Q3 2024 J M Smucker Co Earnings Call

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Good morning, and welcome to the J M Smucker company's fiscal 'twenty 'twenty four third quarter earnings question and answer session. This conference is being recorded and all participants are in a listen only mode.

Operator: Good morning, and welcome to the J. M. Smucker Company's fiscal 2024 third quarter earnings question and answer session. This conference is being recorded, and all participants are in listening only mode.

Operator: Please limit yourself to two questions and rise if you have additional questions. I'll now turn the conference over to Aaron Broholm, Vice President of Investor Relations. Please go ahead. Good morning, and thank you for joining our fiscal 2024 third quarter earnings question and answer session. I hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks, which are available on our corporate website at J M Smucker dot com. We will also post an audio replay of this call at the conclusion of this morning's Q&A session. During today's call, we may make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainty. Additionally, we use non-GAAP results to evaluate performance internally.

Aaron Broughton: Please limit yourself to two questions and re queue. If you have additional questions I'll now turn the conference over to Aaron brought home Vice President Investor Relations. Please go ahead Sir.

Aaron Brouhaha: Good morning, and thank you for joining our fiscal 2024 third quarter earnings question and answer session. I Hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks, which are available on our corporate website at J M. Smucker dotcom we.

We'll also post an audio replay of this call at the conclusion of this morning's Q&A session.

During today's call we may make forward looking statements that reflect our current expectations about future plans and performance. These.

Aaron Brouhaha: These statements rely on assumptions and estimates and actual results may differ materially due to risks and uncertainties. Additionally.

Aaron Brouhaha: Additionally, we use non-GAAP results to evaluate performance internally.

Aaron Broholm: I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning's press release. Participating on this call are Mark Smucker, Chairman of the Board, President and Chief Executive Officer, and Tucker Marshall, Chief Financial Officer. We will now open up the call for questions. Operator, please queue up the first question. Thank you. The question and answer session will begin at this time. If you're using a speakerphone, please pick up the handset before pressing any numbers.

Aaron Brouhaha: I encourage you to read the full disclosure concerning forward looking statements and details on our non-GAAP measures in this morning's press release.

Aaron Brouhaha: Participating on this call are Mark Smucker Chair of the Board, President and Chief Executive Officer, and Tucker Marshall Chief Financial Officer.

Speaker Change: We will now open up the call for questions. Operator, please queue up the first question.

Speaker Change: Thank you the question and answer session will begin at this time, if youre using a speakerphone. Please pick up the handset before pressing the numbers should you have a question. Please press star one on your telephone.

Operator: Should you have a question, please press star one on your telephone. If you wish to withdraw a question, please press star 2. For operator assistance, please press star zero.

Speaker Change: If you wish to withdraw your question. Please press star two.

Speaker Change: For operator assistance. Please press Star Zero as a reminder, please limit yourselves to two questions. During the Q&A session should you have additional questions you may re queue and the company will take questions. As time allows please standby for our first question. Our first question is coming from Andrew Lazard from Barclays. Your line is now live.

Operator: As a reminder, please limit yourselves to two questions during the Q&A session. Should you have additional questions, you may recur, and the company will take questions as time allows. Please stand by for our first question. Our first question is coming from Andrew Lazar from Barclays. Your line is now live. Great, thanks so much.

Andrew Lazar: Great. Thanks, so much.

Andrew Lazar: I guess to start, obviously Smucker delivered 6% comparable sales growth in fiscal 3Q, and I think you should expect something similar in the fourth quarter as well. With Uncrustables set to accelerate, as you talked about in the prepared remarks in the fourth quarter, trying to get a sense of what would be the offset or what you expect might slow to get back to that mid single-digit range in the fourth quarter? Or is there some conservatism built in?

Andrew Lazar: I guess to start obviously smucker delivered a 6% comparable sales growth in fiscal <unk> and I think you expect something similar in the fourth quarter as well.

Andrew Lazar: With Lincrusta bowls set to accelerate because you talked about in the prepared remarks in the fourth quarter I'm trying to get a sense of what would be the offset or what you expect might slow to get back to that mid single digit range in the fourth quarter or is there some conservatism built in.

Speaker Change: Andrew Good morning.

Mark T. Smucker: Andrew, good morning. We're certainly pleased with our third quarter performance. And as you've noted, we anticipate the business momentum to continue into the fourth quarter. Specifically, to your question, we would anticipate PET to slow down a bit in the fourth quarter but still maintain its momentum across the portfolio. Got it. And I guess just picking up on that thread, pet food comparable sales obviously increased about 20% in the quarter. And even if you take out about six points of growth from contract manufacturing, it was still pretty solid double-digit growth on the base within pet food. And obviously, expect that to slow a bit. But I guess was there something anomalous in the third quarter that led to that strength of growth in underlying pet that doesn't continue into the fourth quarter or the next few quarters? Thanks a lot. Andrew, we did see a normalization of our pet supply chain, specifically on Meowmix, in support of manufacturing. That was a contributor to the third quarter.

Andrew: We're certainly pleased with our third quarter performance and as you've noted we anticipate the business momentum to continue into the fourth quarter specifically to your question, we would anticipate Pat to slow down a bit in the fourth quarter.

Andrew: But still continue its momentum across the portfolio.

Speaker Change: Got it and I.

Speaker Change: I guess, just picking up on that thread pet food comparable sales, obviously increased about 20% in the quarter and even if you take out about six points of growth from contract manufacturing. It was still pretty solid double digit growth on the base within pet.

Speaker Change: And obviously, you expect that to slow a bit but I guess, what was there something anomalous in the third quarter that led to that that strength of growth in underlying pet that doesn't continue into the fourth quarter over the next few quarters. Thanks a lot.

Speaker Change: Andrew we didn't see a normalization of our pet supply chain, specifically on the Opex in support of manufacturing that was a contributor to the third quarter and we would still anticipate in the fourth quarter that Pat grows double digits.

Mark T. Smucker: And we would still anticipate in the fourth quarter that P&L grows double digits. Thanks so much. Appreciate it. Thank you. Next question is coming from Ken Goldman from JP Morgan. Your line is now live. Hi, good morning.

Speaker Change: Thanks, so much appreciate it.

Speaker Change: Thank you next question is coming from Ken Goldman from Jpmorgan. Your line is that a lot.

Ken Goldman: Hi, good morning, Thank you.

Ken Goldman: Thank you. Um, last week, you mentioned that marketing would be a headwind to earnings next year, I think, partly on the hostess and partly on the base business. You know, with the understanding that you're not quite in a position yet to give exact guidance, I was just hoping to get a little bit better sense of the degree or magnitude to which marketing for the total company may rise. And I'm asking, especially in light of this year, where I think you're, you know, a decent amount below your longer-term target range as a percent of sales. Thank you.

Ken Goldman: Last week, you mentioned that marketing would be a headwind to earnings next year, I think partly on hostess and partly on the base business I believe.

Ken Goldman: You know with the understanding that youre not quite in a position yet to give exact guidance I was just hoping to get a little bit better sense of the degree of magnitude to which marketing for the total company may rise and I'm asking it especially in light of this year, where I think you're a decent amount below your longer term target range as a percent of sales. Thank you.

Ken Goldman: And with respect to marketing.

Mark T. Smucker: And with respect to marketing, associated with our Sweetbakes Snacks business, we anticipate a step up in marketing in the coming quarters in support of the brand and our excitement about the portfolio and the opportunity to continue to advance and support the growth of the hostess brands or portfolio. We contemplated that at the time of acquisition.

Ken Goldman: Associated with our sweet baked snacks business, we anticipate a step up and marketing in the coming quarters in support of the brand and our excitement of the portfolio and the opportunity to continue to advance and support the growth of the hostess.

Speaker Change: Brands or our portfolio.

Speaker Change: We have contemplated that at the time of acquisition, we have contemplated that as we gave our outlook for this fiscal year.

