MAMA - NASDAQ

Greetings, and welcome to the Mama's Creations' Second Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Luke

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Mama's Creations' Second Quarter Fiscal 2026 Earnings Conference Call. During today's presentation, all parties would be in a listen only mode. Following this presentation, the conference will be open for questions. This conference is being recorded today, Monday, September 8, 2025, and the earnings press release accompanying this conference call was issued after the market closed today. On our call today is Mama's Creation's Chairman and CEO, Adam Michaels; and CFO, Anthony Gruber. Before we get started, I'll read a disclaimer about forward-looking statements. The conference call may contain, in addition to historical information, forward-looking statements within the meaning of federal securities laws regarding Mama's Creations. Forward-looking statements include, but are not limited to, statements that express the company's intentions, beliefs, expectations, strategies, predictions or any other statements relating to the future earnings, activities, events or conditions. These statements are based on current expectations, estimates and projections about the company's business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions that are difficult to predict. Therefore, actual outcomes and results may and are likely to differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in the company's 10-K and other documents, which the company files with the U.S. Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to factors beyond the company's control. Matters that may cause actual results to differ materially from those in the forward-looking statements include, among other factors, the loss of key management personnel, availability of capital and any major litigation regarding the company. In addition, throughout today's call, the company may refer to adjusted EBITDA, a non-GAAP financial measure, which it believes provides helpful information to investors about the performance of the business on an ongoing basis. A reconciliation of adjusted EBITDA to its most directly comparable GAAP financial measure is included in today's earnings release, which is available on the Mama's Creations website under the Investors tab. And finally, this conference call contains time-sensitive information that reflects management's best analysis only as of the date and time of this conference call. The company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this conference call. At this time, I'd like to turn the call over to Chairman and CEO, Adam Michaels. Adam, the floor is yours.

