Q4 2024 Hormel Foods Corp Earnings Call

Speaker Change: Good morning ladies and gentlemen and welcome to the Hormel Foods Corporation fourth quarter earnings conference call. At this time all lines are in less than only mode.

Speaker Change: Following the presentation, we will conduct a question and answer session.

Speaker Change: If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, December 4th, 2024. I would like to turn the conference over to Jess Blomberg, Director of Investor Relations. Please go ahead.

Good morning.

Jess Blomberg: Welcome to the Hormel Foods conference call for the fourth quarter of fiscal 2024.

Jess Blomberg: We released results this morning before the market opened. If you did not receive a copy of the release, you can find it on our website, formalfoods.com under the investor section.

Jess Blomberg: On our call today is James Snee, Chairman of the Board, President and Chief Executive Officer, Jacinth Smiley, Executive Vice President and Chief Financial Officer, John Gingo, Executive Vice President of the Retail Segment, and Nathan Annis, Vice President of Corporate Development.

Jess Blomberg: Jim and Jacinth will review the company's 2024 fourth quarter and full year results and provide a perspective on our outlook for fiscal year 2025.

Jess Blomberg: Then, Jim, Jacinth, and Nathan will provide a holistic update on our Transform and Modernize initiative, which was introduced at our 2023 Investor Day.

Jess Blomberg: John will join Jim, Jacinth, and Nathan for the Q&A portion of the call.

Speaker Change: The line will be open for questions following Nathan's remarks. As a courtesy to the other analysts, please limit yourself to one question with one follow-up. If you have additional questions, you are welcome to get back into the queue.

Speaker Change: At the conclusion of this morning's call, a webcast replay will be posted to our investor website and archived for one year.

Speaker Change: Before we get started this morning, I'd like to reference our Safe Harbor Statements.

Speaker Change: Some of the comments we make today will be forward looking and actual results may differ materially from those expressed in or implied by the statements we are making.

Speaker Change: Please refer to our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, which can be accessed at HormelFoods.com under the Investors section.

Speaker Change: Additionally, please note we will be discussing certain non-GAAP financial measures this morning. Management believes that doing so provides investors with a better understanding of the company's underlying operating performance.

Speaker Change: The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

Speaker Change: Further information about our non-GAAP financial measures, including our comparability items and reconciliations, are detailed in our press release, which can be accessed from our corporate or investor website.

I will now turn the call over to James Snee.

Thank you, Jeff. Good morning, everyone.

James Snee: In FESCAL 2024, we demonstrated the solid execution of our strategy.

James Snee: The Power of Our Portfolio and the Resilience of Our Team.

James Snee: In our business segment, we navigated a dynamic macro consumer environment by reinvesting in our brands, expanding market presence, and introducing innovative solutions across our portfolio.

James Snee: In doing so, we delivered solid results, coming in line with our adjusted diluted net earnings per share expectations for the year.

James Snee: We made significant progress in the first year of our Transform and Modernize initiative, delivering an impressive $75 million in operating income benefits and setting our company up for growth and long-term success.

With our Disciplined Financial Approach.

James Snee: The strength of our value-added portfolio and the benefits from Transform and Modernize, we delivered a record year of operating cash flow, enabling us to return a record amount of cash to our shareholders in the form of dividends.

James Snee: In retail, we leverage the strength of our brands by prioritizing resources towards brands and categories where we know we can win.

James Snee: Flagship and rising brands such as Hormel Black Label, Geneo, Spam, and Applegate delivered strong growth and expanded households across on-trend categories.

James Snee: We brought meaningful consumer-centric innovation to our brands and fueled their growth through increased advertising investments.

James Snee: We continue to expand our leadership in our food service segment, growing net sales by 6%, well above industry growth.

James Snee: This success highlighted the differentiated value and relevant offerings our dedicated team brings to the industry.

James Snee: The team executed on our strategic priorities by launching solution-based innovation for our operators and drove impressive growth in the convenience channel by expanding distribution of entertaining and snacking brands like Columbus and Gatherings.

James Snee: And as expected, we saw the strong recovery of our international segment.

James Snee: We increased branded exports for the SPAM family of products and Skippy peanut butter. We drove growth from investments in the Philippines and Indonesia, and achieved a solid recovery of our China business.

James Snee: In addition to delivering on expectations and driving momentum with our value-added portfolio, we accomplished other considerable milestones in fiscal 2024.

James Snee: We drove a hundred and forty basis point increase in our estimated net sales from innovation.

James Snee: Successful innovation underscores the importance of understanding consumer and operator needs and delivering effective solutions.

especially in this dynamic macro environment.

James Snee: Our brand teams understand that consumers are hungry for new food experiences, both in-home and away from home.

James Snee: Innovation will continue to be foundational to our growth strategy, supported by our exceptional R&D professionals, signature chefs, and brand fuel team.

James Snee: And the safety of our employees will always remain a pillar of our culture.

James Snee: I am proud to report that in fiscal 2024, we achieved our safest year in our company's history.

James Snee: This milestone is fundamental to our success and a testament to our team members' focus on our Safety First culture.

James Snee: Cash flow has always been a bedrock of our company, and this year we broke our all-time record for operating cash flow, delivering 1.3 billion dollars for the year.

James Snee: The strength of our portfolio, the disciplined operation of our business, and the success of our T&M initiative allowed us to deliver this significant achievement.

James Snee: As a result of our record operating cash flow and disciplined capital allocation strategy, we once again returned a record amount of cash to shareholders in the form of dividends.

James Snee: We also recently announced the 59th consecutive increase to our annual dividend, a record we are incredibly proud of.

James Snee: There are a number of reasons to be excited about the position we are in today, because in fiscal 24, we overcame significant headwinds to deliver our earnings guidance.

James Snee: We leverage the strength of our value-added portfolio across our retail, food service, and international sales.

James Snee: And we delivered $75 million of operating income benefits through our Transform and Modernize initiative.

James Snee: As we head into 2025, our brands continue to have either number one or number two share positions in over 40 retail categories.

James Snee: We are making strategic investments into flagship and rising brands like Hormel Black Label Bacon.

James Snee: Planters, Spam, Applegate, and Genio. Our food service segment continues to provide unique value in the marketplace, and our international segment is well positioned to deliver growth and expand our global presence.

James Snee: Transform and Modernize is on track, delivering value and helping to return the company to its historical earnings trajectory.

James Snee: There is a growth mindset embedded in our culture, allowing us to be more competitive, agile, and capital efficient. We are fueling investments back into the business to drive growth and deliver shareholder returns.

James Snee: The momentum in our underlying business, coupled with the strength of our most transformative initiative ever, gives me great confidence in our team, brands, and company.

Speaker Change: I will now transition the call to Jacinth for her remarks.

Thank you, Jim.

