Earnings Call Transcript - MAMA Q2 2026

Operator, Operator

Greetings, and welcome to the Mama's Creations' Second Quarter Fiscal 2026 Earnings Conference Call. It is now my pleasure to introduce your host, Luke Zimmerman. Thank you. You may begin.

Luke Zimmerman, Host

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Mama's Creations' Second Quarter Fiscal 2026 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following this presentation, the conference will be open for questions. This conference is being recorded today, Monday, September 8, 2025, and the earnings press release accompanying this conference call was issued after the market closed today. On our call today is Mama's Creation's Chairman and CEO, Adam Michaels; and CFO, Anthony Gruber. Before we get started, I'll read a disclaimer about forward-looking statements. The conference call may contain, in addition to historical information, forward-looking statements within the meaning of federal securities laws regarding Mama's Creations. Forward-looking statements include, but are not limited to, statements that express the company's intentions, beliefs, expectations, strategies, predictions, or any other statements relating to future earnings, activities, events, or conditions. These statements are based on current expectations, estimates, and projections about the company's business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in the company's 10-K and other documents the company files with the U.S. Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to factors beyond the company's control. Matters that may cause actual results to differ materially from those in the forward-looking statements include, among other factors, the loss of key management personnel, availability of capital, and any major litigation regarding the company. In addition, throughout today's call, the company may refer to adjusted EBITDA, a non-GAAP financial measure, which it believes provides helpful information to investors about the performance of the business on an ongoing basis. A reconciliation of adjusted EBITDA to its most directly comparable GAAP financial measure is included in today's earnings release, which is available on the Mama's Creations website under the Investors tab. And finally, this conference call contains time-sensitive information that reflects management's best analysis only as of the date and time of this conference call. The company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information, or circumstances that arise after the date of this conference call. At this time, I'd like to turn the call over to Chairman and CEO, Adam Michaels. Adam, the floor is yours.

