The Chefs' Warehouse, Inc.

Greetings, and welcome to the Chef's Warehouse Third Quarter 2021 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Alex Aldis, General Counsel, Corporate Secretary, and Chief Government Relations Officer. Please go ahead, sir.

Thank you, Operator. Good morning, everyone. With me on today's call are Chris Pappas, Founder, Chairman, and CEO, and Jim Letty, our CFO. By now, you should have access to our third quarter 2021 earnings press release. It can also be found at www.chefswarehouse.com under the Investor Relations section. Throughout this conference call, we will be presenting non-GAAP financial measures, including, among others, historical and estimated EBITDA and adjusted EBITDA, as well as both historical and estimated adjusted net income and adjusted earnings per share. These measurements are not calculated in accordance with GAAP and may be calculated differently in similarly titled non-GAAP financial measures used by other companies. Quantitative reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures appear in today's press release. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements, including statements regarding our estimated financial performance. Such forward-looking statements are not guarantees of future performance, and therefore you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today's release. Others are discussed in our annual report on Form 10-K and quarterly reports on Form 10-Q, which are available on the SEC website. Today we are going to provide a business update and go over our third quarter results in detail. then we will open up the call for questions. With that, I will turn the call over to Chris Pappas. Chris?

Thank you, Alex, and thank you all for joining our third quarter 2021 earnings call. Revenue trends remain strong as momentum from second quarter customer and consumer demand continued into the third quarter. In September, limited growth in return to offices and hospitality-related activity contributed to a moderate increase in sales trends sequentially over August and July, and we exited the quarter at approximately 103% of 2019 sales. Similar to our previous reporting, I will compare sales and gross margin results of the current quarter sequentially to the second quarter of 2021. Jim will provide the comparison to prior year in his comments later in the call. During the quarter, net sales increased approximately 14.5% versus the second quarter of 2021. Specialty sales increased approximately 18.1% sequentially versus the second quarter of 2021, with average unique customers increasing 7.1% and we saw higher placements of approximately 8%. Specialty cases increased 12.8% versus the second quarter of 2021, while center of the plate pounds sold were approximately 2.8% higher sequentially versus the second quarter of 2021, excluding the impact of acquisitions. While gross profit margins were relatively unchanged compared to the second quarter of 2021, total gross profit dollars increased 14.7% versus the second quarter. Gross margin in the specialty category increased 70 basis points as compared to the second quarter of 2021, while gross margin in the center of the play category decreased 97 basis points. Jim will provide more detail on gross margin and inflation in a few minutes. During October, we completed two acquisitions that will contribute to our continued growth as a provider of choice for high-end center-of-the-plate product lines to our customers nationally. On the West Coast, we added Silver State Meats, the premier provider of specialty proteins in the greater Las Vegas metro area. We are excited to partner with the Silver State team as their high-touch, high-quality service model will serve as a great complement to our existing specialty business in Las Vegas. This acquisition will also provide us with a bridge to growing our Southern California specialty protein sales until we implement Center of the Play processing in our new LA facility, which we currently expect to be opening in 2022. In Texas, we acquired certain assets of Martin Preferred Foods. This will facilitate accelerated growth of our premium Allen Brothers brands to our growing customer base in the Lone Star State. Regarding recent business activity, recent sales trends have continued in excess of 2019 sales, consistent with the final weeks of the third quarter. Continued modest growth in travel, office building and college-related markets combined with favorable fall weather led to moderate week-over-week sales progress during October. Despite the ongoing challenges in the labor and supply chain environment, our team at Chef's Warehouse continues to focus on sourcing, marketing, and delivering our high-quality product and high-tech service model to our customers. If anything, the last few months have strengthened our confidence in both the future growth of the culinary industry at large and the investments we as chefs are making in market, in category expansion, and adding key talent and partners as we look forward to returning to above average industry growth. I would like to thank all of our CW team members for their dedication and resilience as we move forward towards our achieving our medium-term and long-term goals. With that, I'll turn it over to Jim to discuss more detailed financial information for the quarter and update on our liquidity. Jim?