Ken Goldman: We have contemplated that as we gave our outlook for this fiscal year, and we've contemplated that as we think about what potential contribution Hostess could provide for FY25. Certainly, I look forward to providing a little bit more of the detail of what that step up is on our fourth quarter earnings call when we give the outlook for next fiscal year. Okay, I'll follow up offline on that one.

Speaker Change: And we've contemplated that as we think about what potential contribution posters can provide for FY 'twenty five certainly we look forward to providing a little bit more of the detail of what that step up is on our fourth quarter earnings call. When we give the outlook for next fiscal year.

Speaker Change: Okay I'll follow up offline on that one and then I wanted to ask.

Tucker Marshall: And then I wanted to ask, maybe I missed this, but transaction and integration cash costs. I think you raised the number by around 20 million for that in terms of your expectation for this year. Can you go into a little bit of why that was increased? Unless I'm wrong about that? And were these pulled forward from next year? Or are they added to the total deal cost? Yeah, so it's really a pull forward of some expenses that we had thought would time out into next fiscal year. We have not raised our outlook for overall transaction and integration expenses.

Speaker Change: Maybe I missed this but transaction and integration cash costs I think you raised the number by around 20 million for that in terms of your expectation for this year can you go into a little bit of why that was increased.

Unless I'm wrong about that and where these pulled forward from next year or are they additive to the total deal cost.

Speaker Change: Yeah. So it's really a pull forward of some expenses that we had thought when time out into next fiscal year, we have not raised our outlook for the overall transaction and integration expenses, it's more of an impact of timing.

Peter Thomas Galbo: It's more of an impact of timing. Thanks, Chuck. Thank you. Next question is coming from Peter Galbo from Bank of America. Your line is now live. Hey guys, good morning. Good morning, Peter.

Speaker Change: Thank you Tucker.

Speaker Change: Thank you next question is coming from Peter Galbo from Bank of America. Your line is now live.

Peter Thomas Galbo: Hey, guys good morning.

Peter Thomas Galbo: Good morning, Peter.

Mark T. Smucker: Mark, maybe you could just expand a little bit on your prepared remarks around Uncrustables, specific to the retail channel. You know, I know you had a difficult compare in the third quarter, and obviously, the away from home business is growing pretty nicely. But just what gives you the confidence, I guess, that you'll go from the minus to kind of do a double digit in the fourth quarter, specifically in retail? Yeah, sure, Peter, thanks for the question.

Peter Thomas Galbo: Mark maybe you could just expand a little bit on your prepared remarks around unprofitable specific to the retail channel you know I know you had a difficult compare.

Peter Thomas Galbo: In the third quarter, and obviously the way away from home business is growing pretty nicely, but just what gives you the confidence I guess that you'll go from the minus two kind of a double digit in the fourth quarter specifically in retail.

Mark T. Smucker: Yeah sure Peter Thanks for the question, if I may I might just start a bit more high level on the total business and then to answer your question specifically.

Mark T. Smucker: If I may, I might just start at a high level on the total business and then answer your question specifically. You know, I think, First and foremost, we feel great about our performance this quarter. We feel that it is, in many ways, a validation of our strategic journey and, I know that all of you on the call, particularly our analysts, our sell-side community, have been very closely watching us over the last three years. Along that journey, the reshape of our portfolio, the building of these capabilities, the focus on execution, the marketing expertise, the selling expertise, the supply chain resiliency, all of those things really helped to sort And ultimately, it starts with the consumer and understanding what the consumer wants.

Speaker Change: You know I think.

Speaker Change: First and foremost we feel great about our performance this quarter, we feel that it is in many ways a validating moment.

And our strategic journey and I know that.

Speaker Change: All of you on the call.

Speaker Change: Our our analysts our sell side community has been very closely watching us over the last three years along that journey.

The reshape of our portfolio. The building of these these capabilities to focus on execution.

Speaker Change: The marketing expertise selling expertise and supply chain resiliency all of those things really for us help to sort of validate that we've made the right decisions and choices.

Speaker Change: Along the way.

Speaker Change: Ultimately it starts with the consumer and understanding what the consumer wants so I would like just to just to take a moment and just highlight how proud. We are of these results the underlying business momentum and that we have we feel very confident in the decisions that we've made and the way that we've been able to reach.

Mark T. Smucker: So I would like just to take a moment and just highlight how proud we are of these results, the underlying business momentum, and that we feel very confident in the decisions that we've made and the way that we've been able to reshape our portfolio. As it relates specifically to Uncrustables, you know, our confidence in that brand has not wavered. We're on track to start up the McCullough Alabama facility this calendar year.

Speaker Change: Our portfolio.

Speaker Change: As it relates specifically to <unk> you know our confidence in that brand has not wavered. We're on track to start up the Mccullough, Alabama facility. This calendar year and we knew that we were lapping a huge comp in the prior Q3.

Mark T. Smucker: And we knew that we were lapping a huge comp in the prior Q3 because the Longmont, Colorado, second plant expansion was completed. And so we were able to gain a significant amount of distribution in last year's third quarter. And so obviously, we were lapping that in the retail space. And in addition, you know, we still saw, in addition to the gap in the retail space, we still saw really good performance in both Canada and and and very strong performance in the away from home space. But I think notably, if you look at consumer takeaway in the quarter, consumer takeaway remains very strong, which again helps to support our confidence in double-digit growth and the re-acceleration of the brand as we move forward into the next several quarters. And then, you know, I guess just one final point about Uncrustables.

Speaker Change: Because.

Speaker Change: The Longmont, Colorado, the second plant expansion was completed.

Speaker Change: And so we were able to.

Speaker Change: Gain a significant amount of distribution in last year's third quarter and so obviously, we were lapping that in the retail space and in addition, we still saw in addition to the lap in the retail space. We still saw really good performance in both Canada and very strong.

Speaker Change: Performance in the in the <unk>.

Speaker Change: Away from home space.

Speaker Change: But I think notably if you look at consumer takeaway in the quarter. The consumer takeaway remains very strong, which again helps to support our confidence in the.

Speaker Change: The double digit growth in the re acceleration of the brand as we move forward into the next.

Speaker Change: Several quarters.

Speaker Change: And then I guess, just one final point about <unk> remember, we just turned on marketing.

Mark T. Smucker: Remember, we just talked about marketing. So, you know, we've had great, not only advertising on traditional and social channels, but also the endorsements that we've had across some of our, you know, professional sports sponsorships, and then our ability to continue to gain distribution in all of those channels just supports the confidence in that brand. Great, thanks, Mark. And Tucker, maybe just to follow up on the contract manufacturing sales, you know, the number kind of keeps trickling down, I think a bit quarter on quarter, just, you talked a little bit last week about through the first six months of next year, but any more calls you can give us as we start to kind of model out that, Yeah, Peter, so we have an outlook for this fiscal year that's approximately $140 million. That's on a 12 month period.

Speaker Change: No.

Speaker Change: We've had great not only.

The advertising both in traditional and social channels, but also the endorsements that we've had across some of the professional sports sponsorships and then our ability to continue to gain distribution in all of those channels just supports the.

Speaker Change: The confidence in that brand.

Speaker Change: Great. Thanks, Marc and Parker, maybe just to follow up.

Speaker Change: On the contract manufacturing sales.

Speaker Change: Number kind of keeps trickling down I think a bit quarter on quarter, just you talked a little bit last week.

Speaker Change: Kind of through the first six months of next year, but just any more color you can give us as we start to kind of model out that specific piece of it into next year.

Speaker Change: Yes, Peter So we have an outlook for this fiscal year and it's approximately $140 million. That's on a 12 month period as we think about next year, we know that contract manufacturing sales will continue through largely through the first half of our fiscal <unk>.

Tucker Marshall: As we think about next year, we know that contract manufacturing sales will continue through, largely through the first half of our fiscal year. I think that the cadence will be able to articulate a little bit better in our fourth quarter, but I think it probably makes sense to sort of work with 140 million and think about sort of the front half. Thanks, Chris. Thank you. The next question is coming from Tom Palmer from Citi. Your line is now active.

Peter Thomas Galbo: I think the cadence will be able to articulate a little bit better on our fourth quarter all.

