Utz Brands, Inc. (NYSE:UTZ) Q3 2024 Earnings Call Transcript

Utz Brands, Inc. (NYSE:UTZ) Q3 2024 Earnings Call Transcript October 31, 2024

Operator: Hello and welcome to the Utz Third Quarter 2024 Earnings Call. As a reminder, this call is being recorded. I will now turn the call over to Kevin Powers, Head of Investor Relations. Please go ahead.

Kevin Powers: Thank you, Operator, and good morning, everyone. Thank you for joining us today for our live Q&A session on our third quarter results. With me on today’s call are Howard Friedman, CEO Ajay Kataria, CFO and Cary Devore, COO and Chief Transformation Officer. I hope everyone had a chance to listen or read our prepared remarks this morning and also view our presentation, all of which are available on our investor relations website. Before we begin our Q&A session, just a few housekeeping items to review. Please note that some of our comments today will contain forward-looking statements based on our current view of our business and the actual future results may differ materially. Please see our recent SEC filings which identify the principal risks and uncertainties that could affect future performance.

Today we will discuss certain adjusted or non-GAAP financial measures which are described in more detail in this morning’s earnings materials. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website. Now. Operator, we are ready to open up the line for questions.

Q&A Session

Operator: Thank you. [Operator Instructions] Your first question comes from the line of Andrew Lazar from Barclays. Please go ahead.

Andrew Lazar: Great, thanks. Good morning, Howard, Ajay and Cary. Maybe to start off, you reaffirmed your full year organic growth outlook of 2% to 2.5%, which suggests a pretty significant sequential acceleration in 4Q to at least about 3.5% from the 1.9% you reported in 3Q. And that’s just to get to sort of the low end of the full year. So, I guess how much visibility do you have to this acceleration and how do we square that expectation with consumption data that at least through the first couple of weeks of October, at least based on our data, seems to be running more flattish or so, and particularly in light of the fact that as we know, shipments were ahead of takeaway in 3Q?

Howard Friedman: Yeah, thanks for the question, Andrew. Look, I think there are a couple of things. The first thing I’d kind of point out is we’ve always anticipated that the entire year that we were going to continue to sort of see momentum build. And that’s really driven by a couple of things that you know that are under our control. First is that the marketing Step up continues as we go through the rest of the year, we have innovation that is also building. You mentioned seasonal shipments and you know, there is a little bit of that in the third quarter, but we do see incremental execution on seasonal through the rest of the year. Our distribution has been gaining. And so, you kind of saw that in third quarter, especially in our expansion geographies and kind of bringing our on the Border brand into our core.

You saw the distribution gains and then the last While, you know, not something that I particularly like to hang our hat on is our laps do get significantly easier in the fourth quarter. So, we have pretty good visibility to all the things that are under our control. That would suggest to us that we should see momentum continue to build over time. The last thing I’d offer you is you do see the different the widening between measured and unmeasured in this quarter. So, you saw a little bit of that in the second quarter and you see a little bit more of it in the third quarter and we would anticipate a somewhat similar gap between measured and unmeasured channels in the fourth quarter.

Andrew Lazar: Got it. That’s helpful. And it sounds like outside of potato chips, which had its own sort of idiosyncratic competitive issues during the quarter, the other subsegments held up reasonably well in 3Q. A key competitor recently made some comments about sort of stepping up competitive activity on tortilla chips going forward as well. And I’m just curious how you’re sort of taking that into sort of consideration in your outlook?

Howard Friedman: Yeah, so certainly we saw a much more heightened competitive environment in the third quarter, which, which obviously impacted potato chips. I think the rest of our portfolio, to your point, continued to perform well and kind of is the strength of our portfolio strategy and becoming more focused on our power brands as we go forward. Tortilla chips is a little bit of a different animal than potato chips for us. First of all, we already have made decisions through the course of the year and have historically had a wider price gap between on the Border and some other competitors. And so, we would anticipate that while the gaps may narrow some, that we like where we are competitively. Second of all, the distribution gains that we’re getting again in our core, which has always been part of our thesis, was that we could bring on the Border into sort of our Utz core and drive distribution gains has been working.

