All right. Good morning, everyone. Just a quick disclaimer before we start for important disclosures. Please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. Any questions, reach out to your Morgan Stanley sales rep. So welcome, everyone. Day two of the Morgan Stanley 2025 Global Consumer and Retail Conference. I'm Megan Clapp. I'm the U.S. food analyst here at Morgan Stanley. Really pleased to be here this morning, kicking off the day with Vital Farms and the company's President and CEO, Russell Diez-Canseco, and CFO, Thilo Wrede. Hope I got that right.
Very nice.
Vital Farms maybe needs no introduction, but very briefly, leading U.S. supplier of pasture-raised eggs, ethical products. They have a unique strategy partnering with family farms, focused on animal welfare, transparency, and premium sustainable food offerings. Russell, maybe we can start with you. You can do a much better job of explaining the story than me, but you've got it.
You got it.
Just maybe for those that are newer to the story, they're in the room on the webcast. Maybe you can just start with a bit of a high-level overview of the business, the core egg portfolio, your pasture-raised differentiation, the farm network, the Egg Central Station, and what you think sets Vital Farms apart in today's staples and food landscape.
Thank you for having us, Megan, and great to be here today. Yep. So Vital Farms is a premium brand, largely known as a premium brand of pasture-raised eggs. We also have a small butter business. What I think differentiates us at the front end is that we're really driven by a purpose of improving the lives of people, animals, and the planet through food. And we are all galvanized around a goal, a mission of being America's most trusted food company. Now, most trusted in any survey is a function of both level of trust and size. And so there's a lot of growth that has to come to be recognized in that way. But we operate that way. And I think that really informs a lot of the choices we make. So you're right.
We are the biggest brand of pasture-raised eggs in America. We're the second biggest brand of eggs, period, in America. And for many of our top 10 customers, we're now the number one egg brand in places as varied as Whole Foods and Kroger. So what we've come to understand is that in a very simple way, we've created a premium brand that's based on some of the things you mentioned: great animal welfare, high levels of transparency, a resilient supply chain. And we've turned that into strong growth, strong EBITDA, a strong return on invested capital. But another way to think about it is we're doing it in such a different way from the traditional egg industry that I think when people choose our brand, they're choosing more than just a premium egg.
They're buying into a different way of bringing food to their table, which I think is happening in more and more categories around the store as people are looking for higher quality food and food they can trust, so one point of distinction, we don't own our integrated supply chain the way that I think the industry historically has. We own a packing plant in Springfield, Missouri, where we take eggs from over 575 small family farms with whom we have exclusive contracts, and we pack those eggs in that single location. We're now building a second location in Indiana, and we ship them to stores nationwide. We're in over 23,000 stores, and we're primarily a retail brand. We have a small food service business. At those stores, we are almost universally the most expensive egg.
And if any of you have our eggs in your fridge, you probably have had that conversation with whoever you make your food buying decisions with about whether it's really worth this big premium. But increasingly, consumers are saying yes, not just for great features and benefits, great high-quality product, but because we are transparent in how we brought that to them. And we are irreverent in our marketing and the humor we bring to something that starts to feel like a pretty serious topic, which is, "What food should I feed our families?" And the proof is in the pudding. We continue to deliver hyper growth in the 20s and 30s year after year. We've expanded our profitability, strong EBITDA, and an ROIC that starts with a two, all things that I think are pretty rare in a fast-growing company.
It's a good segue to my next question, which is, as we think about 2025 in particular, you mentioned you've delivered another year of strong growth. This year, you've talked about three priorities: rebuilding supply, expanding capacity, strengthening the brand. As you look back to 2025, almost done at this point, and the growth you've delivered, what's gone particularly well against those priorities that gives you confidence you can sustain that momentum and deliver another strong year in 2026?
You know, I was talking to Paul in the audience, who was a leader on the team that underwrote the IPO, and the answer that I might give you today probably sounds a lot like the answer I would have given him back in 2019, 2020. This business works really well when we grow households, shelf space, egg supply from farms, and packing capacity in line. When those things get out of balance, that's when things don't go quite as well. What we found in the back half of last year and then heading into the early part of this year, we had, because of Avian Influenza, it hadn't affected our farms, but it had taken so much supply out of the market more broadly that we saw really stronger demand in the back half of 2024 than we anticipated.