Adam Michaels, CEO

Thank you, Luke, and thank you to everyone for joining us today. I'd like to welcome you to our second quarter fiscal '26 financial results conference call. Our fiscal second quarter saw broad-based momentum. Revenue growth outpaced the category. We intelligently and judiciously leaned into high ROI trade investment and saw continued geographic balance with volume-led growth supported by new branded placements and incremental doors. We also worked collaboratively with our retail partners and implemented targeted pricing by early Q2, while operational work in chicken improved yields, increased throughput, and optimized labor, helping to manage commodity and inflationary headwinds. I'd also like to call out that we achieved these gains despite a continued challenging macroeconomic environment for our consumers, highlighting the resiliency, reliability, and relevance of our value-oriented high-quality deli prepared foods offerings across any macroeconomic environment. Most notably, we recently announced our acquisition of Crown I Enterprises from Sysco Corporation, a full-service manufacturer of value-added meats and ready-to-eat meals. As competitors, we had long admired their commitment to Grandma Quality products, and I would like to personally welcome Andy and his entire team to the Mama's Creations family. Together, I know we can accomplish great things. Crown I was originally part of J. Kings Food Service and was acquired by Sysco in 2019. It operates a recently upgraded and expanded 42,000-square-foot USDA-certified facility in Bay Shore, New York, just 10 miles from our Farmingdale location, operating much of the same grilling equipment we do in Farmingdale. Its customer roster includes hard-to-break-into retailers with huge cultural followings where we haven't penetrated. This $17.5 million all-cash opportunistic acquisition brings meaningful synergies to our core business, while bolting on an attractive business at 0.3x their fiscal '25 revenue, fully financed through a private placement with institutional investors and further supported by a long-term credit facility with our existing commercial banking partner, M&T Bank, which further supports future opportunities that may come our way. Strategically, Crown adds immediate derisked capacity on familiar grill platforms, nearly 200 experienced operators and a culture of Grandma Quality offerings rivaling Mama's. The plant combines automated and hand-cut portion-controlled proteins with modified atmospheric pressure packaging to extend shelf life, capabilities we can scale across our network. With about $56 million in revenue for the 12 months ending June 30 of this year, Crown I meaningfully advances our path to $1 billion of revenue. The deal is accretive this fiscal year, and we see substantial growth potential with their premium customers and cross-selling opportunities. Crown I adds significant scale and immediate production capacity, especially in chicken to our operation, and we also gained an incredible team as well as management bench strength. We plan to expand SKU penetration across Crown I's customer base and bring their facility into our network quickly, leveraging our incredible Farmingdale operations team to drive integration given its proximity. Over time, we expect to evolve Crown I's margins closer to our current levels through operational efficiencies, improved throughput, joint chicken purchasing, and better coordination of machinery and logistics. Most importantly, the Crown I acquisition following the successful acquisition of Creative Salads and Olive Branch in 2022 and Chef Inspirational Foods in '23 proves once again that our one-stop-shop strategy is working. And with patient searching, prudent diligence, and a practical transition, our Mama's family can acquire and integrate businesses at attractive multiples to drive outsized value for our shareholders. Turning to market dynamics. During the first half of fiscal '25, we have seen growth for private label brands continue to outpace national brands. The Private Label Manufacturers Association reported that private brands outpaced national brands by 4x during the 6 months ending June 15. Leading the charge was Refrigerated Products, which recorded the highest sales growth at 13% over the period. This reaffirms our strategy and remains a tailwind for Mama's. Speaking of Refrigerated Foods, according to new research from the National Frozen & Refrigerated Foods Association, shoppers have a strong and growing connection to the refrigerated section, especially when it comes to healthy, quick meal solutions and everyday family basics. This study discovered that 77% of adults associate refrigerated products with high-quality ingredients and that 70% believe these products support health or wellness goals, another feather in Mama's cap. In addition, protein remains the most sought-after nutrient in American consumers' diets according to results from two recent consumer surveys from the International Food Information Council. This was the fifth straight year in a row that protein was the top nutrient that most Americans say they're trying to consume. Approximately 80% of consumers reported prioritizing protein intake during a daily meal. High restaurant prices continue to bring consumers back to the grocery store for both savings and variety. The July Consumer Price Index highlighted these trends as away-from-home inflation increased from June to 3.9% over the past 52 weeks, while at-home was down from June to 2.2%, creating almost a 2x variance between away-from-home and at-home inflation over the last 12 months. These away-from-home price increases provide significant market potential for our deli prepared foods to capture, particularly in recessionary environments where consumers eat out less. Operationally, we executed against our 4 Cs: cost, controls, culture, and catapult, and we'll run the same playbook at Crown. The first is cost. Skip and his team have done a tremendous job driving efficiency in our facilities. Freight continues to be a highlight with greater freight line management, fuller trucks, and better planning, driving down our costs another 60 basis points from last year and last quarter. We've created new centers of excellence, starting in logistics, procurement, and IT, which allows us to use our scale more effectively. We can't wait to add Crown's muscle to our growing frame. Crown will nearly double our raw chicken needs, and early conversations with our suppliers reflect they couldn't be more excited