Utz Brands Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
July 31, 2025

Key Takeaways

  • Positive Sentiment: Howard Friedman affirmed strong back-half EBITDA growth driven by Q3 margin step-up, accelerated CapEx productivity savings and a recent plant closure, maintaining full-year EBITDA guidance of 7–10% growth.
  • Positive Sentiment: Youth Brands delivered robust top-line growth in Q2, capturing distribution gains across core and expansion markets and achieving volume and value share gains in potato chips and C-store channels.
  • Negative Sentiment: Management revised full-year EPS growth guidance down to 7–10% from 10–15%, citing higher interest expense on accelerated CapEx and additional depreciation from front-loaded investments.
  • Positive Sentiment: The company’s westward expansion strategy continues to gain traction in 30 new geographies, supported by DSD investments and hybrid distribution infrastructure, fueling incremental shelf space and retailer support.
  • Positive Sentiment: Boulder Canyon exceeded $100 million in sales, achieved 49% ACV distribution with rising velocity and shows potential to become a $200 million brand in the coming years.
AI Generated. May Contain Errors.
Earnings Conference Call
Utz Brands Q2 2025
00:00 / 00:00

There are 13 speakers on the call.

Operator

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Youth Brands Inc. Second Quarter twenty twenty five Earnings Conference Call. Today's conference is being recorded.

Operator

At this time, I would like to turn the conference over to Trevor Martin, Senior Vice President of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and good morning, everyone. Thank you for joining us today for our live Q and A session and our second quarter twenty twenty five results. With me on today's call are Howard Friedman, CEO and Bill Kelly, CFO. I hope everyone has had a chance to read our prepared remarks and view our presentation, all of which are available on our Investor Relations website. Before we begin our Q and A session, I just have a few administrative items to review.

Speaker 1

Please note that some of our comments today will contain forward looking statements based on our current view of the business and that actual future results may differ materially. Please see our recent SEC filings, which identify principal risks and uncertainties that could affect future performance. Today, we will discuss certain adjusted or non GAAP financial measures, which are described in more detail in this morning's earnings materials. Reconciliations of non GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website. Now operator, we are ready to open up the line for questions.

Operator

Thank you. We'll go first to Andrew Lazar at Barclays.

Speaker 2

Great. Thanks so much. Good morning and welcome Bill and Trevor.

Speaker 3

Thank you. Morning, Andrew. Good morning, Andrew. First

Speaker 2

off, EBITDA was roughly flat in the first half of the year. You're looking for 8.5% growth for the year at the midpoint in the back half. Think actually looking for 8.5% growth at the midpoint for the full year, it implies high teens growth in the back half. I was hoping you can go through maybe a bit more detail on what gives you the confidence in that outlook, especially in light of just the more muted first half EBITDA performance.

Speaker 3

Good morning, Andrew. It's Howard. I'll start and hand it over to Bill for any other color. But look, think there are a couple of things that are going on in the quarter. Obviously, there's a lot of the investments that we have been making to drive our overall top line, which are coming through, required some required investment as we build into the year.

Speaker 3

When you look specifically to gross margin, first is that it naturally steps up as we build through the year. Q3 is typically a significant step up versus Q2. And as you look at what's coming into the back half of this year, the accelerated CapEx does accelerate productivity savings as we go in. We obviously announced a plant closure that also is going to impact the back half of the year. And then I think the last thing that you're going to see is there is some benefit to our portfolio mix as well as we are continuing to see top line momentum that also helps to step up as we go into the back half of the year.

Speaker 3

I I think overall, we feel like it's we're in a good place on the guide and have some clarity and line of sight to the productivity savings and the margin expansion as we progress through the rest of the year.

Speaker 2

Got it. Okay. Thanks. And then obviously, you have delivered strong top line results in the first half in an overall category that at least doesn't appear to have improved very much as of yet. I guess what specifically led to the better top line?

Speaker 2

Is it frankly just more distribution gains than you might have expected, better velocities, new products? What's kind of led to the at least above what your initial expectation was around top line?

