Freshpet (FRPT) Q1 2023 Earnings Call Transcript

Freshpet (FRPT 0.36%)
Q1 2023 Earnings Call
May 08, 2023, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to Freshpet's first quarter 2023 earnings call and webcast. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation.

[Operator instructions] Please note this conference is being recorded. At this time, I'll now turn the conference over to Jeff Sonnek. Mr. Sonnek, you may now begin.

Jeff Sonnek -- Investor Relations

Thank you. Good morning, and welcome to Freshpet's first quarter 2023 earnings call and webcast. On today's call are Billy Cyr, chief executive officer; and Todd Cunfer, chief financial officer. Scott Morris, chief operating officer, will also be available for Q&A.

Before we begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to the company's annual report on Form 10-K filed with the SEC and the company's press release issued today for a detailed discussion of the risk that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note that, on today's call, management will refer to certain non-GAAP financial measures, such as EBITDA or adjusted EBITDA among others.

While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for how management defines such non-GAAP measures, a reconciliation of the non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP and limitations associated with such non-GAAP measures. Finally, the company has produced a presentation that contains many of the key metrics that will be discussed on this call. That presentation can be found on the company's investor website.

Management's commentary will not specifically walk through the presentation on the call, but rather the summary of the results and guidance that we'll discuss today. Additionally, we'd ask that your questions remain focused on the performance of the business and the results in the quarter. Management will not discuss or speculate on other topics beyond what is being reported here today. With that, I'd now like to turn the call over to Billy Cyr, chief executive officer.

Billy?

Billy Cyr -- Chief Executive Officer

Thank you, Jeff, and good morning, everyone. The message I would like you to take away from today's call is that we are making the steady progress on the key drivers of costs and margins that we committed to deliver this year in the Fresh Future plan, while still delivering strong growth that is in line with our long-term growth plan. This is due to strong operating performance by our teams in Bethlehem and Ennis, and another indication that the investment that we made in the Freshpet Academy is paying dividends throughout the P&L. I will share a few highlights of our performance and a few thoughts on the outlook for the balance of the year, and then Todd will provide more detail on the quarter.

The highlights are: first, strong net sales growth. We delivered 27% net sales growth in the first quarter. This was in line with the guidance we shared for the quarter and puts us on track to deliver our 2023 plan. Nielsen measured consumption was up 29% in the quarter, but the year-ago quarter included some trade inventory refill, so our net sales growth was less than the consumption growth.

The consumption growth was comprised of 14% volume growth and 15% price mix growth. We will be lapping significant trade inventory refill in the year ago to much of this year and won't get nearly as much benefit from pricing this year as we did last year. But our growth appears to be strong, particularly with our heaviest users. Second, adjusted EBITDA ahead of guidance.

As we discussed in our last call, first quarter adjusted EBITDA is expected to be weighed down by the heavy start-up costs in Ennis and the start-up over Dallas DC. I'm very happy to say that both of those initiatives were completed successfully and on budget. But, perhaps, more importantly, our performance on quality and logistics were much better than we had planned as strong performance on quality yielded improved gross margin and enabled higher fill rates that reduced logistics costs. Quality cost came in at 5.3% of net sales, down from 6.1% in the year-ago quarter.

And logistics cost came in at 9.3% of sales, down from 9.9% in the year ago, despite the start-up costs associated with the Dallas DC. These are both key operational areas that our team has been focused on, and we are very encouraged by this progress, as well as the opportunities it provides for continued upside as we execute our margin improvement strategy. Third, more effective balance between commodities and pricing. Input cost as a percent of net sales came in at 34.1%, which only reflects a partial impact from the February price increase.

Looking ahead to Q2, we expect to reduce our input costs as a percent of net sales further. For perspective, our Q1 performance is 180 basis points better than the 35.9% we experienced for the full year of 2022 and 200 basis points better than the 36.1% in the Q1 of 2022. Many retailers did not reflect the higher pricing on shelf until late in the quarter, but, so far, it appears that consumers are accepting the pricing well. Fourth, Ennis start-up.

The Ennis Kitchen is off to a good start, due in large part to the training and preparation to the incredible team that is supporting its build out and commercialization. We are now shipping product off both the bag line and roll line, and are capable of producing a wide range of SKUs on those lines. We're still ramping up production on the bag line. But once that is completed, there will be yet another critical achievement that will unlock significant logistics savings.

We will be able to ship the vast majority of our product assortment out of the Dallas DC using locally produced product. Further, our assessment of the quality of the product produced in Ennis is that it is every bit as good as the product we produce in Bethlehem. And we are doing it with fewer people due to the significant automation that we have integrated into the facility's design. Fifth, strong customer support.

Now that we have restored customer service to a high 90s fill rate, our customers have begun to invest heavily in incremental fridge placements. In Q1, we added 369 net new stores, upgraded 241 stores to larger fridges, and place second or third chillers in 685 stores. And there are many more of those coming later this year. We are well on track toward our goal of having 1.7 million cubic feet of space at retail by the end of this year.

And six, household penetration growth. Household penetration growth was 7% in the past 52 weeks, and buying rate growth was 28% based on numerator data. What is most encouraging is that our number of heavy and super heavy users grew 18% over that time period despite the 20% plus increase in pricing. We believe this reflects solid loyalty among our heaviest users, or HIPPOHs, the high profit pet-owning households; and the impact of our flip-the-bowl effort that is designed to increase the number of people who use Freshpet as the main meal.

We now have 3.3 million HIPPOHs in our franchise. Looking forward, I expect to see continued improvement in our operations as the year progresses. We have momentum and while the intangible benefits of a more experienced and better trained team are increasingly clear to us. We are excited to see them turn into tangible benefits and show up in our financial performance.

With sizable opportunities to recover the efficiencies we lost over the last three years, and our reinvigorated operations team is relentlessly focused on the biggest of those: quality, input costs, and logistics. Although each of these categories has its own timetable for realizing the benefits, we have the critical talent in place. And the progress is increasingly obvious to our team with every passing day. Additionally, the key elements of our marketing model are being fully deployed for the first time in several years.

We have new advertising on the air at heavy media waves that resonates with consumers. Customers are placing new fridges at the strongest rate ever, and we have a large number of new products in distribution or scheduled to ship in the coming months. We are also updating our packaging graphics for the first time in several years, and the premarket testing has shown they elicit an extremely favorable response. Now, let me turn it over to Todd for the details on the Q1 results.

Todd?

Todd Cunfer -- Chief Financial Officer

Thank you, Billy, and good morning, everyone. As Billy said, we are off to a really good start this year. Let me break it down a bit further. Net sales came in at $167.5 million, up 27% versus year ago.

