Q4 2024 General Mills Inc Earnings Call

Good morning and welcome to General Mills fourth quarter fiscal 2024 earnings conference call.

Operator: All participants are in a listen-only mode. After the speaker's remarks, we will have a question and answer session. To ask a question, please press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Jeff Siemon, Vice President of Investor Relations and Treasurer.

Operator: All participants are in a listen-only mode.

Operator: After the speaker's remarks, we will have a question-and-answer session. To ask a question, please press star, followed by the number one on your telephone keypad. As your reminders, this conference call is being reported.

Speaker Change: All participants are in a listen-only mode. After the speaker's remarks, we will have a question-and-answer session. To ask a question, please press star followed by the number 1 on your telephone keypad. As a reminder, this conference call is being recorded.

Jeff Siemon: I would now like to turn the call over to Jeff Siemon, Vice President of Investor Relations and Treasurer.

Jeff Siemon: Thank you, Julianne, and good morning, everyone. Thank you for joining us today for our Q&A session on our fourth quarter and fully year fiscal 24. I hope everyone had time to review our press release, listen to our prepared remarks, and view our presentation materials, which we made available this morning on our investor relations website.

Speaker Change: I would now like to turn the call over to Jeff Siemon, Vice President of Investor Relations and Treasurer. Go ahead.

Jeff Siemon: Thank you, Julianne. And good morning, everyone. Thank you for joining us today for our Q&A session on our fourth quarter and full year fiscal 24 results. I hope everyone had time to review our press release, listen to our prepared remarks, and view our presentation materials, which we made available this morning on our Investor Relations website. It's important to note that in our Q&A session, we may make forward-looking statements that are based on management's current views and assumptions.

Jeff Siemon: Thank you, Julianne, and good morning everyone. Thank you for joining us today for our Q&A session on our fourth quarter and full year fiscal 24 results. I hope everyone had time to review our press release, listen to our prepared remarks, and view our presentation materials, which we made available this morning on our investor relations website.

Jeff Siemon: It's important to note that in our Q&A session, we may make forward-looking statements that are based on management's current views and assumptions. So please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliation of non-GAAP information, which we may be discussing on today's call.

Jeff Siemon: It's important to note that in our Q&A session, we may make forward-looking statements that are based on management's current views and assumptions. So please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which we may be discussing on today's call.

Jeff Siemon: So please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which we may be discussing on today's call. I'm here this morning with Jeff Harmening, our Chairman and CEO, and Kofi Bruce, our CFO. So I think we can go ahead and get to the first question. Julianne, can you please get us started?

Jeff Siemon: I'm here this morning with Jeff Harmaning, our Chairman and CEO, and Kofi Bruce, our CFO. So I think we can go ahead and get to the first question.

Speaker Change: I'm here this morning with Jeff Harmening, our Chairman and CEO , and Kofi Bruce, our CFO .

Jeff Siemon: Julianne, can you please get us started? Certainly, as a reminder to ask the question, please press star, followed by the number one on your telephone keypad.

Speaker Change: So I think we can go ahead and get to the first question. Julianne, can you please get us started?

Operator: Certainly, as a reminder to ask a question, please press star followed by the number one on your telephone keypad. Our first question will come from Ken Goldman from JP Morgan. Please go ahead. Your line is open.

Julianne: Certainly, as a reminder, to ask a question, please press star followed by the number one on your telephone keypad. Our first question will come from Ken Goldman from J.P. Morgan. Please go ahead. Your line is open.

Ken Goldman: Our first question will come from Ken Goldman from JP Morgan. Please go ahead; your line is open.

Kenneth B. Goldman: Hi. Thank you very much. I appreciate it.

Ken Goldman: Hi, thank you very much. I appreciate it. I wanted to make sure, rather than I understood the dynamics and international, it's a bit of a specific question to start, but the commentary and the prepared remarks, you know, about consumer challenges might indicate that volume would have been more pressure than price mix, but it was the ladder that was down by a greater degree.

Kenneth B. Goldman: Hi, thank you very much. I appreciate it.

Kenneth B. Goldman: I wanted to make sure, rather, that I understood the dynamics in international. It's a bit of a specific question to start, but...

Speaker Change: The commentary and the prepared remarks, um...

Speaker Change: You know, about consumer challenges might indicate that volume would have been more pressured than price mix, but it was the latter that was down by a greater degree. So I'm just curious if you can walk us through the dynamic there and if there were any unusual puts and take this past quarter, and then I have a broader follow-up.

Kenneth B. Goldman: I wanted to make sure, rather, that I understood the dynamics of international retailing. It's a bit of a specific question to start, but the commentary and the prepared remarks about consumer challenges might indicate that volume would have been more pressured than price mix, but it was the latter that was down by a greater degree. So I'm just curious if you can walk us through the dynamic there and if there were any unusual puts and take this past quarter, and then I have a broader follow-up.

Kofi Bruce: So I'm just curious if you can walk us through the dynamic there. And if there were any unusual puts and take this past quarter, and then I have a broader follow-up.

Kofi A. Bruce: Ken, thanks for the question. This is Kofi.

Kofi Bruce: And thanks for the question.

Kofi Bruce: This is Kofi. So, as you know, our organic sales were down 10% in international and Q4. A bit more than half of that came from reclassification, from net sales to cost of goods sold in Q4, an adjustment that was immaterial to the company's full year results, but obviously important in the quarter for the segment. The rest of the decline in international was really a function of the difficult market conditions in both Brazil and China. Our Brazil performance, specifically both the consumer environment and value challenges at the shelf, as well as the customer environment where customers were reducing inventory levels pretty significantly versus last year.

Speaker Change: Bye.

Kofi A. Bruce: And thanks for the question, this is Kofi.

Kofi A. Bruce: So, as you know, our organic sales were down 10% in international in Q4. A bit more than half of that came from reclassification from net sales to cost of goods sold in Q4, an adjustment that was immaterial to the company's full-year results but obviously important in the quarter for the segment. The rest of the decline in international was really a function of the difficult market conditions in both Brazil and China.

Speaker Change: So as you know our organic sales were down 10% in international in Q4

Speaker Change: A bit more than half of that came from a reclassification from net sales to cost of goods sold in Q4, an adjustment that

Speaker Change: was immaterial to the company's full year results but obviously important in the quarter for the segment.

Speaker Change: The rest of the decline in international was really a function of the difficult market conditions in both Brazil and China.

Kofi A. Bruce: Our Brazil performance, specifically both the consumer environment and value challenges at the shelf, as well as the customer environment where customers were reducing inventory levels pretty significantly versus last year. And then China, after a strong start to the year, we saw a real souring or downturn in consumer sentiment in the quarter that had a negative impact on our shop traffic for Haagen-Dazs and our premium brands.

Speaker Change: Our Brazil performance, specifically both the consumer environment and value challenges at the shelf, as well as the customer environment, where customers were reducing inventory levels pretty significantly versus last year.

Kofi Bruce: And then China, after a strong start to the year, we saw a real souring or downturn in consumer sentiment in the quarter that had, you know, a negative impact on our shop traffic for Häagen-Dazs and our premium dumpling business. So that's.

Speaker Change: and then China after a strong start to the year.

Speaker Change: We saw a real souring or downturn in consumer sentiment in the quarter.

Speaker Change: that had a negative impact on our shop traffic for Haagen-Dazs and our premium dumpling business.

Kenneth B. Goldman: So, that's all of it. I'm stepping on your words, I apologize, but I appreciate that. The follow-up question, and thank you for all the detailed guidance you always provide from top to bottom in the P&L every year, is if you could break out for us a little bit of the cadence of the top line and EPS growth this year, and, in particular, if there's any considerations as we think about modeling the first quarter. Yeah, I think so.

Kofi Bruce: Oh, sorry. Thank you. I'm stepping on your words.

Speaker Change: So that's, oh sorry, yeah, that's about it.

Ken Goldman: I apologize, but I appreciate that the follow-up is, and thank you for all the detailed guidance you always provide from top to bottom in the PNL every year. I'm curious if you could break out for us a little bit of the cadence of the top line and EPS growth this year, and in particular, represent any considerations as we think about modeling the first.

Speaker Change: Yep.

Speaker Change: I'm stepping on your words, I apologize, but I appreciate that.

Speaker Change: The follow-up is, and thank you for all the detailed guidance you always provide from top to bottom in the P&L every year. I'm curious if you could break out for us a little bit of the cadence.

Speaker Change: of the top line in EPS growth this year, and in particular, if there's any considerations as we think about modeling the first quarter.

Jeff Harmening: Carter. I think that we won't get too detailed other than to just note that our Q1 results we would expect to try and below the balance of the rest of the year, primarily driven by higher levels of investment as we step into the year with a focus on improved volume. And then obviously the comparison against our strongest quarter performance in fiscal 24.

Kofi A. Bruce: Yeah, I think that they all, we won't get too detailed, other than to just note that our Q1 results, we would expect to trend below the balance of the rest of the year, primarily driven by, you know, higher levels of investment as we step into the year with a focus on improved volume, and then obviously the comparison against our strongest quarter performance in fiscal 24.

Speaker Change: I think that we won't get too detailed other than to just note that our Q1 results we would expect to

Speaker Change: to trend below the balance of the rest of the year. Primarily driven by higher levels of investment as we step into the year with a focus on improved volume and then obviously the comparison against our strongest quarter performance in fiscal 24.

Andrew Lazar: Our next question comes from Andrew Lazar from Barclays. Please go ahead. Your line is open.

Operator: Our next question comes from Andrew Lazar from Barclays. Please go ahead. Your line is open.

Andrew Lazar: Great. Thanks.

Speaker Change: Our next question comes from Andrew Lazar from Barclays. Please go ahead, your line is open.

Andrew Lazar: Great. Thanks.

Andrew Lazar: Good morning, everybody. Good morning, Andrew. Maybe Jeff, to start off, I know in the prepared remarks, you discuss sort of a clear mission to drive better volume results through reinvestment, which I know is contemplated in your outlook for 25. And you mentioned prominently the need to improve sort of the value equation for consumers, even mentioning optimizing price points in certain areas, a 20% increase in coupon spending sort of as examples. And I know that consumers measure value in lots of different ways, not just price. So I was hoping to get maybe a better sense of how the mix of incremental spending for 25 is sort of broken out across, you know, what would you consider higher quality sort of brand equity building versus, let's say, more trade or price oriented spend, particularly as this is such a sort of a high-button topic among investors right now.

Jeff Siemon: Good morning, everybody. Good morning, Andrew.

Andrew Lazar: Maybe, Jeff, to start off, I know in your prepared remarks, you discuss sort of a clear mission to drive better volume results through reinvestment, which I know is contemplated in your outlook for 2025. And you mentioned prominently the need to improve sort of the value equation for consumers, you know, even mentioning optimizing price points in certain areas, a 20% increase in coupon spending, sort of as examples. And I know that consumers measure value in lots of different ways, not just price.

Andrew Lazar: Great. Thanks. Good morning, everybody.

Speaker Change: Good morning, Andrew.

Andrew Lazar: Maybe, Jeff, to start off, I know in the prepared remarks, you discuss sort of a clear mission to drive better volume results through reinvestment, which I know is contemplated in your outlook for 25.

Speaker Change: And you mentioned prominently the need to improve sort of the value equation for consumers.

Speaker Change: You know, even mentioning optimizing price points in certain areas.

Speaker Change: A 20% increase in coupon spending, sort of as examples. And I know that consumer measures value in lots of different ways, not just price.