to partner with us for growth and sharing improved costing. One year ago, we only had two chicken grills in Farmingdale. Today, we have six, expertly maintained, skillfully run, and eagerly awaiting our sales team to fill them up. The second C is controls. As promised last year, we have successfully implemented the start of our warehouse management system in East Rutherford. This has provided us unparalleled visibility into our inventories, allowing for reduced waste as well as more agility and higher service levels for our customers. We have also deployed new NetSuite upgrades throughout our network to alert users immediately if the cost of raw materials or assembly builds change in cost above a certain threshold. As you hear me say often, what gets measured gets improved. This is just one more example of our strategy coming to life and not just sitting in a PowerPoint deck. While Crown is already successfully managing their business on an alternative ERP system, we're already planning to bring Crown onto our NetSuite instance early next year to ensure we're optimizing every aspect of our business across all three facilities. As our team knows, our operations mantra is one plant, now three locations. The third C is culture. Abbey and her team recognize that our people are our most important ingredient and have been working to turn jobs into careers. Last month, we announced our first-ever Heritage Mentorship Inaugural Class. This program is for high-potential associates to match up with a leadership team member over a structured 9-month journey with themes, developmental activities, and enrichment experiences rooted in Mama's core values of commit to craftsmanship, honor heritage, and nurture relationships to develop this leadership and EQ skills. The best part of being in a fast, profitably growing business is that there are always opportunities to step up and lead. This will become our breeding ground for the leaders of Mama's tomorrow. While our team is always prepared for the next acquisition, the Crown deal allowed us to break out our M&A people playbook once again and use these repeatable tools to ensure on day 1, our Crown colleagues feel protected, provided for with a sense of purpose in Grandma's house. Culture remains our secret weapon. The final C being catapult speaks for itself. We saw another quarter of 20-plus percent growth, nearly 10x category growth. The capabilities that Chris is building are incredible and part of me thinks we should change catapult to crush. Most importantly, the sales team is focused on the right things, accelerating the club channel this quarter with new non-protein items at BJ's using the entire white meat chicken breast for paninis at Sam's, chicken meatballs at Costco. We have partnered with our biggest grocery partner to launch four new meals for one, leveraging our new map technology, adding shelf life and reducing labor for Publix. We've also leveraged our map technology to launch new meals for one offline and Amazon Fresh stores as well as online. We're excited to share that we recently received confirmation that Costco would like to partner with us on our first-ever national multi-vendor mailer in Q4, allowing the entire country to buy the meatballs that got this company started. This was not planned for in the budget, but Chris and Skip are ready for it. Our biggest surprise this year has been what we thought would be a quiet launch of a new panini line, boy, was I wrong. Following our IDDBA event this summer, our paninis exploded and are now in over 2,000 doors, anchored by Sheetz, Sam's Club, and Publix, just to name a few. More importantly, they're beating all velocity expectations, and we're already being asked to expand the door count. All of this excitement makes it that much more impressive that our sales team across Crown and Mama's are already talking about how to accelerate this amazing growth. As a reminder, Crown provides $56 million in revenue in retailers that are largely incremental to our base today while providing meaningful new product cross-selling opportunities, both in their customers and ours. This provides us a baseline of nearly $200 million in run rate sales from which to grow, catapulting us even closer to our $1 billion goal. I would be remiss and likely in trouble if I didn't share with my fellow shareholders the incredible work Lauren and her team are doing on the marketing front to capture wins today and strengthen our brand for tomorrow. The stronger our brand, the more we can help our retail partners drive more trips, larger baskets, and more profitable sales. Our success in club this quarter didn't come by chance. The Sam's Club influencer campaign drove awareness to the new panini items we launched. The BJ's digital program drove trial and more importantly, repeat levels above historic numbers. Our Walmart web partnership is seeing double-digit returns on advertising investment, and our Instacart partnership is adding fuel to our Costco beef meatball fire. As I hope you see, we do not leave much to chance, and we don't hope new items succeed. We develop in advance the plans, partnerships, and promotions to allow our items to explode. Lastly, while organic growth in the Crown I integration remains our clear priority, we continue to keep our eyes open for our next potential M&A opportunity. As we made clear with Crown I, we are disciplined in our approach, seeking targets that enhance our category leadership, expand our capabilities, and further scale our operations at a fair price. With our robust balance sheet and operational infrastructure, we are confident in our ability to successfully integrate Crown over the next year and thereafter, any opportunities that may arise. In closing, the strategic and operational improvements made in the quarter, paired with our acquisition of Crown I have created a stronger, more agile and efficient business platform. With significant new customer wins coming online in the second half of the year, successful product expansions, and continued operational improvements now realized, Mama's is exceptionally well positioned for profitable growth and market share gains throughout fiscal '26 and beyond. I remain incredibly proud of our team's execution, energy, and relentless commitment to excellence, and I look forward to sharing our continued progress in the quarters ahead. I'd now like to turn the call over to Anthony Gruber, our Chief Financial Officer, to walk through some key financial details from the second quarter of fiscal '26. Anthony?