Speaker 3

Yes. Look, A couple of things that are going on in the quarter. We feel really good about where we are on our top line. And as you know, we are not solely dependent on the category in order to be able to drive our growth. The first is that you suggest, which is obviously we've had a significant increase in expansion market distribution points.

Speaker 3

You see that as we went into the first half of the year, we are investing in infrastructure, which is allowing us to see significant growth in the first half in those geographies. I think the second thing is, is I think for the first time in a couple of quarters, you actually saw volume and value share gains in our core, and that's really being driven by bringing Boulder Canyon and on the border into our core geographies as well as seeing some improvement in our C store performance as well. We're not where we want to be yet on C store, but you are seeing an improvement in the trend. And so we kind of have measured and unmeasured channels all kind of moving together very positively in the first half and certainly in the second quarter, distribution gains supporting it. And then we've been making investments to drive that westward expansion, and they're also coming through in the top line results.

Speaker 2

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

Speaker 3

Thanks, Andrew.

Operator

We'll move next to Peter Galbo at Bank of America.

Speaker 4

Hey, good morning, guys. Howard, maybe just to start, I'd love to get a little bit more clarity on the revision on the EPS line specifically. The stock is currently down about 11% at the open, and I think that a lot of that has to do with just the mechanics of what changed in the EPS guidance. So maybe you can talk a little bit more in detail about what below the line is specifically changing. I know there was a comment around interest expense, but also some accelerated depreciation.

Speaker 4

So just like what was the number before? Where is it going to? No impact to EBITDA, but clarifying comments there would be very helpful.

Speaker 3

Yes. So let me start and then I'll hand it to Pete. Because Pete, obviously, you know, we've always maintained that EBITDA is obviously the first indicator of the overall health of our business. And we continue to feel very good about the EBITDA plan for the year as we obviously nudged up the low end from 6% to 10% to 7% to 10 So kind of we feel pretty good about where we are on the cost savings programs and productivity, all of those things are coming through. As relates specifically to EPS, let me turn it to BK to go take us the rest of the way.

Speaker 5

Yes. Thank you, Howard. Thank you for your question. On the EPS piece, the original guide that we put in place was the EPS growth of 10 to 15%. We revised that in our print yesterday to be or this morning to be seven to 10%.

Speaker 5

As Howard said, you know, EBITDA is is the indicator for us in the health of our business, but the impact of our revision from midpoint to midpoint is about, 3¢. Half of that is interest, the other half is is DNA. On the interest side, you know, on cash interest, we're picking up a couple of pennies there given the impact of the higher CapEx spend that we decided to do to accelerate our productivity programs and to help grow our business. We borrowed a bit more sooner in that line and that's picking up there in terms of more and more interest. On the CapEx side, we did confirm a higher spend on the higher end of our range on CapEx, and and we spend more of that quick more quickly than than in the past.

Speaker 5

Our our CapEx is about 70% spent through the first half of the year, and that's different than our historical kind of pattern. That did create more amortization and depreciation, and that's the other penny or so that's coming through in our guide. So we thought that was the way to think about it. Looking forward, we we think that that we are confident that 2025 will be the peak of our CapEx spending, and and so we think we can manage through that. But I thought it was prudent to just confirm the thinking on EPS.

Speaker 5

I know it's not the most significant metric for us, but I wanted to make sure that we had the right thinking there going forward.

Speaker 4

Got it. Thanks for that. That was helpful. And Howard, maybe just to pivot it back to the business and in relation to Andrew's question. Look, there was a, I think, slide a in the deck around potato chips clearly outpacing the category.

Speaker 4

But then you had two other subcategories in tortilla chips and pretzels that were maybe a bit below trend. So just what needs to be done to get those on the same trajectory or turned around? Maybe there's something in the comps, but additional color there would be helpful as well. Thanks very much.

Speaker 3

Yes. Thanks for the question, Pete. I think there are a couple of things going on. Obviously, to your point, potato is doing well. And it's a little bit of a tale of within the expansion geographies, our Power four brands are all performing quite well, we're pleased with the performance.