And then the third is, I think as you look at some of the merchandising that we are looking at for the rest of the year, and as you turn into the next year on the border does benefit from some of that support. Obviously, we’ll evaluate price gaps as we go and if we need to be more competitive or sharpen where we are, we’ll take that decision when we need to. But we feel pretty comfortable with where we are on tortilla chips right now.

Andrew Lazar: Thanks very much. Appreciate it.

Operator: Our next question comes from the line of Peter Galbo with Bank of America. Please go ahead.

Peter Galbo: Hey guys, good morning. Maybe just to start, if I could follow up on Andrew’s question. As we think about the 4Q exit rate in that 4% type range, at least at the midpoint, that kind of sets you up for exiting an algorithm or at least the low end of algorithm into ’25. And I’m sure you don’t want to give any kind of formal commentary there, but just want to understand if that’s how we should be thinking about it at a high level. And then in addition to that you had some commentary and there’s some nuances as we get into ’25 that I was hoping you could remind us of. I think you mentioned, you know, kettle production is going to start up in 1Q. Maybe you have some laps on golden plate. But anything else we should be aware of as we start to kind of think about ’25. Thanks.

Howard Friedman: Yeah, thanks Pete. You’re right, we’re not going to, we’re not going to do ’25 guidance at this point. But I’d offer you a couple of things. I think first of all if you look at what we have said at our 2023 Investor Day, the conversation was that we had, was laid out our volume share expectations for both our core and for our expansion geographies. And at the moment what has been true, and you can see year-to-date we are delivering a hold the core volume share and an expansion market volume share around that 0.2% points. So, I think we feel pretty good that our distribution gain strategy and our whole the core strategy are kind of yielding the fruit that we would expect. I think what’s been a little bit different year-to-date is the translation from volume to value and certainly with competitive pricing being a near term conversion question that I, that I think remains the thing that we are working our way through.

The other thing I would offer is, you know, we are feeling very good about our non-measured channels. They continue to grow and step up. We are gaining momentum in there and you know, we do expect that the category and category participants remain rational which is great for everybody. So, you know, I think we will continue to see what we control come through in our results and you know, then the translation I think is the wild card. But I think we feel pretty good about where we are for the, for the fourth quarter of this year and we’ll address ’25 as we, as we kind of lap the year. Your second question is around Kings Mountain and Kettle?

Peter Galbo: Yeah. Any other nuances we should be aware of in ’25? Kings Mountain? I think you’re going to have some laps on Golden Flake. Anything else we should take note of?

Howard Friedman: Yeah. So, to your point, our productivity program and our automation and capital installation is going on as planned. And we are expecting for Kings Mountain to start up to add incremental capacity to support our kettle business, which is a lot of Boulder Canyon growth and a lot of on trend performance there. But there’s not a lot of, there’s not a lot of laps to talk about. I think probably the two biggest ones, one is our C Store lap gets better. Remember we actually saw our step down in C Store business in the back half of last year, really in 4Q. So that while we’re not expecting for C Store to become a significant positive, it becomes significantly less negative in the year. And then the second is really around zaps and some of the challenges we’ve had on that business. I think those are the two biggest material drivers that might change next year.

Peter Galbo: Great, thanks very much.

Operator: Your next question comes from the line of Michael Lavery from Piper Sandler. Please go ahead.

Michael Lavery: Thank you. Good morning. Just was wondering if you could talk about the promotional environment a little bit more. You gained volume share in the stepped-up promotional environment but lost a bit of dollar share. How do you think about the optimal balance between price and volume and maybe specifically too by, you know, kind of portfolio segment, it looks like you promoted foundation brands quite a bit more even though the volume lift was there. What’s maybe some of how you think about that role in the portfolio and especially in the environment here now?

Howard Friedman: Yeah, so I appreciate the question, Mike. Look, I certainly in the quarter we saw a much more promotional environment and actually saw overall promotions kind of coming back in line with what we used to see in 2019. So, where we had been lagging promotionally across the category up until then, Q3 of this year was the first time that we kind of saw that step up. And then for us specifically we sort of followed similarly, but we stepped up a little bit further driven by the customer mix that we have, which was fundamentally different versus 2019 remember, that predates a lot of the public skeins and some of the other expansion geographies where we have a little bit more high low than we had. So, the promotional environment has gotten more competitive for sure.

