Pete Pappas: No, thanks for the question. I think, you know, we’re seeing very balanced growth. I’m pleased with that. The AI impact thus far really has been restricted to organic eggs and that’s really been driven most recently. And we haven’t seen a significant impact in that regard. Some of the impact that you’re talking about and has really been isolated to the West Coast, again, our performance there has been very, very strong and isolated to a handful of retailers. And in those retailers, our performance has been quite strong. We have really — I would say we’ve reinforced our position. I don’t think it has been disproportionate in that regard. It has not been outsized as a result of what you’re talking about. Our performance in natural has been very consistent.
Our share performance continues to be quite strong. We’re far and away the leader in natural. And our performance within food and mass continues to grow disproportionately, as we’ve talked about in our opening statement. So I’m really pleased, you know. I don’t think — as Russell said in the outset, this first quarter, we really hit on all cylinders and I’m really excited about that. I think what you’re seeing is, for us, a little bit of how high is high and without any outside influence. Because we’ve — we did not have any of the interference that we’ve experienced in some past quarters. And you’re starting to see what we’re capable of when we can really execute without some of those outside forces. So given the opportunities that we have in front of us and the partnerships that we’re establishing with some of these world-class retailers, I’m really excited about what the future holds.
Adam Samuelson: Okay, that’s very helpful. And then a clarification question, just as I’m going through the Q, and you disclosed your revenue from retail — from the retail channel, which if you compare that to the total revenues, it looks like your sales in the non-retail channel were actually down year-on-year. And so I just want to be clear, is that some of the egg products and non kind of core items or is that a — the actual decline in foodservice? And maybe bridge that a little bit. Thanks.
Thilo Wrede: Yeah, it’s a great observation, Adam. It really is a function of first quarter last year, right? So when AI hit, there were no eggs available. At times we were the least expensive offering for the foodservice channel. And so we had sort of outsized demand in the foodservice channel. Last year that came back down to earth once AI — this really big impact from AI had passed. And so with that, on a year-over-year basis, foodservice sales for us were down. They’re still overall a growing part of the business. It’s just the — you know, last year first quarter, the business went up by, you know, multiples rather than by percentages. And now we’re falling back to more normal pattern. That’s really behind that, Adam.
Russell Diez-Canseco: And there’s one other piece of the non-retail sales, Adam, which we’ve discussed on — in quarters past, which is that small percentage, low-single-digit percentage of our eggs that don’t make it into a carton and end up going into the wholesale processing channel. And we don’t price to take advantage of short-term disruptions in the market. However, the price we get for those wholesale eggs are based on market prices. And so a year ago, those prices spiked just as they were spiking on the shelf, and we are just the taker of those prices. So there was a temporary increase in the price we got for our non-branded kind of wholesale eggs as well.
Adam Samuelson: That makes total sense. Very helpful. I’ll pass it on. Thank you.
Russell Diez-Canseco: Thanks, Adam.
Operator: Thank you. One moment for our next question. Our next question comes from Jon Andersen with William Blair. Go ahead, Jon.
Jon Andersen: Thanks. Good morning, everybody.
Russell Diez-Canseco: Hey, Jon.
Jon Andersen: Two quick ones. I was wondering if you could talk a little bit about what you’re seeing demand-wise kind of across the portfolio. And what I’m getting at here is the kind of growth that you’re seeing for the kind of conventional 12-count relative to maybe some of the higher price point SKUs, 18-count organics and blues, just to get a sense for, you know, your ability to kind of continue to attract that consumer at higher price points. And then the second question, just around resets and distribution gains in 2024, if there’s any way to kind of characterize, you know, where you kind of are in that spring reset process, what percent perhaps is complete, what’s still to come and where that distribution is coming from. Thank you.
Pete Pappas: Sure. Thanks for the question. This is Pete. And we’re seeing very, very healthy growth in our core portfolio across both segments of natural and our food business. So while we are seeing migration into 18-count, the value proposition in large pack size, as you can see probably across the entire food segment, it does exist in the egg category and within our portfolio. We are still seeing solid growth within our portfolio on the core black box item and both across the food segment and probably less so within natural. Primarily within natural because we have such a disproportionate mix within organic. The organic 12-count product is a larger selling item in the natural segment of business. And then to your second question around percentages of retailers that are in the midst of resets, probably a little bit more of a difficult answer for you.
I would say we’re just right in the heart of that. You know, typically, these decisions are made in March, so we’re probably — I would say we’re probably 50%, 60% complete. Those resets are being done and actively completed now. And we’ll start to see some of those benefits flow through in the next — probably next two reporting cycles is when we should see some of that bump. But very optimistic that we’re going to see some nice results as a result of the efforts of the sales group.
