Welcome to the Bellring Brands Third Quarter 2020 Earnings Conference Call and Webcast. Hosting the call today from Bellring Brands are Darcy Davenport, President and Chief Executive Officer and Paul Rhoad, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 1:30 p. M. Eastern Time.
The dial in number is 800 585-8367 and the passcode is 9,248,828. At this time, all participants have been placed in a listen only mode. It is now my pleasure to turn the floor over to Jennifer Meyer, Investor Relations of Bellring Brands for introductions. You may begin.
Good morning and thank you for joining us today for Bellring Brands' Q3 fiscal 2020 earnings call. With me today are Darcy Davenport, our President and CEO and Paul Rhode, our CFO. Darcy and Paul will begin with prepared remarks and afterwards, we'll have a brief question and answer session. The press release and supplemental slide presentation that supports these remarks are posted on our section atbellring.com. In addition, the release and slides are available on the SEC's website.
Before we continue, I would like to remind you that this call will contain forward looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements. These forward looking statements are current as of the date of this call and management undertakes no obligation to update these statements. As a reminder, this call is being recorded and an audio replay will be available on our website. And finally, this call will discuss certain non GAAP measures. For a reconciliation of these non GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website.
With that, I will turn the call over to Darcy.
Thanks, Jennifer, and thank you all for joining us this morning. Last evening, we reported our Q3 results as well as posted a supplemental presentation to our website. This presentation is designed to provide more insight into our business, consumption and key metrics. We reported 3rd quarter sales of $204,000,000 and adjusted EBITDA of $38,500,000 As we discussed last quarter, we ended Q2 with inflated trade inventories after our customers overbought following the mid March consumer stock up. This elevated Q2 sales at the expense of Q3 and factored into our second half planning.
In reaffirming guidance in May, we highlighted that the second half would be backloaded. More specifically, we expected 56% of our second half revenue to fall into the 4th quarter. With July net sales coming in at close to $100,000,000 this plan is proving out. Outside of the timing shift, our actual results were shy of our internal expectations, mainly due to a slower than expected RTD category recovery as a result of less on the go occasions. Specifically, we forecasted a consistent improvement from the April low, reaching pre COVID levels by June.
Shaped recovery, with May dipping back down and not reaching pre COVID levels until after the quarter ended in July. Coupled with longer than expected international recovery, this shades $50,000,000 to $60,000,000 from our second RTB category consumption period, we lowered our Q4 growth assumptions given the choppy recovery we experienced in Q3. However, because of the over performance in the first half, combined with non strategic SG and A reductions in the back half of the year, we still expect to deliver our full year EBITDA in line with our original expectations. I'd like to now focus on brand highlights, progress against our growth strategies, and end with our outlook. Despite strong COVID category headwinds, premier protein shake consumption was strong this quarter, up 11% across both tracked and untracked channels.
Untracked outpaced tracked channels, growing 33% in the quarter, while tracked declined 4.5%. E Commerce, Premier Protein's 3rd largest channel, led the way, up an amazing 185%. We also saw terrific growth in food and drug, up 38% 33%, respectively, driven by distribution and increased marketing and promotions. July consumption has remained strong, up 12% in tracked and untracked channels. Untracked continues to drive our growth up 39%, while tracked channels faced headwinds in July due to promotional timing shifts that will reverse later in the quarter.
Now to our growth strategy. Strong marketing programs continue to be drivers for the brand. Premier Protein increased 2 share points in the quarter to 18% of the RTD category. Our promotional strategy remains effective, driving approximately 40% of consumption growth, and TDPs continue to increase, up 6% in the quarter. Premier Protein household penetration substantially increased year to date to 6.6 percent, supported by media, including television advertising.
Our new products continue to perform well and are gaining distribution. Cafe Latte and our powder product velocities are ranked in the top 10% of the category. Protein with oats continues to sell well and we have gained expanded distribution, which we will see in the next two quarters. I'm excited about our pipeline of new products coming out over the next several months, including welcoming back my personal favorite, Pumpkin Spice, that ships this month. Now to our other brands.