Thank you, Chris, and good morning, everyone. I'll now provide a comparison of our current quarter operating results versus the prior year quarter and provide an update on our balance sheet and liquidity. Our net sales for the quarter ended September 24th, 2021. increased approximately 90.7% to $484.3 million, from $254 million in the third quarter of 2020. The increase in net sales was the result of an increase in organic sales of approximately 84.2%, as well as the contribution of sales from acquisitions, which added approximately 6.5% to sales growth for the quarter. Net inflation was 18.7% in the third quarter, consisting of 10.9 percent inflation in our specialty category and inflation of 28 percent in our center of the plate category versus the prior year quarter. Please note that center of the plate prices were only 4.2 percent higher sequentially versus the second quarter of 2021. Gross profit increased 82.2 percent to $110 million for the third quarter of 2021 versus $60.4 million for the third quarter of 2020. Gross profit margins decreased approximately on 105 basis points to 22.7%. Although gross profit margins declined year over year, strong gross profit dollar growth was driven by increased sales while maintaining a strong gross profit margin profile in an extreme inflationary environment. Specialty inflation was driven by broad-based inflation across most specialty product lines. Inflation in the center of the plate category was driven by higher prices across most beef categories, especially in the higher-end prime categories. Total operating expense increased approximately 37.7% to $99.5 million for the third quarter of 2021, from $72.3 million for the third quarter of 2020. The primary drivers of higher operating expense were higher compensation and transportation costs associated with year-of-year volume growth and route expansion. Adjusted operating expenses increased 33.3% versus the prior year third quarter. And as a percentage of net sales, adjusted operating expense was 17.9% for the third quarter of 2021 compared to 25.7% for the third quarter of 2020. Operating income for the third quarter of 2021 was 10.4 million compared to operating loss of 11.9 million for the third quarter of 2020. The increase in operating income was driven primarily by higher gross profit, partially offset by higher operating costs. Income tax expense was $2.8 million for the third quarter of 2021, compared to income tax benefit of $5.2 million for the third quarter of 2020. Our gap net income was $3.5 million, or $0.09 income per diluted share, for the third quarter of 2021, compared to a net loss of $11.4 million, or $0.31 loss per diluted share for the third quarter of 2021. On a non-GAAP basis, we had positive adjusted EBITDA of $23.4 million for the third quarter of 2021 compared to negative adjusted EBITDA of $4.9 million for the prior year third quarter. Adjusted net income was $4.5 million, or $0.12 per diluted share for the third quarter of 2021 compared to adjusted net loss of $13.7 million, or $0.38 loss per diluted share for the prior year third quarter. Turning to the balance sheet and an update on our liquidity. At the end of the third quarter, we had total liquidity of $243.7 million, comprised of $134.2 million in cash and $109.5 million of availability under our ABL facility, and net debt as of September 24, 2021, was approximately $266.4 million, inclusive of all cash and cash equivalents. At this time, due to the continued uncertainty regarding the pace of broader economic recovery and the timing of event and travel-related business activity, we will not be providing guidance for 2021. Thank you, and at this point, we will open it up to questions. Operator?

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Fred Whiteman with Wolf Research. Please proceed with your question.

Hey, guys. Good morning. Thanks for taking the question. Really helpful color on sort of the September exit rate and how that continued into October, but I'm wondering if you could just give a little bit more color as far as when you saw the Delta impact, how that sort of progressed throughout the quarter, and then the comments that you made about business and travel returning a little bit, how you see those progressing going forward.

Yeah, sure. Thanks for the question, Greg. Yeah, the cadence through the quarter... I guess the headline is we didn't really see much impact from the Delta variant at all. July is seasonally generally a little weaker than June, but we had very consistent revenue trends throughout July, and then August is seasonally a little bit better. Then July, and that played out as we had incrementally higher week-over-week revenue trends in August. And then, as we mentioned in the prepared remarks, in September, we started to see the impact of some of the college markets opening up. We saw very limited incremental business in the segments of our markets that are do better when offices are full, theater districts, things like that. So not a leap, but more of a very gradual, incremental build. So from a Delta variant perspective, I guess we didn't really see much at all. In terms of looking forward, we have, since this pandemic, thing began, have internally modeled a very gradual build back in the hospitality travel, business travel, and that type of business activity, whether it's cruise lines or international travel coming back to the big cities. And so we still model internally a very gradual build back through the end of this year and into 22. I think the United States obviously is opening up travel to vaccinated people internationally in mid-November, and so we'll see how that plays out.