Thank you, Luke, and thank you to everyone for joining us today. I'd like to welcome you to our second quarter fiscal '26 financial results conference call. Our fiscal second quarter saw broad-based momentum. Revenue growth outpaced the category. We intelligently and judiciously leaned into high ROI trade investment and saw continued geographic balance with volume-led growth supported by new branded placements and incremental doors. We also worked collaboratively with our retail partners and implemented targeted pricing by early Q2, while operational work in chicken improved yields, increased throughput and optimized labor, helping to manage commodity and inflationary headwinds. I'd also like to call out that we achieved these gains despite a continued challenging macroeconomic environment for our consumers, highlighting the resiliency, reliability and relevance of our value-oriented high-quality deli prepared foods offerings across any macroeconomic environment. Most notably, we recently announced our acquisition of Crown I Enterprises from Sysco Corporation, a full-service manufacturer of value-added meats and ready-to-eat meals. As competitors, we had long admired their commitment to Grandma Quality products, and I would like to personally welcome Andy and his entire team to the Mama's Creations family. Together, I know we can accomplish great things. Crown I was originally part of J. Kings Food Service and was acquired by Sysco in 2019. It operates a recently upgraded and expanded 42,000-square-foot USDA-certified facility in Bay Shore, New York, just 10 miles from our Farmingdale location, operating much of the same grilling equipment we do in Farmingdale. Its customer roster includes hard to break into retailers with huge cultural followings where we haven't penetrated. This $17.5 million all-cash opportunistic acquisition brings meaningful synergies to our core business, while bolting on an attractive business at 0.3x their fiscal '25 revenue, fully financed through a private placement with institutional investors and further supported by a long-term credit facility with our existing commercial banking partner, M&T Bank, which further supports future opportunities that may come our way. Strategically, Crown adds immediate derisked capacity on familiar grill platforms, nearly 200 experienced operators and a culture of Grandma Quality offerings rivaling Mama's. The plant combines automated and hand-cut portion-controlled proteins with modified atmospheric pressure packaging to extend shelf life, capabilities we can scale across our network. With about $56 million in revenue for the 12 months ending June 30 of this year, Crown I meaningfully advances our path to $1 billion of revenue. The deal is accretive this fiscal year, and we see substantial growth potential with their premium customers and cross-selling opportunities. Crown I adds significant scale and immediate production capacity, especially in chicken to our operation, and we also gained an incredible team as well as management bench strength. We plan to expand SKU penetration across Crown I's customer base and bring their facility into our network quickly, leveraging our incredible Farmingdale operations team to drive integration given its proximity. Over time, we expect to evolve Crown I's margins closer to our current levels through operational efficiencies, improved throughput, joint chicken purchasing and better coordination of machinery and logistics. Most importantly, the Crown I acquisition following the successful acquisition of Creative Salads and Olive Branch in 2022 and Chef Inspirational Foods in '23 proves once again that our one-stop shop strategy is working. And with patient searching, prudent diligence and a practical transition, our Mama's family can acquire and integrate businesses at attractive multiples to drive outsized value for our shareholders. Turning to market dynamics. During the first half of fiscal '25, we have seen growth for private label brands continue to outpace national brands. The Private Label Manufacturers Association reported that private brands outpaced national brands by 4x during the 6 months ending June 15. Leading the charge was Refrigerated Products, which recorded the highest sales growth at 13% over the period. This reaffirms our strategy and remains a tailwind for Mama's. Speaking of Refrigerated Foods, according to new research from the National Frozen & Refrigerated Foods Association, shoppers have a strong and growing connection to the refrigerated section, especially when it comes to healthy, quick meal solutions and everyday family basics. This study discovered that 77% of adults associate refrigerated products with high-quality ingredients and that 70% believe these products support health or wellness goals, another feather in Mama's cap. In addition, protein remains the most sought-after nutrient in American consumers' diets according to results from two recent consumer surveys from the International Food Information Council. This was the fifth straight year in a row that protein was the top nutrient that most Americans say they're trying to consume. Approximately 80% of consumers reported prioritizing protein intake during a daily meal. High restaurant prices continue to bring consumers back to the grocery store for both savings and variety. The July Consumer Price Index highlighted these trends as away-from-home inflation increased from June to 3.9% over the past 52 weeks, while at-home was down from June to 2.2%, creating almost a 2x variance between away-from-home and at-home inflation over the last 12 months. These away-from-home price increases provide significant market potential for our deli prepared foods to capture, particularly in recessionary environments where consumers eat out less. Operationally, we executed against our 4 Cs: cost, controls, culture and catapult, and we'll run the same playbook at Crown. The first is cost. Skip and his team have done a tremendous job driving efficiency in our facilities. Freight continues to be a highlight with greater freight line management, fuller trucks and better planning, driving down our costs another 60 basis points from last year and last quarter. We've created new centers of excellence, starting in logistics, procurement and IT, which allows us to use our scale more effectively. We can't wait to add Crown's muscle to our growing frame. Crown will nearly double our raw chicken needs and early conversations with our suppliers reflect they couldn't be more excited to partner with us for growth and sharing improved costing. One year ago, we only had two chicken grills in Farmingdale. Today, we have six, expertly maintained, skillfully run and eagerly awaiting our sales team to fill them up. The second C is controls. As promised last year, we have successfully implemented the start of our warehouse management system in East Rutherford. This has provided us unparalleled visibility into our inventories, allowing for reduced waste as well as more agility and higher service levels for our customers. We have also deployed new NetSuite upgrades throughout our network to alert users immediately if cost of raw materials or assembly builds change in cost above a certain threshold. As you hear me say often, what gets measured gets improved. This is just one more example of our strategy coming to life and not just sitting in a PowerPoint deck. While Crown is already successfully managing their business on an alternative ERP system, we're already planning to bring Crown onto our NetSuite instance early next year to ensure we're optimizing every aspect of our business across all three facilities. As our team knows, our operations mantra is one plant, now three locations. The third C is culture. Abbey and her team recognize that our people are our most important ingredient and have been working to turn jobs into careers. Last month, we announced our first-ever Heritage Mentorship Inaugural Class. This program is for high-potential associates to match up with a leadership team member over a structured 9-month journey with themes, developmental activities and enrichment experiences rooted in Mama's core values of commit to craftsmanship, honor heritage and nurture relationships to develop this leadership and EQ skills. The best part of being in a fast, profitably growing business is that there are always opportunities to step up and lead. This will become our breeding ground for the leaders of Mama's tomorrow. While our team is always prepared for the next acquisition, the Crown deal allowed us to break out our M&A people playbook once again and use these repeatable tools to ensure on day 1, our Crown colleagues feel protected, provided for with a sense of purpose in Grandma's house. Culture remains our secret weapon. The final C being catapult speaks for itself. We saw another quarter of 20-plus percent growth, nearly 10x category growth. The capabilities that Chris is building are incredible and part of me thinks we should change catapult to crush. Most importantly, the sales team is focused on the right things, accelerating the club channel this quarter with new non-protein items at BJ's using the entire white meat chicken breast for paninis at Sam's, chicken meatballs at Costco. We have partnered with our biggest grocery partner to launch four new meals for one, leveraging our new map technology, adding shelf life and reducing labor for Publix. We've also leveraged our map technology to launch new meals for one offline and Amazon Fresh stores as well as online. We're excited to share that we recently received confirmation that Costco would like to partner with us on our first-ever national multi-vendor mailer in Q4, allowing the entire country to buy the meatballs that got this company started. This was not planned for in the budget, but Chris and Skip are ready for it. Our biggest surprise this year has been what we thought would be a quiet launch of a new panini line, boy, was I wrong. Following our IDDBA event this summer, our paninis exploded and are now in over 2,000 doors, anchored by Sheetz, Sam's Club and Publix, just to name a few. More importantly, they're beating all velocity expectations, and we're already being asked to expand the door count. All of this excitement makes it that much more impressive that our sales team across Crown and Mama's are already talking about how to accelerate this amazing growth. As a reminder, Crown provides $56 million in revenue in retailers that are largely incremental to our base today while providing meaningful new product cross-selling opportunities, both in their customers and ours. This provides us a baseline of nearly $200 million in run rate sales from which to grow, catapulting us to even closer to our $1 billion goal. I would be remiss and likely in trouble if I didn't share with my fellow shareholders the incredible work Lauren and her team are doing on the marketing front to capture wins today and strengthen our brand for tomorrow. The stronger our brand, the more we can help our retail partners drive more trips, larger baskets and more profitable sales. Our success in club this quarter didn't come by chance. The Sam's Club influencer campaign drove awareness to the new panini items we launched. The BJ's digital program drove trial and more importantly, repeat levels above historic numbers. Our Walmart web partnership is seeing double-digit returns on advertising investment, and our Instacart partnership is adding fuel to our Costco beef meatball fire. As I hope you see, we do not leave much to chance, and we don't hope new items succeed. We develop in advance the plans, partnership and promotion to allow our items to explode. Lastly, while organic growth in the Crown I integration remains our clear priority, we continue to keep our eyes open for our next potential M&A opportunity. As we made clear with Crown I, we are disciplined in our approach, seeking targets that enhance our category leadership, expand our capabilities and further scale our operations at a fair price. With our robust balance sheet and operational infrastructure, we are confident in our ability to successfully integrate Crown over the next year and thereafter, any opportunities that may arise. In closing, the strategic and operational improvements made in the quarter, paired with our acquisition of Crown I have created a stronger, more agile and efficient business platform. With significant new customer wins coming online in the second half of the year, successful product expansions and continued operational improvements now realized, Mama's is exceptionally well positioned for profitable growth and market share gains throughout fiscal '26 and beyond. I remain incredibly proud of our team's execution, energy and relentless commitment to excellence, and I look forward to sharing our continued progress in the quarters ahead. I'd now like to turn the call over to Anthony Gruber, our Chief Financial Officer, to walk through some key financial details from the second quarter of fiscal '26. Anthony?

