BellRing Brands Q2 2025 Earnings Report

BellRing Brands EPS Results

• Actual EPS: $0.53
• Consensus EPS: $0.53
• Beat/Miss: Met Expectations
• One Year Ago EPS: $0.45

BellRing Brands Revenue Results

• Actual Revenue: $588.00 million
• Expected Revenue: $577.56 million
• Beat/Miss: Beat by +$10.44 million
• YoY Revenue Growth: +18.90%

BellRing Brands Announcement Details

• Quarter: Q2 2025
• Date: 5/5/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 9:00AM ET

BellRing Brands (NYSE:BRBR), together with its subsidiaries, provides various nutrition products in the United States. The company offers ready-to-drink (RTD) protein shakes, other RTD beverages, powders, nutrition bars, and other products primarily under the Premier Protein and Dymatize brands. It distributes its products through club, food, drug, mass, eCommerce, specialty, and convenience channels. BellRing Brands, Inc. was incorporated in 2019 and is headquartered in Saint Louis, Missouri.

BellRing Brands Q2 2025 Earnings Call Transcript

Presentation

[Operator]

Hello, everyone, and welcome to the BellRing Brands Second Quarter Fiscal Year twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. Now it's my pleasure to turn the call over to Jennifer Meyer with Investor Relations for Brands.

[Operator]

The floor is yours.

[Jennifer Meyer, Investor Relations at BellRing Brands]

Good morning, and thank you for joining us today for BellRing Brands' second quarter fiscal twenty twenty five earnings call. With me today are Darcy Davenport, our President and CEO and Paul Rhode, our CFO. Darcy and Paul will begin with prepared remarks, and afterwards, we'll have a brief question and answer session. The press release and supplemental slide presentation that supports these remarks are posted on our website in both the Investor Relations and the SEC Filings sections at bellring dot com. In addition, the release and slides are available on the SEC's website.

[Jennifer Meyer, Investor Relations at BellRing Brands]

Before we continue, I would like to remind you that this call will contain forward looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements. These forward looking statements are current as of the date of this call, and management undertakes no obligation to update these statements. As a reminder, this call is being recorded, and an audio replay will be available on our website. And finally, this call will discuss certain non GAAP measures. For a reconciliation of these non GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website.

[Jennifer Meyer, Investor Relations at BellRing Brands]

With that, I will turn the call over to Darcy.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Thanks, Jennifer, and thank you all for joining us this morning. Last evening, we reported our second quarter results and posted a supplemental presentation to our website. I'm happy to share that we had a good first half, delivering a second quarter largely in line with our expectations. For the first time since 2021, we had a full quarter with Premier Protein demand drivers. This drove net sales of 19% with strong EBITDA margins of over 20%.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Premier shake consumption accelerated, up 25%, and we reached new highs in household penetration, market share, and shake TDPs. As you saw in yesterday's press release, we affirmed our fiscal 'twenty five outlook for net sales growth of 13% to 17% over fiscal 'twenty four and EBITDA growth of 7% to 14%. While we have some puts and takes in the second half that Paul will review, I am pleased that our outlook and consumption remain resilient and strong. Now to our Q2 category and brand highlights. Even though broad consumer sentiment is weakening, protein and specifically our category remain incredibly healthy.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

The convenient nutrition category grew 12% in q two with everyday and sports nutrition driving most of this growth. From a form perspective, ready to drink growth was strong and continued to lead the category up 19% driven by robust consumer demand and increased promotions. RTDs remain the second fastest growing category in the entire store, only behind eggs. Mainstream everyday and sports nutrition RTD brands continue to bring new consumers into the category and are up over 30%. Ready to mix grew 10%, a slight acceleration from the last two quarters behind distribution gains and increased consumer demand.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Turning to our brands. As I mentioned earlier, Premier shake consumption was up 25% this quarter. Growth was robust in all channels driven by increased promotions, distribution expansion, and strong velocities. Expansion in pack size and form, including bottles, drove the distribution gains, along with space gained for our new indulgence line. Improved retailer in stocks also contributed to our year over year growth.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Our newest seasonal flavor, Lemon Bar, drove high consumer interest with sell through outpacing expectations. As we come off a heavy promotional quarter, consumption remains healthy with April up 16%. We expect distribution gains, improved in stocks, and display activity to continue to drive consumption resulting in Q3 growth in the to high teens. Moving to our brand metrics, Premier Protein reached all time highs in household penetration and market share. Household penetration gained one percentage point, nearly reaching 21%.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Promotional activity, our media campaign, and new products contributed to this result. We saw growth in buy rate and with repeat rate remaining steady, demonstrating our category leading consumer loyalty. Premier Protein with RTD market share of 27% maintained its position as the number one brand in the RTD segment, as well as the number one brand in the broader convenient nutrition category. All of this is especially encouraging because in a high growth category with low household penetration, we see plenty of room to continue to grow our brand and expand the overall category. Given our brand metric gains this quarter, driven by promotions and a new media campaign, we decided to expand our q four promotions.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

