Lancaster Colony Corporation (NASDAQ:LANC) Q4 2023 Earnings Call Transcript

I think maybe the way we’re looking at this thing is we have something that’s laid out that’s going to allow us to incrementally step up, adding more labor to the lines, more staffing, adding more shifts as we run through the period and allow us to grow for that 5 years and that’s both retail and food service because as you think about it in Foodservice, Chick-fil-A remains our biggest customer when you guys get a chance to dig into the K, you’re going to see that they represent north of 40% of the business today in Foodservice. And their business in terms of sales continues to grow in double digits. And if you look at them in terms of traffic, which I know you track that space as well. They’re continuing to grow in the high single digits in terms of traffic, the mid- to high.

Andrew Wolf: Okay. Thank you. I guess my last question is just on the macro, which you alluded to, more in reference to Foodservice. And obviously, you just highlighted Chick-fil-A, which is a great relationship in many ways, but certainly commercially. It seems like the rest of the portfolio, therefore, was the drag on the business. We don’t have to point to any one of them, but just as a group, and that’s not surprising as you mentioned, given the traffic issues and restaurants. So would it be fair for us on the outside to think the Foodservice side, as you look at the year, maybe a little more subdued compared to in the volume side compared to what you expect in retail, given the innovation pipeline that’s in retail?

Dave Ciesinski: No, I think you’re exactly right. What we expect is first of all, the retail business to grow faster than the food service business for the reasons that you described. I think if you look at now the macros take us out of the equation looks to macros, I think you’re going to see Foodservice overall. This is quick service restaurant, full-service restaurants, everything across the board, probably to be somewhere between flat and down a couple of points in terms of traffic. I think you’re going to see the pricing benefit that’s been floating these concepts begin to subside. So I think you’re going to see their sales begin to trail off again to that same sort of area. The folks that are going to grow are going to be doing it behind traffic.

Now if you bring it in, that’s the macro and you look at our mix of business, I think what you’re going to see is, given the size of Chick-fil-A as long as Chick-fil-A continues to grow. And as long as some of our other QSR partners continue to grow, we expect to be outperforming the rest of the broader Foodservice group by probably several hundred, 300 basis points. So I think our business is probably in terms of volume closer to flat to maybe marginally up just based on the strength of Chick-fil-A, and that’s where we are now. Things change with the consumer. We’ll see what happens. If the outlook gets stronger, we may see that improve. If there’s more pressure on the consumer, we could see that soften. But again, relative to the peer group, we feel like from a volume perspective in Foodservice, we’re in a position to outperform.

The other thing that I would share just on food service, maybe a couple of notables. We had the chance several weeks ago to invite the Chick-fil-A leadership team to our facility at Horse Cave, and they had a chance to see it end to end and in full operations. And I think it was an important milestone for all of us. Parenthetically, when we were starting the project, Dan Cathy was the CEO, and he had a chance to walk through the plans with us. And now Andrew Kathy’s assumed the role as the CEO, he had a chance to see it up and running. That continues to be a very important partnership, obviously. And we look forward to hosting other partners there in the weeks ahead. We have other similar sort of visits that are planned. Maybe the one thing that you guys haven’t asked yet, and I want to get into in terms of how we think about Horse Cave is, if you look at that plant, it continues to be our most cost advantaged plant to continue to operate and we haven’t set outside of our commentary is we had a rough quarter, particularly at Horse Cave behind that startup and behind SAP.