Those folks over there, could you guys grab a seat, please? Ivan, could you go tell him we want to get started. All right. Uh-oh, we hear battling dogs. Is that Steve's or Gala's dog over there making all the noise? It's not Shiloh. No. All right. Well, thank you. Thanks, everyone, for coming this morning. We appreciate you taking the time to come and hear a little bit more about Freshpet. I want to cover the material that we're going to cover today. There's 2 pieces. One is the earnings for 2019, the final earnings that we released. I'm going to give you a really, really quick run through on those in a minute. And then we're going to flip over and go into the Investor Day presentation that we'd like you all to hear about. I will give you a little bit of a warning in advance. The warning in advance is that we're going to go very deep on Freshpet today. And part of the reason we're going really deep is because we have an incredibly passionate group of people who are really expert in their area. And as a result, it's very hard to constrain them. But the reality is there's a lot of really good stuff that they want to share. The second reason that we're going to go very deep is because, as a company, we're keenly aware that our stock trades at a very, very high multiple. And that high multiple is justified by 3 reasons. Number one, investors believe that the long-term opportunity for Freshpet is enormous. Second, you believe in our ability to execute against that long-term plan. And three, the competitive moats that are built around this business are very significant. Those are what supports the stock price multiple that…

I'm actually going to ask Cathal Walsh, who is one of the other founders, who doesn't get to -- kind of get into -- in front of you guys quite as much, but I wanted to ask him to come up. So Cathal actually works with us in Europe. If you guys don't know him, he is a force of nature. And I mean that in every aspect of the word, and he's been an incredible partner. And the reality is we wouldn't be standing here today if he didn't contribute along the way. But we do want to recognize Dick for all his contributions. So Dick and I have actually worked together for 18 years, which is pretty amazing, across 2 different companies. And when you work with someone that long, you get to know that person really well. And when there are challenges and difficult and tough times, you really, really get to find out what someone's made of, and they don't make people any better than Dick. And I've worked with him for the 18 years, and we look forward to working together for many, many more years. He will obviously be involved in Freshpet. And who knows what else in the future he'll be involved in and pursuing. But along the way, quite honestly, Cathal and myself created many, many challenges and sometimes some difficult situations for Dick potentially. And Dick was always there to be supportive and helpful, and he'd always kind of help clean up a little bit for us. So we thought maybe it was appropriate to have a one of a kind, golden pooper scooper. And as you can see -- you may not be able to see in the back, but it does say "place large pile here." So once again,…

Thanks. I think the only similarity with me and Steve Jobs is our first name starts with an S and that's where it ends. But anyway, thank you so much, Billy. Thank you, guys, for being here. I know this is -- thank you for being here early. I know it's a long day. Hopefully, we'll kind of run through a lot of really helpful and interesting information over the course of the next couple of hours. We'll try and keep it light hearted. If not, you let me know, raise your hand if you want me to move slides faster, and I will do that. The other thing is, I know there's a burning question you all have, yes, everyone gets one of these shirts later today. Most important. I do want to thank our team. They -- everyone worked incredibly hard, not only on this but also just kind of getting ready for this, really developing a 5-year plan. I mean it's not -- you only get to do it every 5 years. So the reality is most of the time, you're hopefully working on the business and making sure the business is moving forward. So we've been kind of on an intense period with lots going on. So thank you guys, great work. Thank you guys for believing in us and coming along the way and participating with the progress the company has made over the years. So again, thank you all so much. And thank you to NASDAQ and our partners at ICR, who have been great helps too. Okay. So this is some of my pets. This is actually Piper when she was a puppy. And I have another cat, but she didn't make this photo, ran off, which you could probably understand. And I…

Thanks, Scott. Hi, everybody. As Scott mentioned, my name is John Speranza. I'm the Vice President of Marketing. These are my 4-legged children. And what's funny, I was putting this slide together, and I looked at the picture, and I was shocked at how it's captured the individual personality of each of our pets. Angus is down below. Angus is from New York City and is a rescue and has a little bit of that New York swagger, basically looking at the camera saying, "what are you looking at? What do you want from me?" Rosie is -- could spend the entire day basically just hugging and snuggling. And she didn't waste any time taking this opportunity to kind of catch a kiss. And then lastly, it's Whitey. Whitey is the last addition or latest addition into the Speranza household. A rescue cat and pure delight in tormenting both of the dogs. And as you see here, already plotting on, about to kind of jump on unsuspecting Angus. So those are my children. I will say this, they're all rescues. And when we brought them into our household, they were not in great shape. And they've -- fortunately, for them, they've been fed nothing but Freshpet. And we've seen firsthand the transformation, not only just from an overall health, but also a total well-being. And so this position for me and kind of heading up our marketing and advertising is a lot more than just a job. It's kind of like a personal mission to make sure that more and more pet parents get to experience the impact that we've seen personally within our household. And that's what I'm going to take you through today. It's going to be a lot more around the -- how are we leveraging marketing…

Thanks, Tom. Yes, so, Lisa and Gerardo are kind of a force of nature innovation team. Yes. Lisa again has classically-trained packaged goods experience. She's a marketer but she's an innovator at our core, and we feel like we've been really, really strong in innovation. Lisa has led many of the innovations over the past several years. Gerardo was one of the newer members of the organization and he brings an incredible capability and broadens our science, our knowledge of pets. Gerardo has actually worked at many of the larger pet companies around the world, and has just tremendous experience and these guys are going to wow us over the next couple of years by the innovation that they're bringing.

This gives you a little glimpse in our office. This is a product cutting review on a weekly basis. This is winning, and just getting a little experience with our new small dog roll that's coming out.

And this is Pinocchio and I. Pinocchio is a black lab. He's 10 year's old. He's getting a bit of a white beard. And at the weekends, I don't shave and I also get a bit of white beard. My wife was looking up to you know, looking at me and she said, you know, it is getting increasingly difficult for me to tell you two apart. So in case you're wondering I am the one on the right. I am going to tell you about the way we think, about what philosophic when it comes to making any product and the baseline is very simple. We think of three things. The first thing we think of is, we are going to do make this enjoyable for the pet. Then we think of these also needs to be healthy and nutritious for the pets. And the last thing is, we have to make those 3 things visible to the pet. And when you think about things from the perspective of the pet, the first thing that you have to realize and I know you already know this those kind of so much better than we do. But, the difficult thing to explain is, how much better? And to conceptualize, how much better they can actually smell. And I can give you some figures like, okay, those have 300 million of factory, where as we only have 6 million, and that's fine because they get more data. But these not only about getting data, it's how you process the data as well, right. And if you compare our brain to the dog, proportionally, the dog spends 40% more processing power to analyze the smell than we do, and he's not only that, is that their airway's anatomy is different from ours.…

