Andrew Wolf : Okay. Let me ask you about guidance before I get back to Wendy with this, the more of the operations side. Could you kind of parse out the guidance reduction between — I think you said Q3, even though versus the Street, it was an upside was below your internal expectations. So between — versus internal, the Q3 miss and the — what you took down Q4, just to get a sense of where you think the momentum in the business is versus your expectations?
Lee Boyce: So in terms of guidance, just — and again, we kind of — as we went through — I mean, in terms of guidance change, the three elements, obviously, we’re personal care. So as we said, 85% of the business was growing, but personal care pace of stabilization there didn’t deliver against our expectations. So that was one piece. And obviously, we’re making overall changes, simplifying the portfolio and the operating footprint. The second piece Wendy kind of gone through this was really around formula. And based on the commitment from Perrigo, we expected to have more stable and dependable formula to meet the demand. So that was the other large element. And then the final piece that we’ve touched upon is really just kind of the execution in snacks. Snacks is growing, but it was not — it was short of our expectations. So those are the three elements that changed in the quarter that impacted our full year guidance.
Andrew Wolf : So just — I’d like to follow up on two of those. So Wendy, on labor did that also get impacted by supply chain? And do you mean like your co-packers were — you were shorted?
Wendy Davidson: No. So Flavor Burst, yes. Flavor Burst has been an outstanding launch. In fact, our production attainment is right at 100% of where we expected to be. So I feel very good about the supply on Flavor Burst. We’ve begun the distribution. We were in limited distribution really inside quarter 3. You’ll see that ramp up in quarter 4, and it will be available in lots of locations. So I’m expecting you to buy it everywhere that you see it. And then you’ll see it featured as a part of our Summer of Snacking promotion with multi-brand merchandising.
Operator: [Operator Instructions] We will move next with Kaumil Gajrawala with Jefferies.
Kaumil Gajrawala: The common theme, I guess, through this call or through the recent months has been on supply chain issues, whether it’s Veggie or Terra. So I’m just wondering, is there something different at the core of maybe how the infrastructure was set up earlier or how you’re changing it because it’s just — you seem to be relying on what might be a fragile supply chain, and many of the issues are linked to a lack of supply. So I’m just curious if there’s anything we should know about in terms of just maybe the like operating philosophy that used to exist versus what — how you’re approaching it now?
Wendy Davidson: Yes. I guess — let me clarify, we have one category where we have challenges in supply chain, and that would be in formula. The others are legacy supply chain issues that began during COVID that actually gave clarity around and visibility to issues that we had in our end-to-end supply chain. The work the team has done in the last 18 months has been to create a much more reliable and sustainable supply chain. And it’s everything from planning, production and delivery. We have best-in-class safety in our facilities in the last year. We have best in industry availability on shelf as measured by Sircana better than our peer set. And we have a much more predictable and reliable work that the team has done, all while reducing inventories in days on hand.
So when we said that we’ve had a lot of supply chain work, in this first year of Hain Reimagined, as a foundational year, we did focus on fuel, and that was both delivering productivity savings, but it was also ensuring that we have the foundations of the company to be able to enable consistent reliable growth. I feel very confident in our supply chain and whether that’s co-manufacturers, excluding formula, but whether it’s our co-manufacturer partners or our own manufacturing the team that’s been put in place to manage our supply chain, including our co-mans, is best-in-class. And I’m very excited about what that will do for us being able to go out to our customers and walk them through the reasons why we should have more shelf space of our core brands because they’re highly productive and we can assure them reliable supply on shelf.
Operator: We will move next with Anthony Vendetti with Maxim Group.
Anthony Vendetti: Okay. So just Wendy, on the 6% SKU reduction, and I know a lot of the SKU reduction is in personal care. I guess you said 62% there. Is that 6%, is that more than the normal SKU rationalization as you look at the portfolio? And if it is, where is it more than personal care, which I know is the significant portion of the SKU reduction? And then the second part is, if it is more, how is this different from sort of when Mark took over for Owen Simon, he put in a multiyear SKU rationalization. Have things changed significantly since then that’s requiring further SKU rationalization? I was just wondering if you could put that whole thing in context.