We know from experience promotions and more importantly, the displays that come with them are key to reaching new households and growing our business. With our capacity position better than ever, it allows us to lean into effective tactics to drive demand and grow the overall category. Premier Protein Powder continued its growth with consumption up 22% in Q2 behind strong velocities and distribution gains. I'm delighted to share that the product recently gained full distribution at a club retailer and currently has the highest velocity across all whey protein powders in this key customer. We remain encouraged by the growth potential of Premier Protein brand in this format.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

With household penetration of only 2%, we continue to believe Premier Powder has a long runway for future growth. Our new Premier Protein marketing campaign ran nationally during the second quarter reaching TV, streaming, and social media audiences. We are pleased with the first wave's results with all key measures exceeding benchmarks. We expect the second wave, which starts later in Q3 to feature a new logo and package design. As a reminder, the new package builds on our strong performing current design and brings a modern look that improves discoverability at shelf.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Our median interim is focused on our new indulgent line. Recall, we launched this new line late in Q1 with four decadent shake flavors and one powder flavor. These items are richer and creamier, targeting an incremental consumption occasion while still delivering on the nutritionals that our consumers expect from the premier brand. The items continue to build distribution and are off to a promising start. Indulgence has demonstrated impressive incrementality, bringing in a considerable number of consumers new to the brand and category.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

More innovation is planned later this year. Turning to Dymatize, the brand posted positive domestic consumption growth this quarter up 3% lifted by brand investments and new products. Dymatize improved its market share in the powders category to the number four position and continues to hold the number two share position within sports nutrition powders. While the domestic business made progress this quarter, the global brand continues to be driven by momentum outside The US, with Dimetize's international business up double digits. Our Dimetize athlete focused marketing campaign is generating high consumer engagement.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

The campaign has improved our brand metrics and shown great success in bringing in consumers new to the brand. We will continue to add top tier athletes to our Dymatize roster in the coming years. Recall we launched two new dimetized products this quarter, RTD shakes as well as a pre workout called energize. We are encouraged by the positive signs we are seeing in the dimetized business as we expand our portfolio and we remain bullish on the sports nutrition category opportunity. In closing, our q two results position us well for another above algorithm year.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Strong macro tailwinds around protein are driving robust long term growth in our category with ready to drink and powder segments in the early stages of growth. Premier Protein is already the number one convenient nutrition brand and we are just starting to drive demand. Our innovation pipeline for both brands is rich enabling us to bring excitement to consumers and our retailer partners for years to come. Our confidence in the long term outlook for BellRing remains high. Thank you for your interest in our company.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

We look forward to sharing our progress next quarter. I will now turn the call

[Darcy Davenport, CEO, President & Director at BellRing Brands]

over to Paul.

[Paul Rode, CFO & Director at BellRing Brands]

Thanks, Darcy, good morning, everyone. As Darcy highlighted, we had another good quarter. Net sales were $588,000,000 and adjusted EBITDA was $119,000,000 Net sales grew 19% over prior year and adjusted EBITDA increased 14%. Adjusted EBITDA margins were in line with our expectations at 20.2%. Starting with brand performance, Premier Protein net sales grew 22% behind strong volume growth for RTD shakes and powders.

[Paul Rode, CFO & Director at BellRing Brands]

Distribution gains and promotions drove the sales growth along with a positive benefit from higher net pricing. Diamond ties net sales increased 3% this quarter on 20% higher volume. Double digit sales growth for international was partly offset by domestic headwinds. Adjusted gross profit, excludes mark to market adjustments on commodity hedges was $2.00 $3,000,000 and grew 22% from prior year. Adjusted gross profit margin of 34.5% increased 80 basis points.

[Paul Rode, CFO & Director at BellRing Brands]

Our pricing actions have offset input cost inflation to date. However, the rate of inflation will increase in the second half of twenty twenty five, pressuring margins when compared to prior year. SG and A expenses were $91,000,000 an increase of 140 basis points as a percentage of net sales. Higher advertising and promotion spend and warehousing costs largely drove the increase. Advertising and promotion was 4.7% of net sales, up meaningfully from 3.1% last year's second quarter.

[Paul Rode, CFO & Director at BellRing Brands]

The A and P step up was driven by the new Premier Protein national advertising campaign that ran throughout the entire second quarter and support for the indulgence RTD shakes launch. Before reviewing our outlook, would like to make a few comments on cash flow and liquidity. We generated $48,000,000 in cash flow from operations in the second quarter and $51,000,000 in the first half. We continue to expect our cash flow in fiscal twenty twenty five to be in line with fiscal twenty twenty four. As of March 31, net debt was $932,000,000 and net leverage was 1.9 times.

