Oil-Dri Corporation of America (ODC) 2021 Q1 法說會逐字稿

Welcome to the 2020 Annual Meeting for Oil-Dri Corporation of America. Our host for today's call is Leslie Garber, Manager of Investor Relations. (Operator Instructions)

I will now turn the call over to your host, Leslie Garber, you may begin.

Good morning. Due to the current pandemic, we are conducting this meeting virtually to ensure everyone's health and safety. By hosting this meeting via live webcast, we are able to be more inclusive, reach a greater number of our stockholders and save costs. On your screen under Meeting Materials, you will find the meeting agenda, rules of conduct, list of stockholders of record and Oil-Dri's proxy statement and annual report.

During the meeting today, we will be covering the election of directors and 2 other proposals. Next will be the business presentations and financial review, followed by time for Q&A. We ask that you submit your questions online under the Ask a Question field on your screen. Only stockholders of record are able to ask questions during the meeting. Stockholders will also be able to vote online by clicking on the Vote Here button on your screen.

Now it is my pleasure to introduce our General Counsel and Secretary, Laura Scheland, who will conduct the formal portion of today's meeting.

Good morning, ladies and gentlemen. I now call to order the 2020 Annual Meeting of Stockholders of Oil-Dri Corporation of America to conduct the formal business set forth in the notice of meeting and proxy statement. Commencing on October 27, 2020, a notice regarding the availability of proxy materials or a copy of the proxy materials was mailed to all Oil-Dri stockholders of record as of the close of business on October 9, 2020, which is the record date fixed by Oil-Dri's Board of Directors for the determination of stockholders entitled to notice of and to vote at the meeting. Broadridge Financial Solutions, Inc. has delivered an affidavit confirming the foregoing. Oil-Dri has appointed Peter Sablich of CT Hagberg, to serve as the inspector of election for this meeting. He is present and has taken the oath of office.

As of October 9, 2020, the record date for this meeting, there were 5,384,560 shares of Oil-Dri's common stock and 2,770,599 shares of Oil-Dri's Class B stock outstanding. Holders of our common stock are entitled to vote one-to-one vote per share. And holders of our Class B stock are entitled to 10 votes per share and generally vote together without regard to class.

A quorum is present at this meeting if holders of a majority of our common stock and Class B stock outstanding and entitled to vote are present in person or at webcast or represented by proxy. Thus, the number of votes necessary to constitute a quorum at this meeting is 13,080,276 votes. Mr. Sablich has informed me that there are more than such number of votes represented at this meeting. Therefore, I declare there is a quorum present for purposes of transacting business.

Now I will present the matters to be voted upon. If any stockholder would like to make a comment regarding any of the proposals, please submit your comment through the Ask a Question field in the web portal, and we will review any comments on the proposals themselves after all proposals have been presented. I'll move to the first proposal.

As described in the proxy statement, the first item of business is the election of 8 directors. The proxy statement listed Oil-Dri's nominees for directors, each of whom currently serves as a Director of Oil-Dri. Those nominees are Daniel S. Jaffee, Ellen-Blair Chube, Paul M. Hindsley, Michael A. Nemeroff, George C. Roeth, Allan H. Selig, Paul E. Suckow and Lawrence E. Washow.

The second item of business is the ratification of the appointment of Grant Thornton LLP as Oil-Dri's independent auditor for the fiscal year ended -- ending July 31, 2021. The Audit Committee of the Board of Directors of Oil-Dri has appointed Grant Thornton to serve as the company's independent auditors for fiscal year 2021 and has directed that the appointment be submitted for ratification by the stockholders at this meeting.

The third order of business is the approval, on an advisory basis, of the compensation of the named executive officers disclosed in the proxy statement.

At this time, we'll check for and review any comments on the proposals that have been submitted. It looks like no comments have been received. So we will proceed with opening the polls.

It is now 9:35 a.m. on December 8, 2020, and the polls are now open. Any stockholder who hasn't yet voted or wishes to change their vote, may do so by clicking on Vote Here button on your screen. Stockholders who have sent in proxies or voted via telephone or internet and who do not want to change their vote, do not need to take any further actions.

While we allow time for stockholders who haven't already done so to complete their voting, I'll take the time now to remind you that the business presentation and any other commentary by any of Oil-Dri's employees today may contain forward-looking statements of expected future performance. Any such forward-looking statements are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially. We've highlighted a number of important risk factors that may affect our future performance in our SEC filings, including our annual report for the fiscal year ended July 31, 2020. We urge you to review and consider those risk factors carefully in evaluating the company's comments and in evaluating any investment in Oil-Dri stock. Copies of our SEC filings are available through the company or online.

All right. One last minute to finish voting. Okay. At this point, the polls are closed, and I will now report the preliminary results of the voting. We will be reporting the final vote results in a Form 8-K to be filed within 4 business days.

As described in the proxy statement, a Director may only be elected by a plurality of votes cast. The 8 nominees who receive the largest number of votes will be elected. We have been informed by the inspector of election that the preliminary vote report shows that the 8 candidates nominated by Oil-Dri received the largest number of votes.

Regarding the second item of business, an affirmative majority of the votes represented at this meeting is necessary for ratification of the appointment of Grant Thornton as Oil-Dri's independent auditor for the fiscal year ending July 31, 2021. We have been informed by the inspector of election that the preliminary vote report shows that such ratification received more than a majority of the votes represented at this meeting.

For the third item of business, we have been informed by the inspector of election that the preliminary vote report shows that an affirmative majority of the votes represented at this meeting approve the compensation of the named executive officers by advisory vote.