Jacinth Smiley: And to everyone joining us today, I would like to echo Jim's comments around the confidence in our business, the power of our portfolio, and the strength of our global team and culture.

Jacinth Smiley: Volume for the fourth quarter was 1.1 billion pounds and the net sales were 3.1 billion dollars.

Jacinth Smiley: For the full year, volume was £4.3 billion and net sales were $11.9 billion.

Jacinth Smiley: Gross margin in the fourth quarter and full year increased 50 basis points to 16.6% and 17% respectively.

Jacinth Smiley: This reflects the strength of our value-added portfolio and the early successes of our transform and monolize initiative.

Jacinth Smiley: Full-year SG&A expenses increased compared to last year, primarily due to employee-related expenses and the T&M Initiative.

We expect FG&A expenses to increase in fiscal 2025.

Jacinth Smiley: Advertising investments for fiscal 2024 were $163 million, up 2% compared to last year.

Jacinth Smiley: We have planned for double-digit percentage increases in advertising investments in fiscal 2025.

Jacinth Smiley: For fiscal 2024, interest and investment income increased due to favorable rabbi trust performance and higher interest rate.

Jacinth Smiley: Interest expense increased due to higher rates on debt issued during the year.

Operating income for fiscal 2024 was $1.1 billion.

Operating margin was 9% and adjusted operating margin was 9.6%.

Jacinth Smiley: The tax rate for fiscal 2024 was 22.3%, and the effective tax rate for fiscal 2025 is expected to be in the range of 22 to 23%.

Jacinth Smiley: For the full year, diluted net earnings per share was $1.47 and adjusted diluted net earnings per share was $1.58.

Turning now to the balance sheet.

Jacinth Smiley: We remain committed to dividend growth, investing in our business, and maintaining our investment grade rating.

Jacinth Smiley: Our record cash flows from operations of $1.3 billion in fiscal 2024 and disciplined financial strategy directly support these commitments.

Jacinth Smiley: In fiscal 2024, we returned a record $615 million store shareholders in the form of dividends, including payment of our 385th consecutive quarterly dividend.

Jacinth Smiley: We also recently announced an increase of our annual dividend of 3% to $1.16 per share for fiscal 2025.

Jacinth Smiley: This will represent a remarkable 59th consecutive year of dividend increases.

Jacinth Smiley: We invested $256 million in capital projects during fiscal 2024, and our largest projects were focused on capacity for value added growth.

Jacinth Smiley: We are targeting between 275 and 300 million dollars in capital projects for fiscal 2025.

Jacinth Smiley: We ended the year with $2.9 billion of debt and over $765 million in cash and short-term security.

Jacinth Smiley: We remain comfortably within our stated goals of one and a half to two times net debt to EBITDA.

Inventories finished the year at $1.6 billion.

Jacinth Smiley: A decrease of $104 million from the beginning of the year.

Jacinth Smiley: We enter fiscal 2025 with responsible levels of inventory to service our customers and ample production capacity to grow our business.

Jacinth Smiley: Finally, I would like to provide additional color on a few items from fiscal 2024.

Jacinth Smiley: First, as we noted during our third quarter earnings call, we experienced storm damage to our Papillion-Nebraska facility in early Q4. This event resulted in approximately $9 million of negative impact for the fourth quarter.

Jacinth Smiley: Second, we made significant progress during the quarter regarding the Suffolk production disruption.

Jacinth Smiley: We are improving fill rates, regaining distribution, refilling shelves, and prioritizing innovation.

Jacinth Smiley: At the same time, we do expect some near-term commercial impacts and higher costs, most notably in the first quarter of fiscal 2025.

Jacinth Smiley: We expect to benefit from the recaptured momentum in the planters brand starting in the second quarter of fiscal 2025.

Jacinth Smiley: Lastly, in the final week of the fiscal year, we divested of our Hormel Health Labs business

Jacinth Smiley: Which was reported in our food service segment and contributed 64,000,000 pounds.

Jacinth Smiley: and $108 million of net sales to our top line and approximately one penny to adjusted EPS in fiscal 2024, which will not be repeated in future years.

Shifting now to our fiscal 2025 outlook.

Jacinth Smiley: We expect each segment to deliver top-line growth as we continue to provide innovative offerings in the marketplace and increase investments in our brands.

Jacinth Smiley: For full year fiscal 2025, we expect the following in each of our segments.

Retail, comparable volume and low single-digit increases in net sales.

Food service after adjusting for Hormel Health Lab's divestiture.

Mid-single-digit increases in volume and mid-single-digit increases in net sales.

Jacinth Smiley: And for international, low single-digit increases in volume and high single-digit increases in net sales.

Jacinth Smiley: We also anticipate segment profit growth from each segment for the full year with growth weighted towards the back half of the year.

Jacinth Smiley: Regarding key input cost assumptions in our fiscal 2025 outlook, we expect

Jacinth Smiley: Port input costs to be comparable to fiscal 2024 and remain above the five-year average.

Jacinth Smiley: Beef cost to continue to be a headwind. Nut input cost to be a draggy over year.

Jacinth Smiley: Turkey markets to continue to be depressed for the full year with lower year-over-year whole bird prices specifically in the first quarter.

Jacinth Smiley: Our outlook also accounts for a moderate benefit due to favorable grain prices.

Jacinth Smiley: I would also like to note that we expect $0.04 to $0.05 of unfavorable earnings per share impact in the first quarter from lower year-over-year Holberg prices and the Suffolk production disruption.

Jacinth Smiley: In total, we expect net sales of $11.9 to $12.2 billion.

Organic net sales growth of 1 to 3 percent.

Jacinth Smiley: Adjusted diluted earnings per share in the range of $1.58 to $1.72.

Jacinth Smiley: and an estimated $100 to $150 million of incremental benefits from the TNM initiative.

Jacinth Smiley: To the entire Hormel Foods team around the globe, I thank you for your dedicated efforts in fiscal 2024 and I look forward to achieving our fiscal 2025 goals working alongside you.

With that, I'll turn the call over to Jim.

Thanks, Jacinth.

Please advance to slide 13.

Jacinth Smiley: where we will begin the next portion of our call and provide an update on our transformation initiative.

Jacinth Smiley: I will provide a brief introduction before turning the call over to Jacinth and Nathan.

Speaker Change: Just over one year ago, at our 2023 Investor Day, we announced the most transformative initiative in our company's history.

Speaker Change: Our commitment is to transform and modernize our processes, our portfolio, and the way we create value. We are doing this by investing in our people, data and technology, and our brands.

Speaker Change: Today, you will hear about the significant progress we made in 2024 against our commitment.

Speaker Change: At Investor Day, we described three interconnected buckets of opportunity for earnings growth.

Speaker Change: As a reminder, the purpose of our growth initiative is to regain historical, predictable earnings growth and drive long-term value.

Speaker Change: As our business grows, we expect to deliver even more benefits through our transformational initiative.

