Q3 2025 General Mills Inc Earnings Call - Q&A
Good morning, and welcome to General Mills third quarter fiscal 'twenty 25 earnings Conference call.
All participants are in a listen only mode. After the Speakers' remarks, we'll conduct a question and answer session.
To ask a question at this time, you will need to press star followed by the number one on your telephone keypad.
As a reminder, this conference call is being recorded.
Speaker Change: I would now like to turn the call over to Jeff Siemon, Vice President of Investor Relations and corporate Finance. Please go ahead.
Yeah.
Jeff Siemon: Thank you Julian and good morning.
Jeff Siemon: Thanks to everyone for joining us today for our Q&A session on our third quarter fiscal 25 results.
Jeff Siemon: I Hope you all had time to review our press release listened to our prepared remarks and view our presentation materials, which were made available. This morning on our Investor Relations website.
Jeff Siemon: Please note that in our Q&A session. We may make forward looking statements that are based on management's current views and assumptions.
Jeff Siemon: Please refer to this mornings press release for factors that could impact forward looking statements and for reconciliations of non-GAAP information, which may be discussed on today's call.
Jeff Siemon: I'm here with Jeff Harmening, our chairman and CEO and Kofi Bruce our CFO.
Jeff Siemon: So let's go ahead and get to the first question Julien can you. Please get us started.
Jeff Siemon: Absolutely just as a reminder to ask a question. Please press star followed by the number one on your telephone.
Jeff Siemon:
Andrew Levi: Our first question comes from Andrew Levi from Barclays. Please go ahead.
Jeff Siemon: Great. Thanks, so much good morning, everybody.
Andrew Levi: Good morning, good morning.
Speaker Change: Jeff you mentioned in the prepared remarks, the sharp focus right on accelerating organic growth as you move into fiscal 'twenty six and you highlight the you know at least 5% H M. M savings the additional $100 million in cost saves on top of this and I think I've said previously you plan to reinvest the 50 <unk> week as well.
Speaker Change: I guess my question is.
Speaker Change: With the sizable step up in investment planned for fiscal <unk>.
Speaker Change: How do we think about the incremental investment that you think is needed for fiscal 'twenty six beyond what you're already doing in the fourth quarter. This year.
Speaker Change: And thinking about those investments I guess, what does the balance of spend look like for the mix between work that still needs to be done on on price points, specifically versus let's say innovation in store activity and media expense. Thanks, so much.
Speaker Change: Yes. Thank you Andrew It really really fair question, let me give you a couple of pieces of context, and then to answer your question more because I think the context is important.
Speaker Change: First is that coming into this year, we saw at the customer environment.
Speaker Change: <unk> got all of them and that Hasnt really been the case.
Speaker Change: And consumers are still seeking value as much or more than they had when our fiscal year began and if you look at the most recent confidence indices.
Speaker Change: Okay. The consumer confidence is actually below where it was three months ago on about where it was in 2008 and so the situation. We find ourselves in is different than we saw that one coming into the year and so consumers are seeking value and you see that the categories are pursuing them.
Speaker Change: Any ways. The other thing I would tell you is when you think about our investment going forward, we kind of looked at whats worked for us over the last year and when you look at Blue Buffalo, We were having a similar conversation a year ago, and we sharpened our price points, we get really focused on the things that mattered, we improved our marketing our new products and you know we've got into place, where we're competing effectively on blue Buffalo.
The same would be the case on pillsbury. So when you talked about last quarter, but we need to do it yes, we sharpened our focus there on value, but also we have good new products, there and our marketing is really good.
Speaker Change: The focus on value actually allowed our marketing to work better the same would be true <unk>.
Speaker Change: We've got the they get the value in line and our marketing is really good on 13th so as we look at those things or how we're competing with Hagen dazs globally.
Speaker Change: We know that getting the value and the right zone and that adding on top of that really good innovation.
Speaker Change: And improved marketing is the way to go so that's the context as you look at our as you look at our fiscal fourth quarter. Obviously, we're stepping up investments, we're investing some more in pricing, particularly in the fruit snacks area, where our.
Speaker Change: Consumers are really looking for value that's very clear.
Speaker Change: But also we're stepping up our marketing double digits and we're doing that on some of our biggest brand. We think our marketing is really good and you'll see that on blue Buffalo as Youll see that on Pillsbury youll see that in cereal.
