00:00Let's get right to this idea here of exactly where we go next.
00:03When it comes to this growth story, 42% growth is great. Can you sustain it?
00:08Yes, we can. We have very resilient consumer demand for our products, and we're resonating
00:15across baby all the way through kid, which is where our brand meets consumers, and we're in
00:20a really good position to continue to grow. We raised our guidance for this year, and our
00:26outlook for the future is increasing. When do we start to see, though, maybe a little
00:30bit more margin expansion here? What's holding that back?
00:34Yeah, our business has been growing really fast on the baby snack side of our business,
00:38which is a great thing. That mixes our business a little bit unfavorably in the very short term.
00:44That's been a factor that we're facing, but we expect margins to continue to grow over
00:48the coming years. We talked about productivity investments that we'll be making in our plants
00:54and things like that, starting in 27, that are going to be significant, and we're very
00:59confident in this company's ability to drive really strong long-term profitability, and we'll
01:04see a significant inflection upward in our adjusted EBITDA in 27. So we're feeling really
01:10good about all that stuff. We're right where we want to be.
01:12Is there any concern, and I know when it comes to children's food, most parents aren't going
01:16to skimp, but we talk a lot on this show about certain consumers being a little bit stretched
01:21right now and whether that actually gets worse? I mean, what is kind of the buffer that you
01:25have? Is what you do, I won't necessarily say recession-proof, but recession-resilient?
01:32Certainly recession-resilient. We are, you know, baby and kid food is kind of a sacred space
01:38for parents. They're looking to make sure that their kids have the most nutrition that they
01:43can get into them and, you know, added sugar and all these things that are really relevant.
01:47So we know that we perform really well in middle and even lower third income houses. We perform
01:55right to the category because we know that consumers are willing to make trade-offs to
02:00prioritize the products that we have. We're in a really good price value place. And also
02:04our products show up in retailers that tend to do really well when the economy gets soft.
02:10So I think we're well-positioned for the future, even if the economy continues to be a little
02:14bit iffy. With regards to your own costs and particularly labor costs, and I think either
02:19you or the CFO kind of talked about this on the conference call, this idea of that being one of
02:23your single biggest costs of goods. How do you manage that, if at all? Is there any wiggle room
02:29there? Yeah, we have opportunity to invest in capital equipment in our plants to make them more
02:35efficient. Automation is a really important factor, not only to get more efficient, but also because
02:42we need the extra capacity to support our very strong growth that we expect into the coming
02:46years. So we're accomplishing both of that, both of those things by making those kinds of
02:51investments and just managing the business for the future.
02:54I mean, this company, obviously, it's gone public earlier this year. I mean, you were kind of,
02:59you know, did this playbook at Annie's. You've done it again here. As you sort of move forward
03:04with this idea and the idea that you have to sort of, you know, answer to Wall Street investors,
03:08I do wonder where you see this company going. As an independent company, does it become like
03:13an Annie's where it gets absorbed into some other, you know, big food conglomerate? What's your plan?
03:18Well, we took it public to keep it independent, to allow us to invest in our continued growth of
03:25the business and our products. We're a public benefit corporation, so we have a very strong set
03:29of values around the way that we're going to grow this business and our standards for our products.
03:33We want to drive impact as well as really strong profitability. And we know that that's the right
03:38way to grow the brand for the long term. You know, there's always been strategic interest in this
03:43business. There probably will be in the future. But our path really, we think, for creating this
03:47value is to build this into a business that can be north of a billion in revenue. And we are
03:53on our
03:53way and we just got to keep executing.
03:55I ask that, and I don't mean to be clib about it, but I mean, Annie's was public for two
03:59years. I mean,
03:59you went public and then general bills snapped you up for obvious reasons. Why? I mean, you know,
04:06I mean, look, if you guys are actually going to grow at some of the pace that you're out there,
04:10I'm sure some of these big food conglomerates are going to come looking at you pretty soon.
04:14Yeah, I mean, it's flattering. The reality is when you're a public company,
04:18you have a fiduciary responsibility to do right by shareholders. And we do expect that,
04:24you know, in the future, there may be some interest. We just want to make sure that we
04:28do that. We grow the business and that we if we were to partner with somebody like that in the
04:32future, we just need to do it in line with our values. And as a public benefit corporation,
04:36that's really important to us. Talk about your product lineup and more importantly,
04:40the expansion of it. You kind of committed this idea of entering a new category every I think it
04:46was every 12 to 18 months or so. Can you give me a sense? A, you still stand by that
04:51and B,
04:51you have enough confidence that you're going to have enough, enough ideas to do that?
