Operator: Thank you. One moment, please. Our next question comes from the line of Michael Lavery of Piper Sandler. Your line is open.
Michael Lavery: Thank you. Good afternoon.
Chris Hall: Michael.
Michael Lavery: Just want to come back to the Michael Angelo’s sauce. Could you touch on how that’s sourced and if it’s through La Regina, and if it’s not, does it have favorability on costs or more volatility, or perhaps both? How should we just think about the cost profile and the supply chain for that?
Todd Lachman: Sure. Sourced through La Regina, no similar volatility that Rao’s sauce would have, but as I emphasized before. Michael, first of all, good to be talking with you, Mike.
Michael Lavery: You too.
Todd Lachman: It’s different formula though than Rao’s in regards to a lot of different attributes. It is important to highlight, Rao’s uses a very specific breed of Italian same rosada tomatoes, Michael Angelo’s uses, what we call just a vine ripened Italian tomato. It’s a shorter cook time, different sort of ingredient spec, et cetera, with the herbs and seasonings, olive oil, et cetera. That’s different €“ all different from Rao’s. That said, it is a slow simmered kettle cook sauce that’s highly different than mainstream/private label.
Michael Lavery: And would it be fair to say that it’s similarly attractive economics relative to its price point, at least where even if it’s still from La Regina, it’s got a different recipe and different things that allow for the €“ it’s got a better cost profile than Rao’s. Is that fair?
Todd Lachman: That’s fair.
Michael Lavery: And can you just touch on Rao’s share? I know you gave the volume share. If you had the dollar share, I might have missed it. But could you give that and then just remind us some of the seasonal drivers there, because I know your competitive set has different at least ways they approach it, that can drive some share fluctuations for you. Can you just remind us how to think about how its cadence can evolve that way?
Todd Lachman: Sure. We ended the full year at a 14.7% dollar share higher than that in the quarter. It’s interesting, you may €“ I’m so used to working on some other highly seasonal businesses like Halloween candy or even pet treats that I don’t really think of shocks, but it is, there is a seasonal element to it. So I don’t mean to joke, I’m just sort of thinking back, I’m like, my history just came flashing before my eyes in regards to all the categories that I’ve worked on. But, I mean, I think just like some, I mean, you’re seeing a little bit of a phasing more towards Q4 and Q1 colder months versus warmer months, but we still have a pretty darn robust business through Q2 and Q3. If you sort of look at the phasing of consumption data, all other things kind of constant now, it’s difficult because Rao’s is just on a constant uptick of increased awareness every quarter-on-quarter increased household penetration due to distribution.
But like for like category, et cetera, you’re seeing a little bit more in the Q4, Q1 than Q2, Q3, and Chris Hall is about to add something? No. Okay. I thought he was looking at me.
Michael Lavery: Great. Thanks a lot.
Todd Lachman: Does that help, Michael?
Michael Lavery: Yes, no, that’s helpful.
Todd Lachman: Okay.
Operator: Thank you. One moment, please. Our next question comes from the line of Jon Andersen of William Blair. Your line is open.
Jon Andersen: Hi, thanks. Thanks for the questions guys. Just a couple quick ones. Wondering if you could talk a little bit more about the gross margin cadence through the year. Are you expecting kind of a sequential gross margin rate improvement quarter by quarter as you move through the year? And then on the OpEx line, is there anything for us to consider when you talk about incremental investment spending behind brand building and R&D? Is there any particular kind of cadence to that or timing related factors that we should be considering as well? Or is it more kind of spread evenly across the year? Thanks.
Chris Hall: Yes, sure. Thanks. On gross margin, I think, the main point there is that at the majority of the increase, and there will be a strong increase in the first half of the year, year-over-year. And I think H1 will look more like H2 2022. And then as you cross over the year, you are €“ the inflation that we’re going to be seeing here in 2023, which is agro products, paper board, things like that that you’re hearing about tomatoes, for example, fruit. It really is spread pretty evenly across the year because it’s coming out of the new crop season that would have hit us across Q4 into this year. So the inflation mid single-digit pretty much across the year, we get the benefit of that pricing tailwind in the first half of the year.
So that’s how I think about gross margins. And then on EBIT and investments below OpEx, we have traditionally our highest €“ we’ve been more back half loaded our marketing efforts. I think you’ll see that’s going to be more spread evenly across the year. Other than that, I think, it will be pretty much the same type of cadence that you would have seen in prior years across our OpEx, but with a more marketing across the first half of the year as a percent of the total marketing spend.
Jon Andersen: Thanks. That’s helpful. One quick one follow-up. Just any color on noosa, obviously Rao’s is the crown jewel here and performing extremely well. I’m just wondering what your expectations are for and plans are for kind of noosa in 2023 and maybe how some of the TAM expansion work that you’ve done over the past 12 to 18 months are €“ kind of how you’re thinking about that at this point? Thanks.
Todd Lachman: Sure. Hi, thanks a lot, Jon. Good talking. This is Todd. So, a couple things, and we’re €“ so headline is we’re pleased with noosa. We grew the brand 0.3% net sales in fourth quarter. We’ve averaged now three years at about a 5% CAGR on the noosa brand, but a nice mid single-digit contributor, and I think I’ve mentioned this on previous calls. It has been quite honestly a really very good acquisition for us. Some of the areas you don’t €“ unfold visibility to is that dramatic improvement of profitability from when we acquired the business to call it a year ago pre-increase in milk pricing that really benefited us immensely and it’s sort of a turbo boost to help fund the growth in Rao’s. So noosa has been a real nice acquisition for us.
The dollar consumption growth very consistent around low to mid single digits all year, even as the full contribution from pricing increased. We’re going to continue to make sure that this brands and growth contributor. We did as we think we talked on the last call, we’ve worked in the promotional plan, et cetera to ensure that we’ve got consumption growth headed into next year. But it’s obviously the yogurt category is different and it’s unique in regards to its competitiveness. But noosa, as we’ve talked before, is a highly differentiated brand. It’s a taste led yogurt. We unapologetically talk that and trumpet that in regards to while other competitors are taking the taste out of yogurt or putting taste in. And that’s why it’s been a consistent, nice mid-single digit growth contributor to us.
And we have similar expectations for that business this year and beyond. In regards to the TAM launch on gelato, I’d say the headline there is the mix. The results have been mixed. It is done honestly well in a variety of customers and some customers hasn’t performed as well. Ice cream is also a different categories. We’ve always said that was a smaller launch from us difference than something than albeit this year as we’re launching pizza. But we’re constantly fine tuning. We’ve got a large variety of customers that have accepted the three new items that we’re launching this year, cookies and cream, lemon bar, and mint chocolate chip. So we’ve got a variety of customers now that have all seven of our items on shelf. But unfortunately have some customers that don’t have some of that ice cream on shelf.
And we’re going to continue to support that initiative, drive it forward, learn as we go not really a meaningful indicator of like our sales for this year or whatever else, but we think it’s an important one for noosa. So what else can I tell you there, Jon?
Jon Andersen: No, that’s great. Super helpful. I appreciate all the color and good luck going forward.
Chris Hall: Hey, Jon. One clarification on the sequencing of gross margin in the first half of the year. Just note Q1 historically, and will continue to be the lower margin quarter because it’s our highest promotional quarter. So I think the rate of improvement across Q1 and Q2 versus last year, Q1, Q2 will be similar, but we’ll still see Q1 as the lowest overall margin quarter for the year.
Operator: Thank you. Our next question comes from the line of Sarang Vora of Telsey Group. Again, Sarang Vora, your line is open.
