SpartanNash Company (SPTN) Earnings Call Transcript & Summary

Thank you for joining us for SpartanNash First Investor Day. For those of you here in the room today, we provided you with a copy of Our Winning Recipe and Our Family brands snack, which more than 75% of associates chose over a national brand equivalent in a recent blind taste test. As a couple housekeeping items, earlier today, we issued preliminary Q3 results and raised our full year guidance. We will be passing out a hard copy of the deck at the conclusion of the presentation. An electronic version will also be available on the Investor Relations portion of our website immediately following the event. I would like to remind you that today's event and presentation and related materials may include certain forward-looking statements or information about the company's future, which involve risks and uncertainties about the plans, strategies, objectives, goals or expectations of the company. These risks and uncertainties are included in greater detail in our Form 10-K and subsequent filings with the SEC. For this reason, forward-looking statements should not be read as a guarantee of future performance or results. Our actual results may differ materially from the matters discussed during today's meeting. The company will update information regarding the risk factors if circumstances require such updates, in the company's periodic reporting on Form 10-Q, 10-K and other reports that may be filed with the SEC. Thank you for your consideration, and enjoy the presentation. [Presentation]

Good afternoon, everybody, and welcome to our first Investor Day, as Kayleigh mentioned. We are delighted that you've chosen to share some of your time with us as we share with you the good news here at SpartanNash. I thought, to start, I want to do a quick introduction of myself and a little bit of background. I spent 35 years on the mythological other side of the desk, so to speak, in the CPG, manufactured food and sold to companies like SpartanNash. I started that journey at PepsiCo. PepsiCo is a great place to learn. They do a phenomenal job of -- with all their functions. I spent about half that time at PepsiCo in manufacturing. I spent a couple of stints in the finance, worked in sales as well as in the direct store delivery business and finished that up running all of the distribution and DSD business for Frito-Lay specifically. I decided, for 20 years, I wanted to try something a little bit different, thought about maybe getting something a little bit smaller. I managed to find the only food and beverage company that is larger than PepsiCo and joined Nestle. Nestle just acquired an ice cream business. That ice cream business had some operational challenges in the places that I like to solve anyway. So that was kind of a first turnaround into there and did that as a COO of the Dreyer's ice cream division. I went on then within Nestle and convinced the Board of Directors to part with $3.7 billion of the shareholders' hard-earned money to buy the pizza brands from Kraft, and we formed a company called Nestle Direct Store Delivery, sales, warehousing and distribution for those products. So I ran that $5 billion division as president for about 3 years. And then moved on to a company called Ready Pac Foods, a fresh foods company, in Los Angeles, ran that as CEO. It's private equity owned. And it had some very, very significant opportunities there as well. And it was the first time I started actually really culminating all the people ideas and all the great training and experiences I had those previous 2 companies and branding that as People First. And we'll talk about that a little bit today. So we had -- we turned that company around. We had the sale process, sold to a company called Bonduelle. Great outcome there, and it was time to move on. We've done a company called Board + Brie, at Dallas, Texas, for just a little less than 3 years, did some of the same things there. Really, really challenging environment in terms of the dairy industry, in terms of going into sale process and COVID, which is not in the best practice manual. And we wound up having a great outcome after all, and that was all done. At the time that was done, then I came to SpartanNash. From an education standpoint, I attended 17% of the Pac-12. I'm a chemical engineer undergrad from Arizona State University, and I went to Stanford University, got a Masters in Science -- in Management from the grad school business there. My wife and I stayed busy at home. We got 6 children, 2 biological, 4 adopted. 3 of them are now out and forging their way in the world today. And the 3 of them are with us in home in Grand Rapids, Michigan. So just a couple of key takeaways I want you to think about here as we get started. One, SpartanNash has driven significant shareholder value in the time since we've actually begun this turnaround. We have -- we're going to share plans with you today that will articulate on some of the things are doing now that give us confidence that turnaround and that growth and that profitability is going to continue for the years to come. We have a incredible strategy. The strategy is underpinned with a lot of detail, and you'll see some of that today, and you'll see more of that as you get out in the trade show and you had a chance to talk to the people there. And we have a leadership team that was built for the purpose of this mission. When you meet those folks, I think you'll agree with me. This is a great team and a team that is absolutely right for the challenges that we have right now at SpartanNash. And we have a financial plan that we think is very robust looking forward. We are going to deliver over $1 billion of growth in the time between the '21 and '25 time frame that we're going to take you today and 40% adjusted EBITDA growth, which is ahead of most of our contemporaries. In our agenda today, I will talk about who we are and a little bit about Our Winning Recipe. Then I'm going to [ Ben ] when I'm done, I'm going to invite Masiar Tayebi to come up and talk about our strategy. Bennett Morgan is going to come and talk about our merchandising transformation. Then Adrian Jansen is going to talk about ESG. Jason will wrap up with some financials, and then we'll save some time at the end for Q&A. So please think about the questions you'd like to ask. We'd be happy to answer those as we wrap up. All right. So a little bit about SpartanNash history. So SpartanNash started the Nash -- Finnish company, is actually a little bit older. It started in 1885. So 3 Nash brothers started a tobacco and candy company in North Dakota. And by 1904, they'd already created the brand, Our Family, that Our Family brand is the flagship brand that we use every day. Then a few years later, in the Grand Rapids, Michigan, 1918, 43 grocers banded together and formed the Grand Rapids Wholesale Grocery Company. That later became known as Spartan Stores. And then 95 short years later, those 2 companies merged and became SpartanNash, and here we are today. So I want to talk about some more detail of the company, what we're made of here. We are a food solutions company made of 2 complementary segments. Those segments are our wholesale business, which is about 71% of our total business, and the retail business is about 29% of our total business. And those numbers are based on our 2021 overall volume of revenue of $8.9 billion. What's important here is that these are really and truly complementary businesses. You saw that a little bit in the video that Bennett mentioned today that we learn things in the retail space that we can share with our customers, gives us a competitive advantage as we share those ideas and those learnings with them. We have -- at $2.8 billion, our retail is not a hobby. It is a big business. And we learned from that. We have scaled, actually invest in it and take those learnings and share those learnings with our groceries. So we share things like we share category strategies. We share things about pricing science. There's elements of HR strategy. There's elements of IT. We have services we provide for those folks as well. So compared to other wholesale, we think this gives us a really, really interesting advantage. And our independent customers love the fact they can come in and look at our stores. We invite them in multiple times a year and learn and continue that learning process. Okay. A little bit about our network. We cover almost the entire United States in our network. You can see that our retail stores are clustered up in Michigan and the Upper Midwest. We have 19 distribution centers, mostly in the eastern part of the United. We do have a relationship with a third-party relationship in Stockton we deliver our goods out to the West Coast. We have 17,500 associates in company. We serve 2,100 independent retail grocers. We have 147 of our stores that we run under multiple banners. The vast majority of the 3 banners here on the page, Family Fare, D&W and Martin. We also, within those 147 stores, we run 84 pharmacies and 36 fuel centers, so they're very complete operations. And as I think I mentioned earlier, they're about 3x the size on average of the independent grocers we serve, so we get scale that we can share with within the box of the stores that we run. 19 distribution centers, as I mentioned a moment ago. We have some key national partners that we work with, Dollar General, Amazon and, of course, the military business, prominent amongst those. And the brand I mentioned a few minutes ago from the Nash Brothers, Our Family, is our flagship brand, and we're making more investments in that. And we think there's a lot of great opportunity for us to continue to differentiate ourselves with the our family brand. This and. This is an exciting chart. The overall addressable market for the wholesale part of our business, $125 million. We have $1 billion -- we have a $7 billion share of that. That's only 6%. So just in the wholesale portion by itself, we have enormous opportunities. That doesn't contemplate what's available in terms of opportunities for retail and then other adjacencies. So we see almost limitless number of opportunities to grow as a company. Okay. So a little bit about people first. I just mentioned one element of that here today, and I'll double back and grab some more pieces. One of the things I did when I joined here, I want to make sure that the overall organization has a sense of where we're going, and that was going to come through forming a clear corporate identity. And so we got to work on that in the early part of 2021. And we developed the winning recipes on your desk there. Take a peak of that in the details. Really, really important. And what we did was we got -- we made sure that we got all the voices and the words of the organization. So we've got 1,900 of our associates involved in the process. That process included surveys, included focus groups and other mechanisms to get those ideas from our team. I thought that was really important because I want to make sure that we -- this wasn't just a radical change in some of the things they built that were actually working very well. We want to make sure they're respectful of some of the things that those people had built over time. But there are some important changes embedded in it. We are a food solutions company that we serve primarily, we serve food retailers. We identify it as a business, no big surprise. But we want to know what kind of difference we make for our customer as well. So we established a mission statement that we deliver the ingredients for a better life. And we think very seriously about that. Those are ingredients for a better life for our independent grocers, for our national customers, for our own retail stores, for our shoppers and for the communities that live it. We think that's very, very important. The opening of that is the core capabilities. The core capabilities are super important. The first one, no surprise, is people. We're going to invest in people. We're going to make sure we can distinguish ourselves with great people and engage them and build a real powerhouse team with people. The second of our core capabilities is operational excellence. We know we're an operating company. We have to be great at operations and that we want to invest in and be the best operator in our business, and so we're going to make sure that's one of our core capabilities. And the third one is the insights that drive solutions. We want to bring insights to our independent grocers, to our national customers. We want to use these insights to run our stores better. And so we're getting good at finding insights and mining them and turning that into execution in another one of those really important core capabilities. So there's other components here. I'll just mention the vision. We -- our vision is broadly that we want to see a day when our customers will tell us that they can't live without us, okay? So it's a noble noble goal. It would take extraordinary people to pull that off. And amongst the extraordinary people, I want to introduce some of them right now. This is a team that I brought here to work on this mission overall, and they are 10 of my direct reports. All of them are here today. 