This completes the business to be conducted at this meeting. There being no further business to come before the meeting, the 2020 Annual Meeting of Stockholders of Oil-Dri Corporation is now adjourned.

I am now happy to introduce Dan Jaffee, our President and Chief Executive Officer, to kick off our business presentations and financial review.

Thank you, Laura. Hello, and welcome, everybody. And first and foremost, thanks for recounting the vote for us. And since it went my way, I will not be making unsubstantiated claims of voter fraud or suing any of our electorates. So I'm happy to hear we were properly voted in, and I will honor the vote.

Fiscal 2020 is truly a year that none of us will ever forget. And we always say here at the company that winning at Oil-Dri is a team game, and this year exemplified that to an incredible level. And I just want to make sure, I thank, start by thanking and then finish by thanking the Oil-Dri team globally because none of this could have happened without them, and it is truly my honor to be leading such a great group of people who share core values and then work every day to create value from sorbent minerals for our investors.

And this year, we had the dual charge of not just keeping everybody fiscally healthy but also physically healthy. And so we have been virtual since March for all our non-frontline workers. And then our front-line workers have been coming in every day, and we do strictly adhere to all social distancing. We clean the plant 3 times a day. We do a super cleaning on the weekends. And knock on wood, to date, we have had a few COVID -- teammates who have had COVID, but to our knowledge, they didn't get it at Oil-Dri. They got it somewhere else. And because of our policy of letting people stay home and recover and sequester and so forth quarantine have not brought it into our facility. So I just want to thank everybody for keeping Oil-Dri fiscally and physically healthy.

And it allowed us to raise our dividend for the 17th year in a row, which was our way of thanking our shareholders for their loyal support. At the same time, because we delivered such an incredible year, we were actually able to pay double bonus for all of our 800-plus teammates worldwide, and it just feels really good to be able to navigate this pandemic. And sometimes they say, it's better to be lucky than good. And my grandpa, Nick, used to always say, the harder I work, the luckier I get, whichever led to our luck of being essential, that no one thought about that before. And now I don't think anyone will ever forget again, whether or not the businesses they happen to be in are essential or the businesses they happen to be investing in are essential because you could be the greatest team in the world and the greatest CEO in the world. And if you're running a movie theater business or a cruise line or something like that, your business is hurting. Because nothing -- everything is grounded at this point in time.

So I feel very fortunate that our products have been tied forever to food and to pets, and I think we've all seen the trend in pets, and you'll be hearing from Jessica Moskowitz, but our free 4-legged friends are always important to us. But in times of stress and pressure, they're even more important to us. And with people living at home with their family and kids and so forth, adoptions went through the roof. As many of you know, I've been -- have the pleasure of serving on the Board of the Anticruelty Society for over 20 years, the Midwest largest shelter. And we actually ran out of dogs in April. They all got adopted and our cat population is way down as well. So it's just -- we're finding forever homes for our 4-legged friends, and that makes us feel good as well.

As I said, winning at Oil-Dri is a team game, and I always like to highlight the new Vice Presidents during the year because an investment in Oil-Dri really is an investment in our people. We have 2 new Vice Presidents during the year. So I'm going to highlight them right now. First is Rachel Bellante. She is our Vice President of Sales for Non-Foods. And Rachel received her B.A. from Wisconsin-Madison. She cut her teeth, getting great brand experience at Miller Brewing Company, PepsiCo, Dannon, Dr. Pepper, my favorite. And Rachel, by the way, if you can get me Diet Dr Pepper Cherry, I'd be forever in your debt. I can't seem to find it anymore and Snapple in category management and sales, and she's also had private label experience with Heartland Food Products. And as you well know, we -- our reason to be -- our unique positioning in the cat litter category is that we not only sell popularly priced and high-performing branded items, but we also partner up with retailers from coast to coast to provide their own brand, their private label. And so her dual experience makes her uniquely qualified to be our VP of Sales and Non-Foods. Also, as many of you know, in the consumer products industry, the days of schmoozing the buyers and wining and dining them is over. It is now all about data management. It is all about helping them better run their categories so that they can look better and advance their careers. And so her background in syndicated data management, analysis and insights with IRI and Nielsen, again, makes her a fact-based seller. And as we always like to say at Oil-Dri, everyone is entitled to their opinion, but they're not entitled to the facts. And so fact-based selling is always fantastic. Her role now with us is we're entrusting our largest and most important cat litter business to her, among our most important. She's got Walmart, Target, Meyer, and she's been with us 1.5 years, and I look forward to her being with us for years and years to come. So Rachel, congratulations and thank you for being our VP of Sales in Non-Foods.

And then over on the other side, as you well know, our other incredible growth opportunity is in Amlan International, and Fred Kao has joined us recently as our Vice President of Global Sales. He received his Bachelor of Science and Poultry Science from the University of Arkansas, so he is a razorback. He has had over 20 years' experience in the poultry industry, all with primary breeding companies. He's got global experience, the U.S., Europe, Middle East, Africa and Asia. He recently -- before coming to us, he was the Managing Director of the Asia Pacific region for Cobb-Vantress, one of the largest poultry producers in the world, if not the largest. And for us, he's been -- already been able to hit the ground sprinting. He's responsible for setting strategy for our sales team globally. This includes sales and technical support. It aligns our regional marketing strategy with Amlan's global strategy, and Fred is like our seal of approval because he's joined us, we have been able to recruit and onboard just an incredible, what I call, a dream team, and we've been able to rapidly enhance our skill set in our sales team, thanks to Fred. They initially see us because of Fred and then they get involved with our lab and our science and our data, and that seals them on the fact that we are sitting on a gold mine, and it's up to us to figure out how to monetize that and mine that.