Thank you. So Gerardo take you through that palatability, the bioavailability of our food, but what are pet parents really see, Scott touched on this just a little bit. Over 80% of our pet parents see a significant difference in their pet, that transformation, kind of what you've seen in our letters campaign. But what is it? Energy, I have brought my pup back, shiner coat, there's no stains under the eyes. There's a major transformation that's happening in pet parent's home. So if you see a transformation, I think you're going to be not surprised by our satisfaction stores. These are the green charts, the green bars 96,98,100, you're seeing that transformation. Many pet parents will say, I'm willing to pay more because if I could get a few more years in my dog's life, and that is also why we have really a good value. So I know Scott had shared opportunity for us to get pet parents like, is this worth of value? I will tell you getting more pet parents to see that transformation to them. It is certainly a good value. So Gerardo and my job in the future is really what is this all look like for 2025? How do we get 5 million more households to try FreshPet, and it's really about taking where we are today, looking at fresh real food to reimagine it. Fortunately, we have a lot of success in this. Think about our fresh in the kitchen, our small dog. The chart in the left shows how we brought a new households with this. I've been an innovation for sometime, I've seen how you create one cereal flavor and then the next and you just swap household from one flavor to the next. You'll be happy to know that…

2025, we've taking you through the marketing piece. We're taking you through the innovation piece. The next piece we're going to go through is accessibility and visibility, but, I see the pain on your faces. And I recommend that we take a short break and we'll have a hard startup back at 9:45.

All right, probably like a well-deserved break. Thank you guys for hanging with us. Alright, so we've taken you through our vision, our mission. We're taken you through our kind of long-term goal of having 5 million consumers in 2025. We've taken you through, how we're going to market to those consumers are? How we're going to market to those consumers, a little peak into how we think about innovation, not necessarily the exact innovation, but the innovation that will be bringing in the near-term. And then over the next several years and how we'll be thinking about it. And the next piece of that puzzle on how we get those 5 million consumers. We've got to improve our accessibility and visibility. But what does that mean? ACV is kind of the simplest, most common way we think about accessibility. So we're in a little over 50%, 52% ACV today that continues to grow every single year we're adding stores and it helps us to kind of broaden our ACV. But one of the other things we talked about is the ability to have more depth of distribution, second fridges. And I'll chat about that in a second. The next piece is how can we be accessible to even more people and that will be from an e-commerce standpoint. And Jake will be talking about that in a minute. I'll introduce Jake. All right. So accessibility and visibility. This is a really interesting and compelling chart. 67% of our stores have at least one large chiller today. When we started, the majority of our fridges were these waist height or chest height fridges of about 4 feet wide. Now 67% of them have a fridges 4 feet wide by about 7 feet high our typical kind of large fridge and…

So thanks again for everybody for coming out today. Today just want to give you guys a glimpse of just some of our results in e-commerce in 2019. And what we're looking at really from a path forward for 2020 and beyond. Before I jump into that, though there is been a lot of pictures of everyone with their dogs. I don't have dogs. But these are my 2 beautiful children. You have Tessa, she's 2.5 and Addison who is 10 months. Tessa is an absolute dog lover. Any time we go for a walk or we're at her cousins houses, Tessa be freaks out when there's dance around. So if you asked her, if she wanted dogs in the house, we probably have a shelter but within the first week. So just moving into e-commerce, just a little bit about, just how we think about e-commerce for Freshpet. Certainly a unique product. So we think about it in a different way. But as Bill mentioned earlier, more broadly, we want to be available anywhere in any way that pet parents want to buy pet food, right? And we think about that really within three distinct segments. The first is online fresh delivery. And really over the past year, the biggest development for us within that segment has been with AmazonFresh. So, traditionally you had to pay a monthly fee to participate and buy Freshpet within that network on their site. Back half of 2019, they officially dropped that fee for all prime subscribers. So we have much broader access to a much wider level of consumers really across the country. And we've seen some nice growth from that in the back half of the year and it will continue moving forward. The second area is last-mile delivery. And when…

So, I'm going to cover the next section, which is pretty straightforward. What is our potential? Do we share the idea of 5 million consumers of the next several years? How big in Freshpet be? And what we did is we actually use a pretty wide array of approaches. I would literally call it pretty much an all you can eat buffet for someone. This pretty much something for everyone in here. So we've actually tied again, we actually took 5 different approaches. These two were shared last week at some of the CAGNY presentation where we looked at some of the developer retailers that we had, and we did some extrapolation I'll share that. We looked at some markets that we're in and we also did some extrapolation around that to give us kind of an idea or some perspective on what the potential is. But then we also went back to what we've done and we've always focused on which is consumer. How many consumers are interested in the things that we're bringing to market are offering. So we use the consumer concept test. Basically, we showed people a one pager on this is what Freshpet this will go to the people that were unaware that people are talking about earlier, and we basically said, are you interested in this concept, and I'll share the results in a minute. They were very interesting. We also did consumer modeling, where this is a very standard approach. But basically you identify your consumers today. And you actually look at what how many of those consumers are like that out in the marketplace. So we've actually kind of looked at that's called prime prospect modeling. And then lastly, you looked at potential appear, we actually went and did a future projection.…

Thank you for that Scott. And I appreciate the opportunity to be here because it gives me a chance to do a lot more than just turning off a few light bulbs. And I'm very excited to share with you, the pets, people and planet initiative here at Freshpet. We believe that pets and people live better together, and Billy has touched on that a little bit earlier in the presentation. Scott's touched on it marketing touched on it. But there is an incredible bond between pets and their pet parents. And this picture I love this picture because the dog is basically as big as the woman is she sits there and enjoys this lovely small view of a lake. So what's going on here is not just a pretty picture of two people two beings enjoying a pretty view. There is a chemical pathway being developed here. And most of you probably heard of oxytocin. It's a love hormone that's used within the body to develop bond between a mother and a child, and also between pets and their pet parents. And I was reading an article and I love the way it was said, but it said that dogs have been so successful through evolution because they basically hijacked our oxytocin pathways so that we start thinking of them as children. When they look at us, it's scientifically proven that we get a boost in oxytocin. When we rub their ears, they get a boost in oxytocin, and that generates that bond, and creates an amazing relationship that has a number of great benefits. And these benefits shown here, whether it's lower cholesterol, lower triglycerides, decrease stress, those benefits come from the CDC website. So there's scientifically proven results of this powerful relationship. And what's so great…

The idea of sustainability is built into our proposition right from the get-go. And we're pleased with the progress we're continuing to make. Scott laid out for you in great detail that we see the opportunities to be a very big business. And the obvious question then becomes, how will we meet all that demand? So I want to talk about the strategies and then I will turn it over to our manufacturing experts to talk to you a little bit more about our progress. The strategies that we're using are pretty basic and simple. First is we've got a plan ahead. Obviously, our growth of late has been very, very robust. And so we're playing a little bit of catch up at this point. But our goal is to get to the place where we are actually ahead of demand, and demand or the capacity is no longer a limiter of our growth. The second is specialized. Our lines because we relatively small scale. We're in essence generalize lines, they produced a variety of products. The more we can make some of the lines specialized, the ability, increase the throughput, the efficiencies and the margins is pretty significant opportunity. Third is we want to diversify our supply. Many of you have asked us, geez, you have all your operations based in Bethlehem. What happens if there's a natural disaster or a weather event, something like that. So we'll talk about what we're doing to diversify the supply, not just where our facilities are, but where we've draw some of our input materials are. Fourth is phased. We don't want to get so far ahead of ourselves both from a spending perspective, but also from a building the sort of the infrastructure. We want to make sure it's a phase…

