Lifeway Foods Inc (LWAY) 2010 Q4 法說會逐字稿

Greetings, and welcome to the Lifeway Foods Inc. fourth quarter and fiscal year 2010 earnings conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to your host Mr. John Mills. Thank you, you may begin.

Great. Thank you. Good afternoon, everyone, and welcome to Lifeway Foods' fourth quarter and fiscal year 2010 earnings conference call. On the call with me today are Julie Smolyansky, Chief Executive Officer; and Ed Smolyansky, Chief Financial Officer. Right now everyone should have access to the fourth quarter earnings release for the period ending December 31, 2010, which went out this afternoon at approximately 4.05 PM Eastern time. If you have not received the release, it is available on the Investor Relations portion of Lifeway's website at www.lifeway.net.

This call is being webcast and a replay will be available on the Company's website as well. Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and, therefore, undue reliance should not be placed on them. Similar descriptions of Lifeway's objectives, strategies, plans, goals or targets contained herein are also considered forward-looking statements. Actual results could differ materially from those projected in any forward-looking statements.

Lifeway assumes no obligation to update any forward-looking projections that may be made in today's press release or call posted on their website. And with that, I'd like to turn the call over to Lifeway's CEO, Julie. Please go ahead, Julie.

Thank you, John. Thank you for joining us today. We are extremely pleased with our overall performance in 2010. We expanded our product offerings, retail shelf space, and increased the number of retail partners. In addition, because of our strong cash flow and earnings we were able to increase strategic investments in our advertising and marketing campaigns.

We achieved a sales growth of 11% in the fourth quarter and our gross profit was over $3 million. These increases were offset by our strategic decision to increase advertising and marketing investments during the quarter as we are seeing a tremendous opportunity to increase customer awareness as our industry continues to gain notoriety in health and wellness as well as mainstream retailers and club stores. During 2010, we increased retail distribution in leading retailers including 600 Wal-Marts, as well as Costco and Safeway and expanded our SKU count in many of our existing retailers.

For example, one of our new products, BioKefir, which is a 3-ounce shot, has 100% distribution in Whole Foods and is now shipping to the majority of our other customers. For those of you that are new to our story, I would like to take a moment to provide you with an overview of our business and how I believe we are well positioned for strong top and bottom line growth for many years to come. Our Company began to 25 years ago and we started manufacturing Kefir, a milk-based cultured probiotic drink.

At that time, not many people in the United States had ever heard of Kefir or its many beneficial health attributes . Today, the Kefir industry represents approximately $70 million in annual sales and we believe the industry is growing in excess of 20% as new people everyday are learning for the first time about Kefir and its many benefits. Lifeway is the country's leading manufacturer of Kefir with multiple flavors and varieties that include low fat, whole milk and organic versions, as well as a children's line called ProBugs.

Our product is currently available in 12 flavors across many categories and we offer our drink in 32-ounce, 8-ounce and 3-ounce bottles that can be found in the dairy sections of supermarkets, grocery stores, gourmet shops, natural food markets, club stores, delicatessens and convenience stores. In addition to our current offerings inspired by the success of frozen Kefir made for Lifeway, Starfruit Cafe, the new guilt-free indulgence will be for the first time a Kefir product , the first frozen [key piece] in the freezer aisle, ready to take home to feed your sweet tooth as well as your appetite for healthy eating.

With a tart, tangy taste similar to frozen yogurt or a California style frozen yogurt, also known as [throw yo], Lifeway's frozen Kefir will begin shipping next week in strawberry, pomegranate, mango and original flavors. All four varieties will come in a one-pint container selling for $4.49 to $4.99. And we'll also offer single serve container in the original flavor. Like Lifeway's well-known Kefir beverages and Starfruit Frozen Kefir, Lifeway Frozen Kefir will contain ten live probiotic cultures, up to three times more than yogurt with roughly half the calories that help stimulate digestion and support the immune system.