Speaker 3

Potato chips, obviously, from a subcategory perspective in the quarter was also very strong. As you look at pretzels, you sort of have the UTS brand, which was actually growing in line with the sub cat and is performing well. And then the rest of our pretzel portfolio, a little bit softer, which kind of pulled the number down. But our primary power brand in us is growing strong in pretzel. And then obviously, Zaps and Bachman and some others were a little bit softer.

Speaker 3

And then on tortilla chips, it was a little bit more of an overlap of merchandising. We had some activity in the club channel as well as in the South Central portion of The United States where we were lapping some promotions in the prior year, not an issue that we see, but more just a quirk of the calendar.

Speaker 4

Great. Thanks very much.

Speaker 6

Thanks, Pete.

Operator

We'll move next to Michael Lavery at Piper Sandler.

Speaker 7

You. Good morning.

Speaker 2

Hey, Mike. I just wanted

Speaker 7

to unpack some of the distribution gains a little bit. You've obviously got really good momentum that you called out in the Midwest. Can you give a sense of, you know, is that smaller retailers and, you know, kind of what the shape of the channels look like there? And how much does that momentum help your selling story to to to bigger retailers? And how well established is your infrastructure to support a bigger push out there?

Speaker 3

Yes. So we actually are seeing so obviously, we're seeing growth in all 30 of the expansion geographies. So we did actually we are seeing momentum picking up across the expansion markets. It's a combination of things that are going on, Mike. Obviously, we have we've been we continue to get very strong retailer support from national chains as they are taking our products westward with us.

Speaker 3

And so that continues to be a good news story. And we're also seeing good progress in channels, whether it's club, discount, dollar, all also continuing to see momentum. And so from a distribution gain perspective, it's a little bit more broad based, than sort of a smaller retailer, but it's certainly something that we're pleased with. And that obviously the thing that we have found historically, and we've seen it in most of our expansion geographies, once we get in and start to execute our playbook around the perimeter, around end caps and around the distribution, because we are additive and incremental to the category, retail we tend to get incremental space as we go. And so what we wind up doing is building strength upon strength.

Speaker 3

And so you're starting to see distribution gains both in core and expansion markets kind of across the board. And from an infrastructure perspective, that is the benefit of our hybrid model between direct to warehouse and DSD. We can serve as a customer based on how their unique preferences are or in some cases, start out in a market before we can get to it, the route infrastructure that we need for customers that want to be serviced that way. So hopefully that answers the question. We're feeling really good about where we are, and we believe that that was part of the logic of saying that we would bring our the low end of our guide to at least 2.5% moving into the back half of the year.

Speaker 7

No, that's great color. And just a quick follow-up on packaging. The slide with some of the new innovation looks good. I know you've got a big portfolio, but does it reflect maybe any even subtle changes to brand architecture that might be applied more broadly?

Speaker 3

Yes. Well, look, I think at the moment, there's a lot of there are a lot of things going on with our packaging. We obviously introduced a cheese ball barrel refresh that we want to do from a structure perspective. The front of pack graphics at the moment, we continue to obviously look to make sure that the brands are fresh and modern and that the packaging is appealing. So we'll continue to look at that and tweak as necessary.

Speaker 3

But for the moment, I think that we're pretty pleased with our architecture overall.

Speaker 2

Okay. Thanks so much.

Speaker 3

Thank you.

Operator

We'll take our next question from Robert Moskow at T. B. Cowen. Mr. Moskow, your line is open.

Operator

You may be on mute.

Speaker 8

I'm sorry about that. Having trouble with the headphone. I'm glad you have Trevor there to help explain why the stock is down because I don't think I can. This is I thought the print was pretty good. Can I ask the bridge, the EBITDA bridge in the back has the investment spending that you talked about Howard in SG and A to drive the distribution gains?

Speaker 8

Can you I would imagine that that continues in the back half of the year because it's supporting your growth in expansion categories or expansion geographies and also your DSD system. So is that true? Will that continue in the back half?