Thank you, Adam. Moving to the financial results. Revenue for the second quarter of fiscal '26 increased 24% to $35.2 million as compared to $28.4 million in the same year ago quarter. The increase was largely attributable to volume gains driven by same customer cross-selling of new items, accelerating velocities of existing items and new customer door expansion. Trade spend was prudently managed to drive outsized returns and remain 2x larger than prior year. Targeting pricing actions were successfully negotiated in Q1, implemented in Q2 and now more accurately reflect the current macroeconomic conditions. Gross profit increased 28% to $8.8 million or 25% of total revenues in the second quarter of fiscal '26 as compared to $6.9 million or 24% of total revenues in the same year ago quarter. The difference in gross margin was primarily attributable to operational efficiency improvements across the organization, partially offset by continued protein commodity headwinds and increased investment in trade. Operating expenses totaled $7.1 million in the second quarter of fiscal '26 as compared to $5.3 million in the same year ago quarter. As a percentage of sales, operating expenses remained within our targeted range in the fiscal second quarter '26 at 20.1% from 18.6% in the same year ago quarter. Operating expenses in the second quarter benefited from increased operating leverage and ongoing operational efficiency improvements, partially offset by a 75% year-over-year increase in marketing spend, an area of historical underinvestment to help drive repeatable and profitable brand growth. Year-to-date, our high ROI marketing spend has nearly doubled versus prior year. Looking ahead, following the acquisition of Crown I, our revenue run rate stands at approximately $200 million today, and we believe that our normalized gross margin profile, not including major commodity fluctuations will hover in the low 20% range. This is driven by Crown's lower gross margin profile standing in the mid-teens percentage range, about 10 points short of our historical margin profile at Mama's Creations and we believe that over the next 12 to 18 months, by instilling our operational discipline into Crown's operations and realizing meaningful procurement and throughput cost savings across the enterprise that we can structurally lift our combined gross margin profile from the low 20% range today towards Mama's historical levels in the mid- to high 20% range. As a reminder, all of this is inclusive of rightsizing our trade promotion investments when our margins are achieved, and the funds are available. In Q2, we knew we had commodity headwinds, and we adjusted accordingly. Trade came in at 2.2%, more than 2x higher than prior year. For the first half of the year, trade is running 3x prior year with over $3 million invested in growing our velocities, brands and retailer partnerships versus less than $1 million last year. We remain vigilant on managing the magnitude and ROI of our trade spend and see it as a critical tool to achieve our ambitions. Net income for the second quarter of fiscal '26 increased to 11% to $1.3 million or $0.03 per diluted share as compared to net income of $1.1 million or $0.03 per diluted share in the same year ago quarter. Second quarter net income totaled 3.6% of revenue as compared to 4% in the same year ago quarter. Adjusted EBITDA, a non-GAAP measure, increased 18% to $3.3 million for the second quarter of fiscal '26 as compared to $2.7 million in the same year ago quarter. Cash and cash equivalents as of July 31, 2025, grew to $9.4 million as compared to $7.2 million as of January 31, 2025. The increase in cash and cash equivalents was primarily driven by improved profitability and working capital optimization. As of July 31, 2025, total debt fell to $2.7 million as compared to $6.8 million as of July 31, 2024. As we clearly demonstrated, the robust balance sheet, further supported by a $27.4 million credit facility with M&T Bank proactively prepares us to pursue whatever organic or inorganic growth opportunities may come our way. This completes my prepared comments. Now before we begin our question-and-answer session, I'd like to turn the call back to Adam for some closing remarks. Adam?