[Paul Rode, CFO & Director at BellRing Brands]

With our strong cash flow generation and EBITDA growth, we anticipate net leverage will remain below two times throughout fiscal twenty twenty five. With respect to our share repurchases this quarter, we bought 2,400,000.0 shares at an average price of $71.68 per share or $172,000,000 in total. As of March 31, our remaining share repurchase authorization was $280,000,000 Turning to our outlook, we affirmed our fiscal twenty twenty five guidance for net sales to be 2,260,000,000.00 to $2,340,000,000 and adjusted EBITDA of $470,000,000 to 500,000,000 Our guidance implies strong top line growth of 13% to 17% and adjusted EBITDA growth of 7% to 14% with healthy adjusted EBITDA margins of 21.1 at the midpoint. Overall, our second half outlook for net sales is unchanged, but now reflects increased sales from our expanded fourth quarter promotions offset by third quarter reductions in retailer trade inventory levels. Starting late in Q2 and continuing into the third quarter, several key retailers lowered their weeks of supply on hand, which is expected to be a mid single digit headwind to our third quarter growth.

[Paul Rode, CFO & Director at BellRing Brands]

This change is in addition to the previously anticipated mid single digit impact to the third quarter from lapping last year's trade inventory replenishments. We now expect Q3 net sales growth of low single digits with Premier Protein the main driver and all others flat to down. Without the impact of these trade inventory changes, our underlying third quarter growth for Premier Protein RTD shakes would be more in line with our expected consumption growth of mid to high teens. Regarding adjusted EBITDA, we expect second half margins of just over 20% at the midpoint with our EBITDA dollar growth occurring in the fourth quarter. As anticipated, third quarter margins faced moderate year over year pressure from input cost inflation, packaging redesign cost and lapping some non recurring product cost favorability.

[Paul Rode, CFO & Director at BellRing Brands]

Margins in the fourth quarter will be sequentially lower as higher input cost and promotional spend weigh on margins. Wrapping up, we are closely monitoring developments as it relates to tariffs. Based on current policy, a portion of our input costs could be subject to future tariffs with the majority of this potential impact from dairy protein sourced from New Zealand and the EU. For fiscal twenty twenty five, there is no expected impact. Regarding fiscal twenty twenty six, given our normal lag time from sourcing to P and L flow, we'd only expect a partial year impact from tariffs.

[Paul Rode, CFO & Director at BellRing Brands]

However, we are actively evaluating ways to mitigate tariff impacts. We will continue to monitor and provide updates later this year. In closing, we are pleased with our first half performance. Our Q2 results were strong with our products continuing to resonate with consumers. Our long term prospects remain bright with a long runway of growth ahead.

[Paul Rode, CFO & Director at BellRing Brands]

I will now turn it over to the operator for questions.

[Operator]

Thank you so much. Please stand by for our first question. It comes from the line of Andrew Lazar with Barclays. Please proceed.

[Andrew Lazar, Managing Director at Barclays]

Great. Thanks so much. Good morning, everybody. Firstly, the convenient nutrition category, as you said, has grown 12% in each of the first two fiscal quarters. I'm curious what expectations are built into your back half guidance when it comes to sort of category growth just in light of the broader weakening consumer environment?

[Andrew Lazar, Managing Director at Barclays]

Thanks so much.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Yeah, the category fundamentals haven't changed. I mean, we are they are continue to be incredibly strong macro tailwinds. Also, the low the fact that the RTD category only has 50% household pens so long runway. Obviously the RTD category you referenced the 12% of the convenient nutrition category but the RTD category was up 19% and has been consistently driving the overall category and we expect that to continue. Now, are modeling some different scenarios.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

I think that we aren't seeing the kind of impact of the weakening consumer on our category as much as other people are seeing it in their categories. And I think that just goes to kind of the fundamentals, the macro trends that are just boosting convenient nutrition. Having said that, I think we're modeling out a few different scenarios. One that it will continue at the rate and then also a couple that it will be slightly impacted but nothing dramatic.

[Andrew Lazar, Managing Director at Barclays]

Thanks so much.

[Operator]

Thank you. One moment for our next question. It comes from Thomas Palmer with Citi. Please proceed.

[Tom Palmer, Vice President & Senior Equity Research Analyst at Citi]

Good morning and thanks for the question. I wanted to ask on what you were seeing with the retailer inventories. Look, you're not obviously the only company to highlight this, but your takeaway trends have been a lot better than many of these others. What do you think is driving that change from your perspective? Does it seem like it will be kind of more of a one time reset?

[Tom Palmer, Vice President & Senior Equity Research Analyst at Citi]

And are there any on shelf changes or product mix changes that are accompanying those? Thank you.