And for those of you who saw the news release, I was recently demoted. I am now running the Amlan International business. And very excited to do it. I did the same thing when we invented lightweight cat litter and got it up and off the ground and then was very happy to hand that off into the able hands of Jessica Moskowitz with and her team, and they're doing such a great job, as you can tell from the news release that now I can focus on Amlan and get that up and off the ground. And so I'm happy to roll up my sleeves, really understand it in a granular way. And then I will be handing that off when it's ready to someone who is better suited than I am to do the daily blocking and tackling that's necessary. But right now, a lot of it is about strategy setting and global positioning. And Fred and I are working daily, if not hourly, together to make that happen. So Fred, thank you for joining Oil-Dri. Like I said, you've hit the ground sprinting, and it's really been a pleasure to work with you directly, and I'm glad we're getting the ability to do that.

So those are our 2 new Vice Presidents. At this point in time, I would like to turn it over to Susan Kreh, our Chief Financial Officer, and she will walk you through some of our financial highlights.

Thank you, Dan, and I know you love to sometimes add color on the finance stuff, so feel free to jump in. It's a privilege to be here today at our first ever virtual annual meeting on behalf of my teammates heard at Oil-Dri to share the financial results of our record fiscal year in 2020 as well as our strong first quarter of fiscal 2021.

Fiscal 2020 was a record year for Oil-Dri, both for net sales and net income, and momentum continued to carry into the first quarter of fiscal 2021, which had the highest net sales of any of Oil-Dri's first quarters.

As I proceed through these slides, I will be sharing a look back at the past decade of performance trends as well as focusing on our first quarter results.

So let's start by looking at 10 years of net sales growth. Noting the stronger growth in the past 2 years, driven by our retail and wholesale products group, where we are seeing the benefit of our strategic focus on the lightweight and the private label segments of the cat litter market.

Looking at the first quarter of fiscal 2021, the $76 million in first quarter net sales represents year-over-year growth of 7% and is driven by 9% growth in our retail and wholesale products group accompanied by 4% growth in our business-to-business products group were strong sales of our agricultural products were partially offset by a year-over-year reduction in net sales of our Amlan products. As Dan mentioned, we have made some key organizational changes in our Amlan business to better position us to serve the animal health market and Dan has refocused the team on the execution of our animal health products strategy.

Taking a 10-year look at our tons sold, you can see the downward impact as we very purposefully continue to focus on our mission of creating value through sorbent minerals. We continue to review our product portfolio to wean out products that no longer achieve our mission and value creation while developing new products that do create the additional value for our customers.

And as we look at net sales per ton, we see the 10-year impact of focusing on creating value because while volume has decreased 16% over the past 10 years, our net sales per ton has increased from $244 to $375 per ton, an increase of 54%. And that continued focus led to a net sales per ton of $383 in the first quarter of fiscal 2021, an all-time record for Oil-Dri.

Right. Applause here. And not only are we driving growth in our net sales per ton, we are driving even stronger growth at a 10-year compound annual growth rate of 6% in our gross profit per ton, a key profitability metric that we use to manage the performance of our business. In fact, the $100 gross profit per ton that we achieved in fiscal year 2020 was an all-time high for Oil-Dri, and we continued that momentum into the first quarter of fiscal 2021, delivering gross profit per ton of $102.

Next, you can see that our strong growth in gross profit per ton over the past decade has translated into an even stronger 10-year compound annual growth rate of 8.6% on net income per ton. The $25 of net income per ton is another all-time record for Oil-Dri.

Looking at our first quarter performance, gross profit of $20.3 million was $400,000 higher than the same quarter in the prior year. At the same time, our selling, general and administrative expenses were down by $700,000, due primarily to reduced travel and related expenses and some timing shift in advertising. With our first quarter net income attributable to Oil-Dri of $4 million, which is a 5% increase over the same quarter in the prior year, we generated a strong $20 net income per ton in the quarter.

On an earnings per basic common share basis, we came off a record year at $2.70 per share to deliver $0.57 per share in the first quarter, up $0.06 per share over the first quarter last year.

Next, we see the 10-year delivery of dividends per share that are both predictable and are growing. The dividend per share during our first quarter rose to $0.26 from $0.25 per share, marking, as Dan noted earlier, 17 consecutive years of growth in the dividends we paid to our shareholders.

We continue to maintain a strong balance sheet and our solid financial performance enables us to invest on multiple fronts. In addition to the return to our shareholders through dividends, we fund new product development through R&D. We maintain our plants and we fund cost reduction opportunities in those plants through our CapEx. And in fiscal year 2020, we repurchased 5.5 million of our outstanding shares. From a liquidity standpoint, Oil-Dri is well positioned with a low level of debt and with a $75 million shelf financing arrangement that is already in place that should enable us to have quicker access to funding when the right investment opportunity arises.

And speaking of opportunities, with the focus and alignment on our key strategies in cat litter and animal health and with some key investments that have been made in technology, in organizational capacity and in leadership combined with the strong financial performance of our business, we are eager to pursue the right investment opportunities when they become available.

And with that summary, it is my pleasure to turn this over to Molly Vandenheuvel, our Chief Operating Officer.

Thank you, Susan. Good morning. As Susan mentioned, I'm Molly VandenHeuvel, the Chief Operating Officer at Oil-Dri. And I also want to start the discussion with a COVID recap and impact. Dan did summarize some of this, but I'll get into a little bit more detail.

