All right. Good afternoon. Our next presenting company is John B. Sanfilippo & Son, trades on the Nasdaq under the symbol JBSS. A 102-year-old company, 104 now. It is tough to keep up. Fourth generation of the family currently running the business. They have been a longtime supporter of the IDEAS Conference, and they are a client of Three Part Advisors. Anybody that is looking to follow up with them after the presentation, feel free to catch us in the hall today, and happy to set something up for you. Here today to start off the presentation is Mike Finn, the company's controller. Also with us today is Jeffrey Sanfilippo, for the next about five weeks or so, will be the company CEO.
Jeffrey is retiring and moving into the executive chairman role on October 1st, handing the baton off to the younger brother, Jasper, who some of you may have met here over the years. With that, I will turn it over to Mike.
Thank you, John. Good afternoon, everybody. My name is Mike Finn, and here is our fiscal 2026 presentation. These numbers are actually pretty fresh. We are at our June year-end, so about two weeks ago. The clicker doesn't work. All right. Before I begin, just want to let you know, today's presentation will include forward-looking statements based on our current expectations, assumptions, and beliefs. These statements are not guarantees of future results. With that, let's begin. Who are we? John B. Sanfilippo & Son is a leading processor, marketer, and distributor of nuts and snack products in North America. We serve many of the nation's largest private label customers while also marketing a portfolio of recognized branded products. Our offerings include snack and protein bars, recipe nuts, snack nuts, trail mixes, and confection products.
Today, we are one of the largest nut processors in the world, generating approximately $1.2 billion in annual net sales. As John mentioned, for more than 100 years, JBSS has built and strengthened its market leadership through innovation, disciplined investment, and strategic growth. We remain a fourth-generation, family-managed company with long-term perspective and commitment to creating sustainable shareholder value. Our strategy of targeted capital investments and complementary acquisitions has created a vertically integrated platform across pecan, walnut, and peanut manufacturing. Where are we? We are a U.S.-based company. We operate five high-capacity, state-of-the-art manufacturing facilities strategically located across the United States. Our shelling operations are positioned in prime nut-growing regions, providing access to raw materials. We also operate a dedicated peanut facility and a separate peanut-free facility. What differentiates us? Our combination of capabilities, expertise, and customer partnership.
We proactively bring innovative ideas to private label customers, develop their customized formulas, and continue investing in new capabilities. Our technical expertise and deep industry knowledge enable us to anticipate trends and adapt to evolving consumer needs. Portfolio diversification has been deliberate strategy. We process and market a full range of nut varieties. Snack nuts and trail mixes now represent approximately 25% of our sales, a category we intentionally built over time. We plan to apply that same approach to snack and protein bars. Product diversification reduces our commodity exposure and helps support our long-term growth. Regarding our financial performance, over the last 10 years, all major performance indicators have shown growth. Volume is up, diluted EPS is up. Both gross profit and operating income margins have improved. Our stock price delivered a CAGR of approximately 2.5%, reflecting consistent value creation despite challenging consumer cost environment.
Regarding EBITDA, fiscal EBITDA has exceeded $100 million for the last five years, which demonstrates our earnings consistency. EBITDA per pound has also turned positively after being impacted by product mix changes beginning in fiscal 2024. Shareholder returns and capital investments. Nine years ago, we established a regular dividend program and have increased it annually. We also supplemented those payments with special dividends, averaging nearly $3 per share annually. At the same time, we invested over $150 million in CapEx over the last two years to support future growth. We expect the capital investment to decrease to more historical amounts going forward once our high-speed bar lines are completed in this current fiscal year. Despite substantial investments, our balance sheet remains strong. Working capital has increased from higher nut procurement costs and inventory added through our 2024 acquisition.
Leverage ratios reflect investments in bar capacity expansion, while return on equity has increased approximately 35%. Demonstrating our ability to generate strong shareholder returns while investing for future growth. Regarding our fiscal 2026 results. Over time, our business has become increasingly concentrated in the consumer channel, a deliberate strategic decision aimed at enhancing profitability and reducing risk. Within our private label portfolio, nut and trail products represent the majority of sales, while Fisher remains the primary driver of our branded business. This balanced mix allows us to leverage both the scale of private label and the strength of our branded portfolio. The consumer channel is our largest sales distribution channel. It delivered a 6% sales increase in fiscal 2026. Growth was primarily driven by selling price alignment, favorable product mix, and contributions from new customer wins.
