Q4 2025 Conagra Brands Inc Earnings Call

Yeah.

[music] looking forward.

Okay.

Speaker Change: Good morning, and welcome to the Conagra Brands' fourth quarter fiscal 2025 earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.

Unknown Executive: All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad.

Unknown Executive: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.

Speaker Change: After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.

Unknown Executive: Please note this event is being recorded.

Matthew Nieces: Please note. This event is being recorded I would now like to turn the conference over to Matthew nieces.

Matthew Neisius: I would now like to turn the conference over to Matthew Neisius. Senior Director of Investor Relations for Conagra Brands, please go ahead. Good morning, everyone, and thank you for joining us. Once again, I'm joined this morning by Sean Connolly, our CEO, and Dave Marberger, our CFO.

Matthew Nieces: Senior director of Investor Relations for Conagra brands. Please go ahead.

Speaker Change: Good morning, everyone and thank you for joining us once again I'm joined this morning by Shaun Connolly, our CEO and Dave <unk> our CFO.

Unknown Executive: We may be making some forward-looking statements and discussing non-GAAP financial measures during this session.

Matthew Nieces: We may be making some forward looking statements and discussing non-GAAP financial measures during this session.

Matthew Neisius: Please see our earnings release, prepared remarks, presentation materials, and filings with the SEC, which can be found in the Investor Relations section of our website for more information, including descriptions of our risk factors, GAAP to non-GAAP reconciliations, and information on our comparability items. I'll now ask the operator to introduce the first question. Currently, we will now begin the question and answer session. To ask a question, you have to press star, then one, on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. And if at any time your question has been addressed and you'd like to withdraw your question, please press star, then two.

Matthew Nieces: Please see our earnings release prepared remarks presentation materials and filings with the SEC, which can be found in the Investor Relations section of our website for more information, including descriptions of our risk factors GAAP to non-GAAP reconciliations and information on our comparability items.

Matthew Nieces: I'll now ask the operator to introduce the first question.

Matthew Nieces: Thirdly, we will now begin the question and answer session to ask a question Press Star then one telephone keypad, if you're using a speakerphone. Please pick up your handset before pressing the keys and if at any time. Your question has been addressed and you'd like to withdraw. Your question. Please press Star then two and we ask that you limit your.

Unknown Executive: And we ask that you limit yourselves to one question and one follow-up.

Matthew Nieces: Selves to one question and one follow up.

Speaker Change: And our first question comes from Andrew Lazar with Barclays. Please go ahead.

Andrew Lazar: First question comes from Andrew Lazar with Barclays, please go ahead. Great. Thanks. Good morning, everybody. Morning, Sean, I know you and I think other industry leaders have often said that, you know, it doesn't make much sense for a company to take sort of a full margin reset to increase spending against the consumer, you know, if they're not sort of ready to engage in some categories yet, because that means you don't really get the required lift on that spend. And you also may not get, you know, all the margin back in a reasonable timeframe. But I guess as we've seen with some other sort of fiscal year reporters of late and with Conagra's 26 guidance today.

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

Speaker Change: Good morning.

Andrew Lazar: Sean.

Speaker Change: I know you and I think other industry leaders have often said that it doesn't make much sense for a company. It takes sort of a full margin reset to increase spending against the consumer if they are not sort of ready to engage in some categories yet.

Speaker Change: That means you don't really get the required lift on that spend and you also may not get all of the margin back in a reasonable timeframe.

Speaker Change: But I guess as we've seen with some other sort of fiscal year report as of late and we've kind of <unk>.

Speaker Change: 26 guidance today.

Andrew Lazar: It does appear a more aggressive investment approach is sort of needed and being taken.

Speaker Change: It doesn't appear more aggressive investment approach is sort of needed in being taken and I guess my question is should that suggest to us that you think the current challenges in the industry is facing are are more structural at this time around or how should we read all of that.

Andrew Lazar: And I guess my question is, should that suggest to us that you think that the current challenges the industry is facing are more structural this time around, or how should we read all of that?

Sean Connolly: All right, Andrew, let me tackle that. Good question. First, as you saw in our prepared materials, we got a tremendous consumer response to our volume-focused investments in the first half of fiscal 25 before we ran into the supply constraints that we've talked about. In fact, recall, we started those investments in the back half of fiscal 24, and we saw excellent lifts even then. So the consumer, at least on our portfolio and our key areas of frozen snacks, is definitely responsive to investment, and that's why we returned to absolute volume growth in Q2 of last year.

