Ben Wood: Great. Thank you. And then just another quick one from us. I think you mentioned that you’re seeing some share loss to certain of the bigger players by your customers. Can you just walk us through the competitive positioning of your customers and your retail? Maybe how they are aligned to mass and value players? And then what might you be messaging to them going forward to focus on to take the share back?
Sandy Douglas: Sure. We serve 32,000 food stores, so very wide set of positioning from large natural to very, very strong ethnic position retail in the number of key markets that don’t report to IRI and Nielsen, so they don’t get counted in that share calculation. And so, their strategies to win vary by their positioning. What our job is as their back end is to have the tools and resources at the ready that allow them to win, to buy right for them, to get them items that are sharply priced, supplier promotions and services that allow them to streamline their operations, be more competitive and profitable. And we collaborate with them on strategy, but they drive it. Our job is to serve it. And independents are very widely and capable and innovative and many of them are gaining share, but there is a significant trend in price competition from the big players.
And right now in this economic environment, it’s working for them on the margin. That’s just the general state of play.
Ben Wood: Great. Thank you.
Operator: Next we’ll move to William Reuter at Bank of America.
William Reuter: Good morning. I just have two. The first is on the change in the outlook regarding inventory gains and forward purchase opportunities. Are there any investments in systems that are going to be required to have greater visibility? Or is it just that the environment moved very quickly in terms of what those purchase opportunities were?
Sandy Douglas: Yes, this is Sandy. One of the things that I’ve seen since I joined the company is an opportunity to address system maturities and modernization. And we’ve been building a plan for the last six months to take advantage of the opportunity to finish the integrations of past acquisitions that modernize our tech stack, establish a common data architecture so that we could begin to realize the full benefits for our customers of the extraordinary capabilities we have around the country. And in the middle of that is an opportunity to get much more effective and granular in real time analysis, which would have really helped in this situation. So we were in the process of building that plan. And as I mentioned in my comments, the Board approved it and we’re moving forward.
So think about it as people processes and systems deployed to build the analytical competence of the company. Some of that cost nothing. Some of it will involve investment that will be done in a very disciplined way. But the net effect of it is that we expect to have a more granular and real time view of our metrics and we expect to deploy all of that capability for the benefit of our customers and more efficient operations.
William Reuter: Got it. And then my second question, you mentioned the broad different baskets or groups of customers that you do serve. I would have thought that in the current environment, maybe natural and organics would do a little bit better than traditional grocery, because traditional grocery maybe experiencing that trade down to dollar stores, et cetera, that you mentioned. Are the natural and organic customers doing better than our more traditional grocers?
Sandy Douglas: Some of them aren’t, and I’m not trying to give you a huge answer. It varies. We’re seeing some of our natural customers do extremely well. And in some cases, they’re giving us more to do for them which makes it look even better. And you can see that in our results. But there is a bifurcation generally and some of the natural customers are taking full advantage of it. Some of the more conventional retailers are doing very well because of the diversity of their offer, their foodservice offer. So it varies really across the board based on the capability of the customer.
William Reuter: Great. That’s all for me. Thank you.
Operator: And your last question comes from Scott Mushkin at R5 Capital.
Scott Mushkin: Hey, guys. Thanks for thanks for squeezing me in here. So I kind of say that I’m a little bit confused and maybe it’s me, but I think you guys said the inflation rate year over year was a little over 11% last year, a little under 11% this year. So why wouldn’t the forward buy opportunity still be there given the fact that you’re still going up 11%.
Sandy Douglas: Hey, Scott. It’s Sandy. 11% is the year over year inflation. The forward buy opportunities happen in much narrower circles. Suppliers are obligated in one format to give us 60 days and the other 90 and the forward buy impact happens in that cycle. And what we’re seeing right now is, while the accumulation of all the price increases that have happened in the last 12 months add up to significant year over year price inflation. The number of price increases that are happening now is reduced by about two-thirds from last year and that significantly impacted P6. And when we lapped it, we were able to understand it analytically. And as we look ahead, it was more impactful than we had expected. And that’s what we’ve now applied to our second half guidance.
Scott Mushkin: That’s what you said. I thought it was me and it was. So the second question is, I mean, did you guys just not have the systems in place to understand how much forward buy you were doing?
Sandy Douglas: Great question. Our systems, the way they’re structured now, do a very good job of aggregating DC data each period and they do it accurately and it’s very controlled. However, the granularity of that data and the real time ability to analyze it is not strong. And if you recall in the second quarter last year, and again, I’m just giving this to you the way we experienced it. Second quarter operating environment was crazy and we reacted to it like many others did by renting people and doing whatever we could to try to service customers. I mean I mentioned last year that our vacancy rate went from about 9% to 20% in seven days right before the holidays. And so that was where our focus was. And while margins started to pick up in P6 due to forward buying, the operating expense side of our business grew and we had lots sales and no EBITDA growth in the second quarter last year.
And so as the year went on, margins continued to improve as a result of forward buying, but the company’s focus was largely on making sure that we were operating properly and as efficiently as possible. And we missed it. The other thing I would say and this is as it happened, the macro nature of the systems in the way they worked, worked very well with an experienced management team that had experienced the trends over time. And the one scenario that none of us had was the rapid increase of extreme inflation. And so, the questions that we would have asked were not as natural and that just led to us missing it until we lapped it. And once we lapped it, we saw clearly that this is a big driver. Nothing makes a bad forecast good. It’s simply bad.
But what it doesn’t mean is that the company is really in a different place after it gets through it. And then that’s what you saw on Slide 6. But that’s how we missed it, why we missed it and I don’t know if you have a follow-up question.