[Paul Rode, CFO & Director at BellRing Brands]

Yes, there are no changes in the inventory set. So what we've seen is back when in last summer, last kind of the second half of last year, some of our retailers leaned into inventory weeks of supply as we were exiting our supply constraints. And in particular, one of our club customers really carried a fairly healthy weeks of supply starting last second half and really carried that through the second quarter. We believe that's likely in response to just protecting themselves, especially as they got to the first the second quarter promotions. So we believe it's one time and it's somewhat unique to us.

[Paul Rode, CFO & Director at BellRing Brands]

You're right. We've seen I think there's some broader macro impacts on why some of our some of other retailers are taking their inventories and optimizing them. But for us, we believe it's primarily our club customers that were protecting themselves after coming out of supply constraints last year. And after we've done a really great job of supplying them over the last several months that they have chosen now to optimize. So we're seeing that in our orders, in particular in April.

[Paul Rode, CFO & Director at BellRing Brands]

And that's obviously with strong consumption growth that we saw in the second quarter and the consumption growth that continues into the third quarter. So we do think it's just a timing dynamic.

[Tom Palmer, Vice President & Senior Equity Research Analyst at Citi]

All right. Thank you.

[Operator]

Thank you. Our next question comes from Ken Goldman with JPMorgan. Please proceed.

[Ken Goldman, Managing Director at J.P. Morgan]

Hi. Just to stay on the topic of the trade deload, it's fairly substantial in size, obviously. And I hear your comment on how it's one time and it's primarily one customer who carried a lot of supply last year. But you know, when it's that substantial, you know, typically it doesn't happen unless there's a little bit of a either deceleration in consumption or disappointment in consumption from that retailer side. Are you hearing anything along those lines from your retailers about why they're really pulling back on this other than that they over ordered?

[Ken Goldman, Managing Director at J.P. Morgan]

Because it just typically, we really don't see deloads happen unless it's on the consumption side as well.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Yeah,

[Darcy Davenport, CEO, President & Director at BellRing Brands]

for sure. So, I really think that this dynamic is unique and related to coming out of capacity constraints. And so, there's really no change in consumption. Mean, we continue to see strong consumption. Q2 was up 25%, boosted by the new year, new you, promotions and advertising as we go into Q3, we're expecting to continue to see strong consumption.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

We 16 in April, expect Q3 to land mid to high teens, so incredibly strong. So this is really tied to retail, specifically one but a couple retailers holding on, kind of protecting themselves coming out of capacity constraints. They were a little bit hoarding inventory to make sure that they didn't run out of stock on shelf. And then we've now showed over several quarters of high in stock rates and so they felt comfortable about bringing them down. We thought this could happen, we just had no idea when it would happen and we're seeing it.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

But absolutely no softness, no concern around consumption.

[Operator]

Can that answer your question? One moment for our next question, please. It comes from the line of Megan Klap with Morgan Stanley. Please proceed.

[Megan Clapp, Executive Director at Morgan Stanley]

Hi, good morning. I wanted to shift to ask about tariffs, if I could. Paul, appreciate the commentary, and clearly, the operating environment is fluid and a lot can change. I think you said a portion of the input cost could be subject to tariffs. Wondered if you could just expand a bit, maybe remind us what percentage of input costs are raw materials related to dairy protein?

[Megan Clapp, Executive Director at Morgan Stanley]

And how should we think about potential mitigating actions? Are there opportunities to source some of those input costs in The U. S? Or would you look to things like pricing? Thank you.

[Paul Rode, CFO & Director at BellRing Brands]

Yes. So overall, the dairy inputs for our business are, call it, a third to 40% of our total cost of goods sold. But only a portion of those are subject to tariffs. Our powder business is pretty much insulated on shakes. There is some of our dairy proteins do come from New Zealand and EU, which currently are contemplated at a 10% tariff.

[Paul Rode, CFO & Director at BellRing Brands]

So it's a portion there that could be impacted. As we look at the total potential impact, we would our estimation if unmitigated and if the rates do not change from where they are now, it would be a low single digit impact to our total cost of goods sold. So relatively minor can certainly be addressed. But as far as what can be mitigated, how can we mitigate it? That's what we're exploring.

[Paul Rode, CFO & Director at BellRing Brands]

It can be anything from looking at different suppliers. So yes, think these are all things that we're assessing, still obviously too early to tell. Just to highlight again, we do not expect any fiscal twenty twenty five impact, any impacts from tariffs would start sometime after the beginning of fiscal twenty twenty six because of just the lag time from when it goes from sourcing the protein to when it flows through our P and L as well as just some of the things we have with our suppliers that would push some of that until later in the year anyway. So again, we think it's an overall minor impact, but something we're continuing to keep an eye on and we'll keep you all updated as we move forward.

[Megan Clapp, Executive Director at Morgan Stanley]

Okay, great. Thank you.

[Operator]

Thank you. Our next question comes from Matt Smith with Stifel. Please proceed.