9 of those folks are in new positions in the last 18 months. 7 of them have brought great experiences from outside of the company. A couple of them are promoted in their position, but they all form a great team. I work with 1 consultant to actually help to build teams overall and with specific objective of building a great team, not about getting a whole bunch of individuals who check a bunch of boxes on experiences, but it's about building a team. And this is a really, really great team. You'll get a chance to meet them. 4 of them are going to come follow me and talk to you from the stage here today. 6 you can meet in the trade space and the store. And I really encourage you to meet them. You will meet them. I think you also agree that this is a phenomenal team right for the journey that we're on at SpartanNash. And amongst the things you'll learn from them is this change in the mindset here. We have a real growth mindset and a much more aggressive view of growth and a really aggressive view of winning. And so we are willing to make bigger investments and take bigger chances to grow our business and to win and to win every day, and we're doing that through all businesses as well as the communications and the work we do with our people to make sure they feel and are winners. And that is actually core to our people first. And so I want to say a few words about some other elements of people first I think have really made a difference for us at SpartanNash. First and foremost, you can't underestimate the power of just making that statement that you're going to be about people, you're going to really value what people do. You tell them that you're the most important person in this company, that we're going to invest in you, we want to engage you, we want to make sure that the people lens is the first lens by which we make decisions, that we're going to invest emotionally and financially on our people. And we want to them to feel great, feel like winners and we want them all the feel like SEC insiders, right? That was a really important piece for me as well. And part of the journey then, the next step in that was I need to have great communication. So we built a great communications team under Adrian's leadership. And we do what I call, not the best language, but on the organization with communications, and we take that very seriously. So we do a monthly video on all the things we're doing as a company and how we're doing against our key priorities. We do weekly post to our Internet site to make sure that people are up to date on what happened last week and how we're doing. We do quarterly town halls that we simulcast across the entire company and allow people to watch that and have longer discussion about what's important to us, what's coming up next in our business. And we do a number of other institutions around winning and around recognition. And we take that part very seriously as well. We know we're going to have great performance. I want to make sure people feel great about that great performance. And so we have a variety of recognitions, small ones at DCs, parties as well as our penultimate event we call our Circle of Excellence where we recognize the top 1/2 of 1% of our hourly associates, and we bring them in for a 3-day celebration to make sure that they feel valued -- and of course that overwhelming celebration of their efforts winds up bleeding back in the organization. It makes you feel good about the company. And for that next round, they want to be a winner as well. So lots just great stuff going on, on people. And all those things we've woven together have yielded great results even even as we get started here. So I'll talk about a few of them now. We have, in terms of our applicant flow, we made some changes to our overall offer to folks we think the culture has actually played a role in actually getting better applications. We have 2.5 -- almost 2.5x the number of applicants coming in to work at our sites across the entire company. Part of that is as people go to independent sites like Glassdoor, which is an independent site, we have 2x the rating right now, 2x the rating we had previously in terms of would you recommend this is a company you want to work for. And we can get that word getting out as well. We made early investments and important investments in safety. We are probably an average performer in safety when I got here, and we said that's going to be a benchmark of how we're going to make statements about people first. And we did that. We invested. We've hired a lot of safety trainers, a lot of systems in place, 53% improvement in less than 2 years on our overall injury rate and those injuries that take people away from work most serious lost time injuries, we have a 76% improvement overall in 2 years. So we've gone from being average to be easily in the top quartile. We think we can be at the best in the industry in safety. We've increased wages, as I hinted out early, and our retail store have increased our entry-level wages by 30% in the last 2 years. We've increased our entry wages in our warehouses by about 25%. Those are really big investments. Those are 7, 8 years plus of annual increases, all in the span of less than 2 years, about 1.5 years now. But it was important for us to make that statement by getting the best people. And as you all know, it's a very challenging labor market, so it's critically important that we also had those tools at our disposal. We have worked hard on our network. We have pulled 10% of our miles out of our network in the last couple of years. We've also done -- that point those of those miles in the network have great impacts on our company broadly. We save money, of course, right? We've gotten our -- the network change we may have gotten our products closer to the end user. And importantly, it's also great for the environment. We pulled 10,000 metric tons of CO2 out of the environment by reducing those miles overall. On the topic of supply chain, still we're at 97% on-time delivery rate to our customers, which is really, really important, of course, to be predictable in that fashion. We are getting a little less than 50% -- 57% on-time delivery from our suppliers. And so we're turning that around and saying, "We're going to be more predictable to our customers." We know how important that is. And our team has worked really, really hard to get that rate at the right place. And then on throughput. Throughput is critical also it helps with your overall predictability and it helps your cost, and we have an 8% improvement in throughput just in the little of this year plus in our supply chain transformation. So in delivering the ingredients for a better life, it takes a lot of specific plans to pull that off. And so we have what we call our master action plan. The master action plan or the map, as we call it, starts with those core capabilities I mentioned just a moment ago, the people, about operational excellence and insights to drive solutions. And from that, we build out drivers and we build out all the detail. There are hundreds of initiatives on this plan that go down to the work group as appropriate, right? They have names, dates, and that is the underpinning of all the things that we do and all the things we hope to achieve as a company. It makes for a great week, a great month, great months make for great years, great years make for great 3-year plans that we're sharing with you here today. So focusing on 2023, these will be the ones we review and all those monthly institutions I talked about just a moment ago. Our retention rate, we're going to focus on, make sure we keep our people and keep them engaged. We're going to continue to focus on safety incident rates. We want to be the best, as I mentioned, in the industry. We're going to focus on the merchandising transformation benefits -- Ben's going to talk about in a minute, and that's going to get a lot of visibility from us as we track that and see how we're doing. We're going to focus on that raw fill rate to our customers, again being rigorously predictable. It's so important in engaging our customers to make sure we're a good service to them. And we're going to focus on our cost per case. That's an important driver for us in our overall profitability. And finally, we're going to focus on market share. And that market share is not just retail, retail and wholesale. As a growth-minded company, we need to know if we're beating the competition. We're going to focus on that and make sure that we are doing that indeed. So in terms of the overall 3-year plan, $10 billion in net sales. That's a CAGR of about 3% from '21 to '25. And the $300 million of EBITDA, that's about a 9% CAGR between '21 and '25 as well. The sales growth will come from -- our growth of share will come from growing the amount of products we ship to our current customers. We try to grow more items in their stores. It will come from growing our retail store and growing them with the services we offer to our shoppers as well as growing Our Family brand. We think has great legs to continue to grow and attract more people to our stores. We'll bring on that incremental EBITDA with a combination of the margin-enhancing behaviors that we take at store level as well as a lot of productivity measures. You'll see some of those here today as well, especially the trade show. So we've got a lot going on there. And the overall plan does not contemplate any M&A. So there will be some. We are quite certain of that. But we -- that plan doesn't include that. The M&A stuff will come on top of it. So I mentioned the team earlier. Here's another great shot of the team overall. This is a team that you can bet on, a team that is ready to win. And the team is going to present you with the reasons to believe here the balance of the day. So with that, I've said quite enough. I'm going to turn it over to Masiar, who's going to take you through the rest of the strategy.

