Q4 2020 General Mills Inc Earnings Call - Live Question And Answer Session

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Greetings and welcome to the fourth quarter fiscal 2020 <unk> earnings call.

The presentation, all participants, but not listen only mode.

Of course will conduct a question answer session.

At that time, maybe have a question expressed a 1.4 on your telephone if any time to coffers to reach an operator, if you press the star somebody to zero.

So my notes coffee it really quite a Wednesday July 1st 2020.

No I would like to turn the call sort to Mr., Jeff Smith. Please go ahead.

Thank you Donnie and good morning, everyone. Thanks for joining us for acuity session on our fourth quarter results and full year results. This morning.

I hope everyone had time to review our press release listen to our prepared remarks, and do our presentation materials, which are available on our investor relations. So.

It's also important to note that are in our Q and a session. This morning, we may make forward looking statements that are based on management's current views and assumptions, including facts and assumptions related to the impact of the cobot 19 pandemic on our fiscal 2001 outlook.

Please refer to this mornings press release for factors that could impact forward looking statements and for reconciliations of non-GAAP information, which may be discussed on todays call.

I'm here virtually with Jeff Harmening, our chairman and CEO Kofi Bruce our CFO and John Nuti Group President of North America retail.

We are holding this call from different locations. So hopefully our technology cooperates and everything goes smoothly with that so let's go ahead and get to the first question. Tommy can you. Please get us started.

Absolutely. Thank you and once again before we start as a reminder provides us or for question and just a one fell by the far on your telephone and you hear three Tom product technology request. If a question has been asked her to draw. Your restoration is it's a one followed by the three.

And we'll proceed with our first question on the line from the line of Andrew Lazard with Barclays Go right ahead.

Good morning, everybody and thanks very much for all the the change in the earnings release format. How this morning very helpful.

Morning, Andrew warning Andrew.

Maybe to start a I was hoping to focus on on sort of the underlying business momentum if I could and I know it's.

It's a little harder to get at now obviously, given everything that's going on but I think kind of third quarter call. The general Mills I had said that you know excluding the pandemic impact it would be at the low end of its full year organic sales growth range of 1% to 2%.

I think that.

Buffalo coming into the base adds about a point, so I guess underlying business trends at least as of three Q roughly call. It flattish your expectation for the year.

My question was again, excluding the pandemic.

I guess would would general mills have been considering.

Fiscal 21 to kind of still be somewhat of an incremental reinvestment here to really sure up sort of organic growth and build on the recent improvements you've seen in categories like snack bars in yogurt and things like that.

Yes, Andrew your your math is right on that and you know as I've said before where we try to stay in the middle of boat and one of the ways. We do that is by continuing to reinvest in our business and you see the results in the in the fourth quarter included a pretty significant step up on our marketing spending and actually we thank you know our strength at the beginning of June, especially in North America retail.

Sales due to the second we are spending money on marketing because our promotion levels are actually down in June and our growth is still double digits and so we believe in and investment in marketing and you sell in the fourth quarter and you'll see that again in fiscal 21, you'll also see investments for us and capabilities, particularly in the <unk>, particularly on the data and analytic side to drive Bull.

Our sales growth of things like ecommerce and strategic revenue management as well as cost savings projects like a procurement and so.

Whether cobot or not we had planned to to reinvest some of the earnings growth back into 'em sustained top line sales growth and that's our plan going into next year currently.

And then I guess lastly, it's a it's really on inventory I, specifically at the consumer pantry level I think in today's release, you mentioned that that there's the potential for sort of pantry inventory drawdowns moving forward.

And I'm curious if if this is simply a pet food comment, which I think would make it very but it makes sense or a broader portfolio comment.

Because to me because it seems that consumers have been both consuming and replenishing you know a lot of your center store products, rather than it's been stocking up so I'm just curious if if that's something that you're already starting to see or anticipate in fiscal 21 or more of a broader just pay at some point just given how strong.

Shipments have been we should just keep an eye out for this if you get my what I'm asking.

