Further, we must accurately forecast demand for our products, potentially over an extended period of time, in order to ensure we have adequate available manufacturing and production capacity. Our forecasts, however, will be based on multiple assumptions that may prove to be inaccurate. If we underestimate our demand, it would limit our ability to plan for and obtain adequate manufacturing capacity (whether our own manufacturing capacity or co-manufacturing capacity) in order to meet the actual demand for our products, which could result in the loss of sales and harm to our reputation. If we overestimate our demand and overbuild our capacity, we may have significantly underutilized assets and experience higher costs and reduced operating margins. If we do not accurately align our manufacturing capacity and production capabilities with our current or future demand, or if we experience disruptions or delays in scaling our manufacturing facilities, our business, operating results, and financial condition may be materially adversely affected. We believe there are a limited number of high-quality co-manufacturers that can meet our pricing requirements and quality control standards, and as we seek to obtain additional or alternative co-manufacturing arrangements in the future, there can be no assurance that we would be able to do so on satisfactory terms, in a timely manner, or at all. Any inability to replace one or more co-manufacturers, could delay or postpone the production of our products, or reduce our overall production capacity, either of which could have a material adverse effect on our business, operating results, and financial condition. As our business grows, we may not be able to obtain ingredients in sufficient quantities to meet the demand for our products. Our ability to meet demand for our products and increase our net sales depends in part on our ability to arrange for the purchase of sufficient quantities of ingredients that meet our quality control and pricing requirements. We do not have long-term contracts with our suppliers, any of which could discontinue their relationship with us or seek to modify their commercial terms with us. Further, certain of the ingredients used in our products, including poultry and dairy products, are considered food commodities that are subject to fluctuations in pricing and availability. We are not assured of continued supply or current pricing of ingredients. Events that adversely affect our suppliers could impair our ability to obtain the ingredients necessary to meet demand. Moreover, the raw materials and other supplies, including ingredients, agricultural commodities, energy, fuel, packaging materials, transportation, labor and other supply chain inputs that we use for the production and distribution of our products, are subject to price volatility and fluctuations in availability caused by many factors. Such events and factors could include facilities disruptions; food disease; contamination; financial hardships; labor shortages, strikes or work stoppages; natural disasters or other catastrophic occurrences; fluctuations in supply and demand; supplier capacity constraints; inflation; weather conditions; health epidemics, pandemics or other contagious outbreaks; changes in or the enactment of new laws and regulations; governmental actions or controls; transport capacity constraints; cybersecurity incidents or other disruptions; political uncertainties; acts of terrorism or violence; or governmental instability. We continuously seek alternative sources of ingredients to use in our products, but we may not be successful in these efforts. If we need to replace an existing supplier, there can be no assurance that supplies of ingredients will be available when required on acceptable terms, or at all, or that a new supplier would allocate sufficient capacity to us in order to meet our requirements, fill our orders in a timely manner, or meet our quality control standards. If we are unable to manage our supply chain effectively and ensure that our products are available to meet demand, our operating costs could increase and our net sales could decrease, which would have a material adverse impact on our operating results. Many of our raw materials and supplies are purchased in the open market and the prices we pay for such items are subject to fluctuation. During 2022 we experienced inflationary pressures on certain commodities we utilize in the production of our products. Costs stabilized towards the end of 2022, however, certain of these cost pressures may return in 2023, as, for example, there has been another recent outbreak in avian flu which could potentially negatively impact the cost of poultry. We rely on our suppliers to meet our quality standards and to supply ingredients and other products in a timely and safe manner, and in accordance with our product specifications. We have developed and implemented a 15
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