Utz Brands Inc Class A Common Stock

Ladies and gentlemen, thank you for standing by, and welcome to the Utz Brands Inc. Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode, and after the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star and then 1 on your telephone keypad. If you require any further assistance, please press star 0. I would now like to turn the conference over to your speaker today, Anna Kate Heller from Investor Relations. Go ahead, please, Ms. Heller.

Good morning, and thank you for joining us on Us Brand's third quarter fiscal year 2020 earnings conference call. On the call today are Dylan Lissette, Chief Executive Officer, and Carrie DeVore, Chief Financial Officer. During this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could differ materially from actual events and those described in these forward-looking statements. Please refer to us brand's perspectives on Form S-1 filed with the Securities and Exchange Commission and the company's press release issued this morning for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note, management's remarks today will highlight certain non-GAAP financial measures. Our earnings release also presents the comparable GAAP numbers to the non-GAAP numbers provided and reconciliations of the non-GAAP results to the GAAP financial measures. The company has also prepared presentation slides and additional supplemental financial information, which are posted on us and Baxter Relations' website. You may want to refer to these slides during today's call. This call-listing webcast and archive event will also be available on the website. And now I'd like to turn the call over to Dylan Lissette.

Thanks, Anna Kate. Hello, everyone. I'm Dylan Lissette, and I've been with us for 25 years and CEO since 2013. I'm very excited to kick off our first earnings call as a public company after our successful business combination with Collier Creek in August. Since our inception nearly 100 years ago as a family business, Lutz has developed a strong portfolio of iconic consumer brands, a solid competitive position in our core geographies, and a tremendous history of consistently industry-leading performance across economic cycles with over 40 years of consecutive sales growth. The strength of our brands, our dedicated employee base, and our unique action-oriented culture has driven our growth and enabled us to move competently to our new chapter as a public company. My sincere appreciation and congratulations to all of our associates for this achievement. On behalf of our Utz associates, our management team, and our board of directors, I'd like to welcome all of our new investors. You can rest assured that we'll continue to work hard to build our business sustainably and responsibly for all of our stakeholders over the long term, as we've always done. After I conclude my remarks on the state of votes, I will turn things over to Carrie, who will discuss our Q3 financial results and guidance for 2020. After that, we will open up the call for questions. Before I begin, though, I would like to turn to COVID-19 and take a moment to extend my deepest gratitude to all of our associates and business partners who have worked incredibly hard to keep what's running safely and efficiently throughout the pandemic. My deepest condolences and thoughts go out to those who are affected by the coronavirus and their loved ones. As a consumer staples business, we are very fortunate that COVID-related trends have been favorable to Utz brands, and we continue to believe that an increase in at-home food consumption will further benefit Utz long-term. Given Utz's superb execution capabilities and our well-known brands, our consumption trends have remained strong, outperforming the salty snack category. In addition to successfully combining Utz with Collier Creek, we executed very well in the third quarter, driving solid results across several fronts. First, our sales, margins, and earnings for the third quarter were very strong. Second, our in-market retail sales performance meaningfully outpaced the salty snack category from a power brand, geographic, channel, and product subcategory perspective. Third, we are executing well against the value creation strategies that we presented in our SPAC business combination materials and investor presentations. And fourth, we are ensuring the safety of our associates and the resiliency of our supply chain while continuing to experience increased demand trends. This performance allows us to raise our outlook for fiscal year 2020, which Carrie will go into more detail later. When we look at the numbers, our financial results for the third quarter were very strong, with reported net sales growing 24.2%, and 7.2% on a pro forma basis that includes acquisitions on a full-year basis in 2019. Adjusted gross profit margins increased approximately 313 basis points to 40% for the third quarter, leading to year-over-year growth in adjusted gross profits of 34.8%. In addition, adjusted EBITDA margins increased approximately 173 basis points year-over-year to 15.4% of sales for the third quarter, driving growth in adjusted EBITDA of 39.8%. From an IRI retail sales perspective, our strong momentum continued in the third quarter, with retail sales growth of 12.9% for the 13 weeks ending September 27, 2020, versus category growth of 8.7%. We outperformed the market by approximately 420 basis points overall, gaining share again in the quarter. Importantly, year-to-date, our retail sales growth was meaningfully above our key competitors. We remain focused on our mission of becoming the fastest-growing, pure-play branded salty snack platform of scale in the United States and continue to execute well against the value creation strategies we outlined in our previous investor presentations. To recap, there are three fundamental pillars of our strategy. First is reducing costs and increasing margins, which entails driving productivity, optimizing revenue and trade, and improving margin mix. Second is taking a portion of the productivity and reinvesting in our brands to accelerate revenue growth. This involves accelerating the growth of our power brands through enhanced marketing and innovation, expanding distribution and under-penetrated channels in customers such as mass and convenience, continuing our national geographic expansion and