Thank you, Anthony. We exited the quarter with a tighter, higher throughput platform, now amplified by Crown's capacity and premium customer access. Our priorities are clear: enhance Crown's margin profile, integrate them quickly and efficiently and drive aggressive synergy realization and cross-selling by helping them to be brilliant at the basics. This is a playbook not dissimilar from when I first joined Mama's Creations back in late '22 and equally straightforward to implement given their proximity. I could promise you that our entire management team is laser-focused on executing upon this goal. We're approaching escape velocity, well positioned to compound profitable growth as consumers shift to convenient, high-quality deli prepared foods. With that, operator, let's open the line for questions.

[Operator Instructions] Our first question comes from the line of Ryan Meyers with Lake Street Capital Markets.

First one for me, just on the gross margins. And I know things will be a little difficult to predict as you guys are integrating the acquisition. But if we think about just the organic Mama's business, do you still feel confident in the gross margin rebound in the second half of the year? Are you may be seeing ongoing chicken commodity headwinds? Are you planning to pull back on trade spend at all? Just how we should be thinking about the Mama's business organically as itself, the gross margins in the second half of the year?

Yes, absolutely. Thanks, Ryan. And before I begin, I just really want to thank the team again. Everyone has done an incredible job operating the business. My partner, Anthony here through the whole M&A process. I really appreciate him. And just a huge thank you to everybody. Directly to your question, yes, we feel really good. If you look at what's happening with chicken, I think there was a little bit of a God smile or something. But if you remember when we had this conversation in the beginning of June at the last call, I told you we hadn't seen chicken prices go down. And literally, the day after our earnings call, it started to go down. Chicken is literally a full $1 a pound cheaper than it was when I last spoke with you guys. So I feel really good there. Obviously, Skip is doing a great job with his team on continuing to drive efficiency in the process. Our throughput is really impressive. We're seeing now that we have -- well, we have four grills, now we have six, but you're seeing just a lot more throughput, which is really helping us. So yes, from a core business perspective, and Crown will after this call become core. But yes, we feel good with what's happening with chicken. Beef is pulling up a little bit. It's something that we want to keep looking at. But again, we have contracts in both places. But yes, everything knock wood, is going our way. Chris and his team is doing an incredible job. I mentioned just a minute ago, the first ever Costco national buy that we just got in Q4 that is massive and completely not in budget. So yes, I feel good. Look, we just have to keep doing what we're doing. We've been doing this now for the past 3 years together as a team. And I feel great with how we're doing. And yes, so I feel really good there.

Got it. That's good to know. And then thinking about the $56 million in revenue that the Crown acquisition will add, is that growing? Is it expected to continue to grow? Is there any kind of SKU rationalization or channel rationalization that you need to do? I know you did some of that when you first joined Mama's, there was some stuff you guys walked away from. But just kind of help us understand where that Crown business is from a revenue standpoint and kind of anything we should be understanding with that.