Obviously, potato chips was the big story on the quarter as a variety of competitors and a variety of channels actually wound up becoming more competitive or more promotional. So, as we go forward, I think the category remains rational and I think that we will see sort of some of the stabilization of that. I think the category household penetration remains strong and so it certainly shows that consumers are engaging when we bring promotions and marketing and innovation forward. As for us on foundation brands, just a couple of things you’ll remember last year we spent a lot of time talking about Vintners and Kitchencook and some of our other businesses, HK Anderson that had struggled a little bit more. And what you saw in the quarter is as we’ve been doing the price pack architecture work, those are some of the businesses where you also wind up putting some pricing against to get the absolute price point down.

And that’s I think a little bit of what you’re seeing there as well. And then we do have on HK Anderson, we had a promotional shift into the third quarter from the second quarter at one of our retailers. So, you know, we’ll always be a volume value story. I think volume obviously driven by expansion. And you know, we do expect that pricing will be somewhat thing that we’ll continue to look at as all the category participants do. We’ll maintain our price gaps and be rational.

Michael Lavery: Okay, thanks for that. And just was wondering how much you could give an update on distribution progressing. You’ve had some smaller wins recently that, you know, I think we’re just ramping up in the second half of this year. But how do we think about maybe how that continues to go or you know, is there capacity in place for bigger wins maybe especially in the west or Midwest. And how does DSD play a role in that?

Howard Friedman: Yeah, so to your point, look, we felt very good about what our expansion geographies have been doing and you certainly saw that in the quarter as they continue. As we continue to gain distribution with both larger national retailers that have local banners as well as we start thinking about some of our alternative channels club and the sort. So, we would expect to continue to gain distribution there. We are ongoing conversations for next year already, as you can imagine, and expect that will continue. As far as capacity is concerned, look, we feel very good about our overall capacity utilization as well as the investments that we have been making to be able to get a supply chain that is both resilient and responsive and efficient in as we gain, as we have those gains.

So, we don’t see any foreseeable issues with capacity as we go forward. Even if there were sort of a, you know, a larger than average distribution gain that we have, we have visibility and then in terms of DSD, you know what, we’re a hybrid model so we will service customers how they want to be serviced. So, if you want to be in DSD, we have the, we have the routes. We also have relationships to make sure that that happens. If you want direct to warehouse, we can ship it to you that way as well.

Michael Lavery: Okay, great. Thanks so much.

Operator: Our next question comes from the line of Rob Dickerson from Jefferies. Please go ahead.

Robert Dickerson: Great, thanks so much. First question is on competitive activity and just the geographic expansion plan. I’m just curious and I’m not sure if you kind of touched on this a little bit earlier, but is there like you know, a component of kind of the kind of the close in competitive activity impacting the distribution gains you’ve seen or you expect that or is it kind of more of a kind of post distribution velocity translation dynamic that you have to keep your eyes on? I mean, basically what I’m asking is like has anything changed to, you know, being able to expand in new geographies if there is more competitive activity within the category?

Howard Friedman: Yeah, I think the short answer is no. We don’t anticipate a change in our geographic expansion strategy in the discussions that we have with retailers. I think you have to remember that part of why retailers like us is because we tend to be incremental to the category. We are not supplemental. I mean the data is fairly clear and compelling that when we come in there are more buyers in the category and obviously some investment comes along with that. So, the first thing I think for us is that we remain incremental. And I think the second thing is we are highly supportive of a retailer’s individual strategy because if you are a, if you are appealing to different consumer segments, it’s nice to have a portfolio of brands to choose from so that you can actually curate your assortment.

And the breadth of our portfolio actually allows that to happen. And so, I think in both cases retailers understand the benefit there. And then the third is we are a rational actor. So, you know, we will be disciplined about what we do. We have the data, we’ll share it. We share it with retailers and are pushing, pushing forward with them to make sure that we are meeting our obligations to support a healthy and growing category that consumers want to be a part of. I think in terms of the overall promotional environment, I think it’s to your point, it’s really a question of what does that, how does that impact velocity in the category overall? And that’s a little bit of that volume to value translation as well. I think those are the biggest drivers.