So 2020 was a tumultuous year. But it is times like these where the true values in the core of the company become evident, and at Oil-Dri's core is focused on keeping our teammates and our business healthy. And as you heard from Susan, we did keep our business very healthy, and I'll talk about how we kept our teammates healthy and how we kept our business operations running.

So first of all, being an essential business was a key component. We are essential through many of our applications, to name a few. We're part of the food supply chain and oil purification. We supply antibiotic alternatives for animal health. And of course, cat litter is still essential for cat owners, more so now that we're all inside at home. So we needed to make sure that we kept our business running well, keeping us healthy. Our teammates have been flat out amazing, and we have done what we can to support them. Their physical safety, financial health and emotional well-being have been at top of our priority list. At the start of the pandemic, we pivoted quickly. Anyone that was not directly needed for production worked remotely. We had a paradigm here before the pandemic that many of these roles in the past just could not be effective remotely, such as our very important customer service representative. But we leveraged many of our teammates and many of our functions and many of our processes to make the adjustment and break that paradigm. And we ensured a rapid and successful transition that has reinforced us something we say often, and which Dan even said earlier, is winning at Oil-Dri is a team game.

So for our teammates still on the front line, some of the things we have done at the production facilities and our R&D lab to keep our teammates safe include deep cleaning processes, so one shown here, I'll show you here. So one shown in this picture. Social distancing requirements and online video meetings, even often when we're at the same location, and of course, mask wearing, and in most cases, this is 100% of the time while on property. As you can see, we had some specific Oil-Dri masks that we have made. So these actions have been successful, and we prevented any outbreak or transmission at Oil-Dri.

So through this transition, we had no major impact to customer service and in some cases, we shipped and produce in record quantities. So not only has Oil-Dri survived his pandemic, we worked as a team to thrive and we'll continue to do so.

Okay. So with that, let's talk a little bit about operations, obviously, within this past year. So last year, I reviewed the sales and operations planning process we were implementing at Oil-Dri. As a reminder, this is a holistic process on how we run the business. It has a regular cadence of meetings at each month and tools and processes to better our end-to-end and cross-functional decision-making.

So it turns out that having this foundation prior to the pandemic has been instrumental in our success this year. So it has really helped us through the online transition and keeps us organized and focused, and it's a tighter process for communication, data sharing and overall resolution. So there's a lot of things that we've implemented in the last year, and I want to brag about just a few that we've implemented that I'll talk about. That's part of the S&OP process.

So the first one is the first review meeting is the portfolio management review. So we spent a lot of time on this, and we now have a very robust list of potential new items for all of our divisions in various project stages. We have spent a lot of time redefining the current project success criteria and ideating many new really breakthrough and growth generating product ideas for this lift. Projects still must meet financial hurdles at each stage and have detailed time lines that are managed to keep us on track. We're setting ourselves up for a healthy future growth with new product solutions that create value from sorbent minerals. We also have a monthly demand process. It's a consolidated set of demand forecast that is forward-looking in around the 12 to 18-month horizon, and it utilizes the ERP or enterprise resource planning system, JDE, that we implemented 2 years ago, so we're further leveraging that symptom system that was implemented. That gets (inaudible) supply on a monthly basis.

We've also done a lot of improvements in the supply area, and I'm just going to give you 1 today is now we actually have what's called a rough-cut capacity planning process and tools in place. So this lets us look at how much capacity is needed by product platform by month, looking out in the 12- to 18-month horizon. This has allowed us to see potential capacity gaps quite early and then develop plans to close these gaps. This is one tool that's enabled service level improvements and better utilizes our sometimes expensive capacity throughout the year.

So I also want to talk about results in the operations world. So last year, I shared, I focus on our main areas in supply chain operations around the 4 Cs, customer, cost, cash and capability. So how did we do in those areas? So the first one is the customer. And as you can see, that's both internal and external. And the internal customer is our teammates. And as I mentioned in the COVID update, we were able to continue to support our teammates through this pandemic. For our external customers, we have new metrics that are tracking and improving against -- we are tracking improvement against, including case fill rate, on-time as promised and on-time is ordered. And I'm very pleased to say that we saw a step-change improvement in all of those metrics in fiscal '20 as compared to fiscal '19. Our focus on quality has also improved, with many new metrics, and for example, one of them that's been continually improving is our consumer complaints per million units is at a record low and still continuing to improve.

The next area is cost. So how did we do in cost? The simple answer here is that we took out $5 million of cost in the supply chain in 2020, helping to improve gross profit with the bottom line adjustment. The not simple answer is that took an incredible amount of effort and coordination from the entire team with hundreds of savings projects completed and still hundreds underway. So really great results in cost helping us overall.

The third is cash. So our cash and inventory position as a whole did not significantly change, has slightly reduced. But I will say that mix and active inventory has improved considerably. We spent a lot of time rightsizing the working capital that we have. We have focused on inventory by SKU, and we've reduced our obsolete inventory, improving both service and costs.

And then last but not least is capability. So the supply chain and operations team and Oil-Dri overall has implemented numerous processes to sustain these results and really too many to even start to list, things like cross-functional service meetings, and of course, S&OP, as I talked earlier. And this has really built us a strong foundation for continual improvement in the 4 Cs, for the foreseeable future.

So with that, I'd like to hand it off to Jessica Moskowitz who is our VP and General Manager for our Consumer Products division.