And we shipped the relatively modest amounts of inventory that we typically build to carry us through the winter months when we have seasonally high demand. And so what that resulted in was tight supplies in Q4 2024, Q1 2025. And so a priority for us was rebalancing that supply growth to go with our continued growth in both households and shelves, but also in the growth of egg supply. And frankly, we've accelerated all of the above this year. So we've added more than 100 farms this year. What's the number? 150?
150.
150 farms so far this year. We're now at over 575. No sign of a challenge in adding new farms. We successfully opened a third production line at our plant in Springfield, which, frankly, if you'd asked me two years ago if that was possible, I would have said no. But we keep hiring really strong people who have really great out-of-the-box ideas. And so we were able to fit another one in. That opens us up to over $1.2 billion of revenue capacity in Springfield in 2026. And the households that continue to be attracted to the brand, even as we see varied price premiums to conventional eggs, prove that the value proposition is strong for more and more American households. So I would say that all the above has gone as well as we hoped it would.
Frankly, we just keep learning and getting a little bit better every day. I don't know that I can point to one thing that's been particularly disappointing.
You touched on it a little bit, but wondered if we could just talk about the value proposition. Price gaps to conventional eggs have widened. I think we get the question a lot from investors still to this day of, "How can eggs be a branded product?" And your market share has accelerated, household penetrations accelerated, even as these price gaps have widened. So maybe spend some time talking about the value proposition as we see it, what you're seeing from the households you're acquiring, repeat rates that's kind of driving that strength, even as price gaps widen.
You know, it's funny. Thilo and I have bonded over the fact that we're two recovering MBAs. And if we had, in graduating business school around the same time, gotten together to do a startup and we'd done a screen of all the grocery categories in the store, I'm pretty sure eggs would have been at the absolute bottom of the, "Let's start something in that category" place. Right? It's a hugely private label. Over 95% of the hens back when this company was started, I think 99%, were in cages, which was producing the absolute lowest cost of eggs with zero points of differentiation. Huge capital intensity. Everything from the farm to the plant, feed and chicks, it's a vertically integrated industry dominated by asset-heavy incumbents. It's got, like the dynamics of any high capital cost business, think airlines. It's got bouts of ruinous price competition.
It's got hugely variable margins. I mean, it's just an ugly category. And yet a founder who wasn't thinking about NPV, but was thinking about animal welfare, decided that it was time to let the chickens out of the cages. And when he did it, he saw that the eggs were better. And that's all he needed to think that there was an opportunity there. So thankfully, we weren't left to be the founders because this thing wouldn't exist. And here we are, 20 years later or so. And I think what we found in those early days, like any first mover, we saw some early success because we were meeting an unmet need in the marketplace. There were people who already knew they wanted a better quality protein, a better quality egg. They were going to the farmer's market back then.
I was going to the farmer's market back then, and suddenly, I could find this high-quality egg with the right attributes and the right levels of animal welfare at the grocery store. Perfect, and then the joke was back then that we found everybody who was willing to spend $5 a dozen on eggs. Now what were we going to do? We're going to have to drop our price to four or three or two to keep growing volume, and that was about the time, 2015, 2016, when we actually started building our marketing team. We hired our first, basically, chief marketing officer who explained to us that we were the first mover in a new commodity.
And we better talk about why we have a unique right to win with consumers, or we will simply be stuck in a new commodity segment with lots of entrants, as you might predictably expect from Business School 101. And as we did that work, that ethnography work, this was 2016, 2017, what we found time and time again was that people that were choosing to pay more for anything in a commodity category, people who were paying more for milk versus the cheapest milk, more for eggs, more for an organic vegetable versus the cheapest, they were voting with their dollars for something better because they understood that it could be more valuable to them, that there was value in paying that premium for something. It could be better animal welfare aligned with their values.