But I think it probably makes sense to sort of work with $140 million and think about sort of the front half.

Peter Thomas Galbo: Thanks, Chris.

Peter Thomas Galbo: Thank you next question is coming from Tom Palmer from Citi. Your line is now live.

Tom Palmer: Good morning, and thanks for the question.

Tom Palmer: Good morning, and thanks for the question. Maybe I'll just follow up quickly on the contract manufacturing that Peter asked about. So you've taken down your outlook for sales. I think one of the limitations is in terms of eliminating stranded costs while the contract manufacturing sales are still going on, but you also haven't changed your earnings dilution this year, right, the 60 cents. So maybe just get an update.

Tom Palmer: Maybe I'll just follow up quickly on the contract manufacturing piece.

Tom Palmer: <unk>.

Tom Palmer: So you've taken down your outlook for sales I think one of the you talked about some limitations in terms of eliminating stranded costs.

Tom Palmer: Contract manufacturing sales were still going on but you also you haven't changed you.

Tom Palmer: Earnings dilution this year.

Tom Palmer: So maybe getting up.

Tom Palmer: Are you able to eliminate some of these stranded costs as you think about this year? Because I think last week there was a little bit of a call out maybe as we look at the back half of the year, moving parts with the contract rolling off, having the stranded cost lag. But again, seeing that this year, the accelerated roll off, it hasn't really impacted veterans' abilities. Yeah, Tom, maybe for awareness

Tom Palmer: Are you able to eliminate some of these stranded costs as you think about this year.

Tom Palmer: Because I think last week, there was a little bit of a call out maybe as we look at the back half of the year.

Moving parts of the contract.

Tom Palmer: Turning off having the stranded cost lag, but again.

Tom Palmer: And that this year.

Tom Palmer: And the rollout it hasn't really impacted that room.

Tom Palmer: Yeah.

Tom Palmer: Yeah, Tom maybe for awareness purposes.

Tom Palmer: Stranded overhead and contract manufacturing sales.

Tucker Marshall: Stranded Overhead and Contract Manufacturing Sales are independent. So, first of all, speaking to contract manufacturing sales, the outlook for this fiscal year today is 140 million. It is essentially at no profit. Those sales will begin to go away halfway through next fiscal year. The removal or the elimination of contract manufacturing sales really does not address stranded overhead.

Speaker Change: Our independent so.

Speaker Change: First of all speaking to contract manufacturing sales.

Speaker Change: Outlook for this fiscal year today is $140 million.

Speaker Change: It is essentially no profit.

Speaker Change: Those sales will begin to go away halfway through next fiscal year.

Speaker Change: But the removal or the.

Speaker Change: Elimination of contract manufacturing sales really does not address stranded overhead.

Speaker Change: Stranded overhead outlook for this fiscal year as a net 60 impact.

Tucker Marshall: The stranded overhead outlook for this fiscal year is a net 60 cent impact. We had said since the time of divestiture that there would be an impact in FY24 and in FY25. To date, we've not outlined what the FY25 impact is, other than to note there will be an impact. As you think about stranded overhead, really what is driving that?

Speaker Change: We have said since the time of divestiture in there would be an impact in FY 'twenty four and in FY 'twenty five to date, we have not outlined what the FY 'twenty five impact is other than to know if there will be an impact.

Speaker Change: As you think about stranded overhead really what is driving that.

Tucker Marshall: And the predominance of what will need to be addressed is our network, largely driven by distribution. So, as the post, https://www.youtube.com.au for the benefit of next fiscal year. And then ultimately, we believe by the time we step into FY 26, we should begin to have a draft stranded overhead and begin to get it behind. Okay, thanks for that detail. Wanted to maybe clarify some of the costs on Un

Speaker Change: And the predominance of what will need to be addressed is our network largely driven by distribution so as the post <unk>.

Speaker Change: Volume and our product leaves our distribution environment, we need to right size that in support of dressing stranded overhead.

Speaker Change: Among other activities that we've already identified and are begin being inning to address for.

Speaker Change: For the benefit of next fiscal year, and then ultimately we believe by the time, we step into FY 'twenty six we.

Speaker Change: Should began to have addressed stranded overhead and begin to get it behind us.

Speaker Change: Okay, Thanks for that detail.

Speaker Change: Wanted to maybe clarify some of the costs on cross the bowls.

Tom Palmer: You mentioned the startup costs for 4Q and kind of the four-year startup costs. I just wanted to clarify on that, you know, how much the startup costs were in 3Q as we think about kind of the progression into 4Q. And then, secondarily, just to step up in advertising, how significant that might be as we think about 3Q to 4Q. Thanks.

Speaker Change: You mentioned the startup costs for <unk> and kind of the full year startup costs I just wanted to clarify on that you know how much the startup costs were in <unk> as you think about kind of the progression into <unk> and then secondarily just the step up in advertising.

Speaker Change: How significant that might be if you think about <unk>.

Speaker Change: So as we think about the <unk> venture.

Tucker Marshall: So as we think about the Uncrustables venture, there are three areas where we see incremental costs. One is as we begin to bring the McCall facility online, that becomes an overhead carrying cost. The second component is, as we advance the building of McCall, there's pre-production expenses that we've also included in our full year guidance. And then the last component is that we have turned on marketing. And so there's incremental marketing. And a portion of the outlook for marketing switching from the third quarter to the fourth quarter is not only due to timing, but you're also seeing the step up associated with uncrustable support for the business or the portfolio. Okay, I just was hoping for any quantification, I guess, as we think about kind of the progression through Q and the 4Q. I understand, maybe you guys aren't providing that. Tom, we're certainly happy to follow up with you afterwards just to help you round out your model. Got it, thank you.

Speaker Change: Three areas that we see incremental cost one is as we began to bring the mccall facility online that becomes an overhead carrying cost.

Speaker Change: The second component is as we advance the building of Mccall Theres, a preproduction expenses that we are also having a full year guidance and then the last is as we have turned on marketing and so theres incremental marketing and a portion of the outlook for marketing switching from the third quarter to the fourth quarter is not only due to.

Speaker Change: Timing, but you're also seeing the step up associated of unprofitable support for for the business or the portfolio.

Speaker Change: Okay. I just was hoping for any quantification I guess as we think about kind of the progression through the queue and before to understand maybe you guys aren't providing guidance. Tom we're certainly happy to follow up with you afterwards, just to help you round out your model.

Speaker Change: Thank you.

Christopher R. Growe: Thank you. The next question is coming from Chris Carey from Wells Fargo. Your line is now live. Hi, good morning.

Speaker Change: Thank you. Your next question is coming from Chris Carey from Wells Fargo. Your line is real life.

Speaker Change: Yeah.

Christopher R. Growe: Hi, Good morning, I, just wanted to drill down on the coffee segment specifically.

Christopher R. Growe: I just wanted to drill down on the coffee segment specifically. Can you just give me context on, you know, how you see brand performance from here across Brussello, Duncan, and Folgers? And also, how do you see Boeing mixed versus pricing? Just given you, and so just any any context on how we should be thinking about coffee evolution going forward on a really ballistic scale for his price and any comments on the brand. Here Chris, it's Mark.

Christopher R. Growe: Can you just give any context on how you see brand performance from here across the cello her dunkin and folgers.

Christopher R. Growe: And also.

Christopher R. Growe: How do you see volume mix versus pricing just given.

Christopher R. Growe: Step up in competition for pricing actions from from some of your competitors and so it just just any context on how we should be thinking about coffee evolution going forward.

Christopher R. Growe: Really on a <unk> price and any comments on the brands.

Mark T. Smucker: Sure Chris It's Mark.

Mark T. Smucker: You know, I say overall, we feel very good, you know, obviously gross. We will continue to be driven by Bustelo, Duncan, and then K-Cups broadly across all brands. Our K-Cup performance in the quarter was very good.

Mark T. Smucker: I'd say overall, we feel very good.

Mark T. Smucker: Obviously growth.