Dymatize's domestic business had a good quarter, up 9%, led by club and e commerce. Our launch of ISO 100, Cocoa and Fruity Pebbles has quickly shown success, ranking in the top 10 SKUs where it is sold. Unfortunately, both Diamatize and PowerBar's international businesses continue to be challenged as a result of COVID. Our supply chain remains stable. During the quarter, we successfully brought online a 5th co manufacturing location.
This was challenging given the COVID environment, and I'm proud of our team's hard work on this achievement. This additional capacity gives us further flexibility to support our growth plans. Now to our outlook. The pandemic has created strong category headwinds and the slower than expected recovery has affected both of our domestic and international businesses. As a result, we have lowered our back half sales.
However, despite those challenges, we still expect to deliver double digit net sales growth for the year. In Q4, we have significant growth drivers lined up, including promotions in most major retailers, expanded distribution, and we already have a strong July in the books. Given we exceeded our expectations for the 1st two quarters and we are confident in our ability to achieve our Q4 forecast, I'm happy to reaffirm our full year EBITDA guidance. I am incredibly proud of our company and I don't want to miss the opportunity to publicly thank all of our employees and our co manufacturing partners for navigating this stressful time. I continue to have confidence in our brand fundamentals and I am energized by the business momentum, expanded distribution, innovation pipeline and our long runway for growth.
I will now turn the call over to Paul.
Thanks Darcy, and good morning, everyone. Net sales for the quarter were $204,000,000 and adjusted EBITDA was $38,500,000 Third quarter results, as anticipated, were pressured by the impact of COVID as well as changes in customer inventory levels when compared to prior year. COVID impacted our quarterly net sales results on several fronts. 1st, it took longer for retailers to reduce their on hand RTD shake inventory from inflated levels at beginning of the quarter. 2nd, as Darcy detailed, the RTD liquid category had significant headwinds.
3rd, our international business, which historically has accounted for 50% of our net sales, declined significantly compared to last year. Though we anticipated many of these impacts, the category recovery was slower than expected. From a shipment perspective, Premier Protein net sales declined 12% with RTD shake net sales down 10%. The disconnect between shipments and our strong 11% consumption growth for RTD shakes was largely expected. Shipments lagged consumption as retailers work through an overbuy in March.
Additionally, recall we left last year's pull forward shipments related to a 4th quarter promotion. These inventory related headwinds were partially offset by strong distribution gains across channels. Dymatite has strong growth in the club and e commerce channels, which combined grew 50% in the quarter. We anticipated strong growth for these channels in the second half and the brand continues to gain distribution in FDM and club, while consistently delivering double digit growth within e commerce. This growth was outweighed by COVID driven declines globally for the specialty business, resulting in an overall net sales decline of 16.6%.
PowerBar net sales declined 44%, reflecting the impacts from our portfolio optimization strategy in North America and lower international volumes driven by specialty store closures. We expect COVID to weigh on the brand's results in the Q4, but the decline should moderate now that we have fully lapped the portfolio optimization strategy in North America. Turning back to consolidated results. Gross profit of 69,000,000 dollars declined 24% this quarter with gross profit margin declining 450 basis points to 33.6%. The margin decline related to anticipated higher input costs, primarily milk based proteins and a higher trade promotion rate.
SG and A expenses as a percentage of net sales increased 2 40 basis points to 16%. This increase was driven by a strategic increase in marketing spend of $2,000,000 $2,100,000 of incremental public company costs, offset partially by lower compensation expense. Adjusted EBITDA for the quarter was $38,500,000 a decrease of 37.1 percent with an adjusted EBITDA margin of 18 point 9%. Before reviewing our outlook, I would like to make a few comments on cash flow and liquidity. We had a strong Q3 for cash flow generating $32,000,000 from operations and we repaid the $65,000,000 we had borrowed under our revolver as a precautionary measure in light of the uncertainty COVID created.
This left us with $22,500,000 of cash on hand and $145,000,000 available under our revolver at quarter end. As of June 30, net debt was $715,000,000 and net leverage was 3.8 times. Although this is an increase in leverage from last quarter, it is in line with our expectations given our quarterly adjusted EBITDA compared to prior year. We still expect to end the fiscal year with a cheerleader net leverage and to reach our net leverage target of 3x in fiscal 2021. Turning to our outlook, we are pleased to reaffirm our fiscal year 2020 adjusted EBITDA outlook of $192,000,000 to $202,000,000 However, based on lower second half expectations due to COVID, we have adjusted our net sales range to $960,000,000 to 980,000,000 dollars In spite of COVID headwinds, the 4th quarter is expected to deliver strong double digit top line growth driven by premier protein RTD shakes, which will benefit from distribution gains and incremental promotional activity.
