Q4 2024 Conagra Brands Inc Earnings Call - Q&A

Operator: Good morning, everyone, and welcome to the Conagra Brands Q4 and Fiscal Year 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star and then one. To withdraw your question, you may press the star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Melissa Napier, Head of Investor Relations. Ma'am, please go ahead.

Operator: Good morning, everyone, and welcome to the Conagra Brands Q4 and fiscal year 2024 earnings conference call. All participants will be in a listen-only mode.

Good morning, everyone and welcome to the Conagra brands Q4, and fiscal year 2024 earnings Conference call.

Speaker Change: All participants will be in a listen only mode should you need assistance.

Operator: Should you need assistance? We assume a conference specialist by pressing the star key followed by zero.

Our specialists by person that Starkey followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two.

After todays presentation, there will be an opportunity to ask questions.

Speaker Change: Ask a question you May press Star and then one.

Speaker Change: To withdraw your questions you May press star two.

Operator: There's also note today's event is being recorded.

Please also note today's event is being recorded.

Melissa Napier: At this time, I'd like to turn the floor over to Melissa Napier, Head of Investor Relations. Man, please go ahead.

Speaker Change: At this time I'd like to turn the floor over to you.

Speaker Change: Nathan <unk> head of Investor Relations Ma'am. Please go ahead.

Melissa Napier: Thanks, Jamie. Good morning, everyone.

Melissa Napier: Thanks, Jamie.

Speaker Change: Thanks, Jamie good morning, everyone. Thanks for joining us today for a live question and answer session on todays results. Once again I'm joined this morning by Shaun Connolly, our CEO and Dave Marburger, our CFO.

Melissa Napier: Good morning, everyone. Thanks for joining us today for our live question-and-answer session on today's results. Once again I'm joined this morning by Sean Connolly, our CEO, and Dave Marberger, our CFO. We may be making some forward looking statements and discussing non-GAAP financial measures during the session. Please see our earnings release.

Melissa Napier: Thanks for joining us today for our live question and answer session on today's results. Once again, I'm joined this morning by Sean Connolly, our CEO, and Dave Marberger, our CFO. We may be making some forward-looking statements and discussing non-GAAP financial measures during this session. Please see our earnings release, prepared remarks, presentation materials, and filings with the SEC, which can all be found in the Investor Relations section of our website, for more information, including descriptions of our risk factors, gap-to-non-GAAP reconciliations, and information on our comparability items. We hope you all had a chance to listen to our prepared remarks this morning, and I'll now ask Jamie to introduce the first question.

We may be making some forward looking statements and discussing non-GAAP financial measures. During this session. Please see our earnings release prepared remarks presentation materials and filings with the SEC, which can all be found in the Investor Relations section of our website for more information, including descriptions of our risk factors.

Melissa Napier: Prepared remarks, presentation materials, and filings with the SEC, which cannot be found in the investor relations section of our website for more information, including descriptions of our respectors, gaps to non-GAAP reconciliation, and information and our comparability items. We hope you all had a chance to listen this morning to our prepared remarks, and I'll now ask Jamie to introduce the first question.

Speaker Change: GAAP to non-GAAP reconciliations and information on our comparability items. We hope you all had a chance to listen this morning to our prepared remarks, and I'll now ask jamey to introduce the first question.

Operator: And once again, if you would like to ask a question, please press star and one.

Speaker Change: And once again, if you would like to ask a question. Please press star and one are.

Andrew Lazar: Our first question today comes from Andrew Lazar from Barclays. Please go ahead with your question.

Operator: And once again, if you would like to ask a question, please press star and 1. Our first question today comes from Andrew Lazar from Barclays. Please go ahead with your question.

Our first question today comes from Andrew.

Speaker Change: Andrew Lazard from Barclays. Please go ahead with your question.

Andrew Lazar: Great. Thanks so much.

Andrew Lazar: Great. Thanks so much.

Great. Thanks, so much good morning, everybody good.

Sean Connolly: Good morning, everybody. Good morning. Sean, you talked in the prepared remarks about expecting a sort of gradual transition in fiscal 25 to a more normal operating environment as consumers adjust their reference prices. And I know you've talked a lot through the back part of this last fiscal year that consumers were increasingly ready to sort of engage in your categories and just needed to be nudged a bit. And it seems like that that adjustments taking longer, not just for kind of aggra, obviously, but the industry at large. Why do you think that is, and is it going to require, is it requiring more investment than maybe you initially anticipated.

Unknown Speaker: Good morning, everybody. Morning. Morning.

Andrew Lazar: Good morning.

Andrew Lazar: Sean, you talked in the prepared remarks about, you know, expecting a sort of a gradual transition in fiscal 25 to a more normal operating environment as consumers adjust their reference prices. And I know you've talked a lot through the back part of this last fiscal year that consumers were increasingly ready to sort of engage in your categories and just needed to be nudged a bit. And it seems like that adjustment is taking longer, not just for Conagra, obviously, but for the industry at large.

Speaker Change: Sean you talked in the prepared remarks about expecting as sort of a gradual transition in fiscal 'twenty five to a more normal operating environment as consumers adjust their reference prices and I know you've talked a lot through the back part of this last fiscal year.

Speaker Change: <unk>, who are increasingly ready to sort of engage in your categories and just needed to be nudged debate and it seems like that adjustment is taking longer not just for conagra, obviously, but the industry at large why do you think that is and is it going to require or is it requiring more investment than maybe you initially anticipated and obviously I ask because that's one of the if not the biggest debate in the spa.

Andrew Lazar: Why do you think that is? And is it going to require, or is it requiring, more investment than maybe you initially anticipated? And obviously, I ask because that's one of the, if not the biggest debates in the space right now.

Sean Connolly: And obviously I ask because that's one of the, if not the biggest debate in the space right now.

Speaker Change: This right now.

Sean Connolly: Sure, Andrew, here's how I think about that. The operative word is transition. It's a process. It's not an event. And as we showed in our charts today for Conagra, that process is working. You saw in the materials today steady positive inflection on our volume, which is the key metric for us for the past three quarters. And that indicates that our investments to nudge volumes back toward positive territory are successfully engaging consumers. And importantly, we were able to expand our margins despite that investment. So I was particularly pleased to see volume consumption growth in Q4 in our snacks business, in our largest frozen business, which is frozen meals in our refrigerated business, and in our international business.

Sean M. Connolly: Sure, Andrew. Here's how I think about that. The operative word is transition. It's a process; it's not an event.

Andrew: Sure Andrew Here's how I think about that the operative word is transition it's a process it's not an event.

Sean M. Connolly: And as we showed in our charts today for Conagra, that process is working. You saw in the materials today, steady positive inflection on our volume, which has been the key metric for us for the past three quarters. And that indicates that our investments to nudge volumes back toward positive territory are successfully engaging consumers. And importantly, we were able to expand our margins despite that investment. So I was particularly pleased to see volume consumption growth in Q4 in our snacks business, in our largest frozen business, which is frozen meals, in our refrigerated business, and in our international business. All of those posted positive volume growth in the quarter.

Andrew: As we showed in our charts today for Conagra that process is working.

Andrew: In the materials today steady positive inflection on our volume, which is the key metric for us for the past three quarters and that indicates that our investments to nudge volumes back towards positive territory are successfully engaging consumers and importantly, we were able to expand our margins despite that inverse.

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Andrew: So I was particularly pleased to see volume consumption growth in Q4, and our snacks business in our largest frozen business, which is frozen meals in our refrigerated business and in our international business all of those posted positive volume growth in the quarter grocery has a couple of businesses that will get more.

Sean Connolly: All of those posted positive volume growth in the quarter. Grocery has a couple of businesses that will get more support in fiscal 25, but those investments are baked in our plans.

Sean M. Connolly: Grocery has a couple of businesses that will get more support in fiscal 25, but those investments are baked into our plans. So overall, we have been nudging, and the nudging is working, but it is a transition, it's a process, and we've moved the needle meaningfully, and that will continue to move in a positive direction. But it's a transition, it's not one of these events where we sprinkle a little money on the consumer, and they forget that they ever experienced runaway inflation. It's a period of adjustment, and for us, that is clearly happening.

Andrew: More support in fiscal 'twenty, five, but those investments are baked into our plans. So overall, we have been nudging. The nudging is working.

Sean Connolly: So overall we have been nudging; the nudging is working, but it is a transition. It's a process, and we've moved the needle meaningfully, and that will continue to move positive. But it's a transition. It's not one of these events where we sprinkle a little money on the consumer and they forget that they ever experienced runaway inflation. It's a period of adjustment. And for us, that is clearly happening.

Andrew: But it is a transition it's a process and we've moved the needle meaningfully and that we will continue to move positive, but it's a transition it's not one of these events, where we sprinkle a little money on the consumer and they forget that they ever experienced runaway inflation, it's a period of adjustment.

Andrew: And for Us that is clearly happening.

Sean M. Connolly: Thanks for that. And then, you know, I know a good portion of the negative year-over-year pricing in refrigerated and frozen is, I think, more pass-through on some refrigerated items. But I guess I'm more curious about what the pricing and competitive environment looks like in the frozen space specifically, and sort of how you see that playing out as we start doing so much. Sure. Yeah, absolutely.

Andrew Lazar: Thanks for that, and I know a good portion of the negative year of your pricing in refrigerated and frozen is I think more pass through on some refrigerated items. But I guess I'm more curious on what the pricing and competitive environment looks like in the frozen space specifically and sort of how you see that playing out as we start the new fiscal year. Thanks so much.

Speaker Change: Alright, Thanks for that and then I know a good portion of the negative year over year pricing in refrigerated and frozen is I think more pass through on some refrigerated items, but I guess I'm more curious on what the pricing and competitive environment looks like in the frozen space, specifically and sort of how you see that playing out as we start the new fiscal year. Thanks, So much sure yeah, absolutely yes.

Sean Connolly: Sure. Yeah, absolutely. Yeah, we invested in frozen as a result of volume consumption, and frozen overall is back to just about flat. Again, with our largest frozen business single-service of meals already growing volume, and our shares there hit record highs, as you saw, the materials, merchandising, advertising, and innovation have all contributed to that. So it's not been a situation where it's a price-based driver that is driving that positive news in the frozen business. It's all of those things. And with respect to the merchandising for us, it's really been about quality display and it's been about frequency, not about discounting.

Speaker Change: We invested in frozen as a result volume consumption and frozen overall is back to just about flat again with our largest frozen business single serve meals already growing volume in our shares there hit record highs as you saw in materials merchandising advertising and innovation have all contributed to that so.

Sean M. Connolly: We invested in Frozen As a result, volume consumption in frozen overall is back to just about flat, again, with our largest frozen business, single-serve meals, already growing volume, and our shares there hit record highs, as you saw in the materials. Merchandising, advertising, and innovation have all contributed to that. So it's not been a situation where it's a price-based driver that is driving that positive news in the frozen business. It's all of those things.

Speaker Change: Not been a situation, where it's a price based driver that is driving that that positive news in the frozen business. Its all of those things and with respect to the merchandising for us it's really been about quality display and it's been about frequency not about deep discounting I think what youre seeing in frozen overall and I called this.

Sean M. Connolly: And with respect to the merchandising, for us, it's really been about quality display, and it's been about frequency, not about deep discounting. I think what you're seeing in Frozen overall, and I called this out last year, is that when we were at the peak of the inflationary period, and people were having to make choices and trade-offs to make their household balance sheet work, they moved some of their purchases of convenience-oriented items toward more scratch cooking, and they kept their leftovers and things like that. The challenge with that is that consumers don't really like planning for meals. They don't like preparing meals. They don't like cleaning up after meals.

Sean Connolly: I think what you're seeing in frozen overall, and I called this out last year, is when we were at the peak of the inflationary period and people were having to make choices and trade-offs to make their household balance sheet work, they moved some of their purchases of convenience-oriented items toward more scratch cooking, and they kept their leftovers and things like that. The challenge with that is that consumers don't really like planning for meals. They don't like preparing meals. They don't like cleaning up after meals. So the need for convenience, that's why I showed that 40-year chart in our materials today is as strong as it's ever been.

Speaker Change: Last year is when we were at the peak of the inflationary period and people were having to make choices and trade offs to make their household balance sheet work. They moved some of their purchases of convenience oriented items toward more scratch cooking and they kept their leftovers and things like that the challenge with that is that consumer.

Speaker Change: I don't really like planning for meals, they don't like preparing meals. They don't like cleaning up after meals. So the need for convenience. That's why I showed that 40 year chart in our materials. Today is is as strong as it's ever been and after the consumer has to cut back for a while they grow weary of those work around behaviors and they come flying back to.

Sean M. Connolly: So the need for convenience, that's why I showed that 40-year chart in our materials today, is as strong as it's ever been. And after the consumer has to cut back for a while, they grow weary of those workaround behaviors, and they come flying back to convenience, which is why the investments we've made in Frozen to nudge consumers have materialized, and we saw growth in our Frozen single-serve meal business in the quarter.

