Neptune Wellness Solutions Inc. (NASDAQ:NEPT) Q3 2023 Earnings Call Transcript

Michael Cammarata: Yes. So our first goal was to make sure that we got the footprint in. Now we’ve started expanding doors. So as we’ve mentioned, we’re around like 5% of the potential of what doors and retailers that we’re in. And we do — right now, our focus has been really on scaling in a couple of areas, our up-age meals, which started to roll out, our toddler meals, which are performing very well, as well as expanding our footprint on our existing core SKUs. We are trying to streamline it in a way that we’re focusing on SKUs that drive the highest revenue while also positive to our gross profit margin. So we have prioritized it based on our supply chain and margins on the SKUs that we’re entering into. And we’ve also looked at reducing SKUs that may not be picked up in the fleet that don’t have the potential to grow as fast.

CoComelon has been very key to our partnerships because it’s opened up doors and the velocities. Like the only other peer in our space has like a Sesame Street license. And CoComelon has already shown that it’s performing way better than the Sesame Street license. And so we are expanding that. Our up-age meals is something that we’re really focused on because it gives us a lot of opportunity. Currently, if you look at the baby food aisle in most grocery stores, you’ll see about 50% of it being organic. With up-age meals, only about 10% of it is organic. So we are able to get in and partner with these retailers to really expand the footprint, and that’s where we’re starting to roll out our up-age meals, which are also a much higher-margin product.

Aaron Grey: Okay. All right. Great. That was helpful. And then lastly, maybe more a question for Ray. Some gross margin improvement that we talked about in the prepared remarks, how best to think about the gross margin in the near to medium term?

Raymond Silcock: We continue to see margin improvement, and we’re still seeing the effect of pricing that we’ve taken on both Sprout and Biodroga. So I think we see continued growth in the margin. And we’re very — as Michael said, the mix of products in Sprout is shifting to be slightly more margin accretive. And the same is true in Biodroga, too. The MaxSimil product lines are significantly more profitable on the gross margin level than the other lines that Biodroga makes and sells.

Operator: Thank you. There are no further questions at this time. Ladies and gentlemen, we thank you for your participation, and we ask that you please disconnect your lines at this time.

Valter Pinto: Thanks, everyone.