Anthony Gruber, CFO

Thank you, Adam. Moving to the financial results. Revenue for the second quarter of fiscal '26 increased 24% to $35.2 million as compared to $28.4 million in the same year ago quarter. The increase was largely attributable to volume gains driven by same customer cross-selling of new items, accelerating velocities of existing items, and new customer door expansion. Trade spend was prudently managed to drive outsized returns and remain 2x larger than prior year. Targeting pricing actions were successfully negotiated in Q1, implemented in Q2, and now more accurately reflect the current macroeconomic conditions. Gross profit increased 28% to $8.8 million or 25% of total revenues in the second quarter of fiscal '26 as compared to $6.9 million or 24% of total revenues in the same year ago quarter. The difference in gross margin was primarily attributable to operational efficiency improvements across the organization, partially offset by continued protein commodity headwinds and increased investment in trade. Operating expenses totaled $7.1 million in the second quarter of fiscal '26 as compared to $5.3 million in the same year ago quarter. As a percentage of sales, operating expenses remained within our targeted range in the fiscal second quarter '26 at 20.1% from 18.6% in the same year ago quarter. Operating expenses in the second quarter benefited from increased operating leverage and ongoing operational efficiency improvements, partially offset by a 75% year-over-year increase in marketing spend, an area of historical underinvestment to help drive repeatable and profitable brand growth. Year-to-date, our high ROI marketing spend has nearly doubled versus prior year. Looking ahead, following the acquisition of Crown I, our revenue run rate stands at approximately $200 million today, and we believe that our normalized gross margin profile, not including major commodity fluctuations, will hover in the low 20% range. This is driven by Crown's lower gross margin profile standing in the mid-teens percentage range, about 10 points short of our historical margin profile at Mama's Creations, and we believe that over the next 12 to 18 months, by instilling our operational discipline into Crown's operations and realizing meaningful procurement and throughput cost savings across the enterprise, we can structurally lift our combined gross margin profile from the low 20% range today towards Mama's historical levels in the mid- to high 20% range. As a reminder, all of this is inclusive of rightsizing our trade promotion investments when our margins are achieved and the funds are available. In Q2, we knew we had commodity headwinds, and we adjusted accordingly. Trade came in at 2.2%, more than 2x higher than prior year. For the first half of the year, trade is running 3x prior year with over $3 million invested in growing our velocities, brands, and retailer partnerships versus less than $1 million last year. We remain vigilant on managing the magnitude and ROI of our trade spend and see it as a critical tool to achieve our ambitions. Net income for the second quarter of fiscal '26 increased 11% to $1.3 million or $0.03 per diluted share as compared to net income of $1.1 million or $0.03 per diluted share in the same year ago quarter. Second quarter net income totaled 3.6% of revenue as compared to 4% in the same year ago quarter. Adjusted EBITDA, a non-GAAP measure, increased 18% to $3.3 million for the second quarter of fiscal '26 as compared to $2.7 million in the same year ago quarter. Cash and cash equivalents as of July 31, 2025, grew to $9.4 million as compared to $7.2 million as of January 31, 2025. The increase in cash and cash equivalents was primarily driven by improved profitability and working capital optimization. As of July 31, 2025, total debt fell to $2.7 million as compared to $6.8 million as of July 31, 2024. As we clearly demonstrated, the robust balance sheet, further supported by a $27.4 million credit facility with M&T Bank proactively prepares us to pursue whatever organic or inorganic growth opportunities may come our way. This completes my prepared comments. Now before we begin our question-and-answer session, I'd like to turn the call back to Adam for some closing remarks. Adam?

Adam Michaels, CEO

Thank you, Anthony. We exited the quarter with a tighter, higher throughput platform, now amplified by Crown's capacity and premium customer access. Our priorities are clear: enhance Crown's margin profile, integrate them quickly and efficiently, and drive aggressive synergy realization and cross-selling by helping them to be brilliant at the basics. This is a playbook not dissimilar from when I first joined Mama's Creations back in late '22 and equally straightforward to implement given their proximity. I could promise you that our entire management team is laser-focused on executing upon this goal. We're approaching escape velocity, well-positioned to compound profitable growth as consumers shift to convenient, high-quality deli prepared foods. With that, operator, let's open the line for questions.

Operator, Operator

Our first question comes from Ryan Meyers with Lake Street Capital Markets.

Ryan Meyers, Analyst

First one for me, just on the gross margins. And I know things will be a little difficult to predict as you guys are integrating the acquisition. But if we think about just the organic Mama's business, do you still feel confident in the gross margin rebound in the second half of the year? Are you maybe seeing ongoing chicken commodity headwinds? Are you planning to pull back on trade spend at all? Just how we should be thinking about the Mama's business organically as itself, the gross margins in the second half of the year?