It is a creamy low fat, fat belly power food that also provides all-natural gluten-free and 99% lactose-free benefits. Frozen yogurt continues to be a strong growth segment and our Starfruit Cafe business is riding the same wave. Our same-store sales were nearly 50% last year and our average store ticket rose 20%. We've seen a demand expanding from an afternoon snack to a breakfast and lunch meal replacement. Taking the product to grocery stores around the country with the introduction of Lifeway Frozen Kefir is the next logical step. You will be able to find our Frozen Kefir in many retailers including but not limited to Ralphs, Kroger, Wegmans and Whole Foods.

We are also expanding our Starfruit Cafe this spring with a location within the Chicago Cubs ballpark at Wrigley Field. We believe this will be a tremendous marketing and sales opportunity for our frozen product and symbolizes the crossover of Kefir into mainstream. You can't get any more American than being in one of the most storied ballparks in all of the United States. As I mentioned, during the latter half of 2010 we increased our marketing and advertising investment in order to benefit from the increased national attention in Kefir and educate the consumer on our many years of innovation and great taste.

We've dramatically increased customer awareness of Kefir and the great example of this is our large Facebook following, as well as our increased website traffic by over 200% compared to 2009. We've begun a very large outreach to leading chefs around the world. We're also a very large sponsor of the Mercedes-Benz fashion week in New York during February. The response from this group of trendsetters and influential taste makers was phenomenal. As we enter 2011, we believe there are a number of reasons we're well-positioned to achieve record sales and profitability this year.

First, our strategic decision to increase advertising investment during the latter half of 2010 combined with our new and innovative products including Frozen Kefir has us well-positioned for top line growth. Secondly, we believe the strong operating platform we've built is now positioned to improve our operating leverage resulting in improved operating margin. Also, we believe the USDA's recent decision to exempt Kefir beverages from the Class I milk classification beginning January 1, 2011 will reduce our costs associated with our key ingredient, milk, which is about 80% of our product cost of goods sold by approximately 10%.

Specifically, for the first quarter of 2011 we expect to achieve sales growth of approximately 20% which will equate to about $20 million in sales. Now I would like to turn the call over to Ed to review our fourth quarter and full year 2010 results in more detail.

Thanks, Julie. I will now review our financial results for the fourth quarter and fiscal year 2010 in a little bit more detail. Gross sales for the three months ended December 31, 2010 increased by 11% to just over $16.1 million compared to $14.5 million in 2009. This increase, again, is primarily attributable to increased sales and consumer awareness of our Kefir lines, as well as ProBugs, Organic kids Kefir, and BioKefir and all the other varieties of Kefir that we do produce.

Gross profit for the fourth quarter of 2010 had a small dip of 5% to $3 million compared to $3.1 million in the quarter last year. In the same quarter last year. Our gross profit margin decreased by 300 basis points to about $18.3 million in 2010's fourth quarter versus about 21.4% in the same quarter last year. Gross profit was impacted by increased prices of conventional milk, our largest raw material, and higher cost of other raw materials such as the cost of transportation and other petroleum-based production products and supplies, such as labels, bottles, caps, et cetera.

The cost of milk was approximately 30% higher in the fourth quarter of 2010 when compared to that same period in 2009. As Julie mentioned, starting January 1, 2011 the US began classifying Kefir drinks into the yogurt category because they do not directly compete with fluid milk products. Therefore, the milk used to produce Kefir should not be priced at that fluid milk level. Kefir is often consumed as a dairy snack or a meal replacement similar to that of yogurt and, therefore, should be priced at the Class II milk which historically has been the way yogurt is priced. This change from Class I to Class II costing should have a positive impact on what the Company pays for its key ingredient, milk, which Julie had said is about 80% of our products cost of goods sold.

In addition to having a positive affect on gross margins, these improved input costs should allow all of our high-value probiotic rich Kefir products to be more competitive with other non-Class I milk products such as yogurts in the marketplace. This expected increase in cash flow will provide greater financial flexibility enabling us to continue to invest in our marketing efforts and retain cash for future initiatives as well as pay down debt. Operating expenses as a percent of sales in the fourth quarter were approximately 22% in 2010's fourth quarter compared to 21% in the same period in 2009. Again, this increase is primarily attributable to a planned increase in selling expenses due to our advertising and marketing spend which has driven awareness of our expanded product offerings.