Speaker 3

Yes. I think if you look at SD and A front half versus back half, we do expect that on a percentage basis that them to be that SD and A in the second half will be modestly higher. Some of that is to your point, being able to invest in the sales infrastructure for the Westward expansion. And obviously, marketing spending in Q3 will be higher because we're in the peak of the summer selling season. So I think that, that's a fair assumption.

Speaker 3

There's also a little bit of cost inflation around health care that's in there. But by and large, the investment that you're seeing in SD and A is to continue to drive the top line momentum, which is obviously being supported by gross margin expansion that you saw in the first half of the year, and we expect to continue and accelerate.

Speaker 8

Okay. And is there any way to isolate the margin of Boulder Canyon in relation to the rest of the portfolio? Is this a higher margin brand? And will that eventually help your path towards margin expansion as it continues to grow?

Speaker 3

Yes. I think so we haven't disclosed, obviously,

Speaker 9

our brand

Speaker 3

margins historically. But I think it is fair to say that Boulder Canyon is a premium brand and that we expect that it actually has a margin benefit to the business. It's a little bit what we talked about earlier on why do we believe that there's a mix benefit in the back half of the year to EBITDA on our brand and channel mix. So we're bringing Boulder Canyon as an example into not only is in our untracked channels in club and natural and but we're also bringing it to our most profitable channels, is really food. So you should see a benefit over time there, and we think that that actually will support supports the higher EBITDA guide that we have in the back half of the year.

Speaker 3

Okay. Thank you.

Speaker 6

Thank you.

Operator

We'll move next to Brian Holland at D. A. Davidson.

Speaker 1

Thanks. Good morning. Just curious within your outlook, what is assumed from a category standpoint? Around this time a year ago, the competitive landscape became a bit more aggressive on promotion. So what's your view of that dynamic as we head into back to school this year?

Speaker 3

Yes. So obviously, we had said last quarter that we kind of envisioned a that the category would get to flattish kind of growing into that as we went through the year, right? And to your point, at this point, the category has been fairly stable in terms of where it's been sitting. And obviously, we are continuing to grow quite a bit more quickly. I think where you'll what we would expect is you should see some category progress in the third quarter as, to your point, the lapping of last year's merchandising events occurs and the category should start to normalize.

Speaker 3

But our guide at this point is really predicated on the idea that the category is not going to get a whole lot better from here, and that we continue to see the type of performance we saw in the first half of the year, support kind of where expect to be at least 2.5% or better.

Speaker 1

Got it. Thank you. And then you referenced the partnership between Zaps and PopBelly. What can you tell us about the pipeline that you have or are developing relationship? And also, what's the current mix of foodservice within your net sales?

Speaker 1

And then do you have any view on what that could or should ultimately be?

Speaker 3

Yes. So look, we I think many of us who have ever tried Zaps, the first place that many of us may have tried it was was in Potbelly, and we're very, happy with that relationship. What we have been able to build and introduce that our brand to a lot of consumers that way. And so I think that building brands away from home continues to be an area that we are interested in pursuing more of. Potbelly, obviously, a significant partner for us, we're thrilled to have launched to be launching the product.

Speaker 3

I think the food service is a relatively small piece of our business overall and remains so. We can get you precise numbers. It tends to be pretty small and an area where we do think that there is growth potential. We know that most people who go to who tend to wanna buy brands away from home typically experience in in home at first. So we kinda feel like driving our geographic expansion in the introduction into kinda traditional channels and grocery then sets up a really, strong argument to be able to then be included, in single serve away from home.

Speaker 3

So it'll come over time, but it's still early innings there, I think.

Speaker 1

Appreciate the color. And if I could just sneak in one quick and let me echo Rob's comments about the stock at the open this morning. Look, are you still on pace to exceed your 26 financial goals that you set at the 2023

Speaker 9

on the bottom line,

Speaker 1

mindful of kind of the adjustments that you've made today on EPS?