Yeah, So Andrew let me, let me answer broadly and then specific then pet and then I'll have John Nuti answer more specifically on North America retail broadly as you can see in the strengthen the Nielsen data on the human food side month to month to month, while there certainly was a stock up in March and you can see that in the data I'm consumers there are clearly still buying it and eating through.

The this stock do they have on hand and so.

That is consistent with what we thought would happen at the beginning of the quarter. When we when we saw the stock up and in fact that happened throughout the quarter and again. It continues into June was some double digit growth on a human food side of the business on pet food, we saw something different and a again consistent with what we expected which is given that peds don't eat a tremendous amount at restaurants we.

Thought that there would be it when we saw the stock up in March people are asking US is just because there's you know there is a lot of dogs coming out of shelters and answer is no people are just stocking up and we expect that to to reverse in April and May and largely it has reversed in April and May there, maybe a little bit more to unwind as we begin our new fiscal year in that pet food category.

At a lot of that is on wound already and so what we see in pet is different than what we've seen in the human food side, which both of which we expected ingenuity anything specific you'd like to add on that.

Yes, thanks, and good morning answers, so maybe I'll touch on consumer inventory levels once you levels.

Your question on many People's minds to or just customer inventory levels, maybe I'll go there as well so from a consumer standpoint at least in North America. We believe that the majority of the Chronicle, we've moved to consumers has beaten soon.

We do believe that consumers are keeping slightly higher levels of inventory in upstream, but would you expect us to continue obviously as it's a really dynamic environment looks out sometime external.

Ranging across the country.

Customer standpoint, we did see a drawdown in customer inventories over Q4, I guess just to quantify it. So for Q4 non organic growth was 28% our movement was higher than in the U.S. It was up 37% in Canada that was up 20, I really that difference was all driven by retailers pulling on inventories obviously.

Trying to keep.

Participating on the shelf.

I would expect that to come back at some point Swissqual 21.

We don't have a great idea of ones what extent it will come back, but definitely we sold retail was pulled on inventories.

During Q4.

Great. Thanks, so much for that everybody.

Thank you.

Next question on the line from the line of kind of Goldman with JP Morgan I'd have a question.

Hi, Good morning, Thank you and I second Andrew's comments I do like this format. So hopefully we'll keep it going ahead.

I did want to ask two questions. If I can first you mentioned some headwinds to your operating margin in fiscal 2001, you talked about some higher input costs supply chain costs.

Spending on brands and capabilities and cobot related costs.

Is it possible to sort of bucket or rank order of you just do we kind of get a sense of which are going to be the bigger headwinds, which are going to be maybe some of the smaller ones.

Kofi do you want to you when I feel that one.

Absolutely. So I think a great question and good morning.

As you as you look at the as we would reference.

First is where we're coming out of our Q4 or we did see higher operating costs as well as covert related costs.

The split between those two is roughly a we had about 100 billion and higher sort of cold and related costs I would say the split between our two two curves one third with two thirds being comprised of the operating costs things such as accruing external supply chain.

Trucking premiums.

And then on the other side the wellness cost everything from my personal protective equipment wellness policy. So we would expect that to be a continued headwind if we step and map 21 as a portion of those costs will continue.

Recently, we can't quantify that and because a lot of that will be tied to the b the pandemic.

The pace of the virus spread.

And obviously the pace of demand to the extent that that the operating costs are are directly tied to our ability to source product.

So let's get your question.

Yeah, that's perfect I'll follow up with more details later, but that's helpful.

A quick follow up.

We've heard some rumblings in the in the industry that maybe some retailers will get a little bit more aggressive on pricing in the back half of the calendar year just to help out some of the consumer that may start to struggle more as unemployment last longer and perhaps some of the stimulus checks a fade.

And I'm just curious if you're hearing anything similar it doesn't necessarily make sense for me for retailers to be pulling down prices right now I'm not sure a in an environment, where those out of stocks. That's the most logical maneuver, but I'm just curious if you're hearing anything along those lines that you can share with us or whether that's a misguided.

So John New to you I feel that.