Speaker Change: We are creating a sustainable growth engine for the company and watching year one unfold in such a powerful way gives me confidence in our future.

Jacinth Smiley: With that, I'll turn the call back over to Jacinth for you to hear more about our progress.

Thanks, Jim.

Jacinth Smiley: As Jim noted, we have made significant progress in year one.

Speaker Change: I will take a few minutes to talk about our successes to date and our expectations over the next two years, inclusive of the investments we're making to drive those benefits.

Speaker Change: As a reminder, Transform and Modernize is not just a cost-savings exercise.

Although, that certainly is a real and substantial benefit.

Speaker Change: Rather, Transform and Modernize is about the way we do business across the enterprise.

Speaker Change: and it involves every single member of the Whore Mail Foods team.

Speaker Change: It is about reshaping how we operate, creating new opportunities for growth, and generating a powerful growth flywheel.

Speaker Change: And to make all that happen, we're making strategic investments in key areas of the business.

Speaker Change: As we shared with you last year, we have organized the initiative into five pillars.

Four of those pillars focus on supply chain efficiency.

With PLAN, we're adopting a holistic approach to end-to-end planning.

Speaker Change: With BUY, we're implementing new more sourcing events to reduce costs and improve our procurement structure and tools.

Speaker Change: With MAKE, we're standardizing ways of working to improve yields, increase capacity, and avoid unnecessary capex.

Speaker Change: And with MOVE, we're assessing and addressing near-term capacity and long-term network optimization.

Speaker Change: Regarding portfolio optimization, we're finding new ways to reduce complexity, address low-margin items, and create room in our portfolio for further innovation.

Speaker Change: This work is being done at both the brand and business level to ensure our portfolio reflects our company's strategy and leverages our core competencies.

Speaker Change: Nathan will be providing more detail and actual examples for each of these five pillars in just a few minutes.

Speaker Change: But before I turn it over to Nathan, I want to reiterate that year one of Transform and Modernize was a success.

Speaker Change: It is important to note, however, that this only reflects the benefits from the buy, make, and move pillars of our TNM initiative.

Speaker Change: Specifically, we have seen the greatest savings from the improvements in logistics, followed by raw materials and supplies, and then manufacturing efficiencies.

Speaker Change: Looking at fiscal 2025, we're expecting annualized operating income benefits from T&M to be in the range of $100 to $150 million.

Speaker Change: compared with 2024 operating income, and that is an addition to the $75 million we achieved this past year.

Speaker Change: In fiscal 2025, we expect the largest savings from these efforts to come through raw materials and supplies, followed by significant benefits from manufacturing and logistics.

Speaker Change: We also made excellent progress with our plan and portfolio optimization pillars.

Speaker Change: With our plan pillar, we expanded on our end-to-end planning capabilities.

Speaker Change: We are building an infrastructure that ensures a more accurate demand signal flows through to our supply planning.

And that is absolutely critical.

Speaker Change: With portfolio optimization, we have made progress in harnessing the power of our portfolio, which is resulting in a more consumer centric, less complex, more profitable product mix.

Speaker Change: More broadly, we believe the TNM initiative is enhancing Hormel Foods capabilities and unlocking our full potential.

Speaker Change: As I mentioned before, this is not just a cost savings initiative.

Speaker Change: We are making foundational investments in data and technology and people and processes to transform our company.

Speaker Change: In total, we're expecting to spend approximately $250 million through 2026.

Speaker Change: We are investing in talent and upskilling our team members while creating a much more data-driven and analytical organization with modern processes.

Importantly, we are driving complexity out of the organization.

Speaker Change: With our data and technology investments, we are building the analytical capabilities to make empowered decisions based on strategic insights to gain a competitive edge across all of our businesses.

Speaker Change: By focusing on investments, transformation and growth, we are laying the foundation for profitable and predictable growth, not just today, but for years to come.

Speaker Change: With that, I'll turn the call over to Nathan Annis, our Vice President of Corporate Development, who will provide a deeper dive into our transformational initiative.

Thank you, Jacinth.

Nathan Annis: It has been a couple years since 2021 when I was last in Investor Relations, and it's exciting to be back giving you an update on our Transform and Modernize initiative and to review some case studies that highlight our progress and the value we're creating.

Nathan Annis: Our Transform and Modernize initiative is reshaping how we operate across the company in four key ways.

Nathan Annis: First, our processes have historically been built on deep institutional knowledge and were quite manual.

Nathan Annis: As our company has grown, these processes became more complex and highly customized.

Nathan Annis: We have started transforming these processes into streamlined, enterprise-wide ways of working that leverage intelligent automation and digitization.

Nathan Annis: I cannot overstate how critical this changes to all the work we are doing in our initiative.

Nathan Annis: Next, our key capabilities, like business planning and execution, used to be siloed and underleveraged.

Nathan Annis: Over the recent years and quarters, we've moved to centralize these functions to capitalize on our scale, while also strategically investing in areas where we are differentiated in the marketplace.

Nathan Annis: Historically, our business was overly complex, bogged down by a lengthy list of vendors and SKUs.

Nathan Annis: Looking ahead, we are simplifying our operations in a smart, data-driven way. We're also strategically segmenting our business to optimize our investment.

Nathan Annis: Last, where we once had a variety of methods for identifying and realizing value and savings, we now use a standardized, more disciplined approach.

Nathan Annis: This new process ensures we are capturing value consistently with clear accountability tied to key metrics.

Nathan Annis: These four strategic changes are integral to the work we are doing and our team is setting a new standard for excellence in these areas.

Nathan Annis: Now, let's explore some specific examples of how these changes are making a difference in the five pillars, beginning with BYE.

Nathan Annis: This pillar represents a comprehensive enterprise effort to develop a new framework and tools for procuring goods and services across the entire organization.

Nathan Annis: Our prior efforts of creating one supply chain and restructuring our segments through Go Forward are paying dividends as we scope opportunities.

Nathan Annis: Viewing procurement through an enterprise-wide lens allows us to significantly transform how we operate. For instance, we're establishing a new operating model that includes a modern structure

Standardized Training, and Updated Policies and Governance.

Nathan Annis: Additionally, we're adopting new procurement systems such as advanced sourcing tools, should-cost modeling capabilities, and enhanced data visibility and analytics.

Nathan Annis: In 2024, we began implementing the Buy Pillar by focusing on categories and cost of goods sold and indirect spend.

Nathan Annis: For 2025, our goal is to target the remaining categories across our P&L.

Nathan Annis: By 2026, we expect this new approach will be fully embedded in our culture, and we anticipate benefiting from consistent year-over-year productivity growth.

Nathan Annis: A great example of our efforts with the bi-pillar is a recent sourcing event focused on routine supplies and parts for our manufacturing facilities.