Robert Dickerson: All right, super. And then maybe just quickly, you know, excuse me, you had said in the prepared remarks, right. That there’s a shipment benefit in the quarter kind of ahead of some of the holiday merchandising plans you have. I’m just curious, like, so far, right. Have you seen fairly good customer reaction or consumer reaction with some of the merchandising plans you’ve already put in place, let’s say, even over the past few weeks?

Howard Friedman: Yeah, look, so to your point, we had always planned a seasonal shipment in. I think everybody was seeing holidays getting earlier and, you know, certainly we saw that it was planned and the impact beyond that was very small. And then in terms of the consumer and customer response to the merchandising, what we feel good about where we are, our promotional lifts are improving and our elasticities are barely consistent with what we would have anticipated. And so, we think that our business is exactly where we would have anticipated it right now.

Robert Dickerson: All right, super. Thank you.

Operator: Our next question comes from the line of Nik Modi from RBC Capital Markets. Please go ahead.

Nik Modi: Yeah, thank you. Good morning, everyone. Hey. I wanted to go back to the promotional lift question. I mean, you know, you’re talking about feeling good about that, but you know, broadly speaking, in the channel, it just seems like it, it’s not matching kind of what the lift has been historically. Not. I’m not talking about us specifically. I’m just talking about broad based grocery promotional lists. And, you know, I don’t know if that’s a function of the consumer is feeling so much inflation that maybe, you know, $0.50 off on a bag of chips may not be as effective as it used to be. Or maybe it’s that people aren’t trafficking as much in store because they’re doing more online shopping. So just wanted to kind of get your reaction and thoughts to that. And then I have a quick follow up.

Howard Friedman: Yeah, so look, I think the observation, I think is fair that consumers have certainly been responding differently and seeking value, whether they’re shopping on promotion or channel shifting to try and find either absolute price points or value as they define it. Right. We always talk about the latter being up and down. So, if you can afford the pantry inventory, you may lean into a larger pack size. If you prefer an absolute price point, you can do that as well. And so, some of that I think muddles the math a bit. I do think what we are seeing, especially particularly in the Food Channel where promotions do tend to play a bigger role, that we have seen some improvement in the overall promotional price elasticity versus the second quarter.

And you know, I think that is indicated by the incremental buyers that are coming in. That’s sort of a little bit of that value seeking that we’re talking about. And you know, I think you’re seeing the category also testing different price constructs. So, you see buy and gets and you see absolute price points. All I think in trying to find the right combination of things to keep the consumer and the shopper engaged. And you know, and then the last thing I would say is we continue to be an affordable indulgence and an accessible price point. But really this category has always historically been about innovation, marketing and then price promotion. And I think that, you know, I would expect to start to see that also normalize. I think it’s way too early to declare victory, but I think we’re a little, we’re cautiously optimistic that we’re starting to see that come through.

Nik Modi: Great. And then just kind of, you know, a longer-range question. But I’m curious on your thoughts on, you know, new substrates within the snacking category. Right. I mean obviously we saw one of your bigger competitors just announce a deal for a different substrate, cassava. And I’m just curious, like it, do you have the capacity or the capability to actually make some of these alternate substrates like cauliflower and, and edamame and you know, things like that. I just wanted to get your thoughts on that as a holistic strategy going forward.

Howard Friedman: Yeah. So, I think the short answer, so grain free alternative grains, other powders or other products, yes, we can certainly make them because it really depends on the production asset. I think the bigger question is always around allergen, so whether allergens you. That may cause for a different capital strategy. You may need to think about that. I’ve had a couple of opportunities in my career to actually put peanut butter into manufacturing facilities, which as you can imagine is a not a small decision for companies. So, I think the answer is yes, we can do it. We certainly have the capability. And the bigger question to me is always around the consumer insight and the addressable market and how big can you make it for people who are looking for those benefits.

