Arun Viswanathan: Thanks.
Operator: The next question comes from George Staphos with Bank of America. Please go ahead. Your line is now open.
George Staphos : Thanks so much. Hi everyone. Good morning. Thanks for the details. Andres, again, congratulations on your retirement and everything that you accomplished at OI and the support of our research.
Andres Lopez: Thank you.
George Staphos : I guess, I want to come back from – to the extent that your customers had a view on this. What was the reason in your view that March wound up being a little bit weaker than anticipated? You’re not alone in that regard, not trying to pick on OI. It seems like March was a little bit softer than expected even when adjusting four days for a lot of our companies. What was your customer base saying in that regard? And why you feel comfortable that things do in fact improve into 2Q? The second question, again related to what your customers are saying and to some degree, you already covered it, saying it’s too early to call it perhaps is that, as you look out the next couple of years, what worries you most about the volume outlook?
What gives you the most confidence in the volume outlook? Destocking – with the recovery from destocking, consumption and/or its recovery and/or changing consumer taste. There has been some discussion in the trade about change in consumer taste, trade down and consumers moving away from traditional spirits. What are your customers saying in that regard relative to your demand outlook? Thank you.
Andres Lopez: Okay. So, it’s difficult to know exactly what happened in March that there are some things that might be impacting the numbers. For example, customers taking the opportunity to drastically reduce inventories before quarter end. And the other thing is that some of the customers have a fiscal year that is- it was ending or about to end. So, most likely they are taking actions related to that and then will have a more normal operation going into the second half of the year. Because of the excess capacity at this point, we expect that the typical seasonal demand that we see wouldn’t necessarily apply, because customers have access to product right away. So they didn’t need to fill in advance or buy in advance and fill in advance to be prepared for the season.
So, those are some of the reasons, but it’s difficult to know. I think what’s encouraging for us is that April has been a lot better than March and certainly better than Q1 too. So that’s reassuring that we are in the path at to improve. Now, obviously, we find it exactly that based on the timing is a little difficult. When we look two years out, there is some talk about changing in trends, but we still got to see that materializing. As we’ve seen before, some trends come up and then disappear too. They fade away. So it’s a little early to talk about that. I think, what’s good in our horizon is, while we are in the or in a significant volume slowdown at this point, the company is in a very good place operationally and our operating leverage upside is very large.
So, as volumes come back, we’re going to ride the wave. It’s going to be positive.
John Haudrich : The one thing I would add and that is, when we brought this point up in the last call is our pipeline for new product development is very, very strong. So to us, that is a signal from our customers that they are looking to invigorate their brands and bring them forward and address whatever changes in consumer taste and trends that are out there. And, and like Anders said, it’s a very volatile environment and then you go back into the pandemic and people were drinking very significant amount. Now, there’s a little bit of softness that you referenced and it’s very difficult to find out what is a longer term trend and what is a reaction to a different environment. So, time will tell.
Andres Lopez: And that activity on NPV is in all segments, in all geographies and it’s a lot higher than we’ve seen in years. So, and it’s both initiated by OI and initiated by the customers.
George Staphos : Thank you, John.
John Haudrich : Thank you.
Operator: The next question comes from Anthony Pettinari with Citi. Please go ahead. Your line is open.
Bryan Burgmeier: Good morning. It’s actually Bryan Burgmeier sitting in for Anthony. Thank you for taking the question. Maybe just following up on Arun’s question, if I think about OI, having maybe about 10% of capacity on the sidelines this year, when does that start to create some risk for year-end pricing negotiations in Europe? I am just thinking about sort of a historical relationship between curtailments and price and I guess, does this level of curtailments usually support flat to positive price for OI.
John Haudrich : What I would say is at the end of the day, it comes down to balancing your inventories and making sure that the inventory situation is in the right place for whatever the market conditions are. And at OI that’s what we are managing to is to make sure that our inventories in the year in a reasonably snug position. And I can’t speak for the broader marketplace, but we believe that that is the most important thing that we as a company can do to position the company for future success.
Bryan Burgmeier: Got it. Got it. Makes sense. And maybe, George just touched on this. But I’m just wanted to dig into the trade downs that you flagged in the prepared remarks a little bit. I’m just trying to think if it’s – are you referring to people may be moving from wine to beer. Is it moving from a higher end bottle to a lower end bottles or moving from glass to a different substrate. Just any detail there. Thanks. I’ll turn it over and good luck in the quarter.
Andres Lopez: Yeah. So the trade down activity is concentrated in some markets. So it’s not everywhere and for the most part, it’s linked to promotional activity. So every time customers move forward with significant promotions, those are typically in a lower cost package and that’s where the trade down happens. But we’ve seen also in some of those markets a start of a rebound and the consumption of glass, for example in April was positive year-on-year in markets that presented that before.