Great. And then just broadly, a little bit more detail on the staffing outlook. Are you still super constrained to the extent that you're having to turn away new customers or new business, and did you see any change as some of the federal programs rolled off in the late summer, early fall?

Yeah, I think that... Go ahead, Chris. Sorry. Sure. Yeah, staffing has been a challenge. The positive side has made us have to operate you know, much more strategically and efficiently. We kind of knew, I mean, staffing was a problem before COVID. So, you know, it was always an issue trying to find enough CDL drivers and especially night crews. So, you know, it really forced a new discipline on what customers we would take on. Obviously, servicing our existing good customers was the number one priority. So it did limit us from I would say past behavior of maybe taking on too many customers in different regions that weren't as profitable. So I think we learned a lot. It was kind of like a forced discipline. And as staffing comes back, I mean, we are seeing more and more people coming back into the workforce, which is really a great positive sign. We're still looking at the business differently than we did pre-pandemic And I think we've learned a few things. So if anything positive from the pandemic is we understand our business even better than before and are operating more efficiently.

Okay. Thank you. Thanks.

Our next question comes from Alex Slagle with Jefferies. Please proceed with your question.

Thanks. Good morning. Just wanted to follow up on that previous question. If you could just provide some more color on the magnitude of overtime and incremental training and incentive payments just to get some color there where you are maybe in terms of the slope of these cost headwinds. If you kind of see them continuing to increase through the fourth quarter and then maybe moderate at some point as, you know, given where you are on hiring.

Yeah, Alex, thanks for the question. Just kind of adding on to Chris's comments. You know, the biggest impact that we saw during COVID on labor has been in the kind of larger markets where there was a lot more competition for that labor pool. And in September and early October, we started to see more applicants, better applicants, a better flow of of labor. Now, it's still challenging. There's no doubt about that. We think, obviously, the world has changed as it relates to the labor market. And so that's why we're investing in technology where we can to offset that impact to the extent that we can. So that's That's basically what played out. I think as we move forward, it's leveled off a little bit. I think there's always going to be challenges around labor given our business model. We hire drivers. We hire night crews, as Chris mentioned. But our teams have done a great job of of adjusting our operations to the current labor market, and we're pretty pleased with what they've been delivering.

Thanks for that. One question on the inflationary cost pressures, if you could provide a little bit extra perspective on how effectively you've been able to pass along those higher costs relative to your expectations and maybe thoughts on pricing flexibility in the current environment. Obviously, very strong, but I wonder if you're seeing any changes there more recently.

Well, obviously, yeah. I'll take this crack at it, Jim, first. You could opine. But I don't think anyone's ever seen a market, not my generation, of inflation due to a lot of logistics. A lot of it is freight. Obviously, the proteins have seen the greatest inflation, especially in our prime category. And a lot of it is because there's so much demand as well. I don't think anybody really thought that the demand would come back, you know, as fiercely as it has. So, uh, uh, you know, we've always ran the business with a limited amount of contracts. Um, our primary customers are, um, independent restaurants or big shops or caterers and, uh, the price really floats. So the floats with the market. So, We try pretty much never to get locked into a situation where you can pass it on. There are some larger customers that we do have some agreements with, but even those contracts in today's environment, I think everything is negotiable. I think the most important factor in today's market is actually being able to execute and to deliver. And I think, um, in our industry, everyone's cooperating, understanding that, you know, it's a probably once in a lifetime kind of environment and everybody has to be flexible. So, um, it is allowing us to move. Um, as you can see from our results, uh, you know, we were able to pass on a, if not exactly the total margin increase, we're able to keep our gross profit dollars, which is the most important. you know, a way we run the business. The spread between our OPEX and gross profit dollars and more expensive boxes really give us a little leverage on our OPEX because, you know, they don't really cost more to move. And I think you've heard me say many times over the past 10 years, I'd rather sell expensive boxes than inexpensive boxes because they don't really cost more to move. And that's really more of our business model with, you know, higher-end restaurants, you know, We don't sell many, many customers, you know, 300, 400 boxes of French fries at one time. We sell a customer maybe 40 different line items, but it's one of each, and that allows us to get the margin, you know, to be able to deliver to these high-touch, you know, more frequent delivery type customers and, you know, provide the value. for them and for us. And I think that we saw the model pretty much play out in the last quarter.