We anticipate the remainder of our brands will be weighed down by the lingering impacts of COVID, especially the domestic and international specialty businesses. For Dymatize, these headwinds are expected to more than offset continued strong gains in e commerce, club and FDM. Overall, we are confident in our ability to deliver a strong 4th quarter result. Category dynamics have improved from the Q3 and the Q4 is off to a great start as evidenced by our strong July net sales. Premier Protein, which is 80% of our net sales, has continued to register double digit consumption growth in the face of COVID and we expect that growth trend to continue in Q4.
With that, I'd like to turn the call back over to the operator for questions.
Thank you. The floor is now open for Our first question comes from the line of Andrew Lazar of Barclays.
Great, thanks. Good morning, everybody.
Good morning.
First off, Darcy, as you mentioned, the trends in food and drug in tracked channels seems to be in good shape as is club or as our club and e commerce in untracked. So it does seem like it's primarily mass in tracked channels that was some of the issue and some of the data that we all see in scanner. If that's the case, is it primarily sort of promotional timing or is there something else going on there and trying to get a sense of when we would expect to start to see some of that track data, which is heavily weighted I think towards mass start to look improved?
Sure. So one of the things that we experienced during Q3 was that COVID hit club and math harder than the other channels. Consumers stayed away from the larger stores in favor of smaller local grocery stores and e commerce. So there is one category aspect of that and we are already seeing that change and improve. Specific to our brands, we are so specifically in July, we're seeing improvement across consumption, but specifically in July, we are lapping promotional timing in both tracked club and mass and that should turn around later in the quarter.
Got it. Great. That's helpful. And then when we think about trial and repeat, you've obviously talked about the impressive household penetration gains and sort of that 50% or so repeat rate. Just as you think therefore if we think forward a little bit, is there any other research or data points you've got as you tally up what consumers are telling you that makes you feel like that type of repeat rate or the stickiness, if you will, right, of some of the incremental household penetration can be not insignificant if we think forward going into your fiscal 2021?
Yes. I think the biggest predictor of the future is the past. And one of the things I mentioned supplemental deck on our website that goes through some of our key metrics and goes back in time to give you a broader perspective. And one of the pages follows household spend from 2016 to now, and you basically see almost doubling of household penetration, but our repeat rate stays consistent at around 50%. And so I think that right there, I mean, you increase household penetration, you usually see a decrease in receipt, but we haven't.
So for us, our challenge and opportunity has always been to increase household penetration because 6.6% is great growth from 2016, but it's still relatively low in the broader scheme. And we're confident that we'll get the repeat and the loyalty because we've shown that the brand has some of the strongest in the category.
Thanks so much, Tracy.
Thank you.
Our next question comes from the line of Ken Goldman of JPMorgan.
Hi, thank you. I wanted to dig in a little bit more toward guidance. Obviously, you made changes to your sales number, but not your EBITDA number and you gave us some reasons why. But was there any consideration to maybe, given some of the downside surprise this quarter, potentially take the opportunity to take EBITDA down a little bit as well, just to give yourself a little bit of cushion? Or do you really feel like there's just that much visibility into your cost structure and the related sales that you feel that just wasn't necessary?
So we absolutely evaluated it. As you know, we overachieved the first half and our EBITDA margins have been running towards the high end of our long term algorithm and both of those things gave us some EBITDA flexibility. And then in addition, when we entered into this pandemic, we ensured that we maintained some financial flexibility within our P and L just in case that our forecast, our sales forecast were slightly off. So in many ways, we were ready for this because we wanted to deliver on our annual commitment on EBITDA. So I feel confident we have good visibility into Q4 already.
And so and that's the main reason why we didn't adjust it.
Thank you for that. And then I wanted to follow-up with asking about your assortment. You had talked, Darcy, about some of the products, the Oat product doing very well. Was there any pressure from your customers to reduce SKUs by a more meaningful amount than you would have hoped for or expected during the crisis so far? Or given your limited number of products already, is that something you didn't quite feel as much of?