Hey, everybody. My name is Masiar Tayebi. I'm the Executive Vice President, Chief Strategy Information Officer here at SpartanNash. It's a pleasure to be here today. It really is a privilege. I thank you guys for all attending here physically. And those who are attending virtually, I also appreciate your participation. A little bit about how I got here to this moment. My background is over 20 years of strategy, M&A and transformational change programs throughout various places and stages. And those places include Whirlpool Corporation, UBS and PricewaterhouseCoopers, PwC. As Tony mentioned, our strategy components, they're all in service of delivering that winning recipe. And what my goal is here today is I want to communicate to you with conviction. If there were 1 or 2 takeaways from this section, I'd want this to be one of them, that we have a rigorous plan, we have a clear framework and we're relentlessly executing against this strategy. It is embedded within our organization. So we're going to walk through how we take that Our Winning Recipe, those core capabilities that Tony shared, how we execute and enact them to create shareholder value for our investors as well as our other stakeholders, our customers, our associates and the communities they serve. So Tony had mentioned growth mindset. Okay. We're going to be data-driven when it comes to driving growth for our organization. We're going to be insights-oriented. And we're going to enact solutions based on those insights. And we have 3 members of our leadership team who are going to be overdriving that. And that's David Sisk, our Chief Customer Officer, who you will be able to meet here today; Tom Swanson, our Executive Vice President of Retail; and Amy McClellan, our Chief Marketing Officer. Our core capability, it's not the most creative, but it's pretty explicit, incites the drive solutions. That's what we're looking to do as an organization. And the way this works these 3 core capabilities, they each have strategic priorities paired with them. Those strategic priorities have a portfolio of projects that are geared towards shareholder value creation. So you have capabilities, priorities and then initiatives. And they all tick and tie to our long-range plan. So we drive financial accountability within that. So the first strategic priorities we want to share with you today, act on insights to optimize customer product portfolios. I'm going to share with you some specific initiatives underneath the strategic priority to give you the reasons to believe around our long-range plan and our delivery of Our Winning Recipe. Next one, launch customer-centric, innovative solutions. Again, I'll share some of the explicit initiatives, and you'll learn more about it throughout the day to day -- to see how we're enacting the change around Our Winning Recipe. But that's not all. If you grow, that's great, that's fantastic, but we're making a 40% EBITDA commitment. We're going to grow our EBITDA to $300 million plus. So how do we do that? We've got to focus on winning, and we really have that mindset as an organization. And Tony shared with you the core capability of people and how important People First is. But we're explicitly calling it out as 1 of our 5 strategic priorities, okay? So create a People First culture to make SpartanNash employer of choice. Adrienne Chance is going to share a little bit more about that, but I'm telling you, hand on heart, we win or we lose based on the 17,500 associates we put out on the field every single day. Those folks working in our corporate retail stores, those folks working in our distribution center, those folks working in our headquarters. They're our secret sauce. They are our make or break. And so we're investing in them and we're focusing on them and we're setting them up for success. So we truly are oriented to People First. The last one is operational excellence. Dave Petko, our Chief Supply Chain Officer. He's done a fantastic job spearheading this, delivering the promise to transform the supply chain, but we are not done yet. I'll share with you today some of the initiatives underpinning this that give reasons to believe that we'll continue the momentum that we've already established in this space. And the last one -- I love these all equally, but if I had to pick a favorite, elevate execution to win the day, it is it. We talk about not only winning the day. We have to win the hour. To win the hour, we got to win every minute. To win the minute, we got to make every second count. So another thing I wanted you to take away from this is we're energized. We have a sense of urgency enacting change, creating more shareholder value. We have passion around it. and we have conviction on the path forward as part of our strategy. Bennett Morgan and the merchandising transformation, they embody elevate execution to win the day. So he's going to come on stage and share specifics around that program of work and the value creation that we believe it will deliver as part of our long range for investors. So act on insights. That's our first strategic priority to optimize customer and product portfolios. Tony had mentioned own brands. I wanted to give you some explicit examples on what we're doing in this space. So first and foremost, just to reinforce, we leverage the strength of insights to determine our own brands portfolio. We have Our Family for our civilian customers. For our service men and women in the military, we have brands like Freedom's Choice. And we launched a new brand, Fresh and Finest. Fresh and Finest was based on customer research. It was based on shopper insights. And so we took action. And I want to spend a little bit of time on this. We then enacted change. We delivered solutions. So over 480 new products have been launched around indulgence and convenience. And the exact number as of this moment is 47, but if you ask me the end of the day, it might be 490. We are like going as quickly as we can on this insight to create solutions. And so some of the examples here, I actually -- my favorite is the maple glazed carrots. We get it in our household all the time. It is absolutely delicious. It is super convenient. All of these products are overdelivering against plan, and they're priming us for a great holiday season, Thanksgiving on the horizon just at the end of this month. But if you don't believe that is a good data point -- some people say proof's in the pudding. We say proof's in the fruit. Our fresh-cut produce is doing phenomenally well. Grab-and-go precut produce is up 46% year-to-date year-over-year. It's a great trajectory. This is how we grow. This is how we gain share. We take the insights, we act on them, we deliver the solutions. Our latest innovation is taking baked bread, again, indulgence and convenience. Not only are we launching in the Fresh and Finest area, we're also doing a premium center store. So it's not just perimeter. We're also going to be launching premium in 2023. So if you need more reasons to believe -- because we're always looking for them, too. We do not want to let down our investor community. We want to exceed -- we want to meet and exceed expectations every step of the way. We've got a winning streak. We have grown dollar and unit share 17 consecutive periods. We don't plan on breaking that streak. We're going to keep it going. We're going to increase Own Brands penetration 20%. We're going to do so by enacting solutions to delight our customers. We're going to launch over 1,000 new products by 2025. We're committed. We have a strategy. We're going to relentlessly execute within it. The next strategic priorities around customer-centric innovative solutions. Omnichannel, we believe, is extremely important in driving our growth. We're investing in it, but we are playing in ecosystems. We're going to be an open architecture. We're going to participate in all the markets, and we're going to look to drive reach through that. So just in the past year, we have stood up partnerships with DoorDash, Shipt,, Instacart and Grubhub. You may have seen our recent announcement on Shipt. There's more to come. We're going to continue to innovate and partner in this space and place, and it's going to complement our Fast Lane owned solution as well. And when I talk about the omnichannel, we want to expand our reach, we also want to be local to our communities. What we've heard from our customers, both in the food distribution and our retail shopper community, is they like local. They care about their communities. They want to feel like the store represents their local community. And we have a treat for those who are here in the room. This is not a joke. We did not ask the individual to do this, but Grand Traverse Pie Company, they handmade pies, local to Michigan, a little bit of flavor brought to New York City. They made them, and then they drove them here. The owner himself put him in his car. He said, "I want to make sure it's the right temperature. I don't want anybody going over bumps or pot holes. I wanted to get there in perfect condition." You can't make that stuff up. That's love. That's TLC. That's local. That's in the heart and soul of some of these product assortments. And you'll taste a little bit of that today. But we're going to continue to do those types of things in driving our connection to our communities, both our retail stores and for our customers in the food distribution space. Last bit of research, and you can ask Amy McClellan and the marketing team about this, we did banner equity studies, and we've determined that it is in our best interest and shareholders' best interest to consolidate to 4 primary banners, Family Fare for our conventional mass, Supermercado for ethnic and then our upmarket will be Martin's and D&W Fresh Market. This will allow us to have much more purpose as we talk to shoppers and consumers. These archetypes we've identified, they're also mirrored in our customers in the food distribution space so we can provide the service and an advisory they need to grow. And so we're extremely excited about this banner consolidation path we're on over the long-range plan that we're communicating here. And then the last element is renovations and automation. This is not about cost. This is about a richer shopper experience and driving growth. Again, Tom Swanson, on the retail side, he can share with you what we're doing from a renovation perspective, how we're hitting the trends we're seeing in the marketplace with our consumers and how we believe that's going to drive the growth of the company. From an automation perspective, we have some robotics and we have a partner here today showing the experimentation we're doing around this, and you see a visual here. This allows us to have our associates, which I mentioned earlier, is one of our points of differentiation, focus on the shop. So what you see here is a robot we call it Tally will go up and down the aisles doing inventory management. Image recognition, seeing what's stocked, what's not stocked, sending a signal to the back of the house saying, "Hey, do we have this or not? If not, can we get it in the next 24 hours so we can replenish our inventory in the stores near real-time?" Without having associates go up and down the aisles all day. The associates can focus on delighting the shop. So these types of automation opportunities we're rapidly experimenting and we're going to look to innovate on as long as they are the reasons to believe in proof points that it creates shareholder value. Operational excellence. We are transforming the supply chain. Just a couple of data points here. We've already optimized 20% of our network. We closed 2 distribution centers to drive scale in our core markets. We opened 2 distribution centers to drive geographic expansion. We're going to continue to optimize the network. We've taken 7 million miles off the road. We're not done getting efficiencies there. We're implementing a transportation management system. It's going to allow us to be much more efficient in our routing, get those efficiencies and those savings and get that reliable service to be a better operator overall. And then we've redefined our operations. We have seeded training programs. We've seeded process improvement. We've seeded automation experiments within our supply chain as well as retail. But we have a long runway and a portfolio of initiatives that are oriented to the process and training embedment and automation experimentation over the next 3 years that we believe will unlock even further value for our supply chain. So that really is some of the vignettes around our organic strategy, and that ticks and ties to the long-range plan we've communicated. But there's also an inorganic strategy that I want to share today. The opportunities through growth through M&A, they're in addition to, not in place of, our organic strategy. So they're incremental. And it's both M&A and partnerships. And so what we've launched is a strategic framework, and I'll walk you through very quickly here and now. Strategic fit. We define strategic fit as being oriented to our core business. So wholesale geographic expansion opportunities, corporate retail M&A that is in high-density areas. So either it's in places we already have density and a presence or it is of a size that would allow us to go to a new market at scale. After we identify those opportunities, we then say, "Is the business healthy? We look at stand-alone attractiveness. It has to be operating well in and of itself to be creating value in and of itself before we would consider acquiring it. But we also have to be able to add value. We would not just buy dollars. We want to create value with the sum of the parts being greater than the individual components. So we go through hard synergies. We go through the business case. We overlay, and we make sure the synergized value creates sufficient shareholder value to move forward with. And we take a step back and we say, "Hey, can we do this? What's the risk profile? Do we have the management capacity to execute? Do we have a proper sizing of the work that goes into in and quickly? Can we do this?" And as long as we feel like high confidence we can deliver value to shareholders, we'll move to the final step. And that's portfolio improvement. Does it drive growth? Does it increase our profitability profile. So just being very transparent. This is the criteria we look at. We are always on and looking at it. And we're going to look to deliver upon it for our investors. Just this year, we've already started to execute against it. We did a partnership with Coastal Pacific that accelerated our supply chain transformation in the wholesale space. And we did a tuck-in in a high-density location, i.e., our backyard in Michigan with Shop & Save. And we rapidly integrated it, and it's been a great acquisition for us so far. So I just want to close, hand on heart, we have a strategy. We're executing against. It's in service of Our Winning Recipe. It's going to deliver against our long-range plan. We're firing on all cylinders, both organically and inorganically. We're committed to that. You'll sense it, not only from me, but everybody else you interact with here at SpartanNash. We have a set of priorities to deliver the long-range plan, and we're actively working on it in the here and now. We have an inorganic strategy and an inorganic framework that we're also running as a parallel track that is in addition to not in place of. So I can't take it out for the time. I look forward to interacting with those who are here today. And then to continue the conversation on our organic strategy and elevating execution to win the day, I'd like to introduce you to Bennett Morgan.