Sean Connolly: And after the consumer has to cut back for a while, they grow weary of those work around behaviors, and they come flying back to convenience, which is why the investments we've made in frozen to nudge consumers have materialized. And we saw growth in our frozen single-serve meal business in the quarter. So I would say, you know, this is a category of space that has a 40-year compound annual growth rate of 4%, which I think is the highest department in the grocery store. We went through a challenging period last year when we saw some trading down.

Speaker Change: Convenience, which is why the investments we've made in frozen to nudge consumers have materialized and we saw growth in our frozen single serve meal business in the quarter. So I would say this.

Sean M. Connolly: So I would say, you know, this is a category of space that has a 40-year compound annual growth rate of 4%, which I think is the highest department in the grocery store. We went through a challenging period last year where we saw some trading down. We put some targeted investments against it, and now we've seen a real positive response and are knocking on the door of positive growth in our total Frozen business overall, with key businesses like single-serve meals growing and Birdseye gaining share again, which is great to see as well.

Speaker Change: This is a category of space that has a 40 year compound annual growth rate of 4%, which I think is the highest department in the grocery store.

Speaker Change: Went through a challenging period last year, where we saw some trading down we put some targeted investments against it and now we've seen real positive response in <unk>.

Sean Connolly: We put some targeted investments against it. And now we've seen real positive response and knocking on the door of positive over in our total frozen business overall. With key businesses like singles or meals growing and Bird's Eye gaining share again, which is great to see as well.

Knocking on the door of positive over in our total frozen business overall with key businesses like single serve meals growing and birdseye, gaining share again, which is great to see as well.

Speaker Change: Thanks, so much.

Ken Goldman: Our next question comes from Ken Goldman from JP Morgan. Please go ahead with your question.

Operator: Our next question comes from Ken Goldman from J.P. Morgan. Please go ahead with your question.

Speaker Change: Our next question comes from Ken Goldman from Jpmorgan. Please go ahead with your question.

Kenneth B. Goldman: Hi, good morning, and thank you. I wanted to first better understand the comment about the outlook being prudent. You know, on the one hand, your sales and EPS guidance is lower than the street expected. I think that's helpful in, you know, certainly setting a lower bar. On the other hand, you know, as Andrew mentioned, your outlook requires volumes to accelerate, especially on a two-year basis. And, you know, you're relying on the consumer getting used to higher prices, as you mentioned. And we just haven't seen that yet. So I guess I'm just trying to dig in a little bit on where you think you're being most conservative in your modeling as you plan out.

Ken Goldman: Hi. Good morning. And thank you.

Kenneth B. Goldman: Hi, good morning, and thank you.

Ken Goldman: I wanted to first better understand the comment about the outlook being prudent. You know, on the one hand, your sales and EPS guidance, you know, lower than the street expected. I think that's helpful and, you know, certainly setting a lower bar. On the other hand, you know, as Andrew mentioned, your outlook requires volumes to accelerate, especially on a two-year basis. And you're relying on the consumer getting used to higher prices, as you mentioned. And we just haven't seen that yet.

Kenneth B. Goldman: I wanted to first.

Kenneth B. Goldman: Understand the comment about the outlook being prudent.

On the one hand, your sales and EPS guidance lower than the street expected I think thats helpful.

Speaker Change: Certainly setting a lower bar on.

Speaker Change: On the other hand, as Andrew mentioned your outlook requires volumes to accelerate especially on a two year basis, and you're relying on the consumer getting used to higher prices as you mentioned and we just haven't seen that yet so I guess I'm just trying to dig in a little bit on where you think youre being most conservative in your modeling as you plan out.

Ken Goldman: So I guess I'm just trying to dig in a little bit on where you think you're being most conservative, and you're modeling as you plan out.

Sean M. Connolly: You know Ken, I think it's important to you because you just say we haven't seen that yet and look at the charts we demonstrated today. We absolutely have seen that.

Sean Connolly: You know, Ken, I think it's important to you because you just say we haven't seen that yet, and look at the charts we demonstrated today. We absolutely have seen that we have seen three straight quarters of volume trend improvement in our businesses. And in this most recent quarter, we saw snacks volume consumption that was positive. Our frozen meals consumption grew; our refrigerated business volume consumption grew; our international business grew. So we absolutely have seen traction, and we expect to see continued traction from here. We do not have one of the portfolios out there that some have where there just have been investments and there has not been movement.

Kenneth B. Goldman: Ken I think it's important to you because you just say, we haven't seen that yet and and look at the charts. We demonstrated today, we absolutely have seen that we have seen three straight quarters of volume trend improvement in our businesses and in this most recent quarter, we saw snacks volume consumption that was.

Sean M. Connolly: We have seen three straight quarters of volume trend improvement in our businesses, and in this most recent quarter, we saw snacks volume consumption that was positive. Our frozen meals consumption grew, our refrigerated business volume consumption grew, and our international business grew. So we absolutely have seen traction, and we expect to see continued traction from here. We do not have one of the portfolios out there that some have where there just have been investments, and there has not been movement and inflection in the volume line.

Kenneth B. Goldman: Positive our frozen meals consumption grew our refrigerated business volume consumption grew our international business groups. So we absolutely have seen traction.

Kenneth B. Goldman: And we expect to see continued traction from here.

Kenneth B. Goldman: Do not have one of the portfolios out there that some have where there have been investments in there has not been movement and inflection in the volume line, we have had steady inflection.

Sean Connolly: And inflection in the volume line, we have had steady inflection and a fair amount of the portfolio is already either close to flat or turning positive. So that's an encouraging thing, and it indicates that our investments are doing a good job of nudging the consumer along and engaging with respect to the comment that the guidance is prudent. It's prudent in that it recognizes that consumer adaptation is a process and it's not an event, and therefore it embeds some conservativeism around consumer buying behavior, but also some flexibility for us to continue investing behind volume growth, which, by the way, as we've said from the beginning, is our top priority in terms of nurturing the long-term health of the business.

Sean M. Connolly: We have had steady inflection, and a fair amount of the portfolio is already either close to flat or turning positive. So that's an encouraging thing, and it indicates that our investments are doing a good job of nudging the consumer along and engaging them. With respect to the comment that the guidance is prudent. It's prudent in that it recognizes that consumer adaptation is a process, and it's not an event. And therefore, it embeds some conservatism around consumer buying behavior but also some flexibility for us to continue investing behind volume growth, which, by the way, as we've said from the beginning, is our top priority in terms of nurturing the long-term health of the business.

Kenneth B. Goldman: Fair amount of the portfolio is already either close to flat or turning positive. So that's an encouraging thing and it indicates that our investments are doing a good job of nudging, the consumer along and engaging with respect to that.

The comment that the guidance is prudent.

Prudent in that it recognizes that consumer adaptation is a process and it's not an event and therefore it embeds some conservativism around consumer buying behavior, but also some flexibility for us to continue investing behind volume growth, which by the way as we've said from the beginning is our top priority.

Kenneth B. Goldman: Already in terms of nurturing the long term health of the business. So.

Sean Connolly: So, you know, given the slope of our volume trends for the last three quarters, we think the outlook is a prudent outlook.

Kenneth B. Goldman: Given that the slope of our volume trends for the last three quarters.

Sean M. Connolly: So, you know, given the slope of our volume trends for the last three quarters, we think the outlook is a prudent outlook. We had no desire to try to be heroic with our guidance for Fiscal 25.

Kenneth B. Goldman: We think the outlook is as it is a prudent outlook, we had no desire to try to be heroic with our guide for fiscal 'twenty five I think if you really just digest the progress we've made on these discrete businesses, where we've placed investment I think can only conclude that its a prudent play.

Sean Connolly: We had no desire to try to be heroic with our guide for fiscal 25. I think, you know, if you really just digest the progress we've made on these discrete businesses where we've placed investment, I think you can only conclude that it's a prudent play.

Sean M. Connolly: I think, you know, if you really just digest the progress we've made on these discrete businesses where we've placed our investment, I think you can only conclude that it's a prudent play.

Kenneth B. Goldman: Thank you for that. And then, for my follow-up, I wanted to clarify the first quarter outlook. Is the messaging first that the gross margin, on an absolute level, will be down or will be the lowest of the year, or is that year on year? I just wanted to clarify the gross margin comment. And then more broadly, you know, you talked about volume, gross margin, and the tough SG&A lap. It certainly seems like the consensus of 65 cents or so may need to come down a bit.

Ken Goldman: Thank you for that.

Thank you for that and then for my follow up I wanted to clarify the first quarter outlook.

Ken Goldman: And then for my follow up, I wanted to clarify the first quarter outlook is the messaging first that the gross margin on an absolute level will be down or will be the lowest of the year, or is that year on year? I just wanted to clarify the gross margin comment.

The messaging first at the gross margin.

Speaker Change: On an absolute level will be down or will be the lowest of the year or is that year on year I just wanted to clarify the gross margin comment and then more broadly you talked about.

Ken Goldman: And then, more broadly, you talked about volume, gross margin, tough SG&A lap. It certainly seems like consensus of 65 cents or so may need to come down a bit.

Speaker Change: Volume gross margin tough SG&A lap it it certainly seems like consensus of.

Speaker Change: Of 65, or so may need to come down a bit. So understanding you don't provide quarterly specifics I'm just trying to get maybe a slightly tighter sense of where you think some of the puts and takes in <unk> will be just so maybe investor expectations are properly aligned with yours.

Dave Marberger: So understanding you don't provide quarterly specifics, just trying to get maybe a slightly tighter sense of where you think some of the puts and takes in one queue will be, just so maybe investor expectations are properly aligned with yours.

David S. Marberger: Yeah, Ken, this is Dave. Let me give you some color on that. So, if you look at Q1 a year ago, that was the last quarter where we had a significant price mix, right? So, around the mid-single-digit range. So, we're wrapping up that quarter. So, if you break it down, if you look at our domestic retail business, we expect improvement in volumes, but they're still going to be down year-on-year, but we expect improvement versus where we came in at Q4 in terms of volume.

Kenneth B. Goldman: So understanding you don't provide quarterly specifics, just trying to get maybe a slightly tighter sense of where you think some of the puts and takes in 1Q will be, just so maybe investor expectations are properly aligned. Yeah, Ken, this is Dave. Let me give you a call.

Dave Marberger: Let me give you some color on that. So if you look at Q1 a year ago, that was the last quarter where we had significant price mix, right. So around the mid single digit periods, or we're wrapping on that quarter. So if you break it down, if you look at our domestic retail business, we expect improvement in volumes, but there's still going to be down year on year. However, we expect improvement versus where we came in at Q4 in terms of volumes. Our international business, we actually expect to be lower. We called out some supply chain issues in Canada, and that will impact some of the business in Q1.

David: Yeah, Ken This is David let me, let me give you some color on that so if you look at Q1, a year ago that was the last quarter, where we had significant price mix right. So around the mid single digit period. So we're wrapping on that quarter. So if you break it down if you look at our domestic retail business.

We expect improvement in volumes, but they're still going to be down year on year, but we expect improvement versus where we came in at Q4 in terms of volumes our international business, we actually expect to be lower we called out some some supply chain issues in Canada and that will impact some of the business in Q1, So we expect Q1 sale.

David S. Marberger: Our international business actually expects to be lower. We called out some supply chain issues in Canada, and that will impact some of the business in Q1. So we expect Q1 sales, and year-on-year growth in Canada to be lower than it was in Q4. A couple of things in terms of the margin side, SG&A; we're gonna have much higher SG&A in Q1 this year versus last year. Last year, we had an accrual to take down our incentive compensation.

Dave Marberger: So we expect Q1 sales year-on-year growth in Canada to be lower than it was in Q4.

David: <unk> year on year growth in Canada to be lower than it was in Q4, a couple of things in terms of the margin side SG&A.

Dave Marberger: There are a couple of things in terms of the margin side SGNA. We're going to have much higher SGNA in Q1 this year versus last year. Last year we had in a cruel to take down our incentive compensation. So year on year, that's a bounce back, and you're going to see that in expense of that. That obviously is going to depress operating margin and then on the gross margin side. Q1 is a lower sales quarter for us than other quarters. So you do normally get a little bit of drag from fixed cost relative to the other quarters, and we have the higher trade investments kind of rolling in from the end of last year.

We're going to have much higher SG&A in Q1, this year versus last year last year, we had an accrual to take down our incentive compensation. So year on year, that's a bounce back and youre going to see that inexpensive that that obviously is going to depress operating margin and then on the gross margin side.

David S. Marberger: So year-on-year, that's a bounce back, and you're gonna see that in expense, and that obviously is gonna depress operating margin. And then, on the gross margin side, Q1 is a lower sales quarter for us than other quarters. So you do normally get a little bit of drag from fixed costs relative to the other quarters, and we have higher trade investments kind of rolling in from the end of last year. But as we said, and Sean said in his comments, we expect gross margins to be stable for the full year.

David: Q1 is a lower sales quarter for us than other quarters. So you do normally get a little bit of drag from fixed cost relative to the other quarters.

David: And we have the higher trade investments kind of rolling in from the end of last year.

