Thanks, everybody, for joining us this morning. I'm Ben Bienvenu. I cover the food and agribusiness and staples sector here at Stephens. Westrock's here with us today to talk about their business. The company is a leading integrated coffee, tea, flavors, extracts, and ingredient solutions provider in the U.S., with offices in 10 countries and sourcing from 35 countries, and in the midst of significant growth as they build out a Conway facility that's gonna diversify the products that they sell and really amplify the EBITDA that the company generates. I'm delighted to introduce from the team, Scott Ford, Chief Executive Officer, and Chris Pledger, Chief Financial Officer. This will be a fireside chat format, but we'll periodically check in to see if there's Q&A from the crowd, and continue our Q&A as it goes. Thanks so much to everybody for being here.
Scott, Chris, we appreciate your time, as always.
Delighted. Thanks for having us.
I think maybe for the benefit of investors who aren't as familiar with Westrock, if we could start a little bit with the background on each of yourselves, the company, and the opportunity that you see ahead.
Sure. So, Scott Ford, I started Westrock Coffee almost 15 years ago. I did it after a stint running a public company called Alltel in the wireless business. We had a really nice run there over about a 13-year timeframe. Before that, I was Jack Stevens' assistant for the better part of 10 years, which is why I love to always get to come home a little bit to come to this conference, so thank you for the invite. We started Westrock Coffee really as an exporter in East Africa, where we were trying to help farmers access the free market. They'd been blocked by a duopoly of sorts, and one thing led to another.
Today, we're the largest provider of Private Label coffee for other people's brands, the largest provider of coffee to restaurants in America, the largest seller of iced tea, and we are probably the second-largest single-serve K-Cup provider behind Keurig. And I believe we're gonna be the leading provider to CPG companies of coffee extracts in all these wonderful ready-to-drink, cold brew-type products that we're manufacturing in the new facility to make those products in Conway. And I have been alongside my partner here, Chris Pledger, since we started this business when he was the outside lawyer who said, "Rwanda? Sure, I can figure out how to set a business up in Rwanda." I'll let you introduce yourself, Chris.
Okay, thank you. Thanks for having us. My name's Chris Pledger. I'm the Chief Financial Officer at Westrock. I started out. I'm a corporate finance lawyer, a mergers and acquisitions lawyer by training, and I had spent five years in the oil and gas business doing international oil and gas deals in a lot of garden spots around the world, 'cause that's where oil is, in all the nice places. And so when Scott said, " W e're gonna go start a coffee business in Rwanda," it seemed like a pretty good, a pretty good gig. I hadn't done business in Rwanda before, but I knew it was something that we could figure out.
It was just an exciting opportunity to be a part of what the Ford family was building, and then the collection of folks that we have brought together over the years. It has grown a lot from where we started in Rwanda as we expanded, buying a trading company out of the UK, and then starting the business here in the United States.
That's great. Thanks. So I think we have to start with the Conway facility.
Okay.
That's... It can't be overstated, the significance of the opportunity for you guys, and I think it's really the focus for investors. Can you help us understand where we are in the ramp of that facility? We talked a little bit on the most recent call about the trajectory once it's up and going, and maybe some of the nuances around the ramp and EBITDA associated with that facility.
Sure. So where we are is we basically decided to build a facility that could produce, in its first iteration, which we broke originally into three phases, which we've collapsed into one, that that business could produce, you know, two to three times the EBITDA of the core business we were starting from, which is an unusual proposition. To fund that, we had to... a private equity investor with us from a transaction we'd done a few years before, who wanted to roll. T hey always want to sell, and you know, replace their money and recirculate it, but they wanted to roll.
So we ended up going public through a very non-traditional way, where Brad Martin, who was the sponsor of a SPAC, and Brad, of course, is the vice chairman of FedEx, and before that, was the CEO of Saks Fifth Avenue in the retail store department world. We were able to agree to a value and agree to a depth of market that we could deliver through a pipe. So we did a $250 million pipe, and plugged that into a public shell, and went public through that means.