Thank you, Molly. Hello. Good morning to everyone. My name is Jessica Moskowitz, and as Molly mentioned, I'm the Vice President and General Manager of the Consumer Products division. Our consumer division continues to post strong growth in 2021, coming off of an 8% net sales growth in 2020. Net sales were up 12% in Q1 2021, driven primarily by gains in our branded scoop cat litter and private label cat litter businesses.

These gains reflect continued focus against 3 key pillars, the first of which is creating value through vertical integration. Our inhibited access to premium lightweight clay mines across the country drives value for Oil-Dri, but it also drives value from our customer partners and our pet parent consumers. Our vertical integration, coupled with our 80-plus percent year history and expertise in cat litter have provided with us with a real meaningful point of difference.

Secondly, we continue to invest resources with a focus on continuous improvement in quality, ensuring that we're delighting consumers by offering them great products at a great value. And thirdly, our team, we celebrate and embrace our role as a cat litter that cares in both the long term through our decades-long commitment to giving back to animal causes, but also in the day-to-day decisions and strategies that we set as a business.

From a product perspective, on the cat litter side, we've been intentionally focused on expanding and growing the lightweight portion of our business, for all of the reasons we've been talking about since we launched lightweight in 2012.

Firstly, lightweight cat litter addresses a key pain point for cat litter consumers. Cat litter is traditionally very heavy. Second, our vertical integration and lightweight materials allows us to uniquely offer this premium benefit to consumers at a value. And thirdly, as you'll see on the right, lightweight not only benefits the consumer, but also the entire supply chain, meaning less weight, less freight and ultimately less trucks on the road.

Through that focus on lightweight, we continue to see growth across both our private label cat litter, both via new customer acquisition and organic growth as well as in our branded portfolio. On the branded side, we continue to focus on our best-performing lightweight products. Thanks to an impressive cross-functional team effort, this year, we launched 2 new items under our best-performing formula, Natural care and Bacterial Odor Control. Both products combined a 25% lighter formula with a 10-day odor control called out by a newly formed Max Power badge.

We're using those wins to further fuel our growth and to help continue refine our lightweight strategy into the future. Our lightweight learnings have been impetus behind the addition of a new pillar to our strategy surrounding the launch of a new line of flushable cat litters. So you might ask why we're really focused on flushable. Well, let's go back to the foundation of our success in lightweight. As with lightweight, we're starting with a key consumer pain point, handling and disposing of cat litter. We know 30-plus percent of consumers are keeping their litter box in their bathrooms, and with our flushable cat litter, consumers can just scoop and flush. But the reality is today, most cat litters aren't flexible. So consumers are scooping, putting it in a bag, bagging up the litter and then throwing it in the garbage. So for example, one consumer we spoke with was in high-rise apartment. He scoops the cat litter, puts it in a bag, walks the clumps to the other side of this high-rise building to then use the garbage chute. With more consumers at home, close quarters are feeling closer and consumers recognize now more than ever the value of just scooping and flushing.

Second, also like lightweight, we have access to minerals that are inherently flushable. Meaning that we can offer this premium benefit to consumers at a value. And finally, being flushable is better for consumers, but it also means less waste in landfills.

Just as it sounds, our flushable formula was especially formulated to just scoop and flesh, but consumers don't typically think of cat litter as flushable, and that's because traditional litters develop hard clumps that create blockage in a toilet pipe. You can see that in the image on the left. Our flushable litter, shown in the image on the right, is unique in that it clumps and it's (inaudible), but dissolves once it's dispersed into a toilet pipe making it safe to flush.

As we mentioned before, the consumers are beginning to see the benefits of flushable litters. Today, only about 1.4% of points of distribution are dedicated to flushable product. But 5.6% of buyers are already purchasing flushable products, and 8% of consumers are actually looking for and seeking flushable products. This clearly creates not only an opportunity for distribution upside but also consumer pull-through and velocity upside once these products start to gain distribution. Furthermore, while surveys show that 8% of consumers are seeking flushability, we believe that the percentage in places like urban areas is much higher, where there's no basement or no garage. And is that as flexibility becomes available and more marketed, this percentage will only go up. Look at the 30% of consumers that already have a litter box in their bathroom and don't even realize that they can flush their cat litter.

We plan to support flushable with a highly targeted marketing campaign geared towards those consumers who are already looking for a flushable -- who are looking for a flushable alternatives. Both our media plans as well as creative will reflect this focus. Our media plan will be digitally focused with a combination of digital tactics like social media, video, sampling and social influencers. And our creative will focus on how easy flushable cat litter is to use by just scooping and flushing. Consumers can just flush it and forget it. Further, we'll tie into insight that many consumers are sharing small -- are sharing spaces, sometimes small with their furry friends and being able to flush your cat litter at least more time at a friend's house.

In closing, I'd like to thank the entire Division 3 team. When we talk about growth drivers, I can't think of a more important and critical one the team. We continue to invest to elevate our team, and I'm so proud and honored to work with such a dedicated, driven and down to earth team group of teammates that ultimately has helped us become the cat litter that cares. Thank you.

And with that, I'll turn it over to Fred Kao from Amlan International.

Thank you, Jessica. And thank you, Dan, for the introduction earlier. Good morning. I'm Fred Kao. I'm the Vice President of Global Sales for Amlan. I'm here to talk about opportunity for Oil-Dri's unique mineral to improve global food production by sharing our most exciting animal health product. And while it has so much potential to make a huge impact in this $3 billion antibiotic world when the trend is going towards no antibiotic ever for many more countries. China as an example, started that in July 2020.