, Right. Thanks, everybody. Bennett Morgan. Glad to be here with you. I am the Chief Merchandising Officer. I'm going to talk to you a little bit about merchandising transformation, but let me start with a little bit of background, like other folks have. I started out in financial services with Citigroup, worked at Boston Consulting Group and supporting a number of industries, ended up in retail, which is where really where I found my love and passion for food. Then I worked at HEB, Walmart and Amazon Fresh. A lot of what you're going to hear today is inspired by stuff that I learned, sort of, like anybody else, victim of your prior experience. So what did you learn along the way? A lot of that in what we're doing in our merchandising transformation. Let me start with what is our merchandising strategy. The top part shouldn't be surprising on the vision. Customer-led focus, offer the ingredients for a better life, very resonant with the winning recipe that you have in front of you. Let's talk about some of the pillars, products and services customers can't live without. You heard Masiar hit some of these already, fresh, leading owned brands, local expertise, value that can't be beat. You can't talk about being in the grocery industry without talking about value. That is on price. That is also on promotions, and I'm going to spend a little more time talking about promotions. And then last part, sustainable growth and partnerships. We've done a lot of work here. I'm going to share a little bit more about sustainable growth and partnership. This is about making big bets with the right partners, particularly in the inflationary environment that we're in today. And we've got 3 enablers. We got to be simple. Our process, the way that we execute our process has got to be simpler than it is today, particularly given that we operate in a wholesale and a retail business. There's a lot of complexities that we could pass on if we don't do this well with our customers. The second one is category CEO. If you think about the category managed work under the merchandising team. These are the folks that are fighting on behalf of the customers, thinking about the products and how we merchandise the products for the customers. I want them to be category CEOs of categories that they run. And the last part we heard about was leveraging the best of retail across our business. Think about the wholesale customers we work with. They are running retail businesses. the 147 retail stores that we run, that Tom operates for us, that is a big differentiator for us at SpartanNash, something that we're very proud of. Let me talk a little bit more about how that strategy then feeds into what we call our merchandising transformation. I am not going to talk about all the bullets on here. The point around this was really to show that there are a number of different things that we're looking at as we think about our merchandising transformation, all building market-leading capabilities through data and insights. I'm going to talk about 2 more specifically enhanced category planning, what is enhanced category planning. And the second one around promotional effectiveness, what is it that we're doing effectiveness. Enhanced category planning is on the top left, customer-led foundation, data-driven category strategies, this is taking category management to the level at SpartanNash across the wholesale and the retail business. It is also leveraging this new end-to-end view, a true item and brand profitability. We call that dead net profitability. And for someone that spent a lot of years in retail, it's more complicated when you got to combine a wholesale and a retail to figure that out. So you might think, Bennett, that's not that hard. Actually, it was quite hard to sort that out. that unlocks a lot of value in our business because it helps us figure out where we're making money and we're not making money. I don't have to tell you all how that helps you run a better business. That drives the line, that drives bottom line. Top right-hand side, we're also leveraging that dead net profit as we think about promotions. And we're adding some additional analytics into how we think about promotions. So you can see here incrementality and dilution that comes with it. This helps bolt on to what we already knew about sales and how we're performing on -- layering profitability as well. What does that mean? That means better promotions, additional value for our independent wholesale customers and for our shoppers. And then the bottom part really talks about transformation. I couldn't talk about making these changes if we don't talk about how we're going to embed changes in the organization. You saw that circle that shows you we had a lot of different initiatives that were on it. If we don't embed that in the organization with people and technology, we will not get the traction that we want. So training, you can see mentioned here, there's a lot of cross-functional coordination. And a lot of this new data, we've got to now display to the folks on the team to help them be able to activate that and make changes in their business every day. I'm going to talk a little bit more about -- give me 2 more on enhanced category planning. I'm going to double-click a little bit more on enhanced category point. So you heard a lot about category management a second ago, what's involved in category management. I couldn't come up and talk to you without mentioning inflation given all of the inflation that's been going on, we've got to talk about inflation. So one thing we do is we have cost increases that come in. SpartanNash has always had a robust process for how we deal with cost increases, you would have to. But as the paces increase, we've also needed to upgrade our capabilities and how we think about cost increases. So what I've got on the left-hand side is I've got an example of how we break down the component cost of products that we buy from our national brands. So you can see a makeup here of different ingredients and you can see what the assumed composition of those products is. And what we do is we look at cost increases over time. So we had a cost increase in January, and then we had another request that came through, say, in October. We will go look at what is the actual input cost change during that time, let's go build that up and figure out what do we think the real pressure on that product is versus what we're being asked to pass through to our customers. In this case, you can see 11% versus 6%. This is just an example, but it gives you a sense for where we are seeing some gaps between what's justified and what the cost increases we're facing are. On the right-hand side, these are just a couple of examples. It is not uncommon, but I just wanted to share what you all see in the press just substantiates that. You can see these in the results from a lot of the brands that are reporting out. And at the bottom, what does this mean? What's the punchline? Better management and cost increases means we can better drive growth and manage customer -- we're also winning with some great vendor partnerships. When we talk about one in dairy, where we have a large dairy supplier that we worked with is some of the category management that I was referring to earlier. So we had simple goals. We wanted to go drive unit sales and visits in our dairy department and for our independent customers and retail stores. We had a couple of things we're willing to do. We were looking at floor plans, we're looking at planograms, we're looking at what can we do around fixtures. And we had to coordinate support, space planning. The vendor community played a big role in this. They have a lot of insights that we have to partner with them on. And we had to go execute it from a store operations side. The net result was great results. So this is trial versus control. You can see units up 13%, sales up 13%, visits up 14.3%. A key part I wanted to clip here is you note that it is not inflation that's driving the growth. So the sales number is up the same as the unit number is. That's the kind of healthy underlying growth that we want in our business and that we're focused on, critically important when you're in an inflationary environment. So merchandising transformation supports our winning recipe to drive growth. 3 pillars that we talked about, products and services the customer can't live without, value that can't be beat, sustainable growth and partnerships. We will be customer-led in everything that we do. Before Adrienne comes up and talks a little bit about ESG and what we're doing with ESG, I want to show a quick video on communities that we're supporting. [Presentation]