So that was phase one, which was, "Okay, we've got this great idea," which is the coffee extracts world, unlike the roast and ground business or the iced tea business, there's only three or four people in the world that can do a really high-quality coffee extract at a really high volume, and we are the only one that seemed to be willing to put that into packaging on down the line: a can, a bottle, a multi-serve bottle. So when we were looking at that opportunity, we were then . We were literally, with our retail customers, retail, private label, and restaurants, what we were reached out to by CPG brands that said, " W ill you do non-cow milk dairy?
“Because nobody else wants to do that.” We said like, “I’m an idiot.” I said, “Like what?” They said, “You know, like oat milk, and almond milk, and et cetera.” Because we think 50% of all the milk-based drinks that we sell in the next five years are gonna be plant-based milk, and there is no one that will build a product development lab and make that the focal point of what they’re doing. So we said, “ T hat sounds terrific. So where we are in Conway is we had all these discussions, we got a sense of what the orders would be. We went and raised the money. We’ve built two facilities. It’s 1.1 million sq ft under roof in two facilities, two miles apart as a distribution and holding area versus a manufacturing facility.”
Those are now almost complete. The equipment is largely in. The equipment will finish coming in over the H1 of next year, and we're going to turn on the facilities late in the Q2, and start producing commercial product. Now, I'm gonna turn it over to Chris, because when you get into, what does your EBITDA ramp look like? We will be ready. The machines are in, the plant is ready. We can add to the plant multiple times over anything that we've publicly stated over the next few years. So we are ready to commence what we call Phase One, $300 million investment, should generate $100 million-$125 million of EBITDA. That is 80% sold out, but we do not control the timeframe that our customers choose to come in.
If they all come in in the earliest window, our EBITDA could be up 100% next year. If they all come in in the latest window, our EBITDA could be up 5% or 10%. So we're literally wrestling with. We don't even know how to tell the Street that, so we're probably not gonna give any guidance and say we don't control it. We'll report out as they come in. I'll let Chris take you through how the contracts actually work, that, that create that situation.
So the contracts that we enter into is really different than any other part of the business that we have. The contracts for the Conway facility, they're five-year, some form of Take or Pay contract. And so the interesting feature about them, and in some cases, they're set up so that whenever the facility or the line turns on for the specific product that we're gonna make, we'll start a ramp of product for that customer. And so what we don't know now is, you know, what the slope of that ramp's gonna be. So you don't quite know exactly when the timing's gonna be, and you don't know what the slope of the ramp's gonna be.
We know what the volume's gonna be whenever it's fully ramped, but the pace at which that happens is not something that we control. For some of the biggest customers in there, they have a window of time in which they can start to bring product on. And like Scott said, if they come early in the window and the ramp's steep, then what our EBITDA looks like for next year could be, could be really good. But if they come late, and the ramp's a slower ramp, then over the first year, it's hard to be able to predict what the EBITDA generation of the facility's gonna be because we don't control that customer ramp. And so, you know, there's a reason they contracted with us.
They wanna be able to move product, but, you know, the thing we can do is be ready whenever we told them we'd be ready, and we're in really good shape in order to be able to do that.
So on our Q3 call, and I'll let you go on wherever you wanna take this conversation, Ben. Our Q3 call, we said we're highly confident what we can make when the plant's full. I'm less confident about what the slope of the fill will be. We think the business can generate $200 million in EBITDA on what we've built now. We won't stop building once we start to pay debt down, because we have demand from customers that exceeds what we can do even now. But on what we've got now, what everybody can see publicly, we're convinced we can do $200 million in EBITDA by 2026 or 2027, when that facility's full, and then we'll play again with more information after we've got it. So that's where we are.
Okay, great. Between now and then, obviously, you know, the core of the thesis, at least in the first stage of growth associated with this business, is Conway. I think one of the things you all have done nicely over the last year is, before Conway is up and going, you've given us updates or milestones relative to what Conway is going to do prospectively. So you've collapsed the phases down to one. The size of the EBITDA contribution has grown. We've gotten color and nuance around Conway. Between now and, say, the Q2, what are some milestones that you can keep the market abreast of as we stay focused on Conway versus 3Q of, you know.