Dave Marberger: But, as we said in Seanmate, said in his comments, we expect gross margins to be stable for the full year. So, you know, we're pleased with the productivity. We expect that to continue inflation. We called for 3% net for the year. So, you know, the benefit there helps us fund the additional investment they're going to make. So all those things together that hopefully give you some color on RQ1.

Speaker Change: But as we said and Sean.

Speaker Change: <unk> said in his comments, we expect gross margins to be stable for the full year. So we're pleased with the productivity. We expect that to continue inflation, we called for 3% net for the year. So.

David S. Marberger: So we're pleased with the productivity. We expect that to continue. Inflation, we called for 3% net for the year. So the benefit there helps us fund the additional investment that we're gonna make. So all those things together, that hopefully gives you some color on our Q1.

Speaker Change: The benefit there helps us fund the additional investments that we're going to make so all those things together that hopefully gives you some color on our Q1.

Speaker Change: Thank you very much.

David Palmer: Our next question comes from David Palmer from Evercore ISI. Please go ahead with your question.

Operator: Our next question comes from David Palmer from Evercore ISI. Please go ahead with your question.

Our last question comes from David Palmer from Evercore ISI. Please go ahead with your question.

David Sterling Palmer: Thanks. I wanted just to ask you about the challenging environment comments. You made that comment a few times during your prepared remarks.

David Palmer: Thanks. I wanted just to ask you about the challenging environment comments. You made that comment a few times during the prepared remarks, but sometimes we can assume what you mean by that. I assume also that there's going to be some differences in the types of challenges you see per category. I sense that you might have more category issues, for example, in entrees that you speak to price gap issues, perhaps in in vegetables, for example.

Hi, Thanks, I wanted just to ask you about the challenging environment comments, you made that comment a few times during the prepared remarks, but sometimes we can assume what you mean by that but I would assume also that theres going to be some differences in the types of challenges you see per category I sense that you may.

David Sterling Palmer: And sometimes we can assume what you mean by that, but I would assume also that there are gonna be some differences in the types of challenges you see per category. I sense that you might have more category issues, for example, in entrees, that you speak to price gap issues, perhaps in vegetables, for example. So could you speak specifically to those challenges you're talking about and the types of investments that you're making, whether it's just price adjustments through promotion, display, or other activities?

Speaker Change: Have more category issues for example in entrees.

You speak to price gap issues, perhaps in in vegetables for example, so.

David Palmer: So could you speak specifically to what those challenges you're talking about and the types of investments that you're making, whether it's just price adjustments through promotion display or other activity? Yeah, David, sure.

Speaker Change: Could you speak.

Speaker Change: Specifically to what those challenges you're talking about and the types of investments that you're making whether it's just price adjustments through promotion display or other activity.

Sean M. Connolly: Yeah, David, sure. You know, today in our material, as an example, to your point, I shared the consumption trends for our frozen business, and I showed a line chart that showed our consumption in Q1 was minus seven and a half, and in Q4, it was almost flat. And it's pretty much a straight line from Q1 through Q4. So the volume decline in that business is virtually gone over the course of three periods. And that did not happen by accident.

David: Yes, David sure today in our material as an example to your point.

Sean Connolly: You know, today in our material as an example to your point, I shared the consumption trends for our frozen business, and I showed a line chart that showed our consumption in Q1 was a minus seven and a half, and in Q4 it was almost flat, and it's pretty much a straight line from one from Q1 through Q4. So the volume decline in that business is virtually gone over the course of three periods, and that did not happen by accident. You'll recall that after Q1, we made some, I'll call it test investments in frozen to try to nudge the consumer along to see if it would work, and we got a great response to that in Q2.

Speaker Change: Shared the consumption trends for our frozen business and I showed a line chart that showed our consumption in Q1 was minus seven five and in Q4. It was almost flat and it's pretty much a straight line between from one from Q1 through Q4. So so the volume decline in that business is virtually gone over the course of three periods.

Speaker Change: And that did not happen by accident, you will recall that after Q1, we made some I'll call. It test investments in frozen to try to nudge the consumer along to see if it would work and we got a great response to that in Q2, we expanded those investments in Q3. It was a combination of everything from advertising.

Sean M. Connolly: You'll recall that after Q1, we made some, I'll call them test investments in frozen to try to nudge the consumer along to see if it would work. And we got a great response to that in Q2. We expanded those investments in Q3. It was a combination of everything from advertising to merchandising to more support for our innovation, and it all had the desired effect.

Sean Connolly: We expanded those investments in Q3. It was a combination of everything from advertising to merchandising to more support for our innovation, and it all had the desired effect. I think the types of merchandising that you'd look at really, as I mentioned earlier, were high-quality displays. As we say almost every quarter, the overall merchandising level in the last couple of years was down substantially versus pre-COVID. Now it's moving back in line with kind of where we've been historically, but the type of promotion is, and I'd say in the industry in general, has been pretty high quality.

Speaker Change: To merchandising to more support for our innovation and it all had the desired effect I think.

Sean M. Connolly: I think the types of merchandising that you'd look at really, as I mentioned earlier, were high-quality displays. But as we say almost every quarter, the overall merchandising level in the last couple of years was down substantially versus pre-COVID. Now it's moving back in line with kind of where we've been historically. But the type of promotion is, and I'd say in the industry in general, has been pretty high quality. It's been, and I would describe it as reasonable.

The types of merchandising that you'd look at really as I mentioned earlier were high quality displays.

We say almost every quarter the overall merchandising level in the last couple of years was down substantially versus pre COVID-19 now it's moving back.

Speaker Change: In line with kind of where we've been historically, but the type of promotions and I'd say in the industry in general has been pretty high quality. It's been I would describe it is reasonable.

Sean Connolly: I would describe it as reasonable. You know, there are, we always have a keen sense for what are the more than price gaps in frozen. David, it's price thresholds where what thresholds can we hit that drive maximum lifts, so we can, and we know where those are. We've hit those. That's why we've basically wiped out the volume declines in the frozen business because we know what thresholds are particularly important.

Sean M. Connolly: You know, we always have a keen sense for what are the, more than price gaps in frozen, David, it's price thresholds, where, what thresholds can we hit that drive maximum lifts so we can, and we know where those are. We've hit those.

Speaker Change: There are we always have a keen sense for what are that more than price gaps in frozen David it's price thresholds, where what thresholds can we hit that drive maximum lifts. So we can and we know where those are we've hit those that's why we basically wiped out the volume declines in the frozen business because we.

Speaker Change: No what thresholds are particularly important.

Sean M. Connolly: That's why we've basically wiped out the volume declines in the frozen business because we know what thresholds are particularly important. And, you know, the reason the consumer is ready to be nudged in the frozen business, as an example, is because that 40-year chart shows that people rely on high-quality, good-tasting, prepared foods that don't require any prep time and don't require any cleanup.

Sean Connolly: The reason the consumer is ready to be nudged in the frozen business as an example is because that 40-year chart shows that people rely on high quality, good tasting, prepared foods that don't require any prep time and don't require any cleanup. When they're forced to, they might have to trim those purchases a little, as we experienced a couple of years ago in the last year, but they typically come roaring back, and that's kind of what's happened on the business. And that's, you know, that's the strategy that we'll have across the portfolio. We'll look at, to your point, category by category around what are the key thresholds that we need to hit to maximize our engagement.

Speaker Change: <unk>.

Speaker Change: The consumer is ready to be nudged in the frozen business. As an example is because that 40 year chart shows that people rely on high quality. Good tasting prepared foods that don't require any prep time and don't require any cleanup.

Sean M. Connolly: When they're forced to, they might have to trim those purchases a little, as we experienced a couple of years ago in the last year, but they typically come roaring back, and that's kind of what happened in the business. And that's, you know, that's the strategy that we'll have across the portfolio, is we'll look at, to your point, category by category around what are the key thresholds that we need to hit to maximize our engagement.

Speaker Change: When they're forced to they might have to trim those purchases a little as we experienced a couple of years ago in the last year, but they typically come roaring back and Thats kind of whats happened on the business.

Speaker Change: And that's that's the strategy that we will have across the portfolio as we will look at to your point category by category around what are the key thresholds that we need to hit to maximize our engagement. Some categories are more price gap oriented and those tend to be categories, where they are really just a couple of competitors. So canned tomatoes as a good example.

David Palmer: Some categories are more price gap oriented, and those tend to be categories where they're really just a couple of competitors. So, canned tomatoes is a good example where that's more of a price gap type of category than others, but most of our categories are more about high quality display and hitting the right thresholds.

Sean M. Connolly: Some categories are more price gap-oriented, and those tend to be categories where there are really just a couple of competitors. So, canned tomatoes are a good example where that's more of a price gap type of category than others, but most of our categories are more about a high-quality display and hitting the right threshold. And just one follow-up.

Speaker Change: Where that's more of a price gap type of category.

Speaker Change: Than others, but most of our categories are more about our high quality display and hitting the right thresholds.

David Palmer: And just one follow-up on thanks for that, by the way.

David Sterling Palmer: And just one follow-up question, thanks for that, by the way: on AMP margin, do you imagine that being close to the 2.4% level this year again? And maybe this is the type of year that maybe advertising isn't as much of a priority, but maybe that starts to step up in future years? How are you thinking about advertising in the path going forward? About the same. Yeah.

Speaker Change: And just one follow up on on thanks for that by the way.

David Marberger: On AMP, margin, do you imagine that being close to the 2.4% level this year, again, and maybe is this the type of year that maybe advertising isn't as much of the priority, but maybe that starts to stop up from future years.

On A&P margin do you imagine that being close to the two 4% level. This year again and maybe is this the type of year that maybe advertising isn't as much of a priority, but maybe that starts to step up in future years. How are you thinking about advertising in the past going forward.

David Marberger: How are you thinking about advertising in the path going forward?

David Marberger: It's about the same.

Speaker Change: About the same yes.

Speaker Change: Thanks very much.

Peter Galbo: Our next question comes from Peter Galbo from Bank of America. Please, you have with your question.

Operator: Our next question comes from Peter Galbo from Bank of America. Please go ahead with your question.

Speaker Change: Our next question comes from Peter Galbo from Bank of America. Please go ahead with your question.

Peter Thomas Galbo: Hey guys, good morning. Thanks for taking the question. Unknown Speaker You know, you know, Dave, just kind of going through your comments.

Dave Marberger: Hey guys, good morning. Thanks for taking the question. Dave, just kind of going through your comments, if we take kind of the productivity savings, none of the inflation, right? It's roughly, I think, $85 million that will kind of get reinvested back into brand investment or price. Can you verify that that map kind of checks out on your end and give us a sense maybe this being kind of incremental investment, where in the segment that's going to hit, is it more weighted or refrigerated or more weighted to grocery, any kind of color there would be helpful?

Speaker Change: Hey, guys. Good morning, Thanks for taking the question.

Speaker Change: Yes.

Dave just kind of going through year called Ed.

Peter Thomas Galbo: If we take kind of the productivity savings, none of the inflation, right? It's roughly, I think, $85 million that'll kind of get reinvested back into brand investment or price. Can you just, A, verify that that map kind of checks out on your end, and B, just give us a sense of maybe, you know, this being kind of an incremental investment, where in the segment it's going to hit.

Speaker Change: If we take kind of the productivity savings net of the inflation rate, it's roughly I think $85 million that.

Speaker Change: That will kind of get reinvested back into back into brand investment or price.

Speaker Change: Can you just.

Speaker Change: Clarify that that that kind of checks out on your end and be just give us a sense maybe.

This is being kind of incremental investment where we're in the segment. That's going to hit is it is it more weighted to refrigerated or more weighted to grocery or any kind of color there would be helpful.

David S. Marberger: You know, is it more weighted to the refrigerated section or more weighted to the grocery section? Any kind of color there would be helpful.

Dave Marberger: Yeah, why don't I hit that, and then let's show him fill in any blanks. So yeah, from a high level, we're really pleased with our productivity. We talked about expecting 4% productivity and inflation. We estimate around 3%. So clearly there's some benefit there, and we expect stable gross margins for the full year. That allows us to make investments; those investments will be continued investment and certain trade merchandising, which obviously impacts margin. And showing just described how we go about that. Obviously, frozen and snacking are our priorities, but we also have select opportunities in grocery that we're evaluating that we think are important.

David S. Marberger: Yeah, why don't I hit that and then I'll let Sean fill in any blanks. So, yeah, from a high level, we're really pleased with our productivity. We talked about expecting 4% productivity, and inflation; we estimate around 3%. So clearly, there's some benefit there.

Speaker Change: Why don't I.

Speaker Change: If that and then.

Ill, let John fill in any blanks, so yeah from a high level, we're really pleased with our productivity, we talked about expecting 4% productivity and inflation, we estimate around 3%. So clearly there is some benefit there.

David S. Marberger: And we expect stable gross margins for the full year. That allows us to make investments. Those investments will be continued investment in certain trade merchandising, which obviously impacts margin. And Sean just described how we go about that, obviously frozen and snacking our priorities.

