Operator: Our next question comes from Andrew Wolf from CL King. Please go ahead.
Andrew Wolf: I wanted to ask a revisit on the gross margin. Could you tell us either if it’s gross price, how much price was in there or net of mix? I don’t know how you guys communicated about that, but you did, I think, in the release call out price and mix, first listed it first, which often means was the biggest contributor. So, I’d just like to get a sense of that versus maybe volume?
Ken Plunk: Yes. Well, let me see if I can answer that in a few ways. One, I want to be clear, each of the three segments had positive volume growth. So, units were up in all three of the business areas. Pricing that we’ve been taking with the exception of the pricing we take every January with Icee, and I think we took one in January with Dippin’ Dots. The other pricing is more surgical. So, we’re having to do a few surgical things with chocolates, we’ve done some with sugars, but nothing wholesale. So, when you think about margin for the quarter, I don’t really have it kind of broken out Andrew, or I could say this much as price, as much as this. I can just tell you, that when we kind of walk through it, it’s a combination of really all of the above.
The new business we have in Churros is driving really good margins for us. We’ve really done a lot to improve the production efficiencies in our bakery facilities. That is improving margins on bakery items. Some of the automation we put in is also starting to drive benefits in that way. So, we’re just finally getting to the point where these initiatives we’ve had whether it’s procurement, whether it’s operations, whether it’s margin management and sales, and we manage mix and the products we grow. That is all really working nicely together to get us to the margins that we reported this quarter.
Andrew Wolf: I just wanted to ask on, I guess, Subway. It looks like they started announced it sort of mid to late January and at least from my observation started advertising pretty heavy later in the quarter. How should we think about the just kind of, because you gave us a number for Subway, how that run rate can — is that understated as a run rate? Or do you think there was a bunch of trial and maybe like how should we think about the $6 million or so in sales you called out going forward?
Dan Fachner: It’s a great new piece of business for us, Andrew, for sure. I think they’re still dialing in on what that means even to them. The positioning of where we’re at with that Churro is great. It’s there’s three tiers to the foot long pricing and we’re at the bottom tier of that. And we’ve been able to because of kind of foreseeing the need in Churros and the new lines that we’ve had, we’ve been able to keep them in stock where a couple of the other areas struggled with that, which might even turn out to be an opportunity for us in some ways. So, I think they’re still dialing in on it. I don’t know that we have an exact number that we’d be able to guide you with that particular customer, but we love the positioning and believe that we have some opportunities with them internationally even.
Operator: Our next question comes from Robert Dickerson from Jefferies. Please go ahead.
Robert Dickerson: Dan, you said a lot today. Business is doing great. So, congrats like everyone else has said. I guess question I have, you kind of make these comments about like portfolio positioning and kind of indulgent treat that frankly a lot of your products are still affordable. As was brought up before, lot of companies talking about some pressure in food service, restaurants, et cetera. But at the same time, you’re saying, there are a lot of new business wins like Subway comes up, Plunk said in the prepared remarks, like handhelds, frankly, gross was off the charts because the new mass merchant business. Dave & Buster’s you’ve spoken to before. Dippin’ Dots sounds like it has a nice little runway even through the back half of this year.
So, I’m just curious like would you characterize this as like demand broadly in the market could be a little softer in different parts, but given our product portfolio and these new business wins, that clearly, we’re doing better. And then also I’m curious, as you talk to the retailers, are the retailers saying, yes. Like, we really haven’t seen this office in your business. So, absolutely, we’re going to blast that out in all our C stores. I’m just kind of trying to navigate kind of like why it’s doing better, and then also combine it kind of with this new business upside potential.
Dan Fachner: Well, I do think you hit it on the nose there, Rob, and good morning. Thanks for the call. I do think you hit it on the nose though. Our business is diversified enough that, one, we are an indulgent and we’re a treat and a reward. And so, I don’t think we get as impacted as some of the things that are more staples that people are cutting back on. And I love what our team is doing with innovation and new products that we’re releasing that are selling really well. And then kind of the third leg to that is the sales team bringing new opportunities to the business, which is something that we’ve been driving on. It’s really part of the strategy that we have been laying out over the last three years or so, and it’s really come into play.
And I talked about cross-selling several times and even got the questions, can you really make that happen because it’s not easy to make happen, but it is happening here at J&J. We’re seeing the sales team really work with one another to be able to bring new products and their customers that we deal with today, and they’re working really hard at it. I’m proud of the sales team. I’m proud of the marketing team and the way that they brought innovation. And I think we have the fortunate thing of having products that are indulgent treats, that are experiential and all of those are working together. The consumer is a concern. We would, Ken and I aren’t sitting here being naive that it’s soft out there in some ways, but that’s not an excuse for us not growing sales.
And that’s what you would hear within our organization. We’re going to continue to drive other areas even if it is soft out there.