Right
A given quarter that may be insignificant to the long term?
So, we're wrestling through that, and actually-
Yeah
... we're spending time with our board right now, and we are open to suggestions. We are trying to find metrics that people, that we can publicly state, other than, like the one we gave in the Q3, that I thought would be very helpful. Between the Conway facility and what's initially turning on and the facility in California that we bought and have filled simultaneously, there are 6 lines. 4 of them are completely sold out. 2 of them are 50% , they were 50% sold out when, when we made the announcement. My guess is they're more sold out than that now, because that's a week ago.
Yeah.
So, we're trying to give people some sense of, where are we really on a run rate and on a development basis? And we're looking for things we can show and share with people. But at the end of the day, there is more demand than we have than this industry can produce. This is the fastest growing shelf item in American grocery stores. It's growing 25% or 30%, and it was less than 60% in stock in retail stores last year. This is ready-to-drink, multi-serve bottles, which is the first line we're turning on, hint, hint. All right.
There's already demand to build a second one, but we're not gonna do any of that until we deliver on the first wave and get our EBITDA in line, and then get our debt paid back down, and then we'll go forward. But we're being asked to build facilities in the Middle East right now. We're being asked to build facilities in Southeast Asia right now. We're being asked to build facilities in Europe right now by our customers, which are the blue-chip customers in the world, both in the CPG world and in the restaurant space, all of whom we're telling: "That's a lovely idea. We would love to do that. We will get there as quickly as we can."...
And so when people say, " L et's talk about the short term," I'm like, "You know, the short term's gonna be what it is in our core business." We're we did put in a new system. We had to upgrade the single-serve plant this year. 2023 was a really messy year, and it was designed to be a messy year, and it was messier than we designed it to be. But we knew it was gonna be a year we were investing to get systems issues out of the way, so that when Conway came online, we were ready to push, and we've done that. It's been a messy, loud year, and we've probably spent-- we've probably suffered $10 million+ in EBITDA pain from building systems into some of the acquisitions we made, that they just couldn't maintain basic financial systems to get to product profitability.
I f you don't know your product profitability 'cause you don't know your incremental individual cost, you can't run a business. We had to stop and go build all of that from scratch in the middle of what we were trying to do in Conway already. So it's been a chaotic year. I, for one, will be glad when 2023 is over.
Fair enough. I wanna go back to the start of the conversation, actually. We've been talking about hard capital investments, and I asked for background on each of you, but there's been a huge human capital investment that you've made that I think is really important to Westrock . So maybe if you'd talk a little bit about the team that you've assembled, the expertise that they bring, and why that likely amplifies your confidence in, in Conway's ability to be successful.
T hat. A nd that's, you know, we all learn as we go through life. So, you know, Jack Stevens was my mentor, and the guy that I was his assistant for eight years, traveled everywhere he went. And when he sent me to go take over Alltel as my father was getting ready to retire, I told him, "Mr. Stevens, I don't know anything about the telecommunications industry." And, you know, he was a Marlboro Red smoker, and he sat there and he said, "The nouns are different, but the verbs are all the same. You'll do well." And with that, with that, we were sent into the wireless world. And I inherited a wireless business that was the 26th largest wireless business in the U.S., and we went from a $4 or $5 billion market cap to $30 billion over the next 13 years.
We assembled a great team, and I didn't know anything about the wireless business. So it was all about hiring people that knew about it. T he same thing's true here. So when we decided to build this plant, and we worked with a group of investors who said, "We're gonna make an investment on a five-year timeframe, where we're gonna go take advantage of the fact that this extract business is underserved, and that that we have a unique position as one of the few people that can make the extract, that we can pick up services businesses adjacent to it." So putting stuff in a can is a service business. Putting stuff in a bottle is a service business. We have a great product development group, got great sticky customer relationships. We think that's a good bet.