Sure So the Montana.

She was a promotional support obviously in Q4, we saw resource pullback in promotion as the focus was on keeping products and stopped as we moved since you may in early June we saw a promotional levels get back to more normal levels in most categories.

We look to plan through the rest of the year, we're planning on normal levels. So we have not really been chase was.

Yes for deep discounts are deep promotional pricing on the one thing I would add as I mean are certain categories that we are constrained from a supply chain standpoint capacity. Once so even if there was a desire to go hundred from a promotion standpoint, you just on the capacity to do that so I think thats been looking softer across many different categories.

I guess to answer your question, specifically, we've not had those discussions and even if they Tom again, I think we're gonna be limited with what we can do.

Great. Thanks, everyone.

Thank you very much well go next question on the line.

Escrow with Stifel correctly the question.

Hi, good morning.

When it could I will third that that's right word for a appreciated the new formats. So thank you for that as well.

I do want to ask in terms of the decision not to provide guidance for the are you have given a lot of components and things that help us get there if you will but.

And I know that there's a lot of volatility in the business no doubt is I think about giving a you know an indication of roughly flat operating margin for the year.

I'm just curious if you look at the volatility of the business sort of where you get that confidence is that.

The way you're going to manage the business. This year is that you have a good sense of kind of where sales will shake out and therefore, you've been able to give the confidence in that operating margin outlook for the year I'm. Just curious how you think about that.

Yeah. Thanks, Chris This is Jeff Harmening I'm glad you I'm glad you asked that first I guess I'd like to start by saying the fact that we didnt issue formal financial guidance is not a reflection of conservatism and is not a reflection of lack of confidence, it's actually a and understanding that the big determinant of how much we grow this coming year will be.

How that pandemic plays out and that is highly uncertain as as it relates to the duration and that's a pandemic. So I don't want anyone on the call to read into it that is a lack of confidence or actually conservatism. In fact, we think our business will grow over the first three quarters relative to what it was pretty pandemic levels and that's because in now we're in a period.

Good where people are still staying at home, they're working from home. Many restaurants are either closed or people don't want to visit and to a question that Ken Goldman asked earlier, we think that will be followed by a recession and if you look back to the last recession.

General Mills perform quite well and so we think there will be an environment, where we'll be able to grow for the first three quarters, followed by a fourth quarter comparison, obviously that'll be be very very difficult.

The other thing I guess to highlight as our confidence stems from the fact that we've executed really well. We are we're confident that we will emerge from the pandemic in the last few months as a stronger company and as witnessed by our share growth in nine of our top 10 categories in the U.S. by being the third fastest grower and ER in Europe, and leading share growth aren't categories in Europe.

And growing in our categories in Brazil, and growing Wanchai ferry double digits in China, So I think ways, but hopefully what you hear is a company that is confident that the things that we can control we have a good visibility too and I would say on top of that our marketing is particularly good right now whether it's in North America retail and how many things like high Nigeria reservoir we.

We're very bullish on pad and continued to be bullish on pet after posting another year of double digit.

Retail sales growth and 18% reported net sales growth in the year. So that's kind of where we that's where we stand and the reason we didn't provide guidance was because in the environment is so unpredictable with a pandemic.

That's why.

That's a good answer thank you for that I'm, just a quick follow on to that so the you've talked about you know generated efficiencies to incrementally invest in the business in fiscal 21, and you have hmm savings coming through a around 4% of cost of goods sold you got inflation around 3% is that the gap that.

You hope during part of what you hope to reinvest and is it if we think about generating officials efficiencies is that incremental to what you expect for each of them right. Now you hope to have even more savings to reinvest some of these see like it kind of frame that opportunity.

So kofi why don't I leave that went to you.

Sure, Absolutely Hey, Chris How're you.

Yeah, we we are expecting to a two to reinvest a portion of that gap in capabilities, but as you can imagine and add to my earlier question again, I think you know that did challenging operating in this environment is that demand.

And demand for a at home food is probably the single harvesting to predict and so we will we will be focused on managing.