Our net pricing was up 14% versus year ago in the quarter. That will drop to 8% in Q2 as we lap the large price increase we took in February of 2022. The growth was broad based across channels, including our pet specialty business, which saw consumption growth rebound increasing 19% in the quarter versus prior year. Adjusted gross margin was 38.5% in Q1, slightly above the year ago, and above our base expectation.

This improved performance was due to a variety of factors, including increased pricing, improvements in the cost of quality, and a strong start up in Ennis, all aspects of our operational improvement plan that our team is focused on. We expect these elements will continue to improve as we move forward and drive continued margin improvement. Now, that we are shipping product from the bag line in Ennis, we are no longer capitalizing any start-up costs on that line. So, they will flow through the P&L in Q2 as we ramp-up production.

But that is putting us on a path to sustained growth, increased resilience, and margin expansion. Total adjusted SG&A was 36.7% of net sales, down from 38.7% in the year-ago quarter. Consistent with our long-term trend of gaining scale in G&A, our SG&A costs, excluding media and logistics, were 11.9% of net sales versus 12.5% in the year-ago period. We also gained 60 basis points of efficiency improvement in logistics costs versus a year ago, largely due to very high fill rates and partially offset by the start-up costs related to our Dallas DC.

We spent a healthy 15.5% of net sales in media in the quarter, and this was slightly below the 16.3% we spent in the year-ago quarter. Adjusted EBITDA was $3 million in Q1, that is considerably better than the cadence we had initially provided and was primarily due to the strong operating performance in COGS and logistics. Capital spending in the quarter came in slightly below the most recent expectations at $60 million, largely due to sequencing of some sizable expenses in tenants related to completion of the first production building, the chicken processing facility and the early stages of construction of Phase 2. There is no change in our outlook for capital spending this year, which we continue to project at $240 million.

Our cash position is very strong. We greatly appreciate the support of our shareholders and other investors who participated in the convertible debt offering we completed in March. After the cost of the capped call option is factored in, we realize net proceeds of $325 million from that offering. In conjunction with our existing cash reserves, at the end of the quarter, we had $387 million in cash and short term investments.

We have invested the fund in a series of conservative interest-bearing instruments that will yield interest rates well above the 3% coupon cost of debt we issued. These funds are invested across several institutions and [Inaudible] with a maturity of no greater than 120 days. For the remainder of the year, we expect interest income and interest expense to largely offset each other. We believe that we have adequate cash to fully fund our growth through 2024 and will be cash flow positive in 2026.

We also believe that we will have access to traditional nondilutive forms of capital to bridge the gap in 2025 if it occurs. In terms of the cadence of our business for the balance of 2023, we expect to continue the strong growth we demonstrated in Q1, but the net sales growth will increasingly be driven by volume growth versus pricing growth. At the beginning of Q1, our Nielsen-measured volume growth rate was around 12%. By the end of the quarter, it was up to around 16% and growing.

We need that to continue to grow into the high teens and low 20s by the end of the year to continue to support our plan. We believe our marketing, distribution, and innovation programs will deliver that. Q2 and Q3 net sales should have mid-20s growth rates, while the Q4 growth rate will be relatively lower due to the sizable trade inventory refill in the year-ago period. We expect to see continuing improvement in our operating cost in Q2, particularly in logistics and quality, along with the full benefit of the February price increase.

However, we will be absorbing the full operating costs of the Ennis bag lines in Q2 and to a lesser extent in the second half until that line achieves full production later this year. The net result is year-over-year gross margin headwind due to underutilized capacity, which we expect to cause our Q2 adjusted gross margin to come in slightly below that of Q1 2023's performance of 38.5%. With respect to adjusted EBITDA, our expectation is that Q2 should be similar to that of Q1 on an absolute dollar basis with the difference in some additional SG&A investments in Q2, offset by the contribution of higher net sales. Looking at the combined quarters of the first half, we expect to be slightly ahead of where we initially projected we would be at the midpoint of the year and confident in our ability to deliver our commitments for the year based on our strong start and the sustained underlying performance we are seeing.

So, we are reaffirming our guidance for the year that calls for net sales of approximately $750 million and adjusted EBITDA of at least $50 million. In closing, we are very encouraged by the start of the year. The capability improvements that we announced back in September are driving solid and steady improvement in our operating performance. Further, we are seeing significant operational improvement in the investment we've made in the Freshpet Academy.

And the time and money we invested to train the Ennis team during the year prior to the start-up of that facility. We are even more encouraged by the magnitude of the opportunities that remain ahead of us. We believe that we are on track to deliver the margin improvements required to deliver the long-term margin targets we announced as part of the Fresh Future plan. The Ennis Kitchen is up and operating on both lines, and that provides us with the capacity needed to support our long-term growth, adds resilience to our business, and provides significant opportunities for margin expansion.

Further, the improvements we designed into that facility provide the opportunity for efficiency upside versus our long-term projection. In total, that leaves us feeling very bullish about our future. That concludes our overview. We will now be glad to take your question.

And as a reminder, please focus your questions on the quarter and the company's operations. Operator?

Questions & Answers:

Operator

[Operator instructions] Our first question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your questions.

Michael Lavery -- Piper Sandler -- Analyst

Thank you. Good morning.

Billy Cyr -- Chief Executive Officer

Good morning.

Michael Lavery -- Piper Sandler -- Analyst

Just wondering if you could unpack the guidance a little bit. You've got a full year top-line guide consistent with the first quarter. But you have a pricing level or pricing benefit that will moderate over the course of the year. Can you just point to some of what you expect on the volume side in terms of driving that acceleration and what kind of visibility you might have there?

Billy Cyr -- Chief Executive Officer

Yeah, I'll take a shot at it. As we said in the scripted comments that we've seen the increasing shift toward volume growth and less on pricing. So, we began the quarter at -- Q1 at 12% volume growth, we ended the quarter at 16%. And we've seen it continue to grow from there.

So, by the end of the year, we're expecting that volume growth is going to be the driving -- the biggest driver of our net sales growth. Because pricing by the end of the year will basically end up accounting for something like 5% in the last quarter. So, you're going to see an increasing shift toward volume, and we've already seen it.

Michael Lavery -- Piper Sandler -- Analyst

OK. And is that helped by the step up in advertising or the distribution gains or just all of the above? Or I mean, what's the real key, you know, factor there in terms of what accelerate the volume side?

Billy Cyr -- Chief Executive Officer

Yeah. Let me just give you my comment. Scott will probably add some color to. But as we said, the reality is, we're now back in business doing business the way we want to.

So, we've got full fridges, high fill rates, we've got a broad assortment of products, advertising on the air at heavyweights, new advertising, better packaging, a lot more stores, a lot more upgraded stores. So, the growth is coming from and will continue to come from our business model, our marketing model working the way we want it to work.