Nathan Annis: By streamlining our sourcing strategy and using enterprise-wide agreements, we've significantly reduced complexity and our number of vendors while targeting improvements in our inventory levels.

Nathan Annis: This project is just one of many that we are implementing to drive value.

Nathan Annis: By incorporating these new tools and methodologies into our operations, we are developing a procurement function that delivers substantial financial savings.

Nathan Annis: boosts cash flow and sets the foundation for sustainable benefits well into the future.

Nathan Annis: In the Make Pillar, we are transforming the way we manage our manufacturing network to boost efficiency, increase capacity, and reduce cost through the implementation of our Proprietary Hormel Production System, or HPS.

Nathan Annis: The essence of HPS lies in standardizing the ways of working across all our manufacturing facilities.

By Introducing Consistent Management Processes.

Nathan Annis: backed by a maturity model that ensures accountability, we're embedding the right practices at every level of our organization.

Initially, we've concentrated these efforts on facilities facing capacity limitations.

Nathan Annis: HPS is not only enhancing production yields and improving capacity, but also boosting team member engagement, while reducing downtime, working capital, and overall cost.

Nathan Annis: A standout success story from the Hormel production system comes from our efforts to address production bottlenecks for Hormel Bacon 1 fully cooked bacon at our Wichita, Kansas facility.

Nathan Annis: Our food service team has consistently driven growth for this differentiated and highly profitable brand. But our capacity limitations were hindering our ability to fully meet demand.

Nathan Annis: A possible solution was to add new production lines, which would have been expensive and require significant lead time to implement.

Nathan Annis: By deploying HPS at Wichita, we increased capacity by approximately 18%. This increase not only allows us to meet future demand, but also brings lasting improvements in productivity, cost efficiency, and team morale.

Nathan Annis: By extending these best practices to other facilities facing similar challenges, we're enhancing the agility and responsiveness of our manufacturing network.

Nathan Annis: This shift not only helps us keep pace with current demand but also lays the groundwork for sustained long-term growth.

Nathan Annis: Our MOVE pillar is all about enhancing our logistics network and boosting distribution capacity.

Nathan Annis: A significant achievement in this pillar has been the renegotiation of enterprise-wide freight rates.

Nathan Annis: With a detailed freight RFP process supported by our procurement team, we have secured immediate cost reductions.

Nathan Annis: Additionally, we have optimized the flow of finished goods through our network, effectively lowering landed costs.

Nathan Annis: Looking forward, a key milestone for the MOVE pillar will be the opening of a new distribution center in the Memphis metropolitan area.

Nathan Annis: Scheduled to become operational in the second half of 2025, we expect this facility will greatly improve our inventory management and expand our distribution capability.

Speaker Change: Reiterating what Jacinth shared, our investments go beyond just cutting cost. They're crucial for creating a more robust and scalable logistics network.

Speaker Change: The plan pillar is perhaps the most extensive and complex of our five pillars.

Speaker Change: And we believe our work here will revolutionize our approach to end-to-end planning across the company.

Speaker Change: Historically, our planning processes have been overly manual, dependent on spreadsheets, legacy technology, and numerous different processes.

Speaker Change: Our efforts are fundamentally transforming our planning function by centralizing these activities, adopting integrated business planning across all business units, and embedding more data analytics and AI to guide our decisions.

Speaker Change: We believe this comprehensive, integrated, and scalable approach will enhance service levels, reduce cost, decrease working capital, and improve engagement for hundreds of team members across various functions.

Speaker Change: This all sets the stage for a more efficient and responsive organization.

Speaker Change: Portfolio optimization is a critical element of this initiative and is designed to reshape our product portfolio to improve margins and drive top-line growth.

Speaker Change: This strategic focus touches all pillars and ultimately enables us to streamline operations and concentrate on the most profitable and growth oriented categories.

Speaker Change: Historically, we have had a long tail of unprofitable or low volume items, and we have managed these inconsistently across the enterprise.

Speaker Change: The restructuring of our company through Go Forward has allowed us to take a more enterprise approach, and during 2024, our efforts have centered on creating a rigorous process to consistently assess and manage every item in our portfolio.

Speaker Change: As a result of these strategic evaluations, we've taken decisive steps, including divesting a non-strategic business.

Speaker Change: hormonal health labs. Additionally, we've taken action on a large number of low volume or unprofitable SKUs.

and we will continue to right-size our portfolio.

Speaker Change: Portfolio optimization is also about strategically reinvesting in innovation, and we are tailoring our portfolio to resonate with current consumer and operator trends to fuel sustainable growth.

Speaker Change: This ongoing process ensures that each product in our portfolio is capable of making a significant contribution to our revenues and margins, ensuring Hormel Foods remains a leader in the marketplace.

Speaker Change: We made excellent progress in 2024, and we're excited to continue our work and drive accelerated value in 2025 and 2026.

Speaker Change: Through continued investments in data, people, process, and technology, we are unlocking the potential of our people across the enterprise and positively impacting all aspects of our financials.

Speaker Change: We're incredibly excited by how these five pillars have become increasingly interconnected.

and how the work has converged with other enterprise objectives.

Speaker Change: The merging of these activities means that they are rapidly becoming ingrained in our culture and helping to transform Hormel Foods into a more efficient, responsive, and competitive company.

And with that, I'll hand it back over to Jim.

Thanks, Jason.

Jim: As we wrap up our remarks this morning, I think it's important to recognize that we are a stronger company today because of the strategic actions we've taken in the past, like One Supply Chain, and Go Forward.

Jim: These actions, combined with our Transform and Modernize initiative, positions us for continuous improvement, profitable and predictable growth, and sustainable long-term shareholder value creation.

Jim: We remain committed to our long-term growth algorithm of generating between 2-3% organic net sales growth and between 5-7% operating income growth.

There are many reasons to believe in our long-term strategy.

Jim: We have a portfolio of leading and differentiated brands which are fueled by innovation.

Jim: We are organized for long-term growth with an ability to deliver stable financial performance.

Jim: And we do all of this with a focus on being a strong corporate citizen.

Jim: We are building a more efficient, scalable, and adaptable organization that is well positioned to meet the demands of an evolving marketplace.

Jim: All of this would not be possible without the dedication and performance of our team members, and I want to thank them for their hard work and commitment.

Jim: With that, Jacinth, John, Nathan, and I will take your questions.

Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel a request, please press star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys.

Speaker Change: Your first question comes from the line of Rupesh Parikh from Oppenheimer. Please go ahead.

Speaker Change: Thanks for taking my question. So I wanted to go back to the FY25 guidance range. I know you guys gave some color in terms of how to think about some of the puts and takes, but I was hoping if you can go deeper into, you know, some of the variables to get you to low or high end of the range. And then it sounds like Q1 will be the most challenge. So I just also want to get a sense of whether you think you can actually grow earnings in Q1. Thank you.