The middle of RPL. So that we can we can deal with the potentially higher operating costs and so as we take right. Now we have we have that balanced we think the capabilities investments so.

I will help us advance or long term goals or don't want to quantify those for competitive reasons, but they're they're meaningful enough for us to continue to make progress on our capabilities.

So I hope that gets hit your question [noise].

It does thanks, so much for that color.

You bet.

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Thank you very much <unk>.

Next question on the line from Alexia Howard with Bernstein Red hat.

Good morning, everyone.

Morning, when I left yes.

Hi.

Firstly, oh incentive compensation I do that with its fairly big.

Quarter, given its right I was wondering if you were able to roughly quantify how much that oh place a D.S.G. and I line at this time around and then thinking out your if it goes when do you want to how this incentive compensation for next fiscal year.

Hi, good no formal I'm sort of goals at this point.

Then my follow up question is that you mentioned that you'll go see I'd just like every keys to leverage Fothergill increased financial flexibility I did that that M&A pipeline is fast Oh.

Our friends bookings potential deal and if so.

[noise] areas.

HM two most closely to GE docs Nike.

So Kofi let me I'll have you feel those series of questions from Alexia.

Okay. Thanks, Hi, Alexia How're you doing.

Right I would say that let me start first with a incentives and I would say it is it is a big driver obviously in the quarter in our.

And our S. DNA are aligned so it it is obviously a tailwind this year.

Or excuse me ahead headwind this year and we would expect it to be a tailwind next year.

Obviously, a you know I can't go into two a tremendous amount of detail, but just know that we will we will be effectively setting our our targets based upon.

As a dynamic environment and all companies are dealing with us, but we would expect based on everything we know right now for this to to be a tailwind.

All things being equal on on leverage we're pleased with the progress we've made on on debt leverage.

I think at the at the start of the Blue Buffalo acquisition about two years ago, we had a target to get down to three and a half times.

By the end of this fiscal year, we are at 3.2 times. So we're.

Pleased to be slightly ahead of schedule and on pace to get to our long term goal of three times.

I think at that point, then we will start to look at resuming our normal capital allocation policies with a first priority being focused on increasing the dividend rate.

Lexia. This adjustment I was just at a quick color on the on the incentive piece you know, we we always plan versus our internal plan in incentive at the beginning of the year would be 100 100 payout. If we beat our plan you know that's a that's a headwind in the in the year, but obviously good news for for our shareholders.

As we would have exceeded our goals.

Thats what played out in 20, we have an internal plan for fiscal 21, and so assuming we deliver that plan, we'd be we'd be paying out less than we did in 20, but obviously, if we beat our plan that that could change.

Great. Thank you very much I'll pass it on.

Thank you.

Well go next question on the line from Dara Mohsenian with Morgan Stanley go right ahead.

Hey, good morning, guys hope all is well.

So Jeff or maybe John obviously, a large step up in consumer demand and any retail coast cobot.

There's obviously some increase trial there.

Can you spend some time discussing how much of the higher demand was was due to new trial of your products based on your consumer survey work and bringing new customers in and as you look going forward longer term you know your ability to potentially hold all into those customers and what the strategies or would be could do so ex.

So let me let me start with his question and then about a pass it over to John There do you provide some some added detail one of the things I'm most proud of of our company over the last three months it, especially in North America retail is that we have gained penetration across all of our categories and if you look at 52 weeks, which even better way to look at it all but maybe one.

One category, we've increased household penetration, which is a highest correlation to growth and so I'm really pleased with what our team's been able to do obviously it varies by category, So genuity human or provide any any color any insights.

Yes, absolutely. So I guess when you look at penetration we do believe it's important to take a longer view. So it's just mentioned when you look over 52 weeks versus pretend done. The globals. We grew penetration of the majority of our categories Importantly, T L piece.

Our categories in terms of our performance under consideration your girl and the highest growth century sure areas, our meals and baking area, so things like Sue Pillsbury refrigerated baked goods desserts and flower.

