Chefs' Warehouse, Inc. (CHEF) March 2026 Conference Transcript

Good morning, everyone. I'm Mark Harden, the North American Food Retail and Food Distribution Analyst at UBS. Thanks so much for joining us today. We are thrilled to have the team from Chef's Warehouse with us. We have Chris Pappas, the company's founder, chairman, president, and CEO, and Jim Letty, the company's CFO. We're going to dive right into questions, and I appreciate you guys joining us today. If you guys do have any questions throughout the presentation, please feel free to use the iPad, and we can weave them into the conversation. But maybe to start, obviously there's a lot that's going on right now with the consumer. and we'll get into the Middle East in a little bit, but we'll start more high level with the overall business. And you guys have operated a really resilient business. Strap's been holding up better for you guys than it has been for the broader food away from home industry at large. Just what's the latest on the state of your consumer?

Well, so our customer's customer seems – I've always thought that, you know, when we started the business 40 years ago, you know, we, you know, went into different types of customer base, food service, you know, trying to find our path. And we followed our passion, which was, you know, great food, you know, selling to great chefs. And not a lot has changed in 40 years that that customer's customer is very resilient. You know, there's always conferences, there's always business dinners and luncheons, there's always high-end travel, there's always birthdays, bar mitzvahs, holiday parties, so it continues to be an extremely resilient sector of food away from home. And, you know, it's, you know, I think we said, you know, we saw last year was a great year. And we said, you know, coming into this year, we just saw the momentum continuing.

And at the end of the quarter, there was some talk about disinflation coming into play. And that had been a bit of a shift. But obviously, there's been a lot going on in the world today. Any shifts to how you're thinking about the inflation outlook over the course of the year ahead and just how it could impact your broader margin structure?

Yeah, that's a good question. You know, we're very diversified, not just regionally and categorically, but we have 90,000 SKUs going through our distribution centers around the country and Canada and the Middle East. And within those, we might have hundreds of different products that, you know, we're a solutions company. We provide our customers with solutions, and we import from over 40 countries around the world. So having that diversification allows you to really manage inflation and deflation very effectively. And if you have a weather event in Spain, you can use your private label, olive oil in Turkey or somewhere else to provide a customer with a really good solution. So, you know, things like tariffs, significant inflation. We saw pretty significant volatility in protein this last year. And then also on the deflation side, we saw dairy products, you know, highly inflationary last year. and then deflationary this year. And yet we continue to manage that very effectively. And you may have significant inflation in certain products deflation, but if you look back in history, we always land in this kind of aggregate inflation environment of kind of 1% to 4%. And that's what you saw last year.

You saw about 3% to 3.5% inflation company-wide despite tariffs, despite significant volatility and in some of those products like protein and so I think our team is it's just become very effective at managing that and you touched on the point of tariffs obviously we've seen a shift recently just for the courts you know rolling back the hype of tariffs 10 to 15 percent global tariffs potentially going into place how does this impact your sourcing strategy with some of the specialty products that you guys import and you and just talk a bit about your detail approach to your assortment and the degree of flexibility that gives you.

Yeah, I mean, it really doesn't change the way we go about. You know, we offer good, better, best, right? That's what Chef's Warehouse is known for, you know, selling upscale casual to, you know, four, five-star best restaurants, hotels in the world, right? And we, you know, we leave it up to our customers. I mean, we have over 1,000, you know, people in our sales department. So, you know, of course, they're pitching, you know, what we'd like to sell. But ultimately, the customer makes the choice. And, you know, I think when you're dealing with, you know, 20, 30, 40, 50, 60, 70, $100 entrees that we're talking about, you know, no one's not going to order something for a dollar. So that's why I really like our sector. and we continue to get better at every part of the business. Yes, nobody likes to see prices go up. Like Jim said, I'm amazed when I look at it because you hear the news it's either massive inflation or it sounds like massive deflation and then we look at it and it's like 2% overall because we sell such a giant mix of products. The tariffs, I think the first round, You know, our manufacturers, our farmers, growers, I think they, you know, passed on some, ate some of it. I think this time it's, you know, I think we're getting so used to it. We're like, okay, what does this mean now? And I think at the end, we really don't know because, you know, the new tariffs replaced the old tariffs, but a lot of products had tariffs anyway. So I think the difference is not something that is significant. And, you know, none of our departments, our category managers, are panicking. Like Jim says, you know, we offer olive oil as a great example. You know, we import olive oil from Spain, from Italy, from France, from Greece, maybe from Tunisia, even from Argentina, from Australia. So we have lots of different options. And we leave it up to the customers, you know, what profile they want. Do they want to save a dollar? Do they want to stay where they are? And I think after 40 years of building this thing, it works because we do have the solutions and the options for customers to make their choices.