But I've never run the largest facility of its type in the world, that roasts, grinds, makes extract, develops milks from animal-based and from plant-based sources, puts that together with sweetener, sugar, flavor, et cetera, puts it in a beautiful package and wraps it up and sends it down the road. I have never done that. So we said to ourselves, "Who's the best in the world at that?" And we asked all of the customers, "Who's the best in the world?" We asked all of the engineering firms that provide professional services to this group of customers, "Who builds these plants? Who runs these plants? Who's the best in the world?" And I hate to say it publicly, but anyway, Cedric Smith is the best in the world. And his name kept coming up, coming up, coming up.
So we went and hired Cedric Smith to become the plant manager of this facility. Then give them Patty's example. That's another great example. We've got 75 senior people that are the senior leadership of Conway, in Conway, on the payroll, building the facility out, all of whom have come from the largest competitors or most closely defined competitors that you would have in this space, where they've built these machines, run these machines, run these processes. And we went and hired them so that they were here for the final design, implementation, and build phase. And we brought tremendous knowledge in that, allowed us to set up through all the mistakes that they'd personally lived through in their other lives. Patty's another great example of it's not just about the machines, though.
And I think that's a great example. I mean, I think if you look at the equipment and what we're gonna do in the Conway facility, there's nothing unique. There's nothing in there that's not being done somewhere else in the world. There's no unique equipment. We're not creating anything from scratch. What we're doing is the unique part about it is that putting it all under one roof is what we're doing that you can't find in other places. And so being able to go out and find the best and brightest of folks who have done this for years and have decades of experience to come in, having suffered through the single-serve business, where that wasn't the strategy when we started out, we've learned from that.
It's been great to be able to see, because it has literally just been a world-class effort. Patty Bethurum's a great example. She's got 25 years of manufacturing accounting in this type of business. And so to be able to bring her business expertise into the facility, helps us as we start to set up our accounting system, the processes, the manufacturing processes that run through. You're just able to leverage the experience that a lot of people have, and it's been so much fun to watch, see that come together. At the end of the day, what we're doing is hard, and what we've been doing at Westrock since we started the business has been hard. What's exciting about it, having been there from the very beginning, is to see us be successful.
It was exciting when it went public. That was a great marker to look at. To be successful with this group of people, you haven't seen the amount of success we're gonna have and, and the party we're gonna have as we knock this ball, the cover off this ball, deep over the right field fence.
And so it's been exciting to be able to see not only the business grow, but to be able to launch Conway, to be able to see it filled, to be able to see the customers, to be able to see the impact that that drives in the community of Conway, to be able to see the impact on the lives of the people who have devoted their professional careers to this, and then to be able to see the impact on the lives all the way back to the farmers that we source coffee. I mean, it is gonna be a fun day to be able to see that, because there are a lot of things you can spend doing with your life, but it's exciting to be successful with this group of people.
Good work.
We've talked a lot about the financial dynamics associated with Conway. Educate us on the products you're gonna produce and sell inside of that facility versus the business that you're ostensibly in today.
Mm-hmm.
And then, you know, this is a financial conference. What does that mean in terms of margins, return on capital, some of those dynamics?
Sure. So today, we operate under four product lines, if you will. We have roast and ground coffee, so think about going to a burger restaurant, and they're making a pot of coffee, or chicken restaurant, and they're selling iced tea. That's the second one. The single-serve business, so everybody knows Keurig is the dominant player in the single-serve business. I think we're the second largest provider of K-Cups, but we're a fraction of what Keurig is. So we do private label, non-brands, if you will, retail store brands. And then the fourth line of business is the extract business. Well, each one of those businesses have a ROIC embedded return. They have an EBITDA margin.
They have a set of contractual processes and manufacturing processes, and they're, they are largely, generally predictable, with the exception being the roast and ground coffee business, which, if gasoline prices jump up, you can now two years run and predictably predict a quick sell-off in the, or a quick impact on the sales of coffee. Because the average consumer... At, at this conference, everybody's talking about interest rates. O ut in the world, people talk about gas prices. That's what actually drives most people's spend. And where 20% of the people drive 60% of the economic activity in America, and it's certainly true of watches and hotels and conferences like this, it's not true of coffee. I mean, everybody's the same buying a cup of coffee, right?