Yes. It's really interesting. I'm a recovering former management consultant and the sort of inside joke when we used to go to each of our clients, we'd speak to the CEO. And the first thing the CEO would say is, guys, you've never seen this before. We're really special. We're really different. You can't use what you've done in the past. And for 7, 8, however, long years I did it, we ran the same playbook. I got to honestly tell you guys, we're cheating, full stop. We're cheating. We've done this as a leadership team with the Creative Salads acquisition, Anthony Morello, helped us, right? And Anthony is still here. We've done this once before. We're going to do it all over again. It's literally 10 miles away using the same equipment. So everything you just mentioned, absolutely, we're going to look and look at the business, right size the business. We're not making any decisions right now, right? Chris is the boss with Andy, who leads Crown. We're going to meet with each of our customers. We're super excited. We bought the business for our customers. So we're going to have conversations and see how we could help them more, right? That's the whole power we have with the business to share more, to have more capacity for them. So I think we're going to do a -- I feel very comfortable from a revenue side of the house. Yes, if there are SKUs that aren't selling at all, but we keep all of the raw materials in the back and we throw it out every 3 months, yes, we're going to probably stop that. We're going to look at what we have. Hey, we're going to look at do we need two meat loaves? Do we need two meatballs, right? Which one is better? We'll share with our customer both. If they like the one, they have, great. If not, wow, I just improved the quality for your product and actually, from what we're seeing, lower your cost. From an operations perspective, Skip is already, he's been there the whole time. Poor Tammy, his wife, he's been in Bay Shore and looking at our products. We just added two more grills. That means that when we used to have to push hard and pay for overtime in Farmingdale, we don't have to do that anymore, right? Because we have two more grills. We have additional capacity. This 42,000 square feet is -- yes, 42,000 square feet. It is twice the size of both of our other two facilities. This is a big space for us to allow a lot of efficiencies. So I think the so what for all of this is we are all super excited. We are super patient. Anyone that you guys know me; I'm not rushing after anything. We're going to take a very patient approach, speak to our customers first, right? This is a Grandma Quality business and learn together and together see where we could help each other across, right? One plant, three facilities, three locations. And I think that's where we're going to drive a lot of synergies.

Our next question comes from the line of Eric Des Lauriers with Craig-Hallum Capital Group.

Congrats on another very strong quarter here. First question for me on the Costco news. Congrats there as well. I was wondering if you could just kind of recap the progress you've made penetrating Costco over the past 2 years and then expand on the importance of the MVM here. Do you see this as a step closer towards everyday product status? Or is this kind of a nice to have with Costco? And how impactful could everyday product status be at Costco?

Yes. Thanks, Eric. And I'm super proud Scott gets a lot of credit from our sales team. Remember, when I started here, Scott and I, we had about $570,000, I think, of sales, one product, one region. All of last year, we got into all eight regions at different times. We had about $10 million of sales all of last year. If you remember, we had the digital MVM in Q1, we hit $10 million just in Q1. So I explained in the past, it's an evolution. You get one item, you do exceptionally well in one region, you get more regions. As you do exceptionally well, you get all regions, you get a national buy. You do exceptionally well, you get a digital MVM, right? That's what we did in Q1. You do exceptionally well, you get a national MVM, a print MVM. Every house in America, if they have a Costco membership, they're going to see Mama Mancini's meatballs in their brochure in the holiday season, another brilliant move by Scott for timing. He thinks it's pretty good to be -- have a national buy during the holidays. It's awesome. And to your point, if we do exceptionally well, Grandma Quality, great service, the next step is the national -- the everyday item. I just gave you some numbers there. It keeps -- what we used to do in a year, we did in a quarter, could you only imagine what the national MVM is going to look like? And can you only imagine if we have an everyday item. So as long as you stay Grandma Quality, great service, Costco is a great partner for us. And you see that over the 3 years that we've been partnering since I've been here.

That's helpful. I appreciate that. And yes, very nice progress over the past 2 years, looking forward to the years to come here. Switching gears to Crown a little bit. So you called out their map capabilities. You also kind of highlighted yours in your prepared remarks as well. Just wondering if you could help us understand the differences between Crown's map capabilities and yours. What are they bringing to the table? Is it just -- is it more scale? Are there some differences in their capabilities compared to yours? If you could just flesh that out, that would be helpful.