These results demonstrate our ability to execute effectively in a dynamic marketplace while continuing to meet evolving consumer demand. Further diversification within this channel remains a key growth objective. We see significant opportunities to expand our bar business with existing customers, particularly in attractive categories such as kids' snacks and protein-focused products. At the same time, we are focused on growing our customer base and increasing production volumes. These initiatives are designed to drive sustainable long-term growth and improve our capacity utilization.
The commercial ingredients channel increased sales 10%. This was driven by growth in both new and existing customers, as well as implementing strategic pricing initiatives. Our contract manufacturing channel generated 4% sales growth during fiscal 2026, primarily as a result of new customer additions. This channel continues to provide opportunities to leverage our manufacturing expertise, scale, and operational capabilities while broadening our customer relationships. I will now turn it over to Jeffrey to talk about the fiscal 2026 plan. Jeffrey.
Thank you, Mike, and thank you for joining us. We appreciate your interest in the company. For those of you that have been in the stock for a while, those of you that don't know about us, what I would talk about today is we are transforming our business. For 100 years, we have been in the nut, trail mix, peanut butter business. We are experts at procurement. 80% of our cost of goods is in the raw material. We built out a strong foundation to be aware of what's happening with raw materials, with nuts, with commodities. We have that expertise with our growers. We do not own farms, but we have great relationships with our growers around the world.
We also have an infrastructure that we've spent 100 years on building out to be the best manufacturer of private label and branded snack nuts in the country, and that's given us a strong platform. Now we're transforming the business. I'll talk about what's happening in Nut & Trail today and where we saw an opportunity over six years ago to diversify our portfolio. Three key pillars is focus on private label bar growth. We saw the bar category growing much faster than Nut & Trail. We thought we are experts at manufacturing packaged goods in our category. Bars were not that dissimilar. They use a lot of the same ingredients that we use in our snack mixes that we produce. Technology is similar from a roasting, processing, baking to bar category. We did that.
We made an investment a couple years ago infrastructure in our Elgin headquarters, which is about an hour northwest of here. As Mike mentioned, I think we'll have an open house for investors in November, December when all this new capacity comes online. Biggest piece of our business, though, today is still trail mixes and nuts. We want to make sure that we consolidate that industry. We want to make sure that we are the best supplier. We're the go-to vendor for companies like Walmart, who is our largest customer. Target is number two. We're working with Kroger, Whole Foods Market, Aldi, Trader Joe's. Any key retailer that's growing, we want to be the go-to partner for the private label nut and trail mix business. It's been a relatively flat category over the last 18 months to two years, partially because inflation has occurred.
We know about fuel surcharges, commodities, tariffs, higher labor rates, higher shipping. All of that has been passed on and taken pretty significant price increases in the nut and trail category. We have seen some price elasticity as a result of that. Also, selective investments in our own brands. 80% of our total business, 20% is still our branded business. We believe it is an important piece of our business, higher margin. We can go to market faster as we see trends occur. For example, protein. Everyone talks about protein today. We are quick to launch a go protein peanut snack, and we are working on an almond snack that will launch for brands is much quicker in some cases. We could take advantage of trends that we see. We will selectively invest in the brands that are part of our portfolio.
Things that do not get talked about are what enables our infrastructure. We went public in 1991. As John mentioned, we trade on Nasdaq, but we really have a family-led culture. Culture is extremely important. We take care of our team members. We make sure we have good talent and organization. We make sure that our team is laser-focused on our customers and consumers. If you were to walk into our plant and see our team members, you will know that they are committed to getting every order out the door on time, in full, with the best quality. Think about the pandemic. There were so many supply chain disruptions during the pandemic. Freight issues became a challenge, labor issues. Knowing our infrastructure, we were quick to identify it.