We see the whole economic strata buying a cup of coffee, and when gas prices jump up, they start retreating. Lots of reports out, Q3 restaurant CEO reports that have been rolled up, everybody got surprised by the Q3. We did, too. The one business that we've not been able to forecast correctly, because it sells through every forecast we give, is the extract business. The extract business, people say: "What is coffee extract?" W hat is Coca-Cola syrup? It's an extract, right? They hold the recipe in the vault. They ship it as a, they ship it as a syrup to places that add water or whatever however you make a Coca-Cola. I don't know. And they ship it out because nobody wants to freight water all over the world, right?
So the extract is actually the core ingredient that then gets activated with water or milk or carbonated water or soda, whatever it might be, and added other flavors in. So we are in the extract business. That is clearly our best margin business. There's anybody can roast and grind coffee. I mean, you can call a coffee roaster salesman, and he will have you in business in 90 days, and you, too, can be losing money in the roast and ground coffee business in 90 days, if that's what you wanna do, right? You'll have a hard time penetrating major accounts, but you can be in the business, so you provide price pressure. There's only four or five people in the world that know how to make extract at a high quality, at a high volume, because coffee can't be chemically knocked off.
You can knock off about every flavor in the world, but they can't knock off the flavor and aroma profiles of coffee very well. So you have to really treat it delicately if you want that to transition all the way through boiling and roasting and sanitization, heating, all the way into a finished can or bottle. It's tough. So that business we keep wrapped up in other businesses, frankly, 'cause I don't want to talk about it. So it's a great business. So there's a product margin. What Conway is, is the combination of, "That's a great product margin. Let's sell more of that, because there's huge demand for it.
But then let's couple it with services, which have a lower margin, and let's blend them together and then report on a blended basis, and let the aggregate dollars speak for themselves without getting into what's your packaging margin on a can or your packaging margin on a glass bottle or your product margin on an extract?" So that's, that's essentially what all of that gets wrapped up into our forecast.
Okay.
Then in terms of the economics of Conway as a business prospect, we're expecting to spend about $300 million in CapEx for the facility. The facility's gonna generate about $125 million of EBITDA out of it whenever it's full up and running. And so from a return on invested capital, I'm gonna use 100, because it's easier to do the math. That's in the mid-30s. And the other thing that we do at the facility is that, you know, as you build it out and you build the infrastructure in the facility, I mean, you're having to cut floors, you're turning what was a dry plant into a wet plant.
You're cutting floors, you're adding the piping and all the infrastructure, and so you add the infrastructure so that, you know, you can expand from there. So you look at what the base business is and the $125 million of EBITDA that that's going to generate. As we start to get over the debt curve and we start paying down debt, you have the opportunity to deploy more capital, whether it's to grow this plant more, whether it's to build another plant, whether it's to go do an acquisition somewhere.
You've got a lot of capital choices to make in terms of how you allocate it, but from a return on invested capital for the Conway facility, I mean, it's a-- it was the best one that we could see at the time, and so that's what we've executed against.
Okay. Talked about the EBITDA associated with the ramp, talked about it at a full-scale EBITDA run rate. How should we think about the fixed costs associated with the plant and, you know, how the revenue less the variable costs as it's ramping, where do we get to the point at which it covers the fixed cost and you realize the total power of the facility?
I think you see as it, as we turn it on, I mean, the.
Mm-hmm
... you're gonna, from a cost perspective, you'll have, I mean, there'll be more cost as it ramps. It won't be matched up. But from an accounting perspective and from how it flows to the P&L, it does get matched up, 'cause right now, you know, you're capitalizing your cost. As you start to ramp up the facilities, you capitalize less of them as you're matching the growth. And so you shouldn't see a huge drag from, on the P&L as you're ramping up the facility, from where it starts to where it's gonna end up.
Okay.
