Brian Kocher: So yes, Eric, let me make sure that I understand. Your basic question is you’re getting — you’ll have some favorability in unit cost on guac, on input costs on guac. Where is the other improvement coming?
Eric Larson: Right.
Brian Kocher: Okay. So I think we’ve got a couple of things. One, remember, I really believe that the balance of the year volume is going to be an important part of our story. We’ve got some deli customers coming on — 2 national deli customers coming on in the second half. It won’t help the second quarter. We’ll see Prepared, fresh cut challenges in volume throughout the second quarter. So it won’t help the second quarter, but it will help the second half. And with that, we’ll see absorption benefits, and we’ll see some other things that happened in the second half of the year. I think we will get some positive unit cost benefit in our guacamole business, but we also need volume to help us there. The guac category, for the first time in a long time over the course of the last 3 months anyway, was down on a unit volume basis as well, up on a dollar basis, down on a unit volume basis.
So one of the other things that I think is hard to see is we made great progress in getting lower input costs and taking advantage of that market, we made really good progress in yield and labor efficiency in our guac plant, but some of that was, let’s say, used up by lower fixed cost absorption because of lower volume. So really, really the Prepared story from now on — I mean, the fact of the matter is we had year-over-year labor productivity improvements from — but we didn’t from the fourth quarter. So first quarter ’22 to first quarter of ’23, we had labor productivity. But with reduced volume, fourth quarter of ’22 to first quarter of 3 we lost a little bit of labor productivity, again, because of the unit volume. So I think as you look at Prepared, it is growing the volume with the category, but also with new distribution, continuing to manage our cost profile, labor productivity, all the things that we’re talking about so that, that new volume is leveraged disproportionately.
Eric Larson: Got it. Okay. So — and I apologize maybe for the ambiguity towards the end of that — towards that question. But historically, this is historically what has been sort of attractive for the fresh avocado business, right? Is that even at high prices, consumers would pay absurdly high prices for an avocado, it seemed that demand was more inelastic and what it sounds like today, you said that retail prices were very sticky on the upside, much stickier than wholesale, but in past years, the price wouldn’t have been that big of a deal. So if customers aren’t buying your avocados and there’s not — and you had down volumes, what are they switching into? What’s the — what’s your competitive group for avocados that consumers seem to be going to now that they might be more price sensitive?
Brian Kocher: Well, let me try to clarify a couple of things. First of all, the category for produce was down. Avocados were still up in the first quarter year-over-year. I think it was about — on a unit volume basis, I think it was 2.7%. I think we’re up, Shawn, 3.3% or 3.4% something like that. So we know we held our share and one could say maybe even we grew 1 point. So I think that’s one thing to think about. The other thing that I would think about is it’s not just a question of price elasticity or inelasticity. If you remember, in the third quarter, when prices were extraordinarily high, retail stopped promoting and even started shrinking display sizes. So it wasn’t just a pricing story and whether it’s inelastic or elastic.