increasing our presence in key salty snack subcategories and adjacencies. And third is continuing to make strategic acquisitions focused on branded snacking in the United States that deliver synergies. Acquisitions reinforced the first two pillars of our value creation strategy, and on that note, we are happy to report that on November 2nd, we closed our acquisition of HK Anderson, a leading brand of peanut butter-filled pretzels, which I will discuss more later. We also just lapped the first anniversary of the acquisition of ConAgra's DSD Snacks business, and we are pleased to say that the integration has gone smoothly. The businesses are performing very well, and we are on track with our synergy and our growth targets. Enhancing and expanding margins are an important part of our value creation strategies, as they enable us to reinvest incremental dollars into our brands, our marketing, and our innovation initiatives, which we believe further enhances long-term revenue growth potential. As I noted previously in the third quarter, our adjusted gross profit margin increased approximately 313 basis points to 40%. This was driven by the increased leverage in our manufacturing network from higher volumes, lower commodity costs, and mixed shift to power brands and larger package sizes. Incremental productivity efforts are a cornerstone of driving higher margins, and we believe meaningful progress will be made in 2021 in this area. A dedicated team to drive incremental productivity has been formed, and we have identified the slate of projects that will drive our 2021 productivity ramp up. These projects are in areas such as continuous improvement, Automation, network optimization, packaging design, product formulation, and procurement. Turning to the growth drivers for our third quarter results, IRI retail sales for our power brands grew 15.1%, significantly outpacing the category at 8.7%. This is consistent with our strategy to focus on our power brands. Foundation brands grew 5.3%, slightly below the category. Our power brand increases were led by Oots, Zaps, Golden Flake Porkskins, and Tortillas. Also, in the developing Better For You segment of salty snacks, our BFY, or Better For You, power brands grew retail sales in the natural channel by 18.5% in the third quarter. significantly outpacing category growth of 10.3%. Our main BFY power brands in the natural channel are Boulder Canyon and Good Health, and our year-to-date market share in the natural channel was 6.6%, above our approximately 4% share as measured by traditional IRI MILO plus C Importantly, based on IRI panel data, we saw significant growth in households buying our product with higher dollars per buyer being spent and increasing rates of repurchase. We grew households buying our product by approximately $1.7 million for the 52 weeks ending September 27th. 2020 versus the prior year and we also saw rates of repurchase increase year over year suggesting stickiness from this increase in the number of households this gives us belief that the elevated demand that we have been experiencing and the share gains we've been seeing can continue long term turning to the various channels where our products are sold we again significantly grew our e-commerce business in the third quarter which we believe will double in size this year. Success in e-commerce is critical as consumers change their buying behaviors as a result of COVID-19 and is an area where we have been deploying meaningful marketing funds. In Q4, we will increase our investment in e-commerce even further across various digital and social platforms. To assist with these efforts, in October, we appointed the Sasha Group as our marketing agency of record. The Sasha Group is a VaynerX media company and has significant experience in e-commerce and in digital and social platforms. We are very excited to get our brand message to an even broader audience in Q4 2020 and beyond. Along with our incremental marketing spend, we have rolled out a slate of new product innovations, including the Pourables cheese ball product for the convenience store channel, expansion of flavors for our Tortillas tortilla chip line, new BFY cheese snacks under our Good Health Power brand, and new flavors, textures, and variety pack offerings, just to name a few. Consistent with our strategy of expanding in under-penetrated channels, we gained share of salty snacks in Q3 across several key retail channels, including mass and convenience, where we are currently underway, as well as in our largest channel, grocery. We grew retail sales in the mass segment by 16.4% in the third quarter compared to category growth of 9.3%, and we grew retail sales in the grocery channel by 19.2% compared to category growth of 15.7%. Our retail sales and convenience declined, albeit less than the category, as COVID-19 continues to impact on-the-go consumption. We also successfully continued our strategy of geographic expansion as we grew strongly in our expansion and emerging geographies, while also performing well in our core markets, where our retail sales grew 10.6% for the third quarter versus a category growth of 8.5%. Our expansion geographies grew 17.2% in the third quarter, double the category growth of 8.4%, And emerging geographies grew 19.9%, also nearly double the category growth of 10.2%. This outperformance in our expansion in emerging territories is particularly exciting, given that they make up approximately 40% of our overall total retail sales. We continue to benefit from the geographic expansion efforts that have been underway for years at UTSC, which have accelerated over the last five years, driven by acquisitions that provided an increased footprint to further grow our power brands. And lastly, against our strategy of increasing our presence in key salty snack subcategories, we gained share across several subcategories, including potato chips, tortillas, cheese snacks, and pork skins. In addition, our pretzel brands turned in very solid growth, while our popcorn business lagged its subcategory. Both popcorn and tortillas remain areas of continued opportunity and future growth for us. Finally, I would like to touch on the acquisition of H.K. Anderson. H.K. Anderson is a leading brand in the peanut butter-filled pretzel segment, which has approximately 100 million in retail sales and is growing well. The