Speaker Change: Yeah, thanks. Thanks, Rupesh. The important thing for our 2025 outlook, right, is it demonstrates growth on top and bottom line. It's realistic, it's achievable, and it's consistent with how we've messaged about the business.

As we're thinking about 2025, we expect growth in

Speaker Change: Key Retail Categories, Bacon, Applegate. We've talked about our flagship and rising brands and the success we're having there.

Speaker Change: The value we create in a unique manner with our food service business continued growth from international. After an impressive rebound in 2024, we do expect growth again in 2025. Our value added turkey business is an area of the business that's really, really strong.

Speaker Change: Whether it's our lean ground turkey or the business and food service.

Speaker Change: The other part I think that is really important to call out is the additional brand support that we are planning in 2025. So we've got a strong double-digit increase plan to support our brands.

Speaker Change: And then we'll be making other additional investments as part of this transformation initiative, whether it's the people, the processes, the data and technology.

Speaker Change: You know, and we have available capacity to support all of this growth that that we're expecting.

Speaker Change: And so, you know, we do expect some near-term impacts in Q1, commercial impacts for planters, wraparound impacts on the whole bird turkey business.

Speaker Change: And then the other part is really this transformation and modernization initiative.

Speaker Change: over delivering strong performance in year one, acceleration in year two. And when we put all of that together,

Speaker Change: That's what really gives us confidence. And so we're entering 2025 with momentum.

Speaker Change: in this underlying business with really great support all around it.

Speaker Change: And when you couple that with the performance and the strength of the transformation initiative,

That's all for today.

Speaker Change: But when we think about what gets us to the higher end of the range, it's a couple key things, right? Higher volume, a better product mix.

Speaker Change: and improve turkey market, planters over delivery, and certainly as Jim talked about, just the strength and over delivery on our TNM initiative certainly gives us the opportunity to get to that higher end.

Great, that's helpful. Call her. Best of luck.

Thank you. Thank you.

Speaker Change: Thank you. And your next question comes from the line of Ken Goldman from JPMorgan. Please go ahead.

Speaker Change: EBIT growth, and we just exclude TNM this coming year, is expected to decline. I think the math works out that way. You do have, you talked about some of the headwinds in 1Q, you talked about the investments that you're making. Is there an element of conservatism or prudence or whatever word you want to use? I know, Jim, you've talked

Speaker Change: Over the last year about maybe wanting to add a dash or a dollop of incremental conservatism into your guidance. I'm just trying to get a sense of

Speaker Change: You know, if you feel like this range does factor in some unforeseen events to the downside that, you know, in a way that maybe you hadn't as a company in the in the longer term past.

Yeah, Ken, thanks. Thanks for the question.

Now, starting with the transform and modernize.

Speaker Change: initiative. I think one thing that's really important, and I'm sure we'll talk more about it over the balance of the call, is this really isn't a like standalone dollar amount that we should be looking at, because this really is interconnected into the business. And, you know, the term that we've started to use internally is this flywheel to generate growth. Because it is, as business grows, we get more benefits. And as we get more benefits, we're able to reinvest in the business. And so

This is a holistic look at our business.

and the growth that we expect to achieve in 2025.

Unknown Speaker 0 0 0 0

Speaker Change: You know, your comment on conservatism. I think from where we sit, we want to make sure that we're always appropriate. And, you know, when we think about items that have had a lot of volatility, you know, we've talked probably unnecessarily about Turkey in the last couple of years. And so we want to make sure that given that recent volatility, we are appropriate and how we plan and guide the business.

Speaker Change: You know, the other part is, you know, this planter's rebound.

Speaker Change: And, you know, we want to make sure again that we get this right as we start to really scale the commercial piece of this, as we've navigated our way through the production concerns that are largely resolved.

Speaker Change: And so our ability to fill holes faster, right? We're turning on advertising, we're turning on innovation. You know, that's what really, in my mind, makes this plan realistic, achievable, and appropriate.

Speaker Change: Great, thank you. And if I could ask a quick follow-up.

Speaker Change: Are you still planning on, I think you are, $250 million of net.

Speaker Change: Operating Income Improvement from 23 to 26. And the reason I'm asking is it, you know, just mathematically requires a reasonably high step up in 2026 at this point. Just curious if that's still the case. And if so, kind of what you think without obviously providing 26 guidance, some of those key factors might be.

Speaker Change: Yeah, thanks, Ken. You're right. We're not guiding 26, but we are on track for the $250 million.

Speaker Change: And there are a lot of things to feel good about and that we're excited about. It's this trajectory of TNM after a successful year one, which is now interconnected into this flywheel. And we are creating this long term lasting value, we're building processes, we're building capabilities, but underpinning that is the strength of the brands and the business.

Speaker Change: We're talking more about flagship and rising brands and how important they are to our portfolio and they're growing.

Speaker Change: Our food service business continuing to be differentiated and growing in the marketplace.

Speaker Change: and then our international piece. So yeah, we're on track. And what gives us confidence is really the strength of the underlying business coupled with that transformative initiative. So really, really good progress. And I know you heard from Nathan in the prepared remarks. And I'm sure we'll get some additional questions, but we're in a really good place.

Speaker Change: Thank you. And your next question comes from the line of Thomas Palmer from CT. Please go ahead.

Dahlstrom, James Snee, Unknown Executive, Jacinth Smiley

Good morning. Thanks for the question.

Speaker Change: At the midpoint, your guidance implies around $85 million operating profit growth. You expect $125 million from cost savings and also organic sales growth. I just want to make sure I'm thinking through the pieces you laid out that might limit the flow through of these two items to operating profit. So it sounds like advertising could be higher in the $20 million range.

Speaker Change: Turkey plus Suffolk could net out for the year to maybe a slight headwind. I'm just trying to bridge you know what what else is kind of limiting this this flow through make sure as we think through this year.

Good morning, Tom.

Speaker Change: I just want to just clarify that our Transform and Modernize initiative isn't just a cost savings initiative. It is about reinvesting in the business for growth.

Speaker Change: And Jim mentioned this flywheel, and that's exactly how we're thinking about it as we go through what is, we're, we're.

Speaker Change: Targeting is a three-year initiative, but really it goes beyond that, and it's a foundation to set the company up for long-term growth, and we're getting value beyond 2026.

Speaker Change: But in terms of your specific questions as to what's in, you know, what's included in in the midpoint there, Jim mentioned already, you know, how we're thinking about Holberg Turkey and how we're thinking about Turkey pricing. Certainly, prices were depressed coming out of Q4.

and we are.

Speaker Change: expecting that to what we've baked in is for the full year that Turkey will remain at those lower levels for 2025.

Speaker Change: In addition to the fact that we are making double digit

Speaker Change: investment in our brand for 2025. And that's included as well, in that guide. In addition to investing in capabilities for our business, as it relates to the TNM initiative from data and technology, technology, and also around our people.

