
Speaker #2: That's intended to be an additive to our story . We are doing the things you expect us to do at this point in time .
Speaker #2: Having come off our CapEx and P transformation costs , you know , elements . And so now there's a focus starting to not only are we able to expand margins for our top line , we can also drive cash flow .
Speaker #3: Great . Thank you for that . And then I would like to dig in a little bit more on the California route acquisition , which is exciting .
Speaker #3: I guess maybe you can get into a little more detail . Howard , on how sort of previous deals like this in other regions , sort of have enabled us to sort of step change the market penetration that we can look forward to in California , or in other words , I guess I've allowed you to continue to sort of drive share in these expansion markets , even after the initial launch into these markets , meaning in years two , three and beyond .
Speaker #4: Yeah , I appreciate the question . Obviously , you know , probably the the most the easiest example for us to give you is something like Florida , where , you know , it is a geography where we actually entered .
Speaker #4: And then we have bought routes over time. Obviously, we bought a route system last year and back in with our national acquisition.
Speaker #4: But if you were to go all the way back to say , 2020 , in Florida , you know , we were about a two and a half market share .
Speaker #4: And the first couple of years was really about getting into the market . In a more , more focused way and sort of starting to mature it .
Speaker #4: And then in really in 2022 was when we actually saw a meaningful first , meaningful step change , which is about a 70 basis point improvement relative to that 2020 range .
Speaker #4: And we've been able to add , you know , market share growth from there . So call it from a two and a half to a 3.2 .
Speaker #4: And latest 52 weeks in Florida . We're at about 4.2% . And you know , I think it's important to realize this actually does to your point , grow gradually over time as we get into the market and get our execution up and running .
Speaker #4: And actually make sure that that our playbook is working the way we'd expect it to . But you know , where we go , we say , and we have a high degree of confidence that this is the the next step in continuing our accelerated top line growth .
Speaker #3: Thanks so much .
Speaker #2: Thank you .
Speaker #1: Your next question comes from the line of Michael Lavery from Piper Sandler . Your line is open .
Speaker #5: Thank you . Good morning . Mike . To . Yeah . Good . Thanks . I wanted to unpack California maybe a little bit more .
Speaker #5: Can you give us a sense of . Does the acquired network cover the entire state ? What is what are those routes carrying now ?
Speaker #5: Is there, how easily do you have room on the trucks for your products? You know, is there a swap out and maybe a little sense of you mentioned it's included in guidance.
Speaker #5: I assume that means costs . What are some of the costs that are associated with it other than the acquisition price ?
Speaker #4: Yeah , so so let me start . Obviously it's early days on the integration work that we have to do . You know , I think what the route network allows us to do is actually look at the portfolio of products within existing network and infrastructure and customer relationships and begin to introduce our products onto onto those routes , call it an early 2026 .
Speaker #4: So, there is going to be some work there to make sure that we have the right assortment and that we're working with our partners and the retailers to ensure that we're getting the distribution that we're expecting.
Speaker #4: So a little early on , the puts and takes of what will be there . But yes , we're confident that we can bring our products into those systems and start to drive the growth that we expect that we can get for context , remember , we're only about a 1.9 share of market in California , and it's about 10% of the salty category in the total US .
Speaker #4: So there's a there's a big there's a big opportunity in terms of the size of the the market . Obviously this is a this is an entry .
Speaker #4: And so they're about the same size as the national route system was . There's some routes in the upper Midwest that we also got as part of this transaction , where we already carry some of our product , but we'll be making some , we'll make continued investments to fully mature that market with our hybrid distribution model over time .
Speaker #5: Okay, thanks. And just on the volume price mix split: very strong volume gains, obviously you have very slightly negative price.
Speaker #5: It it would seem like that's probably helped or driven at least a bit by expansion markets where I think you , you tend to promote a bit more to drive trial .
Speaker #5: Can you unpack a little bit , maybe just how to think about the runway ? There is price at the right level . Is it mostly trial related ?
