Freshpet, Inc. (FRPT) Earnings Call Transcript & Summary

Good morning, everyone. I'm Steph Wissink, Senior Research Analyst and Managing Director at Jefferies. Thank you for joining us today for our Pet Summit, Pet Care Summit. We're going to start in the pet food space today with one of the most novel and unique brands that we've seen is a brand called Freshpet. And joining us today from the company are the company's CEO, Billy Cyr; and the company's CFO, Heather Pomerantz. Thank you for joining me today.

Glad to be here today.

I want to start -- we've got a number of investors that are from outside the U.S. So I wanted to start by just providing them an introduction to the brands. Maybe Billy, if you could talk a little bit about the history of the company and then also how you fit into the broader food space within pet?

Yes. Thanks, Steph. We're glad to be here. First, Freshpet is fundamentally in the business of changing the way people nourish their pets forever. So before Freshpet, the world was basically kibble and can. And Freshpet was created -- 2 of the 3 founders still worked for the company, but it was founded in 2006. So we've been around for quite a long time. But like many of those companies that kind of incubate for a long time and then suddenly splash on the scene and people think they're an overnight sensation. It really is 15 years in the making to get to the point where we are today. But the reality is that we are fundamentally a different way of thinking about the pet, the role it has in the family and what the proper nutrition looks like. And so we make fresh, all-natural refrigerated pet food. We make it in our own manufacturing facilities. We ship it via a refrigerated supply chain into company-owned fridges that are in retail outlets, grocery, mass, pet specialty, natural food stores, club stores. virtually any class of trade that sells pet food, and we sell a variety of sub-brands all under the Freshpet name across all those competing classes of trade, but they're through our company-owned fridges sold to consumers. We're primarily driven business that drives our growth via advertising. We do no discounting, no price promotions. So it is a very, very pure play business. And what's really amazing about it is that there's a very consistent and reliable behavior to this business that makes it very predictable for us and frankly, very predictable for the investors. And that is -- it starts at the most basic level. Dogs eat the same amount every day. And pet parents are hesitant to change the brand of pet food that they feed. We don't do any discounting. So what that means is that when we advertise and we acquire new users, it's a very predictable growth trajectory of the business, and we've seen that over time, it makes the business a very reliable business. We're also very transparent with the way in which we communicate about the business, both the household penetration dynamics and the data, the Nielsen data that supports the growth trajectory of the business. We've been on a tear for the last couple of years with an accelerating growth rate. The business has gone from a business that was 5 years ago. We just finished a fiscal year where we had been at $115 million in net sales, went to $130 million the next year. And last year, we ended at $318.8 million in net sales, and we've given guidance this year for $445 million. And along the way, that's been an accelerating growth rate where we did 27% growth 2 years ago, 30% growth last year. We've guided to 40% growth for this year. So we feel very good about the long-term prospects and the growth prospects. And that's really reflected in the guidance that we've given. We don't tend to do sort of the near-term growth algorithm of this percent growth year-on-year. What we do is we set a long-term target because we're very focused on a long-term growth algorithm. And the game plan here is that we want to be a $1.25 billion business by 2025, with 25% adjusted EBITDA margins then. And the way we're going to get there is by getting into 11 million households. We're very focused on building the size of the consumer franchise. Because we have a first-mover advantage. We are the first person in the space. We're mainstreaming the idea of higher quality, fresher pet food. And so we're focused on going from 4 million households that we're in today to 11 million households, and the result of that will be a $1.25 billion business, and we'll get a 25% adjusted EBITDA margin as we pick up the benefits of scale across our cost structure. So that's what we're all about. We are in the U.S. We're in Canada and in the U.K., a little bit more in our infancy in those markets. But definitely have a proven model. And we see the future as being very, very bright because this is what the future of pet food looks like.

And Heather, I want to bring you in here too because we were all together recently at one of your facilities in Pennsylvania. And I think what we're all convinced by is that there is clearly a demand cycle here. Now it's really about supply to catch that demand and catch up to that demand. So let's just reflect on the last kind of 18 to 24 months, Billy, you mentioned the business has been on a spike and a tear. And talk a little bit about the supply chain, where we're at now. And then as you look for indicators of starting to close that gap between supply and demand, what are you watching most closely?