Andrew Lazar: So I was hoping to get maybe a better sense of how the mix of incremental spending for 2025 is sort of broken out across, you know, what we consider higher quality, sort of brand equity building versus, let's say, more trade or price-oriented spend, particularly as this is such a sort of a hot button topic among investors right now.

Speaker Change: So I was hoping to get maybe a better sense of how the mix of incremental spending for 25 is sort of broken out across, you know, what would you consider a higher quality sort of brand equity building versus, let's say, more trade or price-oriented spend, particularly as this is such a sort of a hot-button topic among investors right now.

Jeff Harmening: Yeah, thank you, Andrew. That's right.

Jeffrey L. Harmening: Yeah, thank you, Andrew. That's, that's right.

Jeff Harmening: I mean, improving value is really one mission we have to get better than this. If I take a step back and look at this past year, you know, our categories in terms of volume performance and performance improved through the first half of the last year, which was they were down 2.4% in terms of volume or category is up half a percent in the fourth quarter. And I think that's important because, as we had talked about previously, you know, there are a few events in the back half of our fiscal year, which we thought would improve category performance, and they did graduate, they did.

Speaker Change: Yeah, thank you, Andrew. That's right. I mean, improving value is really the number one mission we have to get competitiveness. So if I take a step back and look at this past year,

Speaker Change: You know, our categories in terms of volume performance and pound performance improved through the first half of the last year, which was they were down 2.4% in terms of volume. Our category is to up half a percent in the fourth quarter.

Speaker Change: And I think that's important because, as we had talked about previously, you know, there are a few events in the back half of our fiscal year which we thought would improve category performance, and they did. Gradually, they did.

Jeffrey L. Harmening: I mean, improving value is really the number one mission we have to get competitiveness. If I take a step back and look at this past year, you know, our categories in terms of volume performance and pound performance improved through the first half of the last year, which was they were down 2.4% in terms of volume; our categories were up half a percent in the fourth quarter. And, and I think that's important, because as we had talked about previously, you know, there are a few events in the back half of our fiscal year which we thought would improve categories of performance.

Jeff Harmening: And that really is the lapping of pricing from a year ago, lapping of snap benefits in the on-shelf availability of private label and some of the other smaller brands. And so that indeed took place. And so the job for us to do now is to increase our level of competitiveness. And the fact is that inflation has been higher than longer, higher for longer than many people assumed. It would be not in food necessarily. Actually, food inflation is actually coming down. But if you look at the broader macroeconomic environment, we're still saying, you know, inflation of, you know, 3 to 4% in the broader environment.

Speaker Change: And that really is the lapping of pricing from a year ago, lapping of SNAP benefits and the on-shelf availability of Private Label and some other smaller brands.

Jeffrey L. Harmening: And they did, gradually, they did. And that really was the lapping of prices from a year ago, the lapping of SNAP benefits, and the availability on the shelf of Private Label and some other smaller brands. And so that indeed took place.

Speaker Change: And so, that indeed took place, and so the job for us to do now is to increase our level of competitiveness. And, you know, the fact is that...

Jeffrey L. Harmening: And so the job for us to do now is to increase our level of competitiveness. And the fact is that inflation has been higher for longer than many people assumed it would be, not necessarily in food. Actually, food inflation is actually coming down. But if you look at the broader macroeconomic environment, we're still seeing inflation of 3% to 4% in the broader environment. So the job we have to do is create more value for our consumers. As you rightly point out, that value can take place in a variety of ways.

Speaker Change: Inflation has been higher for longer than many people assumed it would be, not in food necessarily. Actually, food inflation is actually coming down. But if you look at the broader macroeconomic environment, we're still seeing inflation of 3% to 4% in the broader environment. So the job to do is create more value for our consumers. As you rightly point out,

Jeff Harmening: So the job to do is create more value for our consumers. As you rightly point out, that value can take place in a variety of ways. And, you know, I guess I would start at the point of brand communication. And the fact of the matter, we'll have a meaningful increase in the amount of spending. We have a consumer spending next year. You've probably done the math and seen that our productivity levels are higher than what we see for inflation. So our gross margin should be okay. And so the job to do then is to spend the money there wisely.

Jeffrey L. Harmening: And I guess I would start at the point of brand communication. And the fact of the matter is we will have a meaningful increase in the amount of spending we have and consumer spending next year. You've probably done the math and seen that our productivity levels are higher than what we see for inflation.

Speaker Change: that value can take place in a variety of ways and you know, I guess I would start at the point of brand communication and The fact of the matter is we will have a meaningful increase in the amount of spending we have a consumer spending next year You've probably done the math and seen that our productivity levels are higher than what we see for inflation So our gross margin should be okay. And so the job to do then is to spend the money there wisely And and we start with brand communication and so we'll have a meaningful increase But but also, you know get some really good news, you know, I start with pet food and you know wilderness We have some new advertising coming up next week. I just saw it yesterday. It's fantastic advertising

Jeffrey L. Harmening: So our gross margin should be okay. And so the job to do then is to spend the money there wisely. And we start with brand communication. And so we'll have a meaningful increase, but also, you know, I got some really good news. You know, I start with pet food and, you know, wilderness. We have some new advertising coming up next week. I just saw it yesterday.

Jeff Harmening: And we start with brand communication. And so we'll have a meaningful increase. But also, you know, against some really good news, you know, I start with pet food and, you know, Wilderness, we have some new advertising coming up next week. I just saw yesterday; it's fantastic advertising. We've already gotten Live Protection Formula back to growth and tasteful. So now wilderness is a job of doing pet. If you look at what we're doing in cereal, another big global business for us, we've got great taste news coming in our cereal category. The Kelsey brothers, the highlight now in the first quarter, but we've got more coming in the second and third quarter.

Jeffrey L. Harmening: It's fantastic advertising. We've already gotten the live protection formula back to growth and tasteful. So now wilderness is a job of doing pet.

Speaker Change: We've already gotten the life protection formula back to growth and tasteful, so now wilderness is the job of doing that.

Jeffrey L. Harmening: If you look at what we're doing in cereal, another big global business for us, we've got great taste news coming in our cereal category. The Kelsey Brothers are highlighting that in the first quarter, but we've got more coming in the second and third quarters. I'm bringing the Doughboy back after a few years, and, you know, private label. They don't have a Doughboy; we do. And not only is he coming back, but he's got all kinds of news to share about flakier crusts and things like that.

Speaker Change: If you look at what we're doing in cereal, another big global business for us, we've got great taste news coming in our cereal category. The Kelsey Brothers are highlighting that in the first quarter, but we've got more coming in the second and third quarter. I'm bringing the Doughboy back after a few years. And, you know, private label, they don't have a Doughboy, we do.

Jeff Harmening: I'm bringing the Doughboy back after a few years. And, you know, private label, they don't have a Doughboy; we do. And, and not only you coming back, you've got all kinds of news to share about flaky or crust and things like that. So, so we feel great about that. We've got response in the Olympics in many countries, and in Tottino's has some good marketing. So we feel good about our brand investment. But also, you know, it comes down to the products themselves. We've got, we got really good product news. You'd probably twice the taste news that we did a year ago when, you know, in our categories, taste is really king.

Jeffrey L. Harmening: So we feel great about that. We've got, we're sponsoring the Olympics in many countries, and Totino's has some good marketing. So we feel good about our brand investment, but also, you know, it comes down to the products themselves. We got really good product news. You would probably get twice the taste news that we did a year ago when, you know, in our categories, taste is really king.

Speaker Change: And not only is he coming back, he's got all kinds of news to share about Flakier Crust and things like that. So we feel great about that. We've got, we're sponsoring the Olympics in many countries, and Totino's has some good marketing. So we feel good about our brand investment, but also...

Speaker Change: You know, it comes down to the product themselves. We got really good product news.

Jeffrey L. Harmening: And so whether that's flakier biscuits or cheesier Annie's mac and cheese or fudgier Betty Crocker brownies or reducing sugar in our kids' cereals in K through 12, you know, those are all kinds of great taste news. And our new products should be up somewhere around the neighborhood of 40%, where we're investing in new product activity and really good ones on our big brands. So Fruity Cheerios in the cereal category, Mott's Breakfast Bars, which are off to a great start so far this year, as well as Nature Valley Lunchbox, which is an allergy-free option that we know moms really like, Totino's, you know, breakfast rolls.

Jeff Harmening: And so, whether that's whether that's flaky or biscuits or cheese or any mac and cheese or fudgy or buddy crocker or brownies or reducing sugar in our, in our kids cereals in K through 12. You know, those are all kinds of great taste news. And our, our new product should be up somewhere around that, that they ever had a 40% where we're investing in a new product activity and really good ones on our big brand. So Fruity Cheerios and the, and the cereal category. Mods breakfast bars, which are off to a great star so far this year, as well as Nature Valley lunch box, which is allergy free.

Speaker Change: You know, probably twice the taste news that we did a year ago when, you know, in our category is taste is really king. And so whether that's whether that's

Speaker Change: Flakier biscuits, or cheesier Annie's mac and cheese, or fudgier Betty Crocker brownies, or reducing sugar in our in our kids cereals in K through 12.

Speaker Change: You know, those are all kinds of great taste news and our new products should be up somewhere around the neighborhood of 40% where we're investing in.

Speaker Change: and New Product Activity, and really good ones on our big brand. So, Fruity Cheerios in the cereal category, Mott's Breakfast Bars, which are off to a great start so far this year, as well as Nature Valley Lunchbox, which is allergy-free, that we know that moms really like, Totino's, you know, breakfast.

Jeff Harmening: We know the mob's real like Tottino's, you know, breakfast, breakfast roll. So we've got really good innovation. And then there is, there is, so those are a lot of ways that we can, that we can add value, variety of packs, things like that. But also, we're increasing our couponing by about 20 per hour or so in the beginning of the year. And we have found, because we have a lot of first-party data, which differentiates us from many other manufacturers, we can target effectively with good ROI, and not every manufacturer can do that. But we have the ability to do that.

Jeffrey L. Harmening: So we've got really good innovation. And then there is, there, so those are a lot of ways that we can add value, variety packs, things like that. But also, we're increasing our couponing by about 20% or so at the beginning of the year. And we have found that because we have a lot of first-party data, which differentiates us from many other manufacturers, we can target effectively with good ROIs, and not every manufacturer can do that.

Speaker Change: breakfast rolls. So we've got really good innovation. And then there is there. So those are a lot of ways that we can

Speaker Change: that we can add value, variety packs, things like that. But also, we're increasing our couponing by about 20% or so in the beginning of the year. And we have found, because we have a lot of first-party data, which differentiates us from many other manufacturers, we can target effectively with good ROIs, and not every manufacturer can do that.

Jeffrey L. Harmening: But we have the ability to do that. So we're increasing our coupon spending, and we have the research that tells us that it's highly effective when we do that. So we'll do that. And are there some price points we have to sharpen? There are, but there always are. You know, we talked about pet food; it's wet pet food.

Jeff Harmening: So we're increasing our coupon spending, and we, you know, we have the resource that tells us that it's highly effective when we do that. So we'll do that. And are there some price points we have to sharpen? There are, but there always are. You know, we talked about in pet food. It's, it's wet pet food. We, we had to get under a price cliff, but, but we didn't have pricing options in other places. And so, we feel we feel good about the amount of value that we go create for consumers. And that really is job number one as we look at next year.

Speaker Change: We have the ability to do that, so we're increasing our coupon spending, and we have the research that tells us that it's highly effective when we do that, so we'll do that. Are there some price points we have to sharpen? There are, but there always are. We talked about pet food. It's wet pet food. We had to get under a price cliff.

