Geoff E. Tanner: Yes, I mean — the thing that has driven the success of Quest innovation is the brand flipping, we call them flipping the macros on large snacking category. So flipping the macros from high sugar, high carb, high protein, and low sugar, which is what we’ve done with our Iced Coffee launch, and I’m excited to see how that performs. It’s certainly early days, and we’ll monitor it closely. And if we continue to do well, we’ll continue to double down there. To your question on beverage, despite rest assure, we’re looking at it, it’s obviously it’s a large category. And if we can find a way to go in and disrupt that category in a way similar to how we plan to disrupt sweet baked goods, we would certainly look at that. And even drawing a broader circle, where we see those opportunities to give Quest consumers the same quality and taste that they desire of large snacking categories, we’re looking at it.
Stephen Powers: Okay, thank you. Thank you very much.
Operator: Thank you. Our next questions come from the line of Pamela Kaufman with Morgan Stanley. Please proceed with your questions.
Pamela Kaufman: Hi, good morning. How are you thinking about your revenue progression over the back half of the year and what gives you confidence that you can deliver on the updated revenue guidance, I guess where do you see potential for upside or downside to your new outlook?
Geoff E. Tanner: Yes, I’ll start and maybe turn it over to Shaun. I’d say the upside is we are moving into easier — what we believe will be easier comps on Atkins. And we do remain confident in the revitalization plan, the new advertising. We’re confident in the new innovation that’s launching albeit towards the end of our fiscal. And we’re walking to easier comps. So could be some upside there. And on Quest, the momentum that we’ve seen, just looking at March, mid-double digit is very encouraging. We’ve just launched new advertising that launched in the beginning of March. So that gives us a lot of confidence. And then Quest too is bringing some pretty exciting innovation to market. So there could be some upside there, but I’ll turn it over to Shaun.
Shaun Mara: Yes. I mean I think if you take a look at the brands, I mean, Quest, we’re assuming from a consumption standpoint, low double digits. And as Geoff said, through March, so only four weeks, we’re at 13%, a little bit higher than that. So I feel like we’re trending a little above what we thought. We’ll see what happens. So feel pretty good with that. We also have the advertising we turned on, which I think is going to help overall from a consumer awareness and household penetration standpoint. So I feel very comfortable with where we are with Quest. On Atkins, I think we have put ourselves in a position where we have a, I’ll say, realistic target to chase in the second half of the year. As I mentioned, Atkins is basically consistent with the decline we saw in Q2 for Q3, slightly better and as — in Q4, I’m sorry.
And then as it relates to the first month of the quarter, we’re trending down about 6%, as I think you saw in the slides, which is better than what we thought from a standpoint of the quarter. So again, early one month in, but feel like we’re tracking ahead of where we thought we were going to be.
Pamela Kaufman: Okay. That’s helpful. And then can you talk about any adjustments that you’re making to your strategy this year given the performance and competitive dynamics you saw during the second quarter, you mentioned that you’re accelerating some innovation like the protein shakes, can you expand on any other changes in your innovation timing or changes to advertising or promotional plans for the year?
Geoff E. Tanner: Yes, I mean I said at a high level, we’re not really changing our strategy. The impact that we felt on Atkins in January, February, it was a onetime difficult lap, as we talked about in the prepared remarks, but we remain confident in the future vitality of the brand. We remain confident in the revitalization plan we’ve talked about. The innovation with brand to market, the new packaging graphic work that’s underway, the product upgrade work that’s underway, the new advertising, and we’re certainly going to stay the course there. We’ll make adjustments if we need to, but certainly wouldn’t overreact to a merchandising — difficult merchandising lab in January, February.
Pamela Kaufman: Thank you. I will pass it on.
Operator: Thank you. Our next questions come from the line of Jim Salera with Stephens. Please proceed with your questions.
James Salera: Hi guys, good morning. Thanks for taking our questions. I wanted to drill down a little bit on Atkins Strong offering. Exciting to see you guys expand the RTD shake offering. Obviously, it’s been a really hot category. At the same time, it’s also a category that has pretty well-known capacity constraints. So if you could offer any color on co-manufacturing partners, how much capacity you guys think you’ll have when that product kind of comes to market and if we should expect it to be maybe just in club or just in mass or kind of how the channel rollout will be as you expand that 30 gram offering?
Geoff E. Tanner: Yes. We’re also really excited about this launch. It was designed, as we’ve seen these weight loss drugs emerge and adoption increase, and we’ve learned that consumers on those drugs are seeking higher levels of protein to maintain muscle mass when they lose weight. And we’ve also heard that when they’re on the drugs, many experience gut health issue. So we developed this product the primary consumer with those on a weight loss drugs. But we know that there’s consumers out there who are seeking higher levels of protein. So we’re excited to bring that to market. We’re going to put a lot of support behind it. Retailers have been candidly very impressed with how quickly we moved to develop a product for consumers on these drugs. To your question on capacity, we feel we’re in a good spot. It is not a limited launch. We will launch it nationally, and we’ve had extremely strong support.