Speaker #5: Obviously you've got the strong volume momentum . Would you expect price to be positive going forward , or is sort of similar to the splits in this quarter here ?
Speaker #2: Sure . Let me answer that . Thank you for your question on the pricing piece . What you saw in the quarter was a about a 1% drag , 1.11% drag is what we talked about , and it played out how we anticipate it .
Speaker #2: You know , to your point , you know , we are followers , but we also have very good revenue management . And our ability to compete in the best interests of both consumers and category .
Speaker #2: So there are many variety of ways for us to price . We think we will always choose the one that makes more work for us and our surgical approach to pricing .
Speaker #2: But we also manage it through through trade , through promotion into point , managing expansion markets and our goal is to be more effective , more quickly .
Speaker #2: And bringing those markets in line by .
Speaker #4: Yeah , and I'll just add my you know , what we said in Q3 or in Q2 was that we expected a one point drag in Q3 and Q4 .
Speaker #4: And so the year is largely the way we would have expected it to . And I think as you as you go into next year , you know , we'll kind of see where we are .
Speaker #4: But but to explain , feel very good about what we're doing on the rep side of things . And I think the quarter generally came in the way we had we would have envisioned when we started this .
Speaker #5: Okay, great. Thanks so much.
Speaker #2: Thank you .
Speaker #1: Your next question comes from the line of Peter Galbo with Bank of America. Your line is open.
Speaker #6: Hey , guys . Good morning . Howard , I just wanted to ask maybe a few . More technical questions about the California expansion .
Speaker #6: You know , it's been two and a half years , I guess , since since your last kind of acquired . And that was Kings Mountain .
Speaker #6: So even going further back on on routes . But , I mean , should we expect that this like are these independent operator , are they company owned .
Speaker #6: Are we going to have to go through an I o conversion cycle again ? Should we be looking at things like pruning of that portfolio the way you would have on an RW ?
Speaker #6: Garcia . Like I just want to understand some of the more technical components of what kind of will be factored in . You know , now that the deal is kind of consummated .
Speaker #4: Yeah . Are there questions ? A couple of things . First of all , you know , I would offer you we bought a similar size business .
Speaker #4: Or a similar size route network in National last year in Florida . And I'd say that generally the I o conversion discussion that we that we've had has not been driven by routes that we acquire .
Speaker #4: Because you think about it as we were already paying a commission in some cases, or we didn't have a relationship and it was new business.
Speaker #4: And so generally when we buy , when we bought back our distribution , there's actually a , benefit of less commission to a master distributor .
Speaker #4: And a commission to an independent operator , where the I o conversion a couple of years ago was different , as we were actually transitioning from we own the entire relationship on the revenue line to suddenly we had this commission that we were paying .
Speaker #4: So we don't anticipate, mechanically, that being a topic of conversation next year. I do feel like you're hitting the greatest hits of my first year.
Speaker #4: When we talked about private label skew rationalization , we're also not anticipating that to be a a significant part of the story . If you think about where we've been on partner brands over time , the all of these , all of the things that are on this route would , would fall into the partner brand line within the PNL .
Speaker #4: And we would we would expect that that will continue to decline modestly or continue to improve . The decline will get will lessen , but it will still continue over , over some period of time as we continue to expand our business .
Speaker #4: So I'm not sure . I don't think you should expect a whole lot of historical mechanics to actually have to come back into the story .
Speaker #6: Okay , cool . Helpful . And then I don't know , you know , free , free served either Howard or Bill on this one .
Speaker #6: But I think part of the stock reaction today , both is in response to , to maybe the commentary around the 26 margin and , you know , it seems like maybe there is a bit of backing off on that 16 but also in the quarter itself , you know , I think the the EBITDA margins were okay , but the gross margins were a bit light .
Speaker #6: There was some discussion around a worse potato crop . I think that maybe influenced . And , you know , I know you buy from the East Coast , but there was like a record potato crop through most of the US this year .