Yes. So I mean, the focus has certainly been on growing our capacity and achieving the growth aspect of it. And as you saw from the experience in Bethlehem, we're doing a fantastic job of standing up capacity and sort of growing into our scale. From a margin perspective, the expectation is that we start to pivot from not only driving the growth algorithm, but driving profitable growth. In the near term, what has happened like all companies, as we've been faced with the headwinds of inflation, but also growing into our capacity, which has impacted gross margin from an operating inefficiency perspective. But we feel very confident as we pivot into next year that you'll start to see the turnaround coming from not only the wage investment we're making in labor to drive improvements in our operating efficiency but also from the scale that we're getting from the new factories that we're standing up. So do you want to add to that, Billy?

Just part of your question, I think, Steph also, at what point does the supply catch up with the demand? And the answer to that is pretty simple. We're out producing demand right now. So the only question is really how deep was the trade inventory hole that we had dug over the past year. If you think about it, the hole actually gets deeper as you go along because the bigger the business, the more weeks of -- or in essence, the multiple that the retailer uses, they say you have to have this many weeks of inventory on hand. Well, guess what, as the size of the business gets bigger, that number gets bigger. And so we've been chasing any moving target throughout the year. But we're very comfortable that our production is catching up that we are seeing trade inventories get better. It's getting reflected both in the TDPs that we see as reported by Nielsen and also the inventory data that those customers who share inventory data with us, we're seeing it reflected in their inventory. We're still not where we want to be. We still have ways to go. And you can see that in the publicly reported Nielsen data. But it's a matter of how long does it take to fill that hole because the production is very robust. And we've been producing at a rate 40% ahead a year ago for quite some time. August was 47% ahead a year ago. We feel very, very good about that. I will say, though, there's a little bit of a challenge, and we're not the only ones who are facing this which is the supply chain in the U.S. is a little lumpy right now. We had an issue in July, and we're pretty clear about that. Where our third-party logistics provider, the warehouse provider had a labor problem. They just couldn't get the product out. We had trucks sitting on their lot for days waiting to be unloaded, so they could be then loaded into our customers' trucks. And that was just -- that snarled our supply chain. We're hearing it from some of the wholesalers that they're having trouble with labor and stuff as moving through, and we're hearing it from our customers a little bit that their warehouses are in trouble. So it's going to be a little lumpy and uneven between now and then, but it's not a production issue, any longer. Production is doing well. Our consumption is doing really well. It's doing exactly what we thought. It's just a matter of moving product to the supply chain.

And are you seeing any improvement more recently, Billy in respect to the 3P labor? I mean we're hearing just generally labor seems to be becoming a little bit more fluid in the recent weeks, but I'm curious if you're seeing the same?

Yes. So first of all, for our labor, we -- as Heather mentioned, we made a significant intervention in the way in which we're managing our labor. We've laid out a new labor strategy that was -- we announced in August. It was effective on September 1. And it's really early, but it's really interesting to see how that has changed the dynamic. We really are now focused on bringing people, upskilling people to get to the point where they have the kind of skills that can allow them to be real problem solvers. And the way we think about it is the -- we have a labor system where there are 6 levels, Level 100 through 600. And we had 55% of our employees, were at the entry level because we were competing in a very competitive labor pool. The turnover was higher than it should have been. And we really want to get to the point where we're paying the wages that go with our Level 300, which today is $27 an hour. We'd rather pay $27 an hour for somebody who has the skills to solve problems than pay $21 an hour, which is what our entry-level wage is for people who don't have those skills, because the productivity is much higher. Now downstream from us, there's still a lot of labor challenges. We have seen it stabilize of late. Particularly as you got out of the summer vacation period where people are out and gone and now the labor is getting a little more stable and kids are back in school, that helps quite a bit. So we're hopeful that it's going to work, but I would say there's not a lot of room for error in the downstream supply chain. You get 1 snowstorm, 1 hiccup of some sort, and it will cause snarls or backups for days or weeks. So we are a little bit mindful that there's going to be some lumpiness and unevenness. We also just saw -- there's still an issue. It's not as big an issue for us as it is for others, but occasionally shows up. We buy almost all of our ingredients locally or domestically. We're very much a locally sourced business. But we're supposed to be starting up our second line in our Kitchens South, and we have 2 pieces of equipment that are coming from, 1 from Japan and 1 from Europe that are stuck at a port. And getting through the ports is a problem. So we have about a 2-week delay in starting up that line because we can't get stuff moved through the port. Those kinds of supply chain issues are things you never worried about in the past, and now you worry about them. And so just those kinds of issues that are out there. But overall, it's more stable today. And you asked the question sort of what have you learned? I think about the 4 phases that we've gone through in this pandemic. The first 1 was, I would describe it as the surge in trough. It was panics, lockdowns, you just did everything you could to keep people safe and to kind of keep the business moving. And that was the definition of success. The second phase for us was that long, hard winter. Massive COVID cases, lots of people out for testing and quarantine and snowstorms. We had the second snowiest winter we've ever had here in Pennsylvania. The third part is the part that we are kind of coming to the end on, which was recovery, stabilizing the operations, getting the labor fixed, dealing with the inflation, via taking some pricing and whatnot. Phase 4 for us is getting back to winning. We need to get back on that front foot where we are meeting demand. Customers are comfortable putting in more fridges. We can put advertising on the air at very heavy weights. And we can have new capacity, more than enough capacity to meet the demand. And we're about -- we're -- it doesn't happen all in 1 day. You can see glimpses every day, but we're pretty much entering that phase. I can see it in the manufacturing. Manufacturing is doing well. You can see it in the Nielsen's. The Nielsen's are all ticking up just as we said they would, but it's happening. We've now done 3 weeks in a row of an accelerating growth rate as we had predicted that we would see. And you can see it in our ability to stand up new capacity. We're getting the capacity to come online at the rates that we thought. So I think we're headed in the right direction is at that inflection point that we've described to people, but there is a big -- there's a transition that's happened. And hopefully, I mean, the thing I would describe about this pandemic more than anything else is, we never knew what was coming next and it so made your timing horrible. You always thought you were planning for what was going to come next and then something changed. I think things are more stable today, but who knows what's coming next.