And then you're able to leverage... I mean, when you think about from a fixed cost perspective, I mean, there's, if you think about the six lines that we're turning on in the facility, I mean, there's gonna be the base components of what you have to have in order to be able to operate. And then as you start to add more volume to it, the scale effect of that facility is gonna be like the others that we operate. And there's a huge benefit that comes from that las , I would say, last 30% of capacity as you sell it out. The good thing is, as you start looking at the lines that we have, we're 80% sold out now. And so... you've got a lot of it already baked in.
It's just a matter of getting to the ramp.
I had a friend of mine that called me when we opened the first coffee manufacturing facility 10 years ago, and this was a guy in manufacturing. He said, "Y ou ever run a manufacturing facility before?" I said, "No, I hadn't. I'm looking for help." And he goes, "Well," he says, "let me tell you the short answer. There's three phases to owning a factory." And I said, "Okay, tell me what they are." He says, "It's when you're about a third sold through, and you're the biggest idiot that's ever made a decision to open a new factory." He said, "Then the second phase is, well, it's not so bad. Maybe it'll be okay." And he said, "Then you get over about 65% or 70%, and you are a dadgum genius.
and you can't imagine that you ever lived without opening it." T he first one, I lived in the first stage for a really long time when we built the single-serve business. We lived there a long time, and I was the biggest idiot you'd ever met. And then, you know, it got a little better, and then we bought another business, and it was scaled up, and we said, " B uying them already scaled up. Y ou know, that's a better idea.
That sounds smart.
So the next big factory we ever build, let's have it sold out before we actually start. So we didn't have it sold out when we raised the money. We had to sit down with people, which is why we raised money from a very small group of people, that you could have really in-depth, days-long conversations with about the market, the customer base, the products, how that would all flow through. And that we have a great shareholder base that, probably owns 80% of the stock, that we went through those kinds of sessions with. But we thought it was really nice that before we ever had to ink a contract for equipment purchases, we had the facility, I think, already 50%-60% sold out.
Mm-hmm.
So I think we've gotten that right. But it is a 3-year phase, and people say, " W here are we?" I'll go, " W e're in about a middle, the middle. You know, now we're about maybe 2/3 of the way through a 3-4-year process to have an idea, finance it, build it, sell it out, put the equipment in, turn it on, and then scale it up." That's a, it's a 3-5-year window, and it's just longer than the average American has a, you know, an attention span for.
Yeah.
Which is why we get beat up every time people say, " Wh at about this quarter or that?" I go, "I don't even care about this quarter or that one. But if you want to, here, you can talk to Chris." I'm gonna deliver $200 million out of that set of facilities over the next four years. That's what I was hired to do.
Chris, I want to talk about the Q4 of 2023, if we could.
Okay.
I'm just kidding.
Go ahead. I have nothing to say.
Fi re away.
No, I want to talk about the balance sheet between now and as Con-
Yeah
... Conway ramps. Then when you're in this situation where demand exceeds supply, I know a priority as Conway scales and the EBITDA comes, you want to pay down some debt and deleverage the balance sheet. How do you want to think about cash flow, free cash flow management, when you could, you know, spend all of your cash flow from operations on CapEx to meet this demand? How do you think about that long term in terms of scaling the business?
Are you asking-
I don't want to put the cart-
... me or Scott?
Both of you. I don't want to put the cart ahead of the horse.
Yeah.
I know you want to get Conway right, but just-
I think it's that. I think, I mean, at the end of the day, Conway creates a tremendous amount of options for us. And so being able to get that right, we're gonna be in the highest part of the CapEx spend over the next 2-3 quarters, so staying focused and delivering on that, so that we can get the ramp as quickly as it comes in. The benefits of that from a free cash flow standpoint and our ability to be able to pay down debt are fantastic. And when we do that, then we have a whole bunch of options about what we can do. Can we... Do we want to continue to pay down debt and be a really low-levered business? Do we want to look at acquisitions in the space?