Interesting. With the customers nimble as you would have expected, I'll call it a year ago, just in terms of switching from maybe that olive oil that was maybe going from Italy to a product from Italy to a product from Greece, that product from Tunisia.

I think, again, our group of customers goes from a really good takeout coffee shop that wants, you know, better croissants and a better assortment of things to sell that's not $100 an entree, right? So customers like that, you know, may choose to change. More of our middle to higher-end customers, I think they play with their menus more than anything else. They're really good at it. You know, a lot of our customers, you know, we've been serving for 40 years, so the you start to pay attention to menus they start to adapt they'll go to market price uncertain entrees and they'll they'll mix the menu up where they don't have to raise prices even though you know some of their costs have increased on some of their entrees and they'll have other appetizers entrees beverages that they can make back the dollar or two and they're really smart they're entrepreneurial you know most of our independence and they find a way to make it work and keep their customers coming back and they'll make their profits gotcha then another big event this year of course is the potential for

higher tax refunds and just more cash in consumers pockets overall just from you know one big beautiful bill salt reform what's that what's your take would you expect for that to have a material impact we don't I think we've gotten this question about the potential tax refund bump and also the World Cup.

Did we build that into our guidance? And the answer is no. We think it will be some upside. We saw that with some other events that happened. We see it when F1 comes to Vegas or to Miami. You'll see a bump, but they're temporary. It'll be good. It'll be good for us, but we don't actually build it in.

I think until the the war whatever you want to call what's what's happening in the Middle East I think we were cautiously optimistic like Jim says we don't build it in but we thought it could be a big bump because the amount of people that were coming and they were going to need to stay in hotels or and they were going to need to eat and a lot of these people are celebrating some more than others depending on how your team is doing but just from from other World Cups and and reading about the uptick where the games were, you would have to expect there was going to be a good uptick. So now TBD, I guess. We'll see how everything's playing out.

And maybe on that, obviously a big subject with everything that's going on in the Middle East. You guys have a very successful business in the Middle East.

I suppose about 9% of your overall sales are international, with the Middle East being obviously a component of that. how should we think about the impact of recent events on your Middle Eastern business good question I just came back I came back right before you know the bomb started falling and I'm like wow if I was 30 years younger I'd move here it was so dynamic the feeling you know the amount of frames and building and new customers again it's it's a small part of our business but it's very exciting part of our business and it's amazing how resilient it was you know obviously there was days that business was really impacted and then you know even during this we saw really really good days of business so still a lot of people live there obviously if they're hitting the airport with drones it's not going to be a good day, but I think it's resilient. I think, you know, I mean, who has the carrot cards, but the amount of infrastructure and commitment, you know, in Saudi and Dubai and Qatar, again, we just finished some new facilities. I think that, you know, who knows how long this goes on, but I think there's so much money there committed to people that want to live there. It's clean. It's safe. It's got an unbelievable airport. I get it. It took me a while to really understand how is this city just blossoming and continuing to grow. It finally made sense before the drones started coming why so many people were putting their money there, becoming a financial capital tourism, obviously, a clean, safe place, good schools, great medical. So I'm still very bullish on it.

It sounds like demand's fluctuated kind of on a day-to-day basis.

Yeah.

I mean, it was a lot better than I expected.

And now it's, of course, you know, we'll see how this thing is playing out, hopefully, in the next week or so.