Speaker Change: And so as we so that you know as we look at next year it'll be a year of reinvestment for us and it'll be a combination of getting our value right. The place where you'll you'll see that the most is in isn't snacking, particularly fruit snacks and no need to wait until fiscal 'twenty six so we started in the fourth quarter.
Speaker Change: The same with.
Speaker Change: That's where we're the as we look at pricing for next year that the other is that.
Speaker Change: On pricing as we are lapping a lot of pricing we've done in the back half of this year into the first half of next year, but in terms of kind of incremental activity, we need to take on value.
Speaker Change: Fruit snacks is the incremental value beyond that though.
Speaker Change: We're going to improve and we're going to improve our marketing on our core as we've done on some of the categories. Ive told you more broadly we're.
Speaker Change: We're going to increase our marketing spend and we have some really good new products coming in the first half of next year in fact part of the investment we're making in the fourth quarter is the R&D resources to the admin necessary to get those products to market as well as the supply chain and so what we're looking at next year is to reinvest our HMS.
Speaker Change: Savings to reinvest in the 50 <unk> week as well as these efficiencies to get back to growth that his job to do the rest of our P&L looks great and it will look even better.
Speaker Change: Once we get back to growth and my expectation is that our competitiveness will improve starting in the fourth quarter.
Speaker Change: With the actions, we've taken and we will look to carry that over into the first quarter second quarter third and fourth.
Speaker Change: Next year got.
Speaker Change: Got it great. Thanks, so much I'll pass it on.
Speaker Change: Yes.
Speaker Change: Our next question comes from Ken Goldman from Jpmorgan. Please go ahead. Your line is open.
Speaker Change: Hi, Thank you and just to build on Andrew's question I was hoping we could run through a quick very broad exercise of kind of the tailwind and headwinds into next year just on a.
Speaker Change: On a on a general basis, not looking at any numbers and I'm wondering if I'm missing anything here. So as I think about the tailwind you've talked about a little more trade better marketing in general that should help volume innovation. You know your tone is great. There maybe you have some easier laps from some of the trade Destocking. Obviously, you have a little more H M M. Maybe and you have those new.
Speaker Change: Cost efficiencies you talked about.
Speaker Change: And then as you think about the headwind side excuse me, obviously, a little more trade than what you initially expected, although you talked about some easier laps there some investments in brand communication.
Speaker Change: Maybe a bit more slotting than you have tariff stock based comp yoplait dilution I'm running through these very quickly obviously that I'm, putting you on the spot but is there anything obvious that I'm missing there because honestly you talked about how your job is to get back to growth. It seems that those headwinds are a little stronger than the tailwind and that's kind of what we're hearing from the buy side today.
Speaker Change: So I really wanted to push a little bit on that if I could thank you.
Speaker Change: Okay.
Speaker Change: Broadly you've actually got almost all elements, we would want you to be tracking.
Speaker Change: I think Youll play obviously, we don't know exactly when that's going to close that will be a significant probably about five point headwind that we wanted to make sure you have visibility to we flagged that at Cagny.
Speaker Change: Starting with a five point headwind on profit I think you've got kind of the texture of the rest of this there'll be some <unk> impact from the investments we've made this year.
Speaker Change: Horton, but to factor in and we are building flexibility just in terms of our posture for next year for additional investment.
Speaker Change: We're very committed to getting the job done on improving growth trends both in the categories in our own competitiveness. So to the extent that we go into next year, we want to make sure we have flexibility to do that so I think we will we'll obviously give you a little bit more perspective on where the commercial investments are going.
As we step into Q4 and give guidance I think you have the.
Speaker Change: The fence posts about right, though.
Speaker Change: Great. Thanks coffee.
Speaker Change: You bet.
Speaker Change: Our next question comes from David Palmer from Evercore ISI. Please go ahead. Your line is open.
David Palmer: Thanks, and thanks for those comments on innovation I wanted to follow up on that.
David Palmer: I've seen some data that in general in the food space Theres been less innovation the innovation in the category in general packaged food has not really recovered to pre COVID-19 levels. It's been slow to essentially ramped back up youre, certainly ramping up innovation heading into fiscal 'twenty six I wonder if you could sort of characterize for us.
David Palmer: The level of innovation activity into 26, and how it compared to 'twenty, how it will compare to 25% and maybe.
Speaker Change: You sound optimistic about it like what what are the ways you are changing the types of innovation. The messages that that you think will work perhaps better per.