Alright, so we're going spend a few minutes Kitchen 2.0. And really, it started clear back in early 2017 when we started designing business facility. And it's kind of morphed into a artist rendering here and now it is totally come to come to life and it's a true building that we have on site. And Kitchens2.0 is in Bethlehem, Pennsylvania, right next to the existing Kitchen 1.0. And this picture here aerial shot come closely resembles the rendering that we just looked at a little bit ago. And you can see, walls are up. roof is going on, and we're making a lot of good progress. Knock on wood. We've had some good weather here lately. This allowed us to gain a little ground in the construction schedule. We do have our production equipment coming about mid-March to start being installed in the facility. On the inside facility, we have concrete going down and we've got about 75% of the floor going down inside of the building. And we are on track for a Q3 startup. And we've also have hiring and training programs in place. I was just talking with Don this morning, and we have about 20 of the 42 people that we need to get this started up at the end of Q3 are already in place. So we already have business programs going. When we started to design Kitchens 2.0, we wanted to keep three things kind of on the forefront of our minds. We wanted to increase team member safety. We wanted to increase product quality, and we wanted to lower our costs. And so we'll talk a little bit about how we're doing some of that. And on the safety side, we have a long list of things that we did to improve…

This is Maggie. Maggie joined our family all over 15 years ago. My wife and I thought we were getting a little puppy that would turn into a family dog. He's actually turned into a third daughter. So, she gets some of the other daughters complain that she gets a little better than they do, but they left home and she's stuck with us. So, we're very thankful Maggie and it's one of the reasons we talked about the need for capacity. So we talked a lot about Gen Z and millennials. But there's also a few of us out there that don't quite qualify for millennial. But do wear cool T-shirts, or aspire to wear cool T-shirts, and Maggie eats a lot of Freshpet. And we know there's a lot of other dogs to do the same. So we want to talk about our new location. I think we announced this morning it was at Ennis, Texas. And I thought we'd walk through how we picked Ennis, Texas just briefly. So we started with a blank canvas that included all 48 Continental United States and we looked at three primary criteria that we needed, availability of fresh chicken, availability of great talent and the opportunity to improve our particular outbound supply chain. So we started with this blank canvas looked at those three things and really spent a lot of time up front on what I would call a deselection process. And we deselected most of the United States and ended up with an area, kind of ran Georgia out through taxes. If you were a history buff, it would kind of look like mid-1800s cotton belt that provided all three of these things. And then we went from a de-selection process to more of a selection process. There's…

As enthusiastic bearded guy is Willie Everett, who's over there. He is the General Manager for our Ennis, Texas facility and he has bought a house in Ennis , Texas as of December. I have to tell you a quick little anecdote when Scott and I went down with Steve last April to check out Ennis and decide if this is where we wanted to make our second home. We had the mayor, the Head of the Chamber of Commerce, the city manager, the Head of the Hospital, the Head of the schools all meeting with us. We're sitting around a table and as soon as Scott introduced himself and said, I grew up on Long Island and I'm here the city manager's dog walked around in the middle of the table and took a dump on the floor. So New York City anyway. So I wanted to give you a quick view of but we love them. We thought it was a fabulous place and if I can say one thing and it is a great example where great leadership can deliver exceptional results. The leadership of that community over the last 15 or 20 years painted a vision for how to take an old community. That had been a boom town in the cotton days and the railroad days in the late 1800s and turn it into a revitalized community by investing in the community. They've done a phenomenal job and we're very thrilled to have our folks consider that our second home. In fact will end up being our biggest base of operations by the time we're fully done. But I want to give you a quick sense for how the capacity all comes together. Our existing kitchens 1.0 is $300 million in capacity. We added kitchen…

Thank you, Billy. All right. So as Billy shared, I am an animal lover. And so to start off, I have to introduce you to my two loves Aspen -- the very talented Aspen with two tennis balls in his mouth. The very loving Boulder, and the two of them actually super excited. This is a wagging tail to eat Freshpet and they were not before on Freshpet and they hated their food and they are very, very happy campers. Before I jump into a little bit more about me, I was practicing this weekend and I had my presentation printed and my daughter said "oh my god, oh my god," this is a dog let me look. And then she spotted that on the side of the Boulder picture that she was chopped out of the picture. So we then went on to a whole game of who do you love more? Do you love me more than Boulder? Do you love me more than Aspen? I had to explain to her that I love everybody differently. But she was okay with it. And so why else am I here? And from a career ambition perspective my objective was to join to become a CFO of a highly successful company. And so combining my personal passion with that career ambition is why I'm here at Freshpet. So I've been asked to talk about the benefits of scale for the business. And before I jump into that, I will say coming into the new finance leader into a company like this, you're very excited about finding the missing value. So you're really as I have '19 years at Unilever, another year at Nature's Bounty. My whole career has been around partnering with the business to find value creation. And so…

Thank you. Good morning everyone. How's everyone doing? So this is my dog. This is Jeannie. As I stare at her I feel the love hormones. She's a 8 year old pipal beside her about six years ago we rescued her from a local city shelter. She's amazing, she's my best friend, she's my life companion. And when my wife looks at me, she's my dinner date as well. Alright, so 2025 plan. I think everyone's going to the understand how the plan looks. At this point, Scott, Billy has done an amazing job discussing what our plan is to drive growth and get an additional $5 million, a 5 million households. But I want to learn a little bit more time talking about the investments that Freshpet is willing to make and ready to make, in order to support that growth. Those investments are going to span both the P&L and balance sheet. So if you look at the first item, look at CapEx spend, so obviously, everyone's you've seen that on the balance sheet, but we also have certain costs that goes the P&L, ramp up costs. And that's an investment that we make. Once we go ahead and start up a line or start up a plant, we have a very methodical approach to that start-up. So rather than just hiring people off the street and thrown them directly online immediately, we hire them beforehand. We train them, we make sure that with the lines we have, -- we go through the multiple steps. And obviously, that has a cost associated with it. But we think that's a small price to pay in order to ensure that we don't put our mission at risk. But that being said, once the capacity, once the plant is at full…