It could be less likelihood of pesticides in an organic version of a fruit or vegetable. It could be simply higher quality in some way, higher Brix level or some other element of their eating experience, but the other thing we found, which was crucial, was that they're very skittish. Consumers, time and time again, keep getting disappointed that what they were paying more for didn't turn out to be true, and there are so many articles that they would hear and read about organic grain imported from some other country that wasn't organic when it left the port in Romania, but suddenly was organic when it got to America with the right paperwork.
Or the organic dairy whose cows are supposed to go outside. The Washington Post reports a few years back that there's no evidence in the milk of the CLA chemical that would be present in the milk if the cows were eating grass. How do they go outside and not eat the grass? Consumers feel ripped off. That's actually the basis for our first big egg campaign, which was bullshit-free. These are the birds that go outside. They're called pasture-raised. More than half of you back then buying cage-free eggs think that your birds go outside, but they don't. If you feel duped by that, come try our eggs. They're what you think you've been getting all along. The insight wasn't we need more orange yolks or a thicker shell. That's just the cost of doing business.
The insight was there are very few brands in this country that people can trust to feed their families. When they find one, they become remarkably loyal to it. So that's really where the seeming immunity to price gaps, the seeming immunity to the challenged consumer and the K-shaped economy, year after year after year, high inflation, COVID shortages, all the rest. Because the thing that we have that's a scarce commodity isn't an egg. It's a trusted brand. And that's the thing that we, that's our true north. That's where we're focused.
Great. Maybe a bit more shifting to the near term. You raised your guide again on the third quarter call last about a month ago implied an acceleration in volumes here in the fourth quarter. You talked about ERP transition would create some noise in the scanner data. But now that we're through most of November, at least from what folks can see in the scanner data, can you just talk about has the volume performance you've seen in the scanner data been in line with your expectations as you think about what's implied in the four-Q guide?
Yeah. We started off the quarter with, as you said, Megan, with the ERP implementation that went remarkably well. We avoided the pitfall of so many ERP implementations that we couldn't ship for a pick a number of weeks. We did have a slowdown at ECS and our production that was to be expected. The crew there had to learn a whole new way of processing the eggs, using new technology, using new systems. That lasted about two weeks. By week three, we were back at pre-ERP implementation production levels. By week four, we were above pre-ERP implementation production levels. Because of that, shipments to retailers were a bit slow at the beginning of the quarter. That's what we highlighted on the call. Since then, in the scanner data that we see, we use one of the two data providers.
In the latest reading through, I think it was November 23rd, volumes were now at retail higher than where we were at the end of September. That recovery maybe took a week or two longer than I thought it would take at the retail level. But at our own production and shipment level, the recovery was as we anticipated it to happen. I would really be speculating if I would try to figure out why it showed up on the shelf a little bit later than we thought. But ultimately, what we care about is what we're shipping to retailers. And that continues to be very strong.
Right, so from a shipment perspective, in line with your expectations.
Yep.
Got it. Helpful. Maybe looking ahead, so this year we talked about getting supply back online to meet the demand that you knew was there, was a big priority. Now that supply has caught up, as we look ahead to 2026, what are the primary drivers of growth in your mind? So you obviously still have some of those easier comps, especially in Q1. But should we think about growth being first half weighted? And how do you think about lapping this strong second half growth next year?
It's funny, and Thilo will chime in. We're much more used to managing expectations about supply actually being enough, regardless of where we set our bogey for demand. And it's a true story. We have this incredible sales leader called Pete Pappas. Pete joined us in 2020. And every year, Pete would put up a budget that we thought was very reasonable and had similar to the strong growth we put up year after year. And every year, when it came time to write the next year's budget, he would say, "When will we finally get to a point where we have enough eggs?" And the answer was, "Well, we have as many eggs as you told us to have. It takes about a year to add new supply. We wrote a budget a year ago.
You got everything you said you needed, but you're frustrated that you're shorting customers." I said, "Maybe we'll have enough eggs when you tell us the right number, when you give us a fair projection." So I finally got tired of having this conversation between him and the ops team. And finally, a year ago, I asked him to take on the role of recruiting new farmers so that he could have that conversation with himself. "You don't have enough eggs? Go get more eggs." Self-serve. And so I say that not trying to be flippant, but the reality is that I want to be really clear about something. We talk about adding capacity at our plant. We talk about adding farms. I can't promise you it will be enough. Because the reality is, every time we think we're leaning in, it's still not enough.
