I'm George Kelly with Roth MKM. Excited to have Adam Michaels with me on stage from Mama's Creations. He is the chairman and CEO. We have about 25 minutes, not a ton of time, so I'm just gonna get it started with some questions, and I'll open it up if folks have questions, feel free to shout 'em out. So thank you for being here.
No, thank you for having me.
Maybe if you could start with a little bit about yourself. You haven't been in your role for that long, so maybe give us a quick background about where you came from.
Yeah.
Then a little overview on just what you do and the history of the company, too. I think that would be helpful.
Sure. So firstly, again, George, thanks for making some time, and the whole Roth team. So yeah, so I've been here about 18 months now. I've been truly a blessed life. I've been very lucky. So I've been in the food space for, I don't know, 20 years now. The last role I had was at Mondelēz. I spent about 10 years at Mondelēz, former Kraft Nabisco, doing a number of roles. I could and do very well 'cause every couple of years, they'd kick me to another leadership team. So started in supply chain, had the opportunity to do marketing, sales, finance, all of our intelligence operations in North America, so think category management, consumer insights, advanced analytics.
And then the last role I had was in, I guess, corporate development, so I led, helped lead M&A for North America. Before that, I spent about eight years at, in consulting, so with, Booz Allen Hamilton and, Booz & Company, all in the food space. So everything from your upfront ingredient providers, Givaudan, Firmenich, IFF, to your manufacturers. PepsiCo was a big client of mine for many, many years, projects all over the world, and retailers that sold products. So I've had a great run. And hopefully it will continue. But, yeah, so it's been fun. So I was able to take that to Mama's Creations, or I guess, you know, they say I've changed everything but the name, but no, I've actually changed the name of the company, too.
So it was formerly Mama Mancini's. And what we're doing is really, truly building a one-stop-shop deli solution. So today, think about the deli. It's about a $45 billion category. Wherever you shop, behind the glass, you know, so club channels or in Costco, BJ's, Sam's, retailer, groceries, Albertsons on the West Coast, Ahold on the East, Publix down South. Anything behind the glass, in the hot bar, cold bar, the prepared food set, the grab-and-go set, that's where you'd find Mama's products. We do everything, hence the term one-stop shop, so everything from your proteins, meatballs, meatloaf, sausage and peppers, chicken, poultry, breaded chicken, balsamic chicken, chicken strips, salads, Mediterranean farro, Israeli couscous, Persian rice, wraps, paninis, olives. If you could think about it, we're making it for the deli solution.
Maybe if you could give us a little more, just to me, the industry dynamic is so favorable to you. It's such a great place to be. And so if you could talk about the growth prospects of what you... You know, what does the last few years look like, and what are people forecasting out? But also the competitive dynamics. I think they're both really favorable, so if you could touch on both.
Yeah, I mean, it was the main reason why I came. So, you know, again, I mentioned earlier, one of the roles that I had at Mondelēz was to lead our intelligence capabilities. My job was to be the megaphone for the consumer. My 330 million friends, it didn't matter what I thought, didn't matter what our executives thought. It mattered what our 330 million friends thought. And what I, you know, what we identified some years back is the growth of all the things that you guys are gonna know: fresh, clean, easy-to-prepare meals, and that's why, sort of in my corporate development role, if you look at the acquisitions that we made, made about 6 acquisitions, all on the perimeter. So Give & Go, in-store bakery, Perfect Snacks, the dairy.
My swan song of sorts was the Clif Bar acquisition. God bless you. But everything around the perimeter of the store. So when this opportunity came up in the deli, perimeter of the store, it was something really interesting to me. So I mentioned earlier the size of the market. Extra credit, I've asked George. If George doesn't know, nobody knows. I don't know of any other publicly traded deli company in the country, so extra credit, if you guys could figure that out, you get meatballs for a year... if you could tell me another publicly traded meatball company. The second thing is, there's not a lot of... I can name, I think, four. You guys are smarter than me, so you can maybe get to six billion-dollar brands.