acquisition will benefit from our platform and focus, and we expect it will deliver $12 million in net sales and $2 million in adjusted EBITDA in 2021, creating a pro forma purchase multiple of less than five times. This transaction is just a small example of the types of both bolt-on and more transformative acquisitions that our team is well positioned to source, execute, and integrate in the future as our M&A pipeline remains robust and actionable. So, as we begin our life as a public company, I'm very excited about our future growth and our position in the industry. Our strategy is to continue doing what we've been doing for so many decades because we have proven for almost 100 years that it works. but we plan to do it at an even more accelerated rate. We plan to continue to grow our power brands, expand our geographic presence, execute smart acquisitions, drive future productivity, reinvest in our platform with a long-term value creation mentality, and deliver shareholder returns through a balanced capital allocation approach. We strongly believe that because of our resilience to economic cycles, our strong brand portfolio, and our fantastic team that is well-positioned for continued consistent growth. I will now turn it over to Kerry to cover our third quarter 2020 results and provide updated guidance for fiscal year 2020. Thank you, Dylan, and good morning, everyone. It's great to be speaking with you on our first earnings call to public company. Our net sales grew 24.2% in the third quarter, driven by acquisitions of 15.9%, volume of 9.7%, price mix of 1.2%, which were partially offset by the impact of higher discounts to independent operators, which reduced the growth rate by 2.5%. As we outlined during our roadshow, we are in the process of converting company-owned DSD routes to independent operator routes, and as we make these conversions, we no longer incur certain selling costs, such as the route professional's compensation, but instead we pay a sales discount to independent operators. This has the effect of decreasing net sales and gross profit, but it results in higher EBITDA and margins over the long term. Growth in the quarter was driven by our power brands, which grew reported sales by 10% compared to the prior year, excluding the impact of IO discounts and acquisitions, the grocery, mass, and club channels, which account for approximately 70% of our total sales, and our three geographies, core, expansion, and emerging, each of which experienced meaningful growth. As Dylan noted earlier, we had a very strong margin performance in the quarter. Our growth and adjusted gross profit margin of 313 basis points led to an increase in our adjusted EBITDA margin of approximately 173 basis points to 15.4% for the third quarter. Dissecting the increase in adjusted EBITDA margin for the third quarter a bit, first is volume, which was the biggest driver of the margin increase, contributing approximately 130 basis points of margin growth. price mix was the second largest driver contributing approximately 100 basis points which reflects stable to growing average selling prices and more weighting toward both power brands as a group and larger package sizes cost of goods sold contributed approximately 70 basis points as we leveraged higher volume in our manufacturing facilities and experienced lower commodity costs partially offsetting these three drivers was selling an admin expense which reduced margins by approximately 130 basis points due primarily to higher incentive compensation as a result of strong performance. We did see a rate benefit in other major areas of selling and admin expense as a result of our net sales growth, as you would expect. Moving to our balance sheet and other key points, as of September 27, 2020, we had a strong cash balance of $32 million and total debt of $420 million, resulting in a net debt balance of $388 million, or 3.1 times normalized further adjusted EBITDA of $126 million for the last 12 months ending September 27, 2020, which includes pro forma adjustments for unrealized acquisition synergies and public company costs. Our liquidity is very strong. And in addition to our cash balance of $32 million at the end of the quarter, we had approximately $100 million available on our ABL revolving credit facility. I'd like to provide an update on two important strategic projects whose timelines have been adjusted to provide us with more operational flexibility. First is our ERP implementation, which continues to go very well. We are working through a phased deployment across our network and now expect to complete the implementation in the first quarter of 2021. Second, we expect to finish the conversion from company-owned routes to independent operators in the first half of 2022 in order to accommodate the COVID-19 impact and the ERP implementation. We're very happy with our progress across both of these strategic initiatives and our focus on executing them well, while at the same time supporting our accelerated revenue and margin growth during this COVID-19 time. Turning to our guidance for fiscal year 2020, we are pleased to be increasing our expected ranges above what we provided in our SPAC business combination materials. For the 53 weeks ending January 3rd, 2021, excluding the impact of the H.K. Anderson acquisition, we now expect net sales growth of 10% to 11% versus 2019 pro forma net sales of $865.5 million, with a 53rd week representing approximately two percentage points, adjusted EBITDA on the range of $129 to $132 million, including a projected 53rd week impact of approximately $3 million, a net leverage ratio of approximately three times at the end of 2020, and full-year capital expenditures of approximately $28 million, which is consistent with our previous guidance. And please note, we expect to provide 2021 guidance when we report fiscal 2020 results in March of 2021. In summary, the business continues to perform very well, and we remain committed to executing on our value creation strategies. With that, I'll now turn the call back over to Dylan. Thanks, Gary. Again, thank you very much for joining us today on our first earnings call. We are excited about everyone who has become a shareholder of us, and we look forward to continuing to create value for all of our stakeholders. I'd now like to ask the operator to open up the call for questions.