'Cause they're out there, and there are a lot of great opportunities, whether it's in the U.S. or whether it's abroad. Do you want to look at... I mean, there's all sorts of things you can do. And having worked for Scott long enough, we will, we will look at all of them, and we will do some of them. But that'll be, that'll be a great spot to be in.
Okay. Um-
Actually, we'll look at a lot of them, and we'll do some of them. How's that? We'll look at all of them, and we'll do some of them.
It's fair.
Let's talk about the acquisitions you've done already, the capabilities they bring, the scale. You said you like to buy them when they're, when they're already full. You like to build them when you can sell them out before you open it. Talk to me philosophically about the M&A strategy that you've paired with this organic growth strategy.
Sure. And not to go too abstract, but I'll give you a couple of examples. We made two acquisitions. We made two decisions in the last 18 months. One was to buy a facility, and the other one was to build a facility. So we actually walked through this whole build, buy, what do you do? So we bought the Kohana facility on the West Coast. Now, the Kohana facility on the West Coast was maybe 25% sold out, and we weren't really sure how that would factor in, but it had some great customers. So we actually bought some know-how, experienced people that operated and made their own extract and put it in cans in a multi-serve bottle. That was great, great team. So we got that advantage from it.
We also got some retail customers that were buying certain products from them and some, what I call, the startup brands. Th e startup brands in the ready-to-drink space, some of them are gonna be huge businesses, and so we wanted to get in front of all of that with Conway being early on, and we were still designing Conway. We thought, " I f we owned one," and we had, it was small, right? Less than, less than... Did we? What did we say?
We didn't.
O kay. It was small. You know, $10s of millions, not, you know, a huge number. And we were able to get in front of that and bring all the insights and the learnings. What we also were able to do was bring all of the sales, that if you had a need now, we can fill the need now, and then we can scale you into Conway, which opened up every small startup brand on the West Coast became our customer overnight, right? Some of them are coming into Conway at scale because over the last, you know, 18 or 24 months, and in the next 12-18, they've won in the marketplace. So that was a great seed investment that we made through a small acquisition. It was, it was basically break even from the load that it was carrying.
Over the last year, we have filled it. You'll see that fill come in next year, in the 2024 number. Simultaneously to that, one of our biggest restaurant clients, one of the biggest restaurant chains in the world, they had an issue where they needed product manufactured in Southeast Asia. So we built a plant in Malaysia. We looked around, what can be bought, what value is there? What capacity? Is it big enough to serve what we really wanted? So we ended up building it, and we ended up building two facilities, not unlike Conway, where you pair a distribution facility and a manufacturing facility, and we built them essentially from scratch in Malaysia, where the anchor tenant essentially got us to break even on just their volume.
Now, what we're doing is they're wanting to do product expansions, and they've asked us to look at selling into other parts of the world out of that facility, and I think we'll fill that up in 2024. So that's kinda on a smaller basis, how we've tried to wade through, do you build it or do you buy it? We have turned down a lot of things. There have been a lot of assets for sale, but if they don't really fit our customers, the need that our customers have, and they can be something other than just a contract manufacturing place that any PE shop can own. Frankly, there's not a whole lot of interest in owning those.
They've got to have a market position or a customer position, or an ingredient component, if you will, an extract-based component, which is what Kohana had on the West Coast, or they've got to really serve a strategic customer need, like our second or third largest customer needed something in Asia, so we went to Asia with them. T he good news is now that we've gone to Asia, they're asking us to go to three other places in the world right now, and we're telling them: "Hold on, we'll be back. We'll be back once Conway's up, and we make these capital allocation decisions you asked us about a minute ago.
I want to come back to the international topic, but first, maybe sticking on M&A and specifically thinking about S&D business. When you bought that business, did you know that you wanted to do the flavors and extracts business? Could you have done it without that scale and customer set that it brought you?
Yes.
How do those two things form a critical path?