But other than that, this is a market where thousands, like so many thousands, it's with a Z at the end, thousands of mom-and-pop shops that make the best potato salad in Arkansas, and they're awesome at it, and they don't need to do any more than that 'cause they put their grandkids through school. They go away with their wife every year or their husband every year, and it's awesome. And if I have a bad month, so what? Or if I have a bad year, so what? Whereas I have the great fortune of getting a report card every day at 4:00 P.M., and I have, you know, investors and, and analysts that say, "You know, we gotta continue to grow.
We gotta continue to drive, you know, increased margins," and that's the, the extra impetus for us to, grow and acquire and try to be that one-stop shop, whereas everybody else is totally content with their macaroni salad business in Kentucky.
So that's a recent kind of shift, I mean, recent within the last couple of years, where the company is starting to look more and more at M&A and inorganic growth.
Yep.
You've already done it to a certain degree, successfully.
Yep.
Maybe talk a little bit about sort of what that brought you, and then what is the key criteria, sort of checklist, of, you know, as you're assessing future M&A? And how aggressive are you gonna be on it?
Yeah. So we're gonna be a billion-dollar company. I'm not gonna tell you when, but we're gonna be a billion-dollar company. I'm not going anywhere. I'm incredibly patient. Half of that growth is going to be organic.
For context, they're about a $100 million company right now.
So we're about $100 million today. That's gonna go to $500 million, and then we're gonna acquire $500 million of acquisitions, of revenue. Again, I mentioned to you why I think it's a prime space. There's a lot of people, mom-and-pop shops, that, you know, there's no one to pass to the next generation. And I probably get inbounds at least once a week. So we think that the M&A is an interesting opportunity. We've made a few acquisitions in the past, you know, 12, 18, 24 months, that have really helped us a lot. So if you think of the legacy Mancini business, and there really is a Dan Mancini, unfortunately, Mama's, Grandma has passed, but it's really special, and we'll go back in a minute to why I think our business is unique.
But we have this legacy Mancini business that has great relationships. We're national, all 50 states. Unfortunately, in Hawaii, too. Freight's not as good. But all 50 states, and we have these relationships. What has historically been the challenge was we were, and I'm simplifying a little bit, a meatball company, right? We were a legacy Italian company. And if that buyer already had a great meatball or a crappy meatball, sorry, but, you know, they didn't wanna switch 'cause it was their friend's business, I had nothing to sell them. Today, through these acquisitions that we've made, if you don't want our meatballs, that's fine, I got chicken. You don't want chicken, I got salads. You don't want salads, I got sandwiches. You don't want sandwiches, I got olives.
So I got something for you that we could do, and that's what has accelerated the business, why the sales team is stronger, why we're able to build a bigger, strong, stronger sales team, because now we have multiple, too many things to offer. That's where the opportunity is. So now, we already meet with these customers every week, every month, every quarter, because they wanna, they wanna actually hear from us because we have a whole bunch of items in their store. "Hey, do you know we have a new chicken? Oh, wait, do you know we have these new Nashville Hot Paninis?" "Oh, I didn't realize you had these things." It is so much easier now to sell in these incremental items. Why I'm so focused on average items carried: because it's way easier and way more profitable.
The truck's already going there. I've already sold into this customer. I could turn these on in a day. That's where the unlock is.
Which big product categories are you still lacking penetration into?
You know, we've spoken about it, so, you know, our M&A strategy is three-pronged. One, we stay in the deli. We're a deli company. Ideally, incremental, right? I'm not looking for another meatball company. Two, it's west of the Mississippi, so we have facilities and manufacturing here. We'd like to be on the West Coast. My boys are really into skiing, so if it could be in Colorado, that'd be great, or Utah, wherever else they wanna ski. And then third is they have to have their own manufacturing and distribution. So that's the kind of what we're looking for for manufacturing. What are categories we're missing? You know, soup. Soup is. And you guys look at the same data I do. Look at IRI, you could see which subcategories of the deli are growing. Soup is a great business.