At this time, I'd like to remind everyone, in order to ask a question, please press star, followed by the number one on your telephone keypad. And we do ask in order for everyone to be able to ask a question if you limit yourself to one question and one follow-up. We'll now pause to compile the Q&A roster. And our first question comes from the line of Andrew Lazar with Barclays. Go ahead, please. Your line is open.

Morning, everybody. Morning. Thanks for the question. I guess to start off with, I know that the company's productivity target is to reach productivity levels of, call it, 3% to 4% of cost of goods annually sort of several years from now with identified supply chain opportunities of about $50 million to sort of jumpstart the program as you ramp up on this productivity. I guess with the margin expansion that you saw this quarter, would you say there's increased visibility to that $50 million in supply chain saves? And if so, is it possible that you reach that 3% to 4% of COGS target, if you will, maybe more quickly than you had initially anticipated?

Andrew, thanks for the question. This is Kerry. I would say we're currently still around the 1% in productivity. The margin increase you saw this quarter is due to the higher net sales, the volume scale we have in our manufacturing footprint, larger packet sizes, things of that nature. But we are making significant progress toward that 3% to 4% target. We've stood up the team. We've identified the projects. And we'll provide you more details when we give 2021 guidance. But 2021 will provide a meaningful step in terms of getting from where we are today to that 3% to 4%.

Great. Thanks for that. As you talked about in the presentation, you gained share not just in sort of expansion and emerging markets, but in core as well. Trying to get a sense of what drove those share gains and if that's something you expect moving forward. And, you know, I ask because you already have obviously a pretty high share and penetration levels in those core markets. And so we had kind of conservatively assumed that, you know, most of the growth in share ultimately comes from expansion and emerging. But obviously it was good to see share gains in core as well. So trying to get a better handle on what drove that. Thank you.

Yeah, thanks, Andrew. This is Dylan. I mean, CORE has always been an area that we have a lot of opportunity to grow, and it's always been an area that obviously when we do grow it will inure quite well to our financials because of the proximity to manufacturing and whatnot. So I think a lot of that is our DSD system. I think a lot of it is our connection to the retailers. I think a lot of it is our power brands that we're investing and innovating behind. And so our relationships with our core grocery, you know, retailers have been very well through, you know, throughout the last nine months and through the COVID-19 and the flexibility of our DSD has really done well as on top of it. So I think we'll expect to ideally, you know, continue to get a higher percentage of growth from emerging and expansion, but, you know, really can lean on our core to develop solid sort of, you know, mid-single-digit growth as well. Great. Thanks very much.

Our next question comes from the line of Brian Holland with DA Davidson. Go ahead, please. Your line is open.