David Palmer: Activity and marketing dollar next year.
David Palmer: Yes, David.
David Palmer: Good questions and I will give you I'll give you as much.
Context, as I can without giving away exactly what we're going to be doing the first youre right in that new product innovation kind of as a percentage of sales are still lagging where it was pre pandemic. That's also true for us, although we're up we're up significantly.
David Palmer: And our new product innovation as a percentage of sales this year than we were than we were last year. So we are up it's still below where we were pre pandemic I hope that's clear as clear in my mind, when I say that I hope it's clear those listening on the line as we look at as we look at next year I think there are two things that we need to do the first is that the types of innovation, we have we probably need to see.
David Palmer: Support more robustly and so we've had some good new product innovation like Cheerios protein, we just talked about Pitmaster and what we've done with old El Paso and soup.
David Palmer: And we've got stick bars coming yet.
David Palmer: In Asia and in Europe that are really good nature Valley Granola protein is off to an amazing start so we need to we've got some good new product innovation I think we can probably do a better job, even just supporting those a little bit more which which we intend to do and then I think you know the same for next year is probably going to be fewer but.
David Palmer: But bigger and we have we have a.
David Palmer: A few big innovations that we'll talk about in June that I would love to talk about now, but we're not going to.
David Palmer: That are going to come in the first half of next year. In addition to kind of some of the things we already talked about and so fewer and bigger I guess would be and then making sure we support well the good ideas that we have and we have some good ideas.
David Palmer: Yeah.
David Palmer: Okay. Thanks, I'll pass it on.
Speaker Change: Our next question comes from Michael Lavery from Piper Sandler. Please go ahead. Your line is open.
Michael Lavery: Thank you good morning.
David Palmer: Just looking at your call.
David Palmer: Value and price gaps quite a bit and obviously, but that's our focus.
David Palmer: At Dow and Totino's, where you you know kind of had the test cases already.
David Palmer: It's maybe a little harder on protein is to see how much it's coming through because it looks like it picked up.
David Palmer: Later in the quarter or into fourth <unk>, but.
David Palmer: <unk> had sales growth up I think around 4% with volumes up around eight I guess, maybe in those categories. How do you how did you or do you understand or figure out what the right.
David Palmer: Price adjustments are and then really how does that translate more broadly I guess the.
David Palmer: And the question is how do you know that as you've got your it sounds like your 26 plans are broadly set how do you know the price investments you're anticipating are enough and how.
David Palmer: How do you think about just you said, maybe you can be nimble there is that part of how you plan for it as well.
David Palmer: Yeah. So you you you mentioned talked on our call which were.
David Palmer: Mr Refrigerated dough until <unk>, so add blue Buffalo into that mix of things that we have executed well and some price points.
David Palmer: But also improved our marketing and.
David Palmer: That's the that's the other piece of it.
David Palmer: Getting the marketing right, whether that's new product innovation and marketing behind that or marketing behind the core which is also important and so as we look at the new piece.
David Palmer: Claim price.
David Palmer: We've got we've got great brands and so when we talk about that value piece really is kind of getting in the zone.
David Palmer: Cliffs.
David Palmer: Price differentials and that sort of thing. So it doesn't mean, we have to price equally to everybody else. We just have to get into a zone in which our pricing is going to work and then we have to consider all the other elements of the of our marketing mix and we used a remarkable experience framework to do that and we kind of go category by category to say one of the thing where are we where are we.
David Palmer: Good where are we missing elements and then we go by that and we use that throughout the entire company and so I'm confident as we as we head into the fourth quarter and then into fiscal 'twenty six we have a much better handle category by category, what jobs needed to be done and in some cases its value in some cases, that's marketing on the core in some case this innovation and fruit snacks, it's probably all three of those.
David Palmer: And so the so thats the way we look at it and we have confidence because we've done it several times now with some big businesses Blue Buffalo, Totino and Pillsbury, they're all 1 billion plus brands and we've done it effectively there we just need to make sure.
David Palmer: The job to do now is expand that to the rest of our portfolio, which we have been working on which will start to manifest itself in Q4 in fact, I would expect our cereal business to come back.
David Palmer: In Q4, and I would expect our shoe business as well.
David Palmer: To show improvement in Q4, as we as we get the marketing in a good place and as we the value is also in a good place.
David Palmer: That's great color would it be fair to assume that the evaluation exercise that you talked about have you completed that across the company or is there still some brands or categories that maybe under review so to speak.