Speaker #6: So just trying to understand like what happened and how quickly can you pivot . And there should be a lot of cheap potatoes floating around .
Speaker #6: So just how how quickly can you kind of recover that gross margin piece ? Thanks very much .
Speaker #2: I'll start with potatoes and then Howard can can expand on it . Just to give a few facts . You know , about a quarter of our raw material basket is potatoes and we source what we call potatoes .
Speaker #2: That that are mostly from the Midwest and East Coast . This is very different than the crop that is used by folks that manufacturers and deliver French fries as an example .
Speaker #2: But the , the , the areas that we source from are very close to our primary facilities . And what we saw in the quarter was some weather related crop issues .
Speaker #2: Obviously , we had a very cold , wet spring in the east , and then a followed by a very dry , dry summer .
Speaker #2: So what happens is that we dealt in potatoes , not meeting the quality specs . And it required more potatoes for the same throughput .
Speaker #2: So that was very different than a year ago . I think the good news is that that was that ended in the quarter .
Speaker #2: That's not something that is progressing . We see that the crop come back and the potatoes are in good shape . So we don't think we have a systemic issue here at all .
Speaker #2: We think it happened in the quarter. It did have pressure on gross profit, but it is essentially behind us and isolated.
Speaker #4: Yeah . And the only thing I'll add is obviously , as you think about the overall gross margin , you know , while while the some of the input costs were obviously a little bit higher , you also saw us address that with productivity and distribution lines .
Speaker #4: For distribution costs go down year over year , which doesn't show up in gross margin for us . So , you know , I think if you look at the total cost basket and kind of how we work as operators to make sure that we're keeping those things in balance , you know , I think that the journey through the PNL is a little bit different , but I think we addressed costs with cost .
Speaker #6: Okay . Thanks very much .
Speaker #2: Thank you .
Speaker #1: Your next question comes from the line of Scott Marx with Jefferies . Your line is .
Speaker #7: Hey. Good morning. Thanks so much for taking the questions. The first thing I wanted to ask about is you called out in the prepared remarks some softness on the border and talked about how you've kind of isolated the issues and are interactively addressing them.
Speaker #7: Just wondering if you can share some incremental color on on what you're seeing with that brand and how you're thinking about those , those steps to correct the brand ?
Speaker #4: Yeah , I think so . The first thing I would say , and I appreciate the question , the first thing I would say is , look , we don't believe that we have a any sort
Speaker #4: structural issue with on the border . I think it's a great brand open for us . It's a business that we've been growing over time , and we have a great deal of confidence that the that the issues that we're having are relatively short term in nature .
Speaker #4: And it's a couple of things. One is, obviously regionally, we're seeing some greater consumer value-seeking behavior both up and down the price ladder.
Speaker #4: And so we have some regional brands that have showed up that we are addressing , that we're addressing in the near term . And then we had a we had a short term issue that I don't really want to go too far into , that we were able to identify .
Speaker #4: Early in Q3 that we had to that we that we needed to address . And we are actively addressing an isolated issue . And you should see correction beginning in Q4 and into next year .
Speaker #4: But I think overall, we feel very good about the tortilla chip business. Just some short-term noise.
Speaker #7: Understood . Thanks for that . Next question from me would be just on Boulder Canyon . Sounds like it was another strong quarter .
Speaker #7: And I think you noted some some shelf space being awarded for 2026 . Wondering if you can kind of help us understand , you know , is that kind of in expansion geographies ?
Speaker #7: Is that in core geographies with incremental products or categories , just trying to get a better sense of of how those wins are coming about ?
Speaker #4: Yeah . So I the question . We feel very good about the momentum on Boulder Canyon and obviously it will it continues to drive a lot of growth for us .
Speaker #4: And it's really driven by obviously the consumers looking for a better for you credentials and a great tasting product . And you know , in the year over the last period , year to date , we are it is the number one potato chip brand in in the national channel .