We're not in soup. Pizza's a great, is a small, but growing part of the business. I'm telling you, if you have any of Dan's pizza recipes and tried his pizza, you'd love it. I could do that. I'm just gonna make you guys laugh. Sushi is a big and growing part of the deli. I don't wanna lie to you, Dan did not make sushi with his grandmother 50 years ago. I'm sorry. That would be something that you could acquire. And again, it's not that, but you get the understanding of the types of things we're looking to bolt on to our business.
Okay. Happy to take questions if there are any. I've got more, but... Okay.
This is a roll-up, right?
Part, 50% of the strategy is a roll-up.
Are you gonna be funding that again?
Yep. So,
Maybe how did you fund the first few, would be a good-
Yep. So if you look at the last couple acquisitions, I think they're a good blueprint for what you're gonna see going forward. So a couple things. The first one is, you know, we're not gonna overpay, right? I had a whole bunch of years with an unlimited bank account. It was super fun. I'm exceptionally good at spending other people's money. That is not what this business is. So we paid 0.5x revenue for the Creative Salads acquisition. We paid 1/3x revenue for the Chef Inspirational acquisition. So that's one piece of it. Second piece is I'm really passionate about sellers' notes, and you're not selling something, some ticking time bomb, and running away. So the CEO of Creative Salads, Anthony Morello, an amazing guy, he's running our business today. He's on our leadership team.
Rob Loeb, who ran Chef Inspirational Foods, he's leading our sales efforts. He's here today. So that's the second piece. So sellers' notes, you know, we had very good rates, you know, for the Chef Inspirational—for the Creative Salads. I think it was, like, a 3-4% rate. Of course, I have to always outdo myself. Chef Inspirational was a 0% interest rate, which I'm told is low. So that's the second piece of it, and then the third piece is it's, yeah, we're gonna use our equity. I love the fact that the CIF deal was cash, cash, equity, which is at a fixed dollar cost, so the higher the stock price gets, the fewer shares we have to give them. So again, I'm looking to build a bigger, like, a family of teams. I'm not looking for someone to sell out.
You know, it is less likely I'm going to be attracted to it if there's this great, you know, PE business that's trying to offload their company and make it a great multiple for it. I'm very lucky, my, my wife's been in finance for a long time, and I understand that part of the business. I'm looking for the 75-year-old woman that built up an amazing company, and she has no one to give the business to. That, that's what I'm looking for, and I'm telling you, there's I get calls every week. There's thousands of them.
You have a question?
I don't think so.
Go ahead. Reporting wrong.
Okay. If not, I wanna get some dividends too, but no, I never quite understood dividends. I... There's- I promise you-
Sorry.
I have plenty of ideas for high return products. No need for dividends just yet.
You have a question?
Yeah, you said that you're looking for...
It's my aspiration. I'll never, you know-
Are your...
East. So, so we are national. Again, we sell and ship to all 50 states. We're very efficient now, full truckloads. We have just an amazing logistics woman, and, again, a typical truck is over $100,000 of sales. It costs us $4,500 to ship it out there. A 4% freight rate is actually quite reasonable. So now that we're efficiently shipping stuff out, it's not that big of a deal. That said, and I've done the math, I could save money by having something more central or more west. And again, I'm married, so I don't always have my way. You know, on the, maybe I won't hit all three, but that, that's the aspiration.
So we've focused so far on the M&A, on the industry dynamics and your M&A kind of opportunity. We've missed a giant part, though, which is, you're so focused on efficiencies and your plants, and there's a lot of kind of low-hanging fruit that you've found in the last two years-
Yeah
In your role. So if you could start, what are some of those initiatives? Like, what are the CapEx projects you're working on right now, and what kind of opportunity for COGS savings do you have? Have you identified?
Yeah, no, it's great. And again, we've built just a great team. You know, when I came in, gross margins were about 12%. They're now... I've said my target is high 20s%.
You're there.