David Palmer: We have completed that across the across the company and which has led to some of the improvements that you've seen so far some things take longer than others and that's you know the Wolfcamp again has already begun and youll see that in the fourth quarter and will bleed into next year. So you'll see that in next year as well.
David Palmer: But also I would also say it isn't always on kind of capability because context changes in the environment around us changes and so one of the things you're yes, I feel good that we we kind of understand brand by brand and what we need to do but I also know that you know that.
David Palmer: The context changes and we have to be agile enough to change with the world around us and so on.
David Palmer: I also know that.
David Palmer: That's helpful. Thank you.
David Palmer: Yes.
Speaker Change: Our next question comes from Alexia Howard from Bernstein. Please go ahead. Your line is open.
Alexia Howard: Good morning, everyone.
Speaker Change: Okay.
Speaker Change: Can I start with them.
Speaker Change: Come back to snacks, and as I think about previous economic slowdowns like the financial crisis and so on.
Speaker Change: Okay seemed to do okay.
Speaker Change: Feel good treats at a low ticket price and they didn't seem to be behaving in previous cycles with this value seeking discretionary problem that we seem to have today.
Speaker Change: What's different this time around in and could this accelerated uptake of guilty one drugs for example, or increasing consumer concerns about the healthiness of indulgent snack.
Another part of the issue here I'm, just wondering what data you're looking at to really get at the root of what's driving the category weakness. Thank you and I'll pass it on.
Speaker Change: Yeah. Thanks Alexia.
Speaker Change: Now let me give you let me give you a couple of thoughts as we look across southeast snacks grain snacks and fruit snacks kind of quarter on quarter there was about it.
Speaker Change: Negative gap on the category between what was happening before and what is happening now and and.
Speaker Change: Our view is that a lot of that has to do with consumer confidence I mean, yes, <unk> one users increasing its about 10% of the adult population now about 5% or so used for for weight loss, which is up significantly from the year before but it didn't change that much quarter to quarter and.
Speaker Change: And we also see the same kind of activity in dog treats and to my knowledge. There is not G. L. P ones for dog treats and so I don't think that even though we don't we take the GOP one kind of trend seriously and you see we have a lot of protein coming in our new products and macro nutrients and fiber are going to be important in portion size and lower sugar and all that.
Speaker Change: That's really not what we see in this in this environment as to why you know as to why we see the slowdown youre right in past recessions like in 2008, we Didnt see this what.
Speaker Change: Our view would be is that.
Speaker Change: Food at home is now elevated visa.
Speaker Change: It appears to be what it was in 2008, and so and it's elevated gives me what it was in pre pandemic. So pre pandemic food at home consumption was about 83% of occasions.
Speaker Change: Is now 87% and has been 87% for a long time and so what has changed is that in areas like we're experiencing now with consumer confidence we had a lower percentage of people eating at home and that increased as <unk>.
Speaker Change: They got more anxious that levels already increased so that that really hasnt changed much and so.
Speaker Change: Our belief is that consumers have become much more value conscious and that's not only determines what happens in category, but also have what happens in the rest of the store. So if you look at the rest of the grocery store you would see that things that are staples are the ones that are growing faster than things that are more discretionary and so staples like bay.
Speaker Change: Staples for example, and some of the items on the perimeter of those are growing faster because they're they produce more value of this and the same would be true of why you know restaurant occasions are down slightly so what do you think it's much more about value now and that's the biggest difference is the eating occasions. The first of what we saw in the past recessions.
Speaker Change: Thank you very much I'll pass it on.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Peter Galbo from Bank of America. Please go ahead. Your line is open.
Speaker Change: Hey, good.
Good morning, guys.
Speaker Change: Good morning.
Speaker Change: Jeff.
Speaker Change: Just a couple of questions. If we can dig in a little bit more on the snacks business.
Speaker Change: The first would just be around fruit snacks I'm, assuming when you're when you're talking about kind of the value piece of it youre talking more.
Speaker Change: Mott's relative to <unk> I think you had like actually expanded Carter's capacity about a year ago. So I just wanted to clarify on that.
Speaker Change: And then the second piece is just if you can expand a bit more on.
Speaker Change: The remediation plans I guess in snack bars, you know you have a competitor who is was off shelf and is now back on shelf and maybe Saudi as well just maybe at the same level of detail that you provided around fruit snacks would be super helpful. Thanks very much.