I'm Adrienne Chance. I oversee communications for SpartanNash, internal and external communications as well as charitable giving through our SpartanNash Foundation. Prior to my work at SpartanNash, I led similar roles at Board and Dairy, in Topgolf, and I also worked in the customer advocacy team at Southwind Airlines. When I joined SpartanNash 18 months ago, I was blown away by all of the ways that SpartanNash puts People First. Corporate social responsibility is truly in the company's DNA. And it's amazing the work that we've done. I'm excited to share with you today. I'm going to talk to you a little bit about our environmental highlights, our social highlights and our governance highlights. So with our environment, our Corporate Social Sustainability Committee has done a lot of amazing work. This year, they've managed to decrease ozone-depleting emissions by 30%. And Masiar and Tony talked about how we optimize our supply chain network, taking mileage out of the system, decreasing greenhouse gas emissions by 10,000 metric tons. We've also managed to increase our fleet miles per gallon by 4% last year. We're on track to do even better this year. The Sustainability Committee is going to continue to look for ways across the organization to lessen our environmental footprint. All right. On the social side, our social score with ESG has actually improved by 50% in the last 18 months. And a lot of this has to do with what we've done with our associates internally with our total rewards. We've done a lot of work to enhance that total rewards package. So things like expanding tuition reimbursement, improving our paid parental leave program, increasing our associate discount, all of these things have really mattered so much to our people internally. In addition, we have reinvigorated our internship program. We have a very diverse class of interns and we've looked to find them all permanent roles within the company. We're excited to grow that program year-over-year next year. In addition to the great work that we have done with our associates, the work in our communities has also been a big part of our efforts. You saw what we did with the Ukraine, but disaster relief is really nothing new to the company. Just this year alone, we have provided critical aid and supplies in the Ukraine, Puerto Rico, the floods in Kentucky, the hurricanes in Florida. And we always want to be on the ground quickly when disaster strikes. We want to help and provide our supplies when times of need. In terms of our associates volunteering in the communities, we recently reestablished what we call Helping Hands Day. That's where all of our corporate associates take the day off, roll up our sleeves, and we just work to volunteer our time in the community. We pack back to school backpack. We donate food and supplies and pack those boxes for the food pantries. We replanted community gardens. Really great day, and we're looking forward to continuing those types of moments with our associates. This year, our interns also led the Guinness World Record breaking project. You see a picture right here with SpartanNash spelled out, the largest word ever spelled in food products. We actually donated all of those food products after that to the local food pantry. So we're really excited about that. It was a great leadership project and challenge for the intern class that all of our company was excited to get behind. Finally, I'd be remiss not to mention the great work that our pharmacies have been doing, and it's COVID. We led a national award-winning communications campaign to educate our communities about the benefits of vaccination. We were able to get a large population of our own associates vaccinated. And we're going to continue that great work with our pharmacies this flu and COVID season. Hopefully, you saw when you walked in that we are making a $25,000 donation to Feeding America. This will help provide meals for holiday tables this season. This is on your behalf. We want to thank you for being here today, and this is something that's a cause that's near and dear to our hearts as a food solutions company. All right. In terms of governance, we've always maintained a best-in-class score with governance, looking forward to continuing this work. This year, we welcomed 3 new Board of Directors members. We're going to, just like all companies, continue to focus on how do we keep our Board with the right mix of diversity, skills and experience. We also have the Board having official oversight of our ESG practices -- disclosures. So we're going to continue to partner with them and make sure that they have a -- play a big role in our ESG strategy. All right. This summer we completed a materiality assessment. This is a very detailed evaluation among our associates, our customers, our communities, our shareholders to understand what are the ways that SpartanNash can make the biggest impact in our communities. What are the causes that matter the most to them? This is the list that we heard from those groups. Nothing surprising on here. Food waste, of course, for a food solutions company. So we're committed to reducing food waste wherever possible. We're going to continue those efforts and grow them over time. Greenhouse gas emissions, we obviously have a lot of trucks on the road. So we want to continue to take those greenhouse gas emissions out of the environment and do what we can to lessen our environmental footprint, continue to engage in the community through volunteer events like Helping Hands Day. Also really excited that we have appointed our new Head of Diversity and Inclusion here in the room, Deann Wright ,hopefully we'll get a chance to speak with her today, but she's got a lot of great initiatives planned, including associate resource groups that have recently been established to provide networking support and professional education for various associate populations. And finally, with so many of our own brands, we want to make sure that our products are being packaged and produced in a sustainable way. So we're going to continue to evaluate how can we make sure that, that is happening and promoting sustainability with our own brands. All right. In terms of next steps, so you'll see our next ESG report published next year in late summer, early fall, 2023. In that report, you'll see our short- and long-term goals. And these goals are going to be bold, but also very realistic. They're going to be aligned to our long-range plan that goes through the end of 2025. And they're going to be embedded in our corporate strategy. We're going to make sure that they map directly to our core capabilities of people, operational excellence and insights that drive solutions. And of course, we're going to continue to put people first, not only in our own communities, but around the globe. We want to make sure that this continues to stay top of mind for SpartanNash in everything that we do. I'm excited to share more progress with you about our ESG journey. And now I'm going to turn it over to our Chief Financial Officer, Jason Monaco.