[Matthew Smith, Director - Food & Tobacco at Stifel Institutional]

Hi, good morning, Paul. I wanted to ask about the increase in marketing and advertising. It was a little higher than I had anticipated in the quarter reaching 4.7% of sales. Should we think of the second quarter as peak levels in terms of percent of sales? And how should we think about the level of spending for the year now?

[Matthew Smith, Director - Food & Tobacco at Stifel Institutional]

You talked about the path of returning to 4% to 5% of sales on an annual basis. Have you increased the level of spending in marketing and advertising relative to your previous expectations? Or is the higher investment really more focused on incremental promotional activity in the fourth quarter? Thank you.

[Paul Rode, CFO & Director at BellRing Brands]

Sure. Yes. Overall, our second quarter spend was right in line with what we expected. So, again, with the national advertising campaign behind Premier and just our focus on marketing during kind of that peak New Year, new season, the marketing was right in line from what we expected. As far as overall for the full year, we had previously called for kind of mid-3s to low-4s.

[Paul Rode, CFO & Director at BellRing Brands]

We have reallocated a little bit of marketing spend in the second half from marketing to promotion, not a big change, but that, would change our full year thinking down a little bit to more mid-3s to high threes range. So that's what we expect for our marketing spend in the full year.

[Matthew Smith, Director - Food & Tobacco at Stifel Institutional]

Thank you.

[Operator]

Our next question comes from the line of Peter Grom with UBS. Please proceed.

[Peter Grom, Equity Research Analyst at UBS Group]

Thanks, operator, and good morning, everyone. So I wanted to ask a question around how you think about or how you're approaching guidance and what remains a really dynamic backdrop. And Darcy, in some ways, this is a follow-up to your response to Andrew's question, where you talked about category growth and kind of scenario planning. But I'd just be curious, given the many moving pieces and uncertainty, you approaching guidance differently or kind of giving yourself more cushion just given the backdrop? Thanks.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Yeah, sure. So I would just, again, adding on to what we said, how I commented to Andrew's question. Just we feel great about the opportunity. We continue to feel that there is a ton of growth potential, a lot of tailwinds, the category, our brand, just the overall opportunity we feel great about. But yeah, the kind of consumer uncertainty is there.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

And so we are being a little more cautious. I think historically in this quarter we would have tightened our guidance range. We chose not to. And the reason is because we know a lot. We have visibility to, we have five months left of the year.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

We have visibility into promotional plans. We have visibility into marketing. We have visibility to our distribution gains. But there are still some unknowns and part of that is kind of the consumer backdrop and what's going on there. So I think that our approach has been cautious and we will continue to be that way as the consumer is a bit more unstable than we've seen in the past.

[Peter Grom, Equity Research Analyst at UBS Group]

Great. Thanks so much. I'll pass it on.

[Operator]

Thank you. Our next question is from Jim Salera with Stephens. Please proceed.

[Jim Salera, Research Analyst at Stephens Inc]

Darcy and Paul, thanks for taking our question. I wanted to maybe ask about some of the changes in the competitive landscape. If we go back a couple of years, Premier was really kind of at the vanguard of having a 30 gram RTD shake offering. And I think really deserves credit for kind of standardizing that for the industry. We've seen a lot of competitors kind of make up their standard offering as well.

[Jim Salera, Research Analyst at Stephens Inc]

Recently, we've seen some launches that are kind of over 40 grams, but still have limited core count over 200, but they're not by much in that RTD format.

[Jim Salera, Research Analyst at Stephens Inc]

Just any thoughts

[Jim Salera, Research Analyst at Stephens Inc]

on do you think that you're going to need to continue to raise the protein content? Is that kind of the most important characteristic that consumers look for? Or is there a balance between the protein content and the taste and the caloric count? Just any color there would be helpful in how you guys think about how that affects your competitive position.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Yeah, sure Jim. So we have seen some entrants that have upped the protein level. I do not think that will be the standard. Ultimately what has driven our business is this combination of an approachable brand, really good nutritional, so high protein, low sugar, fat, and calories, and unbelievable uncompromising taste. So that is what has driven our business.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

I think as we see this idea, there was a time when 30 grams was thought of as a fair amount of protein in a shake. Now we're starting to see kind of push the upper limits. But we're also seeing lower limits. So I think what you're seeing is that consumers continue to want more protein. Want more protein for some consumers want more protein because they're trying to boost their protein after a workout.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Some consumers want less protein because they're looking at wanting an incremental snack. So I think we should just look at this category is very young and in a category that has only 50% household penetration, it's starting to expand and mature and deliver on different occasions and different consumers. And I think it's actually super exciting. I think that we would never have thought that 40 grams of protein or more would be appropriate for the mainstream. I still think it's somewhat limited, but expanding.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

So, to answer your question, I do not think it will be the norm, but I think we'll continue to see innovation in both levels of protein. I think we'll see innovation in what else goes with protein. I think you'll see innovation to be more appropriate for certain types of people for different occasions, etc.