Speaker 3

Yes. Look, what we said at Investor Day was that we'd be able to contribute 100 basis points of EBITDA margin expansion year over year over year and that we would be delivering double digit EPS growth over that same period of time. If you look at what happened last year, we grew 120 basis points of EBITDA expansion going from 13 to 14.2, and we grew EPS 35%. So at least as we look today and as you see our guide where we are, the building blocks, top line expansion or top line growth and expansion markets holding our core, being able to drive productivity at $135,000,000 which we revised to 150,000,000 plus and where we are on EBITDA, we don't we continue to be very confident that we can meet the bottom line goals that we have, given that we are, I think, executing what we promised in December 2023, and it continues to come through in our results. I think we feel really good about where we are and where we're headed.

Speaker 6

Thanks. I'll hop back in the queue.

Speaker 1

Thank you.

Operator

We'll take our next question from John Bob Garner at Mizuho.

Speaker 10

Good morning. Thanks for the question.

Speaker 8

Hey, John. Howard,

Speaker 11

I'd like to ask about the comments on DSD investments. Can you elaborate on what's sort of changing or evolving there? And then looking specifically at the convenience channel, that was a focal for you coming into the year and you're building some nice momentum in C stores with good distribution point growth for the first time in a couple of years. How much of that improvement in C stores is down to new package capabilities and flavors against sort of a static route to market relative to benefits from material changes or improvements in the actual routes and selling resources? Not sure if the C stores and DSD investments related, but just wanted to ask on both.

Speaker 3

Yes. I appreciate the question. Look, think what is with the part of the investments, it's there are two different investments that we're making in DSD more broadly. In our expansion markets, obviously, we're putting in infrastructure to be able to support the expanded distribution that you see in the in the West as we're moving westward. And that part of that effort is actually still underway, and we're making infrastructure investments, which you can see in the numbers.

Speaker 3

And then the second piece is really in our core geographies, we have been working to kind of evaluate where the routes have been and make sure that our IO partners are getting the support that they need to be able to execute. And in some cases, we are buying back routes and then reselling them to new IOs who want to get into the business. So that is kind of a little bit of standard work, but it stepped up in the quarter, specifically in our core geographies. So I think both of those things, one is laying in new and then the other is acquiring new IOs and making sure that we're providing the services that they require to be able to build their business. Both of those things, I think, are coming through in the top line performance.

Speaker 3

I think with respect to C store, I think there are a couple of things going on. There's no question that when the C store business starts to improve, that, that also makes it a more attractive place for our IOs to place product as well. So there gets to be a little bit of a virtuous cycle there. We've also had distribution gains in a couple of the larger banners that is also coming through, and you can see positive trends, which is reversing some of distribution losses that we talked about a couple of quarters ago or probably a year ago at this point. And then yes, we are introducing better assortment and better assortment management and better product mix into those stores, which is also helping.

Speaker 3

We do expect C store to get to flattish by the end of the year. But for the this has been a long and slow progression back toward where we want to be. Q1 was better than Q4. Q2 was better than Q1, and we expect that momentum to continue.

Speaker 8

Great. Thanks, Howard.

Speaker 6

Thank you.

Operator

We'll go next to Jim Salera at Stephens Inc.

Speaker 1

Hey, Howard. Hey, Bill. Good morning.

Speaker 10

Thanks for taking our question. Hey, Jim. Good morning. Howard, I wanted to ask a little bit, maybe starting off on Boulder and obviously the very strong growth you guys see there in conventional channels. Is that coming from both core and expansion markets?

Speaker 10

Or just

Speaker 6

to maybe if you can kind

Speaker 10

of give us some detail on what's driving that, if it's being introduced across the footprint, if there's specific areas, and kind of what the runway as you see it on a go forward basis?

Speaker 3

Yes. So look, I think Boulder Canyon, we talked at Investor Day that we thought we'd get into $100,000,000 within three years. Obviously, we got past $100,000,000 this past year at the end of Q4, and that business continues to kind of be riding a perfect combination of things. It's a great product. It has a better for you benefit with non seed oil, and it's grown up in the natural organic and better channels.