Yes, there really was no pressure around SKU assortments.
Short and sweet. Thank you.
Thank you.
Our next question comes from the line of David Palmer of Evercore ISI.
Thanks. Good morning. Just looking at your advertising and consumer marketing, the spending for the 1st 9 months, it looks like that was up almost 200 basis points as a percent of sales, which I don't I think that was similar to what you would have thought. But although I remember the promotion and advertising was supposed to be going up 300 basis points. So could you comment on your gross spending year to date?
Is it in line with what you were going to spend? Do you still plan on spending that same sort of step up in the Q4? And then looking into 2021, are you thinking similar amounts of gross spending? In other words, there need not be another step up or maybe even you don't even need to have the same level in that year? And I have a quick follow-up.
Great. I'll hit the strategy and then if Paul has anything specific to add, he will. From a strategy standpoint, our plan from an A and P standpoint was always to focus our biggest spend in Q2, which is around New Year, New You when most people are entering the category, and then we are going to have a smaller spend in the back half. We chose to move that smaller spend into Q3 and spend it in Q3 because we felt like we had a very strong promotional plan in Q4. And candidly, we are seeing softness in the category.
And we also saw benefits on cheaper advertising So overall, from the year, our media spend is very similar to what we expected. And then just to specify, but in Q4, we will not have we will have a small A and P budget because of our heavy promotional spend. On the 2021 question, we saw this year as really this was our 1st year with television advertising. It was very effective in building household penetration, which was our main goal. So we expect and plan to increase that in 2021 and obviously we're in the process of doing that planning right
now. As we're looking into 2021, there's probably there's many gives and takes here with regard to how we should think about your top line. You were kind of unlucky with a lot of the on the go this year, but then again, you're lapping some out of stock issues or supply chain issues and then God knows how things will work as far as the recovery rate of On the Go into this next year. So how are you thinking about the major chunks of gives and takes as we try to model fiscal '21, particularly as regard to that top line? Thanks.
Yes. I don't think we're in the position right now to talk in detail on 2021, which we will obviously do in the next quarter, but we are seeing improved category trends in July. Are although the recovery took longer than we predicted, We are actually it was actually only about a month different than what we predicted. So we are seeing July liquid category up above pre COVID levels. So in many ways, although there are no promises with COVID, but in many ways, we believe we are back to having the category a tailwind.
We know what works to drive our business and it's kind of back to our original playbook.
Thank you.
Thank you.
Our next question comes from the line of Jason English of Goldman Sachs.
Darcy, your performance this quarter definitely caused a little bit flat footage in terms of the magnitude decline, but your forecast for next quarter implies a pretty robust snapback. I think at the midpoint of your guidance implies around 23% growth, roughly speaking. I hear you referenced consumption in July of around 12% on Premier. I'm assuming international Daimatized PowerBar is still down. So somewhere in the mid to high single digit overall consumption for the portfolio in aggregate and tell me if I'm off base there.
If that is generally right, what's going to drive the incremental growth to get to that 23% type level in the 4th quarter?
Yes. So you're exactly right that we're expecting continued declines in the international business, so specifically Dymatized PowerBar. But we are expecting to see pretty robust growth in Premier shakes specifically, and that's really driven by promotions that we have in almost every single major account as well as the category rebound of being more of a tailwind than it has been. I think that what is encouraging is at this point in the quarter, we actually have very good visibility to at least 2 thirds of our quarter from a shipments perspective. And candidly, that is what's giving us confidence.
Okay.
The only thing I would add quickly is that recall that we are also lapping some favorable comps in the Q4 prior year because of the early load in the Q3. So that is about 9% a benefit to the 4th quarter.
Okay. And for my follow-up, I'm going to try
to cheat a little bit here and squeeze 2 questions in. My apologies. I know Jennifer is going to punish me later for it. But first, the volatility of the business, I mean from up 32% to up 19% to down 14% to up 23%, and that's just this year and we see the volatility going back. Is there ever a scenario, a case where we don't have as much volatility going forward?