It's helpful. Thank you.

Thank you. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of Kelly Bonio with BMO Capital. Please proceed with your question.

Hi, good morning. Thanks for taking our questions. I wanted to just ask the comment about sales, you know, tracking at 103% of pro forma 2019 levels is very helpful. I think ahead of expectations. But I guess the question I think on a lot of investors' minds is just on the expense side and just wondering if you could kind of put the same color around operating expenses on a pro forma basis. just how do you think this quarter came in relative to what you think, you know, pro forma expenses would be?

Yeah, thanks for the question, Kelly. Yeah, I think, you know, it's coming in as we expected. I mean, obviously the last two quarters, Q2 and Q3, really when we started to, as business came back and markets opened, we started to leverage our, you know, our fixed markets. cost base, our fixed asset base that was obviously escaping us during the depths of COVID. So that's gradually improved. I mean, I think I'll go back to Chris's comments about growing gross profit dollars above adjusted OPEX. Our gross profit margins are lower than 2020 and 2019, but our adjusted OPEX as a percent of revenue is better as well. And so you're seeing a shift because of the the abnormal inflationary environment. On the commercial side, our balance is managing price such that we're partnering with our customers and passing on market-related costs, but also just making sure that we're growing gross profit dollars and creating operating leverage, as we did for a few consistent years prior to COVID hitting. Obviously, the comps to 2020 are creating a lot of extreme numbers, but when you break it down, our adjusted EBITDA margins in Q3 were very close to what we delivered in Q3 of 2019. If you normalize for the addition of Sid Wainer, which we were very upfront that is a lower EBITDA margin business, but We have a multi-year plan to grow that EBITDA margin over time. We're actually very close. So I think, you know, even with the wage increases, you know, the things that our operating teams have done in terms of investing in technology, process improvement, the things Chris talked about, about prioritizing commercial business based on the environment, All those things have come together and given us an OpEx profile that's in line with what we would expect.

That's very helpful. And I guess just in terms of hiring, maybe can you just give us an update on the extent to which you still do need to hire either drivers or warehouse employees or any labor hiring that you still need to do across the board?

Sure. Again, Kelly, I think we talk about this daily in our ops calls. Hiring people in warehouse jobs and drivers, CDLs for the larger trucks, was a challenge before the pandemic. So it's not something that's new to us. We work really hard to try to recruit. We've actually broken up a lot of our HR programs you know, the way we look at HR and responsibility is required a, um, a, a talent officer, uh, to work with all our leaders to basically, you know, uh, it's, it's not only hiring, it's keeping people in these jobs. I mean, you read about in the paper all the time, it's the, you know, it's the quitting generation. And, uh, unfortunately, uh, it is much harder to get people to stay. Uh, these are, you know, some of them are really hard jobs, right? You're lifting heavy boxes, you're driving big trucks. Um, It's a tough job, and we really appreciate that, and that's why we want to make sure that we have great packages for these jobs so they are compensated for the hard work. I don't think that's going to change much. Like I said, it was tough before the pandemic, so we work at it night and day. I'm almost afraid to say that it is getting better. Um, over the last few weeks, you know, uh, our calls, it seems like, you know, we are starting to get more people showing up for our job fairs and, uh, you know, we're constantly, everybody, you know, full-time recruiters are recruiting. Um, but, uh, you know, this industry forces you to be resourceful. Um, you know, you have to find ways to do more with less. And I don't think that it's going to change drastically. I think that there are more candidates, but we're being really careful as we add trucks back. We are doing the business with less trucks, so we do have more efficiencies. We know now that travel is going to start to resume, hopefully in a week or so. We're going to start to get international travel. We're going to start to get our city's Back to semi-normal, obviously the hotels have not had those travelers and haven't had a lot of business travels. We haven't had catered events. So we know that that volume will start to build, and we're way ahead of it in the way we're out recruiting and planning, putting routes back on. But I think we're doing it under a microscope, understanding that we want to do it much more efficiently than in the past.

