I do think it’s going to help us tremendously as we bring in the three additional protein SKUs this year, giving us more visibility on the shelf. And as we said before, those protein bars in test market are proving incremental to the first three SKUs. So we’re kind of reaching a wider consumer base with that higher protein offering. So velocities are in line with the categories, so we’re all good there. We can always do better. And we will get better. We said many times, we’re treating this as a start-up business. We’re learning a bit as we go to build. But so far, so good. And of course, behind that, we’ve got a nice innovation pipeline four days coming with the snack bites in the back half and even more beyond that in ’25. So we’re off to a good start.
We’ve got nice momentum. The team is excited. Consumers and retailers alike are excited about it. So we’re feeling really good about where we are so far. It’s early days, but we’re in good shape.
Operator: Our next question comes from the line of Jim Salera with Stephens.
Jim Salera: In your prepared remarks, you mentioned some uncertainty in 2024, obviously, around the consumer and promotions. I think we all get kind of the consumer piece of that. But to double-click on the promotion side, is the concern that some of the larger competitors in the category are going to maybe revert to how they behaved in the past where they really aggressively chase volume? Or is it more that retailers are going to come to you guys expecting price deflation and using promotion as a tool to achieve that?
Riyals McMullian: Yes. Jim, definitely the former. We’ve seen this in our category before. We haven’t seen it in a long time. And even though as we noted in our remarks, we even promoted a bit more in the fourth quarter just because, as you know, there is seasonality in our business not being a big dinner roll supplier that the fourth quarter can be a little bit volatile. So we promoted a bit more to drive more unit volume, got good effectiveness out of those promotions, but we also didn’t spend nearly as much in trade to get it and maintained one of the highest average price points in the category. But yes, the caution is much more around the other competitors in the space than it is pressure from retailers, which we really have not felt to date.
Jim Salera: Great. Because it seems like and we’ve talked about this in the past, but part of the challenge is you have this channel shift dynamic that’s going on and from the branded retailers’ perspective or over the branded food company’s perspective rather, if you’re putting promo dollars in the channel, but the consumer is in the wrong channel, you’re essentially just giving price away, at least that’s kind of the way we viewed it. And so would we have to wait until the consumer shifts back to traditional grocery before we see those promotional increases be put into place? Or is it something that even with the consumers still in kind of value-oriented channels, competitors might just put promo in the channel anyway just to see what comes up on the other side?
Riyals McMullian: Yes. I mean it could be either. I think that’s just going to need to be a wait and see and monitor the environment and react accordingly.
Jim Salera: Okay. Great. And then maybe if I could sneak in one more. In the breakdown for the 2024 sales guide, I know you guys mentioned you have some wraparound pricing benefit in the first half and some business exits that negatively impact the volume side. If we just think about — there was a pull forward on business exits into 2023, so I mean, it’s not going to give you guys a more favorable lap in the back half of 2024. So if you can maybe just kind of separate of the volume decline, how much of it that you anticipate is still coming from business exits versus just kind of organic volume declines?
Riyals McMullian: Yes. Most of it is still going to be in business exits. And I do want to note if folks didn’t pick up on it in the prepared remarks, barring something unforeseen, we do expect this to be the last year of strategic exits. I mean, we’re done with what we wanted to do. And I mentioned earlier that what we’re thrilled about is the opportunity we have in front of us and believe me, there is a lot of opportunity to go back and refill that capacity with higher-margin business, which will not only drive profitability, but go a long way to help bring the unit volume back up. But you are correct, it is first half weighted. You’ll see most of that effect in the first half. And then as we move into the back half, it would be much less significant. And then, again, that should be it.
Operator: Our next question comes from the line of Mitchell Pinheiro with Sturdivant and Company.
Mitchell Pinheiro: So just a couple of questions. When it comes to the gross margin in 2024, excluding sort of your input costs, your commodity costs. Are we seeing like a flattish gross margins because of stranded fixed costs as you exit these businesses, or are we seeing — is there something else happening that needs to be called out? Like, I would expect that some of your digital transformation would start to show up in fiscal ’24 a little bit, improved operational sort of the overall equipment effectiveness and things like that. When should we start to see real gross margin improvement absent your commodity costs and some things like that?