We saw some significant gains and for us to pull ins penetration equals about 2.5 million U.S. household so again it significant.

Importantly to me, it's when you look at a year ago, we grew penetration seven of our top 10 categories. So again, it's not just prior to the pandemic versus a year ago. We're growing overall in the majority of or categories. We're starting to look at repeat I'd say, it's still early days and again, we need a bit more time to really understand that but a repeat amongst.

Our new households, strong is outpacing or categories as well.

Well, it's exciting to us again, our highest repeat rates or things like curios. The franchise, a cheerios franchise Pillsbury RPG desserts and is knocking she's an old El Paso. So we worked hard over the last decade, frankly to really improve our products.

Thats a.

Prudent ingredient deck, and making sure that they tasted the best we possibly could and we think that's a new consumers are trying across the first time are coming back after many years funny better experience with you got a bode well for us as we move into fiscal 21 and beyond.

And I would like very hot yeah, I'd like to add on to John's comments that everything that John said about about North America retail is also true for all of our categories in Europe as well as our Wanchai ferry business in China, we saw significant penetration gains as well as our at home business in Brazil with is the vast majority of our Brazilian business and so what do you.

Look at North America, retail or Europe, where China, or Brazil, our major markets, we've experienced strong penetration gains and all of our at home businesses.

Okay, Great and then can you also touch on E commerce performance in the quarter and the changes you've made in that business to take advantage of higher channel growth online from accrue a category perspective going forward.

Well, if we sure if we if we look at ecommerce broadly across the company. It's you know, it's roughly 9% of our sales as we as we enter as we exit the fourth quarter was a significant increase and in all of our geography is and the vast majority of our categories. We over index online versus bricks and mortar and there are two reasons for that one is that.

We've been investing in E commerce for a number of years and the second is that we have really good brands and we have a lot of the biggest brands and when you are shopping online those are the brands it tend to do well and so for for both of those reasons, we have seen outsized growth in E. Commerce over this period as we look globally, it's been a pick your particularly acute in the U.S. and John Eudy you when it comes.

And a little bit on what we've seen in terms of U.S. growth in E Commerce.

Sure, Jeff So specifically for the U.S., we saw 250% increase on our ecommerce business in Q4.

Certainly now almost 50% of all units households will persist food and beverage products over the last year. So again, that's nothing that stuff up a little about southern points.

The prior year from a penetration standpoint.

Probably the biggest limit or in terms of one of the growth consistent than even higher as just a.

Retailers and their capacity to really deliver the consumers' homes and even clicking clopton number slots are they had so we're working with a retail partners to make sure that we optimize our ecommerce business with Saddam.

This is a really conducting into their data and making sure that would take an omni channel approach to making sure whether the consumer wants to shop in the store shop online or seem consistent teens, and then really work is in supply chain standpoint, as well and make sure that we can deliver.

Products, where consumers you ever to our customers will ultimately ultimately going to direct consumer. So we're excited about ecommerce and as Jeff mentioned, we've been working on this for multiple years and it's really paying off the U.S. alone. We have a onetime index lots of bricks and mortar so again onto accident with someone line that's good for us.

Great. Thanks, guys appreciate it.

Thank you very much.

Okay next question on the lives on John Baumgartner with Wells Fargo go right ahead.

Good morning, Thanks for the question.

Good morning.

Yep.

Or maybe John Yeah, I wanted to ask about product mix you had the drag in Q4 from the comp at buff and the composition of the tonnage at and they are but if you step back and think more structurally one of the things we hear from investors that there isn't any pricing power and food, but to the extent that innovation is on trend, you're margining up already with new products that boss and in snacks and you.

<unk>, how do you think about your capacity to capture stronger mix on a consistent basis across your portfolio in a code world, even if the flexibility to move list prices may not be ideal.

So as we as we think about it as a company what you saw as project <unk> positive price mix in the fourth quarter, because we sold a lot more through North America retail and we sold a lot more through pet food and so to the extent that we keep growing pet and we certainly plan to do that and we see elevated demand in North America retail that actually bodes pretty well for price mix as we.