Thank you. And just one more from me. Just on the two transactions announced this month, I'm just curious if you could help us understand what stood out with those two acquisition opportunities. I imagine there's quite a bit of opportunity across the landscape. And just strategically, you know, why those two in those locations especially, and just

general update on how some of those smaller competitors um you know are faring in this environment sure well again i think that you know a lot of the deals you'll see announced uh probably were in the works before uh the pandemic hit so you know we're constantly talking to people in different markets and you hear me talking about fold-ins all the time i would do one a day if we could find them because they're so creative because basically all you're taking really is sales and the customer base. I think the one in Vegas was extremely strategic. You know, we have a, you know, we have a great business there in our regular specialty chef's warehouse facility. And, you know, we were lacking a protein solution to launch our Allen Brothers steak and seafood business. So, Um, so the state provided that, uh, we know we liked the people that ran the business and we thought it would compliment well, and it also gives us the opportunity to start to go in and build our Southern California business. Um, you know, it's close enough and we have trucks running back and forth that this allows us to start to build a volume because our new facility in LA is opening, uh, hopefully, you know, fourth quarter, first quarter. of next year and this gives us the opportunity really to start supplying through our existing routes customers with protein products and allows us to build a run rate so when that cut shop does open in Southern California, you know, we have enough business really to get it going and to get to a profitable level much quicker than starting from scratch. I think If you, again, if you hear of another acquisition, it's something that we were planning, you know, before pandemic and it probably got delayed for many obvious reasons. And I think the pipeline is extremely frothy. I think you'll start to see a lot of M&A, you know, now that people have somewhat of a foreseeable forecast, you know, coming out. You know, even six months ago, you know, with the Delta variant, it was really hard to forecast. It still is. But I think now, I think we know that, you know, we're not heading back to a close down, and it's easier for us to pull the trigger.

Thank you.

Our next question comes from the line of Peter Sala with BTIG. Please proceed with your question.

Great. Thank you. I think most of my questions were asked, but I wanted to ask about the overall industry for independents. I know there's been a lot of talk about a labor shortage and high labor turnover. And I know you guys mentioned that you're being more selective in terms of the customers and the restaurants that you take on. Are you seeing – I think what everybody was expecting was, you know, more of a surge in development coming out of the pandemic, or do you feel like the labor shortage and all the turnover has resulted in maybe independents being a little bit more cautious in terms of opening new concepts and new restaurants? Thank you.

You know, I think if there's another positive – positive thing that we've seen coming out of the pandemic is that, I mean, the sad thing is that we've seen a lot of customers close. Not nearly as many as everybody predicted, thank God, but, you know, there has been many small businesses that didn't make it. And, you know, Um, I always thought maybe perhaps there was too many restaurants, uh, before the pandemic and maybe, you know, this was an opportunity to, you know, to get out of leases and walk away from unprofitable locations. But, uh, I'm sure that there's many, many clients that, uh, just didn't have the wherewithal, but I think the PPP helped our industry tremendously. I think it was a lifeline, uh, for many, many customers. And, um, what we're seeing is many coming out now as volumes are returning. they're looking for new locations and they're signing many leases. I think it's the once-in-a-lifetime opportunity where you can find a fully built-out location ready to go. Maybe, you know, with some minor cosmetic adjustments, you can open a new restaurant in a key location. And I think what we're seeing with the customer count starting to go up and many customers planning new restaurants opening over the next six to 12 months is an outcome of that. It's an outcome of they found stability with PPP, you know, maybe they had many, many good years before that. So it kind of is a tale of two cities, unfortunately. And my crystal ball says that you're going to see a tremendous amount of, of new openings. This industry is, Restauranteurs like to open new restaurants, and I think they're given an opportunity right now to accelerate, you know, that desire to open up new concepts. I mean, you know, our clientele is very creative. There's constantly new ideas, new concepts, a blending of new cuisines, and everybody likes a new restaurant, and I think you're going to see an acceleration of that.