Adam Michaels, CEO

Yes, absolutely. Thanks, Ryan. Before I begin, I want to thank the team again. Everyone has done an incredible job operating the business. I really appreciate my partner, Anthony, for his support throughout the M&A process. A huge thank you to everybody. Directly to your question, yes, we feel really good. If you look at what's happening with chicken, I think there was a bit of luck involved. When we had this conversation in early June during the last call, I mentioned that we hadn't seen chicken prices decrease. However, literally the day after our earnings call, they started to drop. Chicken is now a full dollar a pound cheaper than it was when I last spoke with you. So I feel very positive about that. Skip and his team are doing an excellent job driving efficiency. Our throughput is impressive, and as we've increased from four to six grills, we're seeing much more throughput, which is really helping us. So from a core business perspective, and with Crown becoming core after this call, we feel good about what's happening with chicken. Beef is increasing a bit, and we need to keep monitoring that, but we have contracts in both areas. Everything seems to be going well. Chris and his team are doing an incredible job. I mentioned earlier the first-ever national Costco buy we secured in Q4, which is significant and completely outside of our budget. So I’m feeling good. We just need to keep doing what we've been doing for the past three years as a team, and I feel great about our progress. Overall, I feel very positive.

Ryan Meyers, Analyst

Got it. That's good to know. And then thinking about the $56 million in revenue that the Crown acquisition will add, is that growing? Is it expected to continue to grow? Is there any kind of SKU rationalization or channel rationalization that you need to do? I know you did some of that when you first joined Mama's, there was some stuff you guys walked away from. But just kind of help us understand where that Crown business is from a revenue standpoint and kind of anything we should be understanding with that.

Adam Michaels, CEO

It's quite interesting. Having been a management consultant, there's a common joke among us about how every CEO we met would claim their company was unique and that past experiences might not apply. After several years in that environment, I must admit, we often went with the same strategies. I can tell you, we've approached this situation differently with the Creative Salads acquisition, and Anthony Morello has played a key role in that. He's still with us, and we've successfully navigated similar circumstances before, so we're confident we can do it again. The new facility is nearby, using the same equipment, which gives us a solid foundation to assess the business. We're currently not making any hasty decisions; Chris and Andy, who leads Crown, will meet with all our customers. Our acquisition was driven by our commitment to serve them better, so we'll engage in discussions to explore how we can provide additional support. From a revenue perspective, I'm optimistic. If there are underperforming SKUs that we’ve retained but are not moving, we will consider discontinuing them. We’ll evaluate our offerings—like whether we need two types of meatloaf or meatballs—and present both options to customers. If they prefer what they already have, that's fine; otherwise, we improve product quality and potentially reduce costs. On the operations side, Skip has consistently been involved, and to enhance efficiency, we've added two more grills. This expansion means we can operate without incurring overtime costs like we did in the past. The new facility is substantial, providing us with significant space for operational efficiencies. Overall, we are excited and patient. I’m not one to rush things. We'll communicate with our customers first. This is a quality-centric business, and together, we will identify ways to support each other across our three locations, which will create valuable synergies.

Operator, Operator

Our next question comes from the line of Eric Des Lauriers with Craig-Hallum Capital Group.

Eric Des Lauriers, Analyst

Congrats on another very strong quarter here. First question for me on the Costco news. Congrats there as well. I was wondering if you could just kind of recap the progress you've made penetrating Costco over the past 2 years and then expand on the importance of the MVM here. Do you see this as a step closer towards everyday product status? Or is this kind of a nice to have with Costco? And how impactful could everyday product status be at Costco?

Adam Michaels, CEO

Thank you, Eric. I'm really proud of the recognition Scott receives from our sales team. When I first joined, Scott and I were working with around $570,000 in sales, focusing on one product in one region. Last year, we expanded into all eight regions at different times and achieved approximately $10 million in sales. In the first quarter alone, we reached that $10 million mark. This process has been evolutionary; we started with one successful item in one region, which then led to more regions, and eventually to a national presence. Our success led to a digital MVM in Q1, and we are now moving towards a national MVM and a print MVM. We expect that every Costco member in America will see Mama Mancini's meatballs in their holiday brochure, a strategic move by Scott. Achieving a national buy during the holidays is tremendous. If we maintain our quality and service, the next goal is to have an everyday item in Costco. Previously, what we accomplished in a year we have now achieved in a quarter, and the potential for a national MVM is exciting. If we have an everyday item, the impact could be significant. With Costco as a strong partner, we've seen continuous growth over the last three years.