[Jim Salera, Research Analyst at Stephens Inc]

Okay, great. Thank you.

[Operator]

Thank you. Our next question is from Komel Garrawala with Jefferies. Please proceed.

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Thank you, everybody. Good morning. I guess two things. One, on just to really make sure for absolute certainty on this destocking thing. It's a it's a one and done, or is it a sort of one and maybe reverses back?

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

And then sort of my main question is on marketing spend or, you know, this is the the first time that you've really ticked up advertising and marketing in earnest. Maybe just some initial thoughts on how it's been received and what your maybe what the returns are or what your sort of any metrics you can share on how it's going would be useful? Thanks.

[Paul Rode, CFO & Director at BellRing Brands]

I can take the first one, Darcy. We do we are not modeling or our guidance does not contemplate that trade inventory levels rebound and go back up so that we would consider it a one and done.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Then from a marketing perspective, we are still so as you know, for the new year new you we had a bunch of different demand driving levers. So it is hard to isolate what is causing the up 25% consumption. That will come later this quarter when we do kind of a full analysis where you can really isolate the variables. But what we do know is we have certain KPIs that we follow and it's going well. We've hit all of our benchmarks that we set out to hit.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Total impressions up 30%, above expectations web traffic up over 25%, organic search really healthy. So we are getting our consumers attention, and we're seeing some nice momentum within the business. But specific ROI by tactic, will come later in the quarter.

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Got it. Thank you.

[Operator]

Thanks. Thanks. Our next question comes from John Bogartner with Mizuho Securities. Please proceed.

[John Baumgartner, Managing Director, Equity Research at Mizuho Securities]

Good morning. Thanks for the question. Maybe first off, Darcy, for ready to mix, category level pricing is still soft on the thirteen weeks relative to the 52, despite the upstream cost inflation. And I'm curious, is there a sense that with new capacity coming on stream later this year that competitors are just sort of waiting it out and absorbing some of the temporary margin pain? Or are there any indications that given the higher base for retail prices now that maybe elasticity has hit more of a tipping point with more pricing?

[Darcy Davenport, CEO, President & Director at BellRing Brands]

We did see some net pricing come down and ready to mix and specifically on promotion no changes of we haven't seen any changes in list price, but what we've seen is actually some slight increases in frequency and depth from a promotional standpoint. And yeah, I think that we still expect some tightening. The only thing I can say is that within ready to mix there are a lot of kind of upstarts, pretty low barriers to entry. So I think that what though I think those types of companies are really focused on top line and not as concerned about profitability. And so and mainly, you know, they're looking to sell.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

So I think that is one piece and that is kind of unique to, I think, ready to mix. We have heard kind of rumors that are actually I think it's public, that there are some big players that will be taking price and guess later this year. So I do think that it's going to happen. As far as our pricing, we did announce a price increase on premier protein powders as well as a small line within dimetize to take price as of the beginning of this month. It's small, it doesn't really affect our overall business because it's a small part of our business.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

But we'll see that soon. So I think it's a little bit of a mixed bag and a little bit of a wait and see.

[John Baumgartner, Managing Director, Equity Research at Mizuho Securities]

Okay. Thanks for that. And then on Dymatize in The US, sales are growing in ecom, but they're down in every other channel. And I'm curious to the extent to which that's structural where you're seeing performance oriented consumers migrating more broadly into ecom. And if that's the case, where sort of bricks and mortars is now becoming more structurally inhabited by the everyday consumer, I guess, how do you see retailers responding

[John Baumgartner, Managing Director, Equity Research at Mizuho Securities]

Could we see linear space being reduced for the category in total? Does the category maintain space, but it's just easier to shop for new consumers? Is it a benefit for everyday brands like Premier? How do you see the shelf sets sort of changing going forward given all the dynamics here?

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Ecom has been a major driver of this category for a long time. As you know, you know the category well. That's really if you back up really the specialty, it was predominantly a specialty category. And that as kind of the specialty channel had a ton of headwinds, it shifted to ecom. So ecom has been the number one channel for Dymatize and it's the number one channel for many ready to mix brands.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

However, we still see promise for the kind of mainstream retail channels. And we see it for mainstream brands. I think ecommerce is where consumers discover brands, especially in ready to mix. So that will continue and a lot of the upstarts can make their way first. You'll see them first on ecom.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

But then once they hit a certain level and they're going after kind of the mainstream audience, I think we should expect to continue to see those move from e com into mainstream channels. And I think for Premier Protein, huge opportunity. Again, 2% household penetration, lots of room, and even opportunity for dimetized, so within mainstream channels.

[John Baumgartner, Managing Director, Equity Research at Mizuho Securities]

Thanks, Rossi.