Is there anything you could do to manage the business for a little more consistency, I suppose? And then second part of the question, which is totally unrelated in the cheat of the second question, I look around, the world does not feel anything like a post COVID world yet, and I'm not expecting or a pre COVID world yet. I'm not expecting it to feel like a pre COVID world for quite some time. Why should we expect your business to perform at pre COVID type levels for any time in the next 6 months, even though it may have hit that level in July, why should we believe it will be durable?
Yes. Great questions. Okay. I'll hit the first one around consistency. So our business is just naturally because of we have some club concentrations, we have a natural kind of lumpiness in our quarter to quarter.
However, what we are and hopefully you guys have had a chance to look at that supplemental deck is by providing more transparency to what we usually see quarter by quarter, Our goal is that you guys start understanding that it actually can be more predictable. This year, not predictable, obviously, and even last year, we had our capacity constraints. But there should be some predictability around promotions because in predictability around promotions because in essence, the difference between quarter to quarter is usually just promotional loads and deloads. So that's the first piece. The second piece is just around, I agree it does not feel like we are in a post COVID world.
I think some of the dynamics that are unique to our category, specifically when I'm so when you think about convenient nutrition, the bars, the on the go piece and bars have definitely gotten hit the most. I mean in the quarter bars were down 24%, where RTDs were only down 4%. What's happening within RTDs is I still, even in July where it is up 7% versus pre COVID levels of 6%. Why? I think there are some unique things happening.
1, I still believe that the on the go usage occasion is still under indexing. People are not out and about like they were before. However, the in home use is over indexing. And what we're seeing is some new trends around food as medicine or proactive health, and that is really benefiting the adult nutrition side of our business, but it's also benefiting our side of the business, the everyday nutrition side of the business. It's hurting weight management and sports nutrition, but I think those are some of the dynamics that where our business actually can benefit candidly from kind of a post COVID or a COVID world.
Thank you very much.
I'll pass it on.
Thank you.
Our next question comes from the line of Rob Dickerson of Jefferies.
Great. Thank you so much. So I guess kind of a follow-up comment you just made in terms of maybe seeing some benefit at home consumption around use of kind of as a medicine equivalent, so to speak. I feel like if I remember correctly, I thought in the last call, you would discuss how maybe a decent percentage of your overall buyer base actually consumes the product at home, right? So not on the go.
And obviously, primarily buying that in the club channel. So I guess the question I would have is, if that consumer base relative to let's say other consumer bases within the category consume more at home, is there something you can do to essentially support ongoing food at home consumption of your product and or potentially shift or think about adjacencies, call it, confection, snacks, what have you?
Yes, it's a great question. So you're exactly right. We see about 80%, 85% of our business consumed in the house or at home. And what we're communication strategy. We did it right away to focus more about using our products and recipes, which has always been very successful on social.
Obviously, we adjusted our A and P strategy. I think as we go forward, we are looking at different ways. We can kind of renovate or use packaging callouts on our packages to call out certain benefits that we have to really leverage some of these trends. And then on the longer standpoint, we are definitely looking at product ideas that would be leveraging some of the trends that I already
talked about.
Okay, great. And then secondly, speaking with a number of people within the industry and more specifically around your category, there's a feel that was kind of brewing that as we kind of go into shelf reset later this year that retailers overall are still kind of supporting some of the larger brands. I mean that's obviously the case across all of food, but more specifically just the pure category. And given there's so many players, right, within a higher growth category like sports attrition, especially on the bar side, the feel is that, well, maybe some of the larger players could actually benefit through the shelf reset. Now I realize you're focused more on clubs.
Maybe the reset in, Jason was saying, is it as consistent or is a little bit different. But how do you feel about your share gain potential as we go through this process and as you are promoting heavily, right, and as you are trying to expand that household penetration further?
Yes. I'm really excited about the upcoming resets. Specifically, the bulk I think in the past I talked about kind of 50% of the shelf sets reset in the fall, 50% in the spring. That can change to be more of a sixty-forty split. And so we have visibility to the new resets that are coming up in our Q1.
And I think what you explained about retailers supporting the larger brands, specifically the larger growing brands. I think that our resets will show you that And we're gaining some significant space, which I would argue is long overdue, but I'm very excited to see it.
That's great to hear. I'll pass it on. Thank you so much.