Eric Des Lauriers, Analyst

That's helpful. I appreciate that. Yes, there's been significant progress over the past two years, and I'm looking forward to what lies ahead. Shifting focus to Crown, you've pointed out their MAP capabilities, and you've also emphasized your own in your prepared remarks. Can you help clarify the differences between Crown's MAP capabilities and yours? What advantages do they bring? Is it merely a matter of scale, or are there other distinctions in their capabilities compared to yours? It would be helpful if you could elaborate on that.

Adam Michaels, CEO

Yes, there are a couple of things, and I am really excited. I've been privately enthusiastic over the past few months during the acquisition. I had a chance to work with Andy during the M&A process, although I couldn't speak to everyone on the line daily. However, I started to reach out last Sunday. What excites me is the talent and the people we're acquiring. We're focused on people and capabilities. The new team members are really enthusiastic, and I believe they feel like they've found their home at Sysco, which is a phenomenal company. We can only hope to reach their level of expertise as a distributor. The Crown business was their only manufacturing aspect, so returning to the core of their business is something they're eager about. Regarding equipment, they actually have more than we do, which is great as it provides us with additional space. They also have more experience. While we've had our MAP technology for several months, they've been utilizing it for years. It's essential to remember that this collaboration is not about us dictating what to do; it's about them sharing their knowledge with us. I am already noticing movement among our three plants, and I encourage a lot of learning exchange. It's not just their equipment and capacity; they also have better processes in some areas, and I want to absorb that knowledge. For example, Publix is performing well with four new items featuring our MAP technology, which benefits them by reducing swell, making them more inclined to purchase from us. We also introduced two new paninis there. Things are progressing nicely, and Amazon Fresh is starting with one of our MAP items as well. Overall, I feel good knowing we have additional capacity if demand increases, and Chris and his team are handling things effectively. I hope this information is helpful.

Eric Des Lauriers, Analyst

Yes. No, that was very helpful. And then just last one for me. Anthony, you touched on this in your prepared remarks, but just wondering if you could expand how your trade promotion plans or targets this year might change with Crown expected to weigh on gross margins for the next 4 to 6 quarters.

Anthony Gruber, CFO

We always monitor our gross margin in conjunction with our marketing expenditures. If we encounter a quarter where commodity prices rise, we'll reduce our marketing spend to protect our margin. It's a balancing act, continuously assessing market conditions, input costs, and customer growth strategies. We consider margin figures and adjust our marketing spend accordingly. When we see higher margins than expected, we invest some of that to increase top-line performance through marketing initiatives. Currently, our margins are doing well, especially with chicken prices significantly lower than before, providing us with new opportunities. The MVM will represent one such opportunity.

Adam Michaels, CEO

Yes, I concur with what Anthony mentioned, and I want to add one more point regarding Crown. Crown primarily operates as a private label business, resulting in a significantly lower trade rate. This means that when we analyze the revenue, we won't have to invest as much with some customers who prefer a fixed price. We'll see how this develops. Additionally, it's important to note that Chris and his team are adept at adjusting our strategies fluidly. They work closely with Anthony on a weekly basis to review the numbers, allowing us to make necessary adjustments as needed. This collaboration provides a very flexible approach for both Anthony and Chris.

Eric Des Lauriers, Analyst

That's very helpful. I would like to explore that further. Previously, the target was to achieve gross margins in the high 20% range. If those margins exceed that, you would increase trade promotions. Should we assume that the high 20%s are now adjusted to the low 20%s, for instance, if you're looking at an upcoming quarter with a gross margin around 22% or perhaps even lower than before? Is it possible that during such a quarter, when you typically wouldn't invest heavily in trade promotion, we could actually see an increase in trade promotions due to this new normal, compared to what Mama's stand-alone gross margin would suggest?

