And so we are anticipating that. We do think that our guidance, if it doesn’t reverse entirely as we expected, we’re still well within that range. And I think the reason why our range is what it is, is because there are some unknowns about the pace of that reversal as well as some of the specifics of the industry growth rates.
Jennifer Fall Jung: Yes, and I’ll just add on that. What we see in the inventory within our distributors as well, quarter-over-quarter, it continued to come down this quarter. So it’s well within where we target them. So there’s not a lot of inventory out there.
Sean Sullivan: And as Jennifer mentioned, in our deck on Page 10, there is a second half growth drivers outline that is probably helpful also in piecing together the other elements of your question.
Drew Levine: Okay, great. Thanks. And then just if I could have a follow up. Can you talk about the competitive environment? Clearly, industry growth has slowed. But are you seeing any pickup, I guess, in promotional activity or the wholesalers or retailers kind of asking you to increase activity behind the brands to kind of drive some demand? And that’s in relation, I guess, as well to the strong gross margin performance over the past several quarters. So any thoughts there would be helpful?
Jennifer Fall Jung: Yes, I think where you see more of the promotional activity is really in the value segment, so below $15 versus where we’re currently playing. And then from working with our distributors, we always have our standard promotions with them. We’re not hearing or receiving requests for additional promotions. And what you saw in the quarter was actually we maintained where we do play within that promotional cadence. And we’re also very mindful not to start, for lack of a better word, buying market share through increased promotions because that’s a hard model to sustain. So we’re on track with our strategy.
Drew Levine: Thanks so much.
Operator: Our next question is from Andrew Strelzik with BMO. Your line is now open.
Andrew Strelzik: Hi. Good afternoon. Thanks for taking the questions. My first one is on the margin side. And I was hoping you could elaborate on some of the key margin drivers in the quarter, in particular on the operating cost management that you referenced and how durable are your confidence that you can hold on to those gains for the rest of this year? Maybe if you could comment on whether you think kind of the 2Q SG&A levels are a good run rate or how you expect that to trend through the rest of the year?
Jennifer Fall Jung: Great, thanks for the question. I’ll start with margin. So we do believe that our Q2 margin was a high mark in the quarter based on where the sales landed and our trade spin landed, as well as there was a bit of mix underneath the covers from our different labels, which helped also support the margin. As we spoke about on the call, there will be pressure in the back half on margin based on we believe our trade spin will normalize and align up directly with our sales, which as you can tell are, as we mentioned, are in the low to mid-single-digit growth rate for the back half. So that’s what we expect on the margin line. From a cost perspective, coming into the year, we knew the industry was receiving a lot of pressure and we’ve been managing our costs very tightly throughout the year and we will continue to do that in the back half.
And you see that reflected in our adjusted EBITDA guidance above the midpoint of where our net sales guidance is. And really on the SG&A side or the op side, where we’re cutting back is really on non-essential items. We are not taking any costs out of the organization, which is supporting our growth. It’s really just being extremely prudent, whether it be back office headcount or travel, entertainment, all that kind of stuff that we’re just being very dogmatic about.
Andrew Strelzik: Okay, that’s helpful. And a second question, if I could, is on the acquisition. And I don’t know how much you can really speak to this, but to the extent that you are expressing more optimism on the Synergy side, what’s kind of underpinning that? And then is there any sense that the consumer environment and inventory management could change the cadence to which you think you’ll be able to kind of leverage Sonoma-Cutrer and the broader portfolio relative to how you had initially expected? Thanks.
Jennifer Fall Jung: Yes, thanks for the question. On the Synergies, when we announced the acquisition, that was our first draft going through based on the information we have. We’ve now had a few months to get a lot better information by partnering with Brown Forman and that’s where we’ve been able to go a lot deeper in terms of where we think we can grab some Synergies. And we’ll have a lot more to share on specifically what those look like on future calls. And then from a consumer perspective, no, that’s a great brand and we feel very confident about the acquisition, about how it’s going to play within our portfolio.
Sean Sullivan: Yes. And hi, it’s Sean. I would just, to Jennifer’s point, it is just the continuation of more work we’re doing and being positive and feeling good about what we’re finding as we continue to prepare for integration later this spring. And as Jennifer noted, with respect to the strength of the brand, the Circana data, for example, is out there and shows it continuing to do very well. And we think we’re going to be able to add further value once it’s part of our portfolio.
Andrew Strelzik: Great. Thank you very much.
Operator: Our next question is from Peter Galbo with Bank of America. Your line is now open.