To that end, if you look at our Boulder Canyon business as an example, it’s a great example of something where we have introduced an innovation that has continued to grow. Obviously, avocado oil remains a strong suit for us, but even things like Canyon Poppers, which is a traditional cheese ball that we have now moved. So, we’ll listen to the consumer and if there’s a desire for that, we can. And then the last thing to an overly lengthy answer. This is also a benefit of a company that is investing in its supply chain and its production assets because as those things happen, we have a lot more degrees of freedom to address consumer trends because we are continuing to build out and invest in our production capabilities.

Nik Modi: Great. Thanks so much. I’ll pass it on.

Operator: Your next question comes from the line of Robert Moskow from TD Cowen. Please go ahead.

Robert Moskow: Hi, Howard. Thanks for the question. I wanted to know if you’re noticing the tactics for the promotional activities in the salty snacks category kind of shifting. I thought a few months ago on potato chips it was more like just traditional price discounting, but I think it’s moving more towards bonus bags going forward. Have I got that right? And is it happening in a phasing approach or are these discounts on potato chips, like, still out there? Is it still very aggressive in that category?

Howard Friedman: Yeah. So, I’ll answer the second question first or the second part of it first. I think what you’re starting to see in potato chips is the promotional environment is normalizing. So, we’re not seeing the deep discounting necessarily that you saw over the summer across the category. What you are seeing is different constructs showing up of buy two get three or buy two get something different or an absolute price point of as opposed to multiples. And I think you see that in different customers based on their strategy and different competitors based on their own. To your question around bonus packs, you know, I think bonus packs are just a different way to drive consumer get consumers the value that they want at the pricing at an absolute price point.

And we’ve definitely, we heard a competitor say that they were going to introduce bonus packs. We’ve seen early indication, early indications of those products out in the marketplace. And potato chips is one of the segments where we’re certainly seeing that come through. And I would expect that you’ll continue, continue to see competitors continuing to try all sorts of different ways to get the shopper the value that they want to be able to compete on, to be able to maintain their engagement in a category that they have historically loved and bought and participated in.

Robert Moskow: So, I guess my follow up is do you feel that you have to change your tactics in response to that or do you feel confident with the way you’ve laid things out that you can just keep doing what you’re doing?

Howard Friedman: Yeah. So, I think we feel pretty good about our plans. We feel clear on what we’re executing, the marketing and innovation execution that we planned for the fourth quarter and obviously as we go into next year, the distribution gains, which are always going to be central to our thesis of how we drive our growth and then a lap period. But that said, look, we work in a competitive environment. We will always look at our tactics and constantly revise them if we need to. That’s a lot of the capability building that we’ve been doing. And so, if there is a better way to address the consumer demand, then we will make those changes as we need to. And the biggest thing for us is continuing to be able to do it faster and at speed. And so, we’re in a good place. But as with everybody else, we can always be better. We’ll always be pleased, but not satisfied.

Robert Moskow: Great. Thank you.

Operator: Your next question comes from the line of Brian Holland from DA Davidson. Please go ahead.

Brian Holland: Yeah, thanks. Good morning. I wanted to ask the ’25 question. I guess kind of taking a theoretical approach. Obviously, category stuff is outside your control. Kind of as you referenced earlier, what’s happening there? But maybe just curious, given the extent to which your long-term algorithm incorporates some contribution from price, do you think you can deliver an on-algorithm year if there’s no price and it’s reliant solely on volume?

Howard Friedman: Yeah, well, I think that is the, that is probably the biggest question. But let me give you, I’ll kind of give you what I think how we have thought about it historically. I’ll take you back to Investor Day to start and then kind of how we think about our own growth over time. You know, at Investor Day we take a conservative approach where we had said that we thought that volume would be around 1%, 0% to 1% for the category and 2% in price. Right. Whether a combination of absolute or mix as we build. Obviously, that has not, that was a step down from the 4% to 5% category that we had seen historically. So, I think we had already gone into it with what we thought was a more moderated approach. And you know, obviously the category has been a little bit softer than that this year, but is starting to inflect a little bit more positively as we’ve gone through the rest of the year.