Yeah, thanks. Good morning and congratulations on getting to this point. Maybe if I could just start with the non-track channels, which still just seem a little bit softer than maybe what I was looking for in the model. So I'm just curious if you could maybe talk about kind of the sequential progress in trends in that channel. You know, kind of broad-based from, you know, what we started to see initially from lockdown post, you know, the early days of COVID to kind of where we are today and maybe how you see that kind of going forward in the interim as we still, you know, kind of await maybe a second wave here and potential impacts from that.

Yeah. Brian, it's Kerry. Good question. So we're about 25 to 30% on measured. We have narrowed the gap and narrowed in Q3 as we expected it to narrow. So I think we, you know, if you kind of look at the IRI to the net sales performance pro forma, you know, that delta is smaller in Q3 than it was in Q2, and that's reflecting, you know, some improvement in unmeasured that were significantly impacted by COVID-19. But when you really break down the differential, you know, it's really driven by two things. It's your unmeasured, which is we dug into it a little bit in power and foundation brands. Power brands are about 20% unmeasured, and foundation brands are about 40% to 45% unmeasured. So as you look at the power brands, our power brand IRI growth is tracking much closer to overall IRI than the foundation is. So it's really foundation that brings it down. So when you look at that 500 basis point plus gap between IRI and pro forma net sales, I would say about, You know, half of that is driven by unmeasured channels, and of that half, about 70% is due to the foundation brands.

And then the remaining gap between IRI and net sales, pro forma net sales growth is IO discounts predominantly.

You know, our IO discounts increase 25% year over year, and that's a reflection of, you know, the IO conversion. So that will always create a gap until we're fully converted, but I think we're making progress in narrowing the gap, and I think we should see some sequential improvement, barring any, you know, change in kind of the COVID environment right now. And demand trends, I think, will continue to see sequential improvement, and we'll see that gap narrow.

Appreciate all the color, Kerry. And then maybe just kind of pivoting over to the acquisition, you know, if I look at your portfolio, a lot of, you know, several iconic brands, I look at the HK Anderson acquisition as bringing new capabilities. I'm curious, you know, are these capabilities, can they be leveraged against the power brands? And if so, what would be sort of a timeline for maybe introducing new products, et cetera, under one of your larger banners?

Yeah, this is Dylan. Thanks for the question. For sure. I mean, HK is a unique opportunity for us that we were able to extract from ConAgra. We believe it has, on the backs of our platform, a lot of growth opportunity for top-line sales into 2021. We think also that we can utilize the co-manufacturing arrangements and agreements that came with the acquisition to help us really innovate. I think, you know, from a timeline perspective, we will definitely be seeing broader innovation in 2021 under that filled pretzel category. I think to your question about how it factors into power brands, that is definitely on our slate where we can take some of that knowledge and capability and move it into, you know, power brands like us. and expand on that. So we have a sort of multifaceted DSD and DTW approach, a direct-to-warehouse approach on that brand as well as the US Power brand. So without giving away all of the secrets as to how we'll do that in 2021, we do think that with a $100 million subcategory opportunity of Phil Pressel's, we'll be able to take significant share there and grow that, which is really a creative. I don't think it's cannibalizing really to what we have as well.

I'll leave it there. That's it, gentlemen.

Thank you.

Our next question comes from the line of Rupesh Parikh from Oppenheimer. Go ahead, please. Your line is open.

Good morning. Thanks for taking my question. So I had a question just on the club channel. So your growth did – it under-paced the channel. So I'm just curious what's driving that and what are some of the opportunities to narrow the gap versus the channel?

Yeah, you know, I don't think there's anything in particular that's driving the underperformance. I mean, we continue to do very well in club. The, you know, we've been, you know, we had to outperform it earlier in the year. So, Dylan, I don't know if you have any other thoughts on that, but I think, you know, club continues to be a strong performer for us. Yeah, I mean, if you look at the year-to-date numbers being up 14.5%, I think most people would be very happy with that. The club was up a little bit as a category or as a channel was up a little bit more than we were. You know, club is something we've been in for decades. 20-plus years. I've been here 25 years, and I think we started in club before I got here. We've been in it for quite some time. We have a very broad portfolio of items and SKUs. It's a very item-driven organization. channel where as opposed to like food and grocery where you have perhaps hundreds of SKUs across food and grocery, club is very item driven. And so there are some opportunities there where if you do have a lapping of a program from the year before, you might get negatively impacted just because of the SKU by SKU basis. And I think last year in 2019 during that period, We had a very large MVM in one of the club markets that might have affected a little bit. So it's great performance the way that we look at it. We continue to innovate around club. We've been very good at performing in club over a very long time, and we've got a lot of innovation. So, I mean, I look at that as just a slight underperformance to the category, but we continue to believe that that's going to be very positive as we go forward.