Advertising and promotional costs were approximately $1 million during the fourth quarter of 2010 compared to $160,000 for the same period in 2009. We expect that going forward advertising and marketing and promotional expenditures to be about 9% to 10% of sales in the coming quarters as we continue to increase our marketing initiatives to further drive our revenue. Our operating expenses also increased due to higher general and administrative costs as a result of non-executive bonuses to our now close to 300 nationwide employee base. And that cost was around $300,000 that was paid in the fourth quarter of 2011 that was absent in the fourth quarter of 2009.

In addition, general and administrative expenses include $95,000 of non-cash stock-based expense. In the coming year in fiscal 2011, we plan to build a quarterly reserve for the [risk] bonus pool versus recognizing it completely in the fourth quarter. Our goal is to spread it out over the course of the year versus recognizing it in one period. Overall, we reported a slight loss of around $235,000 or $0.01 per diluted share compared to net income of about $120,000 or $0.01 per diluted share in the fourth quarter of 2009. Again, the fourth quarter net income loss is primarily due to our strategic decision to increase our marketing and advertising spend.

Now I'll briefly focus on our full year 2010 financial results. For fiscal year 2010 our sales increased approximately 9.3% to $63.5 million compared to gross sales of $58.1 million in 2009. This is, again, primarily attributable to increase of our flagship Kefir line as well as our other Kefir drinks. Gross profit for 2010, again, decreased slightly 3.4% to $20.2 million compared to gross profit of $20.9 million in the same period in 2009.

Our gross profit decreased about 420 basis points to 31.8% in 2010 versus 36% in 2009. As for the -- similar to the quarter (inaudible) the decrease in gross profit margin is, again, primarily the result of the increased cost of milk in 2010 which is our biggest raw material. And, again, that was about 30% higher last year versus 2009. Operating expenses as a percentage of sales were approximately 22% in 2010 compared to 21% in 2009. Again, this increase is primarily attributable to a $1.6 million or 60% increase in selling expenses due to increased advertising in order to expand and drive awareness of our products.

Total advertising costs increased by $2.7 million to $4.4 million in 2010 when compared to total advertising and promotional costs of $1.7 million in 2009. As I mentioned earlier, we expect advertising and promotional expenditures to be approximately 9% to 10% of sales in fiscal 2011. As for total net income, total net income for the year was $3.6 million, or $0.22 per share in 2010, compared to $5.6 million or $0.33 per share in 2009. We generated net cash provided by operating activities of $5.6 million for the full year of 2010 and ended the year with cash and cash equivalents of $3.2 million compared to only $630,000 in 2009 as a result of many factors which include continued strong operating cash flows.

Also, regarding our balance sheet, in December 2010 we made the strategic decision to move most of our investments to cash and cash equivalents from investments in order to continue to fund our growth in the future. During 2010, we paid down approximately $2.7 million in short- and long-term notes payable, as well as about $600,000 during the fourth quarter of 2010. That concludes my remarks on the financial overview. Now I'd like to turn back the call over to Julie Smolyansky.

Questions now.

I think that does end our prepared remarks and then I think we will just open it up to about 20 minutes or so of questions and answers.

Thank you. (Operator Instructions) One moment, please, while we poll for questions. Our first question comes from the line of Howard Halpern with Taglich Brothers. Please proceed with your question.

Good afternoon, guys. The $20 million in Q1 revenue, that is gross revenue is that correct?

Yes, that would be gross revenue and, again, you can expect the same sort of promotional allowances as we have always historically had. To continue on as we go.

Now, to get to that $20 million number, how many more stores are you shipping to versus what you shipped in the fourth quarter?

It is really hard to say. I can tell you that we haven't -- we haven't signed up a lot of new customers in the first quarter of 2011, or even in the fourth quarter of 2011. Basically, our last major kind of customer that we would consider new or non-organic would be Safeway which really started to ship at the end of the third quarter, the beginning of third quarter. But in the first quarter of 2011 it's been primarily organic growth. There have been, of course, increased number of stores here and there. But nothing -- not several thousand or even several hundred.

So, for the first quarter, the main driver is really just your traditional Kefir along with ProBugs and what kind of impact is the BioKefir having, is that generating in the millions?