Speaker 3

And what you now see us doing is bringing that product into across our geographies, core and expansion as well as some unmeasured and club. And so you can see that a broad based distribution gain across channels. There's still quite a bit of room to go. I think we're still only around 50%, 49% ACV, which obviously is a step up, but still significantly lower than some of our other products. And then what you're seeing is not only are we continuing as the number one potato chip brand and what you can see in natural channels, but distribution is growing and velocity is growing as well.

Speaker 3

Those two things are both moving together across channels. So we're not seeing the cannibalization that you normally may see, and there is a differentiation between the channels. But we're very bullish about that brand. And look, don't think it's inconceivable to believe that that could be a couple of $100,000,000 brand in the next few years. But right now, we're very pleased with that business.

Speaker 3

And mostly what we're pleased about is what that brand stands for to its core shopper, which is beyond just avocado oil or non seed, but it's a great product that's performing quite well.

Speaker 10

Great. And then maybe pulling on that thread a little bit. You guys talked about household penetration at an all time high of around 50%. Do you see in the composition of the new households that they're maybe nontraditional households compared to where the core kind of Us brand used to play or plays today? And a lot of them are a lot of them coming in through some of the other brands?

Speaker 10

Or is that balance between expansion geographies and households entering from those geographies? Just any details you can offer on what that composition looks like as households continue to grow.

Speaker 3

Yes. I'm not sure that we've broken it out, the household composition for household penetration. But what I would what I would offer you is it's not surprising that as our Power four brands are entering into different geographies, respectively, that, you know, my my hypothesis would be that you would be seeing our Power four brands driving the top line kind of commensurate with their business size on average. Although I would be surprised if there is not a significant contributor given just the sheer momentum of that business kind of where we are right now. But we can get you a better sense of kind of how that growth is coming.

Speaker 3

But the household penetration, the trial rates and the repeat rates are all very strong and continue to be quarter after quarter, year after year, which continues to make us bullish that our expansion strategy and our growth strategy is working.

Speaker 6

Okay, great. I appreciate the color. I'll hop back in queue.

Operator

We'll go next to Scott Marks at Jefferies.

Speaker 6

Hey, good morning. Thanks so much for taking the questions.

Speaker 12

Hey, Scott.

Speaker 6

First one I wanted to ask about, there was certainly some commentary about the supply chain, obviously, closing the Grand Rapids facility and some other comments about automation, some insourcing. So question really around how you're feeling about state of the supply chain currently and where you see maybe future opportunities for improvements and to make things more efficient.

Speaker 1

Yes. So I think the first thing I

Speaker 3

would say, and I'll hand it over to B. K. As well. Look, I think if you look at what we have been able to accomplish over the last two years, at Investor Day, we basically laid out that on average, our manufacturing facilities had about $100,000,000 of revenue coming through and that the journey was to get to $200,000,000 which obviously implied a plant a reduction in overall plants. We are now at that number a couple of years, I think, earlier than we would have expected.

Speaker 3

So I think from a perspective of kind of where are we in terms of the optimization, we're getting towards the end of a lot of the manufacturing piece of the work. I think second, you then saw a significant step up to 6% productivity last year, and we expect to be around 6% or 6% this year as well. And I think that, that is also kind of an indication. You see the gross margin coming through. I think the thing that we're most pleased about and I think what the supply chain is rightfully proud of is that we've been able to do all of those things while we've been driving expansion of our geographies and supporting a growing business.

Speaker 3

And service has been has been outstanding for our retailers, throughout the journey, really kind of starting with the with the middle of last year through to now. So, yeah, we're we're toward the end of a lot of that a lot of the work that we had to do. This is to be case point earlier. You know, we this is sort of the peak of the CapEx investment. Our automation is now in place and is is now active.

Speaker 3

Started up in q two. Tater chip lines actually started up in q two. We had a pretzel line that started up in q one. We've expanded cattle capacity and invested in Kings Mountain. And all of those things are moving forward, which allow us to take this last step, which is to finish the shaping of the plant footprint.

