Lifeway Foods Inc (LWAY) 2019 Q4 法說會逐字稿

Good afternoon. Welcome to Lifeway Foods' business update call. On the call with me today is Julie Smolyansky, Chief Executive Officer. By now, everyone should have access to the press release that went out this evening. If you have not received this release, it is available on the Investor Relations portion of Lifeway's website at www.lifewaykifer.com. A recording of this call will be available on the Company's website.

Before we begin, we would like to remind everyone that prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response. The words believe, expect, anticipate and other similar expressions generally identify forward-looking statements. These statements do not guarantee future performance and therefore undue reliance should not be placed on them. 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 release or call. All of the forward-looking statements contained herein speak only as of the date of this call. And with that, I would like to turn the call over to Lifeway's Chief Executive Officer, Julie Smolyansky.

Thank you, Madeline, and good afternoon to everyone joining us. Thank you, as always, for your interest in Lifeway Foods. On behalf of everyone at Lifeway, I would like to first express our deepest sympathies to all that were affected and have been affected by COVID-19, and thank you to all those in supply chain as well as those working to keep people safe through this crisis. The health, safety, and well-being of our employees as well as local and national communities remains our steadfast priority during this time of unprecedented uncertainty and crisis, and we have taken all necessary precautions to safely meet our consumers' needs.

Today, I will review how we are responding to COVID-19 and its impact on consumer behavior. Spending on groceries has increased significantly during COVID-19, with restaurants and away-from-home food sales accounting for 50% of all food consumption, closing and shifting primarily to retail grocery and at-home consumption. During the week ending March 15, 2020, grocery store sales were up 79% year over year.

Within grocery, e-commerce, where Lifeway products are also sold, continues to grow rapidly as both a convenient and safe option in the time of social distancing. According to Earnest Research, Instacart, Amazon and Walmart grocery delivery sales all jumped by at least two-thirds versus a year ago in the week of March 2. As more states implemented shelter-in-place orders, Instacart saw their orders surge 150% in March.

The major consumer shift to online grocery is likely to continue throughout recovery and afterwards as it gains more traction among consumers. To meet these accelerated supply demands and changing shopping behaviors, we have been in constant communication with our retailers and have made the appropriate adjustments to our supply chain. Our customers remain our top priority, and we want to make sure they always have access to Lifeway products, especially in a time where gut health, immune support, mental health, and overall wellness is more important than ever.

During this period, we have also seen positive sales trends within the dairy industry. US retail dairy purchases were up 57.8% year over year during the week ended March 15 according to IRI. While the surge in purchases can be attributed to dairy products being fridge staples, studies show that many people find dairy products convey a sense of comfort and normalcy, leading an increase in their sales in times of uncertainty. We saw this in the recession of 2008 and are seeing it again in 2020.

Recent IRI data also shows that 40% of Americans are more proactively taking care of their physical and emotional health, and 17% are consuming more immunity-supporting products such as probiotics, kefir, and vitamins. This data correlates to gut health being the fastest-growing trend within dairy. Studies have shown that gut bacteria naturally regulates the immune system and mental health system by producing beneficial chemicals and increasing microbiome diversity. As a natural probiotic, kefir supports a healthy gut microbiome, providing 70% of immune defense from the gut. While doctors project the COVID vaccine is still months away, we see more people turning to gut bacteria products for their essential role in their wellness. This is also supported by the recent surge in kefir and immune support searches on Google.

In addition to the benefits gut bacteria and kefir have on physical health, recent studies have shown the benefits can also have on mental health. The gut-mind connection is strong, and we are now seeing that kefir can help reduce stress, depression, and anxiety with 90% of serotonin for mental health coming from the gut. When you have a strong and healthy gut, you're able to manipulate your mental health. Our mental health is just as important as our physical health, especially at these challenging times, and we are proud to provide a product that fulfills both needs of the consumer.

To adapt to the current need for probiotic products, we have increased our kefir production. We also understand the importance of sustainable and environmental positive packaging and has been able to utilize old labeling that would have otherwise been destroyed to meet the surging needs of charitable organizations. This allows us to meet accelerated demand for our products in both environmental and timely manner. None of these initiatives would be possible without our hard-working employees in our production and warehouse facilities, so we are instituting the Lifeway Heroes Commitment Award, an hourly bonus in recognition of their incredible work.

We have also taken additional precautionary measures to ensure the highest standard of cleanliness at all facilities and our kefir shop locations, protecting the well-being of our employees and customers. In addition, Lifeway is providing donations to singer-songwriter Jewel's Inspiring Children, Mount Sinai Hospital, Meals on Wheels Chicago, Lakeview Pantry, Food Bank for New York City, and countless other local and national food pantries and organizations to help ensure first responders and those in need have access to the microbiome-supporting products and are able to nourish themselves and their families. To date, Lifeway has donated over 45,000 servings of kefir, and we plan to continue providing additional products for as long as needed.

As a financial update, we expect preliminary unaudited first-quarter 2020 net sales to increase 2% to 4% as compared to the first quarter of 2019. And within the month of March alone, net sales were up 13% year over year. We are also pleased with our strong start to 2020 and believe Lifeway is well-positioned for long-term growth and value creation as we serve consumers looking for increased self-care, immunity and gut health options during this time of global health crisis and uncertainty.

Thank you for listening to this call today and for your interest in Lifeway. We hope everyone will continue to remain safe, and we look forward to updating you on our progress on our next call. Have a good day.