Pamela Kaufman: Got it. Thank you. That’s helpful. I’ll pass it on.
Dave Marberger: Thanks.
Operator: The next question comes from Alexia Howard of Bernstein. Please go ahead.
Alexia Howard: Can I ask about innovation, in terms of – I guess during the pandemic and also during the period of supply chain disruption, I imagine that the pace of innovation was dramatically reduced. How quickly is it recovering? Can you give us any numbers on how quickly the pace of innovation is likely to pick-up over the course of the next few quarters?
Sean Connolly: Sure, Alexia. So, let me take us back to kind of the pandemic for a minute. When we guide – hit with the pandemic, we fully expected that we would hit the pause button on innovation even though we had the pipeline ready to launch. To our surprise, our customers asked us in a very convincing way not to do that. And so, we slowed innovation launches modestly during the pandemic, but only modestly. And in fact, if you look at the amount of innovation we continued to put into the marketplace through the pandemic, it was probably the highest or among the highest in our peer group. So, we really didn’t pause the way we expected. When we kept – we kept the momentum there since then. Last year was a much bigger launch, it was one of our biggest launches yet, and we had tremendous performance in terms of productivity per TPD and overall TPDs. And this year is perhaps our biggest innovation slate yet.
So, the – we’ll share some metrics when we’re at CAGNY. Just to give you, kind of, what we track historically, we track this thing called renewal rate, which is a percentage of our annual sales. It comes from items we’ve launched in the last three years. 10 years ago, we were probably at 8%. And then, over the last five years, we probably hit a high watermark of 15%. So, that’s kind of the ballpark we like to be in, is that 13% to 15% depending upon what we’ve got coming into the marketplace. And, again, this year is our biggest launch year yet. And we’ve also, as Dave pointed out, backed that with customer investments and slotting investments, both in the front-half and, very materially, in the second-half of this year. And we’ll do the full parade of innovation for you in a month or so at CAGNY, so you can see it.
We hit some of the highlights today in our prepared remarks. I think the fun one is this Wendy’s chili business, because we’re always focused on Frozen and Snacks around here. And this thing has just emerged from zero to be a major player in that category. So, more to come on that in CAGNY. But net-net, it’s a very significant year for us on an innovation front.
Alexia Howard: Great. Thank you very much. I’ll pass it on.
Sean Connolly: Thank you.
Operator: The next question comes from Nik Modi of RBC Capital Markets. Please go ahead.
Nik Modi: Thank you. Good morning, everyone. So just two quick questions. Just – I don’t think it’s an impact, but all the drama going on in the Red Sea, I just want to make sure there’s no issue with freight rates or some of the temporary specs that we’re seeing that’s the first question. And then the second question is just, Sean, I’d love your kind of observation of out-of-home versus in-home. It seems like it’s a very mixed bag depending on what category or meal occasion we’re talking about. But I just love your view because the thought is if the consumer is coming under more pressure, we should start seeing more in-home consumption, which should benefit you as the year kind of goes through. So I’d just love your thoughts on that.
Sean Connolly: All right. So Nik, the first one is easy. The answer is no, no impact there. And on the second one, that is a very keen observation because I mentioned how our volume outlook for the back half of the year does not assume anything heroic. Part of not assuming anything heroic, we’re not assuming that some of the away-from-home dollars begin to shift into at home, and you’re 100% correct. If that happens, that’s a tailwind for us and probably for the group. What’s very interesting is how sticky some of this away-from-home spending has been even though we’ve seen a challenged consumer who is making trade-offs to stretch their household balance sheet. The one place that they’ve been fairly resilient is in their away-from-home spending.
Should consumers stress increase from here. That is historically the first place that you would see an additional behavior shift is, you would see a reduction in away-from-home spend and you would see an equal and opposite response in home eating. That has not happened yet. But as we think about calendar year 2024, certainly, that is a potential positive if the environment remains stressed and the consumer decides they need to make further shifts.
Nik Modi: And so just a follow-up on that. When you think about price gaps, right, with your strategic investments, is it really just kind of thinking about what goes on within the center of the store within the frozen unit or are you also thinking about kind of some of the price gaps between what you guys sell versus what maybe some low-end QSR would be priced at?
Sean Connolly: The price gaps versus away-from-home tend to take care of themselves. When the consumer reaches a point and they say, look, my burrito and my coke to go have now gotten too expensive, they first make the switch to stop doing that. Second, they switch to buy in the grocery store. And third, hopefully, they’re buying our products. But we do look at our categories and look at this volume malleability as if it is an open set, meaning it’s not just what’s on shelf and then what’s to the left or right of it that’s switching, but it could be other categories. So an example would be, I referenced in our prepared remarks today that we are going to be – one of the things we’re going to be investing behind is advertising on our Birds Eye business.