That would be the first thing I would say. The underlying consumer trends, the strength of our marketing team and our commercial capabilities are really good. We have really well-honed commercial capabilities in this company, the ability to add and retain a household, the ability to get the right product on the right shelf because we've got trusted relationships with retailers. We're excited about the opportunities in 2026. The reality is, I'm much more concerned that we could have done even more than I am about whether or not we'll have a home for all these eggs we're bringing online. I'll start there. Answers number one, two, and three are simply it starts with maintaining high service levels to retailers. We maintain high service levels to retailers, and that product flows through to the shelf.
Now we get an accurate view of the retailer's ability to maintain that shelf. What we saw in years when we had much better in-stock conditions than we did earlier this year was that even with great service levels, we often find periods of the day when our top customers are out of our product on the shelf. Typically, we don't have our fair share of space on the shelf. We have very high-performing SKUs. Our top one, two, three products in a retailer are typically their top one, two, or three, or certainly in their top five. And there's, I would argue, a long tail of underperforming products in most egg category SKUs, egg category sets in retailers.
Once we are doing our part of keeping them in stock, we can have real talk with them about what they need to do to keep themselves in stock for their own benefit. And that starts a wonderful fact-based conversation around space allocation, around stocking practices, et cetera, all to their benefit. We have terrific gross margins, both pennies and percentages for our retail partners. And I'm not trying to compete that away. I don't want to take that from them. I want them to rely on us to drive their economics. We want them to want to do better with our products. And universally, they do. So step number one is simply doing our part to keep them full so that we can talk to them about allocating more space and adding more SKUs to their sets.
That's a flywheel with sort of spring-loaded growth for quite a while to come, I think.
Helpful. Maybe we can talk about just supply in the industry broadly. There's been discussion, and you can see it in the data, not just yourselves, but more supply coming online in the pasture-raised and premium segments.
Isn't it great?
Yeah.
I'm so glad that these birds are getting out of the cages.
And as a consumer, I think you can see more of it in the store, too, with new brands. So maybe we can just talk a little bit about the competitive environment, what you're seeing from new brands, distribution, what you're hearing from the retailers, and how you think about Vital's positioning kind of within the premium set in general. Is more competition good because of the retailers expanding the space for premium eggs? And just kind of how do you think about that?
If I back up what I think we're seeing, and we saw it early with retailers like Whole Foods and Sprouts years ago, is they're shifting space allocation up toward the premium end of the set. Whether it's a free-range egg, an organic egg, a pasture-raised egg, we are part of that. We aren't the only kind of egg in that part of the set. They're shifting the whole thing up. They're premiumizing the category, which is an exciting opportunity, I think, for the hens and for people in that part of the industry. It's interesting. We get the question a lot. What about all these new competitors entering the market? I'm not seeing a lot of evidence of new competitors. I've seen some relaunches, which we can talk about. Our biggest customers launched private label versions of our eggs about 10 years ago.
So Whole Foods launched private label pasture-raised eggs in 2017. HEB back then was our second biggest customer. HEB launched private label pasture-raised eggs about the same time. Perhaps not coincidentally, our two biggest customers launched pasture-raised private label products earlier. But every one of our top 10 customers has a private label and multiple examples of branded premium eggs, including pasture-raised eggs. I'm not seeing more. I don't know that I'm seeing a lot of big new entrants into that space. I know one question I get is, well, what about Pete & Gerry's? They're having lots of conversations with people at a conference like this, and they're talking about their pasture-raised egg. But maybe what they're not sharing is that they had a pasture-raised egg before we were a company. It was called Carol's Pasture-Raised Eggs.
Carol, I think, was an aunt or an uncle of Jesse LaFlamme, who was the owner back then, and it didn't do very well. So I think about five or six years, they relaunched it as a second pasture-raised brand called Consider Pastures. That actually said pasture in the name. Consider Pastures at Whole Foods and a lot of big retailers. It didn't do very well. So what Pete & Gerry's did, I think about a year and a half, two years ago, was they relaunched pasture-raised eggs for a third time as Pete & Gerry's Pasture-Raised Eggs. And that might look like new competition entering, but actually, it was the incumbent who's still trying to figure out what we're doing so differently. When I joined Vital Farms, Pete & Gerry's was 10x our size, and they had a Super Bowl ad.
