Risk Factors

Ingredient Prices

Changes in the market price of milk or cream or interruption in our supply of milk could materially and adversely affect our results of operations, financial condition, and business prospects. Raw milk is one of the primary raw materials we use to produce our products, and as we pursue our growth strategy we expect our raw milk demands to continue to grow. The continuity of raw milk supply is of critical importance to our business and the market price for raw milk significantly affects our operating results. The dairy industry continues to experience periodic imbalances between supply and demand for raw milk. In general, the pricing of raw milk is affected by a relative inelasticity of supply and demand, often resulting in small changes in production or demand having a large effect on prices. Changes in the price of milk have in the past, and may in the future, have a material adverse effect on our business, prospects, results of operations, and financial condition.

Unsuccessful Efforts

Our success depends, in part, on our ability to anticipate the tastes, preferences, and dietary habits of consumers and to offer products that appeal to their needs and preferences on a timely and affordable basis. It is difficult to successfully predict the products our customers will demand. The development of new products requires significant investment in research and development, testing, formulation, and potential manufacturing process changes and enhancements. The product innovation process can be long, and costly and its outcome can be uncertain. Further, our new products may not achieve market acceptance, grow revenue at expected growth rates, or become profitable. Even if we are successful in awaiting consumer preferences, our ability to adequately react to and address those preferences will in part depend on our continued ability to develop and introduce innovative, high-quality products and, in some cases, acquire or develop the intellectual property necessary to develop new products or improve our existing products. The long-term success of these products or any we may begin in the future is not guaranteed or known at this time.

Dependent on Single Product Category

Our future results will depend on our ability to continue to drive revenue growth in the yogurt category. Historically, we have derived a substantial portion of our revenue and profitability from sales of our Greek yogurt products, and we expect to continue to derive significant revenue from sales of such products for the foreseeable future. The success of Greek yogurt products has been supported by shifting consumer preferences and growing demand for natural, low-fat, high-protein food products. The U.S. yogurt category has grown in six of the last seven quarters and consumer food spending for at-home consumption has grown at a 3.1% CAGR since 2019.

The Greek yogurt segment has led this growth, growing from 4.4% to 46.3% market share over that same time period, with $3.3 billion in total Nielsen reported sales, which represents a 24% CAGR. A decline in the overall yogurt and Greek yogurt markets could have a material adverse effect on our profitability, results of operations, and financial condition. Further, a decline in the price of these products, whether due to competition or otherwise, or our inability to drive revenue growth in this product category, would harm our business and operating results more seriously than it would if we derived significant revenue from a variety of categories.