Scott Morris -- Chief Operating Officer

Yeah. I think Billy hit on most of the points, but I would say the overall model is intact. It's continuing to perform, and we've got penetration growth. The most interesting aspect, we talked about it at ICR.

We introduced this idea of like these super heavy, heavies or HIPPOHs that Billy mentioned in the script. We see really strong growth from that group. We really, really like that. Those are our core, core consumers.

Their buy rate is up substantially. The number of fridges that we'll place this year will be extraordinary. It will be an all-time record for the company, the number of fridges in total that we place this year, which gives us the platform to continue to expand our portfolio and appeal to a larger group of consumers. So, it just feels like every single thing is hitting on all cylinders.

And then, you couple all of that platform with great advertising that continues to drive record traffic to our website, which we know converts to the store locator, which we know converts to eventual people coming into the brand. And it really is all working together, and I think we're in a really fortunate position.

Michael Lavery -- Piper Sandler -- Analyst

OK, that's great. And just a quick follow-up on the ad spend. Is -- I'm sorry if I missed this. I don't know if you said it, but is the second quarter spending level similar to the first? How does that play out as far as the trajectory over the course of the year?

Scott Morris -- Chief Operating Officer

Yeah. Q2 will be at similar level to Q1 and will be fairly heavily weighted to the front half of the year. I don't know if we've actually split it out that way, but a little bit over 60% of the advertising will be in the first half year, 65% or so?

Billy Cyr -- Chief Executive Officer

Yeah, heavy spend in the first two quarters. Actually Q2 is projected to be up slightly over Q1 and then it tails down in the second half of the year. But unlike last year where we spent very little in Q4, our expectation is, we will spend at, you know, a reasonable amount in Q4 as well.

Michael Lavery -- Piper Sandler -- Analyst

OK, great. Thanks so much.

Billy Cyr -- Chief Executive Officer

Thank you.

Operator

Our next question is from the line of Bryan Spillane with Bank of America. Please proceed with your question.

Bryan Spillane -- Bank of America Merrill Lynch -- Analyst

Hey, thanks, operator. Good morning, guys. Just two quick ones for me. One, just a clarification on the guidance slide, adjusted EBITDA 2Q, you're talking that you're expecting to be similar to 1Q in absolute dollars, not year-on-year growth?

Billy Cyr -- Chief Executive Officer

Correct.

Bryan Spillane -- Bank of America Merrill Lynch -- Analyst

OK. And then, Billy, maybe -- and Scott, maybe if you guys can just maybe zoom out a little bit. I know there's been some concern just about the household spending, consumer spending meeting under pressure. And again, you're now kind of getting back up to curve.

So, if you can talk a little bit about just -- as you're back in the market and your fill rates are better, just your observations about the consumer? Is it more heavy users using the product more? Is there any barrier to attracting new households? Just kind of how the whole macro environment is playing into your growth expectation as you now are beginning to add more product in the market?

Scott Morris -- Chief Operating Officer

Hey, Bryan. So, I think that we talk about this a lot and we literally look at it like every couple of weeks, very, very close and I think we have pretty expensive data that goes fairly deep down into understanding exactly what the dynamics are. And yes, I mean there's been -- there's a lot of discussion in the market around kind of what's going on from a consumer standpoint, where there have been people that have -- they are concerned about the economy, they are concerned about inflation, etc. And I think that we have really been an exception to that case.

We have definitely seen some of our kind of weaker nonfrequent consumers kind of move out, but we are focused on and we started focusing literally in the beginning of the year to make sure that those heavy and those HIPPOH consumers are the ones that are really kind of coming into the brand and continue to buy us, etc. So, I think that there has been a lot of discussion around the category level around what's going on. I think that we've been fortunate that we have not really had much impact from that. And we feel like we're on a really terrific course for this year and getting the right types of consumers in.

We continue to see interest in the brand and the proposition that we're bringing to market. And also we're always really cognizant of trying to make that the entire portfolio has -- be as affordable and accessible to as many consumers as possible. And we always are keeping an eye on that, and we continue to do work in that area.

Bryan Spillane -- Bank of America Merrill Lynch -- Analyst

Thank you.

Operator

Thank you. The next question is coming from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question.

Rupesh Parikh -- Oppenheimer and Company -- Analyst

Good morning, and thanks for taking my question. So, I was just curious as we look at your gross margins, just I think last quarter you guys indicated that you expect gross margins to up more than 200 basis points. Curious if you saw the same expectations for the year.

Billy Cyr -- Chief Executive Officer

We do at this point. Look, really pleased about Q1. Obviously, came in a bit higher than our original projections. A little bit of that was timing.

We built a little more inventory in Q1 that got capitalized for the quarter. That probably will come back in the second quarter. Look, it's really early. We're off to a great start.

And so, it's just too hard to call the remainder of the year. So, really no change in the expectations at this point, but, you know, we're really pleased. Ennis is still ramping up, we haven't started chicken processing there in that facility yet. So, we still got a little bit of wild card going on, but feeling really good about the start of the year, Rupesh.

Rupesh Parikh -- Oppenheimer and Company -- Analyst

Great. And then, maybe just one follow-up question. I know you launched a fresh food subscription with Petco. Just curious how that launch is going at this juncture? I know it's early, just curious if it's already in stores and how that's progressing.

Billy Cyr -- Chief Executive Officer

Yeah, it's in literally around 300 stores at this point. So, it's super early. We've gotten, I think, a really, really high visibility and a really good response from it at this point. It is super early.

We're -- I think we remain like super enthusiastic about the potential of it. And we will start to support it literally in the next couple of weeks once we kind of have everything kind of flattened out and kind of calm down from a supply chain standpoint with that specific product. So, we'll start to support it then. I think at that point, we'll start to get a real feel for consumer like interest, broad consumer interest, and, you know, just kind of what type of -- size of business that will be over time.

Rupesh Parikh -- Oppenheimer and Company -- Analyst

Great. Thank you.

Operator

Our next question is from the line of Bill Chappell with Truist Securities. Please proceed with your question.

Bill Chappell -- Truist Securities -- Analyst

Thanks. Good morning.

Billy Cyr -- Chief Executive Officer

Good morning.

Bill Chappell -- Truist Securities -- Analyst

Just on a pricing standpoint, I understand that you're successfully pushing through this pricing, but maybe you can talk about where you stand in terms of price gaps with the competition? What you expect the category to do in pricing as we -- as cost do come back or pull back in the back half of the year and we get maybe a little more promotional environment. I understand that you have a differentiated product than the Kibble, but still there is some pricing dynamics between the two.

Todd Cunfer -- Chief Financial Officer

Yes, Bill, we've been watching this closely. And I -- you know, you could definitely imagine where in certain environments there would be increased spending and promotional support activity. We really haven't seen any of that pickup yet. It's definitely possible and I would say it's actually at this point even been slightly below some traditional levels, historical levels.

