So the reason we made the comment in the prepared remarks about the dialing it in fairly closely is three or four years ago, we would put a line in and it would give us capacity that would last us a year or two years and you’re kind of fine on it. Now at the scale that we’ve achieved, when you put a line in, you can pretty quickly burn through the capacity of a line in less than a year. And so we can’t afford to have this thing planned for 25% and deliver 33% on an ongoing basis, because you just won’t have the infrastructure in place. You just won’t have the equipment installed. Lead times on equipment are long, construction takes a long time. Staffing is quick. We can staff up in 90-days. But if we’re going to suddenly outperform our expectations by 5 or 10 points as we might have done over the last couple of years, we could find ourselves short shipping again, we don’t want to do that.
So at this point, we’re very comfortable planning for, call it, 25% growth. There’s a little bit of headroom on top of that, and we plan for a little bit of headroom on top of that, but we certainly don’t want to be pushing over 30%.
Bryan Spillane: Alright. Thanks, Billy.
Billy Cyr: Thank you.
Operator: Thank you. Our next question is from Bill Chappell with Truist Securities. Please proceed with your question.
Bill Chappell: Thanks. Good morning.
Billy Cyr: Good morning.
Bill Chappell: Just a little bit more on pricing, especially move to next year. One, do you think you get back to a normal cadence of just doing some pricing every year going forward? Or is there some pushback on the pricing you’ve taken so far? And then two, and probably more importantly, I know you have a different product than the than the dry goods. But I mean do you see some increased promotions in kind of the competitive landscape that may change your pricing attitude? Or do you think everybody is going to kind of hold the line even at the premium, super premium side as we move into ’24?
Scott Morris: Hey, Bill. So let me talk about the category first. I have — as volume has kind of gotten softer we are looking at it. Category volume. Yes. Yes, I’m sorry. Yes, the category volume has gotten softer. We are kind of all over it, and we keep waiting for someone to really kind of start pressing on the pricing dial. Have not seen it, have not seen increased promotion. There’s been very, very little kind of growth there. It’s been interesting. At some point, I think you’ll see a bit of it. But we haven’t seen anything yet. But again, I think that historically, you’ll see some people kind of layer some of it in, but not a lot. From our standpoint, I think what we try and do is we will take pricing like when appropriate and very strategically and very targeted in everything that we’re doing.
So will we do a couple of points here and there? Yes, that’s probably going to be something that we’ll always look at. But a lot of the pricing that we have done is from how we’ve kind of modified and changed the portfolio and the products that we brought into the market. It hasn’t been just an across the board or 2% or 3% price increase. We’ve basically put new items in at higher price levels. And we’ve just kind of taken different opportunities over time in order to do a little bit on pricing.
Billy Cyr: Bill, I would add to that, we also expect that there is fairly sizable opportunities for us to improve the gross margins from throughput and yield, we have built organizational capability over the last, call it, year that is really focused on increasing throughput, driving efficiencies in the manufacturing operation, driving efficiencies in the supply chain much more competitive bidding on some of the key components that we buy or used to just have to take whatever you could get whatever was available. And now there’s much more ability to do strategic sourcing. So all of those elements will help us and could mitigate the need for further pricing. It doesn’t mean we won’t try to take some pricing at some point, but the need for it won’t be as great.
Bill Chappell: Got it. And then switching back to some of the questions on the club channel. And I mean at the store level, we’ve seen a lot of changes over the past few months, I mean I know you’ve got any benefit, but can you maybe give us an idea of where we are. I think Costco has 11 regions. And I’m not sure if you’re in every store. And it seems like there’s more opportunity in front of you than behind you, but I just want to make sure I’m looking at the right way.
Scott Morris: No. We believe that there’s a tremendous amount of opportunity in front of us. First of all, obviously, year 1, you get into the store. This has been a pretty amazing year and pretty significant expansion. So we’re going to have the benefit of that really all next year. Plus we’re, call it, 2/3 of the way into the Costco goes through Q3. So there’s more Costcos to come and then not only domestically, but then in some other areas, even into Canada and Mexico and even in the U.K., there’s plenty more Costcos. But the biggest single piece is — and I touched on this earlier, we’re in zero Sam’s, and we think that over time, the right proposition going into Sam’s could be really helpful. And provide us like another opportunity to be exposed to another group of consumers that shop for pet food at Sam’s.
Bill Chappell: Great, Thanks so much.
Scott Morris: Thank you.
Operator: Thank you. Our next question is from Rob Moskow with TD Cowen. Please proceed with your question.
Unidentified Analyst: Hi, everyone. This is [Jacob Akin] (ph) for Rob. Congrats on the quarter.
Billy Cyr: Thank you.
Unidentified Analyst: I just have two quick clarifying questions and then a broader question. So first, for media spend, last quarter, you said that it would be up $15 million in the second half. Is that still true? Or it was today an update to that? And then for like freight and logistics costs, does your guidance assume that the fuel cost and the stuff will stay where they currently are or go back to more normalized levels? Or was it include?
Billy Cyr: Your question on media first. So yes, we were up about $5 million in Q3 year-over-year. We’ll be up approximately $10 million in Q4 spend, only a couple of million dollars last year. So we’ll be kind of in the plus or minus $13 million range of spending for Q4, which we’re really excited about. I think it will give us a little bit of a help in Q4, but more importantly, get us off to a strong start as we go into 2024. Logistics been holding steady. We don’t see a big change sequentially between Q3 and Q4. We’ve had a little bit of an uptick in diesel cost, not significant, but we’ve seen some favorability in some other areas. And so we’re feeling very good about the logistics expense right now.
Unidentified Analyst: Awesome. And then just more broadly back to media. You said that next year, you kind of expect it to grow close to sales, maybe above $100 million rough math. But then going forward, you’ll expect it to leverage with sales growth. But it’s my understanding that your media and sales are kind of like 1:1 when you try on meaning you get sales. So how do you expect to generate this 25% sales growth in the later years with a lower media as percentage of sales?
Billy Cyr: There’s certainly some scale benefits as we get further and further out. One of the things that we’ve seen is the more you build out your fridge network and you get the visibility amplifying the advertising. So stores with two and three fridges amplify the advertising. And so we think that part of the reason that our advertising has gotten so effective and driven growth in excess of what we had planned for was because of the increased retail visibility. And that doesn’t go away. Yes, net new fridges is a good thing, but the installed base of fridges, lighted fridge sitting in a store, double or triple fridges, continues to amplify the value of the advertising every successive year. We think that’s frankly where we’re going to get some of the benefit, but also scale in the media. We’ll get some benefit there as well.