Andrew Lazar: We had to get under a price cliff, but we didn't have pricing options in other places. And so we feel good about the amount of value that we will create for consumers. And that really is job number one as we look at next year.

Andrew Lazar: Thank you for that. And then, just a quick one, Kofi.

Speaker Change: But we didn't have pricing options in other places, and so we feel good about the amount of value that we will create for consumers, and that really is job number one as we look at next year.

Kofi Bruce: Thank you for that. And then just a quick one, Kofi, the commentary around HMM for fiscal 25 versus cost of goods inflation suggests, as Jeff highlighted, some gross margin flexibility to reinvest.

Kofi A. Bruce: The commentary around HMM for Fiscal 25 versus cost of goods inflation suggests, as Jeff highlighted, some gross margin flexibility to reinvest. Given the amount of reinvestment you're planning, not just in SG&A, but that reinvestment that goes against gross margin, does your plan, I guess, anticipate that you can at least protect, if not expand, gross margins a little bit for the full year? Or could there still be some gross margin pressure for the full year, given kind of what you need to do across both sorts of trade and consumer?

Speaker Change: Thank you for that. And then just a quick one, Kofi. The commentary around HMM for Fiscal 25 versus cost of goods inflation suggests, as Jeff highlighted, some gross margin flexibility to reinvest. Given the amount of reinvestment you're planning, not just at SG&A, but that reinvestment that goes against gross margin.

Andrew Lazar: Thank you.

Kofi Bruce: Given the amount of reinvestment you're planning, not just in SGNA, but that reinvestment that goes against gross margin, does your plan anticipate that you can at least protect, if not expand, gross margins a little bit for the full year, or could there still be some gross margin pressure for the full year, given kind of what you need to do across both, you know, sort of trade and consumer. Thank you. Great question. Appreciate the question. So I would say we've got enough flexibility that we would see a modest amount of gross margin expansion even with the levels of investment. And the key here is, as we look at the business, we're going to play flexibly with an eye towards investing in gross driving activity, some of which Jeff did an eloquent shallow listing off.

Speaker Change: Does your plan, I guess, anticipate that you can at least protect, if not expand, gross margins a little bit for the full year, or could there still be some gross margin pressure for the full year, given kind of what you need to do across both, you know, sort of trade and consumer? Thank you.

Kofi A. Bruce: Great question; I appreciate the question Andrew. So I would say we've got enough flexibility that we would see a modest amount of gross margin expansion even with the levels of investment, and the key here is that as we look at the business, we're going to play flexibly with an eye towards investing in gross driving activity, some of which Jeff did an eloquent job of listing off.

Speaker Change: Great question, appreciate the question Andrew. So I would say we've got enough flexibility that we we would see

Speaker Change: A modest amount of gross margin expansion, even with the levels of investment, and the key here is, as we look at the business, we're going to play flexibly with an eye towards investing in gross driving activity, some of which Jeff did an eloquent job of listing off.

Kofi Bruce: Thank you.

Kofi Bruce: You bet.

Brian Spillane: Our next question comes from Brian Spillane from Bank of America.

Operator: Our next question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open. Hi, thanks.

Speaker Change: Thank you.

Speaker Change: You bet.

Brian Spillane: Please go ahead. Your line is open.

Bryan Douglass Spillane: Hi, thanks, operator. Good morning, Kofi. Good morning, Jeff.

Brian Spillane: Hi, thanks, Operator.

Speaker Change: Our next question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open. Hi. Thanks, Operator. Good morning, Kofi. Good morning, Jeff. I just have one question, and I guess it's come in a couple of different angles to us this morning. And really, the starting point is just...

Brian Spillane: Good morning, Kofi. Good morning, I'm in a couple of different angles to us this morning, and it really, the starting point is just, has, have you guided low enough for physical 25? And I say that in the context of, you know, there's some reinvestment, right, that, or increased investment, I should say, that's implied in your plan for this year. You know, if we look back over the last four quarters, you know, we've been kind of waiting for the, a term to come around the corner. And that's just general milk. I think that's, you know, that's true across the whole group.

Bryan Douglass Spillane: I just have one question, and I guess it's come to us from a couple of different angles this morning. And really, the starting point is just... Um, have you guided low enough for fiscal 25? And I say that in the context of, um, you know, there's some reinvestment, right, or increased investment, I should say that's implied in your plan for this year. You know, if we look back over the last four quarters, you know, it's, you know, we've been kind of waiting for the term to come around the corner.

Bryan Douglass Spillane: And that's just General Mills. I think that's, you know, that's true across the whole group. And so it seems like, you know, there's just more uncertainty in planning the business this year versus most, and just, you know, given the opportunity, the right to give yourself, you know, I guess more cushion or more actually more than that, just, you know, more potential money to spend back. Why not take that opportunity now?

Speaker Change: Have you guided low enough for fiscal 25? And I say that in the context of...

Speaker Change: You know, there's some reinvestment right that or increased investment, I should say that's that's implied in your plan for this year.

Speaker Change: You know, if we look back over the last four quarters, you know, it's, you know, we've been kind of waiting for the, a term to come around the corner, not just General Mills. I think that's, you know, that's, that's true across the whole group.

Jeff Harmening: And so it seems like, you know, there's just more uncertainty, you know, in planning the business this year versus most. And just, you know, given the opportunity, right, to give yourself, you know, I guess more cushion, or more, actually more than that, just, you know, more potential money to spend back. Why not take that opportunity now?

Speaker Change: And so it seems like, you know, there's just more uncertainty, you know, in planning the business this year versus most.

Speaker Change: And just, you know, given the opportunity, right, to give yourself, you know, I guess more cushion or more actually more than that, just, you know, more potential money to spend back. Why not take that opportunity now?

Jeff Harmening: Yeah, so Brian, thanks for the question. The, you talk about more volatility. And I'm certainly, I said that for the last five years. So I'm waiting for the, wait for the year where we don't have volatility. And the market does continue to evolve. So there's no question about that. You know, obviously, we think we've given ourselves, you know, enough cushion here without being unduly conservative. And the market, you're right, the market does continue to evolve. But, as I said, we're, you know, we've got really good marketing support. New products are up. We've got really good news on our core brands.

Jeffrey L. Harmening: Yeah, so, Bryan, thanks for the question. You talk about more volatility and uncertainty. I've said that for each of the last five years. So I'm waiting for the year where we don't have volatility. And the market does continue to evolve. So there's no question about that.

Speaker Change: Yes, so Bryan, thanks for the question. You talk about more volatility and uncertainty.

Speaker Change: I've said that for the last five years, so I'm waiting for the year where we don't have volatility. And the market does continue to evolve, so there's no question about that.

Jeffrey L. Harmening: You know, obviously, we think we've given ourselves, you know, enough cushion here without being unduly conservative. And you're right, the market does continue to evolve. But as I said, we've got really good marketing support. New products are coming out.

Speaker Change: You know, obviously we think we've given ourselves, you know, enough cushion here without without being

Speaker Change: Unduly conservative. And the market, you're right, the market is, it does continue to evolve, but

Speaker Change: As I said, we've got really good marketing support, new products are up, we've got really good news on our core brands, and so my expectation is that we would improve our volume performance this coming year, which is down 3% this current year, we would improve our volume performance.

Jeffrey L. Harmening: We've got really good news on our core brands. And so, you know, my expectation is that we will improve our volume performance this coming year, which was down 3% this current year. We would improve our volume performance, you know, across our different segments this year. So I know that each of our operating segments, whether it's North America retail, or food service, or international or pet, are committed to improving our volume performance and our competitiveness.

Jeff Harmening: And so, you know, my expectation is that we would improve our volume performance. This coming year, which was down 3% this current year, we would improve our volume performance, you know, across our different segments this year. So I know that each of our operating segments, whether it's North America retail or food, service, or international or pet, are committed to improving our volume performance, our competitiveness. And I'm confident with the level of activity that we have and the news that we have that we can, that we can actually do that, supported by, you know, gross margins that are already good, that are back to pre-pandemic levels already.

Speaker Change: You know, across our different segments this year, so I know that each of our operating segments, whether it's North American Retail or Food Service or International or PET,

Speaker Change: are committed to improving our volume performance, our competitiveness, and I'm confident with the level of activity that we have and the news that we have that we can that we can actually do that.

Jeffrey L. Harmening: And I'm confident with the level of activity that we have, and the news that we have that we can actually do that, supported by, you know, gross margins that are already good, that are back to pre-pandemic levels already. And, as you say, our productivity outstrips what we see as inflation. And so reinvesting some of that to make sure that we have the fuel we need to drive growth.

Speaker Change: Supported by, you know, gross margins that are already good, that are back to pre-pandemic levels already, and as you say, our productivity outstrips what we see as inflation, and so reinvesting some of that.

Jeff Harmening: And as you say, our productivity outstrips of OPC as inflation. And so reinvesting some of that to make sure that we have, that we have the fuel we need to drive the growth. And we're not counting on a change in the environment necessarily to drive our growth. It really is a change in our competitiveness. And that's within our control. And so we feel good about our ability to do that.

Jeffrey L. Harmening: And we're not counting on a change in the environment necessarily to drive our growth; it really is a change in our competitiveness, and that's within our control. And so we feel good about our ability to do that.

Speaker Change: to make sure that we have that we have the fuel we need to drive the growth and we're not counting on a change in the environment necessarily to drive our growth it really is a change in our competitiveness.

Speaker Change: And that's within our control. And so we feel good about our ability to do that.

Jeffrey L. Harmening: Thanks, Jeff. Maybe just a quick follow-on to that is, as you've planned this year, what's your expectation of competitiveness? Meaning, you know, do you expect competitors to make similar moves? And just how are you anticipating the competitive environment would set up this year? Again, given just, you know, how dynamic things are.

Brian Spillane: Thanks, Jeff.

Jeff Harmening: Maybe just a quick follow-on that is, as you've planned this year, what's your expectation on competitiveness? Meaning, do you expect competitors to make similar moves? And just how are you anticipating how the competitive environment would set up this year, again, given just how dynamic things are? Yeah, well, I certainly can't speak for my competitors, but we're all looking for more growth. And what's been interesting is that the environment has been exceptionally rational, and it's hard for me to see that changing. And the reason I say that is because we still have some level of inflation.

Speaker Change: Thanks, Jeff. You know, maybe just a quick follow on that is...

Speaker Change: As you've planned this year, what's your expectation on competitiveness, meaning, you know, do you expect competitors to make similar moves, and just how are you anticipating how the competitive environment would set up this year, again, given just, you know, how dynamic things are?

Jeffrey L. Harmening: Yeah, the I certainly can't speak for my competitors. But you know, we're all we're all looking for more growth. And you know, what's interesting is that the environment has been exceptionally rational. And it's not, it's hard for me to see that changing. And the reason I say that is because, I mean, we still have some level of inflation. We have three to 4% inflation. And so in that kind of environment, you know, absent, you know, leading levels of productivity like we have, it really begs for an environment that continues to be rational.

Jeff: Yeah, well, I certainly can't speak for my competitors, but you know, we're all looking for more growth. And, you know, what's been interesting is that the environment has been exceptionally rational, and it's not, it's hard for me to see that changing. And the reason I say that...

Jeff Harmening: We have three to four percent inflation. And so, in that kind of environment, absent leading level of productivity like we have, it really begs for an environment that continues to be rational. If you look at the last 12 months, promotional spending is up frequency; the absolute depth of discount is up a little bit relative to the year before, but if you look before pandemic, it’s kind of back to that, back to that level of promotional intensity.