So, I think some of it will come back in the past that hasn't had a tremendous impact on our business as you brought up. I think that it's a pretty rational category and I think you have pretty rational players in place. I think people recognize that they appreciate the profitability of the category. And I think that -- I think it's going to be rational behavior from pretty much everybody including the retailers, which will really be the one who either drive it or suppress it.

So at this point, I mean, it's hard to exactly speculate what could happen later in the year. But I don't see it getting -- you know, it gets irrational in some categories. I have not seen that ahead over time.

Bill Chappell -- Truist Securities -- Analyst

But the price gaps with competition are where you want them to be right now?

Todd Cunfer -- Chief Financial Officer

Yeah, we're -- yes, we like where we are and we're watching that. And I think the biggest thing that we're seeing was called out. No matter which way you look at it, our volumes continue to grow. Whether you look at prior periods, literally from the beginning of the year till now, it's been really, really nice consistent volume growth.

So, I'm looking at pounds. And in this case when there's so much going on with all them [Inaudible]. If you're increasing pounds and units you're doing great work in this type of environment. And that's what we're doing.

We've seen the -- you know, we go back on air. We are completely very low levels of any type advertising in Q4, we go back on air and we consistently see our pounds continue to progress through the first quarter, which I don't think anyone could have asked for anything better. So, I think what the market is telling us is, the price gaps are acceptable like where they are and consumers continue to come into the brand and spend a lot of money with us.

Bill Chappell -- Truist Securities -- Analyst

Got it. And then, Billy, I know also penetration and markets here are not interchangeable. But several years ago, the thought was, you had kind of low single digit market share nationwide, but you had close to 10% in some of the West Coast Albertsons, now you're talking about household penetration being close to 7%. And I guess just trying to understand, as capacity comes online, where do you think household penetration and market share for that matter can go? I mean, this year and next is it -- are we talking double digit? Are there any barriers? Are there keys to unlocking that, such as like more fridges per door or stuff like that? Any color will be great.

Thanks.

Billy Cyr -- Chief Executive Officer

Yes. It's one of the issues that we watch very closely. Obviously, with all the rapid price increases that have gone into the market, what you've seen is, the occasional user or the person who uses us as more of an indulgence or an extra as opposed to the person who uses us as the main meal has been a little bit less willing to bring on a new habit or continue a habit that might have yielded discretionary. The flip side of that is, 87% of our business that is the HIPPOHs or the people who view us as a regular main meal have been growing at a very, very healthy rate.

I actually did a little exercise to look at. If all consumers are digesting basically four price increases in 18 months, if you have to lean hard on the heaviest users, the people who recognize the benefits, whose dog don't want to change, can you get from here to where you want to get to on the backs of those consumers, and the answer is yes. You can get there. But over the longer haul, we do want to get back to where we're bringing in the new users at a much more aggressive rate than the 7% we reported in the first quarter.

We just think it takes longer for them to adapt to the new pricing that's in the market. They just don't go through as many purchase cycles when you're not a heavy user and it takes a couple of purchase cycles for them to adapt. So, by the end of this year, I'd like to see that number in the double digits. And frankly, by sometime next year, I like to see the number being in the 20% range.

Bill Chappell -- Truist Securities -- Analyst

Thank you.

Operator

The next question is from the line of Peter Benedict with Baird. Please proceed with your question. Mr. Benedict, please go ahead with your questions.

Peter Benedict -- Robert W. Baird and Company -- Analyst

Sorry about that. Hey, guys. Good morning. So, first question, just on the pet specialty channel, the acceleration you saw there, was that just kind of better in stocks, you think, drove that? Was there anything that any of the players in that channel were doing to help get the better velocity there?

Scott Morris -- Chief Operating Officer

Yes, our in-stocks were particularly bad even through the very end of Q4 in pet specialty. So, just the return of full fridges. I think is a really, really big piece of it. Secondarily, we are seeing nice expansion in fridges, pet specialty through the course of this year.

That will be a help. It's not really kind of shown in the numbers at this point, but that will be a continued help over the course of the year. Yeah, I think those are the two aspects, Peter, in making sure that the products and the portfolio is well represented not only being in stock, but also really being as sharp as we can on pricing.

Peter Benedict -- Robert W. Baird and Company -- Analyst

Got it. Understood. And then, maybe just two quick ones for Todd. Just curious on commodity input costs.

Can you get us up to speed on that, chicken beef, just kind of where you stand, what you've got locked in, remind us on that? And then, just the D&A line, taking a look at that kind of annualized the first quarter that gets you to high 50s for the year. Is that what we should be expecting from D&A this year? Thanks you.

Todd Cunfer -- Chief Financial Officer

Yes. So, steady as it goes on commodities. So, we're locked in around 80%, no big swing. So, we're still kind of seeing mid to upper single-digit inflation, so much better than we've seen in the last couple of years.

So, that's positive. That will allow us with the pricing we have in place to get some margin expansion there. So, no big swings in commodities, and I think we're in pretty good shape. From a D&A perspective, yes, in total, around 60%, both up the gross margin and down below, and that should be closer to the run rate for the year.

Peter Benedict -- Robert W. Baird and Company -- Analyst

Great. Thanks very much.

Operator

Thank you. Our next question is from the line of Jason English with Goldman Sachs. Please proceed with your questions.

Jason English -- Goldman Sachs -- Analyst

Hi, good morning, folks.

Billy Cyr -- Chief Executive Officer

Good morning.

Jason English -- Goldman Sachs -- Analyst

Thanks for sorting me in. A couple of questions. First, I guess, Billy, coming back to your new user comments. The penetration data you shared 26% last year and rolling 52 through April 3rd, having now dropped to 7% suggests really sharp deceleration, perhaps, even outright declines and the math will actually would suggest outright declines year to date over the last three months.

What's driven such a sharp decel there? Why the step back? And how do we put it with the volume, which actually looks fine?

Billy Cyr -- Chief Executive Officer

Yes, it's a good question. First of all, you have to remember the number on the household penetration is a net number. So, if you end up with some number of consumers who are your sort of discretionary purchasers, not purchasing or purchasing less frequently. You can see that number go down regardless of whether you've added new users.

And so, I think what my comments were intended to say is that, bringing in new users, we're still bringing in new users, but there are some number of people out there for whom this was not a critical purchase, it was more of a discretionary purchase. Those are the folks who are not continuing or not continuing at the same rate that we had seen before. The flip side is, the people who have been buying us as the main meal became even more committed than before. The most encouraging part to me was not only did they absorb the price increases, they increased the buying rate beyond what the pricing would be.