[Operator]

Thank you. Our next question comes from Robert Moskow with TD Cowen. Please proceed.

[Robert Moskow, Managing Director at TD Cowen]

Hi. I just wanted to clarify something regarding the guidance. Darcy, I think you said that given the strong retail performance, you typically would have narrowed the guidance, I suppose at the higher end of the range. But because of the uncertainties about the consumer, you're not. But then you also said that the destocking by this major customer was a bit of a surprise.

[Robert Moskow, Managing Director at TD Cowen]

So can you confirm that, yeah, that even with that destocking, you still could have narrowed the guidance. Can I separate those two things?

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Yeah, we absolutely could have. And again, just with the kind of consumer uncertainty, I think that we are just being more cautious about guidance.

[Robert Moskow, Managing Director at TD Cowen]

Okay, I'll pass it on. Thanks.

[Operator]

Thank you. Our next question comes from the line of Brian Spillane with Bank of America. Please proceed.

[Bryan Spillane, Managing Director - Equity Research at Bank of America]

Thanks, operator. Good morning, everyone. Darcy, can you talk a little bit about the now the interplay between channels? I think if we look at the sequential growth from the previous quarter, looks like e commerce slows a little bit and maybe mass club flows a little bit and we're growing for instance, grocery a lot faster. So just trying to get an understanding, like, how much is there any cannibalization we should be thinking about as you expand, especially into the more traffic parts of large food retailers?

[Bryan Spillane, Managing Director - Equity Research at Bank of America]

And then if you could also just give us some thoughts on how you're thinking about pricing across channels, right? So, that there's no conflict or eliminating reducing channel conflict from a price basis. Thanks.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

So, from a channel perspective, we are not seeing necessarily any cannibalization I think that what you're seeing, I think we continue, if you look at market share, we see the most opportunity for kind of our share of shelf is around like FDM, food, drug, math, specifically food. Remember that was also the channel that last year and the year before that had the most out of stocks. So if you're looking at kind of we're still experiencing some tailwinds from kind of a lower comp, especially in those channels, where the in stocks were a little better in some of the other channels. So really, it has to do with kind of year ago.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

But kind of, I would just say macro is we continue to see a ton room and opportunity really in every single channel. But the biggest opportunity really is FDM, so and specifically food. So that's one piece. And maybe I would just emphasize this even more is every channel has opportunity around household pen. So even some of our more mature channels, the channels that we started in like clubs, they have a ton of opportunity with our brand as well as the overall category.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Because it is only a 50% household penetration category. So lot, lot, lot of opportunity. And what was the second question? It was around pricing?

[Paul Rode, CFO & Director at BellRing Brands]

Yep, between channels.

[Bryan Spillane, Managing Director - Equity Research at Bank of America]

Right. Just to the extent that you're watching for channel conflict, You know, that the price between channels doesn't encourage cannibalization.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

No, I mean, we have kind of rules around that pack sizes and channels. And so, no, I think the only thing that we see is kind of in an environment where consumers are maybe value shopping a little bit more. Would say the only thing that we see is we have seen and I've talked about it in past calls, think that we've seen kind of a moving up from kind of four counts to 12 counts. We've seen some movement even to the bigger packs like the club packs. So that is one thing that we've seen because they're looking for kind of a slightly better value per shake.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

But other than that, I think it's very rational.

[Operator]

One moment for our next question. It comes from the line of Bill Chappell with Truist Securities. Please proceed.

[Bill Chappell, Managing Director at Truist Securities]

Thanks. Good morning. Thanks for taking my question. Darcy, just kind of go back to what you had said about new entrants into the category going for more, I guess, lower protein instead of the 40 gram high protein. I mean, historically, Premier has kind of been positioned well for those who wanted that 30 gram protein shake.

[Bill Chappell, Managing Director at Truist Securities]

You've had more with a great taste. Is there a thought that you need to be more aggressive or to kind of get those new users with some lower protein shakes go the other way? Or is there just so much opportunity, right, at the kind of that core 30 gram and consumers moving up from 10 to 20 to 30 that you're in a good spot? So kind of any thoughts, but not necessarily the next couple quarters, but longer term, you need to get to go those opening price point, but opening protein point shakes?

[Darcy Davenport, CEO, President & Director at BellRing Brands]

I think I would answer that with kind of yes. There is a lot more opportunity with our core 30 gram shake in whenever we do testing. That is by far the most kind of mainstream offering and the one that resonates with the most consumers. So we still see a ton of opportunity in household penetration and in distribution for our 30 gram shake just to continue to proliferate across pack sizes, across flavors, etc. And I think there's also a lot of opportunity to innovate.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

And I've in the past watch you guys through kind of our approach to innovation, which is really around capturing either a new consumer incremental to the 30 gram or a new occasion. And that's where innovation can play. Part of that can be macros, so up or down in protein levels. It can also be like our indulgence line, which clearly goes after a new occasion. However, what I think nice to see is we actually are getting new consumers also with the indulgence line.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

So, think I just go back to the fundamentals of this category. When you're dealing with a category that only has 50% household penetration, there is just a lot of opportunity usually within the base as well as with innovation.