Jeff: is because, I mean, we still have some level of inflation. I mean, we have 3 to 4 percent inflation, and so, in that kind of environment,

Jeff: You know, absent leading levels of productivity like we have, it really begs for an environment that continues to be rational. If you look at the last 12 months, promotional spending is up, frequency up a little bit, depth of discount is up a little bit.

Jeffrey L. Harmening: If you look at the last 12 months, promotional spending is up, frequency increased a little bit, and depth of discount is up a little bit relative to the year before. But if you look before the pandemic, it's kind of back to that level of promotional intensity. And as I started out, I think it was Andrew who asked a question about value.

Jeff: Relative to the year before, but if you look before pandemic, it's kind of back to that back to that level of promotional intensity.

Jeff Harmening: And, and they started out, I think it was Andrew who asked a question about value. There are a lot of ways to create value for consumers. And we see that I'm sure our competitors do too. And so we'll be pulling all the leverage we can to make sure that consumers know the value of our big brands, and you know, a lot of that gets back to the marketing and the product news and everything else.

Jeffrey L. Harmening: There are a lot of ways to create value for consumers, and we see that, I'm sure, our competitors do too. And so we'll be pulling all the levers we can to make sure that consumers know the value of our big brands. And, you know, a lot of that gets back to marketing and product news and everything else.

Jeff: And as I started out, I think it was Andrew who asked a question about value. There are a lot of ways to create value for consumers, and we see that. I'm sure our competitors do, too.

Jeff: And so we'll be pulling all the levers we can to make sure that consumers know the value of our big brands. And you know, a lot of that gets back to the marketing and the product news and everything else.

Jeff Harmening: Okay.

Jeff Harmening: Thank you.

Steve Powers: Our next question comes from Steve Powers from Deutsche Bank. Please go ahead.

Operator: Our next question comes from Steve Powers from Deutsche Bank. Please go ahead. Your line is open.

Speaker Change: Okay, thank you.

Steve Powers: Your line is open. Yes. Hi.

Speaker Change: Our next question comes from Steve Powers from Deutsche Bank. Please go ahead. Your line is open.

Steve Powers: Yes, hi, good morning. Apologies if you hear construction; there's someone who started drilling as this call started behind me. I guess the question I have to start with is, you talk about a roughly equal contribution from price and volume through the year at the company level, which I take to mean, you know, sort of flat to slightly positive in each case. Is there any deviation from that, as you think about the sequencing through the year or across the different business segments? Or do you expect that sort of roughly equal contribution to be representative, you know, kind of across the totality of the of the enterprise?

Steve Powers: Good morning. And apologies if you hear construction. There's someone who started viewing as with as it's called started behind me. I guess the question I have to start is, you know, you talk about a roughly equal contribution from price and volume through the year at the company level, which I take to mean sort of flat to slightly positive. And in each case, I guess, you know, is there any. Any deviation from that as you think about the sequencing through the year or across the different business segments, or do you expect that sort of your roughly equal contribution to be representative, you know, kind of across the totality of the enterprise.

Steve Powers: Yes, hi, good morning. Apologies if you hear construction. There's someone who started drilling as this call started behind me.

Steve Powers: I guess the question I have to start is, you know, you talk about a roughly equal contribution from price and volume through the year at the company level, which I take to mean, you know, sort of flat to slightly positive in each case.

Steve Powers: I guess, you know, is there any, any deviation from that as you think about the sequencing through the year or across the different business segments? Or do you expect that sort of

Steve Powers: Roughly equal contribution to be representative, you know, kind of across the totality of the of the of the enterprise.

Jeff Harmening: Yeah, the, you know, as we look at it, by the way, can't hear the drilling in the background, Steve, but, but as we, as we look at it, you know, it's first of all, you would talk about, you know, price and volume rate relatively same as price mix. I think that mixed pieces. You know, it's really important as we, as we look at it, I wouldn't expect undo differential performance, many one of our segments. So it's not as a say we're looking for, you know, lots of one thing in one segment, lots of something in another segment.

Jeffrey L. Harmening: Yeah, the, you know, as we look at it, by the way, can't hear the drilling in the background, Steve, but as we as we look at it, you know, first of all, you would talk about price and volume rate relatively the same as price mix. I think that makes peace. You know, it's really important as we as we look at it.

Speaker Change: Yeah, the, you know, as we look at it, by the way, I can't hear the drilling in the background, Steve, but as we as we look at it, you know, first of all, you would talk about, you know, price and volume relatively the same as price and mix. I think that mix piece is

Jeffrey L. Harmening: I wouldn't expect undue differential performance from any one of our segments. So it's not as to say we're looking for lots of one thing in one segment, lots of something in another segment. Really, the job to do is really volume growth across the different segments. And I think we have opportunities to improve. Even in food service, which did really well, we have opportunities to improve across the board in terms of the sequencing. I guess my only comment would be, as you look at the first quarter of last fiscal year, which was our highest sales growth quarter, you see a lot of pricing in that quarter, and we're going up against that as we go into the year ahead.

Speaker Change: You know is really important as we as we look at it. I wouldn't expect on undo

Speaker Change: Differential performance, many one of our segments. So it's not as to say we're looking for, you know,

Jeff Harmening: That really the job to do is really a volume growth, you know, across the different segments. And I think we have opportunities to improve even in food service, which did really well. We have opportunities to improve across the board in terms of the sequencing. I guess my only common would be as you, as you look at the far first quarter of last fiscal year, which was the, which in terms of sales growth was there was our highest sales growth quarter. You see a lot of pricing in that quarter. We're going up against that as we go into the year ahead.

Speaker Change: Lots of one thing in one segment, lots of something in another segment. Really, the job to do is really volume growth across the different segments. And I think we have opportunities to improve. Even in food service, which did really well, we have opportunities to improve.

Jeffrey L. Harmening: And so you know that that probably has an impact on what we see on price mix in the first quarter, which, as Kofi said, along with some reinvestment, makes the comp, in our first quarter, the toughest of the four quarters in the year. I would expect gradual improvement as we look at our sales and profitability over the course of the year. And gradual doesn't mean it happens even every quarter, but gradually over the course of the year, with Q1 being the toughest. I would say that's especially true in North America retail, where the comp from a year ago was quite good. We had a really nice Q1 at North America Retail last year.

Speaker Change: Across the board in terms of the sequencing, I guess my only comment would be as you as you look at the first quarter of last fiscal year, which was the which in terms of sales growth was our was our highest sales growth quarter. You see a lot of pricing in that quarter. We're going up against that as we go into the year ahead.

Jeff Harmening: And so, you know, that probably has an impact on what we see, but on price mix in the first quarter, which, as Kofi said, along with some reinvestment, makes the calm. In our first quarter, the toughest of the four quarters in the year. I would expect gradual improvement as we look at our sales and profitability over the course of the year. And gradual doesn't mean it happens even every quarter, but gradually over the course of the year, with Q1 being the toughest. I would say that's especially true in North America retail, where the count from a year ago was quite good.

Speaker Change: And so, you know, that probably has an impact on what we see on price mix in the first quarter, which, as Kofi said, along with some reinvestment, makes the comp.

Speaker Change: In our first quarter, the toughest of the...

Speaker Change: of the four quarters in the year, I would expect gradual improvement as we look at our, you know, sales and profitability over the course of the year. And gradual doesn't mean it happens even every quarter, but gradually over the course of the year with with Q1 being the toughest, I would say that's especially true in North America retail.

Jeff Harmening: We had a really nice Q1 in North America retail last year. Yes, okay, great.

Speaker Change: where the comp from a year ago was quite good. We had a really nice Q1 at North America Retail last year.

Steve Powers: Yeah, okay, great. Thanks. And thanks for the clarification as well. You know, on Kofi, maybe going back to where you started, or Ken started the call on international, you talked about some of the challenges in Brazil and China at the moment. I guess, any perspective on how you expect those regions, those countries, those markets to develop as the year progresses, just kind of what you've embedded in terms of contribution in 25. Yeah, we're just a bunch

Jeff Harmening: Thanks. And thanks for the clarification as well.

Kofi Bruce: You know, on the Kofi, maybe going back to where you started or can start the call on international, you talked about some of the challenges in Brazil and China in the moment. I guess any perspective on how you expect those regions, those countries, those markets to develop as a year progresses, just kind of what you've embedded in terms of contribution in 25. Yeah, we're to just pick up on kind of just last point, we are expecting volume improvement in all of our segments, but as we look at international, I think the critical thing for us in Brazil, we certainly see improvement off of this year's performance and are expecting that.

Speaker Change: Yeah, okay, great. Thanks. And thanks for the clarification as well. You know, on the Kofi, maybe going back to where you started, or Ken started the call on international, you've talked about some of the challenges in Brazil and China in the moment, I guess, any perspective on how you expect those regions, those countries, those markets to develop as the year progresses, just kind of what you've embedded in terms of contribution in 2025?

Kofi A. Bruce: Yeah, to pick up on kind of Jeff's last point, we are expecting volume improvement in all of our segments. But as we look at international, I think the critical thing for us in Brazil, we certainly see improvement from this year's performance and are expecting that. Similarly, so with China, and then continued strength from performance in the EU, AU, and our gems markets, which performed really well this past year.

Speaker Change: Yeah, we're, to just pick up on kind of Jeff's last point, we are expecting volume improvement in all of our segments, but as we look at international...

Speaker Change: I think the critical thing for us in Brazil, we certainly see improvement off of this year's performance and are expecting that. Similarly so with China.

Kofi Bruce: Similarly, so with China and then continued strength off of performance and EU and our gems markets, which performed really well this past year.

Speaker Change: And then continued strength off of performance in EU, AU and our GEMS markets, which performed really well this past year.

Kofi Bruce: Thank you very much.

Connor Stingler: Our next question comes from Alexia Howard from Alliance Bernstein. Please go ahead. Your line is open.

Operator: Our next question comes from Alexia Howard from Alliance Bernstein. Please go ahead. Your line is open.

Speaker Change: Thank you very much.

Speaker Change: I'm in.

Speaker Change: Our next question comes from Alexia Howard from Alliance Bernstein. Please go ahead, your line is open.

Connor Stingler: Hello, good morning.

Connor Stingler: This is Connor Stingler stepping in for Alexia Howard.

Jeff Harmening: Jeff, I'd like to ask about your ready to eat serious segment measured channel data suggests you've experienced a bit more challenge market dynamics at a time when promotional spend has increased that one air competitors. Can you talk about how you think about this segment in 2025 and you continue to see rational pricing behavior or their concern on this front. Thanks for passing on. Yeah, I would, you know, if we've seen the rational behavior in cereal, I would, I would expect that to continue. You know, our focus is primarily on our game and our competitors' games.

Speaker Change: Hello, good morning. This is Conor Snigley. I'm stepping in before Alexia Howard.

Conor Snigley: Jeff, I'd like to ask you about your ready-to-eat cereal segment. Measured channel data suggests you've experienced a bit more challenged market share dynamics at a time when promotional spend has increased at one of your competitors.

Speaker Change: Can you talk about how you think about this segment in 2025, and do you continue to see rational pricing behavior, or is there a concern on this front? Thanks, and I'll pass it on.

Unknown Speaker: Yeah, and I would, you know, we've seen rational behavior in serial, and I would, I would expect that to continue. You know, our focus is primarily on our game and our competitors' games. We honestly feel like we have the best brand in the category. And a key job for us to do in serial is get back to playing our game. And and you know, we had we had good news

Jeff: We've seen rational behavior in cereal and I would expect that to continue. Our focus is primarily on our game and not our competitors' games. Honestly, we feel like we have the best brand in the category.