04:56Yeah, we have a very long, you know, three plus year pipeline. We've been working on a lot of
05:00these ideas for many, many years. We'll definitely be going into at least one new category next year.
05:05That's our plan. We could do a little bit more than that. But on average, it'll be one every 12
05:10to 18
05:10months. The most important thing for us to do is really focus on our core categories, our kid and baby
05:16pouch business, driving more coolers in the baby aisle and our snacks business, which is really on fire.
05:22And then just driving stronger profitability and growth out of that. And that's absolutely what
05:26we're focused on as a priority. But we do believe that taking this brand baby through kid,
05:31there are big kid categories that haven't really seen a lot of innovation focused on health and
05:36wellness. We think our brand is perfectly positioned to be able to talk to consumers and bring that
05:41trusted consumer along with the portfolio as we grow. Well, just kind of square the circle,
05:46though, because I did see that baby pouches actually slowed in the most recent quarter. But then at the same
05:50time, it says that baby overall, not only did it grow, whatever it was, 70 plus percent. But the
05:55idea that a lot of that was actually taking share from Gerber and some of the more traditional
06:00legacy companies out there.
06:02Yeah. On a quarter for quarter, the baby pouch business was a little bit slower, but that's really
06:06just a quarter to quarter timing thing. We're going to be putting a lot of baby coolers. We're putting
06:10them in right now in Q3. So the baby, that baby pouch business will continue to grow very rapidly
06:16into the coming years. We're in, we're expecting to end the year with about 5,000 coolers out in
06:22retail where we ended the quarter, second quarter at about 4,100 and then 8,000 next year. And ultimately
06:29at least 15,000, maybe quite a, quite a few more. So there's a lot of growth ahead on that
06:33business.
06:33It's one of the, you know, best margin profiles in our business. We really feel, really feel well
06:39positioned to continue to grow that business. I just want to ask you just kind of about broader
06:43trends right now going on in the food space, the idea of a bigger push for less ultra processed foods,
06:50basically things that are more healthy, organic, natural, if you will. This is obviously right in
06:54the sweet spot of where Once Upon a Farm sits. I assume that's a tailwind, but I am curious as
07:00to
07:00whether you worry at all about fads, the idea that, okay, you can have a huge swath of the
07:05population decides today, we want to be organic. And then, you know, a couple of years from now,
07:08they're onto the next thing. Yeah, we definitely don't want to play fads and we don't in organic.
07:14I've been, as you know, you noted earlier, I ran Annie's for many, many years when organic was a very
07:18small thing in the U S it's a many, many tons, bigger business. Now there's been a tailwind at the
07:25back of organic and cleaner, healthier food for many years. And that absolutely continues. And actually
07:30it's accelerated a lot over the last couple of years. And we see no change in that. We're
07:34definitely not diving onto like the fad trend of the day. You know, we are really looking at
07:40like functionality, like immunity, brain health, protein, energy, things that, that parents are
07:48really interested in bringing into their kids diets, baby through kid, and just bringing great
07:52whole nutrition made from real whole vegetables and, and fruits, and now even meat proteins. And some of
07:59our baby items, those are not controversial. They're not really fads. Those are basically just
08:04bringing great whole nutrition to parents that they're looking for.
08:09What talk to me about marketing and the spend there. I mean, once upon a farm for a lot of
08:14people
08:14is still relatively, not necessarily in the zeitgeist. I know Jennifer Garner brought a lot
08:18of attention to it, but as you know, being in the food business, you know, you have to put marketing
08:23muscle behind this and has to be consistent and constant to keep people aware of who you are.
08:29Absolutely. Yeah, no, we've invested from the very beginning here in really strong full funnel
08:33marketing. Obviously having Jen is an extremely involved and active person in the business from
08:39the very beginning when I joined in 2017 until now is very important, but we've really been talking
08:45about building the brand, you know, with mainstream media, television, streaming, and all the
08:51influencer and peer-to-peer tools. We're doing it all. We're leveraging that marketing as we grow,
08:57but we're investing significantly in that, and we will continue to do that because, you know,
09:02we have, we're in 6.1, 6.2 percent household penetration right now. That's grown a lot from
09:08last year, but we have, that number can triple, double or triple. And so we, there's a lot of consumers
09:13that still don't know us and absolutely don't have us in the household, and we want to become a
09:17household name for baby through kid and with our broad portfolio that's out there now and that
09:22will continue to grow.
09:22to be able to be able to be able to be able to be able to be able to be
09:22able to be able to be able
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