On the feature of building America aired in September, our CEO, Dan Jaffee, emphasizes the importance of our unique mineral to capture the animal health market for years to come by saying mother nature puts everything on this earth, and we need to survive. And our Amlan International businesses are nearing the use of mineral technology to reduce and even eliminate antibiotics used to promote growth in animal protein production. So what set Amlan apart, the key differentiators. Not only does Amlan has the best scientists working in our innovation center, we have a growing portfolio, and we have the most important it factor. Which is our mineral technology. We have the minimal technology that is beyond any competitors that we face in the marketplaces. Please allow me to elaborate.

The value of vertical integration let's take it a little further to know why we have the significant advantages over other similar products in the market by knowing what Oil-Dri represents in this very important integrated business for animal health products. Number one, our mining reserve. We have hundreds of years of reserve that we do not have to worry about running low on our most precious raw material. Number two, not many companies out there can say that control the raw material that we do. This is such an important factor as we are not dependent, we are independent to ensure product quality as well. Number three, we are a mineral company. All we do are evolving around our minerals. And with 80 years experience as a mining company, all we have to do is do what we do best. Our activated mineral are not only treating the animals strongest challenges, but we can actually prevent it from happening by disrupting bacterial communication. This mode of action is (inaudible), which inhibits the bacteria from (inaudible) each other and take over the hosts. Not only does our mineral able to absorb, but they can also absorb by tension of the bacterial molecule to the solid particle of mineral.

Our first defines the harmful toxic and suite them outside of the body to protect the animals, but we can actually try to prevent it from happening in the first place. And all these things are done with only our activated mineral comparing to other more costly products in the market, where our combined additives are needed just to do the same job. So how does it work? A simplified way of saying is our minimal acts as a magnet in the guts of the animal.

So mycotoxins, bacterial toxin and biotoxin are all very common challenges in animal protein production. What we do is to bind our mineral with the feed and feed it to the animals. We are focusing on how the additives can help with this. One faster animals is absorb toxins within the guts and discrete the bonded toxin to the feces. All natural advantages. When using our product, customers enjoy a nice 2-point FCR, which is called fee conversion ratio. This 2-point FCR advantages is in a nice sized company processing roughly 5 million of boilers per week means an additional profit or a saving of USD 3.12 million per year. By calculating the total fee saved modified by the price of the fee to get a total saving for additional profits, as illustrated in the slide.

How will we execute the key tactics? So our growth strategy with Amlan: number one, identify opportunities; number two, grow the team with strategic placement; number three, target key players, direct customers, all distributors in each country and region; number four, align marketing initiatives with sales objectives; number five, accelerate growth with both new and existing product portfolio.

This is just a slide showing no antibiotic ever that was shown before. The key account opportunities. While Asia is so important in our growing plan is shown in this slide. That is why in the last few weeks, we're able to get positive feedback from our very own Varium with the #1 and #2 animal protein producers in the country of the Philippines. We received a similar response from the top 5 protein producers in Thailand as well. The soon to be 17 million (inaudible) company in China just doubled our orders in 2021 last month. And our continual push for North American market, just give us our newest customer with sizable orders the last few weeks to kick off our key account strategy that we set up to do just a few months ago.

So growing our team. The size of the circle indicates what the percent of the key account opportunities are in the previous slide, with emphasis on getting the right person for our target area. We hired [Dr. Harold Zo] for China, Mr. Heath Wessels for North America division to boost our existing team on the ground with Ms.

Margarita Santa For Latin America and Ms. Clare Torralba for APAC. With our plan to hire the Regional Director of sales in the Europe, Middle East and Africa in FY '22, to complete the sales team as our next phase of expansion in the world.

The growth strategies. We're hiring. We plan to triple our size of team members in the upcoming years. Plus, we recently acquired 9 sales license from different parts of the world to push through with our B2B sales strategy with accelerating marketing effort and technical service-related services provided to the customers. We position ourselves in the right place to grow rapidly.

Our go-to-market strategy. To ensure that we are not forgetting about the small and medium farmers, we are partnering with 3 major animal health pharma companies in the world in various different countries to ensure our products can reach every corner of the animal industry by selling both branded and private label products. The diagnostic service and biologics and one under development will only strengthen our position as we start push forward with direct sales strategy to our key accounts in the markets. The direct sales to key accounts. Starting FY '20, Amlan began targeting key accounts, medium, large, poultry and swine integrators in approximately 30 strategic countries with approximately 200 different companies. As explained in the last slide, this is just reemphasize what was discussed and how important it is to set up our regional business hubs within control of the product registration and to support our sales process going forward.

Innovation. Mineral technology is our core competency and our competitive advantage. By building upon it, we're developing natural fee additive solution for drug-free protein production.

With the last slide here, I would like to show you how ready we are as we show our long-term development and adoption process. It can take up to 12 years just to get the product developed and out of the door, including product evaluation, meaning the trials and validation periods with different users internationally. Another 1 to 3 years of key account adoption can take the whole product acceptability to a longer than desired period of the time. So the good thing is that we have quite a few products in the pipeline that we'll release continuously in upcoming years because we know the importance of keeping something new to meet the animal, the end user and the customers' needs.

Thank you very much. With that, I'll pass it back to our CEO, Dan Jaffee.

Fred, thank you, and I'm really impressed at your quick grasp of our business. And we're going to turn it over to Q&A. We've got a bunch of questions about Amlan and the changes, and you answered a lot of what's out there. But Leslie, why don't you read the questions, and then we'll...

