David Palmer: And just a quick follow-up on that. Just if we’re tracking these data, and as you know, we look at scanner data, and everyone looks at scanner data closely. In recent four weeks, it would be down a couple percent. Your guidance is a little bit better than that. Is there a roadmap, a timing that you think you’re going to see more improvement in what metrics would you have us focusing on? Thank you.
Gary Pilnick : Yes, David, we look at those metrics too, so we appreciate the question. I’m really glad you asked it, because it lets me reinforce the unique circumstances that we are working through. We talk about two different things that we were lapping in Q4, and that was the relaunch of the business the previous year, as well as the lapping of pricing. You might recall that when we took pricing, we took it later than a lot of the other manufacturers in our category. That’s because we were still recovering from the fire and the strike. Our last substantial price increase was in March of 2023. So the beginning of the year, we’re still working our way through that. You see it in price realization in the data. So that’s what’s happening early on. Again, we feel very good about our overall guidance and the shape of the year, but that’s a unique situation that’s happening right now.
Operator: Thank you. Our next question comes from Max Gumport of BNP Paribas. Your line is now open. Please go ahead.
Max Gumport: Hey, thanks for the question. I was hoping you could provide a bit more color on the drivers of the better than the expected gross margin expansion in 4Q. I think I heard you mentioned a balanced commercial approach and operational efficiencies, and then how this informs your outlook for ’24 gross margin? Thanks.
Dave McKinstray: Hey, Max. Thanks. So I think if you look back at 2023, and we had the slide that really showed the progression throughout the year, and we talked about the front half of the year really benefiting from the lapping of the relaunch of the business, we talked about the price realization that played through to gross margin and the benefit of that price mix. The other thing Gary talked about is we moved to the latter part of the year that focus on operational discipline, and Gary mentioned the metric OEE, we’re really focused on making sure that we’re running our plants efficiently, effectively, making sure that we’re maximizing output, getting the right food, and all those things are really playing through just that focus has really helped in the back part of the year.
And yes, we did talk about the optimization of our promotional plan in the market, really balancing our returns against profitability and volume. We talked about that dynamic on the Q3 call, and we continue to do that through Q4. So those are really the big drivers as we move through 2023, and as we think forward to 2024 that’s where our focus is. It’s continuing to drive that ROI. It’s continuing to drive that discipline throughout not just our plants, but the totality of our supply chain. And again, as Gary mentioned, we’re planning on making sequential improvements in gross margin into 2024, despite that one-time lapping impact of the insurance recruitment. So we’re pleased with our performance here as we finished out the year, and as I mentioned, the prepared remarks, how that sets us up for 2024.
Max Gumport: Great, and on that as well, I saw the capes fell improvement that you’re making progress on. That was nice to see, but you are still well below historical levels. And the broader package food industry seems to be catching up to, I’d say, more normal levels already. I’d imagine that there’s more improvement you can make on this metric in 2024, and that could open up some opportunities on gross margin and the broader supply chain. Can you just talk more about what that might open up for 2024, maybe even ’25? Thanks, I’ll leave it there.
Dave McKinstray: Yes, thanks, Max. So you’re right, we’re not yet to our goal. We had that outlined on the slide in the prepared remarks. We are happy with the improvements we made, and we’ve made them in a relatively short amount of time here. But as we head into 2024, we’re aware that there’s opportunity, and again, that operational discipline, it’s not just on the cost side, but it’s making sure that we’re having and producing the right product and making sure that we’re filling orders and servicing our customers at the level that they expect, and frankly, that we expect.
Operator: Thank you. Our next question comes from Pamela Kaufman of Morgan Stanley. Your line is now open. Please go ahead.
Pamela Kaufman: Good morning.
Gary Pilnick : Good morning Pam.
Pamela Kaufman: Morning. I just wanted to dig into your outlook for price mix to be up low single digits in 2024 and how you’re thinking about the balance between price realization with increasing promotional activity. To what extent does the low single-digit pricing growth reflect the carryover benefit of pricing from last year? And can you elaborate on the RGM initiatives that would contribute to your price realization in 2024?
Dave McKinstray: Hey, Pam. Yes. So I think Gary mentioned that we’ll lap our last list price increase at the beginning of March. So there is that impact in there at least for a couple months of the year of the list price lapping. Gary did talk then further about our other RGM initiatives that we’re focused on in 2024. Those being promo optimization, I’ll start there. And that’s something that’s really a continuation from 2023. And that’s the focus on ROI, making sure that we’re getting maximum dollars for every dollar that we’re putting into the marketplace. The second is our price pack architecture initiative, again, really focused on getting the right product, the right sizes, and the right customers for our consumers to enjoy all of our foods.
And then the last one Gary mentioned is the premiumization. We’re excited about our two new innovation launches that Gary mentioned, Mouth Off and Extra, and those just mechanically through that premium offering, dry price realization through the P&L. So those are the factors. And I highlighted what we expect kind of the shape is that volumes will decline low single digits and then we’ll realize price from there to get back within our guidance range.