Speaker Change: We expect stable gross margins for the full year that allows us to make investments those investments will be continued investment in certain trade merchandising, which obviously impacts margin and Sean just described how we go about that obviously frozen and snacking our priorities, but we also have select opportunities.

Speaker Change: And grocery that we're evaluating that we think are important but we also have other investments that we make that hit cost of goods sold in terms of continue innovation and product quality that we build in other investments that we're making in the supply chain.

David S. Marberger: But we also have select opportunities and groceries that we're evaluating that we think, you know, are important. But we also have other investments that we make that hit the cost of goods sold in terms of continued innovation and product quality that we build into other investments that we're making in the supply chain. Those do hit cost of goods sold and are part of that whole margin basket. So, you know, at a high level, we feel really good about the efficiency of the operation right now, where we can invest to get the volumes continuing to go in the right direction and maintain the gross margin that we finished in fiscal 2020.

Dave Marberger: But we also have other investments that we make that hit cost of goods sold in terms of continuing innovation and product quality that we build in. Other investments that we're making in the supply chain, those do hit cost of goods sold and then are part of that whole margin basket. So, you know, high level, we feel really good about the efficiency of the operation right now, where we can invest to get the volumes continuing to go in the right direction and maintain the gross margin that we finished fiscal 24.

Speaker Change: Those do hit cost of goods sold and are part of that whole margin basket. So high.

Speaker Change: High level, we feel really good about the efficiency of the operation right now, where we can invest to get the volumes continuing to go in the right direction and maintain the gross margin that we finished fiscal 'twenty four.

Dave Marberger: Got it.

Peter Thomas Galbo: Got it. Okay, that's helpful.

Dave Marberger: Okay, that's helpful.

Speaker Change: Got it Okay. That's helpful. And then Sean just just kind of thinking about the productivity number and it's a question that's being asked of your peers as well.

Sean Connolly: And then, you know, Sean, just kind of thinking about, you know, the productivity number and it's a question being asked of your peers as well, I guess just what's the risk that, you know, we start to push the productivity lever too hard and, you know, that does that create, I don't know, you know, lower, lower ingredient quality or potential issues just as you're kind of getting maybe too productive. You know, I think it's a question that we face a lot as well. So, thanks very much. Yeah, I think our investors should know that that's like the third rail for us.

I guess, just what's the risk that.

We start to push the productivity lever too hard and does that create I don't know.

Speaker Change: Lower lower ingredient quality or potential issues, just as youre kind of getting maybe two productive.

Speaker Change: I think it's a question that we face a lot as well so thanks very much.

Sean M. Connolly: And then, you know, Sean, just kind of thinking about, you know, the productivity number, and it's a question that's being asked of your peers as well. I guess just what is the risk that, um, you know, we start to push the productivity lever too hard? And, and, you know, that did that create, I don't know, Unknown Attendee, lower ingredient quality or potential issues just as you're kind of getting maybe too productive? I think it's a question that we face. So thanks very much. Yeah, I think our investors should know that that's like the third rail for us. We would not cut the quality of our products.

Speaker Change: I think our investors should know that that's like the third rail for US we would not cut quality of our products and we have been and.

Sean Connolly: We would not cut the quality of our products and worsen the consumer experience to drive productivity. In fact, if you look, Pete, over what we've done over the last 10 years, it's exactly the opposite of that. We have infused tons of money into our food quality and our packaging to modernize this portfolio to make it the kind of stuff that people are willing to pay more for and conclude that it's a better value than when it was lower quality and lower price. And so that is that is precious for us. That is central to our innovation success that we've had.

Sean M. Connolly: Unknown Attendee, Pamela Kaufman, Andrew Lazar, Alexia Howard, Alexandra Eboli, Pamela Kaufman, worsen the consumer experience to drive productivity. In fact, if you look at what we've done over the last 10 years, it's exactly the opposite of that.

Worsen the consumer experience to drive productivity in fact, if you look Pete over what we've done over the last 10 years, it's exactly the opposite of that we have infused tons of money into our food quality and our packaging to modernize this portfolio to make it the kind of stuff that people are willing to pay more for and conclude that its a better value.

Sean M. Connolly: We have infused tons of money into our food quality and our packaging to modernize this portfolio, to make it the kind of stuff that people are willing to pay more for and conclude that it's a better value than when it was lower quality and lower price. And so that is precious for us. That is central to the innovation success we've had, and that is not the kind of productivity we're talking about.

Speaker Change: Then when it was lower quality and lower price and so that is that is precious for us that is central to our innovation success that we've had and that is not the kind of productivity. We're talking about we're talking about really a lot of what we've been doing is not only just getting our service levels back in are our labor pool stable, but investing in technology and harnessing tech.

Sean Connolly: And that is not the kind of productivity we're talking about. We're talking about really a lot of what we've been doing is not only just getting our service levels back in our labor pool stable, but investing in technology and harnessing technology so we can run our plants more efficiently. And really, really kind of do the opposite, which is be have zero loss and no waste and be as high quality as we can be. So rest assured, that's not part of the play.

Sean M. Connolly: We're talking about a lot of what we've been doing is not only just getting our service levels back and our labor pool stable, but investing in technology and harnessing technology so we can run our plants more efficiently and really do the opposite, which is have zero loss and no waste and be as high quality as we can be. So rest assured that's not part of the play.

Speaker Change: Acknowledged so we can run our plants more efficiently and and really really kind of do the opposite which is b.

Speaker Change: Zero loss and no waste and be as high quality as we can be so rest assured that's not part of the playbook.

Speaker Change: Thanks, Scott Thanks, guys.

Max Gumport: Our next question comes from Max Gumport from BMP. Please go ahead with your questions.

Operator: Our next question comes from Max Gumport from BNP. Please go ahead with your question.

Speaker Change: Our next question comes from Matt Gunport from BNP. Please go ahead with your question.

Max Andrew Stephen Gumport: Hey, thanks for the question. I might be reading a bit too much into it. But it feels like while you're still encouraged by the direction of the volume recovery, you're maybe a bit less optimistic about the pace of that recovery than you were just last quarter, when it felt like you were moving towards that Mendoza line of flat to positive volumes. If that's right, just give us an update on sort of what's changed over the last three months in terms of what you're seeing in the consumer environment. Thanks. Yeah.

Max Gumport: Hey, thanks for the question.

Speaker Change: Hey, Thanks for the question I might be reading a bit too much into it.

Max Gumport: I might be reading a bit too much into it, but it feels like, while you're still encouraged by the direction of the volume recovery, you may be a bit less optimistic on the pace of that recovery than you were just last quarter. I mean, it felt like you were moving towards that. I mean, does the line of flat to positive volumes? If that's right, just give us an update on sort of what's changed over the last three months in terms of what you're seeing in the consumer environment.

Speaker Change: So while you are still encouraged by the direction of the volume recovery maybe.

Speaker Change: There may be a bit less optimistic on the pace of that recovery than you were just last quarter.

Felt like you were moving towards that Mendoza line of flat to positive volumes.

Speaker Change: If that's right could you just give us an update on sort of what's changed over the last three months in terms of what youre seeing in the consumer environment. Thanks.

Sean Connolly: Thanks.

Sean M. Connolly: Yeah, that's not right, Max. That's not how I feel at all.

Sean Connolly: Yeah, that's not right, Max. That's not how I feel at all. In fact, if you look at the trends of the consumption that we've shown, there has not been a business that has stalled. You know, in our we've had steady upward trajectory from Q1 through Q4. Just virtually everywhere in the business. Now, as Dave points out, there's plenty of noise in this year's Q1. So I get that we've got to be helpful for you guys and understand Q1. For example, part of that is not just on the stuff that impacts margin, but we've got some significant merchandising events in Q1.

Speaker Change: Yes that sounds right Max that's not how I feel at all in fact, if you look at the trends of.

Sean M. Connolly: In fact, if you look at the trends in the consumption that we've shown, there has not been a business that has stalled. We've had a steady upward trajectory from Q1 through Q4, just virtually everywhere in the business. Now, as Dave points out, there's plenty of noise in this year's Q1. So I understand that we've got to be helpful for you guys and understand Q1.

Speaker Change: The consumption that we've shown there has not been a.

Speaker Change: A business that has stalled.

We've had steady upward trajectory from Q1 through Q4, just virtually everywhere in the business now as Dave points out there's plenty of noise. In this year's Q1, so I get that we've got to be helpful. For you guys and understand in Q1. For example, part of that is not just on.

Sean M. Connolly: For example, part of that is not just the stuff that impacts margin, but we've got some significant merchandising events in Q1 of last year that we've shifted to Q2 this year to take more advantage of the holiday and the lifts we get there. So I feel like what we're seeing here is, as I mentioned to Andrew and Ken, a process that's unfolding in a fairly linear way X the noise in terms of just the underlying trend line.

Speaker Change: The stuff that impacts margin, but we've got some significant merchandising events in Q1 of last year that we've shifted to Q2 this year to take more advantage of holiday and the lifts we get there so.

Sean Connolly: On the last year that we've shifted to Q2 this year to take more advantage of holiday and the lifts we get there. So I feel like what we're seeing here is a, as I mentioned to Andrew and Ken, a process that's unfolding in a fairly linear way, extenoise in terms of just the underlying trend line. And I think that's going to continue. And I think, you know, these are discrete investments that we put business by business, and where we've done that, we've seen a response. So we'll do that against more businesses, you know, as we go into fiscal 25 here.

Speaker Change: I feel like what we're seeing here is a as I mentioned to Andrew and Ken.

Speaker Change: Process, that's unfolding in a fairly linear way ex the noise in terms of just the underlying trend line and I think that's going to continue and I think as we've.

Sean M. Connolly: And I think that's going to continue. And I think these are discrete investments that we make business by business, and where we've done that, we've seen a response. So we'll do that against more businesses as we go into fiscal 25, and I think we'll see a continued response. And meanwhile, while we're doing it, if you think about our two most critical strategic businesses in the portfolio, Frozen and Snack, we held or grew market share in 80% of that combined business.

Speaker Change: These are discrete investments that we put business by business and where we've done that we've seen a response. So we'll do that against more businesses as we go into fiscal 'twenty five here and I think we'll see a continued response and Meanwhile, while we're doing it.

Sean Connolly: And I think we'll see a continued response. And meanwhile, while we're doing it, if you think about our two most critical strategic businesses in the portfolio, frozen and snacks, we held our group market share in 80% of those two of that combined business. That is about the best you're going to find in the industry. So these are not only bending the volume line in a very predictable way, but we are gaining share. And that just shows you how well our brands are resonating vis-à-vis their competitors and how well our innovation is resonating with consumers as well.

Speaker Change: If you think about our two most critical strategic businesses in the portfolio of frozen and snacks.

Speaker Change: We held or grew market share in 80% of those two.

That combined business that is.

Sean M. Connolly: That is about the best you're going to find in the industry. So we are not only bending the volume line in a very predictable way, but we are gaining share. And that just shows you how well our brands are responding vis-a-vis their competitors and how well our innovation is responding with consumers as well.

Speaker Change: The best you're going to find in the industry. So so these are not only bending the volume line in a very predictable way, but we are gaining share and that just shows you. The how how well our brands are resonating vis vis your competitors and how well our innovation is resonating with consumers as well.

Sean Connolly: Great. And then on food service, with volumes down 10% in the quarter, you called out the QSR weakness as well as some actions to eliminate the low profit business.

Sean M. Connolly: Great. Then on food service, with volumes down 10% in the quarter, you called out the QSR weakness as well as some actions to eliminate a low profit business. I was just curious if you could disaggregate for us the magnitude of each of those two impacts and also what you're seeing on the QSR side in terms of how that weakness could progress over the coming year. Thanks.

Speaker Change: Great then on.

Speaker Change: Foodservice with volumes down 10% in the quarter.

Speaker Change: Called out the <unk> weakness as well as some actions to eliminate the low profit business I was just curious if you could.

Sean Connolly: I was just curious if you could disagree it gave for us the magnitude of each of those two impacts and also what you're seeing on the QSR side in terms of how that weakness could progress over the coming year. Thanks.

Speaker Change: Great game for us.

Speaker Change: The magnitude of each of those two impacts and also what youre seeing on the <unk> side in terms of how that.

Speaker Change: Weakness could progress over the coming year.

Sean M. Connolly: I'll just make a quick comment here, and Dave, you can add whatever you want, but our food service, I think everybody knows, as a channel, weakened, you know, in the last several months, the traffic's been down, and no company, I think, has been exempt from that. But, we've had a bit of that, but that's really kind of not the big part of what you're seeing in our We have had a very serious margin expansion philosophy in our food service business, where, in the last year, we exercised a fair amount of value over volume strategy, and so that negatively pressured our volumes, but I think our operating margin in food service is up a massive amount, Dave. I don't know if we want to quantify that, but 400 basis points.

Sean Connolly: I'll just make a quick comment here, and David add whatever you want, but our food service, I think everybody knows, as a channel weekend. You know, in the last several months, traffic's been down, and no company, I think, has been exempt from that. But so we've had a bit of that, but that's really kind of not the big part of what you're seeing in our food service business. We have had a very serious margin experience expansion philosophy on our food service business where, in the last year, we exercised a fair amount of value or volume strategy.