Mark T. Smucker: We will continue to be driven by Bustillo Duncan and then K cups broadly across all brands are our K Cup performance in the category in the quarter. Rather was was very good we outpaced the category we regained at just over a half of <unk>.

Mark T. Smucker: We outpaced the category. We gained just over half a point of share in K-Cup, and that included solid performance on Folgers. And then, of course, as we've launched liquid executions and Duncan in the shelf stable coffee aisle, has already sort of captured that number two position in liquid coffee concentrate. And we're launching similar Bustelo executions in the same format that are coming here by the end of the fiscal. And so we feel very good about our performance, and coffee folders is a mature brand, but we're, we're pleased with the performance there as we've continued to increase our share of voice we're advertising on all of our brands. And so we have a very strong share of voice there. And so, just feeling it.

Mark T. Smucker: Of of share and and K Cup and that includes solid performance on folgers.

Mark T. Smucker: And then of course, you know as we've launched liquid some liquid executions and Dunkin' Dunkin' in the in the shelf stable coffee aisle is already sort of captured that number two position and liquid coffee concentrate.

Mark T. Smucker: And we're launching a similar boost stello executions in the same format that are coming out here in the next.

Mark T. Smucker: By the end of the fiscal and so we feel very good about our our performance in coffee Folgers is a mature brand, but we're pleased with the performance there as we've continued our share of voice where advertising on on all of our brands and so we haven't.

Mark T. Smucker: Very strong share of voice, there and so just feeling generally.

Mark T. Smucker: Generally optimistic about the coffee category in general and recognizing that we need to continue to shift and start to own some of the liquid executions as we have. But that segment is going to continue to grow. K-Cups will continue to be a very important part of that segment.

Mark T. Smucker: Generally optimistic about the coffee category in.

Mark T. Smucker: In total and recognizing that we need to continue to shift.

Mark T. Smucker: And and start to own some of the liquid executions as we have but that segment is going to continue to grow K cups will continue to be a very important.

Mark T. Smucker: <unk> part of this segment and our goal is to continue to move to where the consumer is headed as well.

Christopher R. Growe: And our goal is to continue to move to where the consumer is headed as well. Okay, thanks. And just one follow-up on the marketing expense in Q4, obviously understanding the shift in Q3 to Q4, can you just perhaps, and I think that's it. Thank you all so much for joining us today.

Speaker Change: Okay. Thanks, and just one follow up on the marketing.

Speaker Change: Expenses in Q4, obviously understanding the shift in Q3 to Q4 can you just perhaps.

Speaker Change: Ill give a little context around what areas of the portfolio, we'll see the marketing.

Mark T. Smucker: We're going to have a little bit of a Q&A session, and then we're going to give a little context around what areas of the portfolio will see the marketing step up in Q4 and, just in general, where you see the most potential to invest behind the portfolio from a marketing standpoint in kind of more of a medium-term perspective, understanding the comments that you made on Hostess last week. Thanks. Yeah, it's Chris. It's Mark again.

Speaker Change: Step up in Q4 and just in general.

Speaker Change: Where do you see the most potential to invest behind the portfolio from a marketing standpoint.

Speaker Change: Kind of more of a medium term perspective understanding the comments that you made on on hostess last week. Thanks.

Speaker Change: Yeah, Chris it's Mark it's pretty much across the board in marketing.

Speaker Change:

Mark T. Smucker: I wouldn't say it really it doesn't skew to one business or another I think you can generally apply it spreads pretty evenly I guess I would just remind the group as well that we are.

Mark T. Smucker: It's pretty much across the board in marketing. I wouldn't say it really doesn't skew to one business or another, but I think you can generally apply it.

Mark T. Smucker: Committed to continuing supporting our brands through marketing we.

Mark T. Smucker: Over time, and you know, depending on obviously pricing and relative relative pricing, we still strive to be in that six to seven ish percent of net sales obviously it varies a little bit by category.

Mark T. Smucker: It spreads pretty evenly. I guess I would just remind the group as well that, you know, we are, www.youtube.com.au www.youtube.com.au Thank you. Next question is coming from Robert Moskow from TD Calendar Line. Is that why?

Mark T. Smucker: But marketing is really key to our model and it's important to maintain a reasonable level of spend to support the brands over time.

Mark T. Smucker: Thank you next question is coming from Robert Moscow from TD calendar line is that right.

Robert Moskow: Hi, Thanks for the question.

Robert Moskow: Hi, thanks for the question. Actually, to first, Mark on as hostess, you know, those of us familiar with that company are used to seeing maybe like one big product innovation that kind of dominates the pipeline. And when I looked at, you know, some of the announcements for this calendar year, anyway, it seemed like more like a couple of little things.

Robert Moskow: Actually two.

Robert Moskow: First mark on hostess.

Robert Moskow: Those of us familiar with that company are used to seeing maybe like one big pre.

Robert Moskow: Product innovation that kind of dominates the pipeline and when I looked at some of the announcements for this calendar year any way it seemed like more like a couple of little things. So I was hoping you could dive a little bit more into how you view the pipeline this year compared to past pipelines.

Mark T. Smucker: So I was hoping you could dive a little bit more into how you view the pipeline this year compared to past pipelines. And then, secondly, for Tucker on free cash flow, you know, the guides down 30 million, you mentioned a couple of things impacting it, one of which was cash taxes, which is, I think, a $40 million increase. Can you go through the puts and takes as to why it looks like from the puts and takes, you might actually be even lower than that 30 guide, given the cash taxes. So, what was offsetting it? Thanks, sure, Rob. It's Mark.

Robert Moskow: And then secondly for Tucker on free cash flow.

<unk> is down 30 million.

Robert Moskow: Mentioned, a couple of things impacting it one of which was cash taxes, which is a.

Robert Moskow: A 40 million dollar increase.

Robert Moskow: Can you can you go through the puts and takes us to it looks like from the puts and takes you might actually be even lower than that 30 guide.

Robert Moskow: Given the cash taxes, so so what was offsetting it.

Robert Moskow: Yeah.

Hey, Rob it's Mark I'll start on innovation.

Mark T. Smucker: I'll start on innovation. You know, reading between the lines of your question, one of the things that you might have been referencing is Casbars, right, because that was a pretty large innovation. And really pleased with the performance on Casbars. It hits on a lot of different, you know, consumer insights, if you will, in terms of what, why consumers enjoy that product. I would also just point out that Hostess has been very successful in their innovation of doing iterative innovation. I mean, sometimes that's seasonal, sometimes that's variations on flavors, fillings, those types of things.

Robert Moskow: That.

Mark T. Smucker: I think.

Mark T. Smucker: Reading between the lines of your question one of the things that you might have been referencing is cast bars right because that was a pretty large innovation.

Mark T. Smucker: And really pleased with the performance on cast bars.

Mark T. Smucker: It hits on a lot of different consumer insights. If you will in terms of what what why consumers enjoy that product.

Mark T. Smucker: I would also just point out that hostess has been very successful.

Mark T. Smucker: And the innovation of doing iterative innovation I mean, some of that sometimes that seasonal sometimes as you know.

Mark T. Smucker: Variations on flavors fillings those types of things that will continue that needs to continue.

Mark T. Smucker: That will continue, that needs to continue. You know, as I've talked about the complementary capabilities that the Hostess team has, as well as our legacy team, we view, you know, without giving too much away, that there continue to be great opportunities for continued growth, innovation being a key driver of growth going forward. So we won't be unveiling anything today, but we wanted to just make sure that we're focused on it. The pace of innovation, the cycle times of innovation are still very important, and protecting that and fueling it will continue to be a focus for us. Rob, with respect to your free cash flow question, you're correct. The outlook for the fiscal year is now $500 million.

Mark T. Smucker: And as I as I've talked about the complementary.

Mark T. Smucker: Capabilities that that the hostess team has as well as our legacy team, we view without giving too much away that there continue to be a great opportunities for continued growth.

Mark T. Smucker: Innovation being a key driver of growth going forward. So we.

Mark T. Smucker: We won't be unveiling anything you know.

Mark T. Smucker: Just today, but wanted to just make sure that where we're focused on it.