Speaker Change: Yeah. So.
Speaker Change: Let me start with let me start with with fruit snacks, a little bit you're right I mean gushers capacity came back up in Q2, and we feel good about the trajectory of that business. When we look at when we look at the category. The first Nash category is down and part of that is.
Speaker Change: Part of that discretionary, which we talked about but you know we havent distinguished ourselves on the share front either in and there were a couple of big players a couple of our big retailers introduced private label right in that period, and so Theres no question that the job to do on fruit snacks as a as one of making sure our value was in the range. But also then getting back to innovation and we talked a little bit about Harry Potter.
Speaker Change: Bruce and actually what we're doing there as well as marketing on the core and so I would like them, but we have to do with fruit snacks, a little bit to what we had to deal with a couple of items on Blue Buffalo were on Blue Buffalo I'm a year ago. We are pricing was good on life protection Formula is it probably goes on gushers, but all we gotta do as market a bedroom and we started doing that and that was a job and it does probably gushers.
Speaker Change: When you come to some other items, it's probably like wet pet food and treats where we had to improve the marketing, which we did and we had to improve the price points, which we did and it took a little bit longer but we eventually got back to where we need it to go and so that's kind of right.
Speaker Change: That's the corollary to fruit snacks, if you if you would on the on bars.
Speaker Change: Bars was a tough quarter because we.
Speaker Change: We had a competitor it was off shelf you know a year ago, but I feel good about our bars business. Some of the innovation, we have coming on bars, we didnt mentioned materials protein bars, I don't think on this call, but it's coming up and so we feel good about about that.
Speaker Change: Nature Valley that the marketing is good on nature Valley, and so our barge business I would look to to rebound you probably more quickly even than that fruit snacks, but fundamentally we're in a decent place on that.
Speaker Change: Thanks, Kevin just healthy anything there.
Speaker Change: Yes.
Speaker Change: Salty snacks, there, they're really probably as a value play although salt is a relatively small part of our portfolio relative to fruit snacks and nature Valley.
Speaker Change: But I think that one value is certainly true, but I would also say, it's very clear that consumers are looking for bold flavors and so our ability to introduce new products with some some bolder flavors is also going be part of our success in salty snacks.
Speaker Change: Great. Thanks, very much I'll pass it up.
Speaker Change: Our next question comes from John Baumgartner from Mizuho Securities. Please go ahead. Your line is open.
John Baumgartner: Good morning, Thanks for the question.
John Baumgartner: I just wanted to come back to the consumer and this interaction between value seeking and mills as mentioned our functional ingredients functional innovation set against the broader focus on RFK in ingredients more broadly how do you assess the willingness and ability for consumers to pay up for healthier ingredients and better quality I think in the past.
John Baumgartner: The ability to extract premium pricing for premium ingredients that that capacity hasn't always been as clear relative to being just sort of table Stakes to remain competitive you see anything changing on that front in terms of pricing power in premium mix at this point.
John Baumgartner: Yeah.
John Baumgartner:
John Baumgartner: Yeah.
John Baumgartner: Consumers are still good value comes in and a lot of different way as part of that is part of that is pricing, but obviously the benefit part as it is also important and we see that playing out in proteins. So we highlighted a lot of protein innovation, we have coming now whether thats cheerios protein or progresso protein, which is doing very well.
John Baumgartner: Youll see that in the.
John Baumgartner: The key for US is really where we're seeing a lot of a lot of value players, but we're seeing some things at the high end as well. So it's kind of bifurcated again for us value doesn't as I mentioned earlier I'm going to repeat myself, but value doesn't mean getting a raise to the bottom on pricing or getting to the same place that private label isn't making sure we have the the gaps correct.
John Baumgartner: And after a period of kind of record inflation for three years those things those things can take a toll in so.
John Baumgartner: It really is about getting the value right and beyond that it really is about talking about the benefits of our products in some cases thats functional benefits like protein and other places like like Pillsbury biscuits, it's about how flaky. They are when it comes to Betty Crocker, maybe I'll chocolate chocolate in there so.
John Baumgartner: So it really depends brand by brand that benefits are looking for it yes, some functional health, but it's food people really like stuff that tastes good and to the extent like of Cheerios protein, we can make it tastes good and it has a functional benefit that's that's an even bigger win.
John Baumgartner: Okay. Thank you.
Chris Carey: Our next question comes from Chris Carey from Wells Fargo. Please go ahead. Your line is open.