Sort of just a summation, but I want to remind everybody that our mission is to awaken the world to the better way feeding pets and our goal is to find a way to feed 5 million more households Freshpet. So this is what's Scott told you, 5 million more households by 2025. We want to see the buying rate go up and remember, we're still getting a very small share of the households actual purchasing on Freshpet is $630 is the amount you would spend on a £30 dogs. You've heard them exclusively Freshpet in a year and you bought the product and an average size an average retailer. The growth potential for Freshpet. If you do the math on media spend as Scott showed you, which is that in here that is here. And it was exciting. But I'm going to keep going and hope the distraction. The math works for us. The increase in the media spend against the households rise up to $2 billion and 5 million more households. This is a Scott showed you with a few extra lines on it, but basically we've had 40% of the household potential to switch over to Freshpet in order to achieve the $1 billion goal. We have huge demographic tailwinds behind us. Back when we did our study in 2016 Gen Z wasn't in the household formation phase of life yet, they were sub 80 years old. They are now at the age where they are contributing and they're contributing and Scott showed you in a very big way. Okay. All right works is that the end anyway. So, I want to give you one other piece of perspective on how achievable this billion dollar goal is. Blue Buffalo data for household penetration during that they publishes…

Is that right? Yes. Okay. All right. This microphone. There's a microphone right there. You want to use this? All right. Do you want to come on up here? We'll field these together. First, Jason, do you like my dog? Is that working? Yes, there we go.

Okay. That was the trick. Thank you so much for the detail. I guess where I'm left with some on answer questions. It's really about the cash costs to get there by 2025. Because if I do the quick math on finishing 2025 like around three times net leverage, it's $750 million, you should generate at least $500 million of cash from ops. Kind of implies you may burn through north of 1.2, 1.25 on CapEx to get there, which is way more than I was expecting. Is that right or maybe we can just get right to the heart of it. What are you expecting to spend on CapEx and what's the cadence?

So, we aren't laying out this specific cost because we're early in the planning phase. We've given you the cost of Kitchens 2.0. We've already paid for the Kitchen South that's already been float through the balance sheet. We're working on refining exactly what the costs are going to be for the facility and we've kind of scoped out the size. We're doing a lot of work. You got some rough numbers on it, but I don't want to make it sound like it's going to be small because that facility when we build it, we have to put in all the basic infrastructure the systems and the parking lots and all the basic stuff for the first three lines that go in there. We will pay for that out of all both the cash that we have available from operations as well as on our balance sheet and we would consider equity, if we needed equity to fill it.

Okay. So to jump [indiscernible] Billy, I know not going to try on this.

It sounds like, that's not too high of a number first for you. I have to go through and look at the components. I don't know Dick, if you have a point of view on that.

You had better come over here cause then mic, they need to hear you on the phone.

Hey, John. [indiscernible] Balance sheet [indiscernible] find the numbers. Okay. Both the number at 10-K of $300 million for first three lines, and we're kind of evaluating to go next.

Yes, thanks. So first going back to a longer-term addressable market. I just want to get a sense of how you guys talk to your in competition and how you factor in the economic conditions as well as the economic environment.

Yes. So competition, when you create a market size, you assess what is the potential markets that's out there, theoretically, somebody else can come along and we participating in that. If you look at the history of these things, you will get a competitor or some point. There will be undoubtedly be a competitor. And normally the market ends up being the guy who came first, if he is willing to put 80% of the market, the next guy comes along, picks up 20% of the market, again, generalizations but if you think about the way we thought about the addressable market, even at a billion, we're still only at 40% of the total addressable market. So there's a room for, a lot of expansion on top of that. In terms of changing the economic environment. The economic environment, we assume you have to assume is somewhat static they'll be periods that are good, and there'll be periods that are bad as you go along. But we did look at how the category in a bad economic environment in fact category is very resilient, it's incredibly resilient to economic swings because as people cut things out, the pet food is one of the last things they cut out. I don't if you have anything to add to that.

No, I totally agree. I mean, it's in cycles, I mean, you can kind of look at the growth of pet foods and I shared like a 4% CAGR. It is pretty amazing how resilient has been during some of these kind of upsetting or down kind of economic times, people will cut out kind of more luxuries. And you guys have probably heard me talk about this before, but the idea, I'm going to cut out like, newer clothes or jewelry or trips, etcetera, but to cut out food for my child, right. As we talked about, I think that's really one of the last places that people will turn to, could our growth slows slightly, yes, there is a potential that it can flow slightly by a couple of points, but over time, it will catch up.

Just one follow-up questions. On the gross margin line, so, obviously in Q4, they came below your expectations. So, if you're looking at your forecast for this year, is there anything you did differently building more conservative? Or just your confidence and achieving gross margin guidance out there?

Well, I think first of all from an operating perspective, one of the things that we've now reflected in the going forward is a change in the process that was designed to make us less volatile. I won't go into the details of it, but to suffice it to say that part of the volatility we had this year was the system. We probably could have spent a little bit more to make it a little bit more static, but we are now spending and the way we're spending on it is in think of it in terms of amount of time you spend doing sanitation and the amount of extra processing you do. But it gets us to the point where you take some of the ups and the downs out of the system. And so once you build that cost in your risk or your variability is greatly reduced and we did that. I'd also say that Ivan described it incredibly well. I don't think we've properly introduced Ivan, is our VP of Finance. Very talented guy. He's been here since prior to the IPO. But we asked him to take a look at, as you think about the work that we are doing a kitchen out. Make sure that we plan, conservatively for what those costs are going because as he said it very well, it's a new facility in a new place with new people. There's a lot of newness that has to be factored. And I think we've captured it. We'll see. I think the thing is most surprising on the gross margins is we were very -- we're disappointed about the lack of progress that we've made there. But we actually sat down looking at a chart, it's like a pretty tight range over time. And most people look then call that stable. We were disappointed. But it's a fairly stable gross margin. And that's sort of what we're projecting going forward.

We gave up production for quality. And that's the most important thing. Our reputation is the most important thing. So normally we would have sanitation for x hours a day, and we've decided to up that.

Two questions, first -- just, the goal of 20 EBITDA margins hitting scaling, when you hit a billion in sales in three years ago, we were talking about those margins at $400 million in sales. So is there a reason why you can't hit '25 at $900 million? And as we get past the $1billion in sales? Is there a reason why 25% is the is the ceiling?

Yes. So first of all, the margins that we talked about $300 million or $400 million in sales was on the gross margin line. And all the pickup that we've gotten has been out of SG&A. And what we're showing from 2020 to 2025, is almost entirely on the SG&A side. Showing relatively static on the margin side, there's a lot gross margin. There's a lot of good stuff happening on the gross margin side. But we have the headwinds on mix that was describing somebody outsource part of the manufacturing process. Could you get there at $900 million a lot of it is scale dependent. I think that's what Heather shows you is a lot of that SG&A absorption is scale dependent. But we also as you might imagine plan a little bit conservatively around that as well. We have a pretty tight operating mentality on SG&A. You had this much more wage inflation, organization expansion year in a year as this much and sales is that a significantly higher level higher level. And the chart shows we've delivered that pretty consistently for the last several years. And we're projecting that out to 2025. So I feel pretty good about it. Does that mean there's more beyond a $1 billion, probably but you're starting to get to, you're pretty well operating at scale. And one of the things that we have to start thinking about is, we have a very tightly focused business in the U.S. I mean, at the single brand, the classes, the trades that we're in, while they're diverse is we don't have a complicated selling system. We don't have a lot of people doing trade promotion management, a lot of back office is related to that. The minute or business has a significant skew outside the U.S. we have to put a new organization and infrastructure. You'll have an increase in the SG&A that's associated with that. So we have to balance all those factors.