They were the big kahuna that we had in our sight. Someday, if we could only be as big as Pete & Gerry's, maybe we too could have a Super Bowl ad. We're now much larger than they are. I think we're about the size of the next three brands combined in the specialty egg space, and they're just trying new things. Cal-Maine, biggest egg company in the world, they launched pasture-raised eggs in 2017 under the Born Free brand. It failed. They killed it. They relaunched it last year as Eggland's Best, and they actually copied our carton, which was very flattering for the biggest egg company in the world. They look at our carton next to theirs. It looks an awful lot like ours and totally different from any of their other cartons. It doesn't seem to be doing very well.
And so I think this question about competition, they're launching products that have similar claims and features and benefits as our cartons do. Products that have that to be true have been on the shelf next to ours for over a decade. But what is much harder for them to copy is the trust we built with consumers, the transparency we bring. It's really hard to be transparent about your millions of caged hens. Consumers are savvy to that. We're a one-trick pony. We just have this wonderful high level of animal welfare in our products. And then if you want to think about other potential moats, it's really hard to duplicate a network of 575 small family farms. We have a lot of practice at selecting them and onboarding them and helping set them up for success. And so I just think that, one, the competition isn't new.
Two, we've got a ton of examples of how it doesn't impinge our success.
Got it. Helpful. Maybe we can talk about the network you just brought up. It's been a good year for farm recruitment. I think you said 150 so far this year. I think you have more than 10 million hens under contract now. How would you just you mentioned, too, the question is, are we doing enough? So how would you describe, I guess, as you look ahead, the health of your farm pipeline and how you think about the ability to continue to scale it from here?
So we do have a very strong reputation in the farming community as a partner that they can trust. Again, this notion of a trusted brand. Our brand is for all stakeholders, not just consumers. We build relationships for the long term. Most of our farm pipeline is word of mouth. Word of mouth, not unlike you might think about recruiting employees for your company. Many of our farmers are here longer than our average employee tenure. So we think about who to add and how to vet them and how to set them up for success just as intensely, if not more so, than the way we think about hiring and onboarding a great new crew member.
I'm not seeing any sign of abatement of interest from small family farmers, of which there are millions in this country, who are looking for a fair shake, a fair deal, an opportunity to convert their hard work into some cash flow for their families. Our job is to make sure the cash flow is there. And so we've got great sort of our own modeling of what the profitability for these farmers can be. We want to make sure that the opportunity is real. Their regional bankers from whom they borrow to build their farms, they want to know the opportunity is real. That's another example of a moat we've got where the bankers in the Ozarks and in the pasture belt where we build these farms, or where our farmers build their farms, they've worked with us for years, and they know we pay our bills on time.
They know how to convert all the sales paraphernalia they get from us and competitors into real numbers that they can bank on. And they very consistently nudge a farmer toward us because we're very reliable and trustworthy.
Got it. Let me just kind of wrap everything up on the top line. So you added a third line at the Egg Central Station this year. That was a nice surprise to start the year. Seymour remains on track to open early 2027. And I think combined, they represent around $2 billion in annual egg revenue capacity. So how should investors think about the cadence and pace of filling that capacity and what that kind of means for your volume outlook over the next couple of years?
Do you want to tackle that one?
Yeah. I don't want to get ahead on providing guidance, but when you think about that, since our IPO in 2020, we've grown at a CAGR of 29-30%, pretty consistently year after year, actually. Given the farm recruiting that we're doing, given the jump in brand awareness that we've seen this year, we were at 25% aided brand awareness at the end of last year. We're at 33% now. Usually, brand awareness is a leading indicator for us for household penetration. So we see a lot of pent-up demand. We see the supply growing for us. You just mentioned the capacity expansion. So there's really no reason to think that the growth CAGR will change meaningfully. Obviously, it's growing off larger and larger numbers. That's what we've seen for the last five years, and we've been able to maintain that CAGR.
