Arun Viswanathan: Okay. Thanks for that. And if you were to think again on this volume kind of progression that you saw in 2023, would you be able to parse it out into maybe what is related to destocking and maybe what’s related to primary demand. Just kind of curious how we’ve obviously had gyrations through COVID and supply chain issues, but it does appear that there has been some structural weakness on primary demand related to, and just wondering if that’s what it’s really going to take to see some improvement on that side.
Adam Greenlee: Well, I think in fairness, we need to get through the fourth quarter to really understand the full impact of destocking in the year. But I’ll go back to a little bit of what we said earlier that for our high-value Dispensing and Specialty Closures items, we are seeing significant growth in the products that we define as growth products, and that is driving benefit for the company from a mix standpoint. So really, I think it is back to food and beverage. I think we all probably can go right now based upon the expectations for the fourth quarter and do some math and get work to figure out what the destocking value was for 2023. But I think we’d rather sit here three months from now in January on our earnings call, we’ll actually talk about what we did experience from a destocking standpoint in 2023.
Arun Viswanathan: Okay. That’s helpful. If I can just ask one more on promotional activity. You noted that there has been an increase there. Could you just elaborate on that? Is it kind of broad-based? And we’ve also been hearing that the depth of promotional activity is not necessarily that strong, meaning that maybe the discounts aren’t as deep. What are you seeing on the promotional activity kind of incrementally that gives you a little bit more confidence?
Adam Greenlee: Yes. I think there’s a couple of things. One, we know the activities increased from where it was. So let’s start with that. And then we also know that the activity level is not what it was pre-pandemic. So I think there was a report out earlier in the week. It was pretty clear that one of the largest food manufacturers, CPG wise was – had their sales, 21% of their sales were on promotion versus pre-pandemic at 24%. So below pre-pandemic levels, however, up from prior quarters that had a lower than 21% promotion rate. So again, I’m viewing that as progress. And we think that largely, the market is following that kind of progression. I think the other item that you raised is the absolute price or cost of the product on the store shelves.
There’s been a lot of inflation that’s been passed through to customers. And what we’re seeing is, yes, there is increased promotional activity. The promotional value is not the same proposition that was provided to consumers pre-pandemic. And what we’re waiting to see now is how effective those promotions are. And that’s all happening real time right now in Q4. And I think as we enter 2024. We’re encouraged that the percent of product being sold on promotion is going up and approaching at pre-pandemic levels, and we think that will be a benefit for consumers and should, as it always has in the past, drive some volume activity across the segment.
Bob Lewis: Yes. Arun, I think I would take you back to the discussion that we had in the last quarter, and that was that we were getting the sense from our customers that this destocking was all about setting the stage for promotional activity. And we didn’t, at that point, didn’t exactly know when that was going to start. So if there’s a bright spot in this, I think it’s the fact that we are seeing the destocking begin and whether that’s just testing the waters in terms of what the ultimate program is going to look like. We don’t yet know, but the fact that the activity is there is kind of proof of concept, if you will, relative to the destocking activity.
Arun Viswanathan: Got it. Thanks a lot.
Operator: We’ll take our next question from Mike Roxland with Truist Securities.
Mike Roxland: Thank you, Adam, Bob, Kim and Alex for taking my questions. Adam, I just wanted to follow up quickly on a comment you made earlier about how your customers told you about how destocking going to occur later in 3Q. And ultimately, they pulled that forward, which you are not anticipating. Can you speak to how you get your customers’ forecast and the comments that they make to you or whether there’s been any change in your approach to that betting, given the disconnect between what’s actually — between what they’re telling you and what they’re actually doing.
Adam Greenlee: Yes, sure. And maybe just for clarity, Mike, I think as we were talking about the destocking activity on our last earnings call. The information was fresh hot off the presses. So there’s a couple things to think about and just to take that into context. Number one, I think remember many of our facilities were either co-located or near-located to our customers. We’re in their production planning meetings for the most part. So, we understand exactly what they’re planning to manufacture and they understand exactly what we’re planning to manufacture. So that level of the relationship has remained very strong, very transparent. We’ve got a really good understanding of what our customers are doing. I think the issue that we had is there were initiatives and objectives that were coming from outside of the location.
So think of more from a corporate activity with a year-end free cash flow number at our customers that they were targeting. So I think the disconnect was simply a timing issue that the corporate information from our customers was working its way down to the production planners. And at the same time, it was very much focused on the year-end metric of free cash flow and what their objectives were. And then the simple reality was, as those plans got embedded into the production schedules of our customers, they were accelerated. So versus what we were originally thinking, because the disconnect for us is we thought it was a year-end target, whereas they accelerated the timing and moved it earlier into Q3. So that’s just the reality of what happened.
I think we’ve got a good handle on it now and I think those programs are vetted through our customers. And the new item here is pet food and we’re continuing to work through that as we talked earlier.
Mike Roxland: Got it. Okay. Yeah. My second question I realized that it might still be a little early and I know you said you’re still working through all the budget details, but can you help us just initially frame the EBITDA trajectory for 2024? You mentioned the $20 million of cost savings you expect next year. You have the $10 million of closure plan headwinds that they’ll repeat. You also have the two new custom containers, customers you mentioned, which were all positives. But on the opposite end, you still have continued de-stocking, you have elevated inflation, especially in Europe, and you have higher resin costs. Can you help us with any other factors to be mindful of when thinking about the EBITDA trajectory in 2024? Thank you.
Adam Greenlee: I think you’ve got pretty much what we’ve talked about and what we’re thinking about at a high level at this point. So I think maybe the overarching statement I would make to that Mike is nothing has changed as far as our thesis on each of the operating segments as to where we think the kind of near-term and longer-term growth rates are for each of the segments. And we feel pretty good about that. We’ve got to get through this de-stocking. Whether it trails into next year in the first quarter, we don’t believe so, but we need to get through it and make sure we understand exactly what it is. But you’ve got the big moving parts to what we’re thinking about 2024. We then need to add how we’re viewing volumes as it relates to our customer programs for next year, that we’re still working through those details and will be frankly for the balance of the quarter.
Mike Roxland: Understood. Good luck in 4Q.
Adam Greenlee: Thank you.
Operator: We’ll now take our next question from Daniel Rizzo with Jefferies.
Daniel Rizzo: Good morning. Thank you for taking my question. I was just wondering If you could provide a little more color on why there wouldn’t be any de-stocking at all with the high value customers and with the high value products that are now kind of growing, it just seems that just what I’ve heard from other companies, this is fairly broad based across kind of the whole spectrum.
