Dave Ciesinski: No, no. I think when we’ve done these in the past Andrew and we’ve done a handful. I mean, we haven’t done a ton of them. But ordinarily what we’re doing is we’re moving into the industry standard we haven’t done these where we’ve led the industry down. So we’ve certainly conformed. Now on Sister Schubert which is one where we made those adjustments I would tell you if I look at the category trends the period ending at the beginning of November, October 29 the 13 week in the four-week period last four weeks or so it’s continued to perform better than where it was before that. So I think this is an occasion with a little bit of tailwind and I think that’s a question that Rob was asking. So we are seeing just given the environment a little bit of tailwind and we’re getting our fair share of it.
Andrew Wolf: Got it. The last thing and this will be just a follow-on to that. So I guess better — the sharper price point helps the units. How is the per unit profitability for you and for the retailer like profit pennies — pennies per item?
Dave Ciesinski: Yes. Penny profit? I would tell you from the way we’ve talked about really with you guys is more in terms of our margins. And I think the margin story on retail is the important point and you can infer that we’re making more profit per unit because the margins are improving on those. Retailers what I would tell you is what we’re not seeing is them margin up on us. So I would say there’s no reason to think that their penny profit is changing in a big way. I think as we were looking at other categories, in the event we were working against private label heavily. I think the watch out is there’s a propensity sometimes for them to margin up on the brand as a means by which to drive incremental penny profit off of a branded player and then drive trade down to private label and if they have their price point architecture right they can win there as well.
In most of our categories you roll through produce that’s not an issue. If you look at our sauces and licensing not much of an issue. You move around to our bread items it’s a watch out, right? If you look at our frozen noodle business not much of an issue in there. So if I had to guess their penny profit I would guess it’s pretty consistent. But I think if I was working at one of the other mega cap CPGs where Tom and I worked together we may be thinking differently about this. Is that — my guess is that’s a hammer that they’re using to get their big brands to conform to their aspiration.
Andrew Wolf: Okay. Well, it sounds like you guys are managing that those category situations pretty well. So thank you.
Dave Ciesinski: We’re certainly — we’re doing our best. And I think your point is an important way to think about it too with some of these brands because you have to — for all of us on — this side working at manufacturer we need to put ourselves in the shoes of our big retail partners. And I think the corollary is they can make more penny profit per item, but if they’re not careful they trade consumers down and they drive their category down which they usually don’t like as well. So it becomes kind of a holistic story which is what’s the overall health of the category? What’s the health of their shopping basket? And then what’s their penny profit like.
Andrew Wolf: Got it. Thank you.
Dave Ciesinski: Of course. Thanks, Andy.
Tom Pigott: Thank you.
Operator: Thank you. [Operator Instructions] Our next question comes from Todd Brooks of the Benchmark Company.
Todd Brooks : Hey, thanks, and good morning to you all.
Dave Ciesinski: Good morning, Todd.
Tom Pigott: Good morning.
Todd Brooks : A couple questions for you here at the end of the call. First, and thank you for highlighting on the PNOC side that this becomes more the C than the P going forward. If we look at retail pricing, Dave in the past you’ve talked about not necessarily chasing incremental volume by lowering pricing. And I’m just wondering flipping what you just said about your retailers not looking for incremental pricing increases from you. If you look at customer elasticities now at retail, your thoughts on holding the price. It looks like if you normalize the volume trends, volume trends are pretty good, which I think would argue that maybe there’s some confidence in the ability to hold pricing at retail going forward, but would love to get your thought on that.
Dave Ciesinski: So if you look at 52.13 [ph] down to four or five weeks. Obviously, you can see the tension on consumers elasticities. So that much is readily apparent. The elasticities on our products just aren’t such that you drop a list price you’re able to get it back. You can’t make enough you can’t move enough volume. What we find is that there are certain occasions like on price points where if we can get below a cliff, you can get significantly more benefit than you might imagine just in the simple elasticities. I’ll give you — I’ll go back to the example that we provided around that $4 price point. Our elasticity models probably would have predicted a pickup of X, and we saw a pickup on that move that was somewhere so far between 2.5x to 3x of what would have been predicted.
So in that case it made sense. And what we also try to do in those conversations with our retailers is, obviously, we’re at the table with them and we’re trying to figure out how to make the — our brand healthier, but also make category healthier. And in this case, our customer partners said, hey, if you’re willing to make this investment, I’m willing to make some investments and give you in caps. So what you’re likely to see for a brand like Olive Garden, which I mentioned here, but some of our other brands is you’re going to see more support in the back half of the year on things like in cap, where if we can make a reasonable investment and get support in things like in cap feature and display, there again, you’re going to get far better performance than your elasticities would necessarily project.
So that becomes part of what we’re trying to do right?
Todd Brooks : Yes. Absolutely. And then my second question, and obviously, we’re all surprised by the gross margin performance in the quarter, which was great to say. I guess with the magnitude of the bounce back. In the past, you’ve talked about listening getting back to 26%, 27% gross margins without a meaningful correction in commodities would be difficult to do. We’ve seen a correction. I don’t know if it qualifies, as how you would label it meaningful. But with the magnitude of the lift that we saw in Q2, can you just talk a little bit longer term about your thoughts in this type — if we stay in this type of commodity environment that we’re in right now, what do you think the gross margin potential for Lancaster is? Thanks.
Dave Ciesinski: Well, what we said is our aspiration is to get the business to the midpoint of our peers. We still think that’s doable. As it pertains to deflation, this is a tricky one because as go soybean oil, goes a big piece of our business. And we’ve seen the more recent pullback on the Board. And I think what we’re asking ourselves is, is this likely to stick? What drove this up early on? And Todd, I know you and I and others had conversation together was a policy shift towards renewable diesel fuel. So all of a sudden, we saw incremental demand for soybean oil because it was being moved over to diesel fuel that we’ve seen a pullback. And the policy hasn’t necessary change. But if you look at the board today going out to 2025, it’s depressed out to about $0.44, so off a couple of cents versus where it is.
What we’re trying to figure out is that because that’s a correlation between a fall off on let’s say crude oil which is also soft and you guys are looking at it as much as we are, what’s that trading at about $76 a barrel today, right, or is there some sort of anticipation that after another election, we may see a policy change. It’s just really hard for us to guess. But I think in order for us to get — to revert back to that point that you’re talking about, we’re going to have to believe that there are structural reasons for oil to remain low, both on the — or soybean oil not oil, but soybean oil to be low both on the board and on basis. And once that date comes true, I think yes, then, we’re going to have more confidence to say a lot of this cost that we’ve taken out structurally is going to come off.