Jeff Harmening: We honestly, we feel like we have the best brands in the category, and the key job for us to do in cereal is get back to playing our game. And, you know, we had, we had good new product innovation last year. We have the top five new products. I actually, I think some of our product innovation this year is better than we had a year ago. You know, I referenced for each of you in the first half. We have some good new product innovation coming in the second half, but even more important than that is a lot of the news we have coming on our core brands and our messaging, as I talked about with the Kelsey brothers. But I also think some of our merchandising, like in the back to school period.

Jeff: And the key job for us to do in serial is get back to playing our game. And, you know, we had good new product innovation last year. We had the top five new products.

Jeff: Actually, I think some of our product innovation this year is better than we had a year ago. You know, I referenced Fruity Cheerios in the first half. We have some good new product innovation coming in the second half. But even more important than that is a lot of the news we have coming on our core brands and our messaging, as I talked about with the Kelsey Brothers. But I also think some of our merchandising, like in the back-to-school period.

Jeff Harmening: Making sure we have a big program with box tops, which is, you know, which I'm excited about rolling out and some taste news. We have coming in the second half of the year on some big brands, which I promise the brand teams I wouldn't talk about on this call, but I'm excited about coming. And so our job really is to get back to the core growth on our big cereal brands with really good news and continue the innovation. And as good as our innovation was this past year, I thought it was quite good. I think our innovation is coming year has the opportunity to be even better and earlier returns, which suggests that that will be pretty good.

Jeff: Making sure we have a big program with Box Tops, which I'm excited about rolling out. And some taste news we have coming in the second half of the year on some big brands, which I promised the brand teams I wouldn't talk about on this call, but I'm excited about coming. And so our job really is to get back to the core growth on our big cereal brands, which is really good news, and continue the innovation. And as good as our innovation was this past year, and I thought it was quite good, I think our innovation this coming year has the opportunity to be even better. And early returns would suggest that that would be pretty good.

Tom Palmer: Our next question comes from Tom Palmer from City, please go ahead. Delphine. Good morning, and thanks for the question. I appreciate the early comments. You might not want to be overly specific here, but I guess I'll give it a try. If we exclude the inventory reductions in trade or cruel, I think organic sales growth was down around 2%. Should we look at this as kind of a starting point as we enter the year, or are there other considerations we should be thinking about as we move into the first quarter?

Operator: Our next question comes from Tom Palmer from Citi. Please go ahead. Your line is open.

Speaker Change: Our next question comes from Tom Palmer from Citi. Please go ahead, your line is open.

Thomas Hinsdale Palmer: Good morning, and thanks for the question. I appreciate it. Based on your earlier comments, you might not want to be overly specific here. But I guess I'll give it a try. If we exclude the inventory reductions and trade accruals, I think organic sales growth was down around 2%. Should we look at this as kind of a starting point as we enter the year, or are there other considerations we should be thinking about as we move into the first quarter?

Speaker Change: Good morning, and thanks for the question. I appreciate

Speaker Change: Based on your earlier comments, you might not want to be overly specific here but I guess I'll give it a try. If we exclude the inventory reductions and trade accrual, I think organic sales growth was down around 2%.

Speaker Change: Should we look at this as kind of a starting point as we enter the year or are there other considerations we should be thinking about as we move into the first quarter?

Kofi Bruce: I appreciate the question.

Kofi A. Bruce: Yeah, appreciate the question. So, let me see if I can step back and, just if you'll give me a point of privilege here, I'll try to give you a little bit of a broader perspective, starting at the enterprise and then drilling down to pet products in North America retail. So while we saw a slowdown in organic net sales, I think the critical thing here is that we look at our measured retail sales, and they're pretty, pretty consistent as we move from Q3 to Q4.

Kofi Bruce: Let me see if I can step back and just, if you'll give me a point of privilege here, I'll try to give you a little bit broader perspective starting at the enterprise and then drilling down to Pat and North America retail. While we saw the slowdown in organic net sales, I think the critical thing here is that we look at our measured retail sales. They're pretty consistent as we move from Q3 to Q4. So, as you rightly noted, their big point on the front is three points ahead wind from the comparison on the trade expense phasing from Q3 or Q4 of fiscal 23.

Speaker Change: I appreciate the question, so let me see if I can step back and just, if you'll give me a point of privilege here, I'll try to give you a little bit broader perspective, starting at the enterprise.

Speaker Change: and then drilling down to PET and North America Retail.

Speaker Change: So, while we saw the slowdown in organic net sales, I think the critical thing here is as we look at our measured retail sales, they're pretty consistent as we move from Q3 to Q4.

Kofi A. Bruce: So, as you rightly noted, their big point on the front is three points ahead of wind from the comparison on the trade expense phasing from Q3 or Q4 of fiscal 23. At the enterprise level, we also saw a modest decline in retailer inventory in our and pet stores in Q4 versus Q3 where we had a net tailwind. And then, I think third and important, I'd reference again the point I made on international that, you know, in Brazil, we had an adjustment to net sales that then moved to COGS, which was worth about a point of drag on its own. So an aggregate, about five points of drag from those three factors as you peel it back.

Speaker Change: So, as you rightly noted, the big point on the front is three points of headwind from the comparison on the trade expense phasing from Q3 or Q4 of fiscal 23.

Kofi Bruce: At the enterprise level, we also saw a modest decline in retailer inventory in our AMPET in Q4 versus Q3, where we had a net tailwind. And then I think third and important, I'd reference again, the point I made on international that in Brazil, we had an adjustment to net sales that then moved to COGS, which was worth about a point of drag on a song. So, in aggregate, you have about five points of drag from those three factors as you peel it back. And then, as you look at it on a segment basis at NAR, that trade expense comparison is about four points of drag.

Speaker Change: At the enterprise level, we also saw a modest decline in retailer inventory in NAR and PET in Q4 versus Q3 where we had a net tailwind.

Speaker Change: And then I think third, and important, I reference again the point I made on international that, you know, in Brazil we had a...

Speaker Change: An adjustment to net sales that then moved to COGS, which was worth about a point of drag on its own. So in aggregate, about five points of drag from those three factors.

Kofi A. Bruce: And then as you look at it on a segment basis at NAR, that trade expense comparison is about four points of drag. We also saw the retailer inventory adjustment impact NAR at about a point of tailwind flipping to or a point of tailwind in the quarter Q4 versus a point of headwind in Q4. And then we also benefited in Q3 from some weather patterns in NAR. Then, as we looked at PET, we had about two points of headwind from the trade expense comparison.

Speaker Change: as you peel it back.

Speaker Change: And then if you look at it on a segment basis at NARC.

Kofi Bruce: We also had; we saw the retailer inventory adjustment impact NAR about a point of tailwind flipping to or point of tailwind in the quarter of Q4 versus a point of headwind in Q4. And then we also benefited in Q3 from some weather patterns in NAR. Then, as we looked at Pat, we had about two points of headwind from the trade expense comparison. We also saw retail are inventory reductions in Q4 versus Q3. And then we did have a modest amount of headwind as well from SKU losses in a few key places. So, in aggregate, that kind of gets you the picture.

Speaker Change: That trade expense comparison is about four points of drag.

Speaker Change: We saw the retailer inventory adjustment impact NAR at a point of tailwind in the corridor Q4 versus a point of tailwind in the corridor Q4 versus a point of tailwind in the corridor Q4.

Speaker Change: Headwind in Q4. And then we also benefited in Q3 from some weather patterns in NAR.

Speaker Change: Then as we looked at PET, we had about two points of headwind from the trade expense comparison. We also saw retailer inventory reductions to Q4 versus Q3. And then we did have a modest amount of headwind as well from SKU losses in a few key places.

Kofi A. Bruce: We also saw retailer inventory reductions in Q4 versus Q3. And then we did have a modest amount of headwind as well from SKU losses in a few key places. So in aggregate, that kind of gets you the picture. I think the critical thing here is the read-through for you as you're thinking about how to look at the quarter, Nielsen Q3 to Q4 roughly in line.

Kofi Bruce: I think the critical thing here is the read through for you as you're thinking about how to look at the quarter Nielsen Q3 to Q4 roughly in line.

Speaker Change: So, in aggregate, that kind of gets you the picture. I think the critical thing here is the read-through for you as you're thinking about how to look at the quarter. Nielsen, Q3 to Q4, roughly in line.

Kofi Bruce: Okay, thank you.

Thomas Hinsdale Palmer: Got it. Okay. Thank you.

Thomas Hinsdale Palmer: And then in the presentation... In the presentation, you listed M&A above share repo in terms of capital allocation priorities. I had kind of two pieces here.

Kofi Bruce: And then in the presentation, you listed M&A above share repo in terms of capital allocation priorities. I had kind of two pieces here.

Speaker Change: Got it. Okay. Thank you. And then in the presentation...

Thomas Hinsdale Palmer: First, to what extent does the 3% share count decline in guidance? Assume that free cash flow in excess of the dividend is deployed for share repo versus other uses. And then second, and look, I know you've been asked plenty about this over the past year, but could you give us an update on your M&A criteria and appetite from a size standpoint? Thank you. Sure, sure. Right.

Speaker Change: In the presentation you listed M&A above share repo in terms of capital allocation priorities. I had kind of two pieces here. First,

Kofi Bruce: First, to what extent does the 3% share count decline in guidance assume that 3% cash flow in excess of the dividend is deployed for share repo versus other uses. And then second, and look, I know you've been asked plenty about this over the past year, but could you give us an update on your M&A criteria and appetite from a size standpoint? Thank you. Sure, sure.

Speaker Change: To what extent does the 3% share count decline in guidance?

Speaker Change: Assume that free cash flow in excess of the dividend is deployed for share repo versus other uses. And then second, and look, I know you've been asked plenty about this over the past year, but could you give us an update on your M&A criteria and appetite from a size standpoint? Thank you.

Kofi A. Bruce: Sure, sure. I think I'll start by acknowledging that our capital allocation priorities have been pretty evergreen. So I think the first is clearly we want to make sure we have and allocate investment for capital spending internally for growth. That's roughly 4% is kind of the top number. We average around 3.5% if you look at the last handful of years.

Kofi Bruce: So I think I first start by acknowledging that our capital allocation priorities have been pretty evergreen. So I think the first is clearly we want to make sure we have an allocate investment for capital spending internally for growth. That's roughly 4% is kind of the top number. We average around 3.5% if you look at the last handful of years. Second, that we are allocating capital for increasing our dividend roughly in line with our after-tax earnings. And again, we've paid a dividend uninterrupted for 125-plus years. And then third, as you rightly pointed out, M&A. And again, M&A is both episodic, and it's not something we build into the plan.

Speaker Change: Sure, sure. So I think I'd first start by acknowledging that our capital allocation priorities have been pretty evergreen. So I think the first is clearly we want to make sure we have

Speaker Change: and allocate investment for capital spending internally for growth.

Speaker Change: That's roughly, 4% is kind of the top number, we average around 3.5% if you look at the last handful of years. Second, that we're allocating capital for increasing our dividend, roughly in line with our after-tax earnings.

Kofi A. Bruce: Second, we're allocating capital to increase our dividend roughly in line with our after-tax earnings. And again, we've paid a dividend uninterrupted for 125 plus years. And then third, as you rightly pointed out, M&A. And again, M&A is both episodic, and it's not something we build into the plan. But generally, as you look at our M&A patterns, you know, unless we've done something big, which is pretty rare, our last big acquisition was with Blue Buffalo.