All right. Thank you, Adrienne. Great overview of our ESG program. And hello, everybody. Good to see you in person, especially those of you I talk to regularly on the phone. It's good to see you all in 3D. This is awesome. I want to start with just a quick introduction, like many of the others have done here today, my background. I'm more on the other side of the desk from Bennett. So Bennett was the guy who was probably talking to when I was at Kimberly Clarke at [indiscernible] Borden I think we bring some unique backgrounds to the leadership team and an ability to really see different perspectives as we engage with the supplier community. I spent 15-plus years at Kimberly-Clark. I was a CFO of Cornerstone Chemical and Borden Dairy prior to joining SpartanNash. And all of those things, I think, were really constructive and helpful for the current role here at SpartanNash. So let's talk about where we're headed today. So a little bit of a road map for today's discussion. A couple of things we're going to cover. You may have seen that we pre-released our Q3 earnings this morning. I'll touch on a few of those highlights in a little bit. And we'll talk about the portfolio and businesses and the scale that we have and how they're going to drive our performance towards that $10 billion to $300-plus million in EBITDA that you've heard from several of us today. So hopefully, you'll hear the theme coming through. We expect to have revenue growth of $1 billion and 40% EBITDA growth. That's how we're going to get there. And then importantly, for many of you, I want to talk a little bit about how we're going to invest to get there. What's the investment look like? What do we expect the returns to be on that investment and kind of get into some of the more detailed level of what you should expect to see. So let's start with the preliminary results that came out this morning. We had a terrific quarter. Hopefully, you've seen this -- the results already. On the top line, we delivered at the midpoint of our pre-release range about 10% top line growth. On the bottom line, about 11%. So adjusted EBITDA up about 11%, at the middle of that range. So really terrific results. And importantly, we also raised guidance. So this is our third raise of the year. The chart on the left gives you an indication of what the sales looks like. So at the midpoint of that range, sales growth is expected to be about 7% for the year. On the right-hand side of the page, you see the EBITDA chart. EBITDA is expected to be up about 12%. And these are at the middle of the ranges, just to give you an indication of where that plays out. So a terrific year, double-digit bottom line growth and great momentum for our plan. We also made some reporting changes. So this may have slipped by you. I know it came out at 7:00 this morning, but we made some reporting changes. What we've done is taken the former food distribution and military segments and put them together as a wholesale segment. So we now have, instead of 3, we have 2 reporting segments, wholesale and retail. The reason we did this was to better align with the way we run the business. And you've heard from many folks today, and you'll meet the rest of our leadership team later, this is really aligned with how we're running the business with an integrated what was formerly military and food distribution business, really operating integrated supply chain, integrated sales platforms to really drive synergies. And this is part of our plan on how we get to that $300 million. So switching gears a little. I tell a little story and some of you have been following the stock for a long time. So some of you will know the story. Some of you will know it really, really well. I want to start with a little bit of a history lesson. So the Spartan Stores and Nash merged at the end of 2013. From the first year of the merger forward, see 2014 on the side, for the first 4 years, the company was delivering about $230 million a year EBITDA. Pretty steady performance during that time frame. Integration went relatively smoothly, delivered value, but then we hit a soft spot. Results took a pretty precipitous decline 2 years in a row, down to $178 million of EBITDA. Together, that left us post -- that left us post merger with a 5% annual decline, so a 5% decline in CAGR over that time period. There was a real need to change. The Board took action, a new management team came in and Tony joined in September of 2020. And what you have is the start of a turnaround. So if I think about the period from 2020 to 2022, kind of we're in this window right now, we're in this period of what I'd like to call bending the curve. So the curve was on a downward trajectory. And I guarantee you that minus 5%, that's over the 2014 period. That was a pretty precipitous decline in the 2 years to get to $178 million. We were on our way down. This was a turnaround, and the company executed that turnaround. But the turnaround was not the end of the story. The turnaround was the start of next story. What we're doing now is building a plan that's going to really take this business and grow it going forward. And I think it's important to note, as you look at this page here, if you look at the 2022 E The midpoint of the range we guided to this morning, $239.5 million that would be a record adjusted EBITDA for this company. Aside from COVID, you can see the bump in -- We acknowledge that. This year, we're going to outperform our -- what might -- what many may have thought was the very best circumstances that could exist, a COVID environment for a retailer or a wholesaler. Our plan is delivering, and we're outperforming. We're delivering record profits this year. Now it's not done. This is a guide. This is an expectation, but that will land us at record profit. So going forward, going forward, what that means is that what we have is a plan that's going to deliver significant growth and the momentum and confidence in the base that we're going to get there. So if we land the year around $240 million, we expect to get to $300 million. That overall compound annual growth rate from 2021 to 2025 is 9% annually. It's 40% growth over that time period and puts us at least $300 million. Now you've seen this slide or some variation of this slide already. Part of the reason we want to talk about is to remind you where we expect to be. We expect to deliver $10 billion or more in revenue, that's $1 billion of top line growth from 2021, and $300 million in EBITDA or more, a 40% improvement in the adjusted EBITDA, something we're very excited about. I want to talk a little bit about how we get there, and I'll give you a little bit more of the mechanics of the pieces. So first things first. We had a supply chain transformation. There's a booth outside. You'll see more about that later. And we've been talking about this with all of you for many quarters now. We launched this in the middle of 2021. We said we were going to deliver $15 million to $25 million of run rate savings by the end of 2022. We raised our guide about 6 months ago to $25 million to $35 million of run rate. And you heard from Masiar earlier that we've exited the third quarter delivering $24 million and that we are still on pace to deliver that $25 million to $35 million run rate by the end of the year. So for us, this is a really important piece of the story. It's not just the cost savings. It's the reliability of the network. It's all of the operating statistics you heard about from Tony earlier in today's discussion. These are all things that build credibility with customers, help us grow and improve efficiency. Now we're going to stack on top of that a merchandising transformation. And Bennett spent a few minutes earlier talking about what that program looks like, how we create value, what the initiatives are within that program. And what we wanted to do is give a real level of confidence that, one, we know what we're talking about here and what -- we know what the plan is and how we're going to go after it. It's not just a pipe dream. There are specific initiatives, programs and strategies in place to deliver on this. And it builds on the execution capability we had in our supply chain information. Going forward, we also expect to have more programs and initiatives. We expect to have incremental value created through insights and analytics. And you heard just a little snippet of that in Masiar's presentation related to Own Brands, where we're 487 private label launches, and we're going to -- we've got 17 periods in a row of market share growth, both units and dollars. That's the sort of program that sort of winning that we're looking for going forward. So together, what this means is we've got a package of programs, initiatives and execution capability that builds comfortability around building to $300-plus million in EBITDA and $1 billion of growth. But it's really important to remember, the way we get there is not just by strategies, and it's not just by initiatives. It requires execution and execution of a People First organization that really engages our organization, that allows us to drive that efficiency and improvement and has the right workforce to make it happen. All of these things require an engaged workforce and the People First story is not an adjunct to this. It's part of the strategy. So now what many of you have really been looking for, what are the numbers? What does this look like? I tried to simplify the dialogue and give you a little bit of color on how we get to the $10 billion in sales and how we get to the $300 million in EBITDA. On the left-hand side of the page is a simple waterfall discussing and describing the revenue growth. So 2 big blocks. The one on the left, wholesale market share growth, the one on the right, retail share growth. In wholesale, we expect to expand geographically, filling out our footprint. We expect to bring Own Brands to bare. Own Brands are part of our sale portfolio as well, and we expect to grow share with existing customers in our existing geographies. On the right, -- the one to the right of that, the retail market share, you've heard about some of the programs there, Own Brands, going local, bringing a premium experience to our stores. All of these things are contributing significantly to the market share growth. Together, those generate $1 billion of incremental revenue. Moving to the right-hand side, the EBITDA. So how does it flow to the bottom line? We expect to deliver $35 million to $45 million of incremental EBITDA related to market share growth. So if you take the share growth from the left-hand side, the revenue and you put it on the right, it flows through at $35 million to $45 million. In addition to that, we expect to expand our margin and deliver incremental growth related to some of the programs you heard about today, the upmarket activities, the Own Brands, et cetera. Those will contribute $40 million to $55 million of incremental EBITDA, getting us to $300 million overall. Now I'd be remiss if I didn't also say that, like every company, these plans include assumptions around headwinds. Everybody is facing headwinds in this environment, and we're no different. We had significant headwinds built into this program, and we expect to manage through them as we have been to date. So let's talk a little bit about what it takes to get there and what are we going to invest to make this happen. A couple of things you should be thinking about. First and foremost, we have a disciplined capital allocation process, okay? The right process, the right rigor, the right programs to ensure that we're investing in the right places and getting the right returns. At the same time, we need to pivot to growth. We're going to add to the top line and the bottom line. And to make that happen requires investment. The type of investment and the range of expected investment outcomes is going to be higher than what we've had thus far. We expect to spend between $120 million and $165 million a year on capital over the window of this plan, so out through 2025. That's about 1.2% to 1.5% of sales. And importantly, it moves us towards the market mean of what I would characterize as the kind of the weighted average capital spending of players in the retail and the wholesale space. So if you kind of break our business up into those 2 reporting segments, you look at what the market spends on capital related to retail, regional retail and wholesale businesses, that's part of what's guided our move here. It also is guided by what's required to deliver the $300 million of EBITDA and 40% EBITDA growth. As we go about the spending, we expect to spend about half of it on our supply chain, on our network, about 1/3 of it on our retail stores and are going upmarket, and we expect to spend the last approximately 1/4 of it on IT, technology and other capabilities to enhance the strategy. And what returns do we expect? So if I kind of rewind all the way back to that history chart the company, that window where the EBITDA dipped in 2019, down to $178 million, we ended 2019 below 4% ROIC, 3.9%. We began the turnaround, had a 2-year turnaround and at the end of 2021 delivered 5.6% ROIC, 170 basis point improvement. Going forward, and I told you just a moment ago, we're going to invest more in business. On all of the net investments we make on margins, so all the net investments we make over the entire 3-year window, we expect to deliver 10% or more incremental marginal ROIC. We -- so said another way, we expect these returns to be materially accretive to our current return on invested capital, and we expect our ROIC to continue to grow significantly over the time window. But that's not all -- that's not all when it comes to capital allocation. The other piece is that we expect to have a disciplined approach to returning cash to shareholders. So the chart on the left gives you a view of our history on dividends. We've got about a 7% compound annual growth rate since 2015. On the right, we've taken our total dividend returns to -- cash returns to shareholders, added in our share buyback. All in since 2015, we've delivered more than $300 million to shareholders. We expect to continue to have a disciplined approach to capital allocation. All right. Now let's put it all together. What does this look like? And what do we expect the returns to be to shareholders? So if you go back to the -- if you think about that waterfall chart, we had strategic growth that delivered $35 million to $45 million EBITDA. That worked out to about 4% to 5% per year in equivalent shareholder returns. We had the strategic plan components, the merchandising transformation, the margin enhancements, et cetera, that we expect to deliver 4% to 6%. And conservatively, we've applied a dividend, which has currently has a yield around about 2.5%, and put a range of 2 to 3 around that. And all together, you take the incremental returns related to the strategic plan, the strategic growth and the cash return to shareholders, we expect to deliver 10% to 14% shareholder return. Now 10% to 14% far outpaces much of what you saw in our past history. It outpaces many of our peers, and we feel really, really strongly about it. We're very excited about this return. But it's also important to note that may not be the end. You heard from Masiar, M&A, and there's a green bar off to the right. We've got a strategy, a structure, we have a pipeline, and we're evaluating M&A. Now I don't like to plan for M&A, not a plan. There's no incremental M&A in the plan, either capital deployment or incremental returns. That being said, as we identify opportunities that make sense and create shareholder value, we see that as upside to this plan. That's why you see this green arrow on the right-hand side of several of the last few charts. All right. So we're positioned to win. We are executing Our Winning Recipe and we're pivoting from this period of turnaround to really focusing on the strategic priorities and delivering on significant shareholder value creation. We've got a plan for revenue generation that adds $1 billion to the top line EBITDA growth at the bottom line. And we're going to invest behind it. We feel confident, and we expect to deliver significant returns against those investments. We expect those returns to be nearly 2x our current return on invested capital. And we'll be managing it and monitoring it and using that really robust capital process to ensure that we get those returns. Overall, and you heard from all of my colleagues here today, we have great plans in place. We're very excited about this program, and we have a lot of conviction that we're going to deliver $1 billion plus in revenue, $10-plus billion in sales, $300 million or more in EBITDA -- and oh, by the way, 40% EBITDA growth from 2021. And with that, I'd like to invite Tony back to the stage to close us and open up some Q&A.