Great. Very helpful. And then just lastly, on the recent acquisitions this month, any sort of impact that we should expect on margins in 2022 from these two acquisitions, or are they too small to really move the needle?

Yeah, nothing significant. They're more, Peter, they're more growth investments. Obviously, the one in Las Vegas will contribute to our West Coast P&L and operations, but it's a relatively smaller company that we're going to look to grow over the next two, three, four, five years. And then the acquisition in Texas was a processing plant that's going to allow us to really accelerate our Allen Brothers product line growth in that region. And so that's an investment that is going to pay off over the next couple of years. So nothing immediate to model in.

Great. Thank you very much.

Our next question comes in the line of Todd Brook with CL King. Please proceed with your question.

Hey, good morning, guys. I hope you're well. a few follow-ups here. Good morning. Can we talk kind of looking forward, just crystal ball around inflation outlook, maybe Q4 going into fiscal 22 for especially in center of the plate as some of these maybe labor pressures that are driving some of the inflation from from producers, maybe those are starting to ease as well. Just thoughts on inflation looking forward.

Sure. Thanks for the question, Todd. I'll just start and then Chris can add any thoughts, obviously. But prices obviously remain firm going into the fourth quarter. You can see from the public data that pricing sequentially versus what we're experiencing and what we experienced in Q3 and Q2 has not significantly changed. Some of the center of the plate categories have come off a little bit, but certain other categories have remained fairly dear in terms of pricing. In terms of going forward, I mean, our own internal view is that labor markets wages are not going to be resetting lower. At least we think that, you know, that's going to be kind of resetting higher. I mean, I think, you know, sequential and year-over-year changes will most likely moderate, maybe, you know, slightly deflationary versus the extreme pricing we've seen in 21, you know, compared to 20. But overall, you know, the comparisons should, you know, should be easier as you're comping to 21 than you were to 20, of course.

Okay, great. Thanks. Go ahead, Chris. Sorry. Yeah.

No, I think that, you know, again, it's a very unique environment, you know, for us in this industry for many, many years. I don't know if it's the frog boiling in water at this point that we're all getting used to, the new normal. Products are more expensive. I think the good news is that there hasn't been a tremendous amount of pushback from the consumer. When you really break down the cost of ingredients... even if a case of pasta goes up $10 a case, 20 pounds, when you really look at the cost per plate, what is it adding, 50 cents or a dollar? We don't sell to the mass, mass market. We have 50,000 plus customers, but they are catering, I always said, to the top 10% of the world's earners. And hopefully those earners are starting to travel internationally again, and that business travel, comes back. So, um, you, you can't help, but get optimistic when you're seeing what, where we've been, what we've come through and the kind of business that our, uh, our restaurants are doing, uh, without, you know, world travelers and business travelers and events. So, um, you know, we're very, very optimistic, cautiously optimistic that, uh, you know, eventually prices, you know, may moderate some, you know, it's really being driven. A lot is being driven by it's either too much demand or supports, you know, which are on TV every day. You see the ships out there floating, waiting till we get unloaded. So the, the shipping costs about, you know, I've driven the cost tremendously, you know, and I think, you know, my prediction is that that's pretty true. That's going to eventually find supply-demand type of pricing, and it won't be $10,000 or $20,000 to ship a container. It'll come back down to maybe not the $1,500, but $3,000, $4,000. And I think that will help everybody, help everybody's margins. But I think our clientele is finding ways to pass the cost on and be very creative with their menus. And I think that's why you're seeing restaurants are full and more and more are opening. So we live in interesting times for sure.

That's really helpful. Thanks, Chris. And just to follow up on that, can we talk about maybe private label as a percent of sales and how that's changed in this inflationary environment and maybe what that means for margins down the road when people, when things do normalize now that people are discovering the quality of some of the the private label offerings that are in that breadth of offering that you, you've always had.

