WEBVTT - Cava CEO Brett Schulman Talks Cyclospora Outbreak

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<v Speaker 1>Let's take a look at shares of Kava. They're up

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<v Speaker 1>after reporting a faster than expected rise in sales in

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<v Speaker 1>the most recent quarter, salmon beta chips offsetting amids July

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<v Speaker 1>slump tide to consumer concerns around leafy greens. Joining us

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<v Speaker 1>right now is the CEO of Kava, Bretschulman, live here

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<v Speaker 1>in studio. Too great to see you here. Nine percent

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<v Speaker 1>comp growth, That was great, That was above estimates. Talk

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<v Speaker 1>to me a little bit about the forecasts. You maintained

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<v Speaker 1>the forecast. You didn't cut it, but you didn't raise

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<v Speaker 1>it either. Why not?

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<v Speaker 2>We want to be prudent with our guidance and take

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<v Speaker 2>into account what we noted to be the impact of

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<v Speaker 2>some of the broader concerns around food safety issues, even

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<v Speaker 2>though our supply chain or ingredients have not been connected

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<v Speaker 2>to the issues, as well as some of the inflationary

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<v Speaker 2>pressures that may persist throughout the year, and then certainly

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<v Speaker 2>the volatile geopolitical and macroeconomic environment. So we wanted to

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<v Speaker 2>be prudent with that guidance, but very pleased with the

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<v Speaker 2>strength we saw in the quarter.

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<v Speaker 1>Just to be clear, there's been no link at all

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<v Speaker 1>to this outbreak to kava, But I do have to

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<v Speaker 1>ask you, as a restaurant CEO, I'm sure you had

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<v Speaker 1>to take a close look at your slid supply chain,

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<v Speaker 1>your food quality to make sure that there was no concern.

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<v Speaker 1>You're confident right now that your supply chain is clean,

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<v Speaker 1>none of your customers have gotten sick, and that going

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<v Speaker 1>forward you can sell with confidence.

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<v Speaker 2>That's correct. No, there has been no connection to our

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<v Speaker 2>supply chain. We have not been contacted by any public

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<v Speaker 2>health officials, but we are closely monitoring the situation. We

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<v Speaker 2>have an external advisory committee of industry leading experts because

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<v Speaker 2>food safety is paramount to what we do. It's foundational

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<v Speaker 2>to our guest relationship, and we want to make sure

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<v Speaker 2>that our guests have the confidence that we are committed

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<v Speaker 2>to having a food safe environment.

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<v Speaker 1>Just one other quick question on that. Have you been

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<v Speaker 1>in contact at all with any health officials, either at

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<v Speaker 1>the federal level or at the state level.

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<v Speaker 2>No. No, we have not been contact nor have we been involved.

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<v Speaker 2>And again, we have not had any connection within our

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<v Speaker 2>supply chain to any ingredients or farms or facilities that

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<v Speaker 2>were impacted by the recent issues.

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<v Speaker 3>You're also opening restaurants at a pretty aggressive pace I

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<v Speaker 3>thank seventeen this quarter in around nearly five hundred. How

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<v Speaker 3>much of this is how much of this growth is

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<v Speaker 3>kava specific, or how much of this is really maybe

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<v Speaker 3>consumers trading down restaurants for more fast, casual meals like kava.

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<v Speaker 2>Yeah, we see people trading into kava from full service restaurants,

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<v Speaker 2>from other limited service restaurants, or as an alternative to

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<v Speaker 2>the grocery store. Our food is very unique, differentiated, not

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<v Speaker 2>easily recreated at home, and I think people are shifting

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<v Speaker 2>their diets more and more to a Mediterranean style diet.

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<v Speaker 2>It's a number one ranked diet for nine years running

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<v Speaker 2>and delivering on all the needs that the modern consumer

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<v Speaker 2>is looking for. Protein dense, fiber rich, nutrient dense cuisine

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<v Speaker 2>that is flavorful but also helpful for you.

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<v Speaker 1>Well, I'm curious that I was looking through the conference

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<v Speaker 1>called transcript and this GLP one issue was addressed az

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<v Speaker 1>that bic here, and you talked about this idea that

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<v Speaker 1>people are actively reshaping their orders, doubling up protein, adults

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<v Speaker 1>are ordering kid size portions, etc.

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<v Speaker 3>Etc.

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<v Speaker 1>So give me a sense as to how you're adapting

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<v Speaker 1>to that. Are you anticipating that these types of trends

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<v Speaker 1>are indeed long term, structural and not just some fad

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<v Speaker 1>that we'll move away from.

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<v Speaker 2>A couple of We think glps are kind of just

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<v Speaker 2>one part of this larger shift to people more interested

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<v Speaker 2>in longevity, in health and wellness, but also bolder, more

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<v Speaker 2>interesting flavors, and that's where our food sits at the

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<v Speaker 2>intersection of So we feel like, whether it's GLP or

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<v Speaker 2>some of these other secular trends, it's moving more people

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<v Speaker 2>to our style of eating.

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<v Speaker 3>And do you also called out which is interesting to me,

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<v Speaker 3>the pomegranate glaze sound one. Is that part of combas

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<v Speaker 3>News strategy introducing more higher end items and hopefully driving

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<v Speaker 3>sales when it comes to that, because even the extra

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<v Speaker 3>peda chips, I don't think I've ever paid extra for

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<v Speaker 3>apeda chip, but it seems like people are.

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<v Speaker 2>Yeah, well, we are seeing people opt into our premium

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<v Speaker 2>proteins and attachment items. And salmon was really to have

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<v Speaker 2>our first seafood item on the menu. Seafood is a

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<v Speaker 2>core aspect of the Mediterranean diet and we want to

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<v Speaker 2>make it available to our guests. So very excited to

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<v Speaker 2>have that on the menu and the reception that it's

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<v Speaker 2>received from our guests.