And then just follow up on the new products. If you look at every other pet products on the shelf, they have specific products for puppies and then regular dogs, and then for weight management and for elderly dog but you don't. And a lot of them also and that channel have, for arthritis or stuff like that Trey stuff. You seem to kind of have a one size fits all which to be nature of the product. But I mean, is there a plan to try to migrate consumers up or to bring more consumers for need based in there or is it really just, we're just trying to build households right now. That's a two, three years, four years down the road?

Overtime, the first goal is to basically cement the idea of fresh, refrigerated food for as many people as possible. Especially when you're dealing with a single cooler, the most productive use aren't those ones that have unique need space. Over time, you saw an example we do have puppy and the most likely skew and a lot of the second coolers is the puppies skew, or the sensitive some skew. So there's more and more of those skews that are going to be going into our second third coolers, that is not just an opportunity for us to look for space, this is an opportunity for us to kind of innovate and give a broader portfolio to individuals. And we will fill out all of those kind of unique needs space, for different consumers over time. But we also want to make sure that we're using our space as productively as possible. So we're being trying to be really thoughtful around that. And the work that the team is doing. It's not -- we're not just sitting around kind of doing the numbers. We're asking the team, every single person on the team and every single function you saw today, we're asking them to create what does your business what is your responsibility look like over the next five years? So we shared kind of snippets of different things, but everyone's thinking through what is the portfolio look like? What is our overall business look like in five years from now. And you'll definitely see more of those types of products coming.

Thank you for all the details on 2025. One thing that I didn't pick up on was and maybe wasn't mentioned was competition. What do you have baked in there? What are your assumptions for what some of the larger pet food manufacturers that are not currently in fresh are going to do to sort of it such an incredible category, you compare yourself at the beginning to some of the most successful companies in the history of the world? That's going to be.

Okay. Yes. That obviously will attract some right other people into the business?

So the thing that's interesting is we did our work. We've done all the modeling and all the work around the consumer and what the potential is, that's things fun up investing in the category. We actually could see a potential where this and I'm still showing you kind of 8%, 10%, 12% of households, there is a real chance that in the future, if there is a second or potentially even third player. This literally could expand the penetration of the growth of Freshpet food significantly over kind of our anticipated growth rate. So we can see the category getting much, much bigger. I definitely, I mean, think about it today. Just back up. Forget about us for a second. There could be a world where 25% to 30% of the pet food sold in the U.S. is a fresh for refrigerated type of food. And in that scenario as Billy mentioned, when those incremental investments come in and the tech category really does attain the shift. Yes, it will kind of change our operating dynamics. And we've been trying to be thoughtful that and take those into consideration or business planning. But we recognize that it will be a bigger piece of the pie and we think that will position to kind of take the biggest piece of it potentially overtime.

So the thing that I would add to that, which is the one thing that I've seen is, I said before, when you have a category like this is defined by somebody new and somebody else comes in along the way. The market split, as I said earlier, it's looking like it's an 80/20 split. You also see the market goes faster. The added competition events in the Scott said you end up with a much more rapid rate of category growth. So the guy who is the category creator actually ends up with a bigger business than he otherwise would have ended up with flooded things at share of the category. The thing you have to see is that one of the practices of that person comes in. That person comes in with a low price alternative, and turns it into a pricing, they skim off a different kind of consumer. And you have to figure out how to respond to that. If they come in with a super premium price product that tries to take off the top thing, you react very differently to that. We did a very exhaustive look with our board last summer, at who are all the potential competitors, what are the assets that they would bring? How might they approach this category, and the conclusions you would reach would be very different depending on who that competitor was. So in terms of developing our modeling, we had to do it based on what we would do and what the market was and leave ourselves room so that we knew that even if somebody else was in there sharing some part of the market in some way that there was still plenty of room for us to hit our numbers.

So one other example. So over the past 3 years, there was a competitor that came into the business. We competed head to head of them in each up. I've shared a little bit of the story. They came in a lower price anywhere between 10% all the way to 40% lower price on kind of firsthand are feeding basis, it was a fresh refrigerated food, they're now gone. They've been eliminated from HEB. I think that there could be other opportunities for someone to come into the category. But one of the things that we've done is not only from a branding standpoint and a positioning standpoint and a pricing standpoint, like I said that pricing chart, we've actually covered a fair array of the category and the different positionings that consumers are interested in and that potentially people with competing. So I think we've kind of staked good territory from a branding and positioning standpoint. And look, it's definitely does it make you invincible? Absolutely not. But I think, we're in a very kind of envious position at this point. To compete with if someone does show up. The real reality of this is not easy, not easy at all. It took us, it shows you the phases of growth. It took us many, many years and hundreds of millions of dollars in order to get here. If I was going to show off at a major organization and say hey, I want to launch a Freshpet food business and this is going to be an interesting opportunity for us and I need about $300 million or $400 million in order to do this. They say, it's interesting. What's your one revenues, although be at least $25 million. And I've done many, many launches in the pet food category. $25 million or $40 million is that out of the ballpark success when you do a year one launch, which of your two revenues, maybe $45 million to $50 million. What are your three revenues. Maybe $75 million to $100 million. And now they've invested that amount of money, and the first case that they have to make, think about the cost of that first case and the scale benefits that we get as we grow. So there's no perfect answer here. I will say that we think we are again, we are kind of well positioned. And we're looking forward to kind of growing the business as fast as we possibly can. Because we want to be as has as much of a head start as we it can, if someone does come into the category.

And you know in Australia, we talked about 25% of the market and the guys who first came in and Australia still own 80% of that 25%. Mark.

Thanks. I wanted to go back to Jason's question in part. So, when you showed your chart of capacity and demand, it still seems like going up to 2025 years it really wasn't as with as much cushion as I think you probably would want. I guess the question I going for basis is, how do you think about that once you even get the 2525. I mean, I appreciated this five years from now but if you get where you want to get, you're still going to have that same problem and is going to be this expectation that have more it's been so. Can you more efficient in how you're thinking about capitation south that's obviously more a co-packer relationship. Why can't you do that more with existing businesses, what do you hope your potentially can learn from what you're doing in Texas you don't have to do this going forward.