I guess I missed that, so the last couple of quarters we've been over 30, so I apologize in advance. But it's great. And it's not just one or two things, it's thousands of small things done right. What gets measured gets improved. We track it every day. I mean, I am looking at order, SKU level, order level profitability, and the sales team knows that they'll get my love notes if we're missing on some of those to understand where we are. So what gets measured gets improved. Capital-wise, like you mentioned, we got approved, and, you know, we shared at the last investor day, the largest ever capital investment in the company's history, all paid for from cash flow from operations. I hate debt. All paid for cash flow from operations and just incredible high ROI.
The IRI ROI was so high, actually, the board's like: "Are you sure? Did you get, like, a typo somewhere?" But there are just so many opportunities. Our business historically has been very, very, I don't know if I said very yet, manual. So we're bringing in the automation immediate. You know, we were talking about a stripping machine that cuts chicken breasts into strips. You know, a couple of weeks ago, I was in our Farmingdale facility. There were seven women literally spending all day cutting chicken breasts. I showed George this morning, we just got our new stripping machine in. It sells something like 6,000 pounds an hour, one person. That's massive. Or things like, you know, we sell, we grill a lot of chicken, and I'm gonna use super round numbers.
You know, if it costs us $1 to buy the piece of chicken, we pay another $1 for someone to to cut, and I'm gonna simplify a lot, but an 8-ounce chicken breast into two 4-ounce pieces and to marinate it in, you know, a water solution. We're bringing that in-house. So literally, a couple of weeks ago, the machines are in our building. We're epoxying the floor as we speak. That is a massive improvement. Some things, like the stripping machine, we brought it in on Monday. Literally, it was saving money on Tuesday. The trimming and tumbling, it's gonna take a little bit longer, but we're all ready. And grills, we just brought in... You know, we have two grills. The two biggest workhorses of our business is a spiral oven for a lot of our beef products.
We put a new Spiral Oven in, 40% efficiency. For all intents and purposes, I doubled the capacity overnight. Then the other piece is the grill lines. We have two. We ordered two more. They're coming in in a couple of months.
So, I mean, you've already, like you said, you went from 12% to now you're at about 30% gross margin. I think it's not hard, just in my head, to get to something closer to 40% gross margin with all the projects you just identified. But you've been very clear that you're probably not gonna show us that kind of... You know, you're gonna reinvest back in growth. And so... maybe if you could talk about what that means, and why isn't, you know, you're doing trade promotion. There's a lot of different stuff you're doing. Why isn't it those—why aren't those strategies something the prior management team did? Like, why is this-
Yeah, I don't worry about the past. I'm always about the future. So yes, absolutely. So we're at 30% now. I'm telling you, I could easily get 10%. I promise you guys, you will never see it. I'm gonna put that all back into trade promotion. Nick Powers, the guy who's running trade for us, is just incredible, doing amazing work with Lauren Sella and our marketing team. I wanna drive more marketing. This is the time to grow. So the first year was really clear: strengthen, build a foundation with finance, improve our operations. We've done that. Now it's time to grow, and this is where I think it's best for we, as a leadership team and as a board, think it's best to grow.
What does that look like, though?
So trade programs, doing awesome stuff on Instacart now, doing awesome things at BJ's. You just had it, hopefully last Saturday, I hope you guys all signed up, National Meatball Day. We're giving out a year's supply of meatballs. Go online, mamamancinis.com, a year's supply of meatballs for National Meatball Day. I think we tripled our email list. It's working. I mean, it's, it's just awesome. The team is doing an incredible job, and I, I promise you, the best is yet to come.
That's great. Was there another question? There's a couple, I guess. Yeah, go ahead.
Just, uh...
No, no, no, no. That's old. My old time, I used to be... No, no. We sell, we ship to the store's DCs, and then they stock to the individual stores, not DSD.
Got you.
In the back, go ahead.
Yeah, with your customers, just how much share do you have in store?
Again, going back to why, you know, I believe there's this Warren Buffett quote: "When you meet a manager with a good reputation, meets an industry with a bad reputation, it's the industry that keeps its reputation." So I am all about riding someone else's tailwinds, these macro trends that we're seeing. Unfortunately, you guys all know, labor is very tight, so I'm gonna make up all the numbers. You know, yes, 30 years ago, everyone in the back used to make all their food, and they used to spend six hours. They used to get there at 2:00 A.M. to spend six hours braising meatballs, and then they'd be there, ready at 8:00 A.M. They just the stores can't do that anymore. First of all, they just can't get the labor.