Speaker Change: And again, we've paid a dividend uninterrupted for 125 plus years.

Speaker Change: And then third, as you rightly pointed out, M&A, and again, M&A is both episodic and it's not something we build into the plan, but generally as you look at our M&A patterns

Kofi Bruce: But generally, as you look at our M&A patterns, you know, unless we've done something big, which is pretty rare. Last big acquisition was with Blue Buffalo. Most of the acquisitions we do are kind of in that one to one and a half billion dollar price range, which we can easily accommodate with a modest adjustment in our share of purchase patterns.

Speaker Change: You know, unless we've done something big, which is pretty rare, last big acquisition was Blue Buffalo, most of the acquisitions we do are kind of in that one to one and a half billion dollar price range, which we can easily accommodate with a modest adjustment in our share purchase patterns.

Kofi A. Bruce: Most of the acquisitions we do are kind of in that $1 to $1.5 billion price range, which we can easily accommodate with a modest adjustment in our share of purchase patterns. So share of purchase remains the most discretionary element. And obviously, we will make changes to our share of purchase expectations as we identify and act on M&A opportunities. As to your second point around criteria for M&A, Obviously, the critical filter for us is, we start first with our strategic priorities, which leads us to look at critical occasions, which would get us to priorities around breakfast and convenient meals and snacking, as well as, obviously, pet food.

Kofi Bruce: So share share of purchase remains the most discretionary element. And obviously we will make changes to our share of purchase expectations as we identify and act on M&A opportunities to your to your second point around criteria for M&A. You know, obviously the critical filter for us to we start first with our strategic priorities, which leads us to look at critical occasions, which would get us to priorities around breakfast and convenience, convenient meals and snacking, as well as obviously pet food. And, you know, I think the criteria for us anchor around places where we can add value, leverage points around our capabilities that will allow us to unlock faster growth, but also improve margins as we, as we execute transactions.

Speaker Change: So share of purchase remains the most discretionary element and obviously we will make changes to our share of purchase expectations as we identify and act on M&A opportunities.

Speaker Change: To your second point around criteria for M&A...

Speaker Change: You know, I would say the critical filter for us to, we start first with...

Speaker Change: Our strategic priorities, which leads us to...

Speaker Change: to look at critical occasions, which would get us to priorities around breakfast and convenient meals.

Kofi A. Bruce: I think the criteria for us anchor around places where we can add value, leverage points around our capabilities that will allow us to unlock faster growth but also improve. So we've been, you know, candidly working with our always-on M&A capability throughout the cycle. We continue to look aggressively at opportunities. At the same time, we've remained very disciplined and have very strong filters in terms of both returns and value creation.

Speaker Change: and snacking as well as obviously pet food. And, you know, I think the criteria for us anchor around places where we can add value, leverage points around our capabilities that will allow us to unlock faster growth, but also improve margins as we as we execute transactions.

Kofi Bruce: So we've been, you know, candidly working with our always-on M&A capability throughout the cycle. We continue to look aggressively at opportunities. At the same time, we remain very disciplined and have very strong filters in terms of both returns and value creation. Right.

Speaker Change: So we've we've been you know candidly working with our always-on M&A capability throughout the cycle We continue to look aggressively at at opportunities at the same time We've remained very disciplined and have very strong filters in terms of both returns and value creation

Matt Smith: Thank you. Our next question comes from Matt Smith from Seaple. Please go ahead. Your line is open.

Operator: Our next question comes from Matt Smith from CFO. Please go ahead. Your line is open.

Speaker Change: All right, thank you.

Matthew Edward Smith: Hi, good morning. I wanted to dive in a little bit on the profit performance in the PETS segment. You were solidly in the mid-20s, even with the volume decline in the quarter. I know you talked about some increased investment in the wilderness as you try to stabilize that business and get it back to growth. But is this a sustainable margin performance in the fourth quarter that we should look to as we look at fiscal 2025?

Matt Smith: Hi. Good morning.

Speaker Change: Our next question comes from Matt Smith from CFO . Please go ahead. Your line is open.

Kofi Bruce: One of the dive in a little bit on the profit bill or the profit performance in the path segment. You were solidly in the mid 20s, even with the volume decline in the quarter. I knew you talked about some increased investment behind Wilderness as you try to stabilize that business and get it back to growth. But is this a sustainable margin performance in the fourth quarter that we should look to as we look at fiscal 2025? Sure. Let me, yeah, let me start. I think we benefit in this. Both the more stable supply chain environment and our ability to drive higher than expected levels of HMM, even in the face of the volume declines we saw.

Matthew Edward Smith: Hi, good morning. I wanted to dive in a little bit on the profit performance in the PETS segment. You were solidly in the mid-20s, even with the volume decline in the quarter. I know you talked about some increased investment behind wilderness as you try to stabilize that business and get it back to growth. But is this a sustainable margin performance in the fourth quarter that we should look to as we look at fiscal 2025?

Kofi A. Bruce: Sure, let me, yeah, let me start. I think we benefit from this, both a more stable supply chain environment and our ability to drive higher than expected levels of HMM. Even in the face of the volume declines we saw, we continue to have and capitalize on opportunities both to internalize production that was previously external but also to drive HMM that was, frankly, less available when we were struggling to supply during the supply chain disruption period.

Speaker Change: Sure, let me yeah, let me start. I think we benefited this both the more stable supply chain environment and our ability to drive

Kofi Bruce: We continue to have and capitalize an opportunity both to internalize production that was previously external, but also to drive HMM that was frankly less available when we were struggling to supply. In the supply chain disruption period. So we feel good about sort of the exit point. What I would, you know, what I think is critical as we look at the business right now is we're very focused on driving improved volume price. So I think, you know, profitability is very competitive and, you know, at the 20% plus level, I wouldn't expect that that 24% is the level we would necessarily target.

Speaker Change: Higher than expected levels of HMM even in the face of the volume declines we saw

Speaker Change: We continue to have and capitalize on opportunities both to internalize production that was previously external but also to drive HMM that was frankly less available when we were struggling to supply.

Kofi A. Bruce: So we feel good about sort of the exit point. What I would, you know, what I think is critical as we look at the business right now is that we're very focused on driving improved volume trends. So I think, you know, profitability is very competitive, and, you know, at the 20% plus level, I wouldn't expect that 24% is the level we would necessarily target. We continue to expect to be able to drive strong HMM, and much like we're doing at the enterprise, I would say our focus is going to be on reinvesting gross margin improvement back into the business to drive growth.

Speaker Change: in the supply chain disruption period. So we feel good about sort of the exit point. What I would, you know, what I think is critical as we look at the business right now is we're very focused on.

Speaker Change: 24% driving improved volume trends. So I think you know, profitability very competitive and, you know, at the 20% plus level, I wouldn't expect that that 24% is is the level we would necessarily target, we continue to expect to be able to drive strong HMM and much like we're doing at the enterprise, I would say our focus is going to be on reinvesting gross margin improvement back into the business to drive growth.

Kofi Bruce: We continue to expect to be able to drive strong HMM, and much like we're doing at the enterprise, I would say our focus is going to be on reinvesting gross margin improvement back into the business to drive growth.

Jeff Harmening: Yeah, to back up what Kofi said, a year ago, we were challenged both on our gross margin and with our sales growth, and I'm really pleased with the Blue Buffalo team, the job they have done to restore the margin profile. And we've done a lot of work over the past year to do that, to get us back into a place for the margins over the last year, or roughly 20% or so. And so now the job to do is to, and that's without volume leverage. And so now the job to do is to really improve our top line performance.

Jeffrey L. Harmening: Yeah, to back up what Kofi said, I mean, a year ago, we were challenged both on our gross margin and, you know, and with our sales growth. And I'm really pleased with the Blue Buffalo team for the job they have done to restore the margin profile. And, you know, we've done a lot of work over the past year to do that, to get us back into a place where the margins, you know, over the last year are roughly 20% or so. And so, you know, now the job to do is to, and that's without volume leverage.

Speaker Change: Yeah, to back up what Kofi said, I mean, you know, a year ago, we were challenged both on our gross margin and, you know, and with our sales growth, and I'm really pleased with the Blue Buffalo team for the job they have done.

Speaker Change: to restore the margin profile. And, you know, we've done a lot of work over the past over the past year to do that to get us back into a place where the margins, you know, over the last year are roughly 20% or so. And so, you know, now the job to do is to and that's without volume leverage. And so now, now the job to do

Jeffrey L. Harmening: And so now, now the job to do is to really improve our top line performance. And, you know, we feel good about what we've done with the life protection formula. We're going to double down on that. We feel good about our tasteful cap business. And then in the last quarter, we put some more advertising on that, and we've seen that business get back to growth. And so we're going to, we're going to put more fuel on that.

Jeff Harmening: And you know, we feel good about what we've done on Live Protection Formula. We're going to double down on that. We feel good about our tasteful cat business. And then in the last quarter, we put some more advertising on that. We've seen that business gets back to growth. And so we're going to put more fuel on that.

Speaker Change: is to really improve our top-line performance.

Speaker Change: And, you know, we feel good about what we've done on life protection formula, we're going to double down on that. We feel good about our tasteful cap business, and then last quarter we put some more advertising on that. We've seen that business get back to growth.

Jeffrey L. Harmening: And now the job to do, the next job to do, is in the wilderness. And we've been talking about it for a little while, but we're putting advertising on air here in July and good levels of advertising behind really good messaging. And so that really is the job to do. And, you know, I think the rest of it will flow quite nicely, to the extent that we can get Blue Buffalo back to growth. We do have good productivity, but the real job to do is maintain these really good margins while accelerating our top line performance.

Jeff Harmening: And now the job to do, the next job to do, is on wilderness. And we've been talking about it for a little while, but we're put on advertising on air here in July and good levels of advertising behind really good messaging. And so that really is the job to do. And, you know, to the extent that we can get Blue Buffalo back to growth. I mean, I think the rest of it will flow quite nicely. We do have good productivity. But the real job to do is maintain these really good margins while accelerating our top-line performance.

Speaker Change: and so we're gonna we're gonna put more fuel on that and now the job to do the next job to do is on wilderness and we've been talking about it for a little while but we're put on advertising on air here and

Speaker Change: In July , a good level of advertising behind really good messaging, and so that really is the job to do. And, you know, to the extent that we can get Blue Buffalo back to growth, I mean, I think the rest of it will flow quite nicely. We do have good productivity, but the real job to do is maintain these really good margins while accelerating our top-line performance.

Matt Smith: Thank you.

Matthew Edward Smith: Thank you. And just a quick follow up. You talked about

Matt Smith: And just a quick follow-up. You talked about some distribution losses in the Pet division. Any more detail to add to that? Is that something that remains a drag as we look at fiscal 25? That perhaps keeps volume growth a little less, a little tougher to achieve as we look in the next year.

Speaker Change: Thank you, and just a quick follow-up. You talked about some distribution losses in the pet division. Any more detail to add to that? Is that something that remains a drag as we look at fiscal 25 that perhaps keeps volume growth a little less, a little tougher to achieve as we look into next year?

Jeff Harmening: Here we have, we've had some distribution losses on a little bit on trees and a little bit on wet pet food. And that was because, during kind of the pandemic, there were some other competitors you couldn't supply as well. That we could, as we had some extra self placement that's rolling off. But it's really not our big flavors; our big customers. And so, even even with that, we've seen improved performance on increasingly good performance on our blue Buffalo business and aggregate. If you look at movement. And so, even with that, you know, our expectation is for improved volume performance in the coming year for below.

