Shaun Mara: So I think what you’re asking there is just basically how much we stepping up marketing in fiscal ’20 for. If you take a step back, we — to your point, we had always tried to our model, if you will, was get about 10% marketing spend, we’re probably closer to 8% of that in ’23. We want to be closer to 9% a little bit north of that in ’24. So we’re going to see meaningful increases in marketing. We plan for mid-teen growth in marketing for fiscal ’24 versus where we are today. So that’s the point we have. And as Geoff said, it’s on both brands. We’ll probably see more of that for Atkins in the first half of the year. And then as we have the new advertising for Quest, we’ll see that pop in the second half of the year. So I don’t know if I answered your question or not, but that was what I think you asked.
Rob Dickerson: Yes, that’s good enough. And then just on gross margin, so thinking of magnitude of expansion potential in ’24.
Shaun Mara: Gross margin?
Rob Dickerson: Yes.
Shaun Mara: So first of all, we’re pretty confident in delivering the gross margin meaningfully in fiscal ’24. For the full year, we think gross margin of 38% is very attainable, driven by commodity decreases across most of our key ingredients, a couple of caveats there. First, that’s based on how the world is today. Obviously, we’re not 100% covered. So if something rattles the market is subject to change. You see a little bit of that with come from right now. Second, we’re not going to drop all the favorability to the bottom line. We talked about that already. We’re reinvesting a big piece of that back into the business. marketing will be growing in the mid-teens, both brands, and we’re reinvesting some favorability back into trade for Atkins, particularly in the first half of the year as we want to make sure we stay active in the eyes of retailers and consumers until the revitalization plan kind of bears out. So I don’t think it’s a flavor of what we’re looking for.
Operator: Our next question comes from the line of Matt McGinley with Needham & Company. Please proceed with your question.
Matt McGinley: I have a follow-up on that gross margin. Can you help frame your expectations on the cadence of gross margin improvement this year? Do you expect those gains to be more front half weighted or back half weighted and you made the mention around higher levels of marketing. I guess can you kind of tease out like what — how much higher levels of promotion do you expect? And how much of that would be offset by the gains from input deflation in this year?
Geoff Tanner: So in terms of sequential for gross margin, I think you’re going to see more growth in the second half of the year than the first half of the year. Just if you take a step back, if you look at it historically, Q2 is we have lower gross margin with higher trade spend in the quarter to support New Year, New You. Additionally, we put a little more of the trade spend in Q1 of this year to really jump start the business, as I mentioned. So you’re going to see gross margin improve in Q1 versus Q1 last year, should be about the same as Q4. So with Q1, it will be about the same as Q4 in terms of gross margin. And then you see pretty significant gross margin expansion in Q3 and Q4 this year. So a lot of that, as I say, back half loaded.
As it relates to trade, we’re up — I mean, we’re not drastically up in spend overall. We’re just really trying to make sure that we support the brand in the marketplace as we get through the revitalization. So little bit of an increase there. And effectively, what we did was we typically do promotional plans with our retailers in September and in January to support the resets as well as the New Year New You, we have added some more spending in October and in February this year to support the brand a little bit more and get better growth on those time frames. So I don’t if I answered your question or not, but that’s direction of what we’re doing.
Operator: Ladies and gentlemen, our final question this morning comes from the line of Stephen Powers with Deutsche Bank. Please proceed with your question.
Stephen Powers: I guess just listening to the Atkins conversation throughout the call. I think it comes across as you’ve got a pretty clear view of what the deficiencies have been and a pretty clear vision of needs to be done. I guess the question I’m left with, is there anything, Geoff, as you’ve gone through the review of that brand that you — are there open questions that you still have? Are there things that you still don’t know that you’d like to know to have just even a higher degree of confidence on the overall revitalization.
Geoff Tanner: That’s a fair question. I mean, no, I have a lot of confidence in the plan that we’ve developed, which is based on what was very comprehensive research on the business, talking to consumers, advanced analytics, et cetera. So there’s a tremendous amount of confidence we have in the plan. We know that the opportunities in front of us are to, in the near term, accelerate our innovation to market but ensure we build a multiyear pipeline. We’ve identified opportunities to upgrade the product and hopefully deliver superior shelf life. We’re focused in on specific customers. We’ve talked a lot about the club channel, which is an opportunity, that fix is already shipping to market. We’ve talked about doubling down on e-commerce.
And then a little more long term, how do we modernize the brand how do we enhance the brand experience. You’ve seen us go out initially with new advertising supported by expanded reach. We’ve got a packaging refresh coming, which I’m sure you’ll understand takes a little longer. The series of initiatives we have will come to market sequentially over the next 12 to 18 months. And then we also have the weight management drug which our research strongly shows this is a tailwind for the business. But that’s in the early innings. So as we think about Atkins, we have a goal to stabilize the brand and then by the back half of our fiscal, you’ll start to see improvement. And then underpinning it all, I put a new leadership team in place. to drive enhanced accountability and execution.
So I have a tremendous amount of confidence and then it’s all wrapped up in the opportunity. This brand is so sharply positioned against a need that is only growing and it’s our job to ensure we can deliver its full potential. So a lot of confidence.
Geoff Tanner: I just want to thank everyone for the participating on today’s call. We look forward to updating you on our first quarter results in January. So I hope everybody has a good day.
Shaun Mara: Thank you.
Operator: Thank you. This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.