Matthew Nieces: Alright, Andrew let me tackle good question first as you saw in our prepared materials.

Matthew Nieces: We got a tremendous consumer response to our volume focused investments in the first half of fiscal 'twenty five before we ran into.

Matthew Nieces: So the supply constraints that we've talked about in fact recall, we started those investments in the back half of fiscal 'twenty forward, we saw excellent lift even the debt.

Matthew Nieces: So the consumer at least on our portfolio on our key areas of frozen snacks is definitely responsive to investment and that's why we returned to absolute volume growth in Q2 of last year as for the decision to continue our focus on investing to drive volume in frozen.

Sean Connolly: As for the decision to continue our focus on investing to drive volume in frozen snacks, even in a still inflationary environment, let's copter up to the big picture for a second, because I think it's critically important context. The above-average inflation cycle that we still sit in started in the back half of our fiscal 21, and it has persisted since then. That means that this year, which is our fiscal 26, is the sixth consecutive year of inflation above historical norms, so definitely not transitory. Cumulatively for us, we're talking about over $2 billion in higher total delivered costs.

Matthew Nieces: Volume in frozen and snacks, even still inflationary environment.

Matthew Nieces: Let's let's copter up to the Big picture for a second because I think it's critically important context, the above average inflation cycle that we still sit in started in the back half of our fiscal 'twenty, one and it has persisted since then that means that this year, which is our fiscal 'twenty six.

Matthew Nieces: <unk> is the sixth consecutive year of inflation above historical norms, so definitely not transitory cumulatively for us we're talking about over $2 billion and higher total delivered cost we did price for inflation broadly across the portfolio through fiscal 'twenty, four and offset most all of them.

Sean Connolly: We did price for inflation broadly across the portfolio through fiscal 24 and offset most all of the higher costs to that point, but in fiscal 25, which was the fifth year of above-average inflation, we began prioritizing a return to volume growth, which required investment. That remains our strategy in fiscal 26. Unfortunately, inflation across fiscal 25 and fiscal 26 combined adds another 11% of cost. The confluence of high inflation and higher investments to drive volume translates to temporary margin compression. At the end of the day, though, we are in the business of building brands, and it's hard to build brands when relentless pricing actions broad-based across the portfolio lead to protracted volume declines.

Matthew Nieces: A higher cost to that point, but in fiscal 'twenty, five which was the fifth year of above average inflation. We began prioritizing the return to volume growth, which required investments that remains our strategy in fiscal 'twenty six unfortunately inflation across fiscal 'twenty five in fiscal 'twenty six combined added another 11 <unk>.

Matthew Nieces: <unk> of cost and the confluence of high inflation and higher investments to drive volume translates to temporary margin compression.

Matthew Nieces: At the end of the data we are in the business of building brands and it's hard to build brands when relentless pricing actions broad based across the portfolio lead to protracted volume declines we believe that healthy volumes are key at this point to long term value creation. So we are investing margin this year in the service of volume.

Sean Connolly: We believe that healthy volumes are key at this point to long-term value creation, so we are investing margin this year in the service of volume, but I do not see it as structural.

Matthew Nieces: But I do not see it as structural we absolutely expect margin expansion going forward, particularly in frozen and here are the building blocks. It starts with productivity in fiscal 'twenty six between core productivity and tariff mitigation efforts. The number is just over 5% which is very strong.

Sean Connolly: We absolutely expect margin expansion going forward, particularly in frozen, and here are the building blocks. It starts with productivity. In fiscal 26, between core productivity and tariff mitigation efforts, the number is just over 5%, which is very strong. Second, at some point, we will get inflation relief, hopefully back closer to our typical 2%. Third, the advancement of our supply chain resiliency investments, including our chicken plant, will enable us to repatriate outsourced production at lower cost. Fourth, we are taking pricing in certain categories. And fifth, we are kicking off an ambitious initiative to re-engineer our core work processes, leveraging technology, including AI, to accelerate growth and lower costs.

Matthew Nieces: And at some point, we will get inflation relief hopefully back closer to our typical 2%.

Matthew Nieces: Third the advancement of our supply chain resiliency investments, including our chicken plant will enable us to repatriate outsource production at lower costs.

Matthew Nieces: Fourth we are taking pricing in certain categories and fifth we are kicking off an ambitious initiative to reengineer, our core work processes, leveraging technology, including AI to accelerate growth and lower costs. So more on that one on a later date, but between these actions and our ongoing efforts to reshape the portfolio for faster growth in.

Sean Connolly: So more on that one on a later date. But between these actions and our ongoing efforts to reshape the portfolio for faster growth and better margins, we expect good margin expansion following fiscal 2016.