Adam Michaels, CEO

I believe that over the years we've spent together, we need to evaluate how the business evolves. We've demonstrated our ability to adjust as needed. I want to take my time with this integration because rushing could lead to setbacks. I want to monitor our progress patiently. As Anthony mentioned, with the decline in chicken prices, we find ourselves in a better position than we were in the second quarter. It’s important to remember that Q2 began in May, when chicken prices peaked. On the day of our earnings call, chicken was around $2.83 a pound, and now it's approximately $1.70 a pound. We are committed for the long term and will stay patient to see how things develop. Our core business will support the Crown business in reaching higher numbers. Reflecting on our experience with Creative Salads, when we started three years ago, its performance was below the Mama's average. Within a year, we improved it to above the Mama's average. The team behind this success remains the same, with Anthony, myself, Lauren, and now Skip and Chris. I believe we can achieve even better results with the Crown business than we did with the Creative Salads acquisition, especially in terms of gross margin improvement.

Operator, Operator

Our next question comes from the line of George Kelly with ROTH Capital Partners.

George Kelly, Analyst

To start, I was curious if you could be more specific just on the sort of potential revenue capacity out of Crown's manufacturing facility? And is there a lot of CapEx that you anticipate investing to get you up to whatever that potential capacity number is?

Adam Michaels, CEO

Yes. I'll address the second question first because it's quite exciting. This is the most recently enhanced business we've expanded. Sysco deserves credit for investing about $6 million into this facility over the last couple of years, making it one of the most automated and advanced temperature-controlled facilities, and it's also the largest. We really don't need to invest much into this facility, which is a great aspect of this acquisition. The net book value of the fixed assets we've acquired is impressive, and aside from our usual maintenance, we don't anticipate any significant capital expenditures for the Crown business. In fact, we might move some underutilized resources to Farmingdale and East Rutherford, which means we won't need to purchase something new. From a systems perspective, it's essentially a net negative capital expenditure. Regarding the revenue potential, remember the Creative Salads acquisition. Initially, we saw some decline due to their legacy street business, similar to what Creative Salads faced, but this approach will help us increase efficiency with our trucking routes. While we will engage in collaborative discussions with customers about costs and margins, it's possible that we may decide not to continue some business, which could lead to a temporary decline in revenue before it rebounds. Look at how Creative Salads initially dipped but then tripled in revenue. I genuinely believe we can double our business across the three facilities from our current levels. I was speaking to Skip earlier, hoping for a small treat for securing an additional 42,000 square feet, and while I didn’t get the casserole I wanted, I feel significantly more confident operationally now that we have this facility and the added space.

George Kelly, Analyst

Okay. Excellent. You mentioned that you believe you could double your revenue productivity. With the three properties, you think you could increase your current $200 million business to $400 million?

Adam Michaels, CEO

Yes, it's not just about the physical space and the added capacity; it's also about our efficiency. Crown operates two shifts but doesn't work weekends. With the two additional grills in Farmingdale, we're not working weekends either, which gives us more space and improves our efficiency. We increased our throughput in Farmingdale not just by adding grills but by working more efficiently. I'm feeling very optimistic. I often think of a little game between Skip and Chris, where Skip should be reaching out to Chris about the excess capacity available, while Chris should be offering to slow down if needed. I want them to engage like players in a match. Overall, I'm very pleased with our current capacity.

George Kelly, Analyst

That's great. I have one more question. Congratulations on the recent news regarding Costco and the Q4 promotion; it seems significant. Could you share some insights about your other major club customer, Sam's? I believe you mentioned in the press release that the panini has been performing well. Could you provide more details on that SKU's performance? What are your expectations for the second half? Are there any additional products coming or anything else you can highlight for the latter part of the year?

Adam Michaels, CEO

Yes, I really like it. It's actually one of my favorite products, the chicken pesto panini. It's performing well, and they have increased the number of locations. There was a rotation during the summer, and they're continuing to place orders. I am looking forward to discussing with the teams how we can do more. These paninis are definitely gaining traction. I am very eager to keep collaborating with Sam's on the panini. We introduced two paninis at Publix and three at Sheetz, and they are all doing exceptionally well. I'm also pleased that Crown has additional space. Our approach is flexible; we can produce paninis in various locations rather than being limited to one. So, things are looking good for the paninis and Sam's. The chicken and the stuffed pepper mix are performing well too, and I truly value our long-standing partnership with Sam's. It’s fantastic.