Very helpful. Okay. I want to talk a little bit about the second half because you did give guidance, and I want to just give you a chance to provide an additional level of clarity because the scope of guidance was that there was going to be a pretty big acceleration in the fourth quarter just based on the timing of capacity coming on and some of the things that you mentioned. But both of you, either of you, just talk a little bit more about kind of where you exited Q2. I think the growth rate in Q2 is around mid-30s and kind of the look for the back half into the 40s, what do you want us to take away as kind of the degree of that step function quarter-by-quarter just so we can have a bit more of a point of clarity around the scope of that magnitude?

Thanks. We appreciate that opportunity. So first of all, I think because of the unusual dynamics of last year and a little bit of this year that will influence the year-on-year comparisons next year. I think in a lot of ways, it's more helpful to look at our business sequentially. So if you think about Q2, where we shipped $108 million worth of product, then you say, okay, how much capacity was added between Q2 to go to Q3? Because we shipped everything we could make in Q2. We built a little inventory to provide support for the pet specialty channel and for the Chewy launch that we did on July 7. But for the most part, we shipped everything we can make. And we're shipping everything we can make in Q3 as well. So how much more capacity do we have in Q3 than we did in Q2? Well, we added -- we went 24/7, from a 5-day 24-hour schedule on our bag line in our Kitchens 2.0 to 24/7. That's the only real incremental capacity gain that we had in Q3 versus Q2. We did take our roll line to 24/7 just this week in that facility, but it's not a -- it will give you like 1 week of 24/7. And 24/7 versus 5 days, 24 hours is not a huge step up. So Q2 to Q3, the actual revenue gain is not significant. It reflects basically the increment and capacity that we produced. But as you go from Q3 to Q4, we add that second line in Kitchens South which is on a 2-shift operation, which is a fairly significant increase. You get the benefit of the 24/7 operation on our rolls line in Kitchens 2.0. So you should expect to see a more significant step-up. When you also look at the growth rate on a year ago comparison, people underestimate how bad our December was last year. But historically, we've had Q3 and Q4 have been about the same size because you get the natural holiday stuff and whatnot, and we never marketed in Q4. Last year, we did a little marketing in Q4. We did a men's advertising. We did College Football and a little bit of the NFL. And Q4 should have been significantly bigger than Q3 but December was a disaster. December, we had all the COVID shortcomings, the massive spike in COVID cases, and we lost production time. And then we had a significant snowstorm right in the middle of the month that cost us both shipping time as well as production time. And so when you look at it on a year-on-year basis, you're going to see some outlandish growth rate in Q4 just because December of last year was such a mess. And that's where I think it's more helpful to look at it on a sequential basis and say, Q4 should be bigger because we'll ship everything that we can make again. It's not -- we'll build a little bit of our own internal inventory. That's part of restoring the supply. But the reality is that the year-on-year comparisons are not going to be particularly helpful. I'd also make sure a caveat is all this assumes that the supply chain flows very fluidly. We're seeing hiccups and you're going to continue to see hiccups and it's going to make things a little bit lumpy and uneven as they go along. But what people should take away is demand is doing everything we thought it should. The consumption is going, the Nielsen's are showing what we thought and production is going the way we thought it should. We're producing at a very high rate. So those things, as long as those things are intact, the long-term piece is right. Where it falls by week, month or quarter is not as important to us as are you on track versus your long-term growth, and we are, we're exactly where we thought we would be.