Speaker Change: Okay, thanks. And then just on what's going on with Suffolk, it's kind of been a couple quarters now delaying the restart. I guess what's really contributing to that slower ramp and why the confidence now that kind of 1Q will be the end of the issues?

Speaker Change: Yeah, that's an important part of 2025, Tom. And it is

Speaker Change: It's important to know that we've made significant progress in Q4 regarding the situation.

Speaker Change: So our production concerns are largely resolved, and we're in a good place from a supply perspective that's ramping up and continuing to build.

Speaker Change: A couple of other pieces that I think are important, and I'm going to let John probably get into more specifics, but as a reminder, right, we had tremendous momentum in the planters business last year.

and...

Speaker Change: Since the time of acquisition, we've had a lot of positive data, right? The work that we've done, whether it's volume, sales, shares.

Speaker Change: Thanks, Jim. Good morning, Tom. So I'll just comment briefly on the planter's recovery and kind of next steps around planters.

Speaker Change: This quarter, the first quarter is largely refilling retailer shelves, replenishing retailer inventories, replenishing our own inventory, essentially refilling all of those gaps that were created in the back half of last year as we dealt with the supply disruption. By the end of the first quarter, we will be in a position to fully meet retailer demand across the entire planters portfolio. In the meantime.

Speaker Change: We are seeing some progress in our scanner data, so our baseline trends are improving sequentially over the past two four week periods.

Speaker Change: Meaning baseline declines are lessening versus prior year, and what's driving that is a restoration of loss distribution on those items that were impacted.

Speaker Change: by the supply disruption at retail. In fact, more than half of that distribution has been recovered at this point versus where we were at our low point.

So, we still have.

Speaker Change: more to do over 2025 on that recovery, but we are very encouraged by the good progress at this point. We have chosen in the near term to scale back some of the merchandising activity, in particular in November and December. So our Q1 data will be a little bit choppy from the scanner, but we're prioritizing

Speaker Change: getting the base replenished and getting the shelf back to where it needs to be. Now, as we get into the second quarter, we will start to dial back up promotions, we will dial back up advertising.

We will start to attract consumers back to the brand.

Speaker Change: and begin to recapture that momentum that Jim commented on. I mean, in general, Planters is a great platform for us. It's sitting in a wonderful space. The macro snacking space continues to be a great consumer space. The substantial nature of Planters portfolio really fits with what consumers are looking for in terms of more substantive, fuel-oriented snacks.

We have a leading brand that's very responsive.

Speaker Change: to advertising to promotions on its core with a lot of innovation potential. You know, just looking at some of the innovation we were driving behind our flavored cashews and duo's lines, they were attracting new households, bringing in younger consumers. We're going to continue driving that and we have restoration of advertising spend on planters that will help us do that. Unknown Speaker

Speaker Change: And just a reminder, I mentioned it in my prepared remarks, but in Q1, as the.

Speaker Change: John is mentioning here that's going to be a period of right recovering from a financial impact standpoint.

Speaker Change: There is going to be four to five cents of impact on favorably in the quarter.

split between Holberg, Turkey and

Speaker Change: planters, and that's about a 50 50 split. But, you know, the key takeaway here is planters is a brand that is strong, and we expect to benefit from recaptured momentum in Q2.

Okay, thank you for all the detail.

Speaker Change: Thank you. And your next question comes from the line of Heather Jones. From Heather Jones Research, please go ahead.

Good morning. Thanks for the question.

Speaker Change: I guess my first question is wondering, it sounds like as part of the TNM initiative,

Speaker Change: There could be further skew rationalization. So I was just wondering if the sales and volume guidance you gave, I know it excludes the Hormel Health Labs, but does it anticipate further skew rationalization?

Speaker Change: I think all of that's embedded in our guidance, Heather. I think your call out on Hormel Health Labs is important. You know, when you think about the top line impact of $100 million, the bottom line impact of, you know, it's a one penny EPS, but that does figure into the year over year comparison. You know, the work that we are doing on TPO is included in our guide. You know, maybe ask Nathan to comment a little bit more about it to give you some additional color.

Nathan Annis: Yeah. Hi, Heather. This is Nathan. As we think about portfolio optimization and how it's built into next year, you know, I would think about it in two different ways. First, it's, you know, it's all baked into the guidance.

Nathan Annis: and as we think about what SKUs are coming out, they're usually unprofitable SKUs or SKUs that are adding complexity. And I think the key takeaway for us is that we're creating the right room in the portfolio to drive innovative new items and the right profitable items.

Speaker Change: Okay, thank you. And then as a follow up, I just wanted to talk about Turkey. So over the years, since I've followed you guys, I mean, you've taken all these steps in your pork business to make it more and more value added and to reduce your exposure, you know, to the more commodity commodity elements.

In the Turkey side, because of HPAI,

Speaker Change: That business has just become even more cyclical and just, you know, the impact on exports, etc. But I'm just wondering, I know it's an important value added business for you to ground turkey, but just was curious as to your thoughts about

Speaker Change: Taking steps on that side to do similarly to what you've done on the pork side of like focusing more on the value-add and maybe entering into partnerships that would limit your exposure to the more commodity volatile side.

Speaker Change: So, I know it's a wide ranging question, but just broadly, which how y'all thinking about that strategically.

Speaker Change: Yeah, Heather, it is. It's wide ranging, but it's an important question in terms of, you know, the work that we have been doing as an organization and where we see this going.

Speaker Change: And so I think if you do start with that, that pork analogy that you have, and I think back to my early days in the chair, and how frequently, you know, we talked about pork operating margins. And, you know, fast forward, eight, nine years, we're not talking about that, because of those steps that we took.

Speaker Change: It still exists, but it's obviously a small portion of the portfolio and the impact that it has.

Speaker Change: I want to remind you that several years ago, right, we did a lot of work on Genio Turkey Store, Turkey Portfolio. We called it Project Tower. I can't remember if we said that publicly.

Speaker Change: But it really was all about, right, appropriately sizing the supply side of the business.

Speaker Change: and the phrase that we used was creating a demand-driven business.

Speaker Change: with a goal of exactly what you're saying, right? Reduce or minimize the volatility because we don't get any credit for that.

Speaker Change: And so we had a plan. There's a lot of work that's been done to get that supply to the right side.

Speaker Change: What has hindered that is the most recent avian influenza outbreak, because supply then became obviously very disruptive.

Speaker Change: And, you know, we weren't able to fully execute some of the actions that we had in had planned and wanted to put in place.

Speaker Change: But we are on that track and we agree with your assessment.

Speaker Change: that our goal is to create a demand-driven business. And that demand is our focus on the value-added business, right? When we think about the success of Lean Ground Turkey.

Speaker Change: Okay, that is the number one scanned item in our company.