Operator, Operator

Our next question comes from the line of Nick Sherwood with Maxim LLC.

Nick Sherwood, Analyst

My first question is, can you expand a little bit more on the success you had at Walmart in the quarter from the marketing perspective and sort of how that relationship has evolved and where you see that going through the rest of the year?

Adam Michaels, CEO

Yes. Another great partnership. Last year, we had no sales at this time. This development occurred towards the end in Q4. Our four-count chicken product is performing exceptionally well. I believe when we started, we had around 200 to 400 stores, and now we're up to almost 1,800 or 2,000. It's not just about the individual item; Chris, Scott, and the team visited about a month ago. I appreciate the collaborations we build. It's not merely transactional; it's about how we can work together, identify new products, and understand consumer needs. I find this process very rewarding. I truly believe there's significant momentum because of our consumers—our 330 million friends across America. They're facing challenges, and many are spending more at club and mass retailers. Our teams aim to provide the best products and promotions to meet consumers where they are. Overall, we have a strong partnership with Walmart.

Nick Sherwood, Analyst

Appreciate the detail. And then kind of switching gears, Sheetz is your first convenience channel customer. Can you kind of talk about the experience and expanding in that channel and where you see yourself growing more? Is that a near-term priority? Or are you more focused on club and mass and then maybe really getting into convenience as something further in the future?

Adam Michaels, CEO

Yes, if we aim to be the top choice in deli, we want to succeed everywhere. This is a key focus for us. There are various convenience channels. When we started this about a year ago, our first step was to get into all the distributors, as that's how you access the convenience channel. It's a bit of a chicken or egg scenario. Distributors won't work with you unless you have a C-store customer, and C-stores won't buy from you unless you have distributors who can sell there. Initially, this posed significant challenges. The good news is that we are now partnered with all distributors, such as Sysco, Dot, and KeHE. This development simplifies things. Every day, our team, including Tony, is working to get us into different C-store banners. We want to go where consumers are going, and while it can be challenging, the convenience channel is about convenience rather than low pricing. Our aim is to cater to the needs of every consumer, regardless of their location. We plan to develop different products, potentially at lower price points, to serve specific channels. We're currently testing some new products that I'm excited about, which have attracted interest from several C-store banners.

Nick Sherwood, Analyst

Okay. Perfect. And then my final question is, how does this acquisition affect any of the planned improvements to the East Rutherford facility?

Adam Michaels, CEO

We're continuing to develop our East Rutherford facility and have already made significant investments there. Last time, we more than doubled our space in East Rutherford, and that plan remains unchanged. A specific example of what is changing is our investment in a new shredder for pulled and shredded chicken. It's a significant purchase, but fortunately, we found that our Bay Shore facility has an extra one we can use. Recently, we successfully transported one of our popular products, cheese stuffed chicken meatballs, across five regions at Costco, which requires a special stuffing machine. Eric, who manages our East Rutherford facility, reached out to Ray at Farmingdale to borrow one of his stuffing machines, which was readily available. This collaboration allows us to share equipment across our different locations, meaning that instead of purchasing additional machines for East Rutherford, we can utilize what we have at hand. Thus, while we are still investing in East Rutherford, our overall spending will be less than what we initially planned, thanks to our ability to source equipment from other locations.

Operator, Operator

And we have reached the end of the question-and-answer session. I would like to turn the floor back to CEO, Adam Michaels, for closing remarks.

Adam Michaels, CEO

Thank you for joining us today. Our team is beginning to find its momentum. The sales and marketing teams have the necessary products and relationships to boost our business. The operations team possesses the capacity and expertise to achieve significant efficiencies across our network. The finance team continues to demonstrate effective balance sheet management and has the capital markets skills required to support future investments. Most importantly, our people operations team is successfully attracting new talent and developing existing employees to foster the Grandma Quality culture essential for our success. We are currently integrating our new Crown family with speed and discipline, focusing on growth while maintaining our margin goals and utilizing additional capacity and premium customer access to ensure profitability. Looking forward, we are well-positioned to gain market share as we implement our one-stop shop deli solutions strategy. I appreciate your ongoing support. Thank you.

Operator, Operator

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.