Speaker Change: I'll just make a quick comment here and David add whatever you want but our foodservice I think everybody knows as a channel weakened in the last several months and traffic has been down and no company I think has been exempt from that but so we've had a bit of that but that's really kind of not the big part of what you're seeing in our foodservice business we.

Speaker Change: We have had a very serious margin experience expansion philosophy on our foodservice business, where in the last year, we exercised a fair amount of value over volume strategy and so that negatively pressured our volumes, but I think our operating margin in foodservice is up a massive amount Dave I don't know if we haven't quantified that.

Sean Connolly: And so that negatively pressured our volumes, but I think our operating margin and food services up a massive amount. I don't know if we want to fly that, but 400 basis points. So we've gotten the impact we were looking for from our value over volume. The top line part is a little bit soft, attributable to the traffic piece that we've seen elsewhere. But the overall takeaway around top line food service, the primary driver is our value of volume strategy, and that has had a very material expansion on our operating margins there.

Speaker Change: But 400 basis points. So we've gotten the impact we were looking for from our value over volume.

Sean M. Connolly: So, we've gotten the impact we were looking for from our value over volume strategy. The top line part is a little bit soft attributable to the traffic piece that we've seen elsewhere, but the overall takeaway around top line food service is that the primary driver is our value over volume strategy, and that has had a very material expansion on our operating margins there. Anything else you'd add to that?

Speaker Change: Topline part is a little bit soft attributable to the traffic piece that we've seen elsewhere, but but.

Speaker Change: The overall takeaway around top line foodservice. The primary driver is our value over volume strategy and that has had a V.

Speaker Change: Very material expansion on our operating margins, there or anything else you'd add to that yes, no I'm just going to say majority of the volume decline is from the discontinuation it's been mostly in bulk.

Dave Marberger: Anything else you get at?

David S. Marberger: Yeah, no, I was just going to say the majority of the volume decline is from discontinuation. It's been mostly in popcorn and some tomato businesses. We just weren't making the money that we wanted to make, so we got out of those businesses.

Dave Marberger: Yeah, no, I was going to say the majority of the bottom decline is from the discontinuation. It's been mostly in pop like popcorn and some tomato businesses where just we're not just weren't making the money that we wanted to make. So we get out of this business.

Speaker Change: Bulk popcorn and some tomato businesses. We're just we're not just werent, making the money that we wanted to make so we get out of those businesses.

Unknown Speaker: Great. Thank you very much.

Great. Thank you very much.

Robert Moskow: Our next question comes from Robert Moskow, TD Talent. Please go ahead with your question. Hi, thank you. Sean, you have a lot of brands that skew more heavily towards lower-income consumers. You have a lot of brands that skew the other way. Are you seeing any differences in terms of how those brands are performing, like low income versus high income? Because a lot of when food companies are asking why things are slowing, they tend to point to that cohort. And you have a pretty broad portfolio. So do you see more in one versus the other? Yeah, I think any large, diversified food companies going to sell products to pretty much every income level.

Operator: Our next question comes from Robert Moskow from TD Talon. Please go ahead with your question.

Speaker Change: Our next question comes from Robert Moscow TD Cowen. Please go ahead with your question.

Robert Bain Moskow: Hi Sean, you have a lot of brands that skew more heavily towards lower-income consumers. You have a lot of brands that skew the other way. Are you seeing any differences in terms of how those brands are performing, like low-income versus high-income? When food companies are asking why things are slowing, they tend to point to that cohort, and you have a pretty broad portfolio. So do you see more in one versus the other? Yeah, I think any large, diversified company.

Sean: Hi, Thank you Sean you have a lot of brands that that skew more heavily towards towards lower income consumers, you've got a lot of brands that skew. The other way or are you seeing any differences in terms of how those brands are performing like low income versus high income.

Sean: There's a lot of.

Sean: When when food companies are asking and why things are slowing they tend to point to that that cohort.

Sean: And you have a pretty broad portfolio. So do you see more in one versus the other.

Sean M. Connolly: Yeah, I think any large diversified food company is going to sell products to pretty much every income level. And I think the headline in the last year is that value-seeking behavior was not exempt from any income level. And part of that was just grounded in reality; people had to make their household balance sheet work for them. Part of it was principle; even higher-income consumers just, on principle, didn't like the new price points they were seeing in the basket, and they would, they would trim their normal purchases.

Speaker Change: Yes, I think any large diversified food company is going to sell products to pretty much every income level and.

Sean Connolly: And I think the headline in the last year is that value-seeking behavior was not exempt from any income level. And part of that was just grounded in reality. People had to make their household balance sheet work for them. Part of it was principle; even higher income consumers, just on principle, didn't like the new price points they were seeing in the basket. And they would they would trim their their normal purchases. So to get to your point, it's things like, you know, when we looked at Snap and some of the sunsetting of the excess payments. Did we see any material impact in the business?

Speaker Change: I think the headline in the last year is that value seeking behavior.

Speaker Change: Was not exempt from any income level and part of that was just grounded in reality people had to make their household balance sheet work for them pardon was principal even higher income consumers just on principle didn't like the new price points that we're seeing in the basket and they would they would trim their normal purchases so to get to your point. It is things like when we looked at.

Sean M. Connolly: So to get to your point, things like, you know, when we looked at snap, and, and, and some of the sunsetting of the excess payments, did we see any material impact on the business? Not really, a little bit, but not much.

Speaker Change: Snap in.

Speaker Change: And some of the sunsetting of the excess payments did we see any material impact in the business is not really a little bit but not much. So I would just I would say that the value seeking behavior. We saw in the last year really was across income cohorts.

Sean Connolly: Not really a little bit, but not much. So I would just I would say that the value seeking behavior we saw in the last year really was across income cohorts. You're always going to have more sensitivity for the lowest income bracket. And that's where you tend to see those thresholds that I talked about a little earlier with Dave Matter the most problem because if you are going to invest in a high quality merchandising event, and you can get to a material a meaningful threshold for that lower income consumer, it tends to manifest itself in high lifts.

Sean M. Connolly: So I would just, I would say that the value-seeking behavior we saw in the last year really was across income cohorts; you're always going to have more sensitivity for the lowest income bracket. And, and that's where you tend to see those thresholds that I talked about a little earlier with Dave matter the most, Rob, because if you are going to invest in a high-quality merchandising event and you can get to a material, meaningful threshold for that lower-income consumer, it tends to manifest itself in high lifts.

Speaker Change: You're always going to have more sensitivity for the lowest income bracket.

Speaker Change: And that's where you tend to see those thresholds that I talked about a little earlier with Dave matter. The most Rob because if you. If you are going to invest in our high quality merchandising event and you can get to a material or meaningful threshold for that lower income consumer it tends to manifest itself in high <unk>.

Sean M. Connolly: And when we've done that, we have seen higher lifts than we've seen on average, kind of in the last 10 years. And I think what that tells you is, you know, people who have trimmed their buying rate are ready to get back to that buying rate; they just need a little bit of that nudging. And I think those thresholds probably mean the most to the people who need them.

Sean Connolly: And we have, where we've done that, we have seen higher lifts than we've seen on average, kind of in the last 10 years. And I think what that tells you is, you know, people who have trimmed their buying rate are ready to get back to that buying rate. They just need a little bit of that nudging, and I think those thresholds probably mean the most to the people who need them the most.

Speaker Change: And we have where we've done that we have seen higher lifts than we've seen on average kind of in the last 10 years and I think what that tells you is.

People, who have trimmed their buying rate are ready to get back to that buying right. They just need a little bit of that nudging and I think those those thresholds probably mean, the most to the people who need them. The most.

Speaker Change: Great. Thank you.

Speaker Change: Thanks.

Nick Moody: Our next question comes from Nick Moody from RBC. Please go ahead with your question.

Operator: Our next question comes from Nick Modi from RBC. Please go ahead with your question.

Speaker Change: Our next question comes from Nik Modi from RBC. Please go ahead with your question.

Nick Moody: Thanks.

Sunil Harshad Modi: Thanks, good morning, everyone. Maybe I can just follow up on Rob's question, you know, from a different angle. And Sean, I'd love your perspective on this. I mean, I'm wondering if there's a mismatch between where the consumers are and how you're spending. I mean, Conagra has been at the forefront of digital marketing for many years, but it seems like a lot of older consumers tend to over-index for your categories.

Nick Moody: Good morning, everyone. I just maybe I can just follow up on Rob's question, you know, from a different angle. And Sean, I'd love your perspective on this. I mean, I'm wondering if there's a mismatch between, you know, where the consumers are versus how you're spending? I mean, can I was been very on the on the forefront of digital, you know, marketing for for many years, but it seems like a lot of older consumers, you know, tend to over index your categories. And I'm curious if you think there's a mismatch between where you're spending the money, which is more digital versus kind of more traditional media, which is where some of these older consumers tend to traffic.

Sunil Harshad Modi: Thanks, Good morning, everyone.

Speaker Change: Maybe I can just follow up on Rob's question.

Speaker Change: From a different angle and Sean I'd Love your perspective on this I mean.

Speaker Change: I'm wondering if there is a mismatch between.

Speaker Change: Where the consumers are versus how youre spending on and Conagra has been very on.

Speaker Change: On the forefront of digital.

Speaker Change: Marketing for many years, but it seems like a lot of older consumers tend to over index to your categories and I'm curious if you think there is a mismatch between where you are spending the money, which is more digital versus kind of more traditional media, which is where some of these older consumers tend to traffic any thoughts on that.

Sunil Harshad Modi: And I'm curious if you think there's a mismatch between where you're spending the money, which is more digital, versus kind of more traditional media, which is where some of these older consumers tend to go. Any thoughts on that?

Sean Connolly: Any thoughts on that?

Sean M. Connolly: Well, if you think about what I'll call our brand building spend in total, by far the biggest investment we make is in new product innovation, product, and package. So it's actually right into the COGS line.

Sean Connolly: Well, if you think about our, what I'll call our brand building spend in total, by far the biggest investment we make is a new product innovation, product and package. So it's actually right into the cog line. And, and if you look across the food space, you'll you won't probably find the breadth of innovation that we do around here. Why does that matter? Because that the consumer spends the bulk of their time, you know, shopping, whether it's shopping online or shopping in the store, and we want our products to be arresting at the point of purchase.

Speaker Change: Well.

Speaker Change: Think about our what I'll call our brand building spend in total by far the biggest investment we make is in new product innovation product and package. So it's actually right into the Cogs line.

Sean M. Connolly: And if you look across the food space, you won't probably find the breadth of innovation that we do around here. Why does that matter? Because the consumer spends the bulk of their time shopping, whether it's shopping online or shopping in the store, and we want our products to be arresting at the point of purchase. We want our products to be provocative, to look modern and contemporary, because we believe that appeals to all age groups, young, middle, older, it doesn't matter.

Speaker Change: And if you look across the food space Youll.

Speaker Change: You won't probably find the breadth of innovation that we do around here.

Speaker Change: Does that matter because that the consumer spend the bulk of their time.

Speaker Change: <unk>, whether it's shopping online or shopping in the store and we want our products to be arresting at the point of purchase we want our products to be provocative to look modern and contemporary because we believe that appeals to all age groups young middle older. It doesn't matter. So thats our biggest spend and then we also invest with our customers we <unk>.

Sean Connolly: We want our products to be provocative to look modern and contemporary because we believe that appeals to all age groups. Young, middle, older doesn't matter. So that's our biggest spend. And then we also invest with our customers. We invest in high quality display. We invest in the proper shelving at right eye level. And again, that's the kind of investment that is agnostic to age group.

Sean M. Connolly: So that's our biggest spend. And then we also invest with our customers. We invest in high-quality displays. We invest in the proper shelving, the right eye level. And again, that's the kind of investment that is agnostic to age groups.

Speaker Change: Best in high quality display we invest in the proper shelving right high level and again, that's the kind of investment that is agnostic to age group and the smallest piece of it is the A&P piece of it which is heavily focused on the social media realm and the reason for that is because we're trying to we're trying to drive virality were.

Sean Connolly: And the smallest piece of it is the AMP piece of it, which is heavily focused on the social media realm. And the reason for that is because we're trying to we're trying to drive a virality. We're trying to get word of mouth about our products. And just because virality may start online in TikTok or on Instagram, it doesn't end there. The point of those types of investments is they get consumers talking. And when you get consumers talking, they talk to their friends, they talk to their families, they talk to their moms and their dads. And that's how you drive brand saliency, top of mindness, and intrigue in the new innovation.

Sean M. Connolly: And the smallest piece of it is the A&P piece of it, which is heavily focused on the social media realm. And the reason for that is because we're trying to drive virality; we're trying to get word of mouth about our products. And just because virality may start online on TikTok or Instagram, it doesn't end there.

Speaker Change: Trying to just get word of mouth about our products and just because virality may start online tick tock or on Instagram.