S o let me just be brutally honest and not try to act like I'm something I'm not. It is true that Brown Brothers Harriman, our PE investor that partnered with us, when we went and made the investment in S&D, it is true, 100% true, particularly a guy named Matt Salisbury, saw the extracts ingredient space and said: "This is gonna be a burgeoning business, and we need to own one. There aren't any in America for sale. There's only four or five people in the world that can do this. We need to own this asset, and what we pay for the roast and ground business isn't really gonna matter because we're gonna get this asset." And I will admit that I didn't really fully grasp that and only took that as incidental information and kept going.
Now, obviously, we didn't understand what COVID was gonna be because we closed on S&D, the largest provider of coffee to restaurants and C-stores, three weeks before the government shut them all down for COVID. So I'm, like, wearing the idiot tag twice here so far in this story, right? I really didn't understand the extracts and ingredient business. I really didn't understand what COVID was gonna turn into. And at that point... And, you know, I've been honest with people. I had to bet everything I made in Alltel. I've had to put all of it back on the line to build this business from scratch. And so, you know, it's like the third or fourth time it's all on the line. You know, at this juncture, you get numb to it after a while.
But, my wife is quarantining at home on the farm we live on, and I'm over in North Carolina with the 15 people that I'm quarantining with, trying to save S&D. And I called her one night, and I said: " I've got good news and bad news." She said, "I t's been like years since we've had good news. Why don't you start with that one?" I said, "Super, I'll do that." I said, "I've had two phone calls this week where people have offered me 50% more than we paid for all of S&D for just the extracts business." And she went: "T hat is fantastic news!" AKA, we're not gonna go broke because, you know, you could connect all the dots.
She said, "What on earth is the bad news?" I said, " I'm not really sure what it is, but I found this guy, who's originally from Oklahoma, named Kyle Newkirk, who really seems to have his arms around what it is and what it can be. And so tomorrow morning, I'm gonna go find him, and we're gonna... I'm gonna figure out how to make something of this extracts business, because if two people call you and offer you that, rule number one, Jack Stevens taught me, is as long as people are talking and they're offering you stuff, just shut up and listen and don't act. Just see what the third bid is. The third bid is gonna be spectacular. Spectacular.
... So let's talk about international. Again, not to put the cart ahead of the horse here, but the customers that you have today operate all around the world. That gives you an entrée into a lot of different markets for growth longer term. You're in Malaysia already. Talk about maybe the presence you have already, what that experience has been like, and then how you see going after international opportunities.
I think the experience that we have that we've had in Malaysia, I think has been a a great way to enter that market. I mean, I think we were doing business for the customer through a co-packer in the area, and so being able to manufacture for them has given us more control over the manufacturing process, the quality of the products that we're making, and has created just additional opportunities with that customer. I think when you invest in a place at the request of your customer, right honestly, in the middle of COVID, it generates a lot of goodwill. And we've been able to leverage that goodwill into expanded product base from out of that facility. We're sending people over for opport...
to look at opportunities, not only in manufactured coffee, but in extracts, across Southeast Asia, in order to be able, just based off that investment. So I think there is continued opportunity to grow, either through acquisition or through expanding that facility in Asia. And so you start with your existing customer base as the catalyst for why would you, why would you open a plant there? But then existing customers that we have recognize that, you know, this is what you're doing, this is what you do for us in the U.S., we'd like to be able to experience that same customer service that we get in the U.S. with you in wherever you are internationally. And so we've gotten inbound calls from existing customers about, " W e see you're in Malaysia.
How can we piggyback off that in order to be able to expand our business in that area?" And then you've got other businesses that know who we are, that aren't our current customers in the U.S., that are saying, " H ow can we partner with you in out of your facility in Malaysia, and are there other places in Asia that you can go?" A lot of folks will supply the Middle East out of Asia or Malaysia, so that's an opportunity for us that we've been exploring. And then the ability to ultimately go into probably into Europe at some point in time. And so it's really about looking at, you know, what do the customers want?
What are the opportunities around what your customers want, and what does that create for you to be responsive? We've always been a say yes to the customer first. Oftentimes, that costs you in the short term, but in the long term, it's paid huge dividends, and so that's, that's what we'll do there.
Okay. Scott, Chris, enjoy the coffee?