Yes, I did forget to mention that. That is something that is considered a new product for 2011. There was an exclusive for Whole Foods which ended in December of 2010. So for the first quarter we began shipping to the rest of, basically the rest of the country. I don't have exact numbers on what BioKefir contributed to revenue in the first quarter.

But, obviously, it did contribute considering BioKefir was a new product in 2010. The other point to, that we want to get across for, the gross revenue in 2011, is that our ACV increased at least 10% on most of our major lines which means that the major stores that were report to companies like IRI and Nielsen, basically, what that means is the major SKUs that we have in those stores, the SKU offerings increased by 10%. So about 10%. The new stores may not have increased but the shelf space within the stores increased at a lot of those stores.

Okay. Are you also seeing, because I've seen it in Long Island, that your product in the Stop & Shop used to be on the [tippy] top shelf and now it's down to where people actually see it, on eye level. Is that a common occurrence throughout your network of stores that you're selling to?

Absolutely. As Kefir becomes more and more mainstream and more and more well known is going to naturally move into a place within the store that is more practical, has more eyeballs going towards it and is more attainable by the customer. We find, actually another interesting point for that is we find that a lot of the places where ProBugs now are going are at the very bottom where kids walk by. Kids are two or three feet tall and it makes perfect sense for them to have the product on the bottom shelf where they can easily pull it up.

I guess of the two products, your just traditional Kefir and the ProBugs, is ProBugs still growing fast, which one is growing faster?

I would say they are growing at the same pace. A lot of our products, even though some -- one of, some of the band brands might be more developed than the other, we're seeing really good growth in our new products as well as our traditional products that we haven't seen for the last three or four years. One of the bigger growth drivers for 2010 and 2009, where we grew about 10%, was new products and new stores. What we're seeing now the first quarter is that traditional, our top, call it, our top four or five SKUs of regular Lifeway Kefir that have been around for 15 years have really started to see large increases themselves of 15%, 20%, 25%.

Okay. And this $20 million in first quarter revenue you believe you are going to grow from that level in the next three quarters and beyond?

We are very optimistic that at the very least that becomes kind of our level -- our plateau level, our base level. We start to have now new products in our pipeline. So the Frozen Kefir which is starting to ship the first week of April is going to be 100% incremental to sales growth. Whatever revenue is generated by it, which we think is going to end up being another substantial product line for us, all of that is going to be incremental revenue growth because it is going into the freezer section versus possibly going next to our other products and cannibalizing them.

For the Frozen Kefir, is that nationwide in all of your customers or is that going to be slow in the beginning and then eventually get nationwide, say in a Whole Foods?

It's going to be nationwide very soon. The customers are coming to us to get it versus traditionally having to beg them to take it. So we are seeing a real shift in how the interest is for a new product. And that is why we are probably, it's probably the most highly anticipated new product -- new product introduction, even more so than a BioKefir or maybe even more so than a ProBugs.

Again, it's incremental. It's exciting. It's not something that we are just repackaging and maybe inputting another ingredient. It's a brand new offering.

In terms of gross margin, I know you have this switch because of the USDA. So just as a benchmark if the conventional milk stays at this current level, you believe that will be offset and gross margin should be about the same or a little better as long as we don't have huge increases overall?

Yes, of course. We saw in the fourth quarter in 2010 was basically similar gross margins across the board. A slight increase here and there. But the cost of our inputs definitely did rise. Hopefully, milk stays where it's at and we could see some sort of benefit from the reclassification. Obviously, if the whole built complex goes up 30% that will kind of take us down to par level. We are hoping it stays at par and we can come down a little bit further.

Okay. I will let someone else jump in. Thanks a lot.

Thank you. Our next question comes from the line of James Fronda with Sidoti & Co. Please proceed with your question.

Hey, guys. How are you?

Good.

Could you just talk a little more about what the advertising was actually spent on, I guess, a little more specific what is going on in the advertising costs?