So, when -- in our data we're showing 41% increase in the dollars that we're getting from the super heavy users. And so, that's encouraging. It says, the people who've decided that we're the main meal are continued to bias and bias at a heavier rate. I think over the long haul though, we do need to get it to the point where we're bringing people into the -- in the front end of the funnel at a more rapid rate.

I think for price increases in 18 months, shook out some of the people who are more discretionary buyers and now we're focusing on bringing in the new people who are going to move along that purchase curve and become super heavy users in the future.

Jason English -- Goldman Sachs -- Analyst

So, Billy, is it right that year to date, last few months, you're losing as many consumers as you're bringing in?

Billy Cyr -- Chief Executive Officer

I don't think that's right, but I'll have to look at the date on that. I don't think that's --

Scott Morris -- Chief Operating Officer

There's been some moderate growth.

Billy Cyr -- Chief Executive Officer

Yeah.

Jason English -- Goldman Sachs -- Analyst

OK. OK. That's helpful. And then, I heard you were talking about in terms of more retail presence, more advertising, better on shelf availability, better packaging, all that sounds great.

And you -- clearly, you've been leaning in, why aren't we seeing more acceleration in 2Q? Your guidance would suggest, like, despite we're no longer lapping that shipping headwind, it's not really going to look a lot better.

Billy Cyr -- Chief Executive Officer

Do you mean why the growth rate in Q2 is not a stronger growth rate than Q1?

Jason English -- Goldman Sachs -- Analyst

Yes. Yes, that's right. Exactly. It's given the investment given the acceleration in volume, given that we no longer have a two point drag on cycling the prior year shipments.

Billy Cyr -- Chief Executive Officer

Yeah. I mean, we haven't given you a specific number we said sort of in the mid-20s, we'll see where it ends up shaking out when it's all said and done. We like the trends we're seeing, we feel good about the trends that we're seeing, but, you know, we want to see it all play through.

Todd Cunfer -- Chief Financial Officer

And there is -- obviously, there is some pricing that kind of wanes off in Q2. And as Billy said earlier, the volumes are coming in really, really nicely. So, in total, we feel good about the way it's rolling up. But obviously, we've all gotten a bit of a benefit from pricing.

The good news is, our volumes are still really, really strong.

Scott Morris -- Chief Operating Officer

I mean, Jason, the only thing to consider with fridges is, when a fridge goes in, it takes literally six months for it to have significant impact. So, even the fridges that we're putting in now that you can kind of start banking on those for the back half of the year where they really start contributing and adding significant incremental dollars to the business.

Jason English -- Goldman Sachs -- Analyst

Makes sense. All right. Thank you.

Billy Cyr -- Chief Executive Officer

Thanks.

Operator

The next question is from the line of Mark Astrachan with Stifel. Please proceed with your question.

Mark Astrachan -- Stifel Financial Corp. -- Analyst

Hey, good morning everyone.

Billy Cyr -- Chief Executive Officer

Good morning.

Mark Astrachan -- Stifel Financial Corp. -- Analyst

I guess just to follow-up a little bit on the last line of questioning there. Advertising spend increasing -- expectations that will continue to increase, especially through 4Q. I guess, I'm curious how you're thinking about how the return is today versus historical levels? The correlation has always been very strong. Is it as strong as it's been in terms of the advertising spend to sales growth? Anything you could elaborate there would be helpful?

Scott Morris -- Chief Operating Officer

Yes. So, I think Billy touched on this concept, too. And really, what we're seeing is just like when you go through like a change in the economy, there are certain businesses that basically don't come through, right? They just -- they wash out basically. And I think there are a group of consumers that are in the category.

There were also some of them were in Freshpet that are kind of moving out. So, what it does is that's shown in the total number. And so, you're losing some of these people that were occasional low-level buyers. And as you move through those, you've got to get -- you start to get to your real core group of consumers.

And you kind of start to return to the model that we've had for 10 years, where we spend dollars and we see that in -- that productivity in the advertising and then the CAC, like the way we think about it. So, I think we're going through a transition period where we're flushing out some of those weaker, less-committed consumers that were buying us casually that may have gotten some type of economic stimulus that may have had enhance savings for a period of time, etc. So, I think that's what we're seeing and we're going through. So, when you ask about the return, we believe we're getting -- here's what we know.

We know we're getting the best response ever to the TV advertising. We know we're getting tons of people going to the store locator. And historically, again, for 10 years, we've been able to see people go through that and come into the brand. What's being kind of masked by some of those less dedicated consumers leaving.

So, it's hard to calculate exactly the return, but we believe that nothing has changed that we've seen for really, really long historical periods. And that as we kind of move through this in the near term, we'll get right back to similar types of returns on when we spend -- what we spend in advertising will drive, you know, incremental new consumers.

Mark Astrachan -- Stifel Financial Corp. -- Analyst

Got it. And from a consumer standpoint and those that have left, can you get them back? Or is it about going after new kind of non-Freshpet household today. And I suppose you're not going in after the lost households that have just come in and out, does that then reduce the longer-term opportunity?

Scott Morris -- Chief Operating Officer

Yes. I think that -- I think globally, we -- two things we presented at ICR that I think are important to that. One of them is, we continue to see -- and this is like, you know, been five or six year trend that we demonstrated where the total addressable market for Freshpet food has really continued to expand. And I don't think there's anything that's changed the direction of that.

I think there's some short-term disruption in that, which is the commentary I was just referring to. So, I don't think there's really been any change in that, and it will continue to grow -- you know, continue to grow over time. So, I think that's where I am, Mark.

Billy Cyr -- Chief Executive Officer

Mark, I would just add to that is -- I think that what we're seeing is, as people are increasingly recognizing Freshpet as their main meal item, we are seeing the buying rate become an increasing driver of the growth. It's not what we model. That's not what we built out. But at some point, that will be a critical driver of growth of the business as people recognize it.

We're just happening to see it in an environment where those who are committed to the brand have become -- are very, very committed. And those people for whom it was a more discretionary purchase, they're less committed.

Scott Morris -- Chief Operating Officer

Yes. And the other thing -- I'm sorry, I meant to -- we touched on an ICR where, we mentioned this idea of the HIPPOHs. We've talked about it a couple of times on the call about targeting that group. That's really where we're seeing the increase in not only households but also the buy rate.

So, it's really -- the strategy that we put in place in the beginning of the year seems to be playing through well.

Mark Astrachan -- Stifel Financial Corp. -- Analyst

Go it. Thank. you.

Operator

The next question is from the line of Cody Ross with UBS. Please proceed with your questions.

Cody Ross -- UBS -- Analyst

Good morning. Thank you for taking our question. I just want to dig in a little bit on the EBITDA because it came in about 5 million to 6 million better than your guidance here. I think you mentioned that gross margin is supposed to sequentially decel a little bit here.