Speaker Change: And when we think about how that aligns with today's consumer.

That opportunity is only going to continue to increase.

Speaker Change: The work that we've done to integrate the business into food service has yielded very positive results.

Speaker Change: And so you can see how we are setting this business up for long-term success while minimizing the volatility.

Speaker Change: And so we are focused on the value added business, lean ground turkey and retail, broad offerings in food service. And it is a very important part of this portfolio, just as again, as we think about what's happening in the consumer environment.

Thank you so much. I appreciate it.

Speaker Change: Thank you. And your next question comes from the line of Max Gumport from BNP Paribas. Please go ahead.

Max Gumport: Thanks for the question. I just wanted to turn back to the question on 26, because you did reaffirm that the $250 million of growth from 23, it does imply about $200 million of EBIT growth in FY26.

Max Gumport: It sounds like you'll only have $25 million or so left of the TNM program in 2026.

Max Gumport: Strategic value, I think, was only supposed to contribute $25 million over this three-year period. And the goal is to get the base business to grow 5% to 7% in 2026, or about $75 million.

Speaker Change: So it feels like there's a pretty big hole I'm missing in terms of what would get you to that target in 26 I'm just hoping you could provide a bit of color just high-level given you have reaffirmed a target and you've discussed it previously

Thanks so much. Unknown Speaker Cool.

Speaker Change: Good morning, Max. Thanks for the question. And we have indeed reaffirmed our $250 million of expanded operating income by 2026.

Speaker Change: And I just want to clarify that that number is a net number. So net of.

Speaker Change: Our reinvestment in the business net of inflation. And so going back to what we're calling the growth flywheel. This is all interconnected in terms of the delivery that what we're delivering to get to that 250.

So it is indeed not just a

Speaker Change: a growth number. So when you think about it, we are delivering more than $250 million from our from our initiatives to be able to actually yield a net $250

Speaker Change: to get to the operating income expansion of the 250 by 2026.

Speaker Change: Got it. But just any, any other drivers you would point to in terms of what helps you get there? I think if it's a net number, there's probably an even bigger hole I hadn't considered. So just any, any other drivers you could point to?

0.2.

Speaker Change: Yes, I mean, it goes back to the items that Jim talked about when we when we kick this off in terms of

Speaker Change: Our portfolio, our brand, right, our underlying business, driving that, our flagship and rising brand, continuing to deliver food service, continuing to deliver the recovery of our international business.

Speaker Change: and all of the other initiatives within our TNM as well.

Speaker Change: are really driving those. So I mean, it's everything together. And we will, I mean, certainly Jim can add additional color here, but it is beyond just the pieces underneath our TNM initiative. Yeah. And Max, first off, it's nice to meet you.

Speaker Change: And, you know, I think the math that you're doing, you know, you might imply that there's only so much left in the work that we're doing. And that's not at all how we're thinking about this, right? The work that we're doing.

Speaker Change: Successful in 24, accelerating in 25, continuing to accelerate in 26.

with benefits.

Speaker Change: to the organization that go well beyond 2026. And you know, you heard from Nathan, some of the successes that we've had in 2024. But you know, he may want to elaborate on a few more points.

Nathan Annis: Yeah. Hey, Max, this is Nathan. You know, as you think about what we're doing in 25 that sets us up for continued success in 26 and beyond,

Nathan Annis: You know, in the bi-pillar, we will have, you know, RFP'd virtually every category, some categories, you know, multiple times.

Nathan Annis: will have implemented over a dozen different modules in our end-to-end planning system like

Unknown Speaker Demand planning.

Nathan Annis: scheduling deployment that'll yield benefits well into the future. We'll have fully implemented our Hormel production system across all of our different facilities, we'll have an optimized logistics network, and we'll have really made more progress reshaping our portfolio, picking up steam, driving more innovation. So we feel really confident about what we're doing now and how that will deliver value in 26 and beyond.

Speaker Change: Great, thanks very much. Nice to meet you guys too, and I'll leave it there.

Thank you.

Speaker Change: Thank you and your next question comes from the line of Peter Galbo from Bank of America. Please go ahead.

Peter Galbo: Hey, guys, thanks for taking the question. And Nathan, nice to nice to speak with you again.

Yeah, good to see you again.

Peter Galbo: If I just take the midpoint of your guidance for this year, you'd be up, call it, $40 million in EBIT relative to your 2023 starting point. And that's on $200 million of savings, kind of, you know, program to date.

Speaker Change: Forgetting about 26 for a moment, maybe we can just clarify that that's the right way to think about kind of the 25 relative to 23 as a starting point.

Peter Galbo: Yep, that's correct, Peter. Okay, so whatever our assumption is on 26, you know, whether that additional 210 million that would have to come through in 26, that's kind of the toggle as to

Speaker Change: how you would get to your your 26 target and that's how we should think about it.

Speaker Change: Yeah, and I think it's that's correct, Peter. And, you know, there's a couple of pieces as you are thinking about it is, you know, this strength of the performance.

Speaker Change: Right of our growth initiative strong 24 accelerating in 25 continuing to accelerate in 26

Speaker Change: The recovery of our planters business, right? The opportunity to grow that business now that we've worked through the situation and are filling on the supply side and getting that business back on track.

Speaker Change: You know, and then the strength of the underlying business, the brand, the business, right? We talked again about flagship and rising brands, food service, international.

So it is all interconnected.

Speaker Change: You know, the math you're doing is right, but those opportunities are there as we look into, obviously, twenty five.

Speaker Change: which we have, and as we're thinking about 2026, right? That's why we're saying we're on track because we're doing the same type of thinking behind the scenes.

Speaker Change: Okay, okay. Thank you for that clarification. And then if I can just just on Turkey, I guess I get the I think it's two and a half cent headwind in the first quarter.

Speaker Change: I think there was a mention on some benefit from lower grain prices that you're expecting. So is maybe I have this wrong, but is the expectation in 25 that Turkey on the full year basically ends up being a neutral, you know, again, offsetting the first quarter weakness against kind of a grain benefit? Do we have that correct?

Speaker Change: From a grain perspective, or maybe I'll start first with, you know, Turkey, I mentioned before that we're expecting Turkey pricing to be

Speaker Change: Comparable to our Q4, so we haven't assumed any upside there for the year from a grains perspective. Just just a reminder. We strategically hedge.

Speaker Change: our grains to reduce volatility. And we've done that for 2025. So we're well bought into 2025. And so we'll see moderate benefit from grains in in 2025. And so that's really what's baked into our guide here.

Speaker Change: Yeah, and I think just if we if you do break it apart into the different components.

Speaker Change: Obviously, we, as Jacinth said, you know, there's some moderate benefit to the grain, our value added business, we expect growth. And then the commodity side of the business, again, we feel like we planned it appropriately, thinking about it with being flat to slightly down.

Okay, thanks very much guys. Appreciate it.