Unknown Speaker: Yeah, we have. We've had some distribution.

Speaker Change: We've had some distribution losses on trees and a little bit on wet pet food, and that was because, you know, during kind of the pandemic, there were some other competitors you couldn't supply as well that we could, and so we had some extra self-placement, and that's rolling off.

Speaker Change: But it's really not our big flavors or our big customers. And so even with that, we've seen improved performance on increasingly good performance on our Blue Buffalo business in aggregate if you look at movement. And so even with that, you know, our expectation is for improved volume performance in the coming year for Blue.

David Palmer: Thank you.

David Palmer: Our next question comes from David Palmer from Evercore, ISI. Please go ahead. Your line is open.

Operator: Our next question comes from David Palmer from Evercore ISI. Please go ahead. Your line is open.

Speaker Change: Thank you all for listening.

Speaker Change: Our next question comes from David Palmer from Evercore ISI. Please go ahead, your line is open.

David Sterling Palmer: Thanks. I'll just follow up on pets for a second. I know one of the big areas of focus was the specialty pet segment. Clearly, it was a drag into the fourth quarter. Do you, you talked about in the prepared remarks about revenue growth for PET in Fiscal 25. Do you also see that the PET specialty segment also stabilizing and growing in Fiscal 25?

David Palmer: Thanks. I'll just follow up on pet for a second. I know one of the big areas of focus was the specialty pet segment. Clearly, it was a drag into the fourth quarter. Do you, you talked about in the prepared remarks about revenue growth for pet in fiscal 25? Do you also see that the pet specialty segment also stabilizing and growing in fiscal 25?

David Sterling Palmer: Thanks. I'll just follow up on pets for a second. I know one of the big areas of focus was the specialty pet segment. Clearly it was a drag into the fourth quarter.

David Sterling Palmer: Do you, you talked about in the prepared remarks about revenue growth for PET in Fiscal 25. Do you also see that that PET specialty segment also stabilizing and growing in Fiscal 25?

Jeff Harmening: Yeah, so I, you know, I'm not going to get into the specific channel by channel, but since you ask, I won't avoid it completely, David. The, you know, the what I would say is that what I would see is an improvement in that channel. We've actually seen an improvement in the channel. Now the job for us to do is improvement in our own performance. It really is about wellness and about getting our sizing right and about working with the retailers there to improve the performance of Wilderness. By the way, they're in on it too. We all want to improve the performance of wilderness.

Jeffrey L. Harmening: Yeah, so you know, I'm not going to get into specific channel by channel, but since you asked, I won't, I won't avoid it completely, David. The, you know, what I would say is that what I would see is an improvement on that channel. We've actually seen an improvement on that channel. Now, the job for us to do is improve our own performance. And it really is about wellness, and about getting our sizing right, and about working with the retailers there to improve the performance of wilderness. By the way, they're in on it, too.

David Sterling Palmer: Yeah, so, you know, I'm not going to get into specific channel by channel, but since you asked, I won't avoid it completely, David. What I would say is that what I would see is an improvement in that channel. We've actually seen an improvement in the channel. Now the job for us to do is improvement in our own performance, and it really is about

David Sterling Palmer: and about getting our sizing right.

David Sterling Palmer: and about working with the retailers there to improve the performance of wilderness. By the way, they're in on it too. We all want to improve the performance of wilderness, and so we're all rowing in the same direction.

Jeff Harmening: And so we're all growing in the same direction. And so, you know, my expectation would be to improve performance for us in the pet specialty channel. We'll see what that yields over time. But I feel is that we have the right actions in place to improve our performance in that channel, particularly with Wilderness, which is the most important thing to them.

Jeffrey L. Harmening: We all want to improve the performance of wilderness, and so we're all rowing in the same direction. And so, you know, my expectation would be improved performance for us and the pest specialty channel. We'll see what that yields over time. But I feel as if we have the right actions in place to improve our performance in that channel, particularly with wilderness, which is the most important thing to them.

David Sterling Palmer: And so, you know, my expectation would be improved performance for us and the Pet Specialty Channel. We'll see what that yields over time, but I feel as if we have the right actions in place to improve our performance in that channel, particularly with wilderness, which is the most important thing to improve.

Andrew Lazar: Andrew.

Andrew Lazar: And just a question on the baking segment. That seemed to be an area that did very well during COVID. You cited it as one of the areas that was most declining in this quarter.

David Sterling Palmer: And just a question on the baking segment. That seemed to be an area that did very well during COVID. You cited it as one of the areas that was most declining in this quarter. Are you seeing? I just wanted to get your pulse on that segment and consumer behaviors around that and make sure that it's not gonna be an ongoing drag for you in fiscal 25. How do you feel about that segment and the consumer behaviors around baking and the at-home occasions that would drive that? I know it's a high-margin segment for you.

Speaker Change: And just a question on the baking segment. That seemed to be an area that did very well during COVID. You cited it as one of the areas that was most declining in this quarter.

Jeff Harmening: I just wanted to get your pulse on that segment and be consumer behaviors around that and make sure that it's not going to be an ongoing drag for you in fiscal 25. What are you, how are you feeling about that segment and the consumer behaviors around baking? And the ad home occasions that would drive that, I know it's a high margin segment for you, and I'll pass it on. Thanks.

Speaker Change: Are you seeing? I just wanted to...

Speaker Change: get your

Speaker Change: Your pulse on that segment and consumer behaviors around that.

Speaker Change: and make sure that it's not going to be an ongoing drag for you in Fiscal 25. How are you feeling about that segment and the consumer behaviors around baking and the at-home occasions that would drive that? I know it's a high-margin segment for you, and I'll pass it on. Thanks.

Jeff Harmening: Yeah, so let me start with that home occasions. You know, at home, occasions are actually quite high. I mean, about 86 to 87% of food is now eaten at home. You know, given the challenges, consumers are facing with inflation, we would expect that to continue. So I don't see a drag on category of performance for at-home eating occasions. So that would be the first point. The second is, you know, that the category itself in terms of volume has hung in there, you know, pretty well. It's our sheer position, particularly if you look at Pillsbury, that has been the challenge, and after many years of remarkable growth.

Jeffrey L. Harmening: Yeah, so let me start with at-home occasions. You know, at-home occasions are actually quite high.

Speaker Change: Yeah, so let me start with at-home occasions. You know, at-home occasions are actually quite high. I mean, about 86 to 87 percent of food is now eaten at home. You know, given the challenges consumers are facing with inflation, we would expect that to continue. So I don't see a drag on category performance for at-home eating occasions.

Jeffrey L. Harmening: I mean, about 86 to 87% of food is now eaten at home. You know, given the challenges consumers are facing with inflation, we would expect that to continue. So I don't see a drag on category performance for at-home eating occasions. So that would be the first point.

Jeffrey L. Harmening: The second is, you know, that the category itself, in terms of volume, has hung in there pretty well. It's our share position, particularly if we look at Pillsbury, that has been the challenge. And after many years of remarkable growth, this past year, we saw a return of, you know, private label to the shelf, some smaller competitors, but mainly private label. And so this past year, I think is going to be an anomaly. And I think the key for us is really not a change in the environment. The key for us is our change in level of activity.

Speaker Change: So that would be the first point. The second is, you know, the category itself in terms of volume has hung in there, you know, pretty well. It's our share position, particularly if you look at Pillsbury, that has been the challenge and after many years of remarkable growth.

Jeff Harmening: This past year, we saw a return of, you know, private label to sell some smaller competitive, mainly private label. And so this past year, I think, is going to be an anomaly.

Speaker Change: This past year, we saw a return of private label to the shelf, some smaller competitors, but mainly private label, and so this past year, I think, is going to be an anomaly, and I think the key for us...

Jeff Harmening: And anyway, I think the key for the key for us is really not a change in the environment; that the key for us is our change in level of activity. And I tell you, our plans are quite good. As I talked about, we're bringing the Doughboy back, but also, but also we've got product improvements, taste improvements on things like biscuits, which I think will serve us very well. We have, you know, variety packs coming in and cookie dough with brands like Reese's and Oreo and Monster cookies. And so we have a really good plan and really good news to share on our Pillsbury business this year.

Jeffrey L. Harmening: And I tell you, our plans for dough are quite good. As I talked about, we're bringing the dough boy back, but we've got product improvements, taste improvements on things like biscuits, which I think will serve us very well. We have, you know, variety packs coming in cookie dough with brands like Reese's and Oreo and Monster Cookies. And so we have a really good plan and really good news to share about our Pillsbury business this year. And so it's really within our hands to get us back to growth on Pillsbury, and I feel good about our plans there.

Speaker Change: It's really not a change in the environment. The key for us is our change in level of activity, and I tell you, our plans in Delaware are quite good.

Speaker Change: As I talked about, we're bringing the dough boy back, but also we've got product improvements, taste improvements on things like biscuits, which I think will serve us very well. We have, you know, variety packs coming in cookie dough with brands like Reese's and Oreo and Monster Cookies. And so we have a really good plan and really good news to share on our Pillsbury business this year. And so it's really within our hands to get us back to growth on Pillsbury, and I feel good about our plans there.

Jeff Harmening: And so it's really within our hands to get us back to growth on Pillsbury. And I feel good about our plans there. Thanks for that.

Robert Moskow: Our next question comes from Robert Moscow from PD Cowan. Please go ahead. Your line is open.

Operator: Our next question comes from Robert Moskow from TD Cowan. Please go ahead. Your line is open.

Speaker Change: Thanks for that.

Speaker Change: Our next question comes from Robert Moskow from TD Cowen. Please go ahead, your line is open.

Robert Bain Moskow: Hey, thanks for the question. Good morning, Jeff.

Robert Moskow: Hey, thanks for the question.

Jeff Harmening: Good morning, Jeff. I wanted to know you, and a lot of your peers have shifted the emphasis more to volume. And I'm not denying the importance of it right now. But it just sounds different than the strategy that a lot of CPG companies have used over the years to create value through premiumization, convenience. That's been a way to improve margins and improve mix historically. Can you do both of these things at the same time? It seems like there's a lot of discussion on volume today. And I'm wondering if there's still, if the consumer can still absorb or accept more premium offerings in this environment.

Jeff: Hey, thanks for the question. Good morning, Jeff.

Robert Bain Moskow: Morehead, I wanted to know, you know, you and a lot of your peers have shifted the emphasis more to volume.

Robert Bain Moskow: I'm not denying the importance of it right now, but it just sounds different than the strategy that a lot of CPG companies have used over the years to create value through premiumization, convenience,

Robert Bain Moskow: This has been a way to improve margins and improve mix historically. Can you do both of these things at the same time? It seems like there's a lot of discussion on volume today. I'm wondering if the consumer can still absorb or accept.

Robert Bain Moskow: I wanted to know, you know, you and a lot of your peers have shifted the emphasis more to volume, and I'm not denying its importance right now. But it is, it just sounds different than the strategy that a lot of CPG companies have used over the years to create value through premiumization, convenience, and Unknown Speaker. That's been a way to improve margins and improve mix historically. Can you do both of these things at the same time? It seems like there's a lot of discussion about volume today, and I'm wondering if a consumer can still absorb or accept more premium offerings in this environment.

Robert Bain Moskow: More premium offerings in this environment.