I don’t know that we believe that we’re going to in the near term get back to that forecast because it would. It will continue to be a little bit of a work in process. The things that we control and the things that we’re doing which I think give us some confidence is we’ve always said that we are not solely reliant on the category assumption in order to drive our growth because of the white space distribution opportunities we had and because we believe that we can bring products from the expansion geographies into our core and our core products into our expansion. And that has largely going as we would have expected. So, you can see that in our, in our results. And so, you know I think what we’re controlling is working for us. Non measured channels continue to be a, which had been a headwind prior year are building into a tailwind as we’re gaining and you know, and I do think that in the near term pricing is a challenge but over the longer term I would suspect that the category will move back toward a rational place to occupy and continue.

It’s you know what makes it probably the best category in CPG. So, we have work to do for sure. But I do think that the things that we control actually should drive the results we are promising.

Brian Holland: Great, thanks. And then more recently we see, I know you referenced you know, kind of the convenience channel pressures which we’ve seen for a while now. More recently gas prices come in. Just curious and I appreciate it’s a more recent phenomenon. So certainly, fewer if any data points behind this. But any lift in pulse purchases in the convenience channel concurrent with lower fuel prices?

Howard Friedman: You know, I mean I’m not sure that we’ve seen that. And to the point around convenience. The convenience channel has been a challenge for the category overall and us particularly. So, a lot of the work that we’ve been doing that are yielding better results. We’re feeling pretty good that where we fixed it, where we’ve changed, we’re seeing an improvement in trend. I’m not sure we could correlate that to gas per se. So, I think, I’m not really sure that we have a unique perspective on that.

Brian Holland: Fair enough. Thanks.

Operator: Your next question comes from the line of John Baumgartner from Mizuho. Please go ahead.

John Baumgartner: Good morning. Thanks for the question. Howard, I wanted to ask just on the volume pressure in salty snacks, sweet snacks volumes are also down confectionery, baked goods. So, it’s not just salty. Then there’s an elasticity impact, obviously. But as the inflation dust sort of settles and you look back, how much of this volume softness in salty do you perceive as a function of just sort of an elevated base and overconsumption in the years following Covid? I mean, did frequency become overstretched? I’m curious how you think about base demand relative to trend and whether there’s sort of a natural diminishing of returns from promo and lifts that sort of cultivates more price discipline going forward.

Howard Friedman: Yeah. So, I think a couple of things. I think it is fair to look at the last several years and say, boy, the category really ran strong and well ahead of its long-term algorithm. And therefore, is the pause that we are seeing particularly surprising or, and is it a broader question? I do think we believe that there is some normalizing in the growth rates. What I would also say is that if you look at category household penetration, you look at category buy rates and buyers, you do still see a step up and you do see the category growing buyers and households. So, there is certainly still consumer interest and desire to engage in the category more than it has historically. And we certainly see that the consumer engages when innovation and marketing comes through.

That’s one of the reasons why we feel very good about for our own business. If you look at our household penetration growth and the buyer acquisition that we’ve had that you’re also seeing, not only are we getting new buyers, but they’re buying at a similar rate as our historical did, which is, as you know, not particularly easy to do as you gain distribution. So, you know, I don’t think there’s a long-term question on the category and the consumer enthusiasm for it. I think those are all still strong. I do think there’s a little bit of, a little bit of normalization going on.

John Baumgartner: Thanks, Howard.

Operator: Your next question comes from the line of Mitch Pinheiro from Sturdivant and Company. Please go ahead.

Mitchell Pinheiro: Yeah. Hey, just two quick questions. One is private label, is that having any impact on the potato chip category? Certainly, anecdotally we’re seeing a pickup in stores that we visit regularly and the quality of the private label potato chip and even other salty snacks has gotten, has improved substantially. So, I’d love to hear your take on that.

Howard Friedman: Yeah. So, I mean, look, the category, I mean obviously overall this category has a fairly low presence of private label historically and sort of the usual actors who, you know, use private label as a, as, as central to their brand will continue to support it. And I think that that is not unusual. It’s still a relatively small piece of the business, albeit grew as inflation took off. I think one of the things that’s been sort of interesting is that when you look at the pricing that we saw in the third quarter and that, and that in some cases we saw branded players going down to private label level pricing, you actually saw private label struggle in those boxes over that period of time, which to me kind of continues to affirm that brands matter and that, you know, when that ultimately, as we think about, as we go forward, making sure that we have a healthy, rational pricing environment for the category, including a, an opening price point like a private label, all makes sense to me.

