So for example, we’ve seen a really strong uptick in buy rates for our larger pack sizes. Those are more of a value offering for arguably our heaviest using households. So for example, we have our core items, our 12 count or dozen sized cartons of eggs, but we also have seen remarkable growth in our 18 count or value pack size across channels. And so that’s been an indicator for us that even our highest income households are still looking for great values. They may not compromise on the quality of their product, but they’ll potentially vote for a better value, and we appreciate the chance to serve them in that way. On the other hand, we’re seeing some really strong growth in more of the mass channel with some new products we’ve brought to market that are some of those off-sized eggs that Thilo mentioned earlier.
We have a medium organic SKU at Walmart, for example, that’s performing remarkably well. And that’s a great way for us to bring the unique value to shoppers at that store who may not have had the opportunity to find us somewhere else or may not find that our more traditional items are compelling value for them. So we appreciate the chance to find the right answer for many households in this country.
Matt Smith: And if I could just ask a follow-up question on input costs and the cost environment overall, there was a comment early in the prepared remarks about higher costs are expected to, I believe, remain a part of the cost structure going forward. But at the same time, you had pricing that offset input costs and packaging in the quarter. So could you talk about your view of your price structure today relative to cost structure? Do you have the pricing you need in place today? Or would you expect additional pricing actions based on that comment about higher cost persisting longer?
Russell Diez-Canseco: Yes. That’s a great question. It goes back to that crystal ball a little bit, I think. You may recall that prior to sort of the inflation that we saw starting at the beginning of ’21, we hadn’t taken price in a — across the range since about 2016. And typically, we were able to fund that through our own scale economies and efficiencies. So even as we might have seen input cost inflation in line with overall inflation, we were able to more than offset it with our own operational improvements. Our preference is not to vary price a whole lot or very frequently, which I think is more typical of the commodity egg market. Nothing — it’s important to us as we continue to add households over time that we do everything we can to help those new households build a habit, and that includes not changing very many things at once, whether it’s price or package design or location in the store, et cetera.
We try to make it easy to find us and easy to repurchase us. When I think about input costs, it’s one thing to see that they’ve come down substantially from a year ago. But when we go back to 2019 to a pre-pandemic pre-inflation period, what we find is that our main input costs, including corn and soy, are substantially higher than they were at that time. And so while these decreases that we’re currently seeing seem substantial across a broader period of time, they’re still actually relatively small. So we believe we’re well positioned to have taken enough price to cover the input cost inflation we’ve seen and potentially we’ll see in the short to midterm. And that gives us more flexibility, for example, to invest if we — if gross margins are expanding because input costs are accelerating downward, we can make investments in anything from promotion to marketing spend as we see fit.
It just gives us more room to adjust as we need to.
Operator: And our next question comes from Robert Moskow with TD Cowen.
Robert Moskow: I guess a question for Thilo. In the release, it does say commodity costs higher. But corn and soy are a lot lower than they were a year ago. So are there just other costs that are higher that are offsetting the lower grain costs? And then secondly, given just the comparisons, if you look at like, say, first half of ’24, let’s just take corn and soy stay where they are today, I know no one knows what they’re going to do. But if they did, would you have a continued benefit in the first half of ’24 as well?
Thilo Wrede: So on the first part of your question, the commodity cost that flow through for us with the lag, given that we are adjusting prices that we pay to farmers on a lag. So it’s not a direct correlation to what you see for the total commodity costs, plus then we have organic feed, which doesn’t really trade publicly. Those swings, they just show up in the feed sills that our farmers have. So there’s a component on why our commodity costs and the commentary that we have on commodity cost doesn’t necessarily track what you see on the Chicago Board on a day-by-day basis. On the outlook for next year, let’s talk about that when we get there. We haven’t provided ’24 guidance yet. And so, as we’re building our plans for the year, once we have them, we’ll talk about that.
Robert Moskow: I understand the lag commentary, but I guess there was a lag last year too. Maybe I’ll take this offline but anyway, I would have thought that the lag that you still would have had lower year-over-year costs even with the lag impact, but I can take that offline, if you like.
Thilo Wrede: So Rob, just to clarify, there’s a lag impact, but then there’s also the cost of the inventory that we have. If you look at our balance sheet, you see that we have an inventory position in eggs. And we are working through eggs that were laid with a bigger time difference than in previous quarters. And so with that, this lag is just — it’s very much a moving target.
Operator: Our next question comes from Robert Dickerson with Jefferies.
Robert Dickerson: I have 2 easy questions. I guess the first one just on LTOs. I saw in press release you’re doing some stake LTO Breakfast Burrito, with 2 other players. And clearly, I heard you say kind of in the quarter 2, like decent shipments to food service and core part of business is not necessarily food service, but as we kind of just think forward, should the expectation be, broadly speaking, that maybe activity can increase on the LTO side and food service, which would, therefore, I guess, extend kind of brand recognition, first question.