Second of all, why would I waste so much space, which I could be making money in, using that for a kitchen? So what's happening is, more and more, they're looking for either fully full solutions, like we have sleeves that all you do is literally put it on the shelf, or we have these meals for one, that you just put the tray, you thaw it out, and put it on the shelf. Or we have semi, so where we create these kits that has, and I'm gonna make up the numbers, you know, 16 pounds, it has 4 pounds of chicken and 4 pounds of sauce and 4 pounds of mozzarella cheese, and in the back, they take one of each and, oh, I'm missing, 4 pounds of grated cheese, and then they take one of each of those, and, and they create packs on their own.
So this, the huge so what with the one-stop shop, not only can I provide anything you need, you could call me on a Sunday night, I'd rather you not, and by Monday morning, I could fill your entire deli case, but also I provide you the solutions you're looking for. From a, I could give you bulk, and your labor team could do all the work, kits, as I gave you an example, or fully, you have to do absolutely nothing, open the box and put them on the shelf.
Still have time for maybe one or two questions. Were there questions over here? I thought I saw someone.
I have a question regarding your trade promotion, right? So deli is kind of a medium, right? Also, kind of the world of consumers. So if you get an attention or a trade promotion, how does that...
Oh, yeah. No, no, I can go on. Yeah, yeah. So all day. So no, it's totally. I mean, it's exactly like your Oreos, take $1 off. Now, I hate TPRs, temporary price reductions. I think that's lazy trade. I think you're just subsidizing someone's sales. But we did a super cool program just last week in Ahold, where they did a circular, they took Locatelli grated cheese, Stop & Shop fettuccine, and Mama Mancini's stuffed meatballs, and if you bought all three of them together, you got it was like $11, and you got that full meal. The numbers were through the roof. I think it was something like 150% increase in sales. That's my type of program, right? Or multi-buys. We have, you know, at Publix, we have 12 items at Publix.
You know, you could get, whether you get their meatball sub in the back, whether you have meatballs, we have chicken fettuccine Alfredo, we have sausage and peppers. Why don't you, at lunchtime, if you've down in Florida, you know Pub Subs, they're pretty famous. Get a Pub Sub, which we are the exclusive provider of their meatball subs, and get $1 off your dinner tonight. That we have 6 items already. Or take the penne, the chicken fettuccine Alfredo, the stuffed meatballs and spaghetti, and the sausage and peppers. Buy 3, get $2 off. So those are examples of great driving, whether it's trial, right? 'Cause if you get the sub, why don't you try. Did you realize we have 12 items over here? Trial, or just getting the basket bigger.
That's the objective, driving household penetration and getting the velocities moving.
One more quick one.
Nobody uses the word...
I apologize.
How do you prevent others from just entering the space?
So there are a couple of things. So the first thing that's really important is, I don't even think about competitors in the sense that, again, remember I told you, I wanna ride someone else's wave. We are adding shelf space. The stores are adding shelf space. So the first, the first people that we're beating are the restaurants. So instead of spending $20, $25, $30 to go out and get your chicken parm, I promise you, $9.99, ours is better. So the first one is, we're just empty space. The second thing, it's just way easier. So I mentioned to you earlier about, I think we were talking about BJ's. We have literally 10 items in the store. They have 13 total items in their deli. We have 10 of the 13.
Now, it doesn't irk me at all that one of the three that we don't have are meatballs. Go figure. But it's just easier. It's just easier that it's just only one truck that you have to worry about as a buyer, right? Britt is an awesome buyer for us. Just one truck I have to worry about, one trade promotion deal, one EDI system, one invoice. It's just easier if you have, find a company with great quality, great service, which we have both of, and it, and it just works. And it's just getting bigger and bigger. BJ's-