Sean M. Connolly: The point of those types of investments is that they get consumers talking. And when you get consumers talking, they talk to their friends, they talk to their families, they talk to their moms and their dads. And that's how you drive brand saliency, top of mindness, and intrigue in the new innovation. So we have investments all across the board, from product to in-store to online, and we're highly confident we're reaching every demographic. And frankly, if we weren't, you would not have seen the types of volume inflection that we've seen across each of our consumer domains.

And there was a point of those types of investments as they get consumers talking and when you get consumers talking they talk to their friends. They talk to their families. They talk to their moms and their dads and Thats, How you drive brand saliency top of mind, this and intrigue and the new innovation. So so we have investments all across the board from product to in store.

Sean Connolly: So, so we we have investments all across the board from product to in store to online. And we're highly confident we're reaching every demographic. And frankly, if we weren't, you would not have seen the types of volume inflection that we've seen across each of our consumer domains. Great, that's helpful.

Speaker Change: To online and we're highly confident we're reaching a ground breaking frankly, if we werent you would not have seen the types of volume inflection that we've seen across each of our consumer domains.

Sean M. Connolly: Great, that's helpful. And then maybe you can give us an update on Slingin. Some of the channel work would suggest there's some pressure there, some kind of encroaching competitors, like baddies. I'm just curious if you have any perspective on how that brand is faring right now.

Speaker Change: Great. That's helpful. And then just maybe if you can give us an update on some of the channel work would suggest there's some pressure there.

Sean Connolly: And then just maybe you can give us an update on Slim Jim and some of the channel work, which suggests there's some pressure there, some kind of encroaching competitors with baddies. I'm just curious if you have any perspective on kind of how that brand is fairing right now. Yeah, I think to kind of wrap your mind around Slim Jim. You got to think Slim Jim enjoyed its absolutely explosive growth through the pandemic, which saw the business increase in size dramatically. That led to some capacity constraints for us. And so between this past year, between the capacity constraints and the tough comps, you know, those are things we had to deal with in fiscal 24.

Encroaching competitors Macfadyen I'm just curious if you have any perspective on kind of how that brand is preparing right now yes.

Sean M. Connolly: Yeah, I think to kind of wrap your mind around Slim Jim, you have to think Slim Jim enjoyed absolutely explosive growth during the pandemic, which saw the business increase in size dramatically. That led to some capacity constraints for us. And so between this past year, between the capacity constraints and the tough comps, you know, those are things we had to deal with in fiscal 24. But now, with good investment, good innovation, and capacity available to us again, the business is already growing again, volumetrically, and I would expect that to continue. Slim Jim is a billion dollar juggernaut, and that's not going to change.

Speaker Change: I think too kind.

Speaker Change: Kind of wrap your mind around Slim Jim you got to think Slim Jim enjoyed absolutely explosive growth through the pandemic.

Speaker Change: <unk> saw the business increase in size dramatically that led to some capacity constraints for us and so between this past year between the capacity constraints and the tough comps.

Speaker Change: Those are things, we had to deal with in fiscal 'twenty, four but now with good investment good innovation and capacity available to US again, the business is already growing again volumetric Lee and I would expect that to continue slim Jim is a $1 billion juggernaut.

Sean Connolly: But now, with good investment, good innovation, and capacity available to us again, the business is already growing again volumetrically. And I would expect that to continue. Slim Jim is a billion-dollar juggernaut. And, and that's not going to change.

Speaker Change: And thats not going to change.

Unknown Speaker: Great. I'll pass it on. Thank you.

Sean Connolly: Great, I'll pass it on. Thank you.

Speaker Change: Great I'll pass it on thank you.

Speaker Change: Thanks.

Thomas Palmer: Our next question comes from Tom Palmer from City. Please go ahead with your question.

Operator: Our next question comes from Tom Palmer from Citi. Please go ahead with your question.

Speaker Change: Our next question comes from Tom Palmer from Citi. Please go ahead with your question.

Thomas Palmer: Thanks for sitting in. I just wanted to clarify on promotional activity and other types of brand building that you've referenced. How does the response and consumers compare to historical norms and relative to what we might have seen, say, in late 2023. And then, are you seeing much response from your competitors based on your actions?

David Sterling Palmer: Hey, thanks for joining us. I just wanted to clarify on promotional activity and other types of brand building that you've referenced. How is the response of consumers compared to historical norms and relative to what we might have seen, say, in late 2023? And then are you seeing?

David Sterling Palmer: Hey, Thanks for fitting me in I, just wanted to clarify promotional activity and other types of brand building that you've referenced how does the responsive consumers compare to historical norms and relative to what we might have seen say in late 2023.

Sean M. Connolly: And then, are you seeing much response from your competitors based on your actions? I would say in the categories that where we've invested, the lifts have been better. And the way I describe that to folks is that there's kind of a longing for some of these businesses if you've cut back on them. So if your normal buying rate when you go to a store for a frozen meal is 10, and you cut that back to 8, that means that after you run out after 8, the people in the household are opening the freezer, expecting there to be two more, and instead, they've got to make a sandwich from scratch, or they've got to cook something, and that gets frustrating.

David Sterling Palmer: And then are you seeing much response from your competitors.

Speaker Change: Based on your actions.

Sean Connolly: I would say on the categories that where we've invested, the lift has been better. And the way I describe that to folks is there's kind of a longing for some of these businesses if you've cut back on them. So, you know, if you're normal buying rate when you go to a store for frozen meal is 10 and you cut that back to eight. That means that after you run out after eight, you know, people in the household are opening the freezer, expecting their feet to more. And instead, they've got to make a sandwich from scratch, or they got to cook something, and that grows frustrating.

Speaker Change: I would say on the categories that.

Speaker Change: Where we've invested the lifts have been better and.

Speaker Change: The way I describe that to folks is theres kind of a longing for some of these businesses if you've cut back on them. So if you're a normal buying right. When you go to a store for frozen meal is 10, and you cut that back to eight.

Speaker Change: That means that after you run out after eight people in the household or to opening the freezer expecting their feet to more than instead, they've got to make a sandwich from scratch or they go to cook something and that grows frustrating and so what happens then is if we can get to the right price thresholds and get a high quality display people I got to thank goodness and I'm going to I'm going to replenish it in my normal cadence and that's kind of what we see.

Sean Connolly: And so what happens then is if we can get to the right price threshold and get a high quality display, people are like, "I got a thank goodness now." I'm going to, I'm going to replenish it in my normal cadence. And that's kind of what we've seen. So it shows up in, in better lifts.

Sean M. Connolly: And so what happens then is if we can get to the right price threshold and get a high-quality display, people are like, oh, thank goodness, now I'm going to replenish it in my normal cadence. And that's kind of what we've seen. So it shows up in better lifts.

Speaker Change: So it shows up in and better lifts.

Sean Connolly: You know, in terms of competition across the category, look, everybody I think in the industry is trying to get volumes north again. And so I think everybody has had room to do more promotion. And that's fine. You know, that's fine because the consumer needs some help. And I think they're, they're getting it. But you know, not everybody has equal brands. So you're not going to get equal lifts and frozen as an example. You know, we've got, look at our market shares there. We're at all time record market shares; we're the biggest frozen player there is.

Sean M. Connolly: In terms of competition across the category, look, everybody, I think, in the industry is trying to get volumes north again. And so I think everybody has room to do more promotion, and that's fine. Because the consumer needs some help, and I think they're getting it. But not everybody has equal brands. So you're not going to get equal lifts.

Speaker Change: In terms of competition across the category look everybody I think in the industry is trying to get volumes North again, and so I think everybody has had room to do more promotion and that's fine that's fine because the consumer need some help and I think they are getting it.

Speaker Change: But not everybody has equal brands, so youre not going to get equal lifts in frozen as an example, we've got look at our market shares there were at all time record market shares where the biggest frozen player. There is and that's in large part in all the category growth in the last 10 years is because of the quality of the innovation, which frankly is just difficult for anybody to match.

David Sterling Palmer: And frozen, as an example, we've got look at our market shares there. We're at all-time record market shares. We're the biggest frozen player there is, and that's, in large part, because of the quality of the innovation, which, frankly, is just difficult for anybody to match. Thanks for that. And then just a quick one on Ardent Mills. The language in the release, or the prepared remarks, at least referred to it as moving towards a more normalized level of operations. I just want to make sure I understand that. Did we think about that 150 million outlook, which is kind of consistent with how you started?

Sean Connolly: And that's in large part in all the category growth in the last 10 years is because of the quality of the innovation, which frankly is just, just difficult for anybody to match.

Thomas Palmer: Thanks for that.

Thanks for that.

Thomas Palmer: And then just a quick one on Arden Mills. The language in the release, or the prepare to mark at least, referred to it as moving towards a more normalized level of operations. I just want to make sure I understand this. If we think about that 150 million outlook, which is kind of consistent with how you started off last year as well.

Speaker Change: And then just a quick one on ardent mills the language in the release.

The prepared remarks referred to it as moving towards a more normalized level of operation I just want to make sure I understand that should we think about that $150 million outlook, which is kind of consistent with how you started off last year as well.

Unknown Speaker: Unknown Attendee

Dave Marberger: As a more normalized rate, or is that like normalizing and we should look for maybe a glide path slightly lower over a series of years. It's time; let me try to give you some color on that.

Speaker Change: As a more normalized rate or is that like normalizing and we should look for maybe a glide path slightly lower over a series of years.

Unknown Speaker: Or is that like normalizing, and we should look for maybe a glide path slightly lower over a series of years?

David S. Marberger: for over a series of years. Yeah, Tom, let me try to give you some color on that. I did spend a little time in the remarks on Ardent Mills. It's really, you know, split into two basic businesses, just the flour business that they sell at a margin. And then there's this business that I call a commodity revenue type business. And this is, you know, things like, you know, them hedging, you know, flour transactions, you know, storing wheat, you know, based on futures curves, you know, speculating on feed prices and wheat and corn futures.

Speaker Change: Yes, Tom let me try to give you some color on that I did spend a little time in the remarks on our.

Dave Marberger: I did spend a little time in the remarks on art at Mills. It's really split into two basic businesses: just the flower business that they sell at a margin. And then this business that I called Commodity revenue type business. And this is things like them hedging flower transactions, storing wheat based on futures curves, speculating on feed prices and wheat and corn futures. So all that kind of trading activity, that is very difficult to forecast with precision, right?

Speaker Change: Ardent mills, it's really split into two basic business is just that the flower business that they sell it at a margin in this business that I call. It commodity revenue type business and this is.

Speaker Change: Things like them hedging flower transactions.

Speaker Change: Storing wheat based on futures curves speculating on on feed prices and corn futures. So all that kind of trading activity that is very difficult to forecast with.

David S. Marberger: So all that kind of, you know, trading activity is very difficult to forecast with precision, right? And Ardent Mills is, they have, you know, significant capability in the area. And so the way that we're going to do this with Ardent Mills is we're going to give you guidance on what the number is based on our latest estimate, you know, from management. And then each quarter, we're going to update you on it because it can, it can ebb and flow. But over the course of the year, right now, the guidance we gave is our best estimate.

Speaker Change: With precision and ardent mills as they have.

Dave Marberger: And art at Mills is they have significant capability in the area. And so the way that we're going to do this with art at Mills is we're going to give you guidance on what the number is based on our latest estimate from management. And in each quarter, we're going to update on it because it can ebb and flow. But over the course of the year right now, the guidance we gave is our best estimate. Okay, thank you for that.

Speaker Change: Significant capability in the area and so the way that we're going to do this with ardent mills is we're going to give you guidance on what the number is based on our latest estimate from management and then each quarter, we're going to update on it because it can it can ebb and flow, but over over the course of the year right now the guidance. We gave is our best estimate.

David Sterling Palmer: Okay, thank you for that.

Speaker Change: Okay. Thank you for that.

Chris Carey: Our next question comes from Chris Carey from Wells Fargo.

Operator: Our next question comes from Chris Carey from Wells Fargo. Please go ahead with your question.

Speaker Change: Our next question comes from Chris Carey from Wells Fargo. Please go ahead with your question.

Chris Carey: Please go ahead with your question. Hey, thank you very much.

Christopher Michael Carey: Hey, thank you very much. So I just wanted to maybe clarify, or not clarify, but get a bit more context on the pricing comments in the presentation around tomato rice based pricing will be lapping, and then you'll be taking new pricing on some cocoa. I guess when you think about those two things, does that net out neutral for the year? And then how would you see overall pricing trending, perhaps x those items for the broader business? And it's specifically asked for in the context of the stable gross margin, despite some of these investments, and then I have a quick follow-up.

Christopher Michael Carey: Hey, Thank you very much.

Dave Marberger: So I just wanted to maybe clarify or not clarify, but get a bit more context on the pricing comments in the presentation around tomato price-based pricing will be laughing and then you'll be taking new pricing on some cocoa. I guess when you think about those two things, does that net out neutral for the year? And then how would you see overall pricing trending, perhaps ex those items for the broader business? And it's specifically after in the context of the stable growth margin, despite some of these investments.

Christopher Michael Carey: So I just wanted to.

Christopher Michael Carey: Maybe clarify or not clarify, but get a bit more context on that.