It's a really important clarification because I'm even just thinking through how we interpreted the slight improvement quarter-to-quarter, not in total volume. We were looking at it as a rate. So I think that's of course correction. That's important, that when we look at it sequentially in dollars, a slight increment, but not significant. And then the big increment is going to come in the fourth quarter. And Heather, do you think about it as -- from the CFO's perspective, a little bit also as a run rate. So the September exit run rate is a foreshadowing of what the fourth quarter scope can look like?

Yes. I mean, for sure, our business is all about the run rate, right, because we're looking literally week-to-week run rate in terms of how we think about the growth of our business. And that's important, not only from a near-term delivery but also from ensuring that we have ample capacity in the near term and longer term. So yes, for sure. And Steph, I'll just -- to complement what Billy said around sort of the sales side of it. I know you were -- just to complement it on margin. We have expected sort of quarter-over-quarter improvement in margin when we entered this year, and that was sort of what we had communicated along with our guide. And what's really turning out now on a full year basis is sort of flat to sort of the Q1 range across the quarters. And the reason for that started in Q2 with what we talked about in terms of those temporary operating inefficiencies that I referred to earlier. And a big piece of that is having a very large portion of our labor force new. When we look at sort of tenure and look at less than 1 year, a large portion of our labor force is that in that bucket of less than 1 year, and that's a function of the labor market that we're in, but also adding a lot of new labor for the second facility. So that sort of defined the first half. And then as we come into the second half, we're layering in now the incremental inflation that wasn't anticipated also in terms of how we thought about margins for the year. And for our business, we have the pricing action in place, but that's not going to impact until next year. And so that's sort of what has happened in the margin for 2021.

That's really helpful. Okay. I want to stop with the second half, and let's go back to the long term because, clearly, there's a trajectory here. So as we think about not so much 2022 from a formality perspective, but just what it represents as a continuation from '19, '20, '21. How should we think about that gap consumption versus supply? And maybe Billy and Heather this is a chance to talk about those big projects that you have from a CapEx perspective. Because again, as an analyst in consumer goods, we don't often spend a lot of time focusing on manufacturing capacity, but it's so critical to the story that there are going to be these big surges in available capacity as we look forward. So talk a little bit about the arc over the next several years and where you expect to see those big injections and step-ups in capacity.