Think about it on a company level.

It gets more complicated when you look within a geography, but let me have John Nuti answer how it how it has played out in North America retail you know over the last or last quarter, because important but it's complicated when you look at it.

Thanks, Jeff and good morning, John.

When you look at price mix, we look in two ways one in the personnel, which is done on a per pound basis, and then also in Nielsen, which is on a per unit basis. We saw some very different things in Q4, if you look in those.

No different ways, so from a PML standpoint, so the first three quarters or price mix was actually slack.

And again, that's on a per pound basis in Q4 to your point it was down seven points. It was a significant drag those 100% driven by next as we sold heavier products, so things like suit desserts and flower as well as larger sized Cox's consumers really moved that way, we look at Nielsen, though on a per unit basis, we actually saw an increase in price mix in Q4.

Really driven by less promotion at Sable customer mix so.

We feel like there is some pricing power out there and one of the things again, we've worked hard out over the last few years, a strategic revenue management really building a tool box that allows us some different levers the pool given the environment. So I think as we look towards fiscal 21.

Likely see less list pricing just as insulation won't weren't it will be obviously competitive environment and value will matter, but things like price pack architecture next will be things that we focus on and the good news again on that out and so while we've got a pipeline of ideas and our tool box it will be able to execute against so we continue to expect to drop price mix infants.

21 will probably just look a little different how we drove in fiscal 2000.

I guess just to build on that I mean, maybe come back to Jeff thinking about Blue Buffalo I mean, some of the price per pound premiums on the new products and wet and treat that's pretty sizable versus the based portfolio is there anything you're seeing out there where.

There was an elasticity for consumers are kind of a push back on pricing or do you feel as though there's still one way to go with the mixed premiumization as long as the innovation is on track.

Yeah with regard to pet I mean, we think there's a we think there's a ways to go and if you looked at a growth of the pet category first of all the pet category is growing mid single digits and as primarily on pricing and and the part of the category. That's growing the fastest is the premium part of the categories. So we certainly think there is a a place to play there and blue Buffalo we.

<unk>.

As the best equity in that premium space on I think our growth over the last couple of years. When would you know add some credence to that we also know that people care deeply about their pets and especially in a time of high anxiety, which I think under any circumstances you could qualify. This is a time of high anxiety people rely on the pads in the last thing they want to do is cheap there patch and a the source of comfort.

So what we see in the marketplace, whether it's through recession or whether through a time like this is that one of the last thing that people are interested in skimping on are there other pets and so they don't do that and we see that being played out in the market right now.

Great. Thank you.

Yeah.

Thank you very much.

Our next question on the line from distinguish with Goldman Sachs correct.

Hi, Good morning thoughts. Thank you for slotting in them and King Congrats to you and get your teams through navigating. This that's a very turbulent situation, especially coolest your supply chain godliness is very challenging for them.

My questions I guess, we just closed on pack. So maybe we can we get ticket backup there. There's obviously a lot of noise and reported results this quarter because of what you're comping and the extra days.

Can you give us a beat on how retail sales are tracking across all channels in the quarter and what you're seeing so far as we roll into the new fiscal year.

Yeah. So thanks, Jason and I appreciate the support for the how Weve, how we've executed last quarter, we feel really good about it as you said our supply chain has held up remarkably well and a and we've driven that those supply chain games, all the way through our sales organization to our customers and feel very good about how weve service the business and service demand and a time when people really needed.

It.

When it when we when we look at Blue Buffalo, Let me take a step back you know for the for the year, we reported net sales 18% through through three quarters, we were up 11% and in the in the last quarter. The year, we believe that our our retail sales were up somewhere in the high single digit range and so for the year.

You had guided 8% to 10% like for like growth and were confident we exceeded that somewhere about the 12% range. So for the year. We over delivered on what we said we'd is we feel great about that in the fourth quarter, you're right. There is a ton of noise.

The retail sales look look like they're up high single digits and again, that's still share leading growth for that category a category. That's up mid single digit. So we're really pleased even amongst the noise with our performance on blue Buffalo in the fourth quarter.

