Lancaster Colony Corporation (NASDAQ:LANC) Q4 2023 Earnings Call Transcript

And both of those conversions happen pretty closely to each other, which drove cost issues that were enumerated during the course of the call. We don’t expect those to continue as we press forward. So as you’re thinking about the cost structure, one of the things that I wanted to sort of steer you from is that those cost issues that we ran into associated with the SAP cutover and operating at full speed as well as the startup and those 2 things interacting together, we expect to be one-timers that’s stung us in that quarter.

Andrew Wolf: Okay. I didn’t want to hog the call, but I want to ask a follow-up since you brought it up. When you talk about cost advantage, I assume it’s greater at Horse Cave for Foodservice, given the single item pack and if you automate that at a greater scale. Just a relative sense is that where you get margin-wise, is that where the margin improvement is on a relative basis greater than versus retail or even an older production facility can still scale up pretty — there’s just more relative scale even on an older facility at retail. Would I be thinking about it right is — in other words, the Horse Cave is going to give more relative margin improvement to the Foodservice side than retail.

Dave Ciesinski: It’s going to provide margin improvement on both facilities because if you look at it, take retail, for example, most of the bottle lines that we have in our other facilities are a little bit older, this facility operates at bottle speeds that are, in some cases, 2x or a little better than what we’re running at other places. And it’s more automated end-to-end in terms of reliance and labor. So in retail, it’s going to give us an advantage because of the speed and the scale and the automation and the same thing is going to be true in Foodservice.

Operator: Our next question is coming from Alton Stump of Loop Capital.

Alton Stump: Just wanted to ask you about the Texas Roadhouse deal, obviously, is coming out in the spring. So you probably can’t share too much. But I guess how much of a role did the new capacity that you now have on line with Horse Cave play in your ability to take on new partners such as Texas Roadhouse.

Dave Ciesinski: Well, Alton, it’s a great question. It’s certainly a consideration. What I would tell you is that it didn’t really factor into the discussions that we had with them. This is another one where as we’ve developed a reputation in the industry or for a competency around licensing, it’s just developed into conversations. And this is one that came to us inbound. It was actually recommended the way it went was Texas Roadhouse talked to a customer expressing an interest in an idea and that customer referred them to us, and that sort of germinated into a conversation that went on for a while as we explored how we thought we could go about this. So the capacity availability was a consideration, but not a very big one in this case. For us, it just allows us to do it far more profitably than it would have been otherwise.

Alton Stump: Understood. And then just as a follow-up to the end, you mentioned the word inbound, which I’m certainly not surprised everybody in Russian industry as, which you well know is watching what Chick-fil-A is doing, and I’m sure they’ve all taken note of the huge growth that they’ve seen with you guys with the licensed business. I mean, how much of an impact has that had on the number of inbound interest calls you’re getting from other major operators in the QSR and/or casual sectors?