Yes. It's interesting because if you think about where we started with this conversation about what happened in the pandemic. It's amazing to think that when we entered the pandemic, we just finished the year, we had a little over $250 million -- about $250 million in sales. And when we exit, who knows when this thing ends or what it looks like. But by April of next year, we will have completed the construction of 2 manufacturing facilities during the pandemic. You think about all the challenges that, that presented and literally going from having just Kitchens 1.0 will have constructed and started up Kitchens 2.0, and we'll have constructed our biggest facility in NS, Texas starting in April of next year. And the sum total of all that capacity in addition to what we brought online at Kitchens South through our partner there. We're going to have incredibly significant -- we're going to have capacity that's in the $1 billion range from a company that had been $250 million when the pandemic started. So you kind of look at that and go, that's pretty heroic lift. And our organization has done an amazing job, and we've expanded the organization quite considerably despite all the challenges around us. As you think about where we're going to exit this year, it's -- our whole organization is looking at next year and going, "Wow, this is going to be pretty exciting" because we're going to exit with a Nielsen measured growth rate that's probably going to be in excess of 30%. Going back to the point about this being a very predictable business, we can lay out on the line. We can tell you fairly closely where it's going to -- where we'll end with the Nielsen, it varies by week, but generally, where we'll be at the end of the year. And in the first half of next year, we'll be lapping, again, tough odd comparisons, but we're lapping a period where we kept pulling advertising off the air just to manage the capacity constraints. So we weren't on the air from January 1 until February 15. We weren't on the air from the third week of March through the third week of April because we just didn't want to create demand when we had out-of-stocks galore. We're going to have enough capacity that we're going to be on the air continuously, a very heavy weight starting January 1, and our heaviest advertising this year is in Q4. So talk about momentum as you head into the second half -- in the first half of next year. And we'll see that reflected in the Nielsen's, particularly since the Nielsen's will be comparing against a period where we had massive out of stocks, the worst out of stocks we had. I caution again, this is going to -- it's going to look great. The Nielsen's going to look fabulous. But when we start comparing against the periods where we were restoring the retail inventory, the comparisons on shipments won't be quite as robust as the Nielsen growth but we're all about the Nielsen growth. The shipments piece will move quarter-to-quarter, but we're about driving the Nielsen measured consumption and it will be very, very robust. The facility in Texas is coming online starting in Q2. It will start at one line. A couple of months later, we'll start the second line. A couple of months later, we'll start the third line. But that facility, we just -- Heather and I just did a review of the facility on Monday, will be dried in within a couple of weeks, so we'll be insulated from weather. We'll still have all the risks that everybody else is facing on getting stuff through ports or getting suppliers to produce steel and all that kind of stuff. But all that stuff looks like we're on track to start up that facility in the second quarter of next year. And that's just a boon to us because it's going to bring on between the second and third line that we're bringing on at Kitchens South, a fourth line later in the year and the 3 lines in NS. You look at that and you think, wow, this is going to be a great year. And it's even more exciting when you think about where the second half of the year will be because we'll have a lot of capacity in the second half of the year. And even more capacity coming on with Kitchens South Building 2 in Q1 of 2023. So as we're modeling next year and trying to figure it out, we can put our foot on the gas at the beginning of the year, and we can actually accelerate in the back half of the year so that we can start soaking up all the extra capacity. I won't go into the guidance that we're going to give. We'll do that when we do our report out in February. But suffice it to say that our team is very excited about all the projects coming on and giving us the opportunity to get back on our front foot. And our customers know this. We've been talking to our customers and explaining how we're going to get to that point, and they all see the opportunity. And so our hope is that some of them decide to lean in with fridges, new fridges, second fridges, third fridges in concert with those capacity admissions.

That's awesome. So let's talk a little bit about the refrigerators because I shop at my local Target and every time I swing through the refrigerators getting better, but still significantly out of stock. So let's talk a little bit about the importance of those fridges in 2 ways. The first is just the representation of the brand at retail, and it is your billboard, but how that also creates somewhat of a defensible moat, as you've claimed that space and you own that space, it's branded. And so it does give you some degree of leeway and permission to really build the capacity into the system. And then I think, Billy, maybe the third thing to throw out as you just hinted at it, the ability to actually build additional fridge capacity just to align with the production capacity that you have. So that's something that's been a little bit more of a pause until the production is there. Talk a little bit about the opportunity to continue fridge installation, add fridges, et cetera?

Yes. I want to be clear that we think this installed base of fridges we have today, which is like $115 million worth of fridges, 25,000 fridges scattered around is more than enough to satisfy the growth expectations that we have. The real value of the incremental fridges that we place is the way in which it amplifies the value of our advertising. So if you go from having a fridge that sits in the middle of an aisle that might be a small fridge and you go to a large fridge that sits on an end cap or double fridges or in the case of what we see in some grocery retailers, 3-fridge islands the visibility gain that we get from that and the ability to carry a broader assortment of products that needs a wider range of needs. That's really where the amplification value or where the real revenue generation potential of the fridges is, we could sell a lot more out of the existing fridge network. They just have to replenish it on a more frequent basis, and that's not unheard of. But for us, it's really -- it's all about the ability to create an amplification of the visibility. When we started doing fridges, it was out of necessity, Scott and Carl talk about it is they never dreamed of owning $115 million worth of fridges, but it was a necessity in order to get the distribution. So you remove the capital barrier for the customer to be willing to invest in the space. And it's not just the capital, it's the expertise to know how to run the wiring, install it. And then not only do that, be able to maintain the fridges, which is something that we do on a regular basis. It's now grown from not just having that capability to being that marketing value that we get, and we think that's very significant. I think one of the things that we've heard a lot of people talk about is we've heard competitors are now starting to enter the space. Walmart is installing some fridges in some stores, people say, "Wait a minute, what happened in that mode " And first thing I'd start with it's very notable, and it's important to point out that those -- they're not going in our fridge. A lot of people question for a long time, "Hey, wait a minute, how are you going to keep other people out of your fridges?" Here the largest retailer in the world has made it very clear that if they're going to bring a competitive item, it's got to go in somebody else's fridge. In this case, they chose to invest. I'd also point out that Walmart is not typical. Walmart, obviously, is much more capable investing than many of our other customers. I'm not saying that others won't decide to put fridges in their stores. There are some who have that capability and some who will choose to do it. But if it's taken us 15 years to get to the point where we have 56% ACV, despite our incredibly strong growth rate and the good margins we give retailers, you can imagine it's not a fast, turn the key and get there overnight. There's a lot of logistical obstacles that have to happen to get there. And we've said all along, we've always expected to see a competitor show up. And what we're going to do is we're just going to keep putting our foot on the gas, go back to my comments about 2022. Put our foot on the gas because we think ultimately, while the fridges are a great marketing vehicle and a bit of a barrier to competitive entry, really what they -- what we want to do is we want to build the installation with the consumer. A highly loyal, satisfied consumer is highly unlikely to change their brand, and we want to get the largest, most loyal consumer franchise before anybody else shows up. And so that's what we're doing. If we end up owning 90% of a very large category, that's great. We never thought we'd have 100% of this category forever.