Throughout the pandemic, we had 98%-99% service levels because we saw what was happening, we were able to react quickly, and our team members really pulled together to make sure we had great service levels. Retailers saw that. They were excited about what we could do for them during a pandemic, so they looked to us to provide more opportunities for them. We had requests for us to do bottled water, for example, which we would not do, but that was part of what they were looking for. The bar category was one that they wanted help with, and that is where those selective investments come in. Oh, you just hit this? Okay. Let us look at the nut and trail category. As I mentioned, it has been relatively flat. Actually, in fiscal 2026, volume declined a little bit.
We look at everything from a volume perspective, but if you were to look at the same chart with top-line dollars, it actually has increased, because even though you had price elasticity driving down volume, you still had higher sales as a result of higher prices. The middle of the chart is private label pound share. You will notice that the yellow line is the average private label penetration across the entire food sector in the U.S. We are averaging around 25%. When you look at nuts and trails, it is over 57% private label penetration, one of the highest in the food space. Why is that? Number one, the brands, Planters, Wonderful, great companies, but it was easy for private label suppliers to come and emulate the typical things that they were doing, and retailers wanted to build up their equity in their own brands.
You have huge, high-level private label penetration. That is good for us because then we provide a lot of that private label for key retail partners. That is the stability of the business. The private label recipe trail mix is so important. The challenge is that consumer is older demographic, the baby boomers, Gen X, and we have got to start positioning our product for Gen Z, millennials, and a younger consumer. What we did is looked at the bar category. That is the consumer that is one of the largest consumers of bars today. Not only does it diversify our product portfolio, but it also allows us to go after a different demographic, which we were not able to do with the nut and trail category. This is where the bar category gets so exciting to us. It is growing category.
You have fruit and grain bars. Think of the Nutri-Grain bar, think of Granola Quaker. You have Quest protein bar, you have CLIF bar, you have KIND bar, you have David's bar, you have Built Bar, Barebells. All of these very fragmented branded bars in the category. As Sarah shows, we are dominant in private label. Private label pound share is low in the bar category. This is our thesis when we decided to invest in the category because we are doing so well with the nut and trail. We knew we could do the same in increase the private label penetration. Even if we were to increase it 2%, 3%, 4% from where it is today, that is huge growth opportunity for JBSS. Very excited about that.
We have extremely strong relationships with all the key retailers around the country, and we already have discussions with a lot of those retailers to build out our bar platform with them, especially the protein-forward bar, which is the fastest growing segment of the bar category. Really exciting. As I mentioned, the consumers for bars, it is skewed Gen Z, millennials, Gen X, and still baby boomers are still part of that consumption for bars. We also know that younger generation, they do not sit down and have three meals a day. They are eating on the run, they eat quickly, they will eat when they are doing something with friends. The bar food segment is going to continue to grow, we believe, as consumers get more on the go and we get those younger consumers into the category.
A lot of what we consider good tailwinds for that category as we grow the business out. Let us talk a little bit about our investments. This is the largest investment we have ever made as a company, between $90 million and $100 million, and we are a conservative company. We are family-controlled. We look at the short and long term. We look at the investments in the future. We knew private label shares in bars was low, but we knew that this investment had to be done because the category was growing faster than any other category in the food sector. Those of you that invest in food companies today, investing a lot of CPGs and CPG companies, growth is the most critical thing for them. It was for us, too.
If we had stayed just as a nut and trail mix category, we would face the same challenges a lot of our food competitors are. The bar category is different. It is actually growing. We are excited about that. When you look at the bar category, nutrition is the largest. It is almost 60%. Think of all the high-protein bars, Quest bar, Barebells. That is the biggest category, and it is growing the fastest.
Mainstream fruit and grain bar, Quaker Chewy Granola Bars, that is the category that is flat. We are seeing consumers actually shift from those categories to nutritional categories. Kid-friendly is another one that is relatively flat, but we are seeing a lot of opportunities to add higher protein bars for kids that we see potential growth for. If you think about Once Upon a Farm, great bar. I do not know if you have tried it or your kids have tried it.