John Baumgartner: Yeah.
John Baumgartner: Hi, everyone.
John Baumgartner: So one slight clarification and then a bigger picture question just on the clarification with the savings targets for next year is there a message today that the savings targets <unk> and the incremental $100 million are there to be.
John Baumgartner: Fully reinvested back into the business or is the message today is simply where.
John Baumgartner:
John Baumgartner: Putting forth strong savings starts to give us the ability to invest as we see fit but the plans are still developing or something of the sort. So that's just a kind of clarification and then the bigger.
John Baumgartner: The bigger picture question is.
John Baumgartner: If I look at your category growth rates.
John Baumgartner: The categories in which you compete they're actually growing which is which is really positive right because that means that you can close category gaffes you're back to growth.
When you assess why your portfolio is not growing in line with the category.
John Baumgartner: What are what are the major diagnoses is it.
John Baumgartner: Value the innovation agenda, the marketing messaging, because I think we all think of valley.
John Baumgartner: Value is the is the key here invested pricing and trade and that'll that'll drive the improvement, but when you assess the portfolio about why there's that relative under performance. What are what are the buckets that are standing out to most of you. So thanks for those.
Speaker Change: Yeah, Let me let me take the let me take the second part of your question first and then I'll pass it over to <unk> to take the first part of your question second.
Speaker Change: On the on that category growth you can make a really important point, which is that our categories are growing and they're growing about 1% and that's that's below the kind of two to three we think will happen as we look into the future and the biggest delta really the delta is price mix.
Speaker Change: And so as we look at volumes that are roughly in line with what we'd expect and what we're what we could expect for 2% to 3%.
Speaker Change: <unk> line growth, except that there is not a lot of theres not much price mix in this environment, which given what we said about the consumer I think kind of kind of lines up so our categories are growing because of that the most important job. We have to do is to get back to being competitive wishes.
Speaker Change: We will look to largely due in the fourth quarter. We have lots of areas are competitive now if I look at.
Speaker Change: I look at foodservice, if I look at Hagen Dazs internationally, if I, if I look at Blue Buffalo or what we've done with Pillsbury Totino's, there are places where.
Speaker Change: Where our market shares are increasingly good and the job for us to do is to get back to that more broadly probably starting with volume share first ultimately the ultimate arbiter as dollar share, but volume share first as we're getting our value realigned. So that's the that's the job to do and then get to get back to algorithm that.
Speaker Change: Just a little bit of a price mix on top of that which we're not expecting in the near term, but which we're pretty confident we'll come back eventually.
Speaker Change: And then so that is the that's the most important thing that we need that.
Speaker Change: We need to do I'll, probably turn it over to coffee to talk a little bit more about the reinvestment profile and what we're expecting there.
Chris Carey: Just kind of picking up where Jeff left off I think to the extent that we see.
Speaker Change: <unk> ahead.
Speaker Change: You are really focused on driving improved growth and competitiveness.
Speaker Change: The purpose of the $100 million plus additional cost savings the net H M M above inflation.
Speaker Change: Is to free up resources to reinvest for growth right. So the efficiency is there to drive growth, we're not trying to drive specific.
Speaker Change: Improvements in margin, obviously to the extent, we have additional flexibility above that 100 <unk> hundred million you can expect that are dialed to be tilted probably towards reinvestment.
Speaker Change: Back into the business, we'll talk more about specifically where in the nature of that investment.
Speaker Change: A little bit more detail, obviously as we go into Q4 and give guidance for the next year.
Speaker Change: Okay. Let me, let me come back to the second part of Chris's question, which I think I've forgotten the first time around but the beacon.
Speaker Change: Being competitive is not only about price I mean, we need to get we need to get the pricing back in the zone, but its value Holistically and you know what.
Speaker Change: CPG company. The recipe for success is relatively simple even if it's difficult to execute which is you need really good marketing on your core you.
Speaker Change: You need good new product innovation and you need to.
Speaker Change: The value to kind of be in the zone, where they are marketing it can work.
Speaker Change: We know this has been true for decades, and we've proven it again.
Speaker Change: The categories that I've talked about earlier and where we're going.
Speaker Change: To start our proven on some other areas as well and I think you'll see that in cereal in the fourth quarter, where we've got good value, but we also have a double digit increase in media.
Speaker Change: You'll see it on soup, where we have good new products.