Yes. We have 2 related questions. I'm going to read them both together. The first one is from Robert Smith, Center for Performance Investing. And he asked where was the direction failure at Amlan? And how will your approach be different? Do you believe you will be able to accomplish substantive progress during the current fiscal year? And then the second related question is from Ethan Star, a private investor. Aside from the pandemic, what are the biggest challenges in growing Amlan sales and why will you succeed where others have not?

Great. Thank you. And I'm going to take the 50,000 foot. I think you heard a lot from Fred, but I'm going to emphasize what he was talking about. And I'm going to analogize it to what went on with lightweight cat litter. Before we revolutionized cat litter, cat litter was denominated on a price per pound basis, those with the lowest price per pound were perceived to be the best value. Despite the fact that not a consumer in America or the world used it by pound, they all used it by volume.

So what that incentivized was a race to the bottom, putting in the most dense materials you could actually adding rock so that you could get your weight up, your cost down and your price per pound perceived value to be enhanced. What we did was turn the entire category on its head to the advantage of the consumer who uses it by volume and the environment because we were able to cut the carbon footprint by 50% because we're able to put twice as many units on a truck and cut the number of trucks going into our retailers' distribution centers in half. So it's been to their advantage, too.

So it's been a win-win-win for everybody, except the entrenched players in the category. And it really took a couple of things. It took a contrarian mind, and it took sort of unilateral control. I mean it just did. I mean, I was in a unique position to make this happen because I am very much a contrarian. And I had control of the company.

And so I can take a $35 million bet that we could turn a USD 2 billion market and frankly, a global market on its head, which is pretty daunting. And most people, if they were betting their careers, wouldn't do it. Because the odds of success are low and the adds of ending up with a career limiting move are high. But I was in that unique position. And so we did it, and you see the results. And the best is yet to come. I mean the snowball continues to grow.

Well, over in Amlan, we were again being -- letting the competition define the playing field. So they were painting minerals in general as a negative. And so our prior regime was sort of getting sucked into fighting the battle on the field that the competition wanted to fight. Well, that's not a winning strategy. The key is we want to make them come to our field. And what we control is what Fred said, we have quality all the way to the source. Nobody can say that. You all hear from farm to table. Well, we control it from mine to farm. And so we're the ultimate in controlling our quality. And our unique mineral is the reason why our products are working so well and do something that really nobody else in the globe is doing. Antibiotics, by definition, antibiotics is killing the bacteria. The bacteria are not the problem. I'm reading a great book that I highly recommend, called the Great Influenza, which covers Spanish flu of 1918 because everything that's happening today happened then and only worse. And in the book, they literally talk about how -- and this is Simon Flexner, who is the first head of the Rockefeller Institute in New York.

And they talk about how it isn't -- they figured out, it isn't the bacteria that's the problem. It's the toxins they emit. And that's exactly what our clay does. It binds the toxins. It's an ad and absorbent and so when you put it in the animal's gut, it binds the toxins, which would be causing the problem. The animal excretes amount, which is a fancy way of saying poops them out and the animal thrives. And our dual mode of action is also what Fred talked about, is quorum sensing. These bacteria don't take over the host until they recognize that there are enough of these bad actors in the neighborhood to cause a major problem. And so our play actually inhibits quorum sensing. And we have intellectual property around that.

And so the integrator should be using our clay not only reactively when there's an outbreak, but prophylactically to prevent it in the first place. And so our dual mode of action is a unique reason for us to be successful. And Fred also talked about the feed conversion ratio in 2x. We have to monetize it. Creating value from sorbent minerals means creating value for our customers, not for Oil-Dri. We get the benefit in that value creation because there has to be enough of it for them where they're happy to pay us a price where we can make our margin, and they still win in the equation.

Well, we are doing a much better job now of making sure we communicate the value to the consumer. We communicate why our clay is not just there, but is the essential reason for our success. And then finally, focus and maniacally disciplined and focused. And I got involved and immediately, it occurred to me, look, yes, there's a $3 billion global opportunity around antibiotic replacement. 40% of that is in poultry. That's a $1.2 billion opportunity for this tiny little less than $300 million company.

We've got Fred who's a poultry expert. He mentioned Heath and Harald, who are both poultry experts. We have a team of existing poultry experts. And yes, we have swine, and we're not going to walk away from those businesses. But clearly, Fred and his team can get sales calls and open doors at every major player around the country.

And they understand how our products are used, how the nutritionists and the decision-makers are making their decisions in order to decide how to move away from antibiotics and where do they go to. And so we're going to lean heavily into poultry, just like we're leaning heavily into lightweight, even though the majority of the category is still heavy, we are winning every day in lightweight and now we're going to be winning heavily in flushability.

So I hope that answers your question. Really, what I'm bringing to the division, first of all, is rapid decision-making. It cuts out a layer. So it's never going to be as good as if I'm hands on involved because I can make the calls, working with Fred, immediately freeing up resources or working with Molly and the IC or the supply chain, I'm getting decisions made that, frankly, were stuck in bureaucracy, and we're such a little company. It's ironic that we have bureaucracy, but we did have red tape and I've been able to immediately come through that just through common sense and just from decision-making power, no great genius on my own.

So I feel very, very confident that you're going to see an improvement. I think Bob's question was, I won't hit it exactly, I'll paraphrase it, are you going to show meaningful benefits this year? And the answer is absolutely yes, but it depends how you define it.

I think we're going to be taking a step or 2 back before we take about 800 steps forward. We've got to fix some things on our go-to-market strategy. We believe our solutions, because we are basic, we are in a great position to sell the big players direct. The key to that is having the right distribution channels so that we can sell the big players direct.