Sure. It's a combination of all of our -- all of the different types of advertising and promotions that we do. A lot of it is direct with the retailers. We are not a large Company that has a huge advertising budget that pays for national ad campaigns or TV campaigns or things like that. A lot of it is grassroots. Things like working with the retailers, doing demos, couponing, obviously. Things like, again, setting up this tour that we are doing.

Even though the tour is commencing this year there's a lot of pre-planning and a lot of work that went into setting it up. Traditional, a lot of other things like these shows that we are doing. So we sponsored a large event like the Mercedes-Benz fashion week in New York where the product was a tremendous hit. We did the South Beach Food and Wine Festival. So we do a lot of these events and we're doing more and more of them. As the product has now national distribution we can go to different cities nationwide and people will be able to find the product.

Right, okay. And in terms of the gross margin have you as of late heard anything or gotten any feel from, I guess, farmers in terms of the milk prices and where they might be headed? I mean, will they continue to go up or have you heard anything on that front?

No, it's difficult to say. We do know that April prices are for us the highest of the year. But it looks like those April prices given the reclassification should bring us back down to some of the normalized levels of last year. If that's the case and April ends up being the highest month of the year that's probably going to be positive for us. If we do see something where, for instance, God forbid, something happens in the northwest with radiation or something moving from Japan, who knows, with people being afraid of their milk crop or something -- or northern California and the northwest.

Obviously, that's going to put pressure on the rest of the United States to fill that. That's a very unlikely situation but something like that could trigger something.

Okay. Can you disclose at all if there's any new products in the pipeline that are going to get rolled out soon by any chance?

We have several in the pipeline. Obviously, the frozen is the big one that will be happening for the next six to eight months. We are working on some other, call it, non-dairy-based probiotic items and we hope to have those launched by the end of the year. So we have a couple of good products, new products in the pipeline for this year, and don't forget, BioKefir is still considered a new product for the first quarter of 2011 because it was only just offered exclusively to Whole Foods last year.

So that's still kind of considered a new product. The frozen, obviously, going forward, and we have other new products which we may wait to roll out for 2012.

Okay, that's it. Thanks, guys.

Thank you. Our next question comes from the line of Anne Morrissy with GAMCO Investors. Please proceed with your question.

Hi, guys, most of my questions have already been asked. But can you tell me what your ad expense was in the third quarter of 2010?

Yes. Depending on how it's being classified or presented on the financial statements, we are traditionally for the fourth quarter in 2010, call it, ad and promotional spend ratio was at about 7% to 8%, maybe, or 9%. We are going to, obviously, increase that up to about 10%, maybe 11%, depending on what kind of projects we have going on. But if we spent $1 million in the fourth quarter and our net sales were approximately $16 million that ends up being around 7%, 7.5%.

Okay, okay. And also, with that rollout of Frozen Kefir has that required any additional capital expenditure? Huge machinery, new factory space, anything like that?

It has not required a capital expenditure but there were expenses, obviously, associated with the creation of the marketing strategy behind the graphics, copy, all those types of things.

But hard machinery equipment was not purchased for it.

Okay. And do you have a feel for a range of revenue for this year for Frozen Kefir that you think is reasonable?

I think it is too early to tell. We think it will be probably one of the best product launches we've ever had. But I think we will have a better idea come --

After the second quarter.

After the second quarter, exactly.

Okay.

We do believe it's a game changing product for us. We are highly optimistic on the success of it.

Okay, great, thank you.

Thanks.

Thank you. (Operator Instructions) Our next question comes from the line of Ivan Zwick with Raymond James Financial. Please proceed with your question.

Thank you. Most of my questions have been answered, but I do have a couple of things I do want to follow up and ask you on. The 7-Eleven, you had a release that you were in most of their stores now --

Correct.

Can you give us a little more flavor on that and what is this going to mean to you going forward and can you also give us an update on how many, if that's, whether that's 600 Wal-Mart stores or what you're in now or there is more?

Yes, for 7-Eleven it's not for us. I mean, it's convenience and we are in most of them in the United States. Obviously, some of them are franchise owned and they are not required to carry the product even though they are urged to. But I would say we are in a large percentage. What it means for the business, it's not a tremendous amount because when you get into these convenience stores the margins are almost zero on them. But they are there for brand exposure.