That's that's super helpful information, Thank you for that.

And turning back to your North America retail portfolios, we look at the Nielsen data, you're Tdps are down a lot for average items or store or down a lot as they are across the industry.

And we we've heard from a lot of a lot different companies about skew rationalization streamline portfolios to where they maximize capacity can you talk on how much streamlining you've accomplished and how much of that streamline you think you'll be able to sustain or when if at all do you think you're going to start to layer back on those products.

So John Eudy, why don't you take that maybe touch on not only the streamlining of distribution, but maybe a couple other actions we've taken to help make our supply chain more efficient.

Absolutely so the one Jason Yes, obviously, if you look at distribution Nielsen nuts.

But of a wild picture right now is there's out of stocks and other things happening as well.

I guess, if you you speak about our business and we compete across 24 different categories. The majority of our categories from a capacity standpoint as a service standpoint, we're in pretty good shape at this point or supply chain has done a terrific job keeping our plants running keeping them see from Portland for employees and then obviously for consumers with food so much.

Labor categories were back up to pretty healthy service levels and you haven't seen significant decrease from a distribution standpoint with the retailers who are the ones that trend prior to the dynamic with retailers really cutting back on the number skews and categories given more fee seems to higher churn skews and that was really driven by E. Commerce, then click and collect and.

And obviously, having shelf capacities to service businesses, we expect to see that continue now we have a few categories that we have capacity constraints suit being one of them desserts being another one and we use temporarily withdrawn seem to be a number of items. So in soup progresso soup, we prepare them a cat something like 80 items.

Now we're down to somewhere around 50, we expect to fees start facing some of those back in as we move through the first half the year frankly, some of them probably won't come back. So again I think we will take the opportunity to make sure that we haven't officially portfolio and one that works for us and works where consumers.

Variety is important though when you think about soup everyone's got the favorites Super Labor. So again, where you have to work through that as well. So we feel good about where we're from a distribution standpoint, one of the things that would the metric that we look at a share of distribution.

Because again, we do expect total district, you just distribution plans to decrease since moved throughout the year, we'd have to the year.

Improving from a total share of distribution standpoint, and that's what we'll continue stay focused on as we move through through fiscal 21.

Good stuff, thank you gentlemen, well.

Thank you.

Thank you very much our next question on the lines from the liner David Palmer with Evercore I. If I go right ahead, where the question.

Thanks, just wanted to follow up on on what were maybe seeing in the scanner data lately it looks like.

The part that is audited by some of the scanner data companies is showing a reduction in display activity, but some of that might be the fact that they're not auditing that as much and then I'm wondering if we're seeing some noise in that percent sold on discount because it looks like we then cereal specifically if there's been some increase in person.

And sold on price discounting, which would seem to run against the times that you wouldn't need to be doing that so are you seeing some price reductions going on out there is there more competitive activity in cereal, whereas there noise and that'll have a quick follow up.

Hi, John duty and why don't you feel that one.

Hi, Good morning, David I would say even on the short answer is probably noise more than anything money the auditing and groups are not going into stores.

At this point, let's say arts and consistent in terms, what we're seeing so we're not looking to closely.

Display facts and some of the pricing gets really confusing as well when I would tell you, though in general we're not seeing anything out of the ordinary in terms of pricing on cereal in fact, we pulled back some of our promotions in Q4, particularly on it sure feels franchise were a bit tight capacity standpoint, So again lets me anything abnormal.

And it seems from a data standpoint again.

The total movement and you know has something to look out in something that makes sense I think when you start getting into some of the the facts below that.

I would put a whole lot of stock at this point at least were not.

Got it thank you and and just a follow up on the incentives you talked about how you did above plan. This last fiscal year because of fourth quarter and probably caused some truing up.

And what you were doing in terms of pay for performance, but I'm wondering are you, making adjustments to your annual targets and how you pay people the board doing that for you when you down to the division levels and and how are you, making those adjustments because this has to be viewed as an extraordinary period, not just because of blue and those acquisitions.