It is really a fruit and veggie bar. You always want your kids to eat fruit and vegetables. This is a great way for them to do it. The taste is really good. We see opportunities with kid-friendly bars that we develop in the future. Really excited about the opportunity. We think that with our portfolio and the investments we are making, we will be able to capture both in the private label bar category. More importantly, we will work with key retailers to help them build their portfolio. One thing that is important about the bar category is you have lower margin bars such as fruit and grain and chewy granola. The fruit and grain and chewy granola are the lowest margin from a manufacturing standpoint. We do those, but we also do more profitable bars.
The CLIF knockoff, the KIND knockoff, the Barebells, the Davids, the Built Bar, all those higher margin bars are things that we can manufacture, and we have a full portfolio now that we can generate and create private brands for. Really excited about that. Installation is going on as we speak. We will have an investor open house, hopefully, when these lines are up and running. I will tell you it is an impressive operation. If you have ever seen a 2,000 bar per minute speed of a line, it is quite extraordinary. It is almost like a bottling line if you have been in some of these big bottlers around the country. Really excited. The equipment is in, and it is almost finished installing, and we will have it up and running by October. Our goal is to now sell out that capacity over the next 3-4 years.
We anticipate there is about $300 million in incremental growth as a result of these investments. Our sales, marketing, R&D teams are working with retail partners around the country to start building out that portfolio and trying to get acceptance for those bars, so we can start manufacturing them for our key partners. In the category trends, if you look at the bar category today, nutrition bars continue to grow. That is the fastest-growing section of the bar category. Mainstream bars, relatively flat, as I mentioned. You are seeing some people go from mainstream to that nutritional bar portfolio. In kids fuel, bars, we really expect it to be a positive momentum going forward. If you look at us today, we are about 95% trail and only about 5% of bar industry portfolio. Our goal is at a minimum 70% of snack and trail and then 30% snack bars.
I would say over the course of the next four to five years, our ultimate goal is almost a 50/50 split between bar manufacturing and the nut and trail and peanut butter. The opportunities are there. As I mentioned, if we get a couple incremental basis points of private label share with bars, the growth opportunities will get us there pretty quickly. I will be stepping down on October 1st, so just a couple more weeks. I am excited about the opportunity for my brother and a new management team and help us. We are a family-controlled business, but we brought from different companies. We believe it is so important to have that insight, that perspective from other leaders in the food industry, and we have got a really good infrastructure. I am confident in the transition.
My brother has been COO for the last 20 years, so he knows the operations very well. I will be stepping down but becoming executive chairman. I will be focused now between now and the end of fiscal 2027 on building out and validating our three-year business plan. We hired some internal and external consultants. They are going to take our plan, they are going to poke holes at it, they are going to figure out what is realistic and what might not be, and help us really build out probably the strongest, most robust three-year plan that we have ever had. Excited to focus my time and energy on that, and I really look forward to watching the company grow and being a part of that transformation as we go further. We have snacks up here. If you would like some protein snacks.
I know you just had lunch, so probably not now, but maybe in a little bit. Open up the floor for any questions. Anyone? We got grilled a lot, so this was a tough morning for us. It is good. You guys have a lot of good questions.
[Inaudible]
Right now it is zero because we are just starting to be able to produce the protein bar. The goal is to get the fruit and grain, the mainstream bars, to be 50% of our volume and the protein to be 50%. Right now it is zero, so we have a long way to go. But knowing protein bars, we think we can pick up some here. We have already started conversations with partners for the last six to seven months. One thing I will mention is that it really takes them a year. Once they decide to launch a private label item, it takes up to a year to figure out how they are going to reset their stores. So our anticipation is by January 4, so your Q3, you will start getting some acceptance and starting to ship something out in the back half of fiscal 2027.
But the goal is ultimately to get, because that is the higher margin business, so get that 50/50 between the high-margin protein and the mainstream items. Yes. Sure. So I have been a part of some of those conversations. I will tell you that it is very positive. As I said, private label is penetration small, and also there is not a lot of capacity to make high-protein bars in the U.S. That is why we are excited about the investments we have made to be able to have a scale to produce those bars. I have very positive conversations. We have talked to Walmart, to Target, Trader Joe's, Sam's Club, Costco. One thing I did not mention is, so we have Mike Finn mentioned before, the food channel, we have the consumer channel, which is all the big retailers. We have the co-manufacturing channel.
