Alexia Howard: Hi, there. So can I ask you — you commented about how the gross margin improvement this quarter is going to give you an opportunity to invest in organisational capabilities? Can you give us a little bit more colour on exactly what you’re hoping to accomplish there and I’ll pass it on. Thank you.
Geoff Tanner: Yes, I’ll take that. So it is — we’re fortunate to have some flexibility. And as I mentioned in the scripted remarks, our focus is on delivering consistent growth quarter-to-quarter, but year-to-year-to-year. One of the biggest areas we have invested, back to Steve’s question, is enhancing our category management capabilities. And that includes research, it includes bringing on some additional talent, and bolstering our capability to develop these long-term plans with retailers. Our industry is pretty good at developing one-year joint business plans with retailers, Alexia. It’s a different muscle to build two to three to four year growth plans at the category level. So that’s been an investment we’ve made. As you saw in the financials, we’ve increased our investment in marketing, taking up to just over 9%.
And we’ve also invested in bolstering our long-term innovation capabilities. As I talked on the last quarter, we were disappointed with the lack of innovation on Atkins. We don’t want that to happen again. So we’re invested in building and bolstering our pipeline. And as you know, innovation is kind of a lifeblood of Quest. So we want to ensure that we keep our foot on the gas there. So those are probably the three biggest areas. Enhanced category management, additional marketing, and innovation, which by the way, is in a much better place from when I came to Simply. Very pleased with the progress we’re making there. Shaun, anything you’d add?
Shaun Mara: Just one more thing [indiscernible] I threw out there. Just the capability wise, I think, we also kind of made some assessment as we kind of get into this year and talk about what the plans we have going forward and the pillars that Goeff talked about last quarter, and making sure we have the right longer-term capabilities to support that type of work, as well as the growth associated with that. So we’ve also kind of looked at that internally and added some capabilities within the organization to support that. So one other area I said we’ve invested in. But we’ve been very thoughtful about where that favorability is for gross margin gets reinvested and really being thoughtful about making sure it provides us with longer-term growth as well as hitting our short-term goals.
Alexia Howard: Great. Thank you very much. I’ll pass it on.
Shaun Mara: Thanks.
Operator: Our next question comes from Brian Holland from D.A. Davidson. Please proceed.
Brian Holland: Yes, thanks. Good morning. I wanted to maybe just dive into a little bit from, I guess it sounds like first quarter consumption trends were better than expected. It sounds like that was maybe more specific to Atkins, so maybe being less negative than maybe the expectations going in. You can correct me if I’m wrong on any of that. But just wanted to kind of focus in on that and understand exactly what you’re seeing there. Obviously, it’s a seasonally lighter quarter, but you did run some fresh advertising as you said at the beginning of the quarter. So excuse me, I’m just curious what you’re seeing with respect to whether you’re finding a new buyer. I know that some of the messaging around the advertising campaign was to try to address some misconceptions about the brand. So I’m just curious if you’re seeing any early results from that and where exactly the better than expected consumption is coming from?
Geoff Tanner: Yes, the consumption was slightly better than we had forecasted. Actually it was across both Atkins and Quest. I’ll start with Atkins. As we said in the scripted remarks, October was a pretty good month for us versus the previous month as we came into the quarter. And…
Shaun Mara: Still below our expectations.
Geoff Tanner: Yes, not happy with the number in absolute, but on a relative basis it was a much better month for us. And that coincided with us dropping the new advertising and strengthening our merchandising and also having this new configuration and club. And so, but it’s only five weeks, and we don’t want to overreact to five weeks of advertising, because as you know, we have to throttle back in November, December given the seasonality. So as we’ve said, the real test on Atkins I think comes in January, February, but we were encouraged with what we saw in October when we did have several of these revitalization plan elements in market, particularly the advertising. But in addition, Quest had came in stronger than we had forecasted as well.
What’s interesting about Quest is, if you go back two, three years, the majority of growth on Quest was coming from penetration, which was very distribution-driven. Now you look at the drivers of growth, and it’s roughly 50-50 balance across penetration and buy rate, as consumers are coming in to buy chips, and they’re buying bars and vice versa. And so we’ve just seen a more balanced growth profile on Quest that I think is carrying the momentum through. And what’s really interesting about Quest is, despite the size of the business, and it will be a $1 billion retail brand this year. Brand awareness is still relatively low versus a lot of key competitors and we’re excited to debut new advertising in February on Quest. So yes, the consumption was a little better than we thought.
Both brands, the critical period for us is again January, February, March.
Brian Holland: Yes, appreciate the color Goeff. And fully recognizing we’re just a few days into new year, new you, I’ll ask anyway, just curious what, if anything, you are seeing either from the competitive landscape, i.e. innovation, promotion, et cetera, or consumer engagement with the category, again, admittedly, only a few days into the new year, but obviously, given its significance, I trust you’re watching that closely.
Shaun Mara: Yes, we’re blowing it away. I’m just kidding. I think right now, we are set up as we get into new year, new you, to kind of get with our retailers. Everything is in the storage, you see the displays, you see a lot of the activity ready to go in all of our key retailers. There’s some advertising that dropped for Atkins specifically on January 1st and you’ll see that continuing through there. We’ve got significant investment in both consumer communication for both brands in Q2, as well as the merchandising and promotional activity that’s out there. As you said, I mean, it’s still early. I mean, it’s very early. We haven’t even got early results other than a day in and day out basis. So I can’t really comment on progress, but we feel confident in our plans.
