Ken Plunk: Yes. I couldn’t say enough positive things about what our procurement organization is doing to get ahead of some of these things. Sugar was double-digits a few months ago, it’s come down, it’s like I think it’s around 6%, 6.5% for us. But we were managed against that with contracts in place and we are in a good position to leverage where those prices are in the six months as well. So, we’re not locked into old prices and we’re able to react to that. So feel good about our position there. We’ve done a good job of locking in supply and cost on chocolate, which is probably the biggest commodity ingredient challenge for us and many others that use chocolate. The good news there is about half of that is it built in the contracts where we pass increases, decreases on to the customer.
But we have that well managed. If you look at Q2, probably on a net basis, we were slightly favorable in terms of inflation, deflation. As we look outward, it’s really focusing in on what inflation continues to do. I think you saw the latest CPI numbers are about 3.5%. I don’t know that anybody sees total inflation getting down to two anytime We’ll probably, food is doing a little bit better than that, more in the 2, 2.2. So, if I had to project out, I’d probably say net, net, we may see inflation of around 2% to 2.5% as we look forward. But we’re in good shape, where we need to be to lock in and protect ourselves.
Dan Fachner: I could just echo something that Ken said as well. Really proud of what that team is doing. Another area where we’re really transforming the Company, we brought in a lead for procurement about a little over a year ago and he’s just doing a tremendous job leading that group and helping us get better in ways that we needed to get better.
Operator: Our next question comes from Connor Rattigan from Consumer Edge. Please go ahead.
Connor Rattigan: So, Ken, you called us an inventory build in the quarter. I guess, I was just curious maybe how much of a tailwind was that inventory build? And were there maybe any other one-time items like pull-forwards or anything like that that drove the top-line? And just thinking about that in total, I guess, also, with all these new business wins that you guys called out, should we need to start thinking about the top-line as maybe trending back to that, pre-COVID mid-single-digit growth?
Ken Plunk: Connor, we talked about this in Q1, kind of the opposite effect, particularly in areas like frozen novelties where you’re in the winter months, but a lot of dialing back of inventory. And in the second quarter, I think as people look forward to spring and summer, we saw a little bit of that being trued up, which I think benefited us. We also like in frozen novelties saw really nice growth in Dogsters and in Icee novelties. Those were all benefits as well. And really some of the work we’ve done and Dan talked about this and improving on time and in full metrics with our supply chain changes, reduced some of the ODA fees that we were paying. So that benefited that sales number as well because those were deductions that we were taking in the prior year.
So, it’s a combination of a lot of things that are working well and worked well in the quarter. And hopefully, it’s a signal for what our customers kind of see as it relates to kind of the entertainment areas and people getting out and buying in Q3 and Q4 and in the spring and summer that the outlook is that they’ll see some improvement there. I mean, I know the consumer many retailers have been a bit stretched, but I think there’s some anticipation that some of that may improve. In fact, I know the outlook on travel is pretty strong based on something I read this morning. So, it’s a combination of many of those things that benefited us in the quarter.
Connor Rattigan: So, I guess also too in the sort of in the same vein, we’ve heard from numerous other reporters that there appears to be a widespread slowdown in foodservice traffic. And I know you guys called that out pretty substantially last quarter, but it was sort of noticeably absent from this quarter’s commentary. I guess, what are we seeing on year-end and this traffic still down and it’s not what do you think change?
Dan Fachner: Conor, we’re certainly in an interesting environment with consumers, right? I kind of call it like choppy waters or pickle customers. We had a great quarter, right? Q2 was a really strong quarter for us, and we didn’t see that nearly as much we did in Q1, but we’re watching it closely. We think that as we’ve said over the past three years, we have a product that is almost an experiential kind of product. And so, often you might cut back at the grocery store or in the basket, but you might still buy the group and I see on the way home or you might get a churro or you might get a pretzel as a reward or a treat, something out of the ordinary. We had a really good quarter. We’re going to watch the consumer closely. We’ll react to it if we see some downturn, but our teams are keenly aware. And again, I just call it kind of a little bit of choppy waters when it comes to consumer.
Connor Rattigan: And if I can just squeeze one more in real-quick. So, on the RDC, congrats on getting all three of those up and running as a big, big, long running accomplishment. So, I noticed that you mentioned only about 80% of product is flowing through that system. I guess just wanted to check-in on the remaining 20%. I guess, is that just going to take maybe a little bit longer to get through and that’s kind of what the puzzle is to get you down to that 10% distribution margin number or are you guys maybe growing so fast that you kind of just need that excess capacity?
Dan Fachner: Well, we need more capacity than just the three RDCs. We’ll probably use an additional RDC when it’s all said and done, not one that we own, but one that we use down in Florida market. But we still have some that we need to shut down. Trying to get that fine-tuned is one of those things that we’re working on right now. The team has done a tremendous job, and you can see it in our numbers almost across the board. But we will continue to shut down some of those other 3PLs over the next three to six months.
Ken Plunk: Yes. Connor, just a reminder, even with this new structure, there will still be maybe six to eight facilities that we’ll use to move product in and out, whether it’s 3PL regionally located. So, it’s not necessarily just going from where we were just three. There still be a few other facilities as well, but that 80% will probably build a little bit higher as we move forward also.