Very helpful. I want to talk a little bit about that growth algorithm and the increase in your TAM. So we were historically talking about 8 million potential households that I think you're up to around 11 million most recently. What was the catalyst for the change in potential? And maybe talk a little bit too about full fresh meal versus meal fresh topper, which is something we get asked a lot about from investors, I mean, this can actually be complementary versus a full replacement.

Yes. The simple thing is that the Gen Zs are now getting dogs and feeding them. And that has been a fundamental transformation. In 2016, when we first set the TAM at, call it, 8 million households, not as our target, but that was the total TAM. We said that's what the opportunity of 7.5 million households. That was the opportunity. No Gen Z-ers were at household formation stage. They're all under the age of 18. Fast forward to 2020, when we started looking at what was the size of the TAM and suddenly it was over 20 million households. That reflected a shift in Americas values about their pet and the shift in their values about the food, but it also reflected the arrival of Gen Z in the household formation stage. And if you think about where we are today, we've only got a few years' worth of Gen Z-ers who are at that household formation stage, and they are twice as likely to choose a pet food like Freshpet, and they're more likely than average to get a dog. And so what you're going to see is another dozen years of Gen Z-ers coming along who are adding to the TAM that we outlined is greater than 20 million households. My guess is that they're adding 1 million households to our TAM every year. I can't say that, that's exactly right. That's our best indication. But I wouldn't be surprised if we arrive at 2025, we're telling you that TAM is north of 25 million, it might be north of 30 million. So if you think about the 11 million household target, we already demonstrated the rate of growth that we -- in household penetration gains between 2020 and then now in '21, that would get us to that target. But 11 million households out of, call it, 132 million households in America or 11 million households out of the, call it, 69 million households have dogs or 93 million households that have pets. It's still a relatively small number. And the interesting thing is if you look at Blue Buffalo, just as when they were entering grocery and mass, they had 11 million households. So even before they became a broad mainstream brand, they were in 11 million households. Now they had a broader product line up than we do, and they weren't refrigerated, but we're in every class of trade. We think that 11 million households is very achievable. In terms of mixers and toppers, I guess the thing I would point out is 1/4 of our Freshpet users feed Freshpet exclusively. That's all they feed. More than 80% of the Freshpet users feed Freshpet regularly, meaning they mix in top or feed regularly. And if you break it down between the new users and the existing users, the new users are doing it, 75% of them are using it regularly. And if you look at existing users, 89% of them are using it regularly. That's a pretty significant indication that people build this into the regimen. They start as a mixer or topper, they're most commonly going to start as mixer and topper, but a meaningful number of them move into becoming using it as the exclusive food that they feed their pet. And our goal over time is to make that a larger number.

It works for us, but we've got a 12-pound meaning Goldendoodle but for a 50-pound dog might be a little bit different. Very helpful. I think we're bumping up right on time. I'm getting a notification from the operator. So we're going to leave it there. I know you guys have a series of meetings today as well to get to. So thank you both very much. And we're going to keep an eye on this build-out of additional refrigerators as we kind of move into 2022. And your comments, Billy, on advertising are really important. I think just double-clicking on that and reminding people that fourth quarter and into '22, there's going to be a pretty meaningful step-up in your plans and really your voice, share of voice in the market as well.

Great.

Thank you both. We're going to leave it there. Thank you, everyone, for listening in as well. And everyone, please have a great day. Take care.