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 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 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 in some of those products like protein. And so I think our team has just become very effective at managing that.
And you touched on the point of tariffs. Obviously, we've seen a shift recently just with the courts, rolling back to tariffs, 10% to 15% global tariffs potentially going into place. How does this impact your sourcing strategy with some of the specialty products that you guys import? 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 or 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. And 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, you know, get better at every part of the business. So, yes, you know, nobody likes to see prices go up. You know, like Jim says, I'm amazed when I look at it because, you know, you hear the news, it's either massive inflation or it sounds like massive deflation, and then we look at it and, like, well, it's like 2% overall because, you know, we sell such a giant mix of products. But the tariffs, you know, I think the first round, you know, Our manufacturers, our farmers, growers, I think they passed on some, ate some of it. I think this time, 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 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 is a great example you know we import olive oil from from Spain from Italy and 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 they want to stay where they are and I think it you know after 40 years of building this thing it works because we do have the solutions and the options for customers to make their choices the customers nimble as you
would have expected called a year ago just in terms of switching from maybe that olive oil that was going from Italy to a product from Italy to a product
from Greece that product from Tunisia I think I think the 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 a hundred dollars 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 you know a lot of our customers you know for 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 on certain 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 you know that that happened we see it when F1 comes to Vegas or to Miami you know you'll see a bump but but they're temporary so it'll be good to be good for us but we don't we don't actually
build it in yeah I think I think until the war whatever you want to call what 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 But just from other World Cups 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 a small part of our business, but it's a 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 mean, I get it. It took me a while to really understand, like, how is this city just blossoming and continuing to grow? And it finally made sense, before the drones started coming, why so many people were putting their money there, It's 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 of years ago when you had the issue with the Red Sea. and you had to bring them around Africa, 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 situation like you know maybe you had a few years ago where you you had a spike in 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 yeah like Jim said you know our our drives our trucks go you know 20 30 miles you look at them all around New York they're not they're not going very long distances it's really what the supply channels what triggers there you know they'll look to see if they could put a surcharge on on our deliveries for for product again you know we we sell expensive boxes so you know 20 cent surcharge on a on a hundred dollar box 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 that 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 is 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 a option where as we grew because remember we were mostly a Northeast company and then we started to you know stretch out and then stretched out all over the country and Then went east How are we going to sell all these products and you know watching all these other companies do it wrong in a way gave us you know 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 ten percent you're saying well where's the growth coming from it's not a surprise for us I mean we're 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 to 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 20 30 80,000 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 a gas station convenience stores and they're selling prisons selling hospitals 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 going to work and you know did I think first 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 a get the technology the computer systems to integrate you know maybe they want to integrate 100% oh you know 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 not just making the sale it's making sure that you have it a lot of its perishable is it going to make the truck is it going to slow up the truck so everyone you know even my my daughter 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 yeah and you know and we like it that way because it makes it more it makes it more difficult for anyone really to disrupt us you know I mean we always have competition there's always somebody selling something and you're never gonna sell everything but I think our team you know the more mature they get the better train they get we have our chef Warehouse University we're upping that you know investment into you know better curriculums you know how do you turn somebody into a you know a chef chef warehouse expert not easy no matter what your background it takes time so first year second year I always say I only want to talk to you three billion five years right because you're not really not going to know what you're talking about you'll know enough yeah to make me upset okay because it just to understand it all and you know the logistics side and the customer side it it just takes time and that's why we know when I hear well we're at you know people are we're adding reps and yeah we're adding we're always adding reps you you don't want to
lose mature reps yeah 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 was a doctor watching him go through medical school and now residency and all that. I'm like, they're not becoming doctors, but 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 they're learning but every year they're going to learn more and it's kind of the same in when you're selling you know these many products and the complexity of logistics supply chains things are constantly you know changing is it free-range is it organic is it almost organic is it really organic and and on and on so yes the technology we have right now and you know 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 college 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 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 sales force 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 The first part would be, how has 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? So, you know, that's why, you know, you're watching our EBITDA, percentage EBITDA, start to climb climb climb we're getting leverage on our on her overhead i mean it's it's not uh this is not uh 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 uh you'll make more money so uh i think all the tools are to make uh 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 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. You know, 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 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 beginning to look a lot like Christmas in ways so yeah we're really
proud the team there is is starting to really find their legs and not easy you know multiple warehouse multiple computer systems different customer base so we knew 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 of you know having done this is you know once we get people trained which is the hardest part 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 on this going to customers you're seeing starting to see the even a 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 chef so three yeah I think what are the
two mm-hmm what are the other two for
You know, I don't want to upset any of our people on this thing, 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 are moving there. Money's growing. Everyone likes to make fun of California. We do Unbelievable in California. You know, every time I go out there, I expect to see, like, a line of people leaving. and I'm like there's a lot of people here
and they're eating really well a lot of money same with New York
you listen to the news like everyone's leaving New York, me and Jim look at our numbers every day and 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 and size 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 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 see produce. They see specialty. And we have, you know, state-of-the-art test kitchens where they'll test their products. 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 more is 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 started, 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 of 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
yeah 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 you guys we're getting a lot of
good deals right now and not on the border of Iran I couldn't help that one you know we've been really 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 It was, you know, all the deals that were in the hopper were 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 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 we want to do tuck-ins because you know they're very low risk as we build facilities that have a lot of excess space tuckings are extremely accretive and we'd love to we'd love to buy something great you know 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 and right now we're just you know focused on growing the business and being disciplined and you know usually opportunity opportunity will show up there enough then when you think about
that area in the white white space opportunity is having the southeast how do you think about the balance between 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 we know they want chef yeah down there so we're starting to hire people and at a certain point so we'll find somebody that we can acquire that gives us routes and then we can fold out from there yeah so just like Texas there was nobody to buy really I mean there was nobody which told us the market was open for us there was 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 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 again, what's going to drive a lot to the bottom line right now is our big core markets. 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 so we have lots of ways to really drive growth and it's where the people are so we get really excited we go into Nashville Nashville's doing great still a small market 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. 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 um dubai has been amazing we've we've uh we've expanded three of our facilities in dubai cutter and oman all over the last couple of years so we've made that investment uh 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. 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 team loves seeing our trucks in Aspen and getting stuck in the snow when there's snow up in Breckenridge or 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 this 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 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 business is build build the 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 we look at what comes in from you know not in the warehouse 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 talk 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 then related just conceptually how do you think about that balance in that there's all sorts of opportunities to save money but you know 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 is you know whenever we have you know a lot of our corporate meetings discuss our 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 love you know a bit away back office I mean we've been 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 provider 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 of 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 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 that's been a real differentiator on the sales side gross profit I would say that's the most impactful in operations I think we're still in the second inning of integrating AI in 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 in our please join me in thanking both Chris and Jim
today this is awesome thank you thank you for having us