Yes, there are a couple of things. And I really am so excited. I've been sort of privately over the past many months during the acquisition. Obviously, I had a chance to work with Andy during the M&A process. I obviously couldn't speak to the folks on the line every day. But I've already started to last Sunday. And what I'm excited about, I love the talent there. I love the people. Again, we're buying people. We're buying capabilities. These are really excited folks that I think we're seeing, and Abbey and Skip could speak better to this, but I think they found their home, right? Sysco is an amazing company. We could only aspire to reach those levels. They're a distributor, right? That is their expertise, and that's where they're exceptional at. They're not a manufacturer, right? Actually, this Crown business was the only manufacturing element of their business. So I think that in these few -- this week or so that we've been able to speak to our new colleagues, I think they're really excited to be back to being core to the business, and that's what's very exciting. You asked very specifically, yes, they have more -- they actually have more equipment than we do, full stop. And that's great, and that gives us more space. But the other thing it does is they have more experience than we do. We've had this map technology now for months. They've been doing it for years. So remember, this is not a one-way street. This is not us telling them what to do, right? This is them teaching us. That's why you get brilliant people, not to tell them what to do, it's for them to tell you what to do. So I am really excited for -- I'm already seeing people moving around the three plants. We have a very permeable across the three plants. I want to see a lot of learnings. So it's not just the equipment that they have and capacity that they have, but it's actually they know how to do things better than we do in some areas, and I want to learn from that. So I mentioned earlier, the Publix is doing really well, four new items at Publix with the map technology, that's better for them, right? That reduces Publix swell, which means they want to buy from us more. We help them out. We actually got two new paninis in there as well. So yes, things are going really well. Amazon Fresh is another one that's starting with our map item. So I feel great. I could sleep a little better at night, knowing that we have more capacity if things really accelerate and Chris and his team do their job, which they are. So yes, hopefully, that's helpful.

Yes. No, that was very helpful. And then just last one for me. Anthony, you touched on this in your prepared remarks, but just wondering if you could expand how your trade promotion plans or targets this year might change with Crown expecting to weigh on gross margins for the next 4 to 6 quarters.

Well, we always look at the gross margin and balance it out with our marketing spends. So we try and optimize there where we -- if there's a quarter where commodity prices are up, we're going to tap the brakes on the marketing spend and make sure to kind of bolster our margin up. It's a seesaw. It's a little bit of feel all the time of what's out in the market, how much we're paying for input and then what we could do as far as a customer standpoint and growing the customer base. We'll always look at that margin number and offset it basically with the marketing spend. If we're seeing a whole lot more margin than we anticipated, we're going to use some of those dollars to drive velocities on the top line by spending marketing dollars. If the margins and things are going very well for us right now, knock wood, as Adam said, chicken prices are a whole dollar less than what they've been. So we have some opportunities now. The MVM will be one of those opportunities.

Yes. I agree with what Anthony said and just one other part with Crown. Crown is predominantly a private label business. So their trade rate is significantly lower. So what that does is understanding just the numerator and denominator, it's going to -- we don't have to spend as much in some of those customers that sort of want a fixed price. So yes, so we'll see. And I think the other thing that's important is, hopefully, you've seen this. You saw it in Q1. You saw it in Q2 now. Chris and his team do a very good job at -- it's a lever that they're able to move up and down fluidly. And the partnership that Chris and Anthony have together weekly. We see what the numbers are. And if we need to pull back, we need to pull forward. So this is -- it's a very flexible tool that Anthony and Chris use together.

That's very helpful. If I could just kind of press that a little bit further. So I think previously, the goal was high 20% gross margins. And when it exceeds that, you would increase trade promotion. Should we kind of think of that high 20s is now being moved down to the low 20s where, say, you guys are looking at a quarter coming up where maybe you're at, just call it, 22% gross margin or something lower than you previously would. Maybe that's a quarter that you would typically not spend a whole lot of trade promotion, but with this kind of "new normal" is that -- could that be a level where we could see more trade promotion than we would if it was Mama's stand-alone gross margin?

So I really think, and you've seen we've been together for a few years now. We have to see how the business goes. So we've shown that we could easily move it forward and back. We -- again, I mentioned earlier, I don't want to rush this integration. That's where you fail. I want to start, see where we are. We have the patience. As Anthony said, with chicken coming down, that actually gives us more than we had in Q2. Remember, Q2 started in May. That was the absolute peak of chicken prices. So you can only imagine what Q2 would have looked like if chicken wasn't -- I mean, I think the day of our earnings call, chicken was, I think, $2.83, something like that, a pound. Now it's like $1.70 a pound. So again, we're in it for the long haul. I think that we're going to be patient, see where it is. Our core business will help the Crown business get up to a higher number. And again, it's really important to remember, again, this is exactly what we did at Creative Salads. When we started, right, 3 years ago, Creative Salads was exactly was below the Mama's average. A year later, we had Creative Salads above the Mama's average. So this is a team that did it. It's the same team. Anthony, myself, Lauren, right? And now we have Skip and Chris. So I think we're going to do even better than we did with the Creative Salads acquisition and the movement right up on gross margin.

Our next question comes from the line of George Kelly with ROTH Capital Partners.

To start, I was curious if you could be more specific just on the sort of potential revenue capacity out of Crown's manufacturing facility? And is there a lot of CapEx that you anticipate investing to get you up to whatever that potential capacity number is?