Mark T. Smucker: The pace of innovation that the cycle times of innovation are still very important and protecting that and and fueling it will continue to be a focus for us.

Speaker Change: Rob with respect to your free cash flow question, you are correct. The outlook for the fiscal year is now $500 million. The change of $30 million is largely driven by the cash taxes as you have noted.

Tucker Marshall: The change of $30 million is largely driven by the cash taxes, as you have noted, but it is partially offset by just a little bit stronger earnings and also a little bit more favorability coming across all working capital. Okay. Maybe a follow-up, Mark, on Hostess. I think you fielded a question on Hostess's pricing. It is down in our tracking data.

Speaker Change: Being partially offset by just a little bit stronger earnings and also a little bit more favorability coming across all working capital.

Okay.

Speaker Change: Maybe a follow up mark on hostess.

Speaker Change: I think you can see over the question on hostess is pricing.

Speaker Change: It is down and our tracking data and then Theres a couple of competitors are also down but then there's another competitor that's up a lot.

Robert Moskow: And then there are a couple of competitors who are also down. But then there's another competitor that's up a lot. Can you give more clarity on what Hostess's pricing strategy has been for the last six months or so? And is it achieving its objective?

Speaker Change: It is.

Speaker Change: Can you give more clarity on what hostess is pricing strategy is for the last six months or so and is it achieving its objectives.

Speaker Change: Rob just generally you know I think that you know as we look at any of our categories. We want to make sure that we're being thoughtful and prudent about pricing that we're recovering our costs.

Mark T. Smucker: Rob, just generally, you know, I think that, you know, as we look at any of our categories, we want to make sure that we're being thoughtful and prudent about pricing and that we're recovering our costs, and and generally speaking not over recovering so you know at the end of the day we have to be responsible to the consumer obviously to our shareholders and making sure that we're doing the right things for the business we're we feel that from a pricing perspective right now we're in a we're in a good place that the prices the pricing is set where it needs to be and we will continue to compete effectively with with the other other brands in the marketplace, Very helpful. Thank you. Thank you. Next question today is coming from Matt Smith from Steeple.

Speaker Change: And generally speaking not over recovering.

Speaker Change: So you know at the end of the day, we have to be responsible to the consumer obviously to our shareholders and making sure that we're doing the right things for the business.

Speaker Change: We feel that from a pricing perspective right now we're in we're in a good place.

Speaker Change: That the prices the pricing is set where it needs to be.

Speaker Change: And we will continue to compete effectively.

Speaker Change: With the other other brands in the marketplace.

Speaker Change: Very helpful. Thank you.

Speaker Change: Thank you. Your next question today is coming from Matt Smith from Stifel. Your line is now live.

Matthew Edward Smith: Your line is now live. Good morning, you've talked about investing more behind the scenes is bringing that advertising and marketing closer to a high single digit as a percent of sales. And you're starting that increase, it sounds like in the fourth quarter. Should we think about the path towards your target level as a multi-year step up, or do you expect to exit next year closer to that targeted investment level? We do expect to step up over time, and so we may not be completed there by fiscal 25. It will be a journey.

Matthew Edward Smith: Hey, good morning, you've talked about investing more behind hostess, bringing that advertising and marketing closer to a high single digit as a percent of sales and youre starting that increase it sounds like in the fourth quarter should we think about the path towards your target level is a multiyear step up or do you expect to exit next year closer to that targeted investment level.

Matthew Edward Smith: We do expect a step up over time and so we may not be completed there in fiscal 'twenty five it will be it will be a journey.

Speaker Change: Thank you and a quick follow up on the pet sales comment you talked about growing in the fourth quarter and I want to make sure or is it growth inclusive of the co manufacturing sales and ill leave it there. Thank you.

Mark T. Smucker: Thank you. And a quick follow-up on the pet sales comment, you talked about growing in the fourth quarter, and I want to make sure that growth is inclusive of co manufacturing sales. I can leave it there. Correct.

Speaker Change: Correct My comments around pack growth were inclusive of co manufacturing volume.

Mark T. Smucker: My comments around pet growth were inclusive of the co-manufacturing volume. Thank you. The next question is coming from Alexia Howard from Bernstein. Your line is now live. Good morning, everyone.

Speaker Change: Thank you next question is coming from Alexia Howard from Bernstein. Your line is now live.

Alexia Jane Howard: Good morning, everyone.

Alexia Jane Howard: Good morning.

Alexia Jane Howard: Morning. Can I ask, there's been a lot of discussion about the marketing step up? Can I ask where you are on promotional activity? Are you anticipating certain parts of the business leaning more into promotions over the coming quarters? And if so, which parts of the business?

Alexia Jane Howard: Hello.

Alexia Jane Howard: There's been a lot of discussion about the marketing can I ask where youre at on promotional activity.

Alexia Jane Howard: Are you anticipating certain parts of the business.

Alexia Jane Howard: Turning into promotions more over the coming quarters.

Alexia Jane Howard: Which parts of the business.

Mark T. Smucker: And I'm wondering how the depth and breadth of promotional activity compares to pre-COVID at this point. Do you still have to get back to those levels? Or where are you in that transition? Alexia, it's Mark.

Alexia Jane Howard: And I'm wondering how the depth and breadth of promotional activity compared to pre COVID-19. At this point do you do you still have to get back to those levels or where are you in that transition.

Mark T. Smucker: Alexia it's mark.

Mark T. Smucker: I think we're not seeing anything abnormal in promotional spend. We're generally back to pre-pandemic promotional levels, and across our categories, the categories and competition, in our view, are behaving normally and rationally. So we don't see anything out of the ordinary from a promotional standpoint.

Mark T. Smucker: <unk>.

Alexia Jane Howard: We don't we're not seeing anything abnormal in promotional spend we're generally back to pre.

Alexia Jane Howard: Pre pandemic promotional levels and across our categories.

Mark T. Smucker: The categories and competition in our view is behaving normally and rationally. So we don't see anything out of the ordinary from a promotional standpoint.

Alexia Jane Howard: Okay, Great and then just touching on the state of the U S. Consumer I think at the Cagny Conference last week, there were a number of companies that said.

Mark T. Smucker: Okay, great. And then just touching on the state of the US consumer, I think at the Cagney conference last week, there were a number of companies that said things seem to be improving. US consumer confidence seems to be in a reasonably good place. Are you seeing any sort of glimmers of light in terms of emerging from a rather challenging last calendar year as we move into 2024? I would make a couple of comments.

Alexia Jane Howard: Things seem to be improving U S consumer confidence seems to be in a reasonably good place are you seeing any sort of a glimmer of light in terms of emerging from.

Alexia Jane Howard: Around the challenging last calendar year.

Alexia Jane Howard: As we move into 2024.

Speaker Change: I would just a couple of comments I think the first is our categories have continued to perform very well in this environment I mean, you have.

Mark T. Smucker: I think the first is that our categories have continued to perform very well in this environment. I mean, you have this notion that within our categories, we play across the value spectrum. So we offer products that are, you know, the consumer views as more valuable, whether it's Folgers or traditional milk phone; dog biscuits are obviously more affordable. We've also seen some of our premium offerings continue to perform well. So I think the breadth of our offering has served us well; we have a relatively low incidence of private label competition, you know, relatively lower than other categories in our, in our, what we have in our portfolio. So that's been helpful. Even when you are in areas where you have seen some consumers shifting a bit, what I would highlight is natural meat and pets. So you see our pepperoni brand, maybe a little bit softer than it has been in the past; that's indicative of the entire sort of soft and chewy pet snack category.

Speaker Change: This notion that within our categories, we play across the value spectrum. So we offer products that are.

Speaker Change: The consumer views as more value, whether it's folgers or traditional milk bone dog biscuits are obviously.

Speaker Change: More affordable.

Speaker Change: We've also seen some of our premium offerings continue to perform well. So I think the breadth of our offering has served us well we have a relatively low incidence of private label.

Speaker Change: Competition.

Speaker Change: Relatively lower than other categories in our.

Speaker Change: Well you have in our portfolio. So that's been helpful.