Speaker #4: And we actually have the the number one SKU in the channel over all time periods for 1326 and 52 weeks . So that business is growing really nicely .
Speaker #4: And I expect it to continue . If you look at the quarter , it is being driven by both velocity and distribution gains .
Speaker #4: Velocity is the natural channel, up about 35% in the conventional channel, up almost 200%, and you can also see the ACV.
Speaker #4: Where we are today is really only around 50% to 52%, versus, say, a brand like us at a little over 80%.
Speaker #4: So as you look into next year , we expect to continue to enjoy broader based distribution gains across channels and geographies . You know , we have a great deal of confidence and visibility into those into those opportunities .
Speaker #4: It will be predominantly getting our actual assortment correct broadly and actually driving data chips into those markets . And then innovation , which we'll share a little bit more with you in February .
Speaker #4: We'll also follow , because I think one of the things we're we're most pleased with is our partners in both natural and conventional , are supporting this brand , and we're able to continue to sustain the momentum in both sides , which is obviously a little bit unusual .
Speaker #4: But an area that we take very seriously , making sure we're investing in growth .
Speaker #7: Appreciate it . We'll pass it on . Thank you .
Speaker #2: Thank you .
Speaker #1: Your next question comes from the line of Robert Moskow from TD Cohen . Your line is open .
Speaker #8: Hi . Thanks for the question . I wanted to ask Howard about how you viewed your biggest competitors line up of new products for for next year .
Speaker #8: They're adding a new sub-brand that's natural colors. They're adding a protein chip line and a package redesign. Do you see this having an impact on the category next year?
Speaker #8: Is it a positive and do you think in the fight for shelf space , does it does it influence what you're able to get in any way ?
Speaker #4: Yeah . So look , a couple of things I think that broadly speaking , anytime the category leader is active in trying to grow the category , it's a net positive for all of us .
Speaker #4: I just I think that , you know , what , you look at this brand at this category over time , it has an innovation and communication that is really kind of driven consumer interest and appeal .
Speaker #4: So I think that regardless of who the competitor is, if they are able to bring more shoppers down the aisle, that is a net positive for us and for the category.
Speaker #4: I think as you look at what does that mean for us, I think there are a few things that retailers like about our business.
Speaker #4: One thing that we tend to be generally incremental with is that we actually bring investment and support through a hybrid model. They can get it through DSD or DPW.
Speaker #4: And third is that we all can see the same data sets . Now of what our products are doing in their stores . And so I'm not concerned that we can't get the distribution gains that we have .
Speaker #4: We certainly have not heard from any retailers that that has been an issue because I think that that our core offering and our partnership continues to grow and mature .
Speaker #4: And I think that that will , that should continue to yield the types of gains that we have been expecting . This allowed us to grow 2 to 300 basis points faster than the category .
Speaker #4: So I think overall I would view it as a net positive thing . Obviously , communication and innovation are always uncertain , and we'll see how the consumer responds to all of the offerings across all the category participants next year .
Speaker #8: Okay . And and I know you got asked this last quarter , but protein chips you know , this this clearly a significant pocket of demand for that type of product .
Speaker #8: And I want to know if you're thinking on that subcategory has evolved in any way . And maybe just discuss that .
Speaker #4: Yeah . I mean , look , I think that if you were to look at sort of the consumer trends right now that are out there , protein non-seed oil .
Speaker #4: Portion control , substantial snacking , are all areas that we continue to understand . The consumer is looking for and are seeking to try to address .
Speaker #4: I think when we get to February , we can we can show you how we think about addressing all of those subcategories as we talk about our lineup .
Speaker #4: But but certainly , as a as a consumer marketing guy , you know , I want to sell the products to consumers that they are most interested in and be able to sort of drive the trend , which is kind of what you're seeing right now in Non-seed with Boulder .
Speaker #4: So more to come on , more to come on innovation . But it is certainly an area that we are paying attention to .
Speaker #8: Great . All right . Thank you .
Speaker #4: Thank you .