Can you just unpack that for us and just, you know, explain to us what those drivers are and then how you expect the cadence through the back half of the trend? And then, I have a follow-up. Thank you.

Todd Cunfer -- Chief Financial Officer

Yeah. So, I mean, let me break down Q1 first. So, you know, just like kind of direct input cost, pricing versus commodities is actually improved by about 200 basis points. So, we've talked about how we've fallen behind the last couple of years with inflation, we're starting to get a nice chunk of that back.

So, that's great news. Quality costs were favorable about 80 basis points. We're seeing continued progress there. And then as we gave everybody a heads up on, hey, look, we are bringing on some new lines in Ennis.

There is going to be an absorption issue through the first half of the year, particularly and we saw that by about 250 basis points to 260 basis points in Q1. That will actually get a little bit higher in Q2 as we bring full cost of that second Ennis line in place. Everything else, we feel good about. It's really that incremental absorption that's going to kind of hurt us in Q2.

As we build into, as we grow into the volumes of Ennis in the second half of the year, as we've been saying, our volume has been trending up nicely. As we build into that volume in the second half of the year, we'll start to leverage that facility a little bit more. And we'll be lapping all those costs of last year. So, again, a slight headwind in -- versus Q1 for Q2.

And then, we expect it to be much stronger in the second half.

Cody Ross -- UBS -- Analyst

That's helpful. Thanks. And then, I just have a follow-up here. You've had some new entrants in the category, and you took two rounds of price over the last year.

Can you just discuss the trial trends and if you're seeing any change in repeat purchase behavior? Thank you.

Scott Morris -- Chief Operating Officer

Yes, there have been a tremendous amount of people that have entered, and we track that very, very closely. And maybe I'll touch on that first. So, a year and a few months ago, we talked about us having 96.4% of what was out there in fresh and frozen pet food. And today, we're at 96%.

So, basically, if you think about it over the course of a year and a few months, we lost four tenth. So, I think that, that's probably the most illustrative way to think about. There have been a ton of entrants. They haven't really grown in size.

And, you know, we have maintained basically our share of the offering. So -- and I think the performance of almost all of them has been really, I would say -- I mean, it's early, early, but I think they're very kind of subpar what would make retailers very excited about it, at least from what I can tell. So, I think that's probably the most important aspect of it. So, when we look at trial and we look at repeat, and I think it's illustrated in some of the stuff that we just were talking about with the HIPPOHs where we're getting -- you know, I mean, our buy rate is the thing that's like been extraordinary and really driving the business.

It's driving it more than almost ever before. And I think that, that naturally demonstrates the dedication that consumers have to the products once they try it. And we have not made it particularly easy for people over the past. More recently, it's been much better.

But up until literally the past like 60, 90 days, we have not made it particularly easy for people to get the products they want and the sizes they want all the time. We still have plenty of work to do in that area. There are still some pockets across the U.S. where we definitely have opportunities to make sure fridges are fuller and better represent our full offering.

Cody Ross -- UBS -- Analyst

Thank you

Operator

Our next question is from the line of Jon Andersen with William Blair. Please proceed with your question.

Jon Andersen -- William Blair and Company -- Analyst

Hi. Good morning. Two quick ones. I was wondering if you could talk about the cadence of the new -- the fridge placements that you expect during the year.

I think your number of net new stores was up 7% in the first quarter. But again, help on the cadence there. And then, also on media for the year, what are your expectations for media spend as a percent of sales on a full year basis? Thank you.

Scott Morris -- Chief Operating Officer

I'll touch on the bridges real quick and then Todd, you know, can hit on the media percent of sales. So, really the way the year is laying out is Q2 and Q3 will be our biggest ads for fridges. And it's not just new placements. We'll actually end up with almost double the number of second and third fridges this year, then we actually have in new placements.

And I think the important thing to note is, a second and third fridge, a second or a third fridge in a high-velocity outlet is worth the same as a new bridge for the most part. So, it's -- you know, I think that hopefully dimensionalizes like the impact that new fridges can have. And again, the second and third fridges are a critical component to us continuing to build out like what we're building out for Freshpet food.

Todd Cunfer -- Chief Financial Officer

And from a media perspective, we'll spend close to 11% of net sales this year. And first half, second half -- first half, somewhere in the 60% to 65% of that spend will occur. And as I mentioned earlier on the call, the big change in the back half is we will spend a lot more in Q4 than we did this past year.

Jon Andersen -- William Blair and Company -- Analyst

Thank you.

Operator

The next question is from the line of Ken Goldman with JPMorgan. Please proceed with your question.

Ken Goldman -- JPMorgan Chase and Company -- Analyst

Hi. Good morning.

Billy Cyr -- Chief Executive Officer

Good morning.

Ken Goldman -- JPMorgan Chase and Company -- Analyst

You know, obviously, the -- and we talked -- you guys talked about this a little bit. There's some great numbers in terms of buy rates and overall shipment trends. I did want to come back a little bit to the questions on household penetration, though, especially for the non-HIPPOH users only because I just wasn't quite sure what the plan of attack was from your perspective. And again, you know, you're focused on the HIPPOHs this year.

I get it. You can't be everywhere all at once. But is the plan just to sort of for now kind of advertise and hope that the shock, I guess, of higher pricing phase. Are there other things you can do? Can you introduce smaller packages? Can you do more targeting -- targeted ads, I guess? I mean just trying to get an idea of sort of what the strategy is and kind of what the path ahead is for what we should expect for household numbers over the rest of the year.

Scott Morris -- Chief Operating Officer

Yes. So, Ken, I mean, I'll touch on a couple of things that we probably hit on, but I will expand a few different comments. So, look, we -- at ICR, we did mention this idea of like we want to focus on HIPPOHs. And one of the things that we've done in that area is, when we think about the advertising that we're putting on air, we're now at a point where we're comfortable and we're willing to basically be more aggressive and I think more direct in what we're trying to communicate.

And that will -- that has been demonstrated to attract and bring in the HIPPOHs into the brand. So, we kind of set that out at ICR. We knew that the advertising was going to change. And you're seeing our advertising kind of, you know, take a course, whether -- you've seen some of the things we had on earlier in the year, the skies, where we're talking about dry pet food, you're seeing what we're doing now.

We're picking consumers that are really, really dedicated to their pet. And we think that's really a core piece of not only this year, but long-term strategy to focus on these HIPPOHs. I do think that when the category gets -- when all this pricing -- and it's not even pet food pricing, it's pricing of my grocery bill. When people finally get more comfortable and digest the overall pricing with their grocery bill, and they will.