Speaker Change: The pricing comments in the presentation around Tomatoes, rice based pricing will be lapping and then youll be taking new pricing on some cocoa.

Speaker Change: I guess when you think about those two things.

Speaker Change: Does that net out neutral for the year.

Speaker Change: And then how would you see overall pricing trending perhaps ex those items for the broader business, specifically ask that in the context of stable gross margin.

Speaker Change: Despite some of these investments and then I have a quick follow up.

Dave Marberger: And then I have a quick follow-up. Well, let me start showing you can fill in.

David S. Marberger: Well, let me start; Sean can fill in. So, you know, all of our pricing is inflation justified. So, we've obviously taken significant pricing over the last two to three years, but you look in fiscal 24, there was significant inflation in tomatoes. So, we took pricing during fiscal 24. And we will wrap that in fiscal 25.

Well, let me start John you can fill in so all of our pricing as inflation justified. So we've obviously taken significant pricing over the last two to three years, but you look in fiscal 'twenty. Four there was a significant inflation in tomatoes, so we took pricing during fiscal 'twenty four so that will we will wrap up.

Dave Marberger: So all of our pricing is inflation justified. So we've obviously taken significant pricing over the last two to three years. But you look in fiscal 24, there was significant inflation in tomatoes. So we took pricing during Fiscal 24. So that we will wrap on that in fiscal 25. And then, as you know, there's been significant inflation in cocoa. So, with our Swiss business, we have pricing that will be effective Q2. So that's it's all based on inflation. So they're really the two big areas right now. In terms of the impact on price mix, they're obviously tailwinds to price mix.

David S. Marberger: And then, as you know, there's been significant inflation in cocoa. So, with our Swiss Miss business, we have pricing that will be effective in Q2. So, that's, you know, it's all based on inflation. So, those are really the two big areas right now.

Speaker Change: That in fiscal 'twenty, five and then as you know theres been significant inflation in cocoa, so with our <unk> business. We are we have pricing that will be effective Q2.

Speaker Change: So it's all based on inflation. So they are really the two big areas right now.

Speaker Change: In terms of the impact on price mix, there, obviously tailwind to price mix right. So when you take prices youre going to get benefit from that but then when we increase investment in trade merchandising that's above that that's within the net sales line. So that shows up as more of a headwind in terms of the overall impact so those.

David S. Marberger: In terms of, you know, the impact on price mix, they're obviously, you know, tailwinds to price mix, right? So, when you raise prices, you're going to get benefit from that. But then, when we increase investment in trade merchandising, that's above the, that's within the net sales line. So, that shows up as more of a headwind in terms of the overall impact.

Dave Marberger: So when you take prices, you're going to get benefit from that. But then, when we increase investment in trade merchandising, that's above, that's within the net sales line. So that that shows up as more of a headwind in terms of the overall impact. So those will net. So as we go into fiscal 25, you'll start to see kind of price mix play out for our grocery and snacks business. Sean mentioned, you know, we see some select opportunities in grocery where we want to do some investment. And so, you know, that will play out as fiscal 25 moves on, and that will be reflected in the price mix line.

David S. Marberger: So, those will net. As we go into fiscal 25, you'll start to see a kind of price mix play out for our grocery and snacks business. Sean mentioned, you know, we see some select opportunities in grocery where we want to make some investments. And so, you know, that will play out as fiscal 25 moves on, and that will be reflected in the price mix line. So, we're not going to give specific guidance, you know, on price mix by segment, but they're, they're the general dynamics that should help you.

Net so as we go into fiscal 'twenty, five youll start to see kind of price mix play out for our grocery and snacks business. Sean mentioned, we see some select opportunities in grocery where we want to we want to do some investment and so that will play out as fiscal 'twenty five moves on and that will be reflected in the price mix line. So we're not going.

Dave Marberger: So we're not going to give specific guidance, you know, on price mix by segment, but there are the general dynamics that should help you.

To give specific guidance on price mix by segment, but there is a general dynamics that should help you.

Chris Carey: Thank you.

Sean Connolly: Okay, great. I said it would be a quick follow-up. Maybe, maybe a bit more than that, but we'll see. So, you know, 80% holding or gaining share on the strategic frozen and snacks, clearly very good share momentum in those areas where you're focused. You did, however, mention that Staples is a work in progress. Can you just comment on the areas where you are seeing competitive encroachment? And, and perhaps specifically, how you see private label developing in some of these areas that give in the setup retailer focus, just any context on this that comes to mind is helpful.

Christopher Michael Carey: Okay, great. I said it would be a quick follow-up. Maybe, maybe a bit more than that, but we'll see.

Speaker Change: Okay great.

Speaker Change: I said it would be a quick follow up maybe maybe.

More than that but we'll see.

Speaker Change: 80%.

Speaker Change: Holding or gaining share on the strategic frozen and snacks clearly very good share momentum in those areas, where you're focused.

Sean M. Connolly: So, you know, 80% holding or gaining share on the strategic frozen and SNAC, clearly, very good share momentum in those areas where you're focused. You did, however, mention that Staples is a work in progress. Can you just comment on the areas where you are seeing competitive encroachment, and perhaps specifically how you see private label developing in some of these areas, given the step up retailer focus? any context on this that comes to mind is is helpful. Thank you. Yeah.

Speaker Change: Did however mention that staples is a work in progress can you just comment on the areas, where you are seeing competitive encroachment.

Perhaps specifically how you see private label developing in some of these areas given the setup retailer.

Speaker Change: Yes.

Speaker Change: Any context on that.

Speaker Change #100: Combined this is helpful. Thank you.

Sean Connolly: Thank you. Yeah. We've, as I mentioned, we've seen value-seeking behavior now for a couple of years, and it really is in every category that people buy in food and beyond food. We've tackled much of that in the portfolio. There are still some places that we haven't pursued that. So, we got a couple of canned food businesses as an example with tomatoes and canned pasta, where we haven't put a lot of attention. And those are categories where that they are not like other categories. They're not exempt from a trade down. If your price thresholds are not right.

Sean M. Connolly: Yeah, we've, as I mentioned, seen value-seeking behavior now for a couple of years, and it really is in every category that people buy in food and beyond food. We've tackled much of that in the portfolio. There are still some places that we haven't pursued that. So we got a couple of canned food businesses, as an example, with tomatoes and canned pasta, where we haven't put a lot of attention. Those are categories where they're not like other categories. They're not exempt from a trade down if your price thresholds are not right, or if your gaps are not right.

Speaker Change #100: Yes.

Speaker Change #101: As I mentioned, we've seen value seeking behavior now for a couple of years and it really is in every category that people buy in food and beyond food we've tackled.

Speaker Change #101: Much of that in the portfolio. There is still some places that we haven't pursued that so we've got a couple of canned food businesses. As an example, with tomatoes and can pasta, where we haven't put a lot of attention those are categories, where they are not like other categories. They are not exempt from a trade down if you're.

Speaker Change #101: Price thresholds are not right, if youre gaps or not right. So we've got we have a vast portfolio. We've got a we've got a handful of spaces not many that we haven't really put energy against that will put some investment against that's baked into the outlook that we gave you today and we know on those businesses. They are the kinds of businesses, we talked about earlier, where when you get.

Sean Connolly: If your gaps are not right. So, you know, we've got, you know, we've, we've asked portfolio. We've got a couple. We've got a handful of spaces.

Sean M. Connolly: So, you know, we've got, you know, we've got a vast portfolio. We've got a couple, we've got a handful of spaces, not many that we haven't really put energy into that we'll put some investment into. That's baked into the outlook that we gave you today, and we know that those businesses are the kinds of businesses we talked about earlier where when you get your fundamentals in the right spot, be it a gap or be it a threshold, and you get the right kind of display support, you tend to see outsized lifts. So there are a few spaces available there.

Sean Connolly: Not many that we haven't really put energy against that will put some investment against that's baked into the outlook that we gave you today. And we know on those businesses, they are the kinds of businesses we talked about earlier, where when you get your fundamentals in the right spot, be it a gap, or be it a threshold, and you get the right kind of display support, you tend to see outside the lift. So, there are a few spaces there. But overall, I mean, if you think about the peer set, you know, our strategic spaces are back to pretty much flat.

Speaker Change #101: Fundamentals in the right spot beat a gap, albeit a threshold and you get the right kind of display support you tend to see outsized lift. So there are a few spaces there, but overall I mean, if you think about the peer set.

Sean M. Connolly: But overall, I mean, if you think about the peer set, you know, our strategic spaces are back to pretty much flat or already growing volumetrically. I don't think you're seeing that in a lot of other portfolios. And I also don't think that you're seeing in other folks' key strategic domains 80% of that portfolio holding or gaining shares. So, you know, I want to make sure we emphasize that because we have been, we were one of the first companies to say that we were going to, we said overtly, we're going to target our key strategic domains for investment if we, since we believe the consumer was ready to be nudged.

Speaker Change #101: Our strategic spaces are back to pretty much flat or already growing volumetric Lee I don't think youre seeing that in a lot of other portfolios and I also don't think that you're seeing in other folks key strategic domains, 80% of that portfolio holding or gaining share. So.

Sean Connolly: We're already growing volumetrically. I don't think you're seeing that in a lot of other portfolios. And I also don't think that you're seeing in other folks' key strategic domains 80% of that portfolio holding or gaining share. So, you know, I want to make sure we emphasize that because we have been, we were one of the first companies to say that we were going to, we said overtly, we're going to target our key strategic domains for investment. If we, since we believe the consumer was ready to be nudged, and we have seen tremendous response, we're back to pretty close to that Mendoza line.

Speaker Change #101: Want to make sure we emphasize that because we have been we were one of the first companies to say that we were going to die.

Speaker Change #101: We said overtly we're going to target our key strategic domains for investment if we since we believe the consumer was ready to be nudged and we have seen tremendous response, we're back to pretty close to that Mendoza line and in some cases already in positive territory. There. So so that between that and our share performance in those strategic domain.

Sean M. Connolly: And we have seen a tremendous response. We're back pretty close to that Mendoza line and, in some cases, already in positive territory there. So, between that and our share performance in those strategic domains, you know, I like the setup as we go into the fiscal year. We'll deal with the noise in Q1, but the fundamentals look pretty solid to my eyes.

Sean Connolly: And in some cases, already in positive territory there. So, so that between that and our share performance in those strategic domains, you know, I like the setup as we go into the fiscal year. You know, we'll deal with the noise in Q1, but the fundamentals look pretty solid to my eyes. Okay. All right. Thank you both.

Speaker Change #101: <unk>.

Speaker Change #101: Like the setup as we go into the fiscal year, we will deal with the noise in Q1, but the fundamentals.

Speaker Change #101: Look look pretty solid to my eyes.

Christopher Michael Carey: Okay. All right. Thank you both.

Speaker Change #102: Okay Alright, thank you both.

Speaker Change #101: Thanks.

Rob Dickerson: And our next question is Rob Dickerson from Jeffries. Go ahead with your question.

Operator: And our next question is from Rob Dickerson from Jefferies. Please go ahead with your question.

Speaker Change #103: And our next question is Rob Dickerson from Jefferies. Please go ahead with your question.

Robert Frederick Dickerson: Great, thanks so much. I guess, Sean, just to come back to the grocery, maybe more staples business, it does seem like it's lagging a little bit for the various reasons you mentioned, but there is a bit more investment going in there as we get through the year. But I am just curious, kind of much more broadly speaking, if we go back kind of to pre-COVID, kind of as you entered the company, and we look through all the different brands and segments, there did seem to be kind of a bit of a potential divestment on some of those grocery brands just to kind of focus the overall portfolio, right?

Rob Dickerson: Great. Thanks so much. I guess, Sean, just to come back to the groceries, maybe, you know, more staples business. It does seem like it's lagging a little bit for the various reasons mentioned in, you know, a bit more, you know, investment going in there as we get to the year.

Great. Thanks, so much.

Speaker Change #104: I guess Sean.

Sean: Just to come back to the.

Speaker Change #105: The groceries.

Speaker Change #105: More staples business.

Speaker Change #105: It does seem like it's lagging a little bit.

Speaker Change #105: For the various reasons mentioned in a bit more investment going in there if we get through the year.

Sean Connolly: But I am just curious, kind of much more broadly speaking, you know, as we, if we go back kind of to pre-COVID, right, kind of as you entered the company and we looked through all the different, you know, brands and segments, they did seem to be, you know, kind of, you know, a bit of a potential, you know, divestment, you know, on some of those grocery brands, just to kind of focus the overall portfolio, right? And then we come back with, okay, well, 80%, you know, holding, getting share in the strategic domains. This is our focus.

Robert Frederick Dickerson: And then we come back and say, okay, well, 80% holding, getting a share in the strategic domains, this is our focus. So, I'm just curious, as you think forward the next few years, I guess, why not just kind of step away from some of those brands, kind of in line with what you've been speaking about on the food service side? Thank you.

Speaker Change #106: I am just curious kind of much more broadly speaking.

Speaker Change #106: As we.

Speaker Change #106: If we go back to pre Covid right kind of as you entered the company and we look through all the different brands.