Speaker #1: Your next question comes from John Gartner from Mizuho . Your line is open .
Speaker #9: Good morning . Thanks for the question . Hey , John , good morning . I'd like to ask about next generation productivity . I guess a savings migrate down to more normalized levels as a percent of Cogs .
Speaker #9: Maybe the dollar amount of savings moderates . But how should we think about the ROI from new productivity initiatives elsewhere ? Whether it's on sales growth volumes in-store execution , I mean , I'm guessing there's benefits outside of pure dollar savings from new technology .
Speaker #9: So I'm curious , your thoughts , your view on implications for the top line .
Speaker #4: Yeah . So I mean , I can start and then offer to be here . Look , I think a lot of what we've done on the productivity line , to your point has been really around getting getting the supply chain consolidation and modernization investments done .
Speaker #4: You know , I think we still continue to have opportunities in our ways of working and equipping our independent operator partners with better information on how to execute sales and make our assortment and our display activity further impactful .
Speaker #4: I think it winds up it should be a top line enabler over time . And I would I would anticipate that that's going to be part of the way that continue you'll see us to outperform the market as we as we continue to call it that , you know , a couple hundred basis points better than the category .
Speaker #4: You know , I think in the near term , what I would offer you is that we have a lot we have a lot of work that we are completing .
Speaker #4: And you'll start to see that productivity step down to , you know , world class at or above , world class levels . Still at that 3 to 4% .
Speaker #4: And you know , the rest will kind of communicate as we understand it . Because anything .
Speaker #2: Yeah . Thanks , John . Thanks for the question . Thanks , Howard . You know , that's a great point for us .
Speaker #2: And I'll just build on Howard's point . You know , it's what we kind of call our second wave of value capture . If you think about kind of within the supply chain and outside the rest of the company , there are still areas that we continue to grow on the supply chain side .
Speaker #2: Obviously, we have opportunities in the indirect recruitment that we've done. Indirectly, we have opportunities in working capital and liquidity management.
Speaker #2: If you think about the DSD network that we have and continue to optimize our transportation logistics , that's helpful to us . And then within the four walls of manufacturing plant , I think the team will take the next step of improvement .
Speaker #2: Predictive maintenance , etc. . And then as you kind of expand . Outside the supply chain , parts of the business that other others of us that drive , you can think about automation and data leverage , whether it's analytics and bots , the advanced demand sensing tools that are out there , self-serve analytics , you know , digital twin modeling .
Speaker #2: rpas and
Speaker #2: I can go on and on , but there is a clog of opportunities for us to continue to drive productivity at very high levels .
Speaker #9: Thank you . Okay . Thanks , Howard . Thank you .
Speaker #1: Your next question comes from the line of Jim Solari from Stephens . Your line is open . Hey , Howard .
Speaker #10: Good morning . Thanks for taking my question . I want to dig in a little bit on some of the market share dynamics , because I've been impressed by
Speaker #10: the continued gain . Obviously , in expansion , but maybe even more so in core , where you guys have a lot more visibility and awareness .
Speaker #10: You just kind of walk through where you're seeing that incremental market share pick up in the core market , and is there maybe an opportunity as we think about , you know , retailers really fine tuning what they have on shelf to to make sure their analyzing on any pockets of growth .
Speaker #10: Is there maybe opportunity to continue to see sustained share gains in the core market ?
Speaker #4: Yeah , I mean , so a couple of things I think , you know , I think as you know , our strategy has been to hold the core and then grow it , or grow through expansion markets .
Speaker #4: And obviously , to your point , you know , where we are pleased with that , that we're actually taking in our core markets as well .
Speaker #4: Not surprisingly , as you know , when you look at our when you look at our original strategy , we had said that really our core market is most significantly in US market and that the opportunity was to continue to expand our assortment of our power for brands into the core geography .
Speaker #4: And as you look at kind of this year , obviously , Boulder Canyon is a significant contributor to to the core , to the core , along with , you know , us pretzels and cheese .