And then outside of the direct impacts to your Middle Eastern business, obviously big issues and implications from oil how do you think about any incremental risk to your supply chain and you know would you expect this to be material to your expense structure how are you thinking about that you know we have some challenges on the supply chain obviously in the Middle East right now but our team navigated that really well a couple years ago when you had the issue with the Red Sea and you had to bring them around Africa and and you know they navigated that really well, and so we're in contact with them every day and assisting them any way we can. But overall, our supply chain, we don't really see major issues. I mean, during COVID, you had a container coming across the Atlantic go from $1,500 to $13,000. That obviously came way back down. So that was temporary. We think, I mean, we estimate that if there's anything, it's going to be somewhat temporary, but we don't see a macro impact to our supply chain right now.

Are you expecting any material implications to inflation from fuel costs going up?

Not really. I mean, diesel prices kind of spiked up. They've leveled off a little bit. It's not our biggest cost, and we manage it centrally by managing through contracts with fuel suppliers. So, we're obviously on top of it, and our operating teams are working on it, but we don't see a huge impact right now.

Is a large percentage of the fuel price simply passed through, or how does that structure tend to work for you guys?

We do, in certain, certain senses, we'll put a fuel surcharge on the invoice. It really depends on the market, the region, the customer. And it's it's something that we don't do lightly.

It'll be in a in a situation like you know Maybe you had a few years ago where you you had a spike in a for a significant spike for a long gated period of time Yeah, we don't have a lot of contracts, but the ones that we do there is a trigger, you know where diesel passes a certain point There's a upcharge on the invoice, so So, like Jim said, you know, our drives, our trucks go, you know, 20, 30 miles. You know, you look at them all around New York. They're not going very long distances. It's really what the supply channels, what triggers their, you know, they'll look to see if they can put a surcharge on our deliveries for product. again you know we we sell expensive boxes so you know 20 cents surcharge on a on a hundred dollar boxes is is not going to be you know tremendously impactful let's pivot over quickly to your Salesforce you guys made a lot of progress pursuing a hybrid selling model you know with more customers using digital tools as well in recent years to kind of complement the face-to-face interactions from your Salesforce Can you walk through a bit on just how this has changed your selling strategy

and the extent to which it can impact how you think about headcount growth over time?

Yeah, so, again, we are celebrating our 41st year now, hard to believe. But, you know, the way we envision this business, because I guess we've been in it so long and, you know, we speak to customers, we monitor our customer base we see the interaction and we see how you know the industry is constantly going to change right technology is always going to change industries but you know we saw how to use you know we've been using AI we just called it something different and obviously our digital team has been getting more you know more and more of our customer base online we saw that evolution coming and we also saw I wanted to have an option where as we grew, because remember we were mostly a northeast company and then we started to stretch out and then stretched out all over the country and then went east how are we going to sell all these products and watching all these other companies do it wrong in a way gave us a map of you know if we're going to sell more categories and especially to the best chefs in the world we have to be experts we have to have the best of all offerings and the people that we send there have to know what they're talking about so we started putting together this puzzle a long time ago so you know when people see our success right now you know in a in a you know population

growth is really not there, right?