[Operator]

One moment for our next question. It comes from Jon Andersen with William Blair.

[Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C]

Hey, good morning, everybody. Thanks. Darcy, I kind of want to follow-up on that last point around innovation. My question was, could you share maybe a little bit more insight around what you're seeing for initially for the indulgence line? As you mentioned, it seems like that's an opportunity to go after a new occasion.

[Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C]

Is that primarily what you're seeing existing users using it for snacking or a different daypart? And then, I think you have another innovation, which might be a big eye, not a little eye, planned for the latter part of the fiscal year. How should we think about that innovation? Is there more you can say about it? Is that more about expanding the range from a consumer perspective or more occasion based as well?

[Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C]

Thank you.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Yeah, so the early from indulgence, I'll start there. We have seen some early success and I think what we're seeing is we launched it first in mass and the success there has led to acceptances in other retailers. Do you know expect to start seeing that roll out across kind of food, drug, mass, as well as clubs. So I think that is great, it is doing what we wanted it to do, which is it's highly incremental to the category from an occasion standpoint. But I think a little bit of the surprise is also it's getting at new occasions.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

One of our mass retailers we're seeing about 35%, the buyers are about 35% new to the category. So again in a low household penetration category we want to bring in new people and it doing which is really exciting. Also, you go on reviews online, you also see a lot of mentions about treat, dessert, etc. You think of our baseline, really you see many more around breakfast replacement. So the fact that we're getting nods to treat and dessert, it's confirming our strategy, which feels very good.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

The second question just about upcoming innovation, yes we have another innovation coming in the latter or in Q4. And I'll just say that the strategy is around new consumers. So, if you step back, we had two innovations. The first one is really designed to go after new occasions. The second one is going after new consumers.

[Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C]

Thanks so much.

[Operator]

Thank you. And our last question, one moment, comes from Steve Powers with Deutsche Bank. Please proceed.

[Steve Powers, Equity Research Analyst at Deutsche Bank]

Hey, thanks a lot. Appreciate it. And this may tie together a number of threads you've already spoken about. But just, Darcy, maybe a little bit more color and detail into your thinking as to specifically why you're leaning into the fourth quarter promotions that you called out. Because I guess, was kind why, this is a basic question.

[Steve Powers, Equity Research Analyst at Deutsche Bank]

And is it opportunistic given the current environment, just given the state of the consumer, the innovation plans you just spoke to? Or should we think about this as now more of a fixed part of the calendar that's likely to repeat?

[Darcy Davenport, CEO, President & Director at BellRing Brands]

Yeah, I think I view it as a fixed part of the calendar. So again, if you go back, we have always pre COVID, pre supply constraints, we historically had two large club promotions annually for probably close to a decade. And that was kind of the it was consistent. And I think that when we looked at the improvement in brand metrics in Q2 last quarter, measure our focuses on household penetration. We saw a really nice bump in household penetration.

[Darcy Davenport, CEO, President & Director at BellRing Brands]

We know that when we do these type of club promotions we get really, really nice displays, eyeballs, and that leads to increased household penetration. When we saw that work so well in Q2 and we have the inventory supported, we were able to kind of expand the Q4 promotion. So really it was a strategic move that was enabled because we have the inventory to support. And it's nice to be able to partner with our retailers to bring value to consumers given the backdrop.

[Steve Powers, Equity Research Analyst at Deutsche Bank]

Okay. Thank you very much.

[Operator]

Thank you. And ladies and gentlemen, this concludes our q and a session and program for today. Thank you all for participating, and you may now disconnect. Good day.

Participants

Executives

• Jennifer Meyer, Investor Relations
• Darcy Davenport, CEO, President & Director
• Paul Rode, CFO & Director

Analysts

• Andrew Lazar, Managing Director at Barclays
• Tom Palmer, Vice President & Senior Equity Research Analyst at Citi
• Ken Goldman, Managing Director at J.P. Morgan
• Megan Clapp, Executive Director at Morgan Stanley
• Matthew Smith, Director - Food & Tobacco at Stifel Institutional
• Peter Grom, Equity Research Analyst at UBS Group
• Jim Salera, Research Analyst at Stephens Inc
• Kaumil Gajrawala, Managing Director at Jefferies Financial Group
• John Baumgartner, Managing Director, Equity Research at Mizuho Securities
• Robert Moskow, Managing Director at TD Cowen
• Bryan Spillane, Managing Director - Equity Research at Bank of America
• Bill Chappell, Managing Director at Truist Securities
• Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C
• Steve Powers, Equity Research Analyst at Deutsche Bank