Speaker #4: I think also continue to be areas where we're seeing some some better performance . So I think what you're seeing is just our portfolio shifting in the core a little bit .
Speaker #4: And that the benefit of the breadth of our portfolio is actually coming through in that , in that market share performance . I think the other thing that is helping us is , is that as the convenience store channel continues to improve , we're by no means where we need to be yet .
Speaker #4: But is that becomes less negative . It actually also continues to help us as we look at overall market share . I think longer term , it is the one geography where we are most linked to the category .
Speaker #4: It's kind of really the only one . And so I think what you'll expect to see us do is we'll drive our share is innovation , communication and share assortment to drive it further .
Speaker #4: But I think we like the notion of over long term , if we can hold , if we can hold there and get our expansion markets growing faster , that you'll continue to see the performance that we're getting right .
Speaker #10: And then maybe as a follow up , you guys called out Florida , Illinois . I think Colorado and Missouri as expansion markets that are above four .
Speaker #10: I talk a little bit about Florida already , but maybe if you can just highlight , are there any kind of idiosyncratic , whether its brands or consumer kind of consumption patterns in those states that drive that share , you know , 100 basis points ahead of kind of the average expansion market share ?
Speaker #4: Actually , not really . I mean , generally speaking , they tend to those four markets , obviously are some of our fastest growing .
Speaker #4: They're averaging about 6% , 6.4% growth across them . And what we wanted to highlight is that we're getting that after we get distribution gains .
Speaker #4: And some of our older vintage expansion markets that we are continuing to show and sustain growth , I do think in those markets , what is do have very strong relationships with the national retailers and our iOS in those markets .
Speaker #4: And so we continue to see very good execution there . And I think that the nature of our relationship with those retailers is actually what you're continuing to see is they continue to reward us with space .
Speaker #4: And we continue to invest and make sure that we're that we're participating in their category growth . And it's kind of working for everyone .
Speaker #10: Great . I appreciate that . Thank you .
Speaker #2: Thank you .
Speaker #1: Your next question comes from the line of Rupesh Parikh from Oppenheimer . Your line is open .
Speaker #11: Good morning and thanks for taking my questions . So I guess just going back to salty snacks category , I know it's , you know , obviously it's still it's still a challenge out there .
Speaker #11: But as you guys look forward , are there any green shoots or anything that gives you optimism as you look out in the coming quarters ?
Speaker #4: Yeah . Look , I think I continue to believe and have been a salty bowl . I think that it's a great category and I think it's probably the best in food .
Speaker #4: And I continue to look at household penetration as the first place that I would look at is our consumers coming and and participating in this category more this year than they did the year before .
Speaker #4: And the year before that . And I think the answer to that continues to be yes . It's not immune to the dynamics of the market .
Speaker #4: And the consumer environment , but on average , when consumers are choosing how to invest their money into an affordable indulgence , they continue to choose salty more than they did the year before .
Speaker #4: So I think in that regard , I remain very optimistic about where the category is . I think second is , if you look at the category progressing , you know , we did say that we thought that the category would get better , would progress through the course of the year , and become less negative .
Speaker #4: Obviously , we thought we'd be more flattish in the year . So we're a little off on that . But you do see that the category has been improving through the course of the year , which I also think is a net positive .
Speaker #4: And then the last thing I'll say is that if you look at category participants , it is we have always been an innovation and communication brand .
Speaker #4: Build , brand led category . And that continues to be the case . The pricing environment remains rational . You're not seeing things that are that don't make sense .
Speaker #4: And I think you're seeing some of those some of the drivers that have always driven this category coming back more to the front .
Speaker #4: So overall , I feel I feel pretty good about where the category is going . Obviously it's a it's been a uneven category for the last couple of years , but I continue to be very , very , very optimistic about the future of this portfolio , about the category and this portfolio .
Speaker #11: Great . And then maybe , maybe just one follow up question . You guys also talked about some of your marketing efforts and also noted that I think you plan to increase your investments in retail media .
