In fact, most of the CapEx that we’ve launched and spent in the first quarter is associated with new customer launches in the second half. And we won’t cut short investment if it’s a really good return. I do think we’re tightening things up. And we want to be disciplined. We want to be responsible. We want to make sure that it is a high returning project. And then on the dividend, as I mentioned, we want to make sure we’re paying a dividend that has yield and payout metrics that are consistent with the peer group. And frankly, with the cash flow and earnings generation over the last several years, our dividend payout ratios have been twice our peer group. And so now is the time to make all of those adjustments.
Mitchell Pinheiro: Very helpful. Are you seeing anything in the Grown business that is structurally different? Do you see anything structure in the industry that might — that would impede your ability to get back to where you were 4 years ago?
Brian Kocher: Well, I think there are things that have changed in the Grown business from 4 years ago. And let’s just look at a sourcing perspective. Mexico, Peru and Colombia are all bigger in terms of volume available to export to the U.S. than they were 4 years ago. All of the supply is great. Now that being said, the demand has been greater as well. We can’t see the demand because it’s been constrained for a couple of years with COVID for a year, food service has gone down for a year. Last year, it was constrained because Mexican export volume was historically low or certainly lower than the prior year. But we do believe that demand has been constrained, and we’ll see demand that keeps up and keeps pace with supply. I do think supply and demand will — if you compare to 10 years ago, I think supply and demand is more balanced today than it was 10 years ago.
Demand exceeded supply. Again, I think that’s also a strength of a marketer model. We’ve got an opportunity to buy and sell on a daily basis. We have an opportunity to flex our inventory up and down, and we have an opportunity to take some risk when we want to or think it’s opportunistic to take advantage of volume growth. We also have the opportunity to dial back some volume if the profit profile isn’t right. So I feel really confident that our model allows us to deliver that $3 to $4 a case of gross margin over time, over time. And so I don’t see big structural changes that will prevent that. But when you have a little bit more balanced supply and demand, I think it brings in some volatility that maybe we didn’t have 10 years ago, I’m going to say, or 5 years ago.
And that’s the case of any evolving commodity market.
Shawn Munsell: Yes. And then the other thing, too, Mitch, I’d say that was unusual in the quarter is that retail prices were more stubborn than wholesale prices, right? And we started to see inventory buildup that put more pressure on wholesale prices, and that, in part, narrowed those margins.
Mitchell Pinheiro: Just — is this just a function of the grocery trade you having a higher margin? Or is it they’re just — why is it stubbornly high?
Shawn Munsell: Yes, just retailers holding margin.
Brian Kocher: Yes. And I think to be fair, retailers were also slower to price up last year when the wholesale prices were going up. So I think they moved a little slower on the front end and are moving a little slower on the back end. We see more promotional activity going on and investment in price. We continue looking at it. Consumers are certainly looking at it. There’s been some recent data by IRI that would suggest consumers almost half of consumers are looking for products that are on sale now. So consumers are certainly looking for what they believe is a deal, and we’ve been working with our retailers and our customers on how to drive promotional activity that makes sense for them and makes sense for the category. And we probably — because of the shelf lives, we can do that more in Grown, and we can do that more in guac than we can in our Prepared fresh cut business.