At some point, the percentage growth will slow, right, so obviously, by the time we open Seymour in early 2027 and we have the 2 billion capacity, I don't know if I would still bank on the 30% growth rate at that point, but Seymour will probably fill up over a few years, and then we have to start thinking about, do we need a third facility? I think for the time being, we are focused on getting Seymour opened. We're focused on capturing the opportunity in 2026, and based on the brand awareness, on the supply, on the retailer conversations that we have, all those growth ideas, I think, are all on the right track.
Great. Thilo, maybe we can stick with you and talk about gross margin, which has been very strong this year, well above your 35% long-term target. As we look to 2026, what are the key puts and takes just to keep in mind for gross margin? Obviously, you want to drive more promotions. Just what should investors think about as being more structural this year versus maybe more temporary?
Yeah. So our long-term target is to be at, we call it 35+% gross margin. I would probably put that somewhere in the 35%-37% range. As you said, we've been above that year to date. We took pricing, excuse me, we took pricing in the middle of the second quarter in anticipation of increased costs because of tariffs. That hasn't fully played out yet. The tariff impact is milder than what we anticipated. And so we have a bit of excess margin right now. We've also been in the situation where, because of our own supply constraints and increased demand because of avian flu, we haven't promoted for four quarters, right? From the middle of 2024 to the middle of this year, we really dialed back on promotions. That's now coming back.
With pricing maybe being a bit ahead of schedule because tariffs didn't play out the way we thought, we got this excess margin. Some of that will now dial back again because promotions are coming again. We're promoting much more on our regular schedule in Q4 to convert this brand awareness that we've generated into household penetration. Next year, right now, we would plan to promote for the full year. That will put downward pressure on margins compared to this year. Then with pricing maybe a bit ahead of schedule, we need to let costs catch up with pricing.
The reason why we set this 35+% margin target is we think at that level, we obviously generate enough gross margin to cover our fixed costs in SG&A, and we don't have to price so much that the consumer doesn't think anymore they get a surplus, right? We want the consumer to know that they're actually getting a really good deal for what they're paying, and that's why we feel comfortable with that 35% target number. We don't necessarily want to go much above that because at some point, we get to a level where the consumer feels like, "Huh, maybe this is getting a bit expensive, and I'm not getting as much upside anymore as I'm used to," and so with that, for next year, I would expect a bit of margin pressure and gross margin.
I want to just double-click on that for a moment. There's a certain discipline that comes with saying out loud to everybody, including my own team, that going far above 35 is not a win. I don't want our economic success to come on the gross margin line. I would much rather have it come on the bottom line and come through the leverage we get of our SG&A. It's easy to raise price. It's been easy to raise price for years. And arguably, and I think retailers showed us this in Q1 of this year when they took price without us taking price, there is consumer surplus. There is consumer willingness to pay beyond what they're being charged today. That's what makes them sticky. That's the secret to the loyalty.
That's the secret to the lower-priced competitor, not simply attriting away our consumers to an egg that on paper looks a lot like our egg. There's a discipline about not jumping to the price button as the way to drive growth. We don't need it, and it makes us work just a little bit harder to make sure that we're being disciplined on the other lines of cost.
Great. We've got a little over five minutes left. I want to open up to the room to see if there are any questions in the room. No? Okay.
Oh, we got room.
Oh, we do? Okay.
Hello.
Hi.
I am Reese. I'm kind of curious. I know from experience that you guys have better eggs than basically anyone in terms of quality. But I'm curious how you're going to or how you're thinking about educating people on that, right? Because a lot of people are kind of thinking, "Well, premiumization, other brands are kind of ramping up. I'm just looking at a cage-free egg, another pasture-raised, organic." How are you thinking about educating people to want to go forward, and how is that going to manifest in the financials? Thanks.
Great. That's a great question. When I first got here, we thought we had to educate every new consumer on all of the, I would say, sort of nerdy features and benefits of our production system. This thing called pasture-raised, nobody knew what it meant. A lot of people thought we were free range. So we had to talk about land allocation and how many waters and feedlines and space in the barn and the type of bird and the kind of I mean, there's a book that describes our standard that we give our farmers. And it turns out that consumers don't have the mind share to dive into all those nerdy details. What they want is a brand that they can trust to have made the right choices on their behalf.