Let me just start with start beginning of the premise of your question. In that chart, we end up at in 2025 with $1.3 billion in capacity on a billion dollar business, and so there's a fairly significant amount of cushion, assuming we fully throwout the Ennis as we've mapped it out. And it says the first thing is there is the room. Second is you have to remember, unlike many other people in the CPG industry, where you need to have capacity in excess of demand because you have a lot of variation, your demand, our demand is incredibly consistent, because people feed the dogs the same amount every day. And once we acquire a consumer, they remain fairly loyal. And we don't do any price promoting. So, we can run up closer to the capacity line, more so than almost any other CPG business can just because of the dynamics of the space that we're in, and the way in which we operate this business. But in terms of getting out -- and getting out ahead of this. The way that curve is working is it gives us about a year ahead on capacity, but because we'll have a bigger facility in Texas that we can add the lines in it gives you the ability to accelerate that rate if you need to accelerate as opposed to where we now are we had to greenfield kitchen 2.0 is it greenfield the kitchen, the next kitchen. But one of the things that you're talking about are the things you can do, whether it's like Kitchen South where you can be a little bit more efficient. We're going to learn a lot from that we literally just started that off last month, or I guess this month, literally just started…

And that is not budgeted.

Yes. That's on the budget. So, if we have any of those breakers, those things will be accretive.

Bob.

Thanks. Two questions. I just want to make sure I want to check Jason's math also might be a dangerous thing to do, but you did say there's 27 pages, but the leverage limit you said was three times, is that right?

So if you have a 25% margin on a billion, that's $250 million of EBITDA. So does that mean that the most debt you would want is 750, is that a fair number?

Yes.

So with that, in terms of cash costs, is only $300 million, how do we get like above $1 billion in cash costs on top of that is just the ongoing cash flow being negative for the next few years. Is that how we get there?

Well, the capital that we would just spend based on this layout from now is around $400 million.

I'm sorry, come again.

Around $400 million going forward. We have an estimate of $300 million for NS. We spent about $55 million already on 2.0. So, we've got about $50 million to go.

Okay.

And then, the Kitchen South cost us, we said $15 million. So, this is non chiller capital. So that's about $365 million between now and 2025.

Okay. So I'll just have a look, Jason right or wrong with $1 billion.

Jason. Jason is very accurate with his experience of many years.

But then I'll use his numbers. But the next question was on platforms. You mentioned three platforms, I just want to make sure I get the nomenclature right. You have roasted meals, Freshpet kitchen, and then the roles. Is that it for platforms? Or is that that new item that you saw that you showed us with it looked like a TV dinner? Is that another platform on top of that.

We would consider that and some others as potentially other platforms overtime, and we also want to make sure that when we do NS that we obviously have kind of what our kind of core businesses, right? The roles and the bags and there's some different forms that are within the bags, but also opportunity that if there are other forms that are really kind of taking off, we have opportunity to bring those up to significant scale.

Okay. So is the idea that in order to get to a billion, you do need new platforms to get to a billion or do you think that these three.

I think that they assist us and make us more efficient along the way. One of the reasons that our advertising and actually or some acquisition costs has actually been going down is because our innovation has been so good. So I think that's a multiplier, honestly. I think existing platforms and the existing distribution could be a dramatically bigger business, but it gets there a lot faster, if we do really relevant product innovation.

All right. Thanks.

Yes, Peter.

Thanks guys. You mentioned that you're going to make it, I think you said drastically easier to buy fresh online in 2020. Can you expand on that and when will we -- will it be that much in environment?

Yes. So at this point, I can't tell you a specifically the action steps, but we do have them in the plan and they will be announced within the next 120 days. You'll see kind of a clear different ability to buy from an e-commerce standpoint. And we are in pretty enthusiastic, we also know that this is going to improve, like when we have out of stock issues is going to improve that. There's also frequency challenges that some people face not being able to get to certain stores in a timely period thing is going to help with that and really significantly expand our buying rate. So can't expand on at this point. But I will say that we wouldn't put Jake leading this up if there wasn't anything to do.

I guess the next question. How do you weigh the benefits of the increased capacity from the Kitchens South, with the risk of kind of the process is now stepping a little bit out of in house? And do you think about that? Is that a risk or not really?

Yes. And it's interesting. We've done a lot of work, and I didn't put it in the slides because we have lots of slides. One of the things that we done is we have the way we've been able to build those business, is not just the internal competencies, but we've actually found partners all along the way that have been close partners for many, many, many years. And I think someone mentioned the term co-pack. We don't think of Kitchens South as co-pack whatsoever. It's our line, it's our equipment, it's our room, no one else can even come into that room without it being basically your Freshpet badge. So it's really our space. And we think that's kind of the right model. We've also taken technology that we think is the least proprietary, in all honesty, the least primary and brought it there, versus some of the most complex things that we do. So we feel good about that. But so it goes back to it's literally the partners that we've had in place for many, many years that we trust, that we feel good about. Can you keep a secret and take care of our business and trust it just the way they would take care of their own.

I would add to that, though, that there's another piece besides, what do you have to protect, but also what do you want to get. And it's not just capacity, the people we pick have some knowledge that's different than our knowledge. And our expectation is the combination of their knowledge. And our knowledge is going to teach us how to do that particular product line for small size, small bag size products, more efficiently than the way we do them today. And so our hope is that by the time this operation is fully going, that will be better than where we were before. Not just another place to make Freshpet, a better way to make Freshpet. And that would probably inform us as we look at NS phase one or phase two about what we might want to do differently there.

And then this is last question, I apologize if I missed it, but as part of the billion dollar target, where is international figured in that and I think you said it was 4% of sales today and it's 10% too high. At what point you need a facility over in Europe?

So we've assumed and developed to the $1 billion that it was proportional to the business as the business grew within expanded opportunity. The opportunity is clearly there and Cathal is sitting over there. And so I'd be careful because my expectations for him are higher than what I'm going to tell you. But the reality is that we think there's a huge opportunity to take the model that we perfected in the U.S., applied in the UK and grow much, much more rapidly, and then prospecting on the continent. But we didn't want to build our forecasts on that basis. So our forecasts are almost entirely based on a U.S. based dog food business. Now, if you also, if you think about where we are, we will be making investments going forward. And we're to enable that we had to do it in a prudent manner, kind of laid in as you get learning and say it's worth going to the next step. And we won't do that unless we see the size of the prize being fairly big. But that's sort of the way we're thinking about it.

Thanks. Just two questions related to I guess the gross to net on revenues and gross margins. One is I think, I heard it right there's no, you're not really expecting to be promoting going forward. And so I guess as you think about the life cycle of the product and household penetration, why would that not be the case? That at some point price becomes a barrier to get into households and we've seen it in some of these other categories that you mentioned the beginning. So that's the first question. And then a I've follow up.