But I think in the near, in the third quarter, private label I think struggled fairly significantly as pricing came down.

Mitchell Pinheiro: Okay, thank you. And then just last question on the gross margin, very good performance in the third quarter. Does that continue at that type of improvement rate because of the, you know, your fixed cost leverage that you’ve been able to achieve or does the promotional environment at all put some of that, you know, strong gain at risk?

Ajay Kataria: Yeah, so I’ll take that. I think the short answer is yes, the gross margin performance that you’re seeing will continue. We have delivered about 270 basis points of margin expansion year-to-date. And you will see that sort of, you know, we’ll finish out about 250 basis points for the year. I would say, you know, productivity programs are running pretty strong. We are, we are delivering more than 4% of EBITDA between 5.5% to 6% of cost of goods in productivity this year. And that is helping us, you know, offset any, you know, price mix investment that we are seeing on the top line. And you know, to be honest, if you look at our P&L, our price investment is slightly negative, you know, 50 basis points in the quarter. So, it’s not, not much.

Mitchell Pinheiro: All right, thank you. That’s all I had.

Operator: Your next question comes from the line of Jim Salera from Stephens, please go ahead.

Jim Salera: Good morning. Thanks for taking that question. Hey, Howard, I believe in your prepared remarks you talked about household penetration up like 180 basis points. Can you just offer some insight into which brands are funneling those new households to you and if have any details on characteristics they find attractive with various US Brands. If it’s a value thing because of the price gaps or unique flavors or any color, that would be helpful.

Howard Friedman: Yeah. So, a couple of things, Jim. I think one is not surprising as we are seeing distribution gains in expansion markets that you would also see some household penetration gains across the portfolio because we’re bringing our power for brands into those markets. I think the two shining stars, I’m sure it won’t surprise you. One is on the border as we have increased our distribution in our core. And the second is obviously Boulder Canyon, which is just continues to grow much faster than the market. Much faster in the classes of trade it’s in. Certainly, it’s outpacing in the spins channel and you can see that number. And we’re approaching $100 million in sales. So, we’re feeling really good about where we are on Boulder Canyon.

And so those two brands are obviously driving a lot of it. But it’s not exclusively there because we’re seeing expansion geographies overall gaining households. So, I think that’s the biggest driver of it. And then I think in terms of insights as to why, listen, we feel very, we’re very proud of the quality of our products. You know, we have recipes and a product that is unique in the market. I think we’re pretty proud of what we taste like. We don’t taste like everybody else’s product overall. And I think when consumers try it, they repeat. We’ve always enjoyed historically high repeat rates and I think that continues to be the case.

Jim Salera: Okay, great. And then maybe if I could drill down a little bit on the border, the on the border growth, especially around I would imagine they get a boost from football season is encouraging to see. But at least in the standard, it seems like I still see some softness in what I would view as kind of the complementary sauces and dips that would go alongside OTB. Is that something that as OTB continues to scale, we should see turnaround in those or do you still need to do some more work to kind of get them on shelf next to the, to the chips or any thoughts there?

Howard Friedman: Yeah, I appreciate the question. Obviously on the border, dips and salsa are an important complimentary products to the overall business because everybody who sits and watches a game wants to have both. We had a contraction distribution last year. It was not a discontinuation, but we went from two locations in a retailer to one. So, we were in sort of the traditional salty aisle and we were also in the ethnic aisle and it consolidated to the traditional salty aisle. And we’re still cycling through that. That’s been a lot of the decline that you’re seeing. The underlying health of that business is quite strong. We also had like everybody else does from time to time, you launch an innovation that doesn’t work that we also have in the prior year that we’re also cycling through.

But I think the underlying health of on the border non salty. So, the dips and salsa business is actually pretty healthy. We just have. We have to cycle through that work and we continue to look at ways to innovate the entire brand, not just the chip.

Jim Salera: Great. Appreciate it. I’ll come back in the queue.

Operator: As there are no further questions at this time. This concludes the Q&A session in Utz third quarter 2024 earnings call. Thank you all for attending today’s meeting. You may now disconnect. Have a pleasant day everyone.