Yes. And actually, I'll take the second question -- the second part first because it's so cool, and this is just another awesome factor. So this is one of -- this is the most recently enhanced expanded business. So to Sysco's credit, I think they put something like $6 million into this facility over the past couple of years. So it is actually one of the more automated, definitely the more enhanced temp-controlled and it's, again, the biggest facility. We really have to put nothing into this facility. This is the cool part of this acquisition. The net book value of the fixed assets, this is a great -- we acquired a lot of great assets. So that's really good. Other than maintenance that we always put in; we do not expect any major CapEx whatsoever to the Crown business. If anything, we're actually going to take some stuff that maybe is underutilized and bring it to Farmingdale, to East Rutherford, where we were going to buy something completely new and now, we don't have to. I would argue from a system perspective, it's like a net negative CapEx, if that's such a thing. So that's to your second part. I think the first part on the revenue potential, this is -- again, remember the Creative Salads acquisition. We actually went down a little bit because we saw some businesses -- there's some part. They have a legacy street business as well, similar to how Creative Salads does. That allows us to drive more efficiency with our trucks, right? We have the trucks, and we do the route rides. But I could imagine, yes, there will be some stuff that we're going to speak to customers. It's a collaborative conversation. We have to show -- we'll show them, this is what it costs. We have to hit a certain margin profile. And we might decide similar to what happened when I got here at Mama Mancini's, similar to how when we were at Creative Salads, there may be some business that we both collaboratively choose not to continue. That's going to lower it and then it shoots up again, right? We went down in Creative Salads and now we're 3x where we started. So I think there's space there. We could easily across the three facilities, double our business from what we have today. So actually, I was speaking to Skip earlier today, and I was looking for at least a candy, a Hershey's Kisses or something now that I got him 42,000 additional square feet. I did not get the casserole I was looking for, but it's okay. But yes, I feel good with -- we really -- I'm breathing significantly better now from an operational standpoint now that we have this facility, a lot more space now.

Okay. Excellent. And just to -- so you said you think you could double your revenue productivity. So roughly a $200 million business now you think you could double that number with the three properties?

Yes. And again, it's not just the physical space and as Skip talks about, bolted down capacity, it's also the efficiency that we have. So I could speak to you more about Crown. Crown really does work two shifts. They don't work a third shift. They don't work the weekends, right? Now that we have the two additional grills at -- in Farmingdale, we really don't work weekends. So there's a lot more space. There's also more efficiency on how we do things. I showed you before, we didn't just increase our throughput in Farmingdale because we got two more grills. We're doing things more efficiently. So that's another place. So it's not just the physical space, not just the equipment, it's the fact that we're being more efficient at what we do. I can speak to you all day about what we're doing in East Rutherford. The automation that we have in East Rutherford now, I told you about the map machine, the way we are doing with the spiral oven. So yes, I feel very good. I -- I'm sure I've used this before. I don't play tennis, my son does. But a little bit of a game with Skip and Chris, right? The goal is Skip should be calling Chris saying, hey, I have all this excess capacity. What are you doing? Chris should be calling Skip saying, hey, you want me to slow down if you can't keep up, and I constantly want them to play back and forth very -- was it Sinner, Alcaraz, right? That's -- Chris and Skip could figure out which one of them they are. But yes, I feel really good now with the capacity we have.

Okay. That's great. And then just one other question for me. You spoke -- congrats, the news you offered on Costco and the 4Q promotion, that seems like a big deal. I was hoping that you could talk a little about the other big club customer, Sam's. And I think you mentioned in the press release the panini has performed well. Maybe if you could give a little more detail just on the performance of that SKU. And what are your expectations in the back half? Are there potentially additional products coming or anything else you can flag for the back half?

Yes, I love it. So it's actually one of my favorite products. It's a chicken pesto panini. And yes, it's doing well. They expanded the door count. It was a rotation that went through the summer, and they're still ordering. So I'm excited for the teams to chat and see what we could do more of. But again, these paninis are really picking up. I would very much love to continue to partner with Sam's on the panini. I told you we got two paninis into Publix. Sheetz has three paninis. So the paninis are doing exceptionally well. And again, I'll just keep going back to, I feel great that Crown has additional space. Again, the way we do things is it doesn't have to be -- look, paninis we're only making in one place, no other place gets to do it. It gives us huge flexibility on our production. So paninis are doing well. Sam's is doing well. The chicken, the stuffed pepper mix, really proud and appreciate the strong legacy, long partnership we've had with Sam's. It's great.

Our next question comes from the line of Nick Sherwood with Maxim LLC.

My first question is, can you expand a little bit more on the success you had at Walmart in the quarter from the marketing perspective and sort of how that relationship has evolved and where you see that going through the rest of the year?