So, it's, I think, what we've demonstrated is we can be highly successful with the model today and continue to grow very, very aggressively with the model the way it is. There's always going to be a group of consumers. If you group of consumers is not saying that your pricing is too high, you're probably priced too low and all honestly, we've done it where we've tried to make it as widely accessible to many people. We think that when you do pricing what you do is and I studied this in many, many packaged goods businesses. You typically lower the loyalty over time and I think it's disruptive to especially a fresh business model. We think that there's a long runway in front of us the way we operate. And there's always going to be people that are asking for a lower price. The reality is there's a great value here and there's an incredible consumer market opportunity in front of us. So I think we need to kind of stick with that model.

I would also just add to that which is that the opportunity for pricing is to move somebody from a comparable good over to your good. And that makes a lot of sense if you're all just selling bags, kibble or cans of dog food. But there's nobody who's selling something like ours. So the ease of switching from one to another is not very great. So I don't know it doesn't make a lot of sense for us to discount to pull people over and only in essence pulled them over on the basis of price. We'd rather track them based on the proposition because once they get there, they hesitancy to change your dog food is really high. You just don't want to have digestive upset. So once we get them, we want to hold them. But we don't want price between the wholesome.

The second question, is this the leverage on the coolers. And I think if I understood Heather's build, as the volume -- as the coolers gets bigger and there's more volume going through the coolers, the cost to serve essentially comes down. I guess my question related to that is what we've seen in like the soft drink industry as coke and heavy is focused more on adding coolers and the complexity of coolers have changed. There's more variety, more products, different velocity products. They've actually had to go back and add resource. So smaller outside, actually more feet on the street, servicing those coolers. So I'm trying to understand if this becomes more complex. Why wouldn't you have more resources?

Well, let me just make sure because there's a having been in business. Part of theirs is not purchasing the coolers. It's supplying and whatnot, and they have a lot of infrastructure that's built around that. We sift through a warehouse system into the fridges. So we're only talking about the maintenance costs of the fridges. And the maintenance costs that we apply to the fridge is it through a third party. And so the more we can get density, in essence, route density around those fridges, the more efficient it gets. So if they show up at a store, there's two fridges, one that had an issue, a second one of these preventive maintenance they can do that on the same stop as opposed to in a less concentrated market, where they go to this store and the next one is 10 miles away, or there's not a second fridge in the store, it gets to be a much, much more expensive service operation. So it's a little bit of a different model than what you see in the beverage business.

So one of the things I think may be helpful and interesting. We actually have to reverse. So we actually, we had all different size coolers height wise. We had all different scenarios mix. We tried out anybody who had a cooler, we tried out their models. And the reality is we still have a lot of those over time. We're consolidating down and we're actually trying to get down to manufacturers for the most part. And a simplified offering of fridges in almost every aspect, because I don't know if they want to be Southwest Airlines, but there's definitely a model there from an efficiency standpoint, in every aspect of how we run our business how we think about it, planogram it whole parts service, et cetera. Client over there and then we'll come back over here.

Quick question, excuse me -- about the sales per household the buy rate that you have built in going forward. Studying similar adoption models. You see that the early adopters of the earliest adopters seem to be the most loyal. You have a pretty marked ramp. I'm just curious what the construct of your buy rate looks like? How much of that is comprised off of discontinuing loyalty or building loyal whatever you're seeing with each subsequent wave of adopters? Or is it more large dog in the mix, and you're planning to attack those opportunities?

So what we've done is we've looked at historical groups of consumers, how they've come in and how they've grown. We understanding each year what the kind of number of consumers that we have coming into the franchise. And the reality is, as we grow further and further out, there's a larger and larger pool of consumers that are sticking with us and that are drop buying more and more of our products. We also see people kind of graduating from some lower price items, actually, not only more in total, but actually higher priced items, and additional kind of products with different features and benefits, edition of treats that might be on et cetera. So overall, we're looking at that buying rate historically and kind of going forward consistently increasing at a fairly set rate is how we thought about it. We've also looked at the consumers that look to come in the future. Actually have many aspects that are demonstrate high loyalty and actually higher buying rate you mentioned large dogs will definitely be a component of it. If you have 2 golden retrievers, and 2 chuao's, think that the amount of the consumption. Even if those people and the golden retriever in our mixers, we're still going to get more dollars for that household overtime. So there's several different factors we tried to look at and kind of and anticipate and model going forward. But part of the work that we did to as you think about Brian, if you have to grow from where our guidance is for 2020 to 2025, you have to grow 27%, kind of CAGR to get there. You're going to get some part of it on penetration, some part of it is going to be based on the buying rate. And as we've shown over the last few years, more rapidly, you have to penetration go up it causes the binary to go flat. But when we had periods where we were flat or not as aggressive growth on the penetration. We saw the binary going up in 10%, 11% range. And so the simplest way, it's not exactly mathematically right to the simplest way is, the sum of the two growth rate has got to get you to 27%. Right now, we're running at a growth rate on the core dog business, which is increasing share of our business over 90% of our business is running at 30%. So you can actually have a negative buying rate between now and then if you continue to grow the household penetration at that rate, negative increases in the buying rate over time and still get to the $1 billion number.

Could you talk a little bit about your in-store merchandising conditions? I'm curious how the technology you described earlier going into the fridges could help reduce out of stocks. What your expectations are in terms of timing and kind of the benefit that can provide?

So they're going to test right now. It's a scalable technology. We've worked with the people that have really kind of invented this and helping them to really kind of scale this out. I think we're adding like -- I think with many of our partners, I think we're adding kind of new ways for them to think about how to utilize it. We don't know the exact improvements, but I think that it's fair to say that if we know that there was a fridge with consistent issues, because we're seeing that those pictures, we can really kind of focus our efforts we're today, it's a very, very kind of difficult model out there to understand what's going on. And we'll actually have the potential to have better visibility of what's going on in that fridge and the retailer will in that store, because we'll have kind of eyes kind of we're calling it the Eagle Eye project. We'll literally be able to have eyes on that fridge every single night, if we want to look at what it is. So, we'll take that those pictures, and we'll actually deploy specific people and I use the term like Uber, right. So basically supply and demand. So we'll spend the resources or the people that can help fix retail to that specific store and hopefully remedy the core problem that's causing those out of stocks overtime. Also, the other thing that's very interesting is as you continue to increase the dollars per store, which we had every single year for the past 5 to 10 years, the dollars per store, when you all of a sudden have a story of swing $500,000 to $700,000 it allows you to think very differently about the resources you'd apply to a store doing $1,000 a week versus store doing $150 a week. And think about if you did a small improvement store doing $1,000 a week, it's pretty interesting how those resources pay back quite quickly. So that's kind of as we gain scale and as we have increasing sales to those bridges, it really changes our thinking on how we can service those bridges. And think about them.

One quick one, it kind of comes back to we talked about it a couple of times already. But if you look at the consumption growth over the past several quarters, then absolute growth has been terrific. And the level has been consistent as well. But the mix velocity, versus maybe ACV, or distribution growth has changed with more moderating velocity growth and an increase in ACV. Could you talk a little bit more about what's driving that and would you expect that to change going forward as some of the newer stores that you've acquired your household put mature into the brand?

