Obviously, the biggest issue for us will always be around maintaining our price gaps where we expect them to be across all of our key PPGs. And as of right now, we only make adjustments if we need to. But right now, I feel pretty comfortable with where we are.
Andrew Lazar: Thanks so much.
Howard Friedman: Thank you.
Operator: Our next question comes from the line of Rupesh Parikh from Oppenheimer. Please go ahead.
Rupesh Parikh: Good morning and thanks for taking my question. So I just wanted to dive deeper into gross margins. So just want to get a sense of your confidence in the second half gross margin expansion, and if there’s anything to think about from a cadence perspective between Q3 and Q4?
Ajay Kataria: Hi, Rupesh. I’ll take that. This is Ajay. So really second half gross margin, you look at second quarter, what we are expecting is headwinds of second quarter, which were temporary in nature are behind us. And the tailwinds we experienced in the second quarter will get stronger into the second half. To elaborate on that a little bit, we experienced some crop issues and our demand went up for Boulder Canyon out West and we shipped potatoes from the Midwest. So that was temporary. We are into the new crop in the second half. That’s behind us. And we talked about in our prepared remarks about Birmingham plant closure a little sooner than we expected as well. So all that is behind us from a headwind standpoint. And then from a tailwind standpoint, our volumes are trending up.
And we show those trends, and you can see that in the retail data. And our margin mix is improving as we work through SKU rationalization program. That’s been coming through. It’s going to continue into the second half. And our productivity program has really ramped up. We are close to 4% of COGS. That’s our new baseline. And our actions around network optimization, in-sourcing of production from co-manufacturers where we have capacity, all of those things are driving cost out in our plants and our logistics network. And finally, as these volumes ramp up, plants are seeing better leverage on fixed costs as well. So all that will continue and actually step up. We’ll continue to make investments in the business. We did so in the second quarter.
We’ll do some investments in the second half as well. But these positive drivers and the lack of negatives gives me a lot of confidence we’ll step up margins.
Rupesh Parikh: Great. Thank you. And then maybe one follow-up question. So one of your competitors called out some channel shifting out there. Just curious if you’re seeing consumer shift to dollar amount or anything else of note during the quarter?
Howard Friedman: Hi, Rupesh. It’s Howard. I’ll take that. Look, I think we remain very fortunate in our category. The consumers overall price outlay for the products that they buy from us tends to be relatively small. So we’re an affordable indulgence. That said, one of the things we always see in this cycle is consumers will start to value shop. So for some consumers, that’s an absolute price point. And they may go to more EDLP classes of trade. And in some cases, they’re looking for lowest price based on volume, and they’ll move up the price ladder. So you’ll see — we do see consumers doing a little bit more shopping and spending a little bit more time on both ends of the price ladder, which again not terribly surprising in any given market, and I call it relatively normal. Our assortment meets all the demands from the consumer, and we feel pretty good that we will continue to have the offerings that they are going to find wherever they shop.
Rupesh Parikh: Great. Thank you.
Howard Friedman: Thank you.
Ajay Kataria: Thank you.
Operator: Our next question comes from the line of Michael Lavery from Piper Sandler. Please go ahead.
Michael Lavery: Thank you. Good morning.
Howard Friedman: Hi, Mike.