Yes. Another great partnership. Remember, we had a whopping total of 0 sales this time last year, right? This is something that happened towards the end in Q4. Another great chicken product of ours. It's -- this four-count is doing exceptionally well. I think -- I'm going to make this number up, but I think when we started, I think there was maybe 200 or 400 doors, something along those lines. I think we're up to 1,800, almost 2,000 doors. And again, it's not just the individual item, Chris and Scott and team were down there just a month or so ago. I love the partnerships that we create. It is not, it is not, it is not transactional. How do we work together? What new items are you looking for? What are consumers looking for? How do we work together on it? So I love it. And I'm really -- I've said this to folks before, I really believe there's just a lot of momentum because of our consumers, right, our 330 million friends across America. Things are tough for them. People are spending more of their dollars in club and mass. And that's where our teams are trying to bring the best products, promotions to be where the consumer is going to be. So really good, great partnership with Walmart as well.

Appreciate the detail. And then kind of switching gears, Sheetz is your first convenience channel customer. Can you kind of talk about the experience and expanding in that channel and where you see yourself growing more? Is that a near-term priority? Or are you more focused on club and mass and then maybe really getting into convenience as something further in the future?

Yes. Look, if we're going to be the one-stop shop in deli, we want to win everywhere. So it's absolutely a focus of ours. There are other convenience channels. If you remember, when we really started this a year or so ago, the first step was getting into all the distributors, right? Because that's how you get into the convenience channel. It's sort of a chicken or egg. The distributors don't want you unless you have a C-store customer. The C-stores won't buy from you unless you have distributors that could actually sell there. So in the beginning, it was very hard. What's amazing is we're now in all distributors, right, starting with Sysco, right, starting with Dot, starting with KeHE. So we have McLane. So we have -- we're in all the distributors now. It makes it easier. Every day, Tony or others are getting us into the different C-store banners. Again, we want to go where the consumers are going, and it is tougher now. The convenience channel is by definition for convenience, right? It's not for low cost. But our goal is to meet the needs of our -- of every consumer regardless of where they are. And we're going to create different products, possibly at lower price points to meet their needs in a particular channel. So there's a lot of testing we're doing with some different products that are -- I want to keep to ourselves for now, but that I'm excited about and has some interest from a couple of other C-store banners.

Okay. Perfect. And then my final question is, how does this acquisition affect any of the planned improvements to the East Rutherford facility?

So like I mentioned to you earlier, so first of all, we're absolutely continuing to develop our East Rutherford facility. We've put a bunch of stuff in already. And if you remember last time, we actually more than doubled the space that we have in East Rutherford. So that's not changing. I mentioned earlier, what is changing is, I'll give you a really specific example. we are going to actually spend money on a shredder, right, pulled chicken, shredded chicken. We're going to go out and buy a brand-new machine, takes forever to get, pay top dollar, all these things. Hey, the Bay Shore facility, the Crown has an extra one. Wow, we can bring it over. Literally just this weekend, we have one of our great products, if you guys -- it's in five regions today at Costco is our cheese stuffed chicken meat balls. Again, one of my son's favorites. And it's really complicated, right? It's a special machine that stuffs the cheese inside, right? You always want to know how they got whatever into the Tootsie Roll Pop. Eric and Ray, Eric runs our East Rutherford facility. Ray runs our Farmingdale facility. We have just a lot of demand. Eric gave Ray a call, hey, can I borrow one of your stuffing machines? Absolutely, Eric. And we go back and forth every day with our trucks. And now we have three machines here. So hopefully, that's just one example of many, one plant, three locations and now getting a lot of equipment from Crown. There are things that we were going to buy in East Rutherford that were, for all intents and purposes, going to get for free. And that's awesome. So that's one example that, yes, we're absolutely investing in East Rutherford. We're just going to -- Anthony is smiling. We're just going to invest less than we were going to because, oops, we actually have the equipment, which is wonderful.

And we have reached the end of the question-and-answer session. I would like to turn the floor back to CEO, Adam Michaels, for closing remarks.

Thank you, operator, and thank you again to each of you for joining us today. I hope you see that our team is starting to hit our stride. Our sales and marketing teams have the products and relationships needed to accelerate our business. Our operations team has the capacity and know-how to continue to drive meaningful efficiencies throughout our network. Our finance team continues to prove we have the balance sheet management and capital markets expertise to support most any investment that lies ahead. And most importantly, our people operations team continues to bring in great talent and lift up existing talents to create the Grandma Quality culture critical to our success. [indiscernible] is our new Crown family, which we're integrating with speed and discipline, focusing on growth while maintaining our margin targets and leveraging added capacity and premium customer access to drive a profitable business. Looking ahead, we're positioned to take share as we execute our one-stop shop deli solutions strategy. As always, I appreciate your continued support. Thank you.