And so we've got to own our own licenses. We've got to do all product registrations, things like that. So we've got all sorts of work to do. So that we're in a better position to sell the biggest players directly. So we will make huge progress during fiscal '21 while the financial progress is going to come from Jessica and the cat litter business. So that by the time '22, '23 and '24 roll around, then the Amlan team will be coming over the hill to help save the day.

So we're, again, always thankful that we have such a diverse business that we have -- everything is doing well. The ag business and the -- while the Pro's Choice business has been hurt by COVID, obviously, our sports turf, the industrial business is doing well. Our fluids purification business is doing well. So fiscal '21 will be a solid financial year, and it will be a pivotal year for the future of Amlan.

So Leslie, what else do we have?

Okay. We have next question from John Bair from Ascend Wealth Advisors. And he says, congrats on a great year in a difficult time. Are there any new markets in animal health outside of poultry and swine that R&D efforts are either being evaluated or being actively pursued? If so, what might they be? And how far along in the process are you to possibly launch any new products?

Yes. And I hope my competition is listening because I'll tell you exactly what we're going to do so that they can ford all our efforts. John, you know me well, great question, but I'm not going to answer it. And I think I did sort of answer you that we are really going to be leaning into poultry. So I think being great at one species is better than being average at all species. So we are really leaning into poultry, and we're going to continue to do so. So next. I think we had a question on the supply chain. Let's go there.

We do. Ethan Star had the next question. The $5 million in savings in the supply chain is very impressive. Could you please give some examples of how this was achieved and what the prospects are for any possible future saving?

Molly, take it away.

Sure. Yes. So I look at savings in 3 main buckets: logistics, procurement and manufacturing. And in fiscal '20, by far, the big savings were in logistics. Some of that is market driven, but I will say that our VP of logistics, J.T. Harrison, really capitalized on the market last year and then wrote some really great contracts for us. But he also led a considerable amount of savings projects that either reduced miles or extra handling or additional costs.

So for example, we were able to consolidate some of our ancillary warehouses reduced mileage handling in some extra cost. And that's the theme that he's driven last year. And then for logistics this year, as we read our first quarter results, we actually are going to have to offset some -- a pretty significant increases in the market. And so we do have some other similar type logistics savings projects where we've reduced handling mileage and improved our utilization across the board. For manufacturing, we've really seen some overall process improvements.

So Aaron Christiansen, our VP manufacturing and that team have really put a foundational process in place, optimize the way we run our business, and we'll continue to do so. And then in fiscal '21, in the manufacturing area, we actually will be starting up some pretty significant capital that we spent that we'll see the savings for. The first is we are looking at alternative energy in our cash facility, solar panels and microturbines as some pretty great projects. And then we have some automation and optimization in one of our jug lines. So that will be pretty significant.

And then the last bucket is in procurement, and that is, again, a great focus by our procurement team to really look at opportunities to either renegotiate, find different suppliers, or in some cases, just redesign the product to better optimize the cost. So we've seen great progress in both last year and this.

Great. Thank you. Leslie. Next question.

Yes. Next question comes from Ethan Star. I'm pleased with the growth in cat litter sales. What opportunities are there for continued sales growth and the addition of new retail customers?

Great. Jessica, do you want to take this one?

Sure. Ethan, thanks for the question. So as we look at our business, we definitely continue to see opportunities for both customer acquisition as well as organic growth. How we look at our business in terms of change and reacting to change? Clearly, consumers are rapidly changing, and we need to make sure that we're adapting, but we're also doing so in a very focused, data-driven way. So like we talked about in the presentation, we continue to be keenly focused on lightweight and flushability.

And frankly, it's really about looking at what's working and what not. In today's world, we're very fortunate to have a lot of data and a lot of opportunities to evaluate what's working and what not. And it sounds simple, but it's really about evaluating what's working and doubling down on that as well as reacting to consumers and understanding how consumers are changing and then how we can change in a way that it's really advantageous to us, and that really benefits us and where we have a right to win.

Looking at marketing, looking at sales, understanding what's working and then doubling down both from a resource dollars perspective as well as investing against human resources and team against these key efforts that are really working. We think in lightweight, there's a lot more runway in terms of growth, both again, through customer acquisition, both on the private label side as well as the branded side.

Great. Great answer. Thank you, Jessica. And we are out of questions, and I want to thank you all, and I promised to finish the way I started, which is thanking the Oil-Dri teammates globally for keeping not only ourselves fiscally and physically healthy, but also our investors. A lot of people rely on our dividend and appreciate our dividend and keeping Oil-Dri. So a lot of companies had to cut their dividend. And some cut it just worried that things were going to happen because they had enough debt and so forth. We entered into the pandemic, that's the part that wasn't lucky. We've always run our business very, very fiscally soundly and we entered into the pandemic in great financial shape. So we didn't panic. We just said, let's see how this plays out, and it played out very well. We saw a surge in cat litter. We saw a continued demand in almost all businesses.

We're starting to see a weakening in our jet fuel purification business as global miles flown has gone down, and that's not a surprise. And we are cautiously optimistic that with the vaccine, which I guess, is starting in the U.K. this week, which is exciting, that if that starts to roll out globally, that it will come to the U.S., and we will see pitchers and catchers' report sometime in April, maybe they'll push the season back a month, maybe it will be May. But then that will mean that universities and municipalities and Park districts will be doing the same. And then our Pro's Choice business will pop back sometime in the late spring, early summer of next year.

So thank you for your continued support, and we look forward to talking to you after our next quarter.

That concludes today's conference. Thank you for your participation, and have a pleasant day. Goodbye.