Jon Andersen: That’s super helpful. If I can squeeze one more in. You know, I know your 2027, you know, algo calls for, you know, household penetration gains. I’m wondering if there’s another part to the story here that you’re seeing today and will also contribute to growth, which is, you know, growing your share of acquirements with existing households, so buy rate. And if you can comment on kind of the loyalty, the repeat activity you’re seeing, you know, for the brand and how that stacks up relative to kind of food overall, any color around that would be helpful. Thank you.
Thilo Wrede: Jon, so the turn — the hitting the ’27 targets, as you pointed out, it depends on household penetration. It also depends on us increasing our buy rate. I think at our Analyst Day back in September, on the fourth quarter’s call, we had pages in our decks that showed buy rate growth, right? In 2023, buy rate went from $28 to $34 per household. However, households are buying a whole lot more than $34 of eggs over the course of the year. So we are still only a fraction of household purchases for eggs. And so getting that loyalty from consumers up, that is certainly part of our math to get to that $1 billion of revenue by 2027. I think we are on a great path there, the loyalty that we get from consumers. I think the growth of 18-count is part of that expression of loyalty.
It’s not just that consumers are looking for a, you know, lower cost per egg, but when they buy an 18-count, we take away half a purchase occasion that they normally have. And we are already locked in with them and consumers are willing to pay the — you know, the premium that we deserve because they’re willing to lock us in, if you want. And so consumer loyalty, I think, is a really big part of what we’re going out there. And that means that we keep selling our marketing message, we keep focusing on quality, keep focusing on being able to stock the shelves with retailers. So all these intentional decisions that we make, they’re all aiming to increasing household penetration and increasing buy rate.
Jon Andersen: Makes sense. Thank you.
Operator: Thank you. One moment for our next question. Our next question comes from Robert Moskow with TD Cowen. Go ahead, Robert.
Robert Moskow: Hi. Thanks. And congratulations on some great results.
Russell Diez-Canseco: Thanks, Rob.
Robert Moskow: Maybe you do this annually, but do you have any update on just overall awareness, consumer awareness of the Vital brand name, like top of mind awareness, and if that continues to move in the right direction? I’m sure it does. And is there any kind of like — have you done any thinking around like tipping points where you get to a certain amount of awareness, a certain presence on shelf? And, you know, some brands are — I remember Freshpet used to talk about some kind of parabolic effect where you hit this tipping point and the growth accelerates because of that, probably because of the pick-up in awareness. So maybe that’s jumping ahead too far, but wanted to ask.
Thilo Wrede: So, Rob, the awareness, we’re tracking it. It’s not a metric that we talk about every quarter, but we’re making progress on awareness. We’re on track to where we want to be this year. I don’t think I can talk to us having a kind of parabolic effect, and I wouldn’t want to copy from Freshpet. But I think what we have seen is that increased distribution begets more distribution and begets awareness, right? I think Russell talked about it in one of the first questions. When we have one facing on the shelf with the black carton, we kind of get lost in the sea of offerings in the egg set. When we have three or four SKUs on the shelf with maybe one or two facings per SKU, all of a sudden we have a brand block, right? And the consumer realizes, so there’s a significant portion of the shelf here that’s Vital Farms.
Even if a consumer had never heard of us before, when you have this kind of brand block in the fridge or on the refrigerated shelf at the retailer, the consumer picks up on that. And so to us then, that is the indication that increasing awareness should accelerate over time. I’m not going to call it a parabolic effect because we haven’t done the math. And I don’t want to promise you something that I don’t know if we can stick with that. But the fact that as we grow, our growth becomes more self-reinforcing, if you want, and kicks off this flywheel, that effect is certainly there.
Russell Diez-Canseco: I think it’s important — Rob, it’s a great question. The only thing I would add to that is even with a brand like ours, with a wonderful community of really loyal repeat consumers, a big percentage of the purchase choice is still happening at the shelf and we still have to get their attention. We can’t take for granted that simply being on the shelf is enough. We’ve got to be on the shelf and compelling at the shelf. And so that’s a street fight every day, and I think we’ve got the right people in that fight.
Robert Moskow: Thank you.
Operator: Thank you. This concludes the question-and-answer session. I would now like to turn it back over to Anthony Bucalo.
Anthony Bucalo: Thank you again, everyone, for your support of Vital Farms. Have a great day.
Operator: Thank you for your participation in today’s conference call. This now does conclude the program. You may disconnect.