Thanks.
Our next question comes from the line of John Baumgartner of Wells Fargo.
Paul, I wanted to come back to
the gross margins. Given the pressure this quarter, the pressure last quarter, the outsourced model, you're not seeing as much deleverage as you wanted to do is in source. Then could you drill down a bit more into the components there of that pressure? You mentioned the cost inflation in your comments between cost inflation, changes in year on year promo, maybe just more detail there. And then as a follow-up, with the dislocations from COVID, how is that impacting any sort of changes in your outlook for dairy cost inflation going forward?
Thanks.
Yes, sure. Yes, so from a 3rd quarter perspective versus last year, you're correct, our margins were down. And it's really 2 primary components. It is the increased promotional spend as well as the increase in milk protein cost. So it's kind of a sixty-forty split really from the drivers on the margin side.
As we look into next year, dairy costs have been somewhat volatile since kind of after COVID. We were expecting higher protein costs as we went into fiscal 2021. That's been a little bit tempered based on the markets recently, but we're still expecting some minor headwinds on the milk protein side. On whey protein, actually, we made that those have been a bit more favorable, not increasing. And so there may be a marginal benefit there.
But any protein costs for next year, our thinking is that with some of our supply chain initiatives and there will opportunity to offset some of that. But we do think there will be some modest headwinds for proteins as we go into next year.
And is there any ability to,
I guess, maybe hedge more than you have historically? Any changes with the supply chain initiatives on that front or still just is the historicals maybe the norm in terms of, I guess, moving up more to chance as opposed to hedging?
Yes. We're evaluating several strategies. At any given time, we're looking at different ways to do that. And we have, even in this fiscal year, implemented some different strategies than we have executed in the past, and we're continuing to explore some additional opportunities there. So yes, we're continuing to evaluate to find the way to mitigate that.
Okay. Thanks, Paul.
Yes, thanks.
Our next question comes from the line of Pamela Kaufman of Morgan Stanley. Pamela, make sure you're not on mute. Our next question will come from the line of Brian Holland of D. A. Davidson.
Yes, thanks. Good morning. Most of
my questions have been answered. So maybe just two quick kind
of follow on. 1, Darcy,
it sounds like from everything you're saying that you have pretty good line of sight on distribution gains amidst the upcoming shelf reset, which is certainly encouraging to hear given the kind of the landscape and some uncertainty going in about how shelf reset timing was going to play out. So maybe just first point of clarification, you do feel very comfortable with the line of sight you have on distribution gains going into fall?
Yes, we do. We have some minor resets happening in the grocery side of the business in Q4, but the major ones we will see in our Q1. And yes, we already know where those will land and it's positive for our brand.
Okay, got it. And then just quickly on the scanner data, obviously, some scrutiny there that's been referenced throughout the call and you did a great job of walking through the puts and takes there. But just to help us understand as we watch this data over the next few months, I know you have lapped some material promotional events in the prior year period, just taking the COVID backdrop out of this. As we look forward over the next couple of months, no significant events that we are lapping that maybe won't be repeated that we should just be mindful of one way or the other that might impact the way the scanner would look?
That I always want to be careful with none, but no major ones. If you remember, so last year, we actually only did we did only a handful of promotions, specifically in our club accounts, and we have a small promotion in mass, which we're lapping right now. But what's different about this year is we basically have promotions in almost all of our top retailers.
Appreciate the color. Best of luck.
Thank you.
Our next question comes from the line of Bill Chappell of Truist Securities.
Thanks. Good morning.
Good morning.
First question, just I just want to go back to the Q3, the inventory or the trade inventory issue. I'm just trying to understand, did we just miss model that or did it happen a little different than expected? Because I think I was going back and I think the comment was it was expected to be kind of a $50,000,000 hit to demand over equally over the next two quarters, but it seems like majority of it happened in 3Q. So did something happen differently or did we just not get the message?
Yes, I think there are 2 things. So we did our best to communicate the high customer inventory at the end of Q2, which benefited Q2 but hurt Q3. And that when you're looking at the back half, it was back loaded to Q4. Clearly, we need to do a better job because we look back at the scripts and we thought we were clear, but clearly not. So we can work on that for sure.