First of all, I want to make sure we have the definitions, right. The number that we share in the charts that you're referring to is not a pure velocity measure, it is a velocity measure in sense that it dot million dollars per million ACV. But that's not the same-store sales, which is what most people are thinking about fewer a retailer who is selling Freshpet, today, you're looking at your same store sales growth, you're still seeing very, very healthy numbers in the same store sales basis. But when we add a lot of new distribution late in the period, and you divide the net sales across a new distribution, the millions of dollars per million ACV drops in so you don't have the same rate of growth. But if you're one of the retailers looking at it today, you're not worried about your same-stores sales you're feeling pretty good about the same-store sales. We're going to see peaks and valleys on that. The fourth quarter of 2019 was a blockbuster for us on new distribution, and it's not just the quantity that went in, it's frankly also the fact that retailers did in the fourth quarter. In the fourth quarter, they usually don't want to touch their stores at all. So, the fact that they went in and did it says that they saw a big opportunity. But we modeled for 2020 was much more in line with our historical performance. We could be surprised somebody could come and say, I really want to go all in now and there's some places where that could happen. But we've modeled a much more traditional level. And if we had that traditional level going forward, you'd expect to see us having the reported million dollars per million ACV. That looks like it looked like at the end of '18 in the beginning of '19.

The quality of a ACV we added has been very, very strong. Overtime, we don't expect I mean, we know ACVs is going to increase, but this is truly a consumer penetration based model that's really kind of focus on how we're thinking about and how we're building out overtime. And we continue to pick up ACV, yes, the more important factor actually overtime will be kind of the what idea of visibility. So it's not just a, I have a fridge in a store, it's what type of fridge, is it a bigger fridge or is it a second fridge? And those will be kind of significant contributing factors overtime there.

We had a question over here.

Hi. I'm curious as ownership as small dogs has grown faster within the pet category, has that benefited Freshpet and can you quantify how much of your growth has benefited and you see as the trends going forward?

So, I do think that that trend. If you think about the relationship with a small dog and a larger dog, it is a slightly different relationship. And I know we talked about dogs in general today, but there is a little bit more of a doting behavior in small dogs. The trend we see over time is there will be more and more smaller dogs. When I say I'm not talking about tiny, tiny dogs, but overall smaller dogs and less really large dogs. That's another potential wind behind our back over time. I talked about pet population in general, but that's another kind of benefit that we can see overtime. I don't think, we can specifically attribute the growth that we've gained to the exact change in the pet population, but we do know that that is helpful to us overtime.

And I have another question. Could you share with us what your share of voices is in the media, your media spend within? I have not looked at that lately, and we're very, very proud of our advertising levels of $24 million, $27 million, $30 million a year, but it is a tiny. We have tiny, tiny amount of what's going on in the category. There's almost a billion dollars is a number I've often heard in pet food advertising over the course of the year. So, we have a very, very small share of voice. But, the thing I think is important is the dollars that we spent have been able to be incredibly productive and predictable overtime. And we know what the exact I've mentioned CAC cost, the consumer acquisition costs. We know exactly what we get for the media spend, and I think John tried to illustrate on slide. We're not thinking about media today and just playing it forward. We're testing things 12 to 18 months out to put us in a position where we know that the performance will maintain and stay very, very strong. In addition, we're testing things well outside of media to make sure that, if at any point media does change dramatically that there's other opportunities for us to continue to build our business and gain more and more consumers into the franchise. Some initial testing has demonstrated that we've been able to take completely eliminate media and on like specific stores and a couple of markets. We've been able to grow share and dollars and get a great return off of some of these alternative tactics. So, it gives us comfort that if literally typical traditional TV does somewhat go away that we have other means to bring consumers into the franchise.

And then just one follow-up on that. So, I think one of the takeaways from Cagney was that, the other large CPG companies that have animal divisions want to increase the branding efforts, the more marketing going forward.

Yes.

So I guess, how would you protect your ROI in face of

It is pretty interesting. Probably over in has really been extraordinary and the amount that they have increased. So when we kind of take a step back and look at it, there has been a massive increase in television advertising and that kind of mass advertising over the past 5 to 7 years. We've been able to kind of keep pace and keep our groceries going in light of that. I think that, those major investments, I don't think you'll see quite the extraordinary ramp up that you've seen from some of the players, like a Blue Buffalo over the past five to seven years, I don't think you'll see quite that ramp up. And I think we'll be able to maintain and actually grow our share of voice, which is to your prior question, with the investments that we planned out over time. Just because of our growth rates, it gives us the ability, it's one of those benefits of scale that Heather's touched on a little bit. The question in the back of the room over here,

Just quick one for me, just on your forecast, GM kind of being flat going forward. If you look at the industry, on a daily basis is going away 3% to 4%. If you assume 1% of that is a mixed benefit coming through and kind of work your way down just back of the envelope. You've got kind of 150 basis points of benefit as a GM line coming for from Kitchen 2.0. Could you just kind of help me work through like the balance what's also now you've talk to bring on capacity, like a year forward? And then also the bags being a headwind, can you kind of quantify that for me?

Yes. I can handle. When Heather showed our chart, basically, she said, we opportunities but just not happens. We do have the fresh from the kitchen line where, we're going to go from £50,000 -- £55,000 a day to the new line in 2.0. We'll go over £90,000 a day which would pick up about 600 basis points about on 20% of our product line. But we've experienced and you can see it in the during the year, further processing more cleaning stuff that kind of hit shit and it hits was basically Billy said, yes, we're in the 49% to 50% range. We're in that, those buckets. When we laid out the 5-year plan, we kind of just said, let's just keep it at 51. There's a lot of stuff going on, we're going to do a lot of hiring. We're going to doing a lot of training. As new people come on, the new line doesn't come on, every line does about $100 million in sales. So we're not going to be at $100 million in sales day one. So you're not going to be perfectly efficient on labor and overhead until you get to those skills. So we laid out 51%, we know we have stuff coming, that could probably enhance that. But we have experienced that other stuff occurs. This kind of takes that down. And we just felt that let's not push the envelope.

Okay, I guess just a follow-up to that. So what you're saying is, and then in a steady state, you'd expect that today, couple of basses points while once you stop not that you necessarily work once it's still pretty young still. And absolutely normal stuff.

Absolutely. I mean, we said we would be $300 million and $60 million, and we could do that in 1.0. Okay, but we're not doing 1.0 now. Now we're 2.0, so we got investments to make this more media to spend. We would have spent a lot less media in 2020, if we were just trying to hit $300 million.

I don't see any other questions. So at this point, we say thank you very much. Katie, are there boxes or anything out there? Okay. So we have gifts parting gifts for everybody and box launches. I guess box launches are over there where the toasts over that way so you get your lunch and then you get your toast on the way out. So thank you for coming very much.