I mean it's been shown over the past 50 years that when these things go through, eventually, people get more comfortable where the pricing is and they return to more normalized behavior. I think we're going to get a lot more of those consumers that are a little concerned about where the economy is. I think we'll start to see some of them flowed back into the brand. And again, they're not as valuable.

They're just not as valuable. But what we're doing in the meantime, and I do think this could be 12 to 18 months before we get to this normalization is, we're getting as sharp as we possibly can on every aspect of the base model, which is the advertising, the products that we offer, the price points that we have on especially key entry sizes. And we're also launching a couple of products that are kind of more -- a little bit more value-oriented and a little bit, we're calling them limited ingredient products. We are starting to offer those products up, including one of the things that we'll start offering up in the next kind of six to 12 months is basically bulk packs.

And in those bulk packs, we think it will dramatically change buying behavior. If you look at the top 13 items in wet pet food, they are not single items. They are bulk packs. And we think it's time for Freshpet to start introducing our product portfolio, expanding out where we give someone the ability to buy not one or two at a time, but now buying four, six or eight at a time.

We've been able to test this. We were able to demonstrate that there's been success in doing that and we will start offering those on a broader basis across the country over the next year. So, that's, you know, definitely a piece of what we're doing over time. But look, the other thing is just get back to the fundamentals on what we're doing, which is the advertising works, the portfolio works, the new products that we've always brought, the innovation we brought works.

And if we're doing that well with these other pieces, we feel really great about the business plan.

Ken Goldman -- JPMorgan Chase and Company -- Analyst

Great. That's helpful. And then, a quick follow-up, if I can. You mentioned that, again, the first quarter was ahead of your expectations.

I think most of it was "organic." But you mentioned there was a little bit of a benefit from timing, some inventory capitalization. Is there any way to quantify that and think about how much of that reverses in 2Q?

Todd Cunfer -- Chief Financial Officer

Yeah. We had about $1 million benefit approximately from that. We also had about $1 million benefit from some miscellaneous sales and marketing spending, nonmedia expenses that we believe will happen in Q2. So, those are the biggest pieces.

Ken Goldman -- JPMorgan Chase and Company -- Analyst

Thanks so much.

Billy Cyr -- Chief Executive Officer

Thanks.

Operator

Our next question is from the line of Corey Grady with Jefferies. Please proceed with your question.

Corey Grady -- Jefferies -- Analyst

Hey. Good morning. And thanks for taking my question. I wanted to follow-up on your comments on fridge placements for the year.

Can you just remind us of your decision process to add a second or third fridge, and what the volume step-up benefit you see from the new fridge? And if you can, what portion of your stores are current, second, or third fridge candidates? Thanks.

Scott Morris -- Chief Operating Officer

OK. So, this is a -- probably a multipart question and answer. I'm going to try and address it at a fairly high level, and then we can definitely talk in more detail like when we get to the one-on-one calls. So, when we look at a retailer, there is definitely a threshold for different stores that we would put a second or a third fridge in.

And typically, what we do is we'll start off with a top 20% of -- and every retailer, there are different -- like retailers that have different volumes. But what we'll take is the highest volume retailers with the highest percent of velocity. So, we'll take the top 20% of stores and those are typically the first candidates for a second fridge. And then, what we've seen over time is, as those progress, retailers are interested in taking the next 20% or 30% of their fridges and putting second and sometimes even a third in the first 20.

So, we're starting to continue to see that progression. And really what is the most important aspect to it is, we -- if we look at dollars per store per week, and we've consistently see increases in dollars per store per week over time, that is the core aspect. So, if we're seeing those consistent dollars per store that's going to open up the entire network to more and more second and third fridges. Hopefully, that's giving you a little bit of a feel for it.

And I would say today, we have the opportunity for about half of our network to have either a second or a third fridge that is applicable. And then, what we tend to end up having to wait on is when there's these reset cycles where retailers are willing to touch the eye on a pretty big way because the take out four feet of something and put in a second fridge is a -- second or third bridge can be pretty significant. So, I think that's probably a very broad way to think about it. And year after year, we can continue to see same-store sales increases and that's the dollars per store per week.

And that really continues to open up more and more of the network. So, the more we can do from an advertising standpoint, grow penetration, buy rate, etc., I think the more opportunity we'll have over time for second and third fridges.

Corey Grady -- Jefferies -- Analyst

That's really helpful. Thank you. And then I know this has been asked a few different ways, but just to follow up on household penetration. Just from the 7% growth you saw this quarter, I mean, is that in line with your expectations to get up to 20% plus by year-end? And then, I mean, do you expect household penetration to be more back half-weighted? And should we think about that as kind of making up for pricing benefits rolling off? Thanks.

Todd Cunfer -- Chief Financial Officer

Yes. I think the way we had planned it was we thought we would see a little bit higher overall penetration. Like again, like when we talk at ICR in January, we started focusing. We want to focus on these HIPPOHs, these higher-value consumers.

And we started to deliver on that. I think that we anticipated slightly higher overall penetration. And I think what's overdelivered is the HIPPOHs and also the buy rate has really like, honestly, overdelivered from what we kind of had really budgeted and planned. But I think what's happened is we've seen -- and it's amazing.

And we're -- like if you look at where the category is, it's just amazing what the category is doing and what we're doing. The category looks like kind of -- it's a little like some brands, I think, would be very upset with where they are. And I think what's happened is, you have people that deload pantries a little bit, and that stretches a little bit. You have some consumers that aren't getting some economic stimulus, and that changes the dynamics of when they're buying a number of consumers.

So, I think once we kind of go through this cycle, we're going to return to kind of a much more normalized growth in penetration. I think it would be toward the back of the year that we'd see kind of more normalized overall penetration. And if we could hang on and make progress on the HIPPOHs like we're doing, it could be something that expands our overall revenues.

Corey Grady -- Jefferies -- Analyst

Thank you.

Operator

Our next question comes from the line of Jim Salera with Stephens. Please proceed with your question.

Jim Salera -- Stephens, Inc. -- Analyst

Hi, guys. Good morning. Thank for squeezing me in. Just wanted to ask as you're looking at the retailers that are adding these second and third fridges, is that incremental buyer? Just a high-frequency user, that now that there's more availability, they're increasing their buy rate? Or does the second or third fridge bring in a new incremental buyer that may be the fridge is busy and they usually don't go there there's more opportunity you see incremental buyers?

Scott Morris -- Chief Operating Officer

Yeah. So, there's probably two major aspects to the second fridges. In some retailers, it literally gives us enough holding power where we can actually get through a weekend. So, literally, on like some of our highest volume items like our six pound roll, for example, which are some of our most loyal users buy, they'll come in on Saturday afternoon, and it's sold out.