What we missed was and what was the new information is the rate of recovery of the category. And that was what I was talking about kind of the W. If you go back to the overall Communion Nutrition category, but specifically liquids, you'll see week on week that it hit a low in April. And then towards the end of April, the category actually saw a steady recovery. We expected at that time with the information we had that that would continue gradually up to pre COVID levels as of June.
Obviously, it actually went back down and that was that W curve that I talked about. So that was really honestly the miss, as opposed to we had visibility to obviously the high customer inventories.
Got it. And then kind of follow-up on the same lines like what are your kind of current thoughts for Active Nutrition over the as we come out of COVID? And the reason I say that is, as you saw, as your numbers were declining, I mean, sales of ketchup and frozen potatoes were tripling. And so clearly, there are consumers that have gone to comfort food and are still on comfort food and just didn't know if you thought it would race back because everybody is trying to shed the pounds and be more active and nutritious coming out of this or whether there's kind of a permanent pause on some of the active nutrition growth as people slowly come out of it?
Yes. So I mean, big picture from a trend perspective, we still are there's the temporary piece, which is really this on the go reduction. So that, I think, will continue once there's a vaccine, even if starting to come back, I think, as more people as we all start as we're all learning more about the virus and understanding how to function with it. So I think that is a temporary piece that we're already starting to improve. I think that when you look at need states, the area that is benefiting is adult nutrition and somewhat the everyday nutrition.
What's getting hit is weight management and sports nutrition. I believe that those will come back. So sports nutrition has been hit for a while, but I believe they will come back, I think, as people start getting wanting to get back into their health routines, etcetera. So the fundamentals of this category are strong. People are looking to improve their health.
They want convenience. So I have no doubt that this category will rebound.
Okay, great. Thanks for the color.
Thank you.
Our next question comes from the line of Ken Zaslow of Bank of Montreal.
Hey, good morning, everyone.
Good morning.
How does this affect your long term growth rate?
It doesn't. So if you remember, we had planned to our long term algorithm, we had planned to have a higher growth rate this year because we were lapping the SKU constraints, but the long term was 10% to 12% growth with 18% to 20% EBITDA margins. And actually, what we're seeing because of COVID is we're actually still delivering on that long term algorithm. However, we thought we would be over delivering this year.
Okay. My second question is when you did the promotional shift from Q2 to Q3 and Q4, how did that play out?
And then I'll leave it there. The promotional shift.
Yes. And 2 quarters ago, you said that there was going to be you were delaying promotions from the Q2 to the 3rd and 4th unless I made a mistake and misread the transcript.
No. You're right. So a couple of things happened. So we actually this last quarter, because of so those moved to Q4 and actually into Q1. But what changed in this quarter is we actually ended up doing an incremental promotion because in our club accounts, mainly because our club accounts saw the declining category and we were their 1st call.
So net net, we actually ended up with the same amount of promotions in this year even though we thought they were moving.
And our final question comes from the line of Chris Growe of Stifel.
Hi, this is Matt Smith on for Chris. My first question relates to the inventory position at retail. Could you talk about what happened in the Q4? When I look at the bars on the slide that you provided, it looks like there's potentially more inventory de loading to go.
Paul, you want to take that?
I'm sorry, yes. Coming out of the Q3, we feel like the inventory levels are in balance at our key customers where we have full visibility. So we do not anticipate the Q4 having significant deviations between shipments and consumption.
Okay, great. And then my follow-up would be, as it relates to the household penetration and repeat rates that you provided, could you talk about the benefit of new products and how those are impacting repeat rates? And then on TDPs, are there varying repeat rates based on the new products that are influencing the performance?
Sure. So there are a few things that kind of you expect with repeat rates is that as you expand distributions and you expand households is that your both buy rate and repeat rate would go down. I think that's one of the things that I was saying at the very beginning is that's what I'm really excited about is that we actually see a very stable repeat rate over the years. So that feels really good. And with regards to buy rate, we are seeing some decline in buy rate, mainly just because we're going from big packs in clubs to smaller packs in FDMs, but still very strong.
So I think I answered your question. Did I get everything?
Thank you.
Thank you.
And ladies and gentlemen, that was our final question. And with that, we do conclude today's conference call. You may disconnect your lines at this time and have a wonderful day.