Yeah.

Speaker Change: Thank you. And your next question comes from the line of Michael Levery from Piper Sandler. Please go ahead.

Thank you. Good morning.

Speaker Change: Morning. Just risking belaboring this a little bit further, I want to come back to, I guess it was partly answering Max's question. You know, Nathan, I think it was you were given some examples beyond just sort of the P&M maybe program or initiatives, but I think they seem to fall under things like portfolio optimization or better procurement or better efficiencies that

Speaker Change: kind of felt like they're under the umbrella of exactly those initiatives. And so I know there's some blurry lines, especially the deeper you get into it, just in terms of...

Speaker Change: You know, it's not like simply closing a plant, for example, where there's quite discrete costs, but can you just maybe help us understand, you know, if you do have most of the savings.

in hand by the end of fiscal 25.

Speaker Change: Is it is it just more sort of similar type things to come next that help keep pushing the upside to EBIT, even if you haven't necessarily identified those out of the gate in that, you know, kind of starting fiscal 24. Is that the right way to think about it? Or maybe just help us understand, you know, kind of how we should bucket some of these in our head.

Speaker Change: Yeah, Michael, this is Jim. I think the first thing I just want to clarify, so your comment about we have all the savings in hand by the end of 2025.

Speaker Change: That's not what we what we said, nor do we intend that, because there's an acceleration in 2026. And so, obviously, there's two components of this, there's the three year initiative that we've laid out.

Speaker Change: Knowing full well that the benefits of this program go well beyond 2026.

Nathan Annis: And maybe just for additional color, you know, Nathan, do you want to just maybe go back to some of the things you were talking about and how you expect the programs to fall through? Yeah. Hey, Michael, this is Nathan.

is as you think about all of the different

Nathan Annis: projects that we're doing, you know, many of them are creating value, but a lot of them are driving new capabilities that will support our business and really help us beyond, you know, 25, 26 and into the future.

Okay, that's helpful. And just back on planters...

Speaker Change: I think initially you felt like you didn't have distribution at risk, it sounds like obviously you're regaining it now. Maybe what's changed a little bit in terms of how the distribution evolved and maybe one part I want to make sure I understand is, you know, in the rebuild, did it get to the point where now there's there's slotting fees we should be thinking about as you restore that? Or maybe just help us understand kind of how that those moving parts look.

Speaker Change: Yeah, I want to handle the first part of that, Michael, because on the last call, you know, we did say that we had not lost any distribution.

Speaker Change: Since that time, we have had a couple of instances where we have lost distribution, but there are two components to this.

Speaker Change: And, you know, the other component is the loss distribution by not being able to supply the product on the shelf. And I think, you know, the work that or the comments that John made earlier really demonstrate kind of the significance or how that splits apart. John, you want to maybe comment on that?

Speaker Change: Sure, so if you think about the distribution on planters, those short-term, I'll call them shelf gaps that resulted from the supply shortage.

Speaker Change: on the SKUs in particular that were impacted out of Suffolk.

Speaker Change: That recovery has been going well, right? That's where we have more than half of that distribution back at this point.

Speaker Change: and largely, you know, that distribution comes without plotting without investment.

Speaker Change: Where we have, you know, other issues, let's say that might be some distribution that we're going to have to work to get back longer term.

Speaker Change: There could be some investment required to do that, but that's not a major factor in our plan. We're very confident and comfortable that the investments we have built in the plan at this point, we'll get planters back to growth beginning in the second quarter.

Okay, that's really helpful clarification. Thank you.

Speaker Change: Thank you. And your next question comes from the line of Puran Sharma from Stevens Inc. Please go ahead.

Speaker Change: Good morning, this is Perron's associate, Adam. Thanks for taking the question.

Speaker Change: Can you talk about the key drivers of growth within food service and if you could highlight any bright spots for the quarter or maybe how we should think about achieving that mid-single-digit growth next year?

Speaker Change: Yeah, Adam, thanks for the question. Thank you for food service.

the playbook, so to speak.

Speaker Change: you know, really remains the same. The business remains historically strong and healthy. You know, 24, we had really good volume and that sales growth we expect.

Speaker Change: You know, good strong growth across the board in 2025, and that growth will be it'll be broad based and across a number of different categories.

Speaker Change: Now, as we've said many times, well, we continue to operate from a position of strength through that direct sales team that we have, you know, the portfolio of ongoing innovative product solutions that really are helping operators with their pain points.

Speaker Change: You know, the diversified channels that we operate in, you know, we've always had really strong presence in commercial or the restaurant segment.

Speaker Change: But over the years, we've built out so many capabilities when you think about lodging, college and university with planters adding the convenience store muscle.

Speaker Change: So there's there's a lot of really good opportunities. Now, that's not to say we don't understand what's happening in the macro environment. But we're well positioned to address that and overcome that with this really differentiated business that we have.

Speaker Change: It's the direct selling organization, innovation, and a keen operator focus that will allow us to deliver really good results in 2025.

Thank you, that's very helpful.

Speaker Change: Thank you. And your next question comes from the line of Frahie Parikh from Barclays. Please go ahead. Hey everyone, I'm on for Ben Toyer. Just for TNM,

Speaker Change: It's kind of a different question is where are you at the end of your full year 24 guidance versus the, or where are you right now versus your initial budget plan? I think you mentioned over delivery in year one, so maybe more hardcore numbers as possible there. And how does the incremental 100 to 150 million next year compared to your original timeline? Thank you.

Speaker Change: Yeah, I think the big thing, Rahi, is we're on track, right? I mean, as we thought about what we're going to be able to deliver, we're on track, you know. And again, it's the momentum and the acceleration that we're gaining really in this, again, we'll call it interconnected business, the flywheel.

Excuse me.

Nathan Annis: really being able to create that value as an organization. And obviously the further we get along, the more capabilities that we build, the more confidence that we gain. And so, you know, we feel really good about what we did in 24, acceleration in 25 and continued acceleration in 2026. Nathan, you had anything? Yeah, I would just say that, you know, in fiscal 24, we spent a lot of time just

Standing up all of the different projects.

Speaker Change: And as we go into fiscal 25, we have a running start, we've got more and bigger projects, you know, pushing the team to think bigger. So, you know, a lot of things in the pipeline and pretty excited about how how it's all shaping up and feel like we're, we're on track.

Okay, sounds good. Thanks so much for the color.

Speaker Change: Thank you. There are no further questions at this time. I will now hand the call back to Mr. James Snee for any closing remarks.

James Snee: Well, I want to thank all of you for joining us today.

James Snee: As you can tell, we are incredibly proud of what we accomplished in 2024, and even more excited about the momentum that we have as we enter 2025. There is a lot of great work being done by our amazing team.

James Snee: I want to wish all of you a safe, healthy, and happy holiday season. Have a great rest of your week.