Mission Produce, Inc. (NASDAQ:AVO) Q2 2023 Earnings Call Transcript

Bryan Giles: Yes. And specific to your question about capacity absorption, when we saw during the second quarter about a 20% increase in our North American volumes, which really – that’s what consumes capacity within our primary North American distribution network. So yes, we’re seeing substantial improvements in how those costs are being absorbed through the network. If you look at cost in absolute terms, certainly, labor costs settled in at a higher level than where they were a few years ago. We think that it’s stabilized now, but it’s certainly at a higher point. To Steve’s point, transportation costs, whether it be ocean or over-the-road freight, that’s come back and off a little bit from its peaks in 2022 and back to a more normalized level.

I’d say ocean freight is still sitting at a level that’s a little higher than where we were in 2021, but much closer to that level than where we were last year. And then we’re even starting to see some reductions in some of our packaging costs as well. I think you can see signs that suppliers, vendors have more – they have more capacity available. There is more competition out there. And I think we’re starting to a small degree see some of the benefits of that in our results.

Benjamin Bienvenu: Okay. Very good. And then one more, if I could. Just thinking about your own production, you talked about your expected range for own farm production, nice growth year-over-year. Can you talk about kind of the drivers there that you’re seeing out of Peru? And then you also alluded to new sources of production out of Mission-owned farms down the road. Can you talk about kind of the development pipeline there and what we might expect?

Steve Barnard: Sure. Let’s say Peru for first point. Last year, we had a big crop, and we also had a size problem on the fruit. It was too big. We had 70%, I think, last year that was 36 is larger, which is a large fruit, which is harder to sell than a midsized fruit because they sell them by the each not by the ton. I was there last week, and the size curve has much improved. It’s only about 20% of large fruit versus 70%, which is a substantial improvement. And the other thing that’s very notable is that the crop is about 5 to 6 weeks later in maturity than it was last year as it is here because of the cold weather – cool weather, El Nino, a lot of rain here and there. So it’s a little bit – it’s not apples-to-apples here compared to a year ago.

It’s slightly tilted on the calendar, which can be hard to track if you don’t know all of the variables, but crops up. Demand is good, especially overseas. China, as an example, is looking at triple their volume from last year as a country. They have got smoothies at the young kids are eating as fast as they can. And now we’re coming out with a noodle soup/avocado promotion this summer with several retailers on across gross promotion. So we’re playing offense over there, and we’re seeing good results so far.