Yeah. I mean, I don't think it's changed much with, uh, with our strategy. I mean, with all our protein private labels, I think we're probably over 50% of what we sell is in some sort of a chef warehouse box or, um, uh, Allen brothers or Michael's box or, uh, uh, exclusive label that we own. So, Um, customers are much more, uh, understanding today when you have to substitute. Um, so, uh, there's not a lot of pushback, you know, they'll, you know, they have no choice in a way. I mean, you know, when Heinz ketchup is out, they have to use something, but, you know, the products that we sell, um, yeah, I think the, I think what we, uh, What we built over 35 plus years was a model that was different than your average food service supplier. We had 180 different olive oils. We had 10 different types of tomatoes from Italy and California and Spain. We already had a very robust industry. product offering, sometimes we thought maybe it was too wide. We were carrying too many of like-kind products because our clientele was very specific. Chefs are very specific on what they want to use. And I think that it really came to the rescue during the last year where there was product supply chain disruptions. So what we thought was something that was costing us extra to carry proved to be extremely beneficial because if we were out of Italian San Marzano tomatoes, we had another tomato that was very close in quality. And the customer was happy to receive, to have tomatoes and accepted the quality. And, you know, it was a win-win situation. So I think that was one of the things that really helped us over the past year.

That's great. And a final one for me, and you spoke to the October trends, but Chris and Jim, I'm wondering when you're talking to your customers, what's the early outlook for holiday as far as kind of pent-up demand to get out and celebrate bookings? What are you hearing from customers about their early reads on holiday and their potential excitement about the season? Thanks.

Sure. That's a great question. Overall, I think what we're hearing is optimism. We're hearing a lot of parties are being booked. They're smaller. So I think people are really anxious to get back together. I know I am. We're hosting our first event today. in a very long time where we have a lot of our leaders coming together who haven't seen each other in almost two years. And I think that, you know, that really goes throughout the whole industry. It's more events. They're just smaller. And I think our operators are very excited to start having them, putting them on the books. You know, we're hearing about Vegas. The bookings are starting to go up. I think if you're watching the playoffs or Sunday football, you see the stadiums are packed again. So it's obvious people want to go out, want to get back together, and we're really starting to see that effect.

Okay, great. Thanks, Chris. Thank you.

Our next question comes from Ben Cleave with Lake Street Capital Markets. Please proceed with your questions.

Hi, thanks for taking my question. Just one quick one from me on the direct to consumer business model here. There's only a couple markets that are included in that model on your website at this point. Wondering if you can update us on kind of how you're thinking about this model, you know, really going forward. Is this something that kind of served its purpose or is this something you're still kind of, you know, focused on, especially as the world, you know, hopefully settles down here in coming quarters?

Jim, I didn't catch that whole question.

Oh, sorry. Sure.

Sure, the question was about our direct-to-consumer business. So, Ben, you're asking about Shop Like a Chef?

Yeah, and kind of how you're looking at that, you know, evolving over the next year, if it's run its course, or if this is still something you'd like to focus on down the road.

Yeah, you know, Jim, I'll take this one first. I don't know why the question wasn't coming through. So, you know, we've always had a, a, a strong, uh, direct to consumer business with our Allen brothers, uh, you know, uh, consumer business, you know, it's, uh, online, it's catalog. It's, uh, it's, uh, you know, it was a solid small, I'd say small business compared to our overall business. And that, you know, you know, quadrupled over, over the pandemic. And now it's, uh, it's, kind of leveled out. It's at obviously a much higher level than pre-pandemic, but the dream really is to take that and direct to the consumer on our own trucks, which we did during the heart of the pandemic when everything was closed down. We don't think that's the model. We think it's just too expensive. Number one, it would have to be something different than operating throughout our existing warehouses. As our business comes back to normal are, you know, the warehousing system and the way we pick our trucks is a lot different than trying to service, you know, people's homes. So I think where we are pushing and where we're going to grow the shop like a chef is more with the Allen Brothers model using a third party and start to build our seafood division and our gourmet division. You know, that's really where the demand comes, you know, when we see people searching and, The information we're getting back from our analysts is that people are looking to buy, you know, our truffle products, our olive oils, our imported cheeses, our really extensive gourmet offerings and proteins. And we think that's a real business, and that's something that we are working on.

Great. That's very helpful. That's it for me. Thanks for taking my question. I'll get back in queue. Thank you.

Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation and have a wonderful day.