Ethan Brown: Yes. So, I think in Europe, we are probably less inclined to do any significant price increases in retail and as well as in Europe because of the heavier action among strategics there. The price point is lower in foodservice. In U.S. foodservice, actually, our pricing went up due to mix. But in retail, of course, it went down substantially. I think the average was 521 to 424, price per pound basis, and that was driven largely by trade discounts and pricing and mix. But – so I don’t – I think in the – we are primarily focused on the pricing question and any significant strategy change in the U.S. market versus in Europe. I don’t know, Lubi, if you want to add to that.
Lubi Kutua: Yes. Adam, what I would add to that is, if you recall at the beginning of last year, I believe, in 2022 we did do a pretty broad-based pricing reduction in the EU to better align our pricing in the European retail landscape. Now, one of the things that’s structurally different about Europe retail, if you will, relative to the U.S. is there is a much greater presence of private label over there. And so when you look at the competitive landscape in the EU, you have to – the pricing structure is going to be different from the U.S. Now, we actually think that our pricing, where it stands today in the EU feels like it is where it needs to be relative to the competitive set. I think there are opportunities for us to drive incremental efficiencies from a COGS perspective.
But our margin profile in the EU business is actually pretty good. I think there is opportunities to make improvements there. But I think when we are thinking about pricing strategy in the EU, I wouldn’t necessarily be thinking about price increases. There is always going to be some variations from a promotional perspective and things that we do in that regard. But we actually went through the exercise a year – over a year ago, right, to make sure that our price points were in the right place in EU retail.
Ethan Brown: And I think the way to think about – so we are undergoing a substantial reduction in operating expense across the company to better fit kind of the near-term conditions. But that in the EU, because of success we are seeing on a relative basis, for expanding our investment there just because it’s such a powerful growth engine for us at the moment.
Adam Samuelson: Okay. And if I could just ask a follow-up on cash flow. So, there was positive cash from operations kind of in the quarter. It seems like a large part of that was your payables actually expanded. So, that was a source of cash, which is not we would expect to happen if you are also trying to reduce your purchases and slow down inventory and shrink inventory. So, as part of the point on the cash flow sustainability that, that payables kind of growth in the quarter, which just becomes a source of cash is not repeatable, and that then becomes a headwind as you move in 4Q and into next year?
Lubi Kutua: Yes. I think that’s right, Adam. So, the working capital was a pretty significant benefit in the third quarter of this year. Typically, we do have a strong quarter from the perspective of accounts receivable in Q3 because that’s following what is seasonally our strongest quarter in Q2. And so we collect I would say AP, typically, that tends to move around. It tends to be sort of more just timing driven. But I think you are absolutely right in thinking about as we move forward sequentially, and we have said we don’t expect to sustain the cash flow positive in the fourth quarter. One of the headwinds, if you will, in this quarter will be we don’t expect that type of a benefit from accounts payable.
Adam Samuelson: Okay. Appreciate it. I will pass it on. Thanks.
Operator: Thank you. Next question comes from Peter Saleh of BTIG. Please go ahead.
Peter Saleh: Great. Thanks for taking the question. You guys mentioned, I know it’s early, the exit of select product lines and/or geographies, potentially restructuring in China. I was hoping you could give us a little bit more color on at least the early thinking there is. Is this mostly related to U.S. retail product lines? And also maybe just a little bit of color on the performance of Jerky. Is that on the in the consideration set? And then when you mentioned restructuring in China, is this just a shrinking of the China market, or are you considering a full-on exit? Just any color around that would be helpful. Thank you.
Ethan Brown: Sure. I mean we can’t give too much, right, for – just want to box ourselves in. But what’s on the table, right, our product lines that are underperforming in a way that we think is perhaps structural on a margin perspective or we are just not exhibiting the growth we want to see. So, some of what you mentioned is probably falls into that pretty well. On China, I think it’s just taking a look at what is our strategy for the next 2 years, 3 years there, and how big or small do we need to be. It’s interesting that part of the world is starting to replicate a little bit of what you are seeing in Europe in just an early, very nascent way. Like if you look at Europe with all the government programs and incentives or campaigns rather probably is a better way to put it, to reduce animal protein consumption as I mentioned in my prepared remarks.
Whether it’s the UK, Germany, Netherlands, etcetera, South Korea, as I mentioned as well, just came out with something you see some interesting activity occurring on the commercial side of things in Japan. So, it’s a little bit too early to give an answer to that, and we are just continuing to look at it. But to drive down the type of cost reduction and the operating expense reduction that we are pursuing, kind of everything has to be on the table when it is.
Peter Saleh: Thank you very much.
Operator: [Operator Instructions] Next question comes from Michael Lavery, Piper Sandler. Please go ahead.
Michael Lavery: Thank you. Good evening. Just would love to understand the table towards the end of the text in the release better on the distribution points by channel. Obviously, you have done much better in international foodservice than in the U.S., but that shows a sharp decline in distribution points and a small uptick in the U.S. in foodservice. Can you just help explain what’s going on with those numbers and how to reconcile that with what you have reported? Is there somebody that’s just had a recent discontinuation or anything we should be sure to be aware of?
Lubi Kutua: Yes. So, in international foodservice, what that’s reflective of is basically the discontinuation of distribution at a certain large like chain customer, and this is in China. It’s not a meaningful percentage of revenues at all. And then I think your – the second part of your question was related to U.S. foodservice. Those numbers tend to – from quarter-to-quarter have some fluctuations in them. So, I don’t think there was anything of note to call out in that particular line item.
Michael Lavery: Okay. That’s helpful. And even a little bit of rounding, it’s just not a huge move is what you are saying. Just following up on – just some of the outlook on the restructuring or SKU rationalizations, I know you don’t want to be too specific, but just in terms of how we are thinking about modeling 2024, which obviously too, I know you are not guiding on yet, but anything just directionally to more specific, I guess in terms of where there is watch out in terms of – even if certain products haven’t been pinpointed yet. Is it more China-focused than U.S. retail? It sounds like we have some of the breadcrumbs, but anything more you can give there?
Ethan Brown: We can give a lot more additional color, but I think it’s – we are not doing anything it would, I think surprise people. If you look at kind of the performance of various product lines and where our emphasis is as a company, obviously we are very focused on beef and burger and sausage and our chicken lines and things of that nature, and really focused on the partnerships we have in Europe and some of the new retail items we have offered there. So, it’s some of the more underperforming SKUs and if you were to do a quick chart, you would see, that’s the process we are going through. So, I don’t think it’s anything is going to surprise at all.
