Oil-Dri Corporation of America (NYSE:ODC) Q1 2023 Earnings Call Transcript

Starting with this fundamental focus on product quality, all this work preceded me, but as a company, I think we’re very proud as I sit here and look at Aaron, who you just heard from, enormously proud of the folks in our manufacturing facilities and the support that we’ve also gotten out of our innovation center in terms of driving fundamental product quality. And I think why would we be so focused on something like a dust index, right? Is that really that exciting? Well, it’s a key consumer attribute or really a key consumer dissatisfier. And I can tell you that other consumer attributes like clumping would show exactly the same sort of progress over the last several years. And that’s why on the third on the right you see a significant decline in consumer complaints below really kind of a targeted threshold of that 0.05.

Again, why does this matter? And I think it’s the old adage, right? Word of mouth is the best form of advertising. And of course that’s always been important, but in a — and I’m not telling you anything you don’t know, but social media around word of mouth has been an absolute, exponential multiplier and maybe a super spreader if you will of word of mouth, so particularly important in terms of our focus on the fundamentals here and product quality. Additionally, we are more longer-term focused on reaching absolute parity or better performance of our lightweight litter to heavyweight litter. I’d say we have a little bit of work to do in the clumping space, but overall, when we look across consumer attributes, we’re on our way and, and continue to look for further break or real breakthrough in addition to focusing on the fundamentals of product quality.

This slide you’ve seen and again, in terms of staying the course, we’re not going to apologize for that. Really the first two buckets here deal with our ability to help the customer, the retail customer understand the benefit of lightweight. And while the idea hasn’t changed, very proud of the team over the last year in terms of its ability to actually go in and model for customers how lightweight litter actually grows their profitability. And in a business that is, where the total value of the litter is 30%, 40% wrapped up in freight by being able to get 30% to 50% more product on a truck, the customer and ultimately the consumer win from that. And we’re going into major customers modeling that benefit, showing them why, whether it shows up on the buyer scorecard in some cases or it doesn’t in the case of other retailers, why that benefit of lightweight litter flows to their bottom line.

And then I’m going to speak in a moment to really amping up our consumer message on the latter half of the continuum around consumer usage and shopability and the benefits of lightweight there. This slide is really intended to trigger these last couple of ideas are not just about branded, but about raising both, as I talked about, raising both the private label business and the lightweight business together. So our innovation that, we’ll get into here in a moment, we’re looking to apply to both, our branded and our private label business and by moving from consumer messaging on the brand that we’re centered around the Litter For Good messaging to a message that focuses on lightweight, we’re really driving a subcategory benefit around lightweight that benefits our private label business as well as our branded business.

That’s really, as you double click on what we’re doing, the key changes in terms of our go forward plan on driving lightweight. Innovation, so we’re being a little dodgy or cagey or something like that here. These — the couple of big innovation ideas have yet to hit the street. I would say within the next couple of quarters when we visit with you all again we’ll be able to share specifics, but a couple things that we’re excited about and one, you might say, okay, a value branded plan and private label player, should you be innovating? Hey, we had innovated the lightweight litter segment over a decade ago, arguably with our partner, we innovated, the lightweight segment in coarse, more than 35 or 40 years ago in partnership with them, so really a great track record of innovation.

We have some product innovation that I can tell you and probably can’t tell you much more, but takes a fundamental category benefit and takes it to the next level in terms of how we can talk about it. And again, initial plans are to bring that into branded, but also use it as an opportunity to drive premium private label in the marketplace. And then, those are you that keep up on particularly consumer package goods specifically see a move towards packaging that hones in on the things about packaging that are particularly consumer relevant, the consumer is ready, willing to pay for, but strips other costs out and ensures that the value is in the sauce or in the clay if you will in this case. And we’ve got some things in the works that we’re studying very hard now from both a manufacturing perspective and of course a consumer perspective that we’re feeling very excited about, particularly as a value brand and a private label producer where we think that will have particular impact on driving value for us in ways that maybe the larger three brands could not.

Really lastly, and there’s a few slides to illustrate this, we are just getting rolling on shifting that message. And to be clear we’re very proud of our social platform around Litter For Good. It will continue to be a secondary message. I was comparing a couple of the brands have similar programs I can tell you that are impact. We can sit around this table and as shareholders and employees, you can be very proud of, we’re making a significant impact in our Litter For Good program vis-à-vis some others that are driving similar programs. With that said, the primary message is going to lightweight litter. It’s celebrating our performance. I showed you a few slides or a few pages ago that enables us to do that with the progress that we’ve made on core quality over the last few years.

And we’re doing it, this is kind of a typical CPG 360 degree marketing slide. It could be in other companies in a lot of ways, but we’re really emphasizing digital shopper influencers that I’ll talk about in a minute, social and e-commerce. And the reason, I talk about those are, those are all places where, I look at Susan. It should make her happy. We can measure return and really drive to I think the pop industry term right now is performance marketing. But we’re excited to drive the business in places where we can see reasonably immediate results. Start to see a little bit of copy. I’d tell you, this is actually temporary. We’re really looking to leverage our influencers, who are pictured here and really the Kitten Lady, it has been a long-term partner with over 4 million followers.

Dr. Evan Antin, almost as handsome as our CEO is not even close. We did a survey Dan, it was close. Dr. Evan Antin is newer to us, but both have driven the Litter For Good platform for us. But both and authenticity is important here, both are very much bought into the lightweight benefit as well, and we’re beginning to drive that content, which this is actually an illustration of that. So there’s Kitten Lady with over 4 million followers hoisting a bottle or a jug rather of our lightweight litter. We were going — I wanted to show a video. But in our kind of frugal culture Leslie didn’t want to spend the extra three grand to put that out there. Anyway, we feel very good about where we are in terms of developing some rich content around that shift to lightweight.

And you’ll start to see this out on the internet over the next quarter. So finally wrapping up staying the course and you saw the results that drive to why we’re staying the course. And yet, I think the big strategic takeaway is really tactics that drive both our branded and our private label business going forward, particularly around consumer messaging and importantly around innovation.

Amlan:

Wade Robey: Thank you, Chris and good morning everyone. It’s a real privilege to be able to speak with you this morning and to represent the Amlan and nutrition and health team globally. Very excited about the opportunity we have with Amlan to build another very strong element of Oil-Dri’s business, and really bring a tremendous amount of value to an industry that is in really great need of innovation as we continue to meet the challenges to feed a hungry world. As we — as I talked this morning, I want to focus on our North American team and really highlight one of the key regions of the world where Amlan has tremendous opportunity to grow our business. But before I do that, I’d like to start where we always like to start, which is the advantage that Amlan has being part of Oil-Dri and the legacy that the Oil-Dri Corporation brings to our business.