Speaker Change: That we're going to that we're going to market and so yes, we need to get the pricing roughly in line, but it is not only about that and it can only be about that we've got we've got the best brands in our categories and so it really is about marketing them effectively which is marketing in the core as well as new product innovation and we will look to Dialup ball tells me.
Speaker Change: At the year ahead, starting in Q4.
Speaker Change: Okay.
Speaker Change: Thanks, guys really helpful.
Speaker Change: You bet.
Speaker Change: Our next question comes from Jordan <unk> from Goldman Sachs. Please go ahead. Your line is open.
Jordan: Good morning, Thank you for taking my question.
Jordan: Wanted to go back to cereal I know that's been a big area of concern for investors recently and with the mid single digit decline in U S. Retail in the quarter. Just curious if you could provide more detail on that how it compared to your internal expectations and then going back to what gives you the confidence to driving the improvement in the fourth quarter and really just how are you.
Jordan: Thinking about the durability of the category longer term. Thank you.
Jordan: Yes, we as we look at the third quarter, let's see how deep. They go on that so as we look into the third quarter in cereal I mean, it was pretty close to what our expectations were in terms of what our reported net sales, where we knew we had a little bit of inventory built up from the second quarter, we talked about timing and that related to a few categories are set.
Jordan: <unk> quarter earnings call Cheryl is certainly one of those.
Jordan: And besides that we did have a competitor who is off shelf and in the.
Jordan: Third quarter of the year end, and we had a little bit less media and merchandising so sheryl.
Jordan: Our Seo performance wasn't great in the third quarter, but it was about what we expected.
Jordan: The reason why im confident that it will get better in the fourth quarter is that we have an increase in and media. We don't have the overhang from from.
Jordan: From the inventory and our merchandising is good we've got a we've got a really good promotion in the fourth quarter and so we have all the things lined up kind of like we did in the second quarter, we had a pretty good second quarter last year, well I think we'll have a good fourth quarter on cereal and the key to longer term is honestly is giving consumers more of what they want and so as.
Jordan: As we look at Cheerios protein clearly what they want we've launched go cereal wishes done which has done well our nature Valley granola.
Jordan: Protein has also done well and so it really is giving consumers more of what they want all of those things happen to be protein but.
Jordan: Lucky charms are still magically delicious and people want that as well and cinnamon toast Crunch is still in our view the best tasting cereal in the category and people want that as well and so the key to our growth as is as it always has been is giving consumers what they want in some cases, that's functional benefits like protein other times its great taste and if we can get the two together.
Jordan: That's why we usually win the most.
Jordan: Yeah.
Jordan: Okay.
Jordan: Yeah.
Jordan: Our.
Speaker Change: Next question will come from Max <unk> from BNP Paribas. Please go ahead. Your line is open.
Jordan: Yeah.
Speaker Change: Hey, Thanks for the question with regard to the good.
Speaker Change: A portion of the retailer inventory headwinds in North America retail and pet can you provide a bit more color on what drove that is this an industry wide phenomenon or is it specific to some of the categories. You compete in are your products, specifically and then what's informing the view that there won't be any material changes in retailer inventory levels.
Speaker Change: The fourth quarter. Thank you very much.
Speaker Change: Well.
Speaker Change: Well first of all in pet it was it was across some of our biggest retailers and pet inventory through the six years or so that we've owned this business has always been more volatile than the rest of our business I suspect it will be a bit because I think because of the E. Commerce nature of the of the business and so there was a five point drag on pad this quarter from from retail.
Speaker Change: A lot of that was dry pet food wishes, which is why you saw the results and drive pet food, especially in dry dog food the way that you did.
Speaker Change: Our inventory levels Werent high before they are even though they're even lowered out for the year. Our inventory was about retailers about flat to where it wasn't the beginning of the year and so that that's what gives us the confidence that.
Speaker Change: We won't have another drawdown in inventory and the rest of the rest of the year as well as an inventory trend.
Speaker Change: Industry trend or just us I'll, let everybody else talk about what their trends are.
Speaker Change: Know what ours are.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Okay, Julian I think we're going to given that we have kind of hit the pass the time allotted here I think we'll go ahead and wrap up.
Speaker Change: Thanks, everyone for the attention and the time this morning.
Speaker Change: We are available all day for follow ups as usual and so I look forward to connecting here.
Speaker Change: In the next few days and we'll be back to discuss Q4, when we get to June. Thanks, So much.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.
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Speaker Change: Yeah.
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