Speaker 3

I don't know if

Speaker 2

you have

Speaker 3

anything to add.

Speaker 5

I think that's all well said, Howard. The only thing I would build on is that this does give us, you know, capability as we think about our margin profile going forward. You know, these savings will be supportive the balance of this year as we head into next year as well.

Speaker 6

Got it. Thanks so much for that. And then last question for me. Obviously, you talked about material step up in marketing spend. Obviously, plans to maintain kind of higher levels of investment moving forward.

Speaker 6

Just wondering if you can kind of share a bit of color around maybe some of your marketing strategies in terms of core geographies, expansion geographies and kind of how you're thinking about channels, I guess, to reach consumers. Thanks.

Speaker 3

Yes. So what we said at Investor Day was about 40% year over year over year for three years. And depending on how our productivity programs came, if we had more gross margin savings that we would consider to invest. Obviously, last year, we invested 70% more in A and C. This year, in the second quarter, we actually invested 44% more than a year ago.

Speaker 3

And we have a combination of things that we're doing. So we do have retail media to support geographic expansion and making sure that shoppers are being introduced to the brand and expansion geographies as they are going in. We have a lot of social and digital media. We had some fun with how you pronounce our name with actual real life consumers asking them to say the name and having a debate because there are two pronunciations depending on geographically where you're from. So that's been fun to introduce The US brands.

Speaker 3

You can guess which team I'm on. The UTS brands to that. We've also been investing in Zaps Media as well. And we will be rolling toward a introducing and launching some more consumer pressure on Boulder Canyon as we get into sort of the back half or the year end. So we tend to try and hit consumers across channels.

Speaker 3

We try to hit them with a message at the right point where they're trying to think about us. And our returns are quite good, but we know we have a lot to do and we have a lot more to learn as we continue to invest more.

Speaker 6

Understood. We'll pass it on. Thanks so much. Thanks, Scott.

Operator

And next we'll move to Rupesh Parikh at Oppenheimer.

Speaker 9

Good morning and thanks for taking my question. So just going back to your commentary on quarter to date trends and the momentum you're seeing quarter to date, just curious what's driving that? Is that compares less promotional backdrop? Just curious what you think is driving the strength.

Speaker 3

Yes. So, well, I mean, I think there are couple of things that are going on for us as we look at Q2 and into early Q3. I think if you look at the building blocks of our top line momentum, it has been expanded distribution, increased consumer pressure and support in store behind our hybrid model. I think all three of those things are working pretty well for us right now. We've definitely enjoyed distribution gains in both our in our core markets and our expansion markets of our items.

Speaker 3

We are investing in the infrastructure. We're getting greater point of sale and greater perimeter support. And all of those things, I think, are driving our top line higher. I think the compares are obviously, we are in a different category environment than last year in terms of sort of the promotional price point environment, which is much more what I consider normal and rational in where we are competitively, which obviously helps some. But I think the building blocks of distribution, A and C, customer support and IO execution are all the things that are driving this flywheel now backed up by the marketing that we are investing in.

Speaker 9

Great. And then maybe one final question. Just on your value proposition. So with bonus packs now winding down, can you

Speaker 12

just talk about where you

Speaker 9

are with your key efforts to improve the value proposition for consumers?

Speaker 3

Yes. So bonus packs ended in April and had no net sales impact on the quarter. So we're which I think turned out to be a great trial event driver for us. Look, we compete we compete in value up and down the price ladder. Right?

Speaker 3

And so in club stores where it's larger packs with more premium items, something like a Boulder, which is the most expensive product in our range, as well as when we think about price pack and assortment through food, through mass, through drug, through dollar and discount. What you can see in performance is we're seeing strength across the board. And some of it is by making sure we have the right price point at the right and the right package at the right time, and some of it is playing the ladder all the way through. We've got a great range of items. You can see strength in pork, and you can see strength in cheese as well.

