Operator: Our next question comes from the line of Pamela Kaufman with Morgan Stanley. Please proceed with your question.
Pamela Kaufman: Can you talk about how you’re thinking about the cadence of top line growth throughout fiscal ’24? And maybe elaborate on how you’re thinking about the growth outlook by brand. And just what are you expecting from the contribution from the 53rd week?
Geoff Tanner: Okay. A lot in there. So let me take a step back and let’s talk about the year first, and then I’ll talk about the quarter a little bit. So on a 52-week basis, we expect total SMPL sales increase in the midpoint of our long-term net sales growth to 4% to 6%, right? That’s all volume. We have no price in there for next year. Within that, we expect Quest to be growing at least low double digits for the year with some slight declines in Atkins. We’re seeing the benefits of the Atkins revitalization plan. We expect POS to improve during the year with the consumption in the second half of the year better than first half. And I think that just speaks to the overall strength of the business as well as the underlying health of the category.
So as related to the 53rd week, we simply added in point of growth here as we had in our plan, we talked about last time. As we finalized our plan will be in a basically did was the average of last 3 year for the first week in September to forecast the extra week. That’s a little bit more than a point of growth, you can’t just take 1 divided by 52 to estimate that because we have a fall resets to be shipped in August, we don’t replenish that until mid-September. So it’s pretty early getting into the 53rd week, but we should plan on about a point of benefit there to more or less depending on timing of shipments. So that kind of focuses on the year and the split of the — by the brands. As it relates to the flow during the year, retail takeaway should be somewhat similar by quarter, say, high to mid — say, mid- to high single digits overall.
And as it relates to net sales, it’s largely going to follow that consumption, a little bit of a flip from Q1 to Q2. So let me explain that. In Q1 ’24, the net sales comp versus last year is a little bit tough for a couple of reasons. One, we had a specific program last year called the Healthy UN Cap for Quest at a very large mass retailer that we are not repeating this year. Secondly, Atkins RTD bonus packs, which are a big part of our New Year New You are going to ship in Q2 this year, they shipped in Q1 last year. And as Geoff alluded to already, we are increasing trade spend in fiscal ’24 on Atkins, particularly in Q1. So we say stay active really in the eyes of the retailer. So Q1 sales is only going to increase in the low single digits.
On the flip side, we expect that impact to reverse in Q2. Q2 last year had flat growth. Therefore, Q2 this year, we expect net sales growth to be at the higher end of our algorithm of 4% to 6%. So at the end of Q1, consumption and sales should largely be in line just a flip between Q1 and Q2.
Pamela Kaufman: I also just wanted to dig into a bit more on how you plan to capitalize on the growth in GLP-1 drugs. What were the findings of the study that you conducted? And how are you thinking about the role that each Atkins and Quest can play in targeting this consumer?
Geoff Tanner: We believe, based on our research, which I’ll talk about the GLP-1 drug pirate significant tailwind for both businesses. Over the past 3 months, we conducted a lot of proprietary research with consumers on the drug to understand the impact they were having. What we saw is, yes, there’s a reduced appetite but it’s especially focused on less healthy products. And what we found is that consumers on the drugs were eating and seeking smaller healthy meals and snacks, especially high protein products because they still need to get nutrition they need. So through our research, what we found for both Atkins and Quest opportunities, for these brands to be an excellent companion when consumers are on the product. And our research found that by far the majority of consumers taking the drugs don’t plan to stay on.
So they still want to hold on to the gains and what we found in our research is our products are an excellent off-ramp as well. So we see this as significant long-term opportunity. We’re clearly still in the early innings of these drugs and their adoption. But we wanted to get a jump start on it. We’ve worked with several external partners to build sizable, addressable audience of consumers who are either interested in or on the drug and we plan to deliver them targeted communication, brand messaging, offers, et cetera, again, about how our products can be a perfect companion when you’re on the drug and off-ramp. Again, we’re still in the early innings of the campaign that we will bring to market or deploy in the next quarter but we see this as a long-term potential.
And as advocates of weight wellness, we think it’s terrific that consumers have another tool in their arsenal. And it’s just going to bring additional focus to weight loss, particularly on Atkins, which is where the brand plays.
Pamela Kaufman: Maybe if I could just sneak in one more. So you don’t [Indiscernible]
Geoff Tanner: [Indiscernible] go back in the queue.
Pamela Kaufman: Okay. I’ll go back in the queue.
Operator: Our next question comes from the line of Matt Smith with Stifel. Please proceed with your question.
Matt Smith: Geoff, if I could ask you, a number of years ago, the Atkins brand, you talked about high loyalty rates and the annual buy rates for existing consumers really being a tailwind to the brand. How do you think about the development of the overall category and the prevalence of new brands and the impact that would have on Atkins as we stand here today? Do those metrics naturally move lower over time, but the growth potential and the size of the category are larger today and therefore, it may not be a negative to the brand? Or do you expect to get back to those high loyalty and repeat rates?
Geoff Tanner: As I said in the remarks, since coming on to the business, dived very deep on Atkins, a lot of research with consumers, a lot of analytics on the business. And that research to me just reaffirmed the opportunity this business has. It is so uniquely positioned against an opportunity that is significant. As I said, 80% of consumers want to lose or maintain weight and Atkins is seen as a trusted leader in low-carb low-sugar solutions. So the long-term potential of this business is significant. What I talked about was we had some executional missteps that have impacted some of those metrics by rate, for example. When you’re not bringing really great innovation, when you’ve got an executional miss-step with a large club customer, that’s going to show up in those numbers.
But fundamentally, when we fix those and those fixes are in market, and when we continue to support the business with marketing, focused on talking to core users as well as some of the skeptics, we believe these metrics will start to turn around. And then you have, to the last question, the additional interest in weight management that is just going to drive additional interest in those brands. So the slight decline we’re seeing in some of those metrics right now. You’ve got to look at those and say, a big driver of the impact we’re seeing as a commercial miss-step. We’re fixing it. We’re committed to the long-term growth of this business. Which is why we’re doubling down, increasing marketing, bringing new innovation to market, working on packaging, and those metrics, very confident we’ll start to turn very quickly in the right direction.
Shaun Mara: Just a quick add on there, Matt, if you take a step back, the Atkins consumer has been a very loyal consumer over the years. We’ve seen that through the modeling that we’ve done. We have mentioned before, we’ve seen a slight decrease in buy rate over the last x period of time, principally because of probably the pricing aspect of that thing. But the buy rate on retained users continues to be very strong. So we’ll see that get better, as Geoff said, with all the things we’re doing in the market, but I think it continues to be a strength of the brand.
