Question-and-Answer Session
Operator
(Operator Instructions) We’ll pause for just a moment to compile the Q&A roster. Our first question is from the line of Diane Geissler with Merrill Lynch.
Diane Geissler – Merrill Lynch
Did you give a top line expectation for snack in the third quarter? I may have missed it.
Michael J. Mendes
No, we did not.
Diane Geissler – Merrill Lynch
Okay. Any hints there about the flow of product in the third quarter versus fourth quarter on snack?
Michael J. Mendes
I think that proportionality generally would match up with last year outside of the timing of some new distribution. You know, we talked about this product shipping to Home Depot and to Blockbuster. We expect more of that to actually ship in Q4 but it’s going to be – these are 2.5 ounce items so they’re not the largest items. We’ve got these 250 clubs that are taking a pallet each of the coco roast, that will ship this quarter. So, I would say that using a proportionality of our Q3 versus Q4 last year would probably be a good starting point Diane and as we get later in the call if I can think to add more color to that I will.
Diane Geissler – Merrill Lynch
Then presumably the new distribution you have with Blockbuster, Home Depot and the coco roast club would all be no slotting?
Michael J. Mendes
Correct.
Diane Geissler – Merrill Lynch
On the culinary which had a better quarter than I had been estimating, can you give us some idea about the sustainability, obviously 17% growth, I think you had a pretty good 7% in the first quarter. I know you’re lapping some business in terms of getting the bake center back, etcetera, but could you give us an idea about kind of long term what your expectations are on the culinary side? Long term, maybe next couple of years.
Michael J. Mendes
One thing is that we did get the benefit of some pricing obviously given the stronger pricing commodity environment that’s underpinning walnuts right now is one of our sub-products. But at the same time almonds were a bit softer. I would say overall the tree nut commodity prices were stronger. I would say that that is a trend that will over time, I think the commodity prices will moderate a bit so maybe there might be some price deflation a few years out. I don’t know if I see that as an eminent trend though. The almond crop this year was the on crop in almonds, next year should be an off crop. However the bearing acreage is increasing dramatically. So I think there’s a big question mark with almonds. The prices today for almonds are in the probably mid $2.00 level compared to walnuts and pecans that are in the $4.00 to $5.00 level. So I don’t know if there’s a lot of price deflation in almonds. I think they’re an attractive value and they’re also going to be bolstered by the weak dollar as about maybe 70 to 80% of all almonds are export and a big part of that goes to Europe. So I think that naturally you would think there might be a little bit of price deflation as far as on the pricing volume I don’t think it’s going to be as dramatic as some people think. On the volume side we have some real nice opportunities to increase our volume in culinary. There’s a number of national retailers that have an opportunity to increase the number of skews and also as we grow our non-walnut business in club and mass merch in culinary we think that’s a growth opportunity. So I think that business has some nice growth opportunity for us maybe faster than center store baking but maybe not as fast as we saw this year given that we’re getting some incremental benefit of pricing. Now I would say sort of steady state 5% growth is I think sort of the intrinsic growth rate of that business and maybe a little better than that if we can get more distribution gains than I’m anticipating.
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