Wendy Davidson: Yes. Great question. I would say it’s two things. So is 6% more than we would expect in the average? Absolutely. And certainly, the 62% of Personal Care is much more than you would expect in any portfolio. I would view this less about peer’s SKU and much more around portfolio rationalization. So in terms of SKUs, we talked about the sort of regular brands portfolio maintenance. That’s going to be in Baby and Kids, a little bit in snacks and some of what’s taking place in in the beverage category is much more around that portfolio maintenance, where you just — you have underperforming SKUs in the tail, you move those out as you bring in innovation is sort of this normal ebb and flow. Personal care and plant-based meat free are much more significant.
And those are us recognizing that there are subcategories we really shouldn’t be in that aren’t productive. So it’s less about SKU pruning and much more about category pruning that’s more significant. I’m not familiar with the work that was done by Mark and team in the prior strategy. I’ve seen some of it, but I’m not sure what it was predicated on, but hopefully, that helps explain some of the things that we’re driving here.
Anthony Vendetti: Yes. And then maybe this is more for Chad. Chad mentioned first to mind, first to find. And then, Wendy, you mentioned that Terra chips is hard to find. How do you fix that? Or what’s the strategy to fix that since it’s obviously one of the brands you’re focused on?
Wendy Davidson: Yes. Let me start, and then I’ll flip it over to Chad, giving him credit for only being here for 4 weeks. But on the — so with Terra in particular, the challenges that we had, it’s a beloved brand that people see as unique and distinctive but because of the supply chain issue 2 years ago, the company rationalized where they were selling it because they couldn’t keep it on shelf everywhere because of some of those supply chain issues. So it made it very limited in distribution, which is why I mean it’s beloved but hard to find. We’ve worked really hard in the last 18 months to invest in capital to add capacity and capability on Terra that will allow us to control our destiny on the brand, and we’ve made investments around the brand campaign to support Terra as we go forward.
All of that combined puts us in position to take that brand love and make it available to the consumer where they’re shopping. But I’ll let Chad talk about the work that he’s driving and driving distribution expansion.
Chad Marquardt: Sure. So I think, first and foremost, Anthony, I think as Wendy mentioned, I think we’re now taking that story external in terms of helping them understand what we’ve done different as Hain in terms of our investments into our supply and that consistency of supply. In my first month, I’ve already been a part of now 3 specific snacks meetings externally with key customers, and they’re very excited about the future of Terra. Now it’s us working together on what that distribution build looks like based on their timeline, but we’re very excited for that future. And as Wendy mentioned earlier, we also will have a new campaign starting in ’25, really to start reinvigorating that brand love to a broader audience of consumers.
Operator: Our next question comes from Matt Smith with Stifel.
Matt Smith : I wanted to ask a follow-up question on guidance. The implied fourth quarter EBITDA margin takes a step back sequentially and year-over-year. Can you talk about the level of investment in the fourth quarter? Is that stepping up, or is the margin performance more a reflection of volume deleverage and maybe less benefit from pricing and productivity? Just trying to get a better understanding of margin exiting the year as we look ahead to fiscal ’25?
Lee Boyce: Yes. So a couple of things. As you go through, there is the margin deleveraging. There is — sorry, volume deleveraging, there is the mix impact of our formula just year-over-year in the fourth quarter, though, we are lapping a benefit that we had in international in the prior year as well. So that actually increased the margin percentage in Q4 of the prior year was a onetime impact. So we’re lapping that as well. So we continue to feel good about the margins overall. I mean, we talked about the productivity delivery, the $61 million that we’re seeing through. From an inflationary expectation, I mean, we continue to see some moderation there from commodity inflation. So again, I think for the fourth quarter, again, year-over-year is kind of the lapping of this prior year benefit that we saw.