So, you know, you look at us growing, you know, round numbers, you know, close to 10%. You're saying, well, where's the growth coming from? It's not a surprise for us. I mean, we're happy about it, but it's come from a lot of, you know, tactical, strategic investments over the past X amount of years, you know, building our cut shop. so they were closer to the busy market so we had the service adding experts you know we call it team selling you know we I think we started calling team selling before people knew what team selling was even I didn't know what it was but I knew it sounded good and I wanted to build the team but having people that you know my experience you know growing up in the industry that nobody knows you know twenty thirty eighty thousand items you know you know I used to watch sales people come into our accounts and especially from you know big broad liners and you know they're selling gas station convenience stores and they're selling prisons selling hospitals is selling and then how do you walk in there and start talking you know about caviar and foie gras and you know some of the high-end ingredients I'm like it I don't think it's gonna work and you I think for us to be successful you know to be where the chef shop we're gonna have to have real departments with expertise and walk the walk and it's more expensive right so you got to build the department you got to acquire the talent we had to buy certain businesses to get the talent to get the expertise and then we had to get the technology, the computer systems to integrate. Maybe they won't integrate 100% overall, but we have tremendous now ability to make it easier for the team to be able to sell and for the category managers to watch the inventory because it's not just making the sale, it's making sure that you have it. A lot of it's perishable. Is it going to make the truck? Is it going to slow up the truck? So, you know, even my daughters say, you know, it sounds easy, Dad. You know, you bring product and you sell it. I'm like, really simple. You know, I just, you know, just snap your finger, the stuff comes in. And, again, a lot of products are simple. But what we do is really hard, and that's why I wanted to make sure we built this moat around the business with all these categories and expertise. And it's not easy. Yeah, and we like it that way because it makes it more difficult for anyone really to disrupt us. I mean, we always have competition. There's always somebody selling something, and you're never going to sell everything. But I think our team, the more mature they get, the better trained they get. We have our Chef Warehouse University. We're upping that investment into better curriculums. You know, how do you turn somebody into a, you know, a chef warehouse expert? Not easy. No matter what your background is, it takes time. So first year, second year, I always say I only want to talk to you until you've been here five years, right, because you're really not going to know what you're talking about. You'll know enough to make me upset, okay, because it's just to understand it all and, you know, the logistics side and the customer side, it just takes time. And that's why when I hear, well, you know, people are adding reps. Yeah, we're adding reps. We're always adding reps.

You don't want to lose mature reps.

It takes too long to teach them. It's interesting you bring up that five-year point. Just as you think about that ramp from a maturity standpoint, I mean, is the biggest gain we hear from others could be from year one to two? Is it two to three? Is it not until you get to five? How do you think about that curve, so to speak?

I think that it's – I have a future son who is a doctor, watching him go through medical school and now residency and all that. I'm like, they're not becoming doctors, but, you know, I mean, I would not want to go to a doctor who had one year medical school. I mean, they know enough to be dangerous, right? They're smart. They're learning. But every year they're going to learn more. And it's kind of the same when you're selling these many products and the complexity of logistics, supply chains, things are constantly changing. Is it free range? Is it organic? Is it almost organic? Is it really organic? And on and on and on. So, yes, the technology we have right now with AI and building the information for customers, it makes their job so much more efficient and easier from back in the day when we wrote on you know on little cards information for them and say just read this to your customer and tell them all about this now you can go online you can watch our videos you can come to our shows you know our shows our New York show had I think 3,000 customers who came and you know we had hundreds of vendors so that's part of the education but kind of like medical school you know there's there's people that you know they finish the fourth fourth year then they go on to do a specialty and that's kind of like our specialists you know they're going further they're going really deep you know in our cut plants we want them on the floor we want them to really learn you know how we cut the steaks or cut the the seafood fillets we have tremendous amount of trips all over the world for them to go visit our our farmers our producers so you to become say I want to give my lapel thing that said you know what I'm here for five years I actually can go see Chris that's a big big step maybe one more in the

Salesforce before we pivot on but just in terms of as you think about those AI tools that you guys have been rolling out and how they help people understand your more complex assortment you also talked about team selling I guess the first part would be how is uptake been on the AI tools relative to your expectations that people embrace them as quickly as you would hope for has it been faster than expected and then the second part is just when you think about team based selling is it still the same number of people on a team is it smaller teams so you just have more of them and you can reach more how do you think about that in our play I think I mean the goal is to do more with less right sure so you know that's why you know I you know you're watching our EBIT a percentage EBIT are start to climb climb climb we're getting leverage on our on

her overhead I mean it's it's not this is not brain surgery you know the more the more money that's on a truck and the same amount of hours you'll make more money right the more boxes that can pick on a shift you'll make more money so I think all the tools are to make you know every department more efficient and we are seeing that it just gets it's getting better and better how many less people will you have say per dollar spent is is the question you know maybe I thought it would be more rapid but what we're still seeing is quality people produce