Speaker Change: Even when you are in areas, where you have seen some consumer shifting a bit.

Speaker Change: What I would it might highlight as natural meat and Pat So you see our Pup Peroni brand, maybe a little bit softer.

Speaker Change: And then it has in the past that's indicative of the entire.

Speaker Change: Soft and chewy pet snack categories. So that's not just us, but I think it's a cross competition as well.

Mark T. Smucker: So it's not just us, but I think it's across the competition as well. That said, brands like Milk Bone that have that play across that value spectrum have actually been able to pick up the slack of where we have seen some, maybe, temporary softness in some of those other brands. Great. Thank you very much. I'll pass it on.

Speaker Change: That said brands like milk bone and then have that play across that value spectrum have actually been able to pick up the slack of of where.

Speaker Change: Where we have seen some maybe temporary softness in some of those other brands.

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

Speaker Change: Thank you. Our next question today is coming from Steve powers from Deutsche Bank. Your line is now live.

Steve Powers: Thank you. Our next question today is coming from Steve Powers from Deutsche Bank. Your line is now live. Hey, thanks. I'm Mark.

Steve Powers: Hey, Thanks, Hi, Mark Hi, Tucker.

Steve Powers: Hi Tucker. Morning, Tucker. Good morning.

Steve Powers: Good morning.

Steve Powers: Hey, good morning.

Steve Powers: So Tucker, I don't want to beat a dead horse, but I do want to go back to the stranded overhead, the conversation you were having earlier, and just play it back to you. I think a lot of the confusion on this point comes from, you know, I think it was slide 90 in your Cagney deck when you gave a number of fiscal 25 considerations. The way that that slide reads is that it's a year over year impact, right? So all of the considerations on those slides are pluses and minuses relative, it seems, to 24. Strand overhead is a negative, and it's confusing because, as you said earlier, contract manufacturing and strand overhead are independent considerations.

Steve Powers: I want to beat a dead horse, but I do want to go back to the stranded overhead the conversation you were having earlier.

Steve Powers: And just play it back to you I think a lot of confusion on this point comes from.

Steve Powers: Slide 90, and you're and you're talking you back when you gave a number of fiscal 'twenty five considerations.

Steve Powers: The way that that slide reeds is that because that's a year over year impact right. So all of the considerations on those slides are pluses and minuses relative seems to 'twenty four.

Steve Powers: Shred overhead as a negative and it's confusing because as he said earlier contract manufacturing and turned overheads are independent considerations and while there should be stranded overhead carryover from 24 before it's fully rationalized and 26 and beyond.

Tucker Marshall: And while there should be stranded overhead carryover from 24 before it's fully rationalized in 26 and beyond, I guess I'm struggling from what you said earlier to see how it is worse in 25 than in 24. So maybe you could just kind of tell me I'm misinterpreting either the slide or your comments earlier, but talking through how to think about stranded overheads specifically. You know, if you could, thank you. Absolutely, Steve. And we certainly appreciate that, you know, the group is looking for clarity on this. You know, we're doing our best without providing an estimate for FY 25, but Going back to this fiscal year, we have a 60 Cent Impact to Earnings Per Share as a Result of Stranded Overhead. That net impact is total stranded overhead costs, last by TSA income and reimbursement for service.

Speaker Change: I guess I'm struggling from what you said earlier to see how it is.

Speaker Change: <unk> and $25 24, so maybe you could just kind of maybe I'm misinterpreting, the Florida your comments earlier, but.

Speaker Change: Just talking through how to think about.

Speaker Change: Staring at overheads specifically.

Speaker Change: If you could thank you.

Speaker Change: Yes, absolutely, Steve and we certainly appreciate that.

Speaker Change: The group is looking for clarity on this.

Speaker Change: So we're doing our best without providing an estimate for FY 'twenty five.

Speaker Change: But.

Speaker Change: Going back to this fiscal year, we have a net.

Speaker Change: 60, <unk> impact to earnings per share as a result of stranded overhead.

Speaker Change: That net impact is total stranded overhead costs.

Speaker Change: Less by TSA income and.

Speaker Change: And reimbursement for services.

Speaker Change: So we will and our transition services agreement about midway through the fiscal year.

Tucker Marshall: So we will end our transition services agreement about midway through the fiscal year; therefore, we will not be collecting the income associated with those services. Secondly, we receive reimbursement for utilization of Smucker infrastructure, such as our distribution environment. And as a result of that, when ultimately POST exits our distribution facilities, we won't be receiving reimbursement. So the company, through our transformation office, has begun to address stranded overhead this fiscal year for the benefit of next fiscal year. But there are certain activities that we can't address until the TSA is completed.

Speaker Change: So therefore, we will not be collecting.

Fee income associated with those services.

Speaker Change: Secondly, as we receive reimbursement for utilization of Smucker infrastructure.

Speaker Change: Such as our distribution environment.

Speaker Change: And as a result of that when ultimately post exits our distribution facilities, we won't be receiving reimbursement.

Speaker Change: So the company through our transformation office has begun to address stranded overhead this fiscal year for the benefit of next fiscal year, but there are certain activities that we can't address until the TSA is completed.

Tucker Marshall: Until they exit our distribution facilities and we can rationalize some of that network. Steve, I hope that helps provide context just around the framework and the mechanics. I certainly appreciate you're not the only one asking. So hopefully, that additional color is helpful to you and others. Yeah, it does. So, I think that, so let me just plug this, is that when you talked earlier about contract manufacturing being essentially a zero-margin activity, you weren't including in that all of the other income considerations that you just spelled out. Contract manufacturing considerations are independent of stranded overhead considerations, whether they be qualitative or quantitative.

Speaker Change: Until they exit our distribution facilities and we can rationalize some of that network.

Speaker Change: Steve I hope that helps provide context, just around the framework and the mechanics.

Steve Powers: I appreciate youre not the only one asking so hopefully that additional color is helpful to you and others.

Steve Powers: Yeah. It does so I think that so let me just so it sounds like the plug is that when you talked earlier about contract manufacturing.

Steve Powers: Being essentially a zero margin activity.

Steve Powers: You were including in that all of the other.

Steve Powers: Some considerations that you just spelled out.

Steve Powers: Fair contract contract manufacturing.

Steve Powers: Considerations are independent of stranded overhead considerations.

Whether they be qualitative or quantitative.

Speaker Change: Understood very clear thank you so much.

Tucker Marshall: I understand. Very clear. Thank you so much.

Speaker Change: Absolutely. Thank you.

Tucker Marshall: Absolutely. Thank you. Thank you. Our next question today is coming from Pamela Kaufman from Morgan Stanley. Your line is now live. Good morning.

Speaker Change: Thank you. Our next question today is coming from Pamela Kaufman from Morgan Stanley. Your line is now live.

Pamela F. Kaufman: Good morning.

Pamela F. Kaufman: Sorry to ask this again, but.

Pamela F. Kaufman: I'm sorry to ask this again. But just to clarify Steve's question on stranded overheads, do you expect the magnitude of stranded overhead costs to moderate next year relative to the 60 cent impact this year, so that effectively it creates a tailwind to year over year earnings growth? Pam, I would love to tell you the number or the direction for next fiscal year, but that would be inappropriate until we finish our planning process. So, unfortunately, we'll have to do that on the fourth quarter earnings call. I'm sorry.

Pamela F. Kaufman: Just to clarify on Steve's question on San.

Pamela F. Kaufman: Ended overhead.

Pamela F. Kaufman: Do you expect the magnitude of stranded overhead cost.

Pamela F. Kaufman: Trended overhead costs to moderate next year relative to the <unk> impact this year, so that effectively creates a tailwind year over year earnings growth.

Speaker Change: Pam I would love to tell you the number.

Pam: Or the direction for next fiscal year, but that would be inappropriate until we finish our planning process.

Pam: Unfortunately, we will have to do that on the fourth quarter earnings call.

Sorry, Andrew.