All right. I'm going to have my colleagues come up here. Maybe give us a minute to get the set up when we get ready for Q&A. So as a reminder, we will have additional time after this Q&A session we have here. We'll be out mingling around in the trade shows. There'll be plenty of time for you to talk to me or any of the 10 folks here in our leadership team. So hopefully, I think that goes to -- it goes into the all-important happy hour after that. So there's a whole different set of questions and answers that come with that time frame. So all right. We have a couple of mic runners here approaching you. So I believe we got Chris over here on my right. Madeline, if you have a question with your hand in the air. They all run over with the mic and get you a chance to talk. No matter how close or how easy to ask that question, please get the mic, so everybody hears the questions. We have to repeat it that way. All right.

Kelly Bania from BMO. So thanks for all the color and just having this day in general. So 80% of the $1 billion in top line that you outlined is wholesale segment. And I think I also heard expanding into new geographies, there's been some optimization. I guess my question is, if you look at that $800 million, is that what's your line of sight into that in terms of where maybe existing customers are planning to expand their own presence versus we've got to go out and find some new business here, growing share with existing customers? I don't know if I heard that metric, what your share of wallet is with existing customers. Just help us really digest that $800 million.

Okay. Great. Your comment is a mix of all those things you mentioned there. I'm going to let Jason go through kind of the rough split of how we see that.

Sure. And thanks, Kelly. As we think about the $800 million, it's going to be a combination of continued growth in our national accounts where we've got really great momentum, and we expect that to continue. It will be -- it will be a piece of it will be expansion of geographies that are -- we're already in a particularly penetrated. So we've got capability and capacity, and we have the opportunity to grow with new customers. And then there will be a component that relates to growing share with existing customers and ensuring that we've got the right model and system in place to make that happen. So kind of, for example, I talked about the supply chain transformation, being really good at supply chain helps you get a bigger share of wallet with existing customers. Being reliable also allows you to open up new doors with new customers even in your same geography. So we expect all of those to play a part.

Okay. And I don't know if that's working -- can you maybe just talk a little bit about state of your customer base, those 2,100, I think those are independent retailers. Because I guess the plan really contemplates a lot of margin expansion, and you outlined some of those initiatives. But I guess, the state of your customers, they are dealing with an environment that's increasingly more scale at the top of the industry, a lot of competitors talking about increasing purchasing power and investing in price. And how are you helping your customers compete in that the next stage of grocery.

Yes, it's a great question. We have -- first of all, customers performance-wise are -- we see some of the numbers that look a lot like what we're experiencing as we share how they're performing and what they're seeing and what consumers are doing in their stores. They see a lot of similarities. Our business is largely in -- or disproportionately in rural and smart communities that those are the folks we serve also amongst that 2,100 person mix. But as I mentioned earlier, the idea that we can actually model things that we can share with them directly. So I gave a couple of examples. I'll recap. Category management, for example, we learn more about how the consumer is evolving. We learn about that through insights that we gather up, and then we had those open conversations. So here's what we're seeing here, some changes we're making overall to planograms. And maybe you can try this. We had success with this in -- so we share those very openly. I talked about pricing science and about how to think about how to price the differential items between indulgent and more value items, and we share those tidbits as well. That's one of the reasons we think this business is so sticky with those folks because they rely on us, in our scale and our insights to move their business forward. I think the work that we're doing now across our company broadly and particularly some of the work that Ben is doing in his area is going to continue to help that. We'll learn more in that process and continue to be able to share with that. So I think we have a great future and be able to help them. It's data. They're moving in lockstep with us in terms of most of the metrics that you might expect.

Great. Robert Dickerson from Jefferies. Maybe just a question for Jason around cash flow, and I saw the CapEx numbers seem to be going up a little bit. That's relative to maybe what you've spent each year over the past 7 years. So with the increase in the CapEx, if we kind of think about what that could be cumulatively through '25 relative to kind of where you can get on EBITDA, kind of almost seems like that's kind of kind of the flex point, so to speak. So I'm just curious if we think about free cash flow, are there incremental working capital improvements? It sounds like the dividend can still grow, share repo, potentially leverage comes down. Just trying to rightsize how you're thinking about free cash flow.

Yes. Thanks, Rob, and great question. So if you think about the plan overall and you think about cash flow, you mentioned that the capital is higher than it was over the last 7 years. And you're absolutely right. The EBITDA growth is also higher than it was in the last 7 years. So for us, the trade-off was how do we ensure we're investing for growth, we're investing for returns against that growth, then also being disciplined from a cash management standpoint. We expect to be relatively cash neutral over the time window over the horizon. It may be a little lumpy at times as you continue to grow. But we want to get -- we want to and we expect to get significant returns from those investments and that those investments will drive cash flow to help support kind of the next round in that virtuous cycle.

Peter Saleh, BTIG. Can you just talk about the underlying assumptions in the growth plans? I think you kind of hinted at that when you last spoke. What are we looking at in terms of the underlying assumptions in terms of inflation, deflation in the targets to 2025? Are you assuming some sort of recession, consumer pullback? Are you assuming more of the same? Just trying to understand what you guys are looking at to get you to incremental $1 billion of top line revenue?

I'll take that one then. So with respect to inflation, we've expected a wind-down towards more normative inflation by the end of the 2025 period. Realistically, 2023 is not going to -- we're in November of '22 and inflation staying high. We're not projecting a deflationary environment into 2023. So we expect to step down next year. We'll give more guidance on next year, specifically at our Q4 earnings call.

Great. And if I could just sneak in one more maybe on acquisitions going forward. Would you consider making an acquisition if it took you off target for 2025, if it made more sense of your growth rate in '26 and '27 and beyond?

We don't see -- and the modeling we are doing right now and the kinds of ideas we're looking at, we don't see any of them taking us off target. So obviously, there may be small trade-offs you'd make if you had a chance to get a big win and take your target for a quarter. So we consider that. But to be clear, we don't see that as being part of the [indiscernible] always some of the things we're thinking about.

Charles Cerankosky, Northcoast Research. And looking at your map, you don't do a lot of food distribution, conventional food distribution in the West. And now you've military and food distribution to better utilize those assets. Is that an opportunity in the West to grow market share and sales, especially in the wholesale ops

Yes. So we look at all opportunities. There's a lot of geographies where we think there's great opportunities. We think the West is almost uniquely so. We've got -- we were there with a couple of our national accounts, of course. And we haven't spent a lot of time in thinking about or contemplating independent grocers, for example, kind of west of our current geography. So the short answer is yes, we see that as an opportunity amongst many other opportunities we see geographically.

You see any opportunity to partner with a regional grocer and sort of take over their distribution?

Yes. In the -- certainly in the portfolio of ideas which is quite large, there are some of those that might manifest in that way. So I mean, just to build, we look at all opportunities, and we're interested in all opportunities. And then we apply that M&A framework. And so for us, it's important that it is a stand-alone attractive, there's synergies to be had through the opportunity and that we have the capability to execute quickly and effectively. Something in that model, if it passes those filters, we absolutely would seriously consider it. So to build on it, yes, but we'd be disciplined in the approach and apply the framework we share today.

You mentioned earlier that retail business, you're planning to consolidate to 4 store banners. Is that process going to evolve? And what's the expected timetable? And I should have asked first, what led to that decision?

Start with what led to us having the banners, to begin with, right? So it's a kind of -- as we've cobbled together to this over the great many years, we made acquisitions of small folks that had great relevance in their community, and we kept the banners in most cases. And we see that we have now something we can actually pull together in terms of a real advertisable benefit for our core banners. And so we think it's time. And so it's time to actually start moving some of those into those banners because we can articulate real distinct advantages for Family Fare, for D&W, for Martin's. So it's time. And so we have -- and we'll be moving those banners over. We moved some already this year, others over next year.