Also, if we do not get acceptance or for some reason, there is something that is not going forward with the retail partners, there is a lot of opportunity with big brands. So think of the CLIF bar, KIND, the big protein-forward brands, that there is opportunities to go with them if they are growing and they do not have capacity to manufacture. Right. That is the backup plan. Obviously, we are going to always focus on the highest margin business, and it could be that some of the big brands, that the margin are pretty strong because they are very high retail price points. So there is a possibility that some of the big brands take on some of that capacity, and it is still margin accretive for us.
[Inaudible] Correct.
Yeah. So the question was on recent CapEx spend. So we annually, the most recent year was largely driven by our high-speed bar line investment that actually began in the previous year with some down payments. In the current 2027 year, we have a little bit of final vendor payments and installation charges. So this year will be elevated, but not as much as 2026. And then 2028 and forward should be back to our normal historical rate of, let us say, $25 million to $30 million.
[Inaudible]
One to two more quarters of additional elevated CapEx. Nowhere near 2026, though.
[Inaudible]
Good question. We focused on the bar space, a couple of reasons. One, it was a fast-growing category. That was one. Our criteria was it has to be a growing category, not flat. We saw that. The ingredients have to be something that we currently understand. A lot of them use peanut butter, they use almonds, they use nuts in general. It was an easy transition for us from a supply chain procurement perspective. Then manufacturing. We already had some equipment that we used to make clusters, like granola clusters. We understood the technology, the baking, the roasting is very similar. It was not a huge stretch for us. It would not have gone into water bottling. That would have been way beyond our bailiwick.
We wanted to focus on something that, from a manufacturing perspective, we could do well, and the procurement perspective as well. The last thing I would say is the customer relationships we have, sometimes the bar buyer is the same as the nut and trail buyer. It was not a huge lift for our sales and marketing team to expand beyond the relationships that we already had with some of those key retail partners. It is a combination. You have some privately held manufacturers. Most of them are actually privately held. You do have a couple private equity owners of some of the big private brand bar companies, and then the co-manufacturers as well. Yes. We will do one line at a time, but they are all being done together.
But once we get one completely done, we will focus on getting that up and running first. It will be parallel path. But the infrastructure is all there to do them all at the same time. We want to focus more on one at a time.
The other driver will be once we get picked up by a key retailer or a partner, that will drive the priority on which line goes first. They are all parallel path, where we could start them all together, but just focusing resources, making sure that we get the efficiencies that we want. That is kind of the focus today. The other thing I would say about our business model, which I did not mention, is we have the consumer channel, food service, commercial ingredient, and then the co-man. Co-man we really use to optimize the facilities, all the capacity availability we have, pricing overhead down.
The food service channel we did not touch on. But as we watch consumers, where they buy food, what they are buying, who is buying it, we want to make sure that we have products everywhere that consumers will shop for a snack. During the pandemic, we had a food service division that fell off a cliff. People were not traveling. They were not going out. They were staying home. Our consumer channel grew dramatically because people were cooking at home, celebrating at home. Everything was done at home. Grocery, mass, club grew quickly during the pandemic. Now people are traveling again. They are going out to eat. We are seeing growth in our food service channels. We get to capture that growth as well. We diversify our product portfolio, but also diversify the consumer and where they are shopping.
As you look at younger generations today, they buy differently than we do. They get their information differently than we do. We have got to make sure that we are always keeping ahead of where consumers are getting information, where they are buying, and what they are buying. Our business model allows us to do that.
[Inaudible]
We will try some samples.
What was the cost of the whole line?
There are two lines that are going into our current manufacturing footprint in Elgin. The cost is approximately $90 million.
The lease.
The $90 million is just the capital spend.
What we did when we made the investment is we moved our shipping facility, all of our warehouse distribution, to a leased space just down the street from Elgin, and we took all that 300,000 sq ft of what was warehouse distribution, and now that's where all the new lines are going, into that space in the facility. Correct. That's the opportunity once we get to capacity. Yep. Thank you, everyone.
Thank you.