Pamela F. Kaufman: Understandable. And then separately, will there be any lingering impact from the unquestionable startup costs that impact 2025? And then can you just give an update on the progress that the Transformation Office has made? What have they been focused on? And what cost savings opportunities have they identified?

Andrew: And then separately will there be any lingering impact from the unprofitable startup cost impact.

Andrew: Impact 2025, and then can you just give an update on the progress of the transformation office has made what if they've been focused on and.

Andrew: What cost savings opportunities have de identified.

Andrew: As we ramp up on cross the bowls.

Tucker Marshall: As we ramp up Uncrustable production and McCalla, we will continue to see an impact associated with carrying overhead and a level of pre-production expenses. We're still refining what that estimate will be. But the great thing about McCullough is it will be producing saleable sandwiches for the benefit of fiscal year 25.

Andrew: Production and Mccall, we will continue to see.

Andrew: And impact.

Andrew: Associated with carrying overhead and a level of preproduction expenses, we're still refining what that estimate will be but the great thing about Macao is it will be producing salable sandwiches for the benefit of fiscal year 'twenty five.

Tucker Marshall: As you think about our transformation office, we continue to be very pleased with our initial year where we've stood up, The office where we've created almost 10 active work streams in support of cost and productivity savings and support of realizing synergies associated with the hostess acquisition and also in support of addressing stranded overhead, associated with the divested pet food brand. And the exciting thing is it's not only contributing dollars for reinvestment back into the business, but it's supporting our earnings and earnings growth and delivery. But it's also enabling new ways of working for our employees and cross functional teams to really deliver great benefits to our company and organization. Thank you. Thanks. Thank you. Our next question today is coming from Rob Dickerson from Jeffries. Your line is now live. Great, thanks so much. Um, I don't mean to, I'm just kidding.

Andrew: As you think about our transformation office, we continue to be very pleased with our initial year, we stood up the.

Andrew: The office, where we've created almost 10 active work streams and support.

Andrew: Cost and productivity savings and support of realizing synergies associated with the hostess acquisition.

Andrew: And also in support of addressing stranded overhead.

Andrew: Associated with the divested pet food brands.

Andrew: And the exciting thing is it's not only contributing dollars for reinvestment back into the business, but it is supporting our earnings and earnings growth in delivery.

Andrew: But it's also enabling new ways of working for our employees and cross functional teams to really deliver great benefits to our company and organization.

Speaker Change: Thank you.

Speaker Change: Thanks.

Speaker Change: Thank you. Our next question today is coming from Rob Dickerson from Jefferies. Your line is now live.

Rob Dickerson: Great. Thanks, so much.

Rob Dickerson: I don't mean to just kidding.

Rob Dickerson:

Rob Dickerson: Um, excuse me, I just want to ask a kind of broader question on coffee. You know, I guess, Mark, you know, when we think historically, the coffee business always very strong, you know, it's been a consistent performer, operating margin, you know, kind of most of the time, let's say, you know, the majority of the time, historically, you know, was coming in a little bit north of 30%. Totally understand that, you know, point in time, input costs were a bit lower. But now, you know, I look at the business and, you know, think, okay, well, I mean, Cafe Bustelo is clearly doing extremely well, Duncan's still strong with new innovation platform, folders, you know, still taking buying shares to the largest brand.

Rob Dickerson: Excuse me I just wanted to ask a broader question on coffee.

Rob Dickerson:

Rob Dickerson: I guess mark.

Mark T. Smucker: When we think historically of the coffee business is always very strong.

Mark T. Smucker: There has been a consistent performer operating margin.

Mark T. Smucker: Most of the time, let's say.

Mark T. Smucker: The majority of the time.

Mark T. Smucker: Historically.

Mark T. Smucker: Coming in a little bit north of 30%.

Speaker Change: Totally understand it.

Speaker Change: Quint in time.

Speaker Change: <unk> costs were a bit lower.

Speaker Change: No I look at the business.

Speaker Change: Okay, well I mean, Cathy Bristow is clearly doing extremely well Duncan so strong with the innovation platform.

Speaker Change: Folders still take share so the largest brand.

Rob Dickerson: So it seems as if the business itself is in a good position. I mean, even on a relative basis across the category, you're investing a little bit in price, but still pass through category. So I'm just trying to right size kind of like, how you're thinking about that margin profile, let's just even say, broadly speaking, over the next couple of years, you know, vis-a-vis kind of volume and price, right, because volume strong, right, and pricing comes through usually kind of in a pastor business, I would think there would be some fixed, you know, cost leverage that would allow you to start to recover, kind of back to that 30% plus profile. We're just not there yet.

Speaker Change: It seems as if the business itself is in a good position, even though on a relative basis across the category.

Speaker Change: You're investing a little bit in price, but still pass through category. So I'm, just trying to right size kind of like.

Speaker Change: Youre thinking about that margin profile, but just even say broadly speaking over the next couple of years.

Vis vis kind of all your price right because volume strong pricing comes through usually kind of a pass through business.

Speaker Change: We think there would be some fixed cost leverage that would allow you to start to recover back to that 30% plus profile.

Speaker Change: Or just not there yet so just curious as to how youre thinking about that thanks.

Tucker Marshall: So just curious as to how you're thinking about that. So Rob, as we think about the coffee momentum through the year, the business continues to perform, across the portfolio. And we're very pleased with the brands and with the format. To your point, we've seen coffee margins improve as we have gone through the fiscal year, particularly as we have lapped larger cost baskets and gotten into more normalized cost baskets. And so we continue to see the strength of the portfolio. I think we're focused on sort of the high 20s, as we've said in previous earnings calls, in support of having healthy margins in the portfolio, but also in support of reinvesting in the business for the health and strength of our brands.

Rob Dickerson: So Rob.

Speaker Change: We think about the coffee momentum through the year the business continues to perform.

Rob Dickerson: Across the portfolio and we're very pleased.

Rob Dickerson: With the brands and with the formats.

Rob Dickerson: To your point, we've seen coffee margins improve as we have gone through the fiscal year.

Rob Dickerson: As we have.

Rob Dickerson: Lapped larger cost basket and gotten into more normalized cost baskets and so we continue to see the strength of the portfolio.

Rob Dickerson: I think we're focused on sort of the high Twenty's as we've said in previous earnings calls.

Rob Dickerson: In support of having healthy margins in the portfolio, but also in support of reinvesting in the business for the health and strength of our brands and also as we think about our desired growth and liquid coffee.

Tucker Marshall: And also, as we think about our desired growth and liquid coffee, And then furthermore, as we continue to think about the trajectory of coffee, we always assess volatility in the green coffee market, And we also ensure that we're passing through pricing when appropriate and prudent, both on the upside and the downside of inflation or deflation. And then lastly is the coffee margin profile will continue to be strong in the fourth quarter. But then as we think about our first quarter of any fiscal year, it tends to be our sort of softer margin quarter of the full fiscal year. Okay, fair enough. And then if I could just ask a fairly simple kind of dumbed down question.

Rob Dickerson: And then Furthermore, as we continue to think about the trajectory of coffee, we always assess.

Rob Dickerson: Volatility in the Green coffee market.

Rob Dickerson: And we also ensure that we're passing through pricing when appropriate and prudent both on the upside and the downside of inflation or deflation.

Rob Dickerson: And then lastly is the coffee margin profile.

Rob Dickerson: We will continue to be strong in the fourth quarter, but then as we think about our first quarter of any fiscal year it tends to be our sort of softer.

Rob Dickerson: Margin quarter of the full fiscal year.

Speaker Change: Okay Fair enough and then if I could just ask you a fairly simple kind of dumb down question.

Speaker Change: In the frozen handheld spread segment.

Rob Dickerson: In the frozen handheld spread segment, you know, you've clearly outlined kind of the revenue bogey per year over the next, I mean, this year, then over the next two years. So for modeling purposes, right, it's easy enough to say, okay, well, let's, you know, take what they finished this year in the segment and add 100 million, right, that's uncrustable, seems like you have decent visibility on that. Are there any other puts and takes?

Speaker Change: You've clearly outlined.

Speaker Change: The revenue bogie per year over the next year.