So the first step is, as much as it was tempting in the early days to shout from the rooftops, "Our birds go outside. Look at the picture of the pasture." Consumers, they don't have time. They don't have mind share. And so what we're really focused on is helping them understand why they can trust us. And a great example of that is traceability. Our cartons of eggs have the name of the farm those eggs came from printed on the end of the carton. It's live printed by an inkjet printer when the product gets dated as well. And it is through our unique supply chain that we can actually trace the eggs back to that specific farm.
Then if you put that farm name, enter it into our website, unless it's a farm that's been added in the last few months, in which case we might not have gotten around to filming that farm yet. Most farms have a video where you can actually see the real farm where those eggs came from. You don't see that on the shelf in America. Some companies don't have the ability to do it. Some companies don't want to show you a video of the farm those eggs came from. That's the education.
So you can always go on our website, and there are some consumers who we have a wonderful top-of-the-funnel-focused consumer awareness and household attraction sort of machine that helps raise awareness of who we are and then a yellow tag for a promotion that maybe catches your eye at the store and gets you to try us for the first time. But then you go and you look at that package. You enjoy the egg, and maybe you get pleasantly surprised by the eating experience. So you check out the package. And all of a sudden, maybe you're looking at a video, maybe you're reading our newsletter.
We have ways to pull you through that education simply through your having become aware of us, tried us, purchased us, and now you're on the website if you are so inclined to learn anything you want about what we do because we're so transparent about it. I'll give you a small example of the level to which we take this trust so seriously. Occasionally, during times of Avian Influenza, a state or local veterinarian, a government employee, will identify an outbreak on some farm and then advise, strongly encourage area farmers to keep their hens indoors until they've declared the area free from Avian Influenza. Now, there's a whole debate about whether going outside is actually a contributor because all the birds getting killed are indoors, right? But that's another story. We don't tell our farmers that they have to ignore that recommendation.
And so some of our farmers hear that state vet in a place like Arkansas or Missouri say, "Keep your birds inside," and they keep them inside. Now, a big part of our brand is the birds go outside. So we want to make sure consumers know that occasionally the birds are inside for their health. Not only do we say on our website and in social media, "Hey, our birds are inside," or "Some of our birds are inside," but we did it to the point where it's a pop-up that you have to acknowledge before you can get to our website. This percent of our birds are inside this week. It's just a small example of that's actually what we're educating on. "Trust us" is the education message, not outdoor access, not feed, not all the nerdy attributes of our animal welfare standards. It's "Trust us.
We're kind of close up on AI. You just brought it up, so I just wanted to ask about it. Started to see table egg prices maybe pick up a bit. Can you just kind of give a state of the union on what you're seeing as it relates to the AI?
Yeah. So historically, if AI is going to hit heavy, it hits heavy in February, March, April. And so I think if you look at this fall of 2025 compared to fall of 2024, fall of 2023, we've actually seen it hit earlier this year than it did in prior years. A lot of turkey farms and other poultry farms and some shell egg farms, it's too early to tell whether it's going to be a big or a little thing. We are seeing some tick up, a wholesale price tick up, very minor retail price tick up, but it's probably as much seasonality as anything else. And I think we'll know by February or March whether it's a big or a little deal this year.
Okay, and last 30 seconds to hosting an investor day in two weeks. Maybe just talk about kind of what the goal is for the investor day.
It's been a little over two years since we've had an investor day. A lot has changed in our business. We've talked about the third production line. We've talked about the ERP system. So it was time for us to renew investor knowledge about what we're doing. Two years ago, we set long-term targets for 2027. That's almost around the corner. Doesn't feel quite like it, but it's almost around the corner. So we need to update our long-term thinking.
What were those targets?
We had said that by 2027, we would get to $1 billion net sales, 35+% gross margin, 12%-14% EBITDA margin.
How's it coming?
Thank you. We are ahead of schedule, I would argue, on revenue. We are above the margin targets. And so it's time to update those.
Great. Well, thanks, Russell and Thilo for being here, and thanks, everyone, for joining. Hope everyone has a great holiday.