Shaun Mara: Yes. I think on the capacity side, just to take a step back, I’d go back about a year, year and half ago, we had some capacity constraints. Basically got another co-man on board in terms of additional capacity. So we have expanded the capacity that we have for Atkins [ph] in general, overall. And we’re actually — I think we have enough to support both that business as well as the continuing business we have overall. So we feel like we’re in pretty good shape there.
James Salera: Okay, great. And then maybe if I could ask a broader question just on the consumer. We’ve heard from other companies, there’s kind of a bifurcation of the higher-income consumers still powering forward and lower income consumer, maybe feeling a little bit more pressured. Since your products tend to skew towards middle to higher income consumer, do you have — what’s your confidence level as the year progresses that the higher income consumer will continue to be resilient relative to the overall kind of economic uncertainty?
Geoff E. Tanner: Yes. I mean we continue to see the category perform. The category performed year after year after year. And I think a part of this for the reason that you cite is that we do over-index with higher income consumers. So I think we’re a little more insulated. I would point to the relative lack of private label in the category. I would point to the relative lack of heavily — heavy promotional activity in the category. And I think it shows the underlying consumer demand, which, to your point, I think, is reflective that we over-index with higher income or educated consumers.
James Salera: Great. Appreciate the color guys. So I’ll hop back in the queue.
Operator: Thank you. Our next questions come from the line of John Baumgartner with Mizuho. Please proceed with your questions.
John Baumgartner: Good morning, thanks for the question.
Geoff E. Tanner: Good morning John.
John Baumgartner: Maybe first off, Geoff, you mentioned the heightened category competition around New Year, New You. I think you called out one specific competitor. But I’m curious, can you expand a bit on competition more broadly. Are you seeing competition based solely on pass-through of lower input costs and that moderates throughout the year as those tailwinds also moderate or is there also any heightened activity from new innovation hitting the shelves or a larger intensity also impacting future display activity?
Geoff E. Tanner: Yes, I mean, I would probably take a step back and say the level of activity in this category, I think, is what you would expect, right. Innovation, can play a role and we have certainly seen what we’ve been able to do with Quest chips, which was essentially to create a category or a segment that didn’t exist. The heightened level of competitive activity that we talked about in the prepared remarks, really does relate to some out-of-stock challenges on shakes. And the industry was constrained, had been constrained for a couple of years. And obviously, with that being turned back on, you’ve seen demand being able to be supplied. But I wouldn’t say that this is a new level of competitive activity. I think it was an inevitable lap and one that we were always going to be on the wrong side of and in the New Year, New You period. But now with supply back, I’d say we’re going to return to a normal level.
Shaun Mara: Yes. I think, John, if you take a step back and look at last year, with one of the key competitors in this marketplace for RTDs, having less availability or capacity, the shelf space they had was less. So now they got that back, and they’ve actually added not so much innovation, but if you want to call it, pack size configurations, four packs to eight packs or 12 packs as well as maybe more space devoted to that competitor for display. So you’re really seeing, I think, two years of growth in one quarter versus what we’ve usually see out there. So we stepped up our merchandising activity and programming. It’s just the share of voice was less than what it was comparatively to everybody else. Does that help?
John Baumgartner: Yes, definitely. I guess, sticking with that theme, I guess, last quarter it sounded like your initial perceptions on new marketing coming out of autumn was pretty encouraging in the early days. I guess building on your point there, Shaun, I mean do you get the sense that the ROI and that marketing, does it require further increases in spending from here to sort of maintain share of voice, how do we think about that? And then for the Atkins brand milestones going forward, I guess, how impactful are you expecting the autumn shelf resets to be in terms of jump-starting sales, should those autumn resets really be used material catalyst or pivot point?
Shaun Mara: The advertising, we’re really pleased with the new advertising we debuted in October. We saw the business response. Certainly, it’s probably too early to draw a hard line on that. But just given the magnitude of the merchandising lap that I talked about in the prepared remarks, it’s very difficult, if not impossible to judge the effectiveness of that advertising in January and February. And as proof to that, we’ve come out of the New Year, New You period and trends on the business have improved. As I said, the ads tested very well. They tested well with both current buyers and potential new buyers. But with that being said, we’ll continue to monitor performance over the coming months and if we’ve got to make changes in the advertising, we will.
To your question on distribution, I recall, we’re category advisers to the majority of our key retailers. And as such, we have a lot of dialogue with them about the category and brand dynamics. We recently wrapped up a road show visiting all those customers, talking about the brands and in particular, Atkins, an emphasis of those conversations was the new conversation and renewed cultural relevance, I would say, of weight because of these weight loss drugs and what consumers on those drugs are looking for and how they want an off-ramp. The retailers get it. They appreciate our transparency. They’re supportive of the revitalization plan and we’re currently in conversations with them about modulars and they will play out over the coming two to four months.