Speaker Change #106: Segments, there did seem to be.

Speaker Change #106: Kind of.

Speaker Change #106: A bit of.

Speaker Change #106: Potential divestment.

Speaker Change #106: Some of those tertiary brands just to kind of focus the overall portfolio right.

Speaker Change #106: And then we come back with their cable, 80% holding getting share in the strategic domains. This.

Sean Connolly: So, you know, I'm just curious, you know, as you think forward, you know, the next few years, like, I guess, why not just kind of step away, you know, from some of those brands, kind of in line, what you've been speaking about on the food service side. Thank you. Yeah, there's a bunch in there. Let me just mention real quick on the first part in terms of what we call our staples domain, which are basically stable products. For us, that's that's refrigeration, refrigerated businesses, and some grocery businesses, and we invested in some of the refrigerated businesses in Q4 and actually saw our refrigerated brands grow volumetrically in our grocery business.

Speaker Change #106: Our focus so.

Speaker Change #107: I'm just curious.

Speaker Change #108: As you think forward over the next few years.

Speaker Change #109: Like I guess, why not just kind of step away.

Speaker Change #109: Some of those brands.

Speaker Change #110: Kind of in line, what you've been speaking about on the foodservice side. Thank you.

Sean M. Connolly: Yeah, there's a bunch in there, Rob. Let me just mention real quick the first part in terms of what we call our staples domain, which are basically just staple products. For us, that's a combination of refrigerated businesses and some grocery businesses. And we invested in some of the refrigerated businesses in Q4 and actually saw our refrigerated brands grow volumetrically. In our grocery business, we had some businesses that were experiencing an easy comp because of some supply chain challenges last year.

Speaker Change #109: Yes.

Robert Frederick Dickerson: There is a bunch in there Rob let me just mentioned real quick on the first part in terms of what we call our staples domain, which are basically stable products for us that's refrigerant combination refrigerated businesses and some grocery businesses.

Robert Frederick Dickerson: And we invested in some of the refrigerated businesses in Q4, and actually saw our refrigerated brands grow volumetric Lee in our grocery business.

Sean M. Connolly: They grew meaningfully in Q4. And then we had some other businesses that I just mentioned, a couple that we've got to get to. So there's a lot that goes into there. We also under shipped consumption in that grocery and snack business in Q4.

Sean Connolly: We had some businesses that were wrapping an easy comp because some supply chain challenges last year. They grew meaningfully in Q4, and then we had some other businesses that I just mentioned a couple that we've got to get to. So there's a lot that goes in there. We also under shift consumption in that grocery at snacks, business in Q4. So that was, that was really a part of what you saw in terms of where we stood versus consensus in the quarter, but to your broader point, you know, if you go back to the deck we shared the last Cagney, I don't know that there's been a more active portfolio in the last nine or so years in terms of reshaping the portfolio for better growth and better margins, including divestitures.

Robert Frederick Dickerson: We had some businesses that were wrapping an easy comp because of some supply chain challenges last year. They grew meaningfully in Q4, and then we had some other businesses that I just mentioned a couple that we've got to get to so there's a lot that goes in there. We also under ship consumption in that grocery and snacks business. In Q4. So that was that was really a part of.

What you saw in terms of where we stood versus consensus in the quarter, but to your broader point. If you go back to the deck. We shared at the last Cagny I don't know that theres been a more active portfolio in the last nine or so years in terms of.

Sean M. Connolly: So that was really a part of what you saw in terms of where we stood versus consensus in the quarter. But to your broader point, if you go back to the deck we shared at the last Cagney, I don't know that there's been a more active portfolio in the last nine or so years in terms of reshaping the portfolio for better growth and better margins, including divestitures. We've done as many spins or divestitures as I can think of anybody.

Robert Frederick Dickerson: Reshaping the portfolio for better growth and better margins, including divestitures we've done.

Sean Connolly: We've done as many spins or divestitures as they think about anybody. So we're always open to that. I think what I would want investors to assume is, you know, anything that's not strategic for us, where somebody else would offer something that is above the intrinsic value of the asset. Why wouldn't we be open to that? Of course, we have been in the past. We would be again in the future. But we also have to be, we have to have sharp pencils in terms of how much overhead to those assets absorb. You know, what would the margin, what is the economic value we would lose if we were to exit them, and are we going to be paid for that?

Robert Frederick Dickerson: Many spins or or divestitures as I think about anybody. So we're always open to that I think what what I would want investors to assume is.

Sean M. Connolly: So we're always open to that. I think what I would want investors to assume is anything that's not strategic for us, where somebody else would offer us something that is above the intrinsic value of the asset. Why wouldn't we be open to that? Of course, we have been in the past, and we will be again in the future. But we also have to have sharp pencils in terms of how much overhead those assets absorb.

Robert Frederick Dickerson: Anything that's not strategic for us where somebody else would offer something that is above the intrinsic value of the asset why wouldn't we be open to that of course, we have been in the past we would be again in the future, but we also have to be we have to have sharp pencils in terms of how much overhead to those assets absorb.

Robert Frederick Dickerson: What would the margin what is the economic value we would lose if we were to exit them and are we going to be paid for that so so you won't find.

Sean M. Connolly: What is the economic value we would lose if we were to exit them? And are we going to be paid for that? So you won't find any entrenchment here against the concept, but we have to be very buttoned up in terms of whether it creates value or destroys value for our shareholders. Because over time, I think you'll see we invest in the businesses we own, we'll add bolt-ons that are additive to our growth and to our margin, and we'll divest stuff that is a drag either on growth or margin and not a I think that's always been our playbook, and I don't think that will change over time.

Sean Connolly: So, so you won't find any entrenchment here against the concept, but we have to be very buttoned up in terms of does it create value or does destroy value for our shareholders because, over time, I think what you'll see is we invest in the businesses we own. We'll add bull bonds that are additive to our growth and to our margin and will will the best stuff that is a drag either on growth or margin and not a strategic fit. I think that's always been our playbook, and I don't think that will change over time. Yeah, fair enough.

Robert Frederick Dickerson: Any entrenchment here against the concept, but we have to be very buttoned up in terms of does it create value or does destroy value for our shareholders because over time I think what youll see as we invest in the businesses we own.

Robert Frederick Dickerson: We'll add bolt ons that are additive to our growth and to our margin and we'll we'll divest stuff that is a drag either on growth or margin and not a strategic fit I think that's always been our playbook and I don't think that will change over time.

Robert Frederick Dickerson: Got it. Yeah, fair enough. And then maybe quickly for Dave, you know, I normally don't ask about impairments, but clearly, you know, called out this quarter, and I think, you know, that some have been called out previously. You know, while I understand, you know, changes in rates, what have you, like, are there certain areas that we should just be aware of or certain brands that maybe have been driving a bit more those impairments? And that's all. Thank you.

Speaker Change #112: Got it fair enough and then just maybe quickly for Dave.

Dave Marberger: And then just maybe quickly for Dave, you know, I normally don't ask about impairments, but clearly, you know, called out this quarter. I think, you know, some have been called out previously. You know, while I understand your changes in rates, what have you, like are there certain areas that we should just be aware of or certain brands that maybe have been driving a bit more those impairments. And that's all.

Speaker Change #113: I normally don't ask about impairments.

But clearly called out this quarter and I think some.

Speaker Change #114: <unk> called out previously.

Speaker Change #115: Well I understand.

Speaker Change #115: Changes in rates what have you like are there certain areas that we should just be aware of or certain brands that maybe have been driving a bit more those impairments.

Speaker Change #116: That's all thank you.

Dave Marberger: Thank you.

David S. Marberger: Yeah, no, Rob. So, yeah, obviously, you know, in the fourth quarter, we go through our impairment testing. We do it every year.

Dave Marberger: Yeah, nevermind. So yeah, obviously, you know, the fourth quarter, we go through our impairment testing. We do it every year. I mean, we really look at impairment both at the brand level and for goodwill, which is based on a reporting level, which means there's several different brands that come together that then go against goodwill that's been allocated to those. So it's two different types of impairment. This quarter, we actually had impairments both in brands and in goodwill. And as I mentioned in my comments, there were three key drivers: the higher interest rates, which obviously impact discount rates, because you're basically doing discounted cash flows when you do impairment on goodwill, and you're using royalty methods, which essentially is a discounted cash flow type concept.

Speaker Change #116: Yes.

Speaker Change #117: So yes, obviously the fourth quarter, we go through our impairment testing, we do it every year.

David S. Marberger: I mean, we really look at impairment both at the brand level and for Goodwill, which is based on a reporting level, which means there are several different brands that come together that then go against the Goodwill that's been allocated to them. So there are two different types of impairment. This quarter, we actually had impairments both in brands and in Goodwill. And as I mentioned in my comments, there were three key drivers that the higher interest rates, which obviously impact discount rates, because you're basically doing discounted cash flows when you do impairment on Goodwill, and you're using the royalty method, which essentially is a discounted cash flow type concept.

Speaker Change #118: Look at impairment both at the brand level and for goodwill, which is based on a reporting level, which means there are several different brands that come together that then.

Speaker Change #118: And go against goodwill that's been allocated to those so it's two different.

Speaker Change #118: Types of impairment this quarter, we actually had impairments both in brands and goodwill and as I mentioned in my comments. There were three key drivers that the higher interest rates, which obviously impact discount rates because youre basically doing discounted cash flows when you do an impairment on goodwill and youre using <unk>.

Speaker Change #118: Key messages, which essentially is a discounted cash flow type concepts. So obviously discount rates have an impact in there they are up based on interest rates.

Dave Marberger: So obviously, discount rates have an impact, and they're based on interest rates. You also, when you do goodwill, you look at the industry market multiples, and that is something that impacted this year is part of the impairment. When you look at the food industry and you look at it as an average, that we have much lower industry market multiple. So that actually impacted us and was part of our impairment that we took. And then the third piece is assumptions we have on that sales, and obviously in this environment, where you know volumes are down, we're investing; you know, that does impact your short term forecast on that sales.

David S. Marberger: So, obviously, discount rates have an impact, and they're up based on interest rates. You also, when you do Goodwill, look at the industry market multiples, and that is something that was impacted this year as part of the impairment. When you look at the food industry as an average, we have much lower industry market multiples. So that actually impacted us and was part of the impairment that we took.

Speaker Change #118: You also when you do goodwill you look at the industry market multiples and that that is something that impacted this year as part of the impairment. When you look at the food industry and you look at it as an average.

Speaker Change #118: But we have much lower industry market multiple so that actually impacted us and was part of our impairment that we took and then the third piece as assumptions, we have on net sales and obviously in this environment where.

David S. Marberger: And then the third piece is the assumptions we have on net sales. And obviously, in this environment, where volumes are down, we're investing, that does impact your short-term forecast on net sales. And when you do that, that can impact any particular reporting unit or brand, depending on kind of where it sits.

Speaker Change #118: Volumes are down we're investing that does impact your short term forecast on net sales and when you do that that can impact any particular, a reporting unit or brand depending on kind of where it sits so we feel great about our business, we talk about our business very openly.

Robert Frederick Dickerson: So we feel great about our business. We talk about our business very openly, and you guys have a very good feel for what our strategic priorities are. This is the standard analysis that we go through, but more than 50% of the impact is really from the interest rates and the lower market multiples.

Dave Marberger: And you know, when you do that, that can impact any particular reporting unit or brand, depending on kind of where it sits.

Dave Marberger: So, you know, we feel great about our business. We talk about our business, you know, very openly. And you guys have a very good feel for what our strategic priorities are. This is the standard analysis that we go through, but more than 50% of the impact is really from the interest rate and the lower market multiple. All right, I'll make sense.

David S. Marberger: All right, all makes sense. Thank you so much.

Speaker Change #118: And you guys have a very good feel for what our strategic priorities are this is the standard analysis that we go through but but more than 50% of the impact is really from the interest rates and lower market multiple.

Got it all makes sense. Thank you so much.

Operator: Thank you so much.

Melissa Napier: Thanks.

Speaker Change #118: Thanks.

Operator: And ladies and gentlemen, at this time and showing you additional questions, I'd like to turn the floor back over to Melissa Napier for closing remarks. Thanks, everyone, for joining us for our live Q&A session today. Investor relations is around and available to take any follow-up questions that you may have. I have a good day, everyone. Thank you.

Melissa Napier: And ladies and gentlemen, at this time, if there are no additional questions, I'd like to turn the floor back over to Melissa Napier for closing remarks.

And ladies and gentlemen at this time in showing no additional questions I'd like to turn the floor back over to Melissa Napier for closing remarks.

Melissa Napier: Thank you everyone for joining us for our live Q&A session today. Investor Relations is around and available to take any follow-up questions that you may have. Have a good day, everyone. Thank you.

Thanks, everyone for joining us for our live Q&A session today Investor Relations is around and available to take any follow up questions that you may have have a good day everyone. Thank you.

Operator: Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your.

Operator: Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your lines.

Speaker Change #119: Ladies and gentlemen that does conclude today's conference call. We do thank you for attending you may now disconnect your lines.