Riyals McMullian: Yes. So as we said, we do expect gross margin improvement this year. And you’re right, some of it will be the commodity moderation. There’s puts and takes there. Flowers better. There are some other cost buckets that are up. But net-net, we expect to see overall gross margin improvement to that. And frankly, also aided by all the things that you just said, baker of the future delivering better OEE results. And then some of that will — what we’ve experienced is that’s been somewhat offset by primarily labor. And that is some of that stranded overhead costs showing up. And again, I want to emphasize that’s temporary because we will refill that capacity and eventually, that will go away. But right now, it is a little bit of a strain.
And then as you move down the P&L, thinking about marketing and ERP costs, little bit of labor and SG&A to that where some of that stranded overhead shows up is what’s pressuring the EBITDA margin line a bit, at least at this time, though. Again, we expect, as we go through the year and then particularly into ’25 for all of those things to improve as we refill that capacity and cover the stranded cost.
Mitchell Pinheiro: You’re a little cautious on the second half. You just talked about it a question before about promotion, the potential for maybe a little more promotional environment. But you guys have invested in your promotional management tools. Can you talk about that as it might apply to the back half?
Riyals McMullian: Yes. I think it’s a great question. And it’s timely because that really showed up in the fourth quarter. If you look at the syndicated data, you’ll see, as I said, that we had among the highest average prices in the category. And yet our units on promotion were up a bit. We did promote more. But we did so much more effectively and with much less trade spend than we might have historically needed to use really good display execution in support of those promotions. And for the first time in a while, actually saw a nice lift and got a good return off of those promotions. And for the past few years, we’ve been talking about how promotions have not been very effective, not seeing a lot of lift from them. But in the fourth quarter, for the first time in a while we did. So that trade promotion management tool that you referenced is enabling us to be a lot more effective when we do promote.
Mitchell Pinheiro: Okay. And then anything to call out from a geography performance point of view? Were there any geographies that were stronger than you expected or weaker in the last quarter?
Riyals McMullian: Yes, not stronger and weaker than expected, but we continue to really do well in the Northeast. It’s a great growth market for us. We’ve talked in the past, Mitch, about what a share point is worth up there, some $35 million or so at retail, and we still got a lot of room to grow. So when you think about opportunities for future growth, whether it’s there, Pac Northwest, still on the West Coast and in particularly the upper Midwest where we’re really not present. We’re excited about the prospects we have in front of us. Retailer excitement about having us move into those areas, et cetera, bringing Nature’s Own, Dave’s and Canyon to those consumers. There’s still quite a bit of headroom left for us.
Mitchell Pinheiro: And then I guess last question on your comments in the prepared remarks regarding M&A. So are you at the point now where you can kind of see pass the obviously, the ERP implementation and just the general — your investments, are we at the point where a more meaningful acquisition besides just the Papa Pita is in the works or contemplated? Or are we still a little bit a ways away before we want to make a bigger commitment?
Riyals McMullian: No, we’re ready when the right opportunity comes along, and that’s the key is what will that opportunity be? And when will it come? But when it does, we’re absolutely ready to go. We’ve got plenty of dry powder despite all the things we have going on. We certainly have the capacity to do a meaningful acquisition. And as we said in the prepared remarks, we’re very proactive. I’m more optimistic about M&A activity, seeing more founders and sellers that we talk to contemplating transactions. Don’t know exactly when they’ll come, but when they do, we’ll be ready.
Operator: Our next question comes from the line of Connor Rattigan with Consumer Edge.
Connor Rattigan: Yes. So we heard some other reporters to see so far this season that the breakfast occasion has remained remarkably resilient in food service channels and away from home with maybe some more weakness in the at home. I guess, have you guys seen any different levels of elasticity like Dave’s part or product types across your portfolio? Or maybe within the category at large.
Riyals McMullian: Connor, it was a little tough to hear you, breaking up a little bit, but I think I got the gist of it. But simply put, elasticities have remained below our forecast and below historic levels kind of across all those channels you mentioned.