Great. And then maybe just one follow-up question, and I know you're not ready to provide guidance for next year, but just curious, you know, just given what you've seen with repeat rates, like how are you guys feeling about the stickiness of some of the share gains as we look towards next year?

Yeah, I mean, I think in general the stickiness, you know, we like it. I mean, we look at new households, we look at repeat rates, and, you know, the customers and the households that we're gaining through our brands, especially our power brands, You know, it's very positive for us. So I think, you know, the way that we look at it going forward is we're picking up new customers and we're retaining those customers. We have very iconic, you know, long-lived brands that have been around for a long time that consumers love. And as we gain new households, you know, we're creating stickiness. We're also investing. in the fourth quarter, as I'm sure you're aware, into a lot of media and a lot of social digital consumer marketing and innovation that will hopefully, you know, continue to drive that new household penetration and also maintain or, you know, really increase the repeat rates as well. Great. Thank you.

Our next question comes from the line of Michael Lavery with Piper Sandler. Go ahead, please. Your line is open. Morning. Thank you.

Morning. When you look at the transition to the IOs and adjusting that timeline a little bit, how should we think about the pacing or the trajectory of the discount headwind? Would this quarter's level be indicative of what we should expect over the next few, or might that accelerate any? How do you think that'll play out? Yeah, I think the trend will continue, certainly. We're going to convert approximately 70%, call it, of the remaining routes at the end of this year.

We're targeting to get those converted in 21 and then finishing up you know, the remaining, you know, 100 or so in 2022. So, you know, we still feel very good about the plan and we're executing it well.

But yeah, it'll continue to be a headwind, you know, until we can kind of finish the conversion and then lap it completely. And just by magnitude, would this quarter be about the pace of, I'm sure there's a little volatility, but is that about what we should expect over the next several quarters? I'd have to go back and look at the last couple quarters and provide some further thinking. But, yeah, I don't think there's any reason to say that this quarter was an anomaly per se. Okay, great. And just on the 1.7 million new consumers, do you have a sense of how that might break down geographically? Is that driven more by core markets or some of the expansion areas?

It's actually more weighted toward expansion than emerging. You know, South, Midwest, territories like that. Core certainly is seeing new buyers, but more weighted outside the core. Okay, great. Thank you very much.

Yep, thank you. Again, as a reminder, if you'd like to ask a question, please press star, then 1 on your telephone keypad. Our next question comes from the line of Robert Moscow with Credit Suisse. Go ahead, please. Your line is open.

Hi, thanks for the question. I was wondering if you've gone deeper into the data on how much of the growth is coming from distribution gains versus velocity gains. And if you had anything to provide us to show that, you know, that your velocity is good in the emerging markets, it's justifying the shelf space, and you can engender more distribution to come.

Yeah, I think that I'm specifics to share with you. But we do, we are seeing distribution and velocity gains, you know, people are buying more products are doing well, and we're seeing we're seeing stickiness in our, in our, you know, outside our core market. So I think, you know, we continue to do well in picking up new customers across the country. So, so I think there's positive, there's positive tailwinds in kind of both areas.

Okay, so they're both up distribution and velocity.

Overall, we're seeing gains in both.

Okay. Can you break it down between emerging markets versus core markets, or is emerging markets just the distribution is growing?

Yeah. I don't have it at my fingertips right now, but I can follow up with you, Rob.

What I would say high level is that as you do look at, you know, the difference between the growth that we're experiencing and, you know, kind of ties into one of the earlier questions about core versus expansion versus emerging. I mean, if you do look at the expansion and emerging markets, I mean, some of those are areas that we as a brand have been in for well over a decade, right? It's not like, you know, totally new areas or velocity. and our share pickup and our sales results are doing quite well in those areas. So I think we could get very specific if you'd like to, you know, offline if you have a particular data point that you're looking at. But as we look at many of the sub, you know, we dial in literally into some of the IRI markets that make up those emerging and expansion markets. We're doing quite well. We're outpacing the category, and we continue to just become a larger and larger part of the share of those markets.

