Vital Farms Inc at Jefferies Consumer Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rob Dickerson - Jefferies Financial Group Inc. - Analyst : No problem at all. Sorry I kind of stole your thunder. So look, Russell, I guess we'll just kind of kick off with the growth opportunity. A lot has occurred through the pandemic. I always have people ask me though, do you think there is a lot of household penetration pulled forward for Vital? Do you think they'll have to give a lot of that back? How do they continue to grow? So I just thought, not to clear the air so to speak, but the question does come up a decent amount. And I think your distribution runway and innovation runway supersedes anything that has been pandemic-driven. So maybe if you just want to kick off with that, that's probably the best.

Question: Rob Dickerson - Jefferies Financial Group Inc. - Analyst : Which is up next. So look, last year you launched Egg Bites. I think that was your first multi-ingredient breakfast product. This summer -- I believe it's the summer you're launching your breakfast bars. So just curious, what do you think about the performance of that new innovation relative to the core egg business? How have you seen the innovation from last year playing out? How has retailer channel reception been in the breakfast bars? And then any color, how you think about which new innovation to pick? Like why did you go bites, why did you go bars versus something else?

Question: Rob Dickerson - Jefferies Financial Group Inc. - Analyst : Okay, super. And then I guess two quick follow-up questions. As you think about go-forward innovation and maybe these products as well, does innovation necessarily need to be margin mix accretive? I mean, that's usually always a goal, right? That's the first question. And the second question is just -- if I'm thinking about innovation for 2022 and I see there is in Egg Bite, there's an egg bar, is there going to be like an egg pop? Or are there -- is it kind of you learn from this, and maybe there are adjacency-esque, let's say, type innovations? But it seems and feels like upfront you want to broaden the brand and the brand equity, and you built that from the start through eggs, so that's likely where we would probably see some of the closer in innovation.

Question: Rob Dickerson - Jefferies Financial Group Inc. - Analyst : Cool. Makes sense. So you just mentioned your farmer network. I thought it would just be helpful for people to hear again as well just for you to talk about a little bit more detail kind of that network that you do have, and how you add farmers over time to support the growth. Because again, this is a topic that comes up, Bo. They have -- there are 200 family farms but what if they get bigger? How'd they find new farmers, how'd they convert farmers, what's the loyalty of farmers, what have you?

Question: Rob Dickerson - Jefferies Financial Group Inc. - Analyst : Alright, great. And then I do think you have what you call a learning farm. I'm unfortunately still kind of unaware of what that is, how it's set up, what benefits you get from it. But I heard you mention it the other day, so I thought I would just ask what that is and what it provides you.

Question: Rob Dickerson - Jefferies Financial Group Inc. - Analyst : It almost sounds like you can -- a farmer wants to work with you, but a farmer shows up and you get out your efficiency book and say, yes, we'd love to bring you into the family -- into the flock, right? But this is how you can do it to maximize overall stakeholder value for everybody inclusive of the farmer, right? That's where it's headed, so to speak.

Question: Rob Dickerson - Jefferies Financial Group Inc. - Analyst : Cool. Okay. And then I just want to ask quickly, just Egg Central Station, given it is obviously a very core component to the operation of your business. I know you're expanding it. Just any update as to where you are with that expansion, capacity levels you have as you think forward to next year.

Question: Rob Dickerson - Jefferies Financial Group Inc. - Analyst : Alright, super. Thanks, Bo. And then I guess on to marketing. I have a hat; I think I have a T-shirt. I always appreciate the online social media ads I see. I'm just curious, as you think forward, how do you approach marketing overall? How do you stay unique, how do you stay interest, how do you get the brand out there? Because I don't believe you're running highly costly TV ads, billboards, what have you. So just any broad-based thinking on how you can continue to brand effectively Vital Farms.

Question: Rob Dickerson - Jefferies Financial Group Inc. - Analyst : So marketing and the branding, obviously, is always a core element to selling the product. And maybe that does -- even increasingly as you move forward and you are able to better communicate or more broadly communicate the message of what Vital Farms is, what it stands for, how it treats employees, what have you, that would have to be part of the equation that helps you keep your moat. That's the branding. I, again, always have people ask, well, how are they differentiated? How do you think they keep that competitive moat, because they're playing in an area which is premium eggs that's based off of stakeholder -- total stakeholder value creation. Farmers seem to like them, no one leaves the network, right? So from A-Z, they're doing everything appropriately. But why couldn't somebody else come in and just do that too? And obviously, there are so many different components of what creates that brand and what creates the company. So I'm just curious, Russell. Maybe just spend a minute or two talking about why you think those relationships with retailers are great and the farmers. And just what keeps that competitive moat going over time?

Question: Rob Dickerson - Jefferies Financial Group Inc. - Analyst : Also, I think you should've been an NFL coach. It sounds like you're building a great platform of competitive moat. But that -- it's all true, right? I mean, it's about the team. It's not just, oh, hey, we have these eggs. Well, how did you get the eggs? Who's the farmer? Where did you get them from? How are employees with turnover? So it sounds like this is a model that could be re-created, but extremely challenging to do so. So I give you all the credit for getting this far. Alright, so look, I guess just before we run out of time, I have to ask, like I've done with everybody so far today and yesterday just on the cost side. Everyone is talking about it, cost inflation, what do you think, how do you offset, what are the pressures? I mean, obviously, you had some exposure on the feed cost with your farmers, which some of that, you absorb that cost. And you've already spoken to that, so that's in the market, that shouldn't be a shock to anybody. I guess, one, I'm curious -- maybe this is for you, Bo -- if you've just seen anything kind of tick up, tick down in the past couple months. A lot are saying that transportation costs are -- have inflated a little bit more. But given you're contracted with farmers, not sure if you feel as much of this labor issue that a lot of other companies might be feeling. So really, just any color overall relative to when we spoke last just on the cost side would be helpful.

Question: Rob Dickerson - Jefferies Financial Group Inc. - Analyst : Alright, fair enough. And then I guess just in terms of pricing. I think, Russell, I've heard you say before, it doesn't seem like you're really itching to increase prices anytime soon kind of given your price point, but then also given you're trying to improve and hold on to a strong velocity. So I just thought, maybe just a bit of a refresher, so to speak, just in terms of that pricing strategy overall, at least for now. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 23, 2021 / 3:30PM, VITL.OQ - Vital Farms Inc at Jefferies Consumer Conference (Virtual)

Question: Rob Dickerson - Jefferies Financial Group Inc. - Analyst : Makes sense to me. Alright, look. I think we're out of time. So, Bo, thank you. Russell, obviously really appreciate it, Matt as well. Always love having Vital Farms attend our conferences and give us their precious time. So thanks, everybody, thank you very much. Have a great day.