They are there for people that may traditionally have never seen or heard of Kefir and (inaudible) live in a very small place or they just don't go grocery shopping that often. It is really for brand exposure. It's more of a marketing tool to, again, increase your brand. In terms of revenue, it's not that significant. But it is an exciting place to be nonetheless. As far as Wal-Marts, we did expand, I believe, from 400 to 600 Wal-Marts in the Midwest area, the Supercenters the ones with the food outlet. And it's doing very, very well. So, hopefully, in the next -- the time that we go in to present or whatever we will be able to expand further.

Again, it is symbolic that there is success in the space that we are driving that success. And that they, Wal-Mart specifically, is very strategic when they increase the stores and their offerings and it's very symbolic that it's moving in the right direction. And also to just go back to comment on 7-Eleven. People who traditionally shop in convenience stores are not necessarily looking for a healthy product. So this is also a new venture and strategy for 7-Eleven. As we see the general trends of eating in America and around the world, we see that people want to eat healthy and they want to have healthy offerings. So along with all of the snack foods that you find, now there are healthy offerings. It's a marketing chance for us.

Also, is there any update on the Starfruit concept as far as maybe some new franchisees going forward? And also anything on what you're going to do in Canada that you'd mentioned in the past?

Sure. So with this new contract with Levy Group which operates -- you can go and check out Levy and what they do on the Internet. But as we now have a stronger relationship with Levy at Wrigley this opens up the door to enter into other stadiums, other venues and what not. So we are very excited at the possible momentum that we will gain from our exposure at Wrigley and with Levy. Specifically about --

For the specific franchises, we don't want to comment right now on that. There might be some news coming out in the future. So we will put that out when it does become available.

Okay, well, thank you. I'm really happy to see that you are doing on the marketing what you are. It seems to be really accelerating your growth and we needed that.

Sure. You also have to remember we are coming out of a recession when the sky was falling. We did pull back a little bit in the previous year. So here, we are ramping up again and it's our 25th-year anniversary.

We could've easily sat by the sidelines and made it just any other year. But the 25th-year anniversary is symbolic. We are looking backwards and forwards in equal measures. We are extremely excited where we've been, how we've taken it. And the future, where we can go with it.

The Frozen Kefir is, for example, a great example of the future. But as you'll notice the core items have a new logo with the 25th-year anniversary. The messaging behind that is we've been here for 25 years, this is not a fad. This is something that's here to stay, that has quality behind it.

And there are certainly could be new players but we've fought off any competition. We're clearly dominating in drinkables.

Well, good luck going forward and I think this Frozen Kefir can be a huge item. I've tasted it and I think it's quite awesome.

Thank you.

Thank you. We have time for one more question. [Robert Rodden] with [FSC Securities.] Please proceed with your question.

Hi, Julie, Ed, pleasure. Thank you for taking my call. I just want -- and I've talked with Ed a couple of times here. The margins I'm very concerned about, the drop in margins. And I'm just curious in terms of the milk situation. I've read your release on the change. Is there any way to hedge the milk with -- definitely commodity costs really on the consumer front taking off in grains and commodities. And other meat products taken off. Is there any way to hedge the milk?

Well, of course, there's ways to hedge different commodities and stuff like that. We don't have that heavy into it because we feel that over the long term, any money that you may make by hedging, you might lose by the price -- you might net yourself out over the course of the long term.

Okay.

What we strive to do is say to ourselves, there's a certain amount of cost of goods sold that we're just not going to be able to change. It is a food item and cows produce milk and over the long term if you look at any kind of milk pricing situation you'll see, 12, 24 months you're at a stable price. The cost of milk is never going to be $10 a gallon. I hope not. And it's never going to be $0.10 a gallon like it was in 1950.

It kind of goes with inflation as our product does. We haven't had a price increase in five years -- or three or four years. How -- if prices do come up tremendously the way we hedge ourselves is by slowly increasing in very small increments the price that we charge our customers. Obviously, nobody likes to increase prices but that is how you hedge yourself. So the gross -- if you look at the gross margins over time, they end up flattening out because it is a food item. And --

It's relative to the other foods sold in the grocery store --

Yes, exactly. It's relative to the other foods sold and the ingredients are -- they are what they are.