Speaker Change: This year and then over the next two years.

Speaker Change: So for modeling purposes right.

Speaker Change: Enough to say, okay, well, let's see.

Speaker Change: Take what they finish this year in the segment had $100 million right. That's across the board. It seems like you have decent visibility on that.

Speaker Change: Are there any other puts and takes.

Mark T. Smucker: You know, in that segment that could potentially get that segment, let's say, higher than that incremental 100 million that you've already defined on Uncrustables and, you know, I'm partially speaking to the new innovation coming from Jeff and then I don't know if they're offsets on Scrubs. And that's all. Thanks a lot. You know, Rob, we continue to be very excited about the trajectory of the Uncrossable's venture brand and or portfolio. You know, we're still on track to the billion dollar ambition by the end of FY26, as you have noted. You know, we said directionally, on average, that might be about $100 million per year. I think right now, that's where our focus is to ensure that we get to that ambition, as we continue to build out traditional distribution channels and territories, along with new distribution channels as well. And so I think that that's probably the framework that I would use as you think about modeling the glide path of Uncrossable's over the next several years.

Speaker Change: In that segment that could potentially get that segment, let's say higher than that incremental $100 million that you've already defined or across the bulls.

Speaker Change: Speaking to the new innovation coming from Jeff and then I don't know if theyre all settled scribes. That's all thanks a lot.

Speaker Change: You know Rob we continue to be very excited about the trajectory of the unprofitable venture brand <unk> portfolio.

Speaker Change: We're still on track to the $1 billion ambition by the end of FY 'twenty six and you have noted we said directionally on average that might be about $100 million per year.

Speaker Change: Right now that's where our focus is to ensure that we get to that ambition as we continue to build out traditional distribution channels and territories, along with new distribution channels as well and so I think that that's probably the framework that I would use as you think about modeling the glide path, but across the board over the next several years.

Mark T. Smucker: Alright, great. Thank you so much. Thank you. Our next question is coming from Max Comfort from BNP Powered By. Your line is now live. Hey, thanks for the question. First one's on coffee.

Speaker Change: Alright, great. Thanks, so much.

Speaker Change: Thank you. Our next question is coming from Max comfort from BNP Paribas. Your line is now live.

Max Comfort: Hey, a quick question first one is on coffee so on volte.

Max Comfort: So on, volume mix it looked like it came in a bit better than we might have expected based on track channel trends during the quarter i was hoping you could unpack the mix impact versus volume and then also what you were seeing in track channels versus non-track channels and how those factors inform your view of the fourth quarter thank you, Yeah, so as we think about the third quarter performance on coffee, we saw nice momentum from a volume mix standpoint. Obviously, we had the deflationary impact as a result of taking pricing. Continue to be very pleased with the momentum on Cafe Bustelo and Dunkin, along with our K-Cup portfolio. They all performed well on the quarter.

Max Comfort: Volume mix it looks like it came in a bit better than we might have expected based on tracked channel trends during the quarter I was hoping you could unpack the mix impact versus volume and then also what you were seeing in tracked channels versus non tracked channels how would those factors inform your view of the fourth quarter.

Speaker Change: Yeah, So as we think about.

Speaker Change: Third quarter performance on coffee, we saw a nice momentum from a volume mix standpoint, obviously, we have the deflationary impact as a result of taking pricing continued to be very pleased with the momentum on cafe Bustillo and Duncan along with our K Cup portfolio. They all performed well on the quarter.

Tucker Marshall: Folgers also had a very strong quarter as well, but it was a little softer from a volume mix standpoint as we were lapping a key retailer activity in the prior quarter. And we continue to be very pleased with how we're considering the momentum into our fourth quarter as well. Thanks, and then on, circling back to a slide you put up at Cagney last week. So you laid out two tailwinds and three headwinds for your top line. Three of those are more are not related to organic, two of them are.

Speaker Change: <unk> also had a very strong quarter as well, but it was a little softer from a volume mix standpoint, as we were lapping a key retailer activity in the prior quarter.

Speaker Change: And we continue to be very pleased with how we're considering the momentum into our fourth quarter as well.

Speaker Change: Yeah.

Speaker Change: Thanks, and then on.

Speaker Change: Circling back to our slide you put up at Cagny last week. So you laid out two tailwind and headwinds for your topline three of those are more yep.

Speaker Change: Not related to organic include Denmark continued brand momentum and inflationary pressures impacting consumers realize you're not giving guidance yet for FY 'twenty five but as we think about those two factor. If there is any reason to think one outweighs. The other I'm really just trying to get a sense for how that continued brand momentum could or could not be offsetting the <unk>.

Max Comfort: So continued brand momentum and inflationary pressures impacting consumers. I realize we're not giving guidance yet for FY25, but as we think about those two factors, if there's any reason to think one outweighs the other, I'm really just trying to get a sense for how that continued brand momentum could or could not be offsetting the inflationary pressures impacting consumers. Thanks, I'll leave it there. Yeah, Max, right.

Speaker Change: Inflationary pressures impacting consumers. Thanks, I'll leave it there.

Speaker Change: Yes Max.

Speaker Change: We have really strengthened the portfolio over the last several years with investments across our key brands.

Tucker Marshall: We have really strengthened the portfolio over the last several years with investments across our key brands, along with reshaping the portfolio. And so we feel very confident in the ongoing growth of the Uncrustables frozen handheld, demonstrating category leadership and spreads, continuing to demonstrate at home coffee leadership with the continued growth of the Cafe Bustelo, Dunkin and K-Cup portfolios. And then thinking about our pet momentum, as we think about Milkbone and also Meow Mix, and then also the contribution from the hostess acquisition. But to your point back on the core portfolio. You know, as it relates to just the the impact of inflationary pressures associated with consumers purchasing behavior, we continue to monitor and assess and understand what that means to our core portfolio.

Speaker Change: Along with reshaping the portfolio and so we feel very confident in the ongoing growth of being across the board frozen handheld demonstrating.

Max Comfort: Demonstrating category leadership in spreads continuing to.

Max Comfort: Demonstrate at home coffee leadership with the continued growth of the cafe style on Dunkin'.

Max Comfort: K Cup portfolios, and then thinking about our pet momentum as we think about milk bone and also meow mix and then also the contribution from the hostess acquisition, but to your point back on the core portfolio.

As it relates to just the impact of inflationary pressures associated with consumers purchasing behavior, we continue to monitor and assess and understand what that means to our core portfolio, but what we have seen over the last several quarters is continued growth across the portfolio and demonstrating volume growth and RF.

Tucker Marshall: But what we have seen over the last several quarters is continued growth across the portfolio and demonstrating volume growth. And our expectation is that we continue to demonstrate momentum. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.

Max Comfort: [noise].

Max Comfort: <unk>, we continue to demonstrate momentum.

Speaker Change: Thank you. We appreciate of our question and answer session I'd like to turn the floor back over for any further or closing comments.

Mark T. Smucker: Thank you. Appreciate everyone joining the call this morning. It was actually great to see you all at Cagney last week.

Speaker Change: Thank you I appreciate everyone joining the call. This morning, it was actually great to see you all at Cagny last week, and obviously, there we were able to share our strategy more holistically and why we are so confident about the journey, we've been on and the future of this business.

Operator: And obviously there we were able to share our strategy more holistically and, and why we are so confident about the journey we've been on and the future of this business. Obviously, you know, we hope you recognize the strong momentum in the third quarter, another, another great quarter for us. And, and none of that would have been possible without our awesome employees. So just want to take a moment to acknowledge our great employees. Again, welcome the hostess folks and the brands to our portfolio and just remain optimistic for the future and hope you all have a great day. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Speaker Change: Obviously, we hope you recognize the strong momentum in the third quarter. Another another great quarter for us and and none of that would've been possible is that our awesome employees. So I just wanted to take a moment to.

Speaker Change: Knowledge, our great employees again.

Speaker Change: Welcome to the hostess folks.

Speaker Change: And the brands to our portfolio and just remain optimistic for the future and hope you all have a great day.

Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.