Geoff Tanner: It is obviously early, but we feel very confident in the consumer and retail plans we have as we enter this critical period.
Brian Holland: Thanks, Shaun. Thanks, Goeff. Best of luck.
Geoff Tanner: Thanks.
Operator: Our next question comes from Jim Salera from Stephens Inc. Please proceed.
Jim Salera: Thanks for taking our question. We’ve already discussed some of the trends with Quest in the category, but I was wondering if you could give us a sense for how much of the broader category growth is being driven by the expansion of products and the appeal that that brings to expand buy rates versus consumers that are increasingly health conscious kind of engaging with these protein dense low calorie snacks?
Geoff Tanner: Yes, it’s a good question. I don’t have that information at a category level. As we look at our brands, we certainly see a balance — balanced across both household penetration and buy rate. And as I said again to Matt’s question, this category largely grew up as bars and shakes. And over time has expanded well beyond that, new format, new usage occasions, new day parts. So that’s a big driver of buy rate. But we continue to see also consumers increase — we still continue to see household penetration increase. So it’s both. And I think the opportunity for us is to continue to drive both, to continue as — particularly as category leaders to continue to bring consumers into the space. That’s the job of advertising.
And then to continue to drive buy rate, which is the job of innovation. I think the biggest driver here underlying all of this is protein has really emerged as the nutrient of choice, particularly for younger consumers. Sugar, they don’t want sugar, they don’t want carbs. And so as these nutrients become more and more broadly adopted, you’re seeing more and more consumers look for our products as a way of delivering against their looking for and to power their lifestyle. But we still believe the category has tremendous runways, both on buy rate and penetration.
Shaun Mara: Yes, and I think just building off that a little bit, I think Goeff mentioned the — bringing consumers in through advertising, getting the innovation, but then also working with the retailers to continue to expand their shelf space that allows us to have new formats that are out there. I think Quest, as Goeff said in the prepared remarks, has actually expanded into other formats pretty successfully, which is great because salty snacks, I think, is about a $300 million business at retail. So it’s grown from just a bar and shake — bar business particularly and then into these other categories and we see that expansion opportunity really in other categories as well — other formats as well.
Geoff Tanner: When Quest was acquired the business was by far majority a bar business. Now bars represent just about 50% of sales. So that shows you the expansion opportunities, and it shows you the opportunity on, particularly I think there on buy rate.
Jim Salera: Great, I appreciate the color. And if I could sneak in maybe one follow up to that. Do you have a sense for consumers that are actively using the GLP-1 drugs, that they gravitate more towards Atkins versus Quest?
Geoff Tanner: Not between brands. We do know from our own research, but I think you’re seeing it from other research as well, that when consumers are on the drugs, their appetite is suppressed, but they’re looking for smaller, more convenient, healthier, high protein, low sugar options. That’s where our category majors in that. In talking to consumers on the drugs, we certainly see an increased interest in products from Atkins and Quest. That’s why I do think our category is on the right side of these drugs. That’s why we’ve got out of the gate early. We’ve been able to identify these consumers on Atkins. We’re sending them targeted communication. We’re investing in research to better understand it. But specifically to your question, we think both Atkins and Quest have a strong role to play here. It’s not one versus the other.
Jim Salera: Great. Appreciate the color, guys. I’ll hop back in the queue.
Geoff Tanner: Thank you.
Operator: Our next question comes from [Kamil Sarawalla] (ph) from Jeffreys. Please proceed.
Unidentified Analyst: Hey guys, good morning. If I could follow up on that — on your last response on GLP-1, is M&A part of the strategy on trying to leverage the opportunity that’s in front of you as it relates to GLP-1?
Geoff Tanner: Not explicitly. Would it be something that we would look at if a right asset came along. Yes, but I think we’re very much in the early innings on GLP-1. We’ve got a lot to learn. I don’t think it would be front and center as an M&A driver, but it would be a factor that we would probably look at as we would look at any asset.
Unidentified Analyst: Got it. And then how about M&A in general? You mentioned a few times kind of value enhancing acquisition. What does the M&A environment look like? Have multiples come down? There’s obviously debates about asset prices and interest rates. How do you see the environment at the moment?
Geoff Tanner: Yes, I mean, I guess take a step back. We love the cash flow, right? And we believe the potential to double that is there over the next, pick a time frame, five, 10 years. We look at a lot of assets that come into our space, especially those that are complementary to our portfolio where we can get synergies. To your point about seller expectations, they’re still high. And we’re not going to overpay quick [handling] (ph). We evaluate, continue to evaluate complementary brands and businesses of size, preferably shelf stable, warehouse delivered, and really in or adjacent to our aisle. That’s what we think the synergies really are. So our targets really here are strong consumer brands that are complementary. We’ve got a strong balance sheet.
