Tom Pigott: That’s correct. And I think part of the reason is that as you get into Q4, there’s less — our expectations based on our commodity outlook and our pricing models we don’t expect this on a PNOC performance year-over-year in Q4 versus Q3 and what we experienced in Q2.
Alton Stump: Got it.
Dave Ciesinski: In the retail business we continue to have the benefit of pricing. And the pricing as you might imagine in this environment is winding down. So, that’s going to continue to diminish during the period. We’ll continue to see favorability on the commodity side, but when you put pricing and the commodities together, that’s the reason why we expect to see this diminish marginally.
Alton Stump: Got it, great. Thank you so much Tom, Dave, for your help.
Dave Ciesinski: Thanks.
Operator: Thank you. And our next question comes from Robert Dickerson of Jefferies.
Robert Dickerson: Graet. Thanks so much. Good morning everyone.
Dave Ciesinski: Good morning.
Robert Dickerson: Nice to hear from you. I’ve got a few questions try to keep it quick. I guess just kind of on the back of your last comment on pricing in retail and how that kind of rolls off, which I totally get. Like could there be some kind of price deflation on year end in retail in the back half? I’m just thinking through maybe some credit investment needs given kind of a broader backdrop right now on the promotional side from a lot of companies within retail. And then also I mean it seems like there’s a little bit of a maybe a more challenged comp let’s say last Q3. That’s the first question.
Dave Ciesinski: Yes. So, great question. So, what you’re going to see is still some marginal pricing that plays through on the deflationary side of pricing. We started to see these trends of softness emerge let’s say in November and into December and really at that point in time Rob we started to put plans in action. So, for those of you that are tracking weekly data we went out on Olive Garden for example and we took our entry price point size of 16-ounce where at Walmart it had floated above $4. And we supported the price down into like a $3.95 price point I think it’s where at on the shelf right now. We also made adjustments. It was sort of a game time audible on Sister Schubert where we had planned actually to take our promoted price point from the prior year at two for $7 up to two for $8, predicated on the softness we are seeing out there in the consumer environment we actually communicated with retailers we wanted to roll back to two for seven, and obviously they were happy enough to honor that.
So that would show up as a decrease versus the prior year, but it was, let’s say, a decrease versus our own algorithm internally. Those are probably cases and points of other areas where we’re going out. We’re selectively looking brand-by-brand at the entry price point that matters is that our GAAP versus private label that matters, is it our promoted price point that matters and we’re putting support in there. So I think what you’re likely to see some marginal tick up in trade support. But you’re going to likely see some — hopefully some volume offsets on that. And what we’re trying to do is long-term, orient ourself towards household penetration, which we think is really probably the more important metric to watch when it comes to the health of the business.
And then again, just brand-by-brand go in and tune things up a little bit just to make sure the brand sits at a good place. Sister Schubert is an interesting one if I could go deeper. So we elected to take the promoted price point back down to two for seven. Parenthetically, we are also in the throes of going through the product down weighted on that where we went from 1.5 ounce per roll down to 1.25 ounce, which is pretty consistent with what the industry is anyway. We didn’t have one complaint during the season. And so, we were able to address lagging margin issues we had on that business as we had skyrocketed, but we felt like it was more important to watch our promoted price points. So that’s how we’re handling it. But back to your original question, which I think is an important one.
I would say marginal upticks on trade. But at this point given our categories, we don’t see a wholesale reset. A work for a long time for Bill Johnson and he had this saying, profitless prosperity. And I think we’re all just somewhat cautious about where we are investing and chasing things down. So we feel like watching household penetration is a good strategic way to think about this and then making those investments that really protect for the short-term and the long-term. So, you ask a short question, I gave you a long answer. I apologize.
Robert Dickerson: Yes. Yes. It’s usually the other way around. I appreciate that. Okay. And then, I guess when I look at your dressings and sauces business, which clearly has the higher margins clearly been going great for you kind of over like — over time it seems like there’s maybe like a little lift with the launch things do well. But at the same time, it seems like recently maybe the frozen breads are kind of driving more of the growth than dressings and sauces. So, I’m just curious like the licensing dynamic has been going great for you in retail. At the same time, like have you seen any recent shifts in consumer behavior, like I totally appreciate your prior comments on some of the price pack architecture and driving household penetration that’s key.
But at the same time, I’m just thinking like we keep hearing kind of value-seeking consumer, that’s maybe buying more, I don’t know frozen dinner rolls and they’re buying amazing maui subway sauce, I don’t know — you got.
Dave Ciesinski: Yes. So it’s — no, this one is a bigger question. So I’ll try to keep the answer crisp, because I know we’re on a time line here. Maybe we’ll take them category at a time. I think we’re in a season where New York Texas Toast is particularly relevant, because that spaghetti and meat sauce meal occasion is a good value for consumers. And our team has done a nice job of using digital marketing to make sure that we’re working with our big retailers to try to get into that basket. So, on — for example, on one of their shopping apps, if they see pasta going in and pasta sauce going in they’re going to be presented with — sometimes it’s just the brand not even a coupon and what we find is that there’s really solid conversion on those occasions.
But on toast, highly relevant in this season. On rolls, I think we — there again, it’s relevant. I don’t know in the case of Sister Schubert, if I would say that, wow, it’s right in the sweet spot of a recession if we ever got there like toast is. But I would tell you, as consumers eat it home, it’s a great product and it rounds out the rest of a great meal occasion. On our sauces, I think where we’re seeing some cases of trade down. We’re not different than any of the others. What you’re seeing is a trade down from traditional food into for example, the mass merchants. In some cases mass merchants down into discounters some larger sizes to smaller sizes. Affluent consumers are going to club. So we’re seeing a lot that and we’re sort of monitoring that as it goes.