Speaker #11: So just curious what you're seeing there in terms of effectiveness and returns on your efforts with retail media ?
Speaker #8: Yeah .
Speaker #4: So a couple of things . Obviously , we committed an investor day to 40% . Marketing investment year over year over year . You know , last year we delivered 68% .
Speaker #4: This year , year to date we're right around 30% . And that that is really being driven by the consumer pressure . You know , our strategy has always been that we'll build the business overnight and our brands over time , and that will be flexible about where we make those investments in any given quarter .
Speaker #4: And so as we looked at this quarter and we look at some of the distribution gains we had and some of the opportunities that we had to invest in retail media , they were they were the place that we prioritized .
Speaker #4: We by no means have a lack of investment , high ROI , investment opportunities that we can make . But we'll always be choiceful in what we're doing first .
Speaker #4: And this quarter it made more . It made a lot of sense for us to invest in the retail pressure that we could get as consumers or in store , and making choices .
Speaker #4: So you'll continue to see us making investments in consumer media , and you'll continue to see that 40% kind of progressing into 2026 .
Speaker #11: Great . Thank you .
Speaker #2: Thank you .
Speaker #1: Your next question comes from the line of Peter Grom with UBS . Your line is open .
Speaker #10: Great . Thank you . Good morning everyone . .
Speaker #12: I wanted to ask maybe two related questions on the category . One more from an innovation perspective . And maybe more just how you're seeing it moving forward .
Speaker #12: So more just kind of a follow up to Rob's question , which I thought was a good one . You talked about this a little bit in your prepared remarks around highlighting fewer ingredients , removing artificial dyes , and kind of the protein dynamic that you alluded to earlier .
Speaker #12: I guess my question is , do you think this innovation can actually move the needle and drive an improvement in category growth as we look out to 26 and then just related , you touched on kind of the sequential improvement , albeit maybe at a slower pace than you anticipated .
Speaker #12: Do you have any preliminary views on the category or industry ? As we look out to 26 ? Thanks .
Speaker #4: Yeah . So look , I think I'll start with the innovation question . First . The short answer is yes . I do actually think that innovation can help move the category .
Speaker #4: I mean , it's I think that what you really when you look at innovation , what you're really trying to do is to drive consumer engagement in the category .
Speaker #4: And so a consumer may buy a new product and then pick up a normal bag of whatever their typical repertoire is . And if they haven't been down the aisle in a little while , I think that that always helps with consumer interest and keeping the assortment fresh and keeping news coming through .
Speaker #4: So I do think that it can it can help drive the category . Obviously , the category is large and it has a lot of traditional portfolio of offerings , and those offerings also need to be healthy and growing .
Speaker #4: And part of that is I think what you're talking about in terms of ingredient simplification . Artificial flavors and colors , those are , frankly , to me , not only addressing , you know , what consumer interests are in , but also making sure that that this category overall and obviously our products remain on trend and allow consumers engagement in potentially a modestly different way .
Speaker #4: I mean , a reminder , 80% of our portfolio already exists as no artificial flavors or colors . And so we'll continue to highlight those credentials as we go forward across our range .
Speaker #4: I think as you look at our future innovation path , you know , there are opportunities to get get new consumers into the portfolio , potentially .
Speaker #4: Weren't there before . As we're entering into new geographies , I think innovation is a piece of the story , but our core assortment and it's trial and repeat rates are very strong .
Speaker #4: And so getting those those products in front of the consumer also will be critically important to our top line growth . So yes , I think it can help .
Speaker #4: I think the whole portfolio story has to continue in order for the category to grow significantly over time . And I feel pretty good that that's where we all are taking steps to do .
Speaker #12: Great . Thank you so much . I'll pass it on .
Speaker #2: Thank you .
Speaker #1: Again , if you'd like to ask a question , please press star . Then the number one on your telephone keypad . We'll pause just for a moment .