Jeff Harmening: Yeah, Rob, I don't see you as a trade-off between volume and premiumization. I think it's an end. I'll take our Blue Buffalo, which is a premium offering, but Live Protection Formula has done particularly well behind really good marketing. And so really, that's one why I talked about value earlier, getting back to really good marketing and really good messaging on our big brands is really crucial. So I don't see a trade-off between getting back to volume and premiumization in the categories. I think it's an aunt, and, you know, Pillsbury is another example where it's a premium offering in the category.

Jeffrey L. Harmening: The, yeah, Rob, the, you know, I don't see it as a trade-off between volume and premiumization. You know, I think it's an and, you know, I'll take our blue buffalo, which is, you know, a premium offering, but the live protection formula has done particularly well, you know, behind really good marketing. And so really, that's one reason why I talked about value earlier, getting back to really good marketing and really good messaging on our big brands is really crucial. So I don't see a trade-off between getting back to volume and premiumization in the categories. I think it's an ant.

Speaker Change: Yeah, Rob, I don't see it as a trade-off between volume and premiumization. I think it's an and. I'll take our blue buffalo, which is a premium offering, but life protection formula has done particularly well behind really good marketing.

Jeffrey L. Harmening: And, and, you know, Pillsbury is another example where it's a premium offering in the category, and we've got really good marketing against it. I think the reason you hear us talking about volume is that, obviously, our volumes were down versus a year ago. And so that's really the job for us to do is to get back to that.

Speaker Change: And so really, that's one why I talked about value earlier, getting back to really good marketing and really good messaging on our big brands is really crucial. So I don't see a trade-off between getting back to volume and premiumization in the categories. I think it's an ant. And, you know, Pillsbury is another example where it's a premium offering in the category.

Jeff Harmening: And we've got really good marketing against it. I think the reason you hear us talking about volume is obviously our volumes were down versus a year. And so, and so that's really the job for us to do is to get back to that. But, and I think you're right to ask, but that doesn't mean that we can't premiumize. So those things are not are not mutually exclusive. And in fact, I think in many cases, they go together. The key is to make sure that the value that we offer. As we think about it is commensurate with the with the brand itself.

Speaker Change: And we've got really good marketing against it. I think the reason you hear us talking about volume is obviously our volumes were down versus a year ago. And so that's really the job for us to do is to get back to that. And I think you're right to ask, but that doesn't mean that we can't premiumize. So those things are not mutually exclusive. In fact, I think in many cases they go together.

Jeffrey L. Harmening: But, and I think you're right to ask, but that doesn't mean that we can't premiumize. So those things are not mutually exclusive. And, in fact, I think in many cases, they go together.

Jeffrey L. Harmening: The key is to make sure that the value that we offer is commensurate with the brand itself. And so that's why you heard me talking a lot about the news we have on our big core billion dollar brands, because that really is going to be the key to our success. And we talked about value; a lot of people immediately go to price, and that certainly is a component, but it's not the whole component.

Speaker Change: The key is to make sure that the value that we offer.

Jeffrey L. Harmening: If you think about it, you know, when consumers feel pinched, one of the most important things that they have to do is feed their families, and what they can't afford is waste. And, and the family has to really want it.

Jeff Harmening: And so that's why you heard me talking a lot about the news. We have on our big core billion dollar brands, because that really is going to be the key to our success. And we talk about value. A lot of people immediately go to price. And that certainly is a component, but it's not the component. And if you think about it, you know, and when it comes to my field pants, one of the most important things that they have to do is feed their families, and what they can't afford is waste. And the family has to really want it.

Speaker Change: As we think about it, is commensurate with the...

Speaker Change: with the brand itself. And so that's why you heard me talking a lot about the news we have on our big core billion dollar brands, because that really is going to be the key to our success. And we talk about value, a lot of people immediately go to price. And that certainly is a component, but it's not the component.

Speaker Change: And if you think about it, you know, when consumers feel pinched, one of the most important things they have to do is feed their families and what they can't afford is waste.

Jeff Harmening: And so you're here talking about news and things like that in this environment. And so I appreciate the question. I think it's a really good one. You hear us talking about volume because, you know, obviously, if that's the most important job to do, but it is not the opposite of increasing premiumization at the same time. Thank you.

Jeffrey L. Harmening: And so you're here talking about news and things like that in this environment. And so I appreciate the question. I think it's a really good one.

Speaker Change: And the family has to really want it. And so you hear us talking a lot about case news and things like that in this environment. And so I appreciate the question. I think it's a really good one. You hear us talking about volume because, you know, obviously...

Jeffrey L. Harmening: You hear us talking about volume because, you know, obviously, it's the most important job to do, but it is not the opposite of increasing premiumization.

Speaker Change: That's the most important job to do, but it is not the opposite of increasing premiumization at the same time.

Chris Carey: Our last question today will come from Chris Kerry from Wells Fargo. Please go ahead. Your line is open.

Operator: Our last question today will come from Chris Carey from Wells Fargo. Please go ahead. Your line is open.

Speaker Change: Great, thank you.

Speaker Change: We will be back again shortly. Good-bye.

Speaker Change: Our last question today will come from Chris Carey from Wells Fargo. Please go ahead, your line is open.

Kofi Bruce: Hey, thank you. I'll just wrap it up when a couple follow-ups. So number one, Kofi, on gross margin, you said expansion for the full year. In the prepared remarks, you did highlight, however, that gross margin compares to harder and Q1. You'll be doing more couponing and Q1. We expect gross margins to be down year of year.

Christopher Michael Carey: Hey, thank you. I'll just wrap it up with a couple follow-ups. So number one, Kofi, on gross margins, you said expansion for the full year. In the prepared remarks, you did highlight, however, that gross margin comparisons are harder in Q1. You'll be doing more couponing in Q1. Should we expect gross margins to be down year over year to start the fiscal year, then improve as couponing becomes more balanced and comps get easier?

Speaker Change: Bye.

Christopher Michael Carey: Hey, thank you. I'll just wrap it up with a couple follow-ups. So number one, Kofi, on gross margins, you said expansion for the full year.

Speaker Change: In the prepared remarks, he did highlight, however, that gross margin compares harder in Q1.

Christopher Michael Carey: Apologies if I missed that. But that would be number one. And then second, just, you know, the recurring debate throughout the Q&A this morning has been the sales reacceleration or acceleration implied in the outlook. If you just think about SRM, couponing, and perhaps other items, how would you frame the relative contribution of these items to the acceleration that you're expecting in your outlook for the year? So thanks so much for those two.

Kofi Bruce: To start the fiscal year that improve as couponing becomes more balanced and comps get easier. Apologies if I missed that. But that would be number one.

Speaker Change: You'll be doing more couponing in Q1. Should we expect gross margins to be down year-over-year?

Speaker Change: to start the fiscal year that improve as couponing becomes more balanced and comps get easier. Apologies if I missed that.

Kofi Bruce: And then second, just, you know, the recurring debate throughout the Q&A this morning has been the sales. So we're going to have a couple of reacceleration or acceleration implied in the outlook. If you just think about SRM, couponing and perhaps other items, how would you frame the relative contribution of these items to the acceleration that you're expecting in your outlook for the year. So thanks so much on those two.

Speaker Change: But that would be number one. And then second, just, you know, the recurring debate throughout the Q&A this morning has been the sales.

Speaker Change: Acceleration implied in the outlook. If you just think about SRM, couponing,

Speaker Change: And perhaps other items. How would you frame the relative contribution of these items to the acceleration that you're expecting in your outlook for the year? So thanks so much on those two.

Kofi Bruce: Okay, well, let me start. I would just say on Q1, you know, I'm not prepared to get too much more detail than already happened, which is effectively we expect the comparison on sales. Just mentioned the price makes comparison component of that, obviously. And then profit compared operating profit compared to the same quarter prior year will be, will be a net headwind. So we do expect the complexion of our Q1 to be lower than the subsequent quarters. I'm not going to get too much more detail below that. Obviously, I think it implied in our guidance and our expectations is that we're going to use all the levers of our SRM toolkit.

Kofi A. Bruce: Okay, well, let me start, I would just say, on Q1, I'm not prepared to get too much more detail than I already have been, which is effectively, we'd expect the comparison on sales. Jeff mentioned the price mix comparison component of that, obviously. And then profit compared operating profit compared to the same quarter a year ago will be, will be a net headwind. So we do expect the complexion of our Q1 to be lower than the subsequent quarters. I'm not going to get too much more detail below that.

Speaker Change: OK, well, let me start. I would just say on cue one, you know, I'm not prepared to get

Speaker Change: Too much more detail than I already have been, which is, effectively, we'd expect the comparison on...

Jeff: Sales, Jeff mentioned the price-mix comparison component of that, obviously.

Jeff: And then profit compared, operating profit, compared to the same quarter prior year will be...

Jeff: will be a net headwind. So we do expect the complexion of our Q1 to be lower than the subsequent quarters. I'm not going to get too much more detail below that.

Kofi A. Bruce: Obviously, I think implied in our guidance and our expectations is that we're going to use all the levers of our SRM toolkit. So, you know, to the point, there's always a lot of focus on the price component of that. And certainly, that is important in this environment. But I think there are there we are using everything from trade optimization to mix will be, you know, front and center and focus as we're pulling the levers of SRM.

Jeff: Obviously, I think, implied in our guidance and our expectations,

Kofi Bruce: So, you know, to the point, there's always a lot of focus on the price component of that. And certainly that that is important in this environment. But I think they're, we are, we are using everything from trade optimization to, to mix will be, you know, front center and focus as we're pulling the levers of SRM. You know, obviously, as we've worked through this year, it's been clear prices and that price mix, it's been less of a driver of sales as we've, as we've lapped all the pricing from the prior year. But we would expect to continue to use SRM toolkit in its full totality next year.

Jeff: That we're going to use all the levers of our SRM toolkit. So, you know, to the point, there's always a lot of focus on the price component of that. And certainly that is important in this environment. But I think we are using everything from trade optimization to

Kofi A. Bruce: You know, obviously, as we've worked through this year, it's been clear that prices and that price mix have been less of a driver of sales as we've lapped all the pricing from the prior year, but we would expect to continue to use the SRM toolkit in its full totality next year. I can't get too much more specific about the components or the complexion at this point.

Jeff: to mix will be front and center and focus as we're pulling the levers of SRM. Obviously, as we've worked through this year, it's been clear.

Jeff: Prices and that price mix has been less of a driver of sales as we've as we've lapped all the pricing from the prior year But we would expect

Kofi Bruce: I can't get too much more specific about the components or the complexion at this point. Okay, thank you.

Jeff: to continue to use SRM Toolkit in its full totality next year. I can't get too much more specific about the components or the complexion at this point.

Jeff Siemon: Okay, I think we'll go ahead and wrap it up there. Appreciate everyone's good questions and time and attention, and as always, we're available for follow-ups throughout the day if you have more questions that you need to get to us.

Christopher Michael Carey: Okay, I think we'll go ahead and wrap it up there. Appreciate everyone's good questions and time and attention. And, as always, we're available for follow-ups throughout the day if you have more questions that you need to get to us. So, appreciate the time today, and we look forward to catching up soon.

Speaker Change: Okay, thank you.

Speaker Change: Okay, I think we'll go ahead and wrap it up there. I appreciate everyone's good questions and time and attention. And as always, we're available for follow-ups throughout the day if you have more questions that you need to get to us. So appreciate the time today and we look forward to catching up soon.

Operator: So appreciate the time today and look forward to catching up soon.

Operator: This concludes today's conference call. Thank you for your participation. You may now have more questions. Thank you.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for your participation. You may now disconnect.