and so we're not slowing down on on hiring but I think we're able to get more with less and I think that's the goal so Hardee's obviously gave you guys scale in Texas you've been making a lot of changes within that organization can you walk through you know essentially where you stand with Hardee's today well with Hardee's we're in the process of integrating our exist a kind of legacy CW specialty business we built an Allen Brothers protein cut shop in Dallas located very closely to our Hardee's business there as well as CW were in the process of securing a new facility to consolidate similar to what we've done in New England we also have presence in Houston San Antonio and Austin but the focus right now is to consolidate in Dallas and it's going incredibly well you know it's a process of combining the sales force gradually integrating the cultures and then we'll really get the aha once we get the facility in place where you have everything going on the same truck our produce business which is Hardee's our specialty legacy specialty business which we've already integrated from a commercial perspective. We are getting a lot of those boxes cross-selling on the trucks. We bought Hardee's not because they were making a lot of money or they were a specialty company. They just had a really good customer base for a portion of their business. There was a smaller portion that I think you're aware we've been attritting out of over time, and those are kind of some big, what we call big, chunky corporate business that didn't make a lot of money, didn't make sense to point our resources at and so we've been treated out of most of that and now it's a process of kind of doing what we did in New England taking combining our companies and over time turning it into a true chef's warehouse and and and we're we're in the second inning of doing that and and we've already started to get their EBITDA margin up on a combined basis and it's really the goal is just to get it to higher than our average as a company. Yeah, it's beginning to look a lot like Christmas in ways.

So, yeah, we're really proud. The team there is starting to really find their legs. And not easy, you know, multiple warehouse, multiple computer systems, different customer base. So we knew it would take five years, you know, when we bought it. you know we bought it we thought for the right price you know it wasn't a company that was exponentially growing like Jim said they had a great base great they were they were great at what they did you know in deliveries and logistics handling produce so our experience from before you know having done this is you know once we get people trained which is the hardest part so I forget what year we're on now but you could start to see it happening you're starting to see all the new items, you know, going to customers. You're starting to see the EBITDA margins rising. You're starting to see people get, you know, confidence and to sell, you know, more and more products that they never sold before. So I think Hardee's, over the next five, six, seven years, could be top three markets for Top three? Yeah, I think so. What are the other two? What are the other two for you? you know I don't want to upset any of our people because we love all our children but we really love Florida right now you know I mean Texas and Florida obviously have population growth it's no secret a lot of companies moving there money's growing everyone likes to make fun of California we do unbelievable in California every time I go out there I expect to see like a line of people leaving at the state. There's a lot of people here.

They're eating really well. Same with New York.

You listen to the news. Everyone's leaving New York. Me and Jim look at our numbers every day.

I'm like, New York's doing really well.

Jim, you pointed out just in terms of some of the attrition that you guys have done with Hardee's.

Can you talk about the capacity that maybe has freed up, how quickly you can you know essentially use that to help chef inside the business yeah yeah it's created some capacity in the near term I think like I mentioned the real aha will be when we secure a new building and then and really consolidate that's where you get the operating leverage and that's where you get you know all the categories in one building it's a place where you bring customers to see you know how it works they see a cut shop they see us cutting fresh fish proteins they produce they see specialty and we have you know state-of-the-art test kitchens where they'll test their products and and and that's a great networking you know tool and a marketing tool so yeah it's you know similar to what we've done on the west coast we've created some capacity on the west coast with some attrition out of some non-core business there we've done that in Texas and that allows us to to to grow the what Chris talked about in the whole sales discussion and how that works so so yeah it's yeah just just the fact that we're growing and even Martin's are going up it's just a testament to the team I mean we couldn't make it more difficult for them right now multiple facilities they're touching things three four times multiple computer systems so it's just a

testament to that the market is there the market loves our product and we're able to we're able to do business and and and grow it so we sort of Florida we had one two three I think four outside storage facilities two other cut shop facilities once we consolidated in Florida it just exploded yeah you know and it just continues you know you know to grow exponentially because it's you You know, I always believe, you know, as a salesperson, you know, selling has to be easy, right? Easy is going to win. You have to make it easy for the customer, easy for the salesperson. And, you know, once these facilities are retrofitted in Texas, it's going to be so much easier. And, you know, it's going to be like lifting a weight off their back that all they have to do now is focus on selling. And we know the market is there.