Speaker 3

So I think our value proposition remains quite strong. We haven't had to make major tweaks, in my opinion, to it, but rather running the play that we expected at the beginning of the year and driving the results that we have.

Speaker 12

Great. Thank you. Best of luck.

Speaker 3

Thanks, Rupesh.

Operator

We'll move to our next question from Peter Grom at UBS.

Speaker 12

Thanks, operator. Good morning, everyone. I hope you're doing well. So I wanted to follow-up on the prior question around underlying category growth. And Howard, I think you mentioned you don't really expect the category to get much better, which which makes sense given what we're kinda seeing today.

Speaker 12

But I was hoping to get your perspective longer term. You know, obviously, a lot of debate in terms of what the current backdrop means for the long term, you know, growth for this industry. So I was just hoping to get your perspective on on how you maybe see category growth evolving beyond 2025. Do you think we can get back to kind of the historical levels of growth, we've seen over time? And if so, what's kind of your perspective on reasonable time line of getting back to that level?

Speaker 3

Yes. So look, I remain bullish on the category long term. I still think it's one of, if not the best category in food. Part of that, I could be biased. But when you look at the underlying panel data, and I kind of always start there, which is what does household penetration look like?

Speaker 3

Is it growing? Is it contracting? And then what do consumers do once they buy at once? And the thing that you do see is this category enjoys good strong repeat, but household penetration continues to grow, which at least says to me that consumers want this category in their these products in the pantry. I think if you look at over the last couple of years, the category had been, call it, a zero to one volume and a three to four price category.

Speaker 3

And I think over the last couple of years, that three to four price has been a lot of the driver for it to obviously outperform. But household penetration continues to hold up. So look, I think as you look outward, I think as the category gets back to brand building, innovation, marketing support and sort of consumers adjust to the pricing levels of where they've been over the last couple of years, I think the category can and will continue to grow and remain what it has always been, which is, I think, the best category in food. I do think that part of the way out is innovation, and I certainly think that investing in things beyond promotional price points is the way forward, and that's certainly what we are interested and focused on on doing as we go forward. And I think our our programs are working so far.

Speaker 3

But long term, I'm pretty I'm very positive on where we are.

Speaker 12

That's super helpful, Howard. I guess and then just maybe on that innovation, point you made, I I had, you know, a a question on protein. Obviously, you've done a great job in the organic natural segment, but, obviously, a lot of consumer interest in protein, One of your largest competitors, you know, appears to be leaning more, into that segment a bit more. So just would love to get your thoughts on kind of protein protein chips as a segment and maybe how you see this subsegment evolving within the category over the next several years.

Speaker 3

Yeah. Look, I I think there are a couple of I think protein is is certainly a a place where all of us look. I feel like I've been in the meat and cheese business for a long before many years ago, and protein snacking was a big driver. Look, I think the consumer interest will remain high in the category, and it's really how do you deliver a product that consumers want to buy with the benefits they want without a taste sacrifice. And so it's an area that we'll certainly look at, much like we look at high flavor and spicy in the natural channel or I mean, sorry, in the convenience channel or non seed oils in the natural channel.

Speaker 3

Where the consumer wants to travel is a place that we're going to do our best to meet those needs. So more to come, I think, on that. But I think, obviously, it's an area among many, that we are that we look at and that we see a lot of consumer interest in.

Speaker 12

Great. Thank you so much. I'll pass it on.

Speaker 2

Thanks, Ben.

Operator

And that concludes our Q and A session. I would like to turn the conference back over to Howard for closing remarks.

Speaker 3

Yes. First of all, thank you all for joining us in Q2. I think if you went back to where we've been as a company over the last couple of years and the promises that we made in Investor Day, I think that you continue to see those results coming through in our numbers. We had promised productivity. We promised a more efficient network.

Speaker 3

We promised gross margin and EBITDA expansion and brand support and westward expansion. And if you look across what just produced and what we've done through the first half, I think we are doing what we've set out to do. I appreciate everybody's time, and I look forward to seeing you all in Q3.

Operator

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

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