Brian Holland: Appreciate the color there. And then I wanted to ask about, within the Atkins brand, the bifurcation between channels clearly on whole, it looks like new buyer growth did increase in q1. So I guess that would I presume that’s overweighted towards the E commerce channel. So I’m just I guess maybe two points on this one. So clearly, this isn’t about consumers who were buying in one channel or now buying in another, it seems like you were picking up new consumers in the E commerce channel. So what are you learning about the composition of that consumer in that channel towards the actions branch? And how strategically do you think about the placement of the Atkins brand going forward as a result of this ongoing momentum in e-commerce
Joe Scalzo: Yes, so interestingly enough, most new buyers come in to Atkins in brick and mortar. And even though the business has been flattish, in the quarter, we still saw strong new buyer growth, which then points to the executional issues around buy rate on snack bars and confections. So we’re going to try to get that fix the growth on Amazon drives by rate, believe it or not, so people, and in general, most shoppers tend to be multichannel. So they’re brick-and-mortar shoppers who go over into e-commerce and Amazon and buy more. So we’re very, very targeted about how we think about that. So and within, within those shoppers that are a multi channel over an Amazon, there are a handful of people that drive a lot of that volume.
So we’re very targeted in our marketing approach over there, encouraging purchases of that consumer group that’s very valuable to us. So when — and when we do it, right, we don’t cannibalize brick-and-mortar at all. So we’re, I would take we have a really good team there. marketing science standpoint, they’re relatively sophisticated. We know what we’re doing in that channel. And they’re and we’re seeing nice impact of our business. And, Frank, I just want to point out that’s a benefit of having bought Quest. Quest is the number one bar on Amazon. We have a strong relationship with Amazon because of that relationship. We’ve learned a lot about how to market on that channel. We’re applying those. We’re applying those learnings to the Atkins business.
You see Atkins is sitting online at around 13% of sales and Quest is around 24%. So we have a lot of opportunity, as we get smarter about how to market Atkins online.
Brian Holland: Great, thanks. I’ll leave it there. Best of luck.
Joe Scalzo: .
Operator: Thank you. Our next question comes from the line of Rob Dickerson with Jefferies. Please proceed with your question.
Rob Dickerson: Great. Thanks so much. Just kind of broader question longer term margin potential. We obviously understand the drivers have kind of why the gross margins pulled in EBITDA margins, obviously held in a little bit just kind of given the flattish year-over-year SG&A. Yes, as you speak to kind of back half of the year gross margin, potentially up slightly year-over-year given benefits to ingredient cost, realize you’re not speaking to ’24 Q1 ’23. But again, just to kind of reiterate sort of thing I’ve heard you say before kind of that path to get back to, let’s say, the 40% gross margin, I just want to clarify that that is really contingent, I guess, on demand, but now you have the pricing as ingredient costs come down.
Are there specific needs you foresee in potential increased promotional spend or trade or what have you, that would prevent you from getting back to that kind of 40% range or no? It’s essentially hey, if ingredient costs come down, we have some pricing and the demand is okay, then yes, I mean, the expectation is we get back to 40.
Joe Scalzo: That’s just the ladder. So we have — Rob, we — look, we going into this year, we had to make a choice based upon what we believed about what would happen in the future, right. So the first thing is, I have been and we have been very concerned about the economic environment that consumers are facing. Why? I don’t think we’ve declared recession. There are a lot of recessionary factors that are out there that consumers are clearly starting to react to, and have been reacting to. So when we were seeing the cost inflation coming towards us as we moved into ’23, we made a choice to try to balance our margin desires with not cooling demand, unit demand off too much. So as opposed to pricing to get back to total gross margins, we price to cover the dollar cost of ingredients, and packaging inflation.
So and with a fundamental belief that we could do better from a consumer recruitment standpoint, not cool off our volumes, keep our velocities on the shelf better. So we made that trade off under a fundamental belief that ingredients and packaging wouldn’t stay at these historic highs for a sustained period of time. So that’s our belief. And the good news is we’re starting to see you can see it in the spot markets, we’re starting to see in some of the negotiations that we’re having in the second half of the year, we’re starting to see those ingredients come off those high. We would expect that to continue to play out over time, right? Do I anticipate that we will have to spend it back? What I would tell you is we’re always — as margins, get back to 40, 40%, our ideal, our ideal shape of our P&Ls 40% gross margin, 10% spending and marketing support, 20% EBITDA margin.
Ultimately, that’s where we want to be. So we’re going to be making investments back with that profile. As we get back to 40% gross margin, we want to get back to that profile marketing spending where it needs to be EBITDA margin where it needs to be.