You know, we just see the sales coming in, the inquiries, the amount of new customers. and and and they're growing even in this environment so we're really excited about Texas and then you guys point to Sid Weiner a lot as a parallel with the Texas conversion just as operation you guys bought and really chef says it over time how long did that process take I guess when you got in there exit winner from when you bought them to like when you were happy with them and is Texas, more or less I really want to go back in history so we bought Sid Wehner we got hacked so after surviving the hack

somebody lit explosives in the parking lot and blew up trucks and part of the building and then COVID hit a month later so it was, I'm like, I don't know I don't know if this is a good idea but yeah so then we you know put Humpty Dumpty back together again and as we thought we started letting go of non-profitable business so Sid Weiner was a great brand you know it's historical it's been around I think three generations was not really making any money for many reasons so you know we knew that we were going to have to go backwards before we went forward and today even without the right facility we're still touching products in multiple buildings they're making really good money but and it's against a testament to the team we have great leadership the the product mix you know the customer base you know you're going through Vermont New Hampshire all the way up to Maine all the islands you know Boston's actually a it's a small town overall compared to you know some of the other big cities so it's it's logistically challenging we're great at that and the leadership there now has figured out the balance I mean the best is yet to come there we're building them a new facility so we think it's going to be exactly like Florida they're doing great but once they're in that new facility they're just going to explode let's pivot over to M&A area that you guys took a little bit of a breather from after doing a spate of M&A post COVID. We're getting a lot of good deals right now on the border of Iran. There's going to be a lot of opportunities. I couldn't help that one. We've been really patient. We did a lot of M&A for a lot of reasons. We had to just to get the footprint. And then coming out of COVID, all the deals that were in the hopper was so backed up so it just we did one after the other and it was you know extremely challenging kind of took a break you know to get everything more organized and I think the numbers are showing you know the efficiencies you know gave the team time to catch up and you know we're we're open for business like I tell all the brokers that want to sell us something just got to bring us something that's priced correctly or something that we really need and you know except for a few little deals you know we look at it and like you know we're growing organically at such a high rate it has to be something compelling because I think we have a lot of our pieces you know we still have that white space in the south to connect Virginia to Florida but other than that you know We want to do tuck-ins because they're very low risk. As we build facilities that have a lot of excess space, tuck-ins are extremely accretive. We'd love to buy something great. We're a growth company. That's something that we think is going to grow, but it just has to be compelling at the right price. Right now, we're just focused on growing the business and being disciplined. and, you know, usually opportunity will show up.

Fair enough. Then when you think about that area in the white space opportunity you guys have in the southeast, how do you think about the balance? Do you have to acquire to get scale there? Can you see yourselves growing organically and reaching into those regions?

Organic is hard. We're starting, you know, what we do normally is we start to send trucks to a depot, and then we start to, you know, grow an area. We are doing that already. And we know they want Chef down there, so we're starting to hire people. And at a certain point, we'll find somebody that we can acquire that gives us routes, and then we can fold out from there.

So just like Texas, there was nobody to buy, really.

I mean, there was nobody, which told us the market was open for us. I would say the good thing about Chef, there's nobody like us. The bad thing is there's no one exactly like us to buy. So we have to buy somebody to get us into the market, and then we start to bring the teams in and the inventory and the experts, and, you know, we start all over. It's like rebirth all over again. So we'll get there. We're patient. We've been talking to a lot of people. We're seeing ways that we can get into that market. But, you know, again, what's going to drive a lot to the bottom line right now is our big core markets, right, growing New York, growing California. growing Florida, growing Texas, continuing to grow the Midwest, obviously all our small markets the Pacific Northwest is doing great, they're moving into a new facility up in Portland we have a new facility in Seattle LA's got a beautiful big new facility they can triple their business, we have a new facility up in Richmond, California for Allen Brothers, so it's not like we have nothing to do You know, so we have lots of ways to really drive growth, and it's where the people are, right? So, you know, we get really excited. We go into Nashville. Nashville's doing great. Still a small market, you know. It'll grow, but we really need to continue to grow our big markets. You know, we can grow 7%, 8%, 9%, 10% in a big market. Those are numbers that move our needle.