Sure, sure. The other -- I'm out on the East Coast. So when you made the Fresh Made acquisition I was interested. I know in talking, how is that acquisition coming along?

The acquisition is coming along great. I mean, the revenues from it are consistent and stable. They are what they are when we purchased the Company. We've put out some new offerings and some new SKUs, so hopefully that will drive the growth a little bit for that brand. But it's a brand that has a very good margin system to it.

What would like to do is use any gains that we have from that operation and put them back into our marketing efforts. To grow Kefir -- the category Kefir -- and to grow the Lifeway brand in general. We don't want to focus on too many brands and spread ourselves thin. So Fresh Made, probably someone on the West Coast will never hear of it. Maybe not never, but in the next -- in the short run will probably not here if they go to the regular grocery stores. It is located on the West Coast but you have to kind of go to more of your delicatessen or niche stores.

I'm very excited about the expansion into the frozen, as one other caller mentioned. The other thing is the spring from that is, and Julie just mentioned it, there is a move towards this healthier food, healthier food groups, people are paying premium, as we know from the explosion in Whole Foods and Hain Group. And I hear all of the time on Jim Cramer, I'm an avid listener of some of his picks. Schools, have you guys reached out, I mean, with the Levy Group into the baseball. Has there been anything in the Chicago area with regard to getting some of the products into the schools?

Sure. One of our -- there's a charitable component to the 25th-year anniversary tour. And part of our charitable partner is Healthy Kids Challenge which focuses on bringing healthier foods to schools and children, specifically schools. We are one of the pieces of the curriculum that they are bringing to schools. The problem is that much of the school funding for food is a federal piece of our economy.

Unfortunately, what frames that is still cheaper foods with less quality ingredients. If you think about what you ate in school, I ate tater tots, hot dogs, pizza.

Sadly, yes.

Very sadly. It's absolutely a horrible situation in our school system. I don't think that the school system is quite ready to pay a premium. There is a movement towards that, obviously, with this particular president's agenda is to bring healthier eating towards children. We are moving in the right direction but it's slow in the school system.

This is really going to be the effort of parents pushing their school systems to bring in healthier offerings, to bring in natural and organic ingredients. As a parent, I am pushing this. As a provider and a believer that we should all be being healthier, more greens, more healthy dairy. Last saturated fats and things like that. This is where we are pushing.

And if you believe in the future of healthy foods, that that's where our public is going to be going with their eating habits, then this is a Company that you would believe in. If you think that we are going towards unhealthy eating then --

Sure. No. No. I fully support that. Just looking --

And I even think that some of those bigger companies, I won't name names, but some of the bigger, unhealthier brands, let's say, they are making dramatic changes towards their ingredients, towards the brands and the way that they are launching new items in the platform, and everyone is trying to launch healthier eating. There is a need for it.

It's a wonderful vision out there and I look forward to that. Again, I want to thank you for the work that you guys are doing. I appreciate the product. I love it. I'm a Wegmans buyer there, so I'll check out the new product line in the Wegmans. I did notice a shifting in price. They were running it in the store for [$2.99] and then I see it's back up to the normal price. Is that part of that promotional thing that you're talking about with advertising?

Well, yes, of course, we always like to give customers new opportunities to try the product, and have people who consistently buy the product. Sometimes have a good deal too. Everybody likes a good deal.

Great. Well, thanks so much, I appreciate it.

You're welcome.

Bye-bye.

Bye-bye.

Thank you. Ladies and gentlemen, I would now like to turn the conference back to management for any closing comments.

We look forward to a successful 2011. We hope that our shareholders and customers can come and possibly visit one of our tour stops. If you can't then you can follow us on Twitter, on Facebook, on Foursquare. We are very active in that space. We encourage everyone to keep up to date. Probably one of the best ways to keep up to date with what we are doing is on a daily basis. And we are ringing the bell on May 16, we invite everyone to join us in Times Square where we will be taking over the Street. And we are very excited about the future.

And with that, our call for the 2010 earnings is concluded. We will see everyone back on May 16. Thank you.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.