Okay. And a quick follow-up. You mentioned increased media investment in fourth quarter, more digital marketing. You're historically more of a push marketer than a pull marketer. Is there anything that you've seen in terms of tactics that are new and able to reach specific consumers with your digital marketing and 4Q just to try to maximize the retention?

Yeah, I mean, we announced the selection of the Sasha Group, which is a VaynerX media company, to be our advertising and media partner as we go forward. And I don't know if you know much about them, but they're very oriented towards sort of the new world of advertising and marketing to create that higher pull versus our more traditional push-style marketing. So they're very creative and very fast-moving, and I think that's really where we're orienting our mindset towards is to spend dollars where we see what works and then we follow that and continue down that path as opposed to, you know, doing what may have been a more, you know, in the years past, a more traditional form of advertising and marketing where, you know, you do one major campaign and you play that major campaign out for six months. You know, this is going to be a much more smaller campaign, see what works and then build upon each. So we're really excited because a lot of that, you know, spend will start to, really occur kind of today forward, right, into November and December as we really ramp up with that spending. And then we'll see how that works. We want it to be meaningful. We want it to be a high ROI. We want it to be highly oriented towards social and digital. We want it to tie into e-commerce because we do believe that there's more of a 360 type of advertising loop that falls into e-commerce as well. So that's really where we're trying to orient and spend money on that as well as ramping up our innovation and our insights that we're targeting the right people with those spends.

And our next question comes from the line of Wendy Nicholson with Citi. Go ahead, please. Your line is open.

Hi, good morning. My first question has to do with popcorn, and you're doing so well across the board in every other category, it seems. So I'm just wondering, why is popcorn an anomaly? Do you think you can fix that organically, or do you need to go outside to make an acquisition, or is that just a matter of time and focus?

Yeah, that's a great question. I think we self-admitted that we have some weakness in popcorn. We think there's a lot of opportunity there. If you go back to our investor roadshow presentations, we kind of identified that we had opportunity in tortillas as well as popcorn to grow relative to our size, relative to the category, right? So we're under weighted in tortillas and in popcorn. We have focused on tortillas. It's a larger subset of the overall salty snack. I believe it's in the four plus billion subcategory of salted snacks, where popcorn's only one and a half billion. So we wanted to focus on tortillas first. and so that we're not trying to do all things at once. We're really trying to be good at everything we do, and so we're focusing on tortillas now. We've got our own internal brand called Tortillas that's growing over 150%. We've migrated towards that as a brand to grow. We obviously know that popcorn is an area for improvement. We've got some package design stuff that sort of coming soon that will help to prop that up as a subcategory for us, but we do look that there are opportunities. We either have to, in the future, create something on our own or there may be M&A opportunities. That's part of our playbook and part of our strategy to organically grow where we can, but also to look at M&A as opportunities to take care of that underweight in certain subcategories.

Fair enough. Okay. And then my second question just has to do with kind of the bigger picture retail environment. I mean, a lot of retailers have said, you know, they haven't wanted to do shelf realignments or change shelf space, and there hasn't been as much promotional activity just during the COVID period. Can you give us a sense of kind of what your experience has been, and do you start to see a pickup in promotional activity, or maybe comment on just what you're seeing at at retail? Thanks.

Yeah, I would say at retail, very high level, very macro. It feels to me like things kind of return to normal in August, September, October. I mean, a level of what we're seeing in terms of the traditional print advertising, the promotional schedules, the you know, salted snacks is a very promotional display and activity-driven category, right? It's a very high impulse. We have a lot of foot traffic going through food, grocery, club, and mass today. And honestly, I think, you know, from a promotional perspective, it does seem like they're things have somewhat returned to normal. We're still doing the traditional advertising and display activity that we've always done. So I would think from our perspective, it is more of a return to normal over the last, you know, few months.

Super. Thanks so much.

And there are no further questions in queue. I'd like to turn the call back over to Dylan Lizette for closing remarks.

Thank you very much. It was an exciting quarter for us. Our team came together and did phenomenal, especially in the face of all that is happening in the world around us from a COVID perspective, and I just wanted to thank all of our associates, all of our team, and thank you very much for a great first quarter, and appreciate everyone joining us today as we had our inaugural third quarter 2020 earnings call. Thank you.

Ladies and gentlemen, this does conclude today's conference call. We thank you for your participation. You may now disconnect.