And building on that point, you guys have added, obviously, a lot of capacity in some of these growth regions over the course of the past few years, and you still have some that's underway. Just how has the ramp gone in these regions relative to your original expectations?

I think they've gone better than our expectations in a number of them. I mean, Chris already talked about Florida. Texas is still early innings. Dubai has been amazing. We've we've we've expanded three of our facilities in Dubai, Qatar and Oman all over the last couple of years. So we've made that investment. They're investing in people. Obviously, you got the short term issue with the war, but that's still a big growth market for us. And Chris mentioned some of the smaller markets, even like the northwest is growing really high single digits, you know, sometimes double digits. So I would say that they've gone as expected or even better.

Atalco, gave you scale in the Rocky Mountain region. How's that gone so far? I don't know if we'd say scale. Maybe not scale.

We're excited. Eventually it'll start snowing as well. Yeah, we're retrofitting. We got lucky. We found a building that doesn't require a huge amount of capex that will allow us to move them into into that and quadruple and more the business so we think they'll scale pretty fast again it's small it's a great market you know our our team loves seeing our trucks in Aspen and getting stuck in the snow when there's snow up in Breckenridge or Vail so it's a it's a great customer it's our customers customer base you know that gets excited there's a lot of money a lot of upscale tourism a lot of people with second homes there now you know Denver's is growing it's sunny 300 days a year okay people forget that we're excited about it but it's still it's a small market but it will scale dropship model something you guys talked about briefly at the analyst day just curious how initial uptake has gone on that front in terms of customers trying to utilize that that service you know we've always had some sort of dropship I think we called it something else I think it complements the business well but the driver the driver of our businesses build build a demand have it have it for next day I like it when it's on our truck it it makes me feel much more in control but it definitely complements and gives our customer base you know we call it the you know the magical sale you know we look at what comes in from You know not in the warehouse and and not in our trucks a lot of times and it just you know goes to the bottom line So it's a good addition Maybe pivoting to some broader topics just obviously artificial intelligence is a big source of discussion really across The consumer industry talked a bit about how you guys are able to use it with your sales force How do you think about?

artificial intelligence and your ability to deploy to the broader organization and And then related just conceptually, how do you think about that balance in that there's all sorts of opportunities to save money, but if we do see unemployment go up, potential demand implications, I think it's something a lot of people are really grappling with trying to figure that out.

Yeah, I mean, I think for our industry, you know, whenever we have, you know, a lot of our corporate meetings discuss our challenges, when I hear that it's hard to find drivers, I wish I would have saved, like, recordings of our first meeting 41 years ago. It's impossible to find drivers. So, really, it's a challenging job. It's a hard job because it's not just driving. You're going downstairs. heavy boxes so you know we you know we take care of our people you know we try to pay as much as possible so any technology to make their job easier is is welcome but I don't see I don't see the robots that can replace people that can deliver products and go downstairs in New York yet so I think that's you know, that's still, you know, a bit away. Back office, I mean, we've been using AI for a while now. I mean, we must have systemized so many of the back office functions.

Yeah, I mean, you know, in corporate, a lot of our, we use a lot of third-party providers, software providers, and they're all integrating AI. I would say where it's been most impactful for us is with our digital team and also our operations team we're starting to use drones to do improve inventory management on the digital side we've you know we put in a really dynamic team over the last couple years and they've really exponentially grown our digital platform and so elements of AI help our sales reps have more real time information on our customers behavior and it gives our customers our chefs and their buyers, a better buying experience. You know, it gives them a window into inventory. Chris talked about how a sales rep could never know 90,000 products, right? But our search engine is so much more improved through AI that they'll buy things and see things that they never knew we had. And that's been a real differentiator on the sales side, the gross product. I would say that's the most impactful. in operations I think we're still in the second inning of integrating AI and robotics I think it'll be bigger you know five or six years down the road but where we started the process I think that just that brings us up on time please thank me everyone and please join me in thanking both Chris and Jim today this is awesome thank you thank you thank you for having us