Maybe if I build, just to make one build on that. One thing to think about when you think about banner consolidation is more broadly about the retail strategy and the work that we're doing around upgrading the buildings themselves, the space and the user experience. You're going to hear a little bit more in the retail session afterwards kind of add some color to it. But you should expect that we're going to touch about 1/4 of the stores over this time period and that we're going to continue to upgrade the experience that's going to range from big projects and small. And that will link together with the banner consolidation so we get a terrific customer experience and grow and deliver the right return on invested capital that I mentioned earlier.

Christina Cotai, Deutsche Bank. You talked a lot about your growth mindset. And some of the questions focused on this, but I just wanted to get your opinion on where do you see yourself positioned right now from a capacity perspective and labor availability as well to really achieve your $1 billion growth. And then as we think about the 9% CAGR of EBITDA, you -- Jason, you specifically talked about baking in some pretty significant headwinds. Maybe if you could just touch on what some of those assumptions are as we think about sort of puts and takes.

Sure. I'll start with the capacity. So we have capacity and the capacity that we're creating right now is really being created by our supply chain transformation. So the throughput improvements we're making, other improvements we're making in our broader network creates capacity on the current footprint. So a big part of our growth has actually been enabled to buy that capacity we create through the supply chain transformation. We also to add on to that, though, we don't want to have capacity to be a conversation closer if we find a great opportunity. So it is likely that we may find opportunities in some parts of the neighborhood where we need to knock on a wall, and we need to go and go build something. So that's part of the overall observation. It is -- we have to think about that the same way of all capital rigor or -- but for starters, we have capacity, we're creating capacity in a need to grow more than we want to make sure that we do that in a very fiscally sound way also.

So -- for the second half, Tony, and absolutely, I wouldn't lose sight of the fact that the throughput is up 8%, CAGR is 9%. So those things to Tony's. Like every company, everybody's got headwinds. And we wanted to share with you, first of all, that we're going to just dismiss this and assume this is how we're going to get to $300 million without assuming that there's going to be a headwind. For us, the predominant portion of those headwinds is going to be labor and benefits inflation. And to your point, first half of your question, labor availability is part of that story around capacity. And we've put in what I think is a pragmatic and practical a set of assumptions with respect to what labor inflation is going to look like, and it will be elevated versus this kind of lower than the current inflationary environment, but elevated versus the pre-COVID environment.

So we didn't hear a lot about services. And maybe if you could just give us a little bit more insight into how big that business is. And how does that factor into the long-term guidance here that has a lot of margin expansion in there.

Great. And for sure, if we don't get to all the details on that, that's a great question for the trade shows because we've got a lot of people who are playing in the service space include the other folks who are on the stage. We'll turn on Masiar to hit a couple. We've got a couple of services that you lead.

Yes. In the role of technology, one of our biggest services is our technology offering, and that's one of the things we're looking to grow. I would tell you, too, when you saw services that we were doing within our retail space, those are services that are tried and true because we're -- the experience that we're offering to our food distribution wholesale customers as well. So I think service is going to be a growing, growing area of focus for us, especially in technology, but more broadly in marketing, merchandising, even renovations. There are things around planograms and insights there that we're looking to provide. And in digital, things like DoorDash and our partnership there. That is a channel partnership as well, we're in a strategic relationship, and we're offering that service to our food distribution customers, too.

Add to that, yes, maybe also a shout out for Amy McClellan, our Chief Marketing Officer, who you all have a chance to meet her a second. She can talk more about what we're doing in a itineraries and some of the investments we're making in pricing, that is a big services offering for our independent customers in area that we are investing a lot in. We talked a little bit about merchandising transformation. Amy can share more about what we're doing pricing side. And then the other one would be planograms and how you go to market. So I gave the example of dairy and what we're doing in dairy. You may recall, is 13% up in units and in sales, 40% up traffic. Those are numbers that other folks would like to be able to do in our networks. So if you think about customers looking at those, we're already piling that with a couple of large customers. Those are areas that we think we can really help them grow their business.

And then just on pricing for it, how well do you think how well positioned do you think you guys are relative to your peers in the market? Are you seeing [ meyers ] some of the other players you invest more in price to take share? And then do you think the independents are priced where they need to be to keep the share that they've gained over the last couple of years?

I'll start with. The pricing is always a journey, right? We're learning. We're learning in a very dynamic time, particularly with the inflation that's going on right now. I think the separate -- there's going to be folks who are going to play their primary cards are going to be played on price as folks who play it primarily on service high-end services or intelligent experiences. And the independent grocers sort of sits sort of in that middle of the ground. I think the offering has to be unique for that community. And so as it spans a territory of offering great value to places but also offering the services that you wouldn't get at some of the places that offer the -- so you trade a lot of those important elements for their communities.

Never done on pricing. That would be my -- so of course, we spend a lot of time monitoring the competitive environment. Obviously, we've got our retail stores and monitoring what happens in the 147 stores. And as Tony talked about, a lot of different communities our 2,100 independents are in. That is a dynamic landscape that we know we've got to continue to invest in to go win. So maybe a little more vague in terms of the commentary. But yes, we know that we've got to be sharp on pricing. I think getting more sophisticated there is, in my opinion, always a good investment, always a good area to go spend time on.

And maybe it goes without saying that -- you heard Bennett talk about the merchandising transformation that is not just for our retail stores. The whole story covers the entire company. And you should think about that as part of the way that we bring more value to our independent customers as well and maintain cost competitiveness.

A couple of more specific questions. So you gave the 8% increase in throughput. Where does that put you in terms of benchmarking relative to your peers? Is there still a long runway to improve? Are you caught up? Just any numbers to help us kind of think about framing where you are. And then same thing on private label. I think I saw a number for 20% growth by '25. What is your penetration today? And where would that put you if you reach that goal?

Sure. Maybe I'll start with the second one first. On private label, we see a significant amount of runway, and we're operating in the low 20s with respect to penetration. And so the 20% upside gets us into the ZIP code of what you see other mainline players doing.

Is that at wholesale or retail.

Collectively, total. And your first question was on supply chain and throughput. Yes, I expect there's more runway as well. As I think about our opportunities for improvement, this is an area that when you think about the plan, if you kind of go back to that waterfall chart, the strategic programs on the right with continued upside in supply chain transformation cost benefits. And so we expect that that's part of the story, both from a customer standpoint as well as from a cost standpoint.

Just circle back on the private label side for a second. Maybe the question seems overly basic, but I got to ask. So just in terms of the distribution model, right, you buy from other suppliers that you distribute resell. On the private label side, given just the growth that you're expecting, how does that business kind of holistically differ for you maybe relative to others? And then how does that drive, I would think it sounds like kind of almost the lion's share of some of this margin improvement. That's it.

Yes. So we're almost in kind of a transition phase on that as well and just because of our size overall. There are -- we participate in the group specifically that actually work with a great day of our private label items. We're largest in that group. And as we're thinking about the future for SpartanNash, we know we have to actually be investing some in capabilities for example, around manufacturing management and around quality management things that as we get this place now as we're growing to where we are now and growing beyond that, that we're going to invest a great deal more in the capability to really refine those private label products and real really kind of the best overall offering that our shoppers want and that our customers -- our independent customers need. So that's -- so we're in transition there a little bit, and that's going to be a really significant part of how we think about investing in our marketing overall development that rigorous capability to be great in the space of developing those brands.

So I might also add, just to reinforce the 147 retail stores that we run, because that is a big chunk of our business, we are going to invest heavily into private brands. You have to if you're going to be successful. We know that that's a key growth engine for us and our customers are looking for it. Because of that, if you look on the independent side, we can leverage that for the independents. If we were just a wholesale business, I don't know that we look at it same way. But because of that, we invest heavily into those brands. We care a lot about those brands. And I believe our independents give us credit for that. I think that is something they look at SpartanNash and say you are bringing a different level or a today and I think they see what we're planning to do in the future.

Great. We grab one more, and then we'll take a break. All right. Here we go. Thank you. All right. lots of terrific questions. Appreciate that. I appreciate your attention in this, and I appreciate in advance the time you spend as we leave here and go over to the trade show. And just I want to finish up with a couple of thoughts I shared as we began here. So we've had a good run. We've had a great run since we began the transformation. And we're excited about the future. And I think as you see here, we have reason to be very optimistic about how we can continue to grow the business and grow it profitably. We have a great, incredible strategy. It's under development, of course, but we have some really, really fine things going on, both in terms of the operations of the company as well as the long-range ideas we have for M&A and for further operational growth. And we have a team, terrific team that is purpose-built for this mission and is doing great work, and you'll get a chance to spend some more time with them as well. And our financial plan reflects all that. We have a financial plan that is growing ahead of our peers, the top line ahead of our peers on the bottom line. And we believe that absolutely the best is yet to come. So thank you again for your time and attention here this afternoon. Of course, spending more time with you all in the trade show. Thanks.