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<v Speaker 3>Another interesting thing digital sales right now, thirty nine percent

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<v Speaker 3>of your revenue of ordering, and you know your order

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<v Speaker 3>is like something twenty dollars, the delivery fee something like

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<v Speaker 3>ten dollars. Is that becoming the new trend now? And

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<v Speaker 3>is that what you see will be the next leg

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<v Speaker 3>to push combas growth further.

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<v Speaker 2>We see growth in all of our channels, and we

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<v Speaker 2>don't think it's an either or, We think it's an end.

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<v Speaker 2>We want to have great digital channels and great physical channels.

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<v Speaker 2>That's why we've invested recently in Project Soul, which creates

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<v Speaker 2>even warmer environments and better aesthetics in our dining room.

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<v Speaker 2>So if you do choose to have a meal, you

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<v Speaker 2>feel like you can have it in our dining room

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<v Speaker 2>and be comfortable, or if you're running errands, you can

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<v Speaker 2>use the app or even have it delivered to you.

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<v Speaker 2>Because we know that most of our guests, depending on

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<v Speaker 2>the day of the week or where they are in

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<v Speaker 2>the world and their need, they cross channel traffic us.

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<v Speaker 2>So we want to be equally as relevant across those

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<v Speaker 2>different channels.

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<v Speaker 1>So talk to me about your marketing strategy, because we

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<v Speaker 1>were talking earlier about you know, the GLP ones and

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<v Speaker 1>the eating healthy. My first thought was, Okay, how are

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<v Speaker 1>you selling that to the public, But I remember looking

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<v Speaker 1>at your marketing at least what's in the filing there.

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<v Speaker 1>You don't spend a whole lot on advertising a market,

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<v Speaker 1>at least not relative to some of the other fast

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<v Speaker 1>casual th food chains.

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<v Speaker 2>We've been very able to be very efficient with our marketing.

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<v Speaker 2>We've seen great word of mouth, a great user generated

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<v Speaker 2>content on social media, and our community day program. When

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<v Speaker 2>we open a new restaurant in every market that we

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<v Speaker 2>open and we invite our new neighbors to our table

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<v Speaker 2>for a free meal, we suggest donations. We'll match those donations.

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<v Speaker 2>They're not required, but if you do donate, we'll match it,

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<v Speaker 2>and that goes to a local filmthropic food partner addressing

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<v Speaker 2>food and security in the market.

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<v Speaker 1>But do you think that that that might have to change?

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<v Speaker 1>I mean, as this company and matures and you start

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<v Speaker 1>to reach saturation points at certain markets, I mean, there

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<v Speaker 1>is this idea of making sure people are always aware

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<v Speaker 1>that you're there because there are a lot of options

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<v Speaker 1>out there.

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<v Speaker 2>Well, there's always opportunities for us to continue to grow

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<v Speaker 2>our brand awareness beyond just opening restaurants and some of

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<v Speaker 2>the activities we do today. And an example of that

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<v Speaker 2>is we just did our Mediterranean Summer Supper series, so

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<v Speaker 2>we did three different cities. We brought people to a

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<v Speaker 2>communal table together to celebrate food, to celebrate meeting one

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<v Speaker 2>another in a human connection form. So we're big about

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<v Speaker 2>human connection in our brand and it's part of the

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<v Speaker 2>Mediterranean Way, the Madterranean hospitality of the Madterranean lifestyle, not

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<v Speaker 2>just the food, but the hospitality and the human connection.

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<v Speaker 2>So you'll see more in real life marketing activities like

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<v Speaker 2>that that help drive that human connection and.

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<v Speaker 3>Your restaurant level margin fill some sixty basis points. I mean,

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<v Speaker 3>we know that you've got strong sales growth, but costs

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<v Speaker 3>are not standing stale. I mean, inflation is all we

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<v Speaker 3>talk about. How much more can you absorb before you

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<v Speaker 3>have to raise prices again.

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<v Speaker 2>Well, that's been part of our long term strategy where

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<v Speaker 2>we've wanted to underprice inflation. This year was no different.

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<v Speaker 2>We took about a one point five percent menu price

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<v Speaker 2>adjustment in January with no plans to take further at

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<v Speaker 2>price increase where inflation is running north of three percent

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<v Speaker 2>this year. So we've in recent years under priced CPI

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<v Speaker 2>by over ten percent, taken less than half the price

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<v Speaker 2>increase of the average restaurant company. Really to invest in

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<v Speaker 2>our guests and help grow that value proposition each and

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<v Speaker 2>every year, that's making us giving us the ability to

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<v Speaker 2>welcome more people to our table.

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<v Speaker 1>All right, Brett, always great to have you another great quarter,

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<v Speaker 1>and we're seeing to catch up with you again and

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<v Speaker 1>see how things are going, particularly with this marketing strateg

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<v Speaker 1>I'm actually very fascinated by this. Uh did you do

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<v Speaker 1>you watch the prediction markets, by the way, because you

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<v Speaker 1>know you were all over that, Like what was he

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<v Speaker 1>going to say on the call? What do you say

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<v Speaker 1>this word? What do you say that someone was talking

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<v Speaker 1>about manifesting its manifesting something in San Francisco or something

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<v Speaker 1>or another. You're like, you're like in the zeitgeist.

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<v Speaker 2>We did announce we are going to open in the

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<v Speaker 2>Bay Area next year, so you know that.

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<v Speaker 3>All right?

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<v Speaker 1>Well, someone somebody prayed above and they got their wish. Brett,

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<v Speaker 1>always a pleasure. Brett Shulman there, the CEO over at

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<v Speaker 1>Comma