The other counter facts, but because of this virus in passing that through the Python any help on that would be helpful.

So the so David the you know the board sets our compensation targets as well as ranges for compensation I'm not going to go into the depth of that only to say that it is based on our sales performance and and our operating performance our profitability performance and a weighted equally among those measures. Let me pass those kind of things down too.

Our to our segments and you're right. It is a dynamic environment, which which requires us to be dynamic in our assessment done certainly one of the things we look at as we assess the performance of our businesses how competitive are they.

In the marketplace, how efficient where they and being competitive and that's why I say, we're really proud of our performance and even in areas like convenience and foodservice, which was down quite a bit in the fourth quarter. They actually grew share and the majority of their categories and so they performed well in the fourth quarter, even in an environment that would really really difficult and so that's the way we'll continue to incent people again it helps.

To stay in the middle boat and driving sales growth, but not at all costs and making sure efficient while we do it.

Okay. Thank you.

Thank you very much.

Well go next question on the phone line from Robert Moskow.

Credit Suisse grid ahead.

Hi, Thanks for the question I guess I have to.

The one is on the breakfast cereal category, if I look at the data I'd say, it looks good but but not great.

Retail sales were up about 6% in the past four week period.

What had been up double digit.

John and Jeff are you surprised that the category is not growing faster.

The environment like this where we're all kind of stuck at home or not eating breakfast on the go we have the luxury of time in our homes to prepare longer breakfast for ourselves or pretty much what you would expect.

The second question is there's talk first quarter <unk>, you know <unk> <unk> <unk> I understand not giving guidance for the year, but.

Hi, can you give us a sense out of the right maybe just North America retail sales. It looks like overall your sales are still up double digit and probably can stay that way for the next three months and the retail data.

Is that fair assessment for first quarter trends John Thanks.

So let me let me answer the question on the first quarter trends and and the say that you know over there. The reason we don't give quarterly guidance just because we've never given quarterly guidance and we're not going to start now you're right, Rob and I'm glad you pointed out or a retail sales. If you look at Nielsen are off to a great start and a and North America retail. So it gets back to a question to answer I think it wasn't Chris.

The way about you know about you know that confidence we have so it's not a lack of confidence that we're not providing guidance is really a matter of for the year uncertainty and for the quarter. The fact that we just don't provide quarterly guidance.

On the question I'm sure I'll, let John answer that in detail, but I want you to know I am thrilled that you're asking your question about the cereal category being good not great. My strong a 6% so with that John there do you want to elaborate on that a little bit.

Yes, sure good morning, Rob So we feel good about zero category and frankly, even better about our performance in Q4. The cereal category grew at 26%. We grew at a similar level and for the full year, the kind of reader 5%.

You go back to even your prior we think we've got a non measured channels a group that youre as well. So we think the kind of rooms have you in the right direction, we like our performance we've grown share in 11, the last 12 quarters with a clear share leader in the category, we're doing that by strong strong marketing campaigns.

Prior to the pandemic, we were having the best year from share standpoint, I'm sure. It wasn't over a decade as we've gotten back to the heart health messaging that works really well, we actually for the first time ever change the shape of the product to a hard for a limited time that worked incredibly well the renovations working as well we had three of the top five new products in the category last year. So we feel good about the category we.

So good amount of performance, we think we'll continue to grow nicely in fiscal 21.

Okay, all right I mean, the market share gains no doubt.

So I congrats on that and well see how the category guys. Thank you.

Okay. I told me I think we're gonna it we're going to wrap things here I know I know, we weren't able to get to everyone, but we want to make sure that we respect everyone's time and life on the call. So thank you everybody for your time and attention. This morning appreciates.

The interest in general Mills, and with four due to continuing to keep you updated on how we are we go from here Yeah follow up questions. Today. Please feel free to reach out to me and I will make sure. We got to you. So thanks again.

Thank you very much. Thank you everyone that does conclude the conference call for today. We thank you for your participation. After disconnect your lines have good day everyone.

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