Operator: The next question comes from Peter Grom at UBS.
Peter Grom: Thanks operator and good morning, everyone. So I wanted to ask specifically about gross margins. You made a lot of progress this year and, Matt, you kind of mentioned that you saw this opportunity to kind of get back to this 45.5% target, but you also said, I think, in your response to Chris’ question that you wouldn’t get it all back next year. So can you maybe help us unpack the reasons why that might be the issues given the momentum you’re angling the year with. And then just maybe building on that, Rick, last year, you kind of mentioned that you were less hedge heading into the year than previously. Can you maybe just give it a comment or so on your outlook for inflation and whether or not you’re kind of deploying a similar hedging strategy looking ahead. Thanks.
Matt Farrell: Yes, I know this is a lot to do with our forward looking guidance for 2024. So I would just tell you, we’ll get into all those details in January, February. We do think we have now gross margin expansion. We think there’s tailwinds on gross margin because for the first time in a long time, productivity can outpace inflation. Inflation, we think still higher than normal next year, but not anywhere near what it’s been like these past few years. So that’s kind of what I would tell you in a heartbeat. The other nuances really, when we look ahead, our pre-COVID margin should be higher because we have some better, faster growing personal care products like HERO and THERABREATH. So we fully recognize that as well, but it’s going to be, like I said, the Deutsche Bank Conference and Barclays Conference as well. It’s going to be two to three years to get to get there. And so we’re going to take a good step each and every year.
Operator: Next question comes from Nik Modi from RBC Capital Markets.
Nik Modi: Thanks. Good morning, everyone. Guys, can you just talk about what you’re seeing in the M&A environment as kind of the situation continues to evolve? Are you seeing any potential assets out there, brands that might look interesting? And then I have just the follow up question on the promotional situation.
Matt Farrell: Okay. Yes, Nik, we’re always on the hunt. And we, if you look at the HERO was acquired last October ‘22. And we’ve looked at three other potential acquisitions since then, all of which we passed on. But we’re always on a hot, we’ve got quite a strong balance sheet right now, a lot of cash building up, so we’ve got a bit of a war chest. I would say that the interest rates will obviously affect the bidding process in any one of these acquisitions or auction processes. And obviously we’re affected by that as well. But you do want to buy brands that long term are going to be able to grow and interest rates, yes, they may be high for a few years, but they do moderate from, it seems. So you’ve got to take a long view when you’re looking at assets. But there’s always something to buy and we’ve been pretty active at looking at what’s available. You had a second question, Nik, on promo?
Nik Modi: Yes, I mean, usually when you see these kinds of unprofitable promos get called, it’s usually part of a revenue growth management initiative a more focused revenue growth management initiative. Over the years, I haven’t heard you guys talk too much about revenue growth management. So I’m just curious, is there just a more concerted effort to really focus in that area? And that’s what’s really what’s driving some of these choices at the fourth quarter. And any perspective around that would be helpful.
Matt Farrell: Yes, no, that’s a timely question, Nik. So our international business was really first out of the gate on revenue growth management. And so we have six subsidiaries. And we have all those six subsidiaries have all been linked up regularly discuss the tactics in improving revenue. And it’s all the levers between gross and net. And more recently, our US business reorganized so that we can adopt more of those practices that our international business has honed, but also link the US into those six international subsidiaries. So yes, the whole concept of revenue growth management is taking hold in the company and that contributes to making decisions about unprofitable promotions.
Operator: The next question comes from Jason English from Goldman Sachs.
Jason English: Hey, folks. Thanks for stopping me in. So a couple quick questions in response to Mr. Lauren’s question. I was surprised to hear you say that you expect inflation next year to be above average. So I guess two questions related to that. First, what’s driving it? And second, in context of that, what sort of price of environment do you expect next year? Would you expect to see positive price growth in your key categories and from you in the domestic market?
Rick Dierker : Yes, thanks, Jason. It’s Rick, I would say, So Lauren got me to comment on 2024 a little bit more than we normally would. But what’s normal for us in COGS inflation is around 2% of COGS inflation. That’s been true for many years, 2013 through 2019. And then it went to 8% during those COVID years, ‘20 to 2022. And then in 2023, it was 4%. My belief is it will be lower than what it is this year, for sure. But a little bit higher than what we’ve had in the past. And what’s driving that is some of the oil-based and resin-based commodities. And that’s probably the extent I’ll go into right now. The good news is that our productivity, it’s not going to be as apparent because productivity for the first time in a long time can actually offset some of these headwinds.
And that wasn’t the case during the last few years with COVID. In that type of environment, I don’t think that pricing will play a major role when manufacturers can cover a lot of their cost headwinds. And in other categories, in other companies, there’s other commodities that are going the other way. And so that’s why there’s deflation in some commodity categories. So that’s kind of the short answer from our perspective. We have one price increase that we just rolled out. You heard us talk last quarter about soda ash and baking soda and those cost inputs being up 40% to 50%. We did roll out a price increase on baking soda in October, and that’s going to be out in retail. And we don’t have further plans to tick price really.
Jason English: Okay, that’s helpful. And speaking of commodities, I’m on the website for this MEGALAC product. It’s like a pretty commoditized product. And it sounds like you have a new competitive threat coming in, undercutting you. So first talk about it. So I’m assuming it’s new. I’m assuming it’s still early inning. So can you give us some context to assess the risk? Obviously, if everything else was up to and this drill would bounce back kind of it is big, how big is it? Like how big was it before this? How big is it this quarter? And how do you plan to deal with that headwind going forward?