And unfortunately, fridges don't get stocked as well as we would like. So, it gives them some additional holding power in some cases. So, you get a buy rate pickup from that aspect. The second thing that we've been able to do and really demonstrate over time is as we add a second bridge, it allows us to add certain items in.

And we think about items differently than, I think, certain CPG companies. It's our fridge. We want to make sure the space is as productive as possible. We're not trying to just kind of get a few inches from somebody else.

So, what we've been able to do is, as we expand the portfolio of products and offerings, we find products that appeal to a slightly different consumer group or a broader consumer group. So, it does help to expand penetration within that individual store. And I think all of those details, which many retailers have extraordinary shopper card data on, and when they see some of those aspects, that's what's encouraging them. In addition to the overall kind of high-level holistic data, when they look at some of those details around the individual impact in the aisle, the buy rate, driving new consumers in, the frequency that it drives for the category, etc., that is some of the final deciding factor for them to put in the second and third fridges.

Billy Cyr -- Chief Executive Officer

I would just add to that, in addition to the holding power benefit and, you know, the extended assortment that the second and third fridges provide, there's an amplification value of our advertising. Think of it as virtually every CPG manufacturer would kill to have a very large off-shelf display or whatnot. We have lighted four foot wide, seven foot tall fridges, sitting in aisles. And when they put a second one in or a third one, forming an island or on end caps.

It has an amplification value of the advertising that is very sizable. And if a reasonably good-sized retailer does it in a meaningful number of stores, we can actually see it in the Nielsen data. And so, there is that benefit. And we frankly think that is a significant added value to the advertising.

Jim Salera -- Stephens, Inc. -- Analyst

OK, great. And if I can maybe sneak in one last follow-up on that. As you add in a retailer that has a second or third bridge, does that provide kind of the shield around the pet aisle that makes it harder for a competitor to get products in there? We talk about the competitive landscape. I mean if you have a third bridge, does that mean that there's no availability for them or significantly less availability? Or does the pet aisle as a whole just expand?

Scott Morris -- Chief Operating Officer

Look, I think that it helps expand the competitive advantage, but by no means does it limit anyone else from coming in and putting either their own fridge or the retailer put a fridge in. It's -- Billy mentioned it periodically. But five years ago, we came up with a strategy. And part of that core strategy was we want to change the way consumers think about pet food, we want them to think about fresh first or flipping the bowl sometimes is referred to.

And we want retailers to think as fresh first as they're building out their aisle. And I think what's starting to happen is, they recognize that fresh food has all the benefits of -- that they see in other areas of the store in pet food now. And it's a really meaningful piece of their category. And I think they're building out.

And there have been a few retailers that have added some of their own fridges out there. So, I think it's great for us, and I think it's encouraged some retailers to, you know, see what else they want to do to build up the segment.

Jim Salera -- Stephens, Inc. -- Analyst

Great. I'll pass on. Thanks guys.

Billy Cyr -- Chief Executive Officer

Thank you.

Operator

Our next question is from the line of John Lawrence from The Benchmark Company. Please proceed with your question.

John Lawrence -- The Benchmark Company -- Analyst

Hi. Good morning, guys. Thanks for squeezing me in. Billy, you've mentioned for a long time that as you got better fill rates up, that these retailers would come back.

I know you've talked a lot about these retail partners. But when you look at -- are there new people that are coming to discuss this category with you that you've been after for a period of time? They went through the lower fill rates and now they're coming back and you've mentioned some of those decision matrix and what they're looking at. Can you expand on that just a little bit, you know, what's happened since you've really restored these fill rates? And what are these retailers -- what are those discussions like maybe for the first time and in the second and third fridge?

Billy Cyr -- Chief Executive Officer

Yes, I'll let Scott take that one. He's closer to that.

Scott Morris -- Chief Operating Officer

Yes, it's actually been, I think, pretty exciting to see that once we were able to make sure that we had enough supply that retailers -- current retailers were willing to expand and have discussions around second and third and to be really excited about it. I mean there were times where they were, you know, almost coming to us, and they were expanding the store, even more sometimes than what we had maybe broader mentioned to them. But I think the other dynamic is, there are some retailers -- there are a few retailers, not many, that have said no for a very, very long period of time. And I think in the last -- literally in the last 90 to 120 days, we've had a few of those actually be receptive to having conversations.

And I think it's going to open up a few additional retailers for us, which we like to see. We want to -- we believe that we should be able to be in 90% of all the stores kind of typical grocery mass, club stores out there. We should be in almost all of them with some type of offering. It may not be, you know, eight feet of fridges in all those stores, but there's some type of offering in the majority of stores out there.

And we started to see that open up. And, boy, I mean, when we didn't have supply, not only were we not encouraging it. But it was -- they weren't interested either. Why would you want to add anything in where you can't have product to offer a consumer and you're taking up space for something that you can't sell.

So, I think we're starting to see past that. So, anyway, we're kind of excited to kind of see that develop.

John Lawrence -- The Benchmark Company -- Analyst

Great. Thanks. Good luck.

Billy Cyr -- Chief Executive Officer

Thank you.

Operator

Thank you. At this time, we've end of our question-and-answer session. Now, I'll turn the floor back to Mr. Cyr for closing remarks.

Billy Cyr -- Chief Executive Officer

Great. Thank you very much, everyone. I always like to end with a quote. The source of this quote is unknown, but it is very apt.

The quote is "It's no coincidence that man's best friend cannot talk." To which I reply, "Reward them for their silence and feed them Freshpet."

Scott Morris -- Chief Operating Officer

And I'll actually build on that. There's four pets in the dogs in the Freshpet family that I want to recognize: Rocky, which was one of the dogs in our advertising; Angus; Macy Gray; and Pinocchio, who was one of the dogs that -- of our head of R&D, and he's helped us develop many products along the way.

Billy Cyr -- Chief Executive Officer

Great. Thank you very much, everyone.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Jeff Sonnek -- Investor Relations

Billy Cyr -- Chief Executive Officer

Todd Cunfer -- Chief Financial Officer

Michael Lavery -- Piper Sandler -- Analyst

Scott Morris -- Chief Operating Officer

Bryan Spillane -- Bank of America Merrill Lynch -- Analyst

Rupesh Parikh -- Oppenheimer and Company -- Analyst

Bill Chappell -- Truist Securities -- Analyst

Peter Benedict -- Robert W. Baird and Company -- Analyst

Jason English -- Goldman Sachs -- Analyst

Mark Astrachan -- Stifel Financial Corp. -- Analyst

Cody Ross -- UBS -- Analyst

Jon Andersen -- William Blair and Company -- Analyst

Ken Goldman -- JPMorgan Chase and Company -- Analyst

Corey Grady -- Jefferies -- Analyst

Jim Salera -- Stephens, Inc. -- Analyst

John Lawrence -- The Benchmark Company -- Analyst

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