Matthew Nieces: Better margins, we expect good margin expansion following fiscal 'twenty six.

Unknown Executive: Great. Thanks very much.

Matthew Nieces: Got it alright, thanks, very much I'll pass it on.

Unknown Executive: I'll pass it on.

Peter Galbo: And your next question comes from Peter Galbo with Bank of America. Please go ahead. Hey guys, good morning. Thanks for taking the question. Thank you. Morning.

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

Hey, guys. Good morning, Thanks for taking the questions.

Speaker Change: Good morning, Good morning, Dave.

Peter Galbo: Dave, maybe you could just help us unpack the 4% core inflation number for fiscal 26. There's obviously a lot of a lot of buckets within that, but but maybe just some of the moving pieces there. What's, you know, what's inflating double digits, what's down, you know, to kind of net you to the 4% just as we kind of think about all the moving parts.

Speaker Change: Dave maybe you could just help us unpack the 4% core inflation number for fiscal 'twenty six there's obviously a lot of a lot of buckets within that but maybe just some of the moving pieces. There what's what's inflating double digits, what's down you know to kind of net either the 4% just as we kind of think about all the all the moving parts.

David Marberger: Thanks. Yeah, let me, let me take it from the top, Peter. So if you look at our total cost of goods sold, so when we quote inflation of 4% core, that's on our total cost of goods sold, roughly 60% of our total cost of goods sold are material costs. So our ingredients, our packaging, and then 25% manufacturing, 15% kind of logistics type costs. So when you look at that 60% of material costs, about 20% of that bucket are animal protein. and this is, you know, our beef, our chicken, our pork, our turkey, you could put eggs in that classification as well.

Speaker Change: Yes, let me, let me take it from the top Peter So.

Speaker Change: If you look at our total cost of goods sold so when we quote inflation of 4% core that's on our total cost of goods sold rough.

Speaker Change: Roughly 60% of our total cost of goods sold our material costs. So our ingredients are packaging and then 25% manufacturing, 15% kind of logistics type costs. So when you look at that 60% of material costs about 20% of that bucket or animal proteins and this is.

Speaker Change: Our beef or chicken or pork or Turkey.

Speaker Change: You can put eggs in that classification as well.

David Marberger: Those costs are inflating double digits in fiscal 26. That's our estimate right now. So that is the single biggest impact to the overall inflation rate of 4%. You know, we are seeing additional inflation areas kind of like corrugated, cocoa, obviously, although it's not a bigger absolute spend for us, but it's still, given the rate of inflation, it's still high. So that's really driving a big part of our inflation. We are also seeing inflation in our manufacturing infrastructure with our labor. And on the transportation warehousing side, not seeing any pressure on the fuel side, actually, that's a bit down, but on the warehousing part of it and line haul, we are seeing some inflation there.

Speaker Change: Those those costs are inflating double digits in fiscal 'twenty six that's our estimate right now so that is the single biggest impact to the overall inflation rate of 4%.

We are seeing additional inflation in areas like corrugated.

Speaker Change: Cocoa, obviously, although it is not a bigger absolute spend for us, but it's still given the rate of inflation is still high. So so that's really driving a big part of our inflation. We are also seeing inflation in our manufacturing infrastructure with our labor and on the on the transportation and warehousing side.

Speaker Change: Not seeing any pressure on the fuel side actually that's a bit down but on the warehousing part of it and line haul we are seeing some inflation there and so they are really the key drivers to get us to the 4%. We're estimating for 2006 and then obviously the tariff piece of that is an additional 3%, which we talked about.

David Marberger: And so they're really the key drivers to get us to the 4% we're estimating for 26. And then obviously, the tariff piece of that is an additional 3%, which we talked about. Got it.

Speaker Change: Got it no that's helpful context.

Unknown Executive: No, that's that's helpful context.

Unknown Executive: And apologies, guys here, and equity guys can ask a leverage question, which I know, can can always come off a little weird. But look, look, Dave, like with with where the leverage is, is projected to go on this year, you know, the need to kind of shore up the supply chain with with the capital spend. Just like your draws on cash are pretty significant.

Speaker Change: Apologies guys here and what are you guys gonna have to.

Speaker Change: Average question, which I know.

Speaker Change: Can always come off a little weird, but.

Speaker Change: Let's say like with with where the leverage is projected to go on this year.

Speaker Change: The need to kind of shore up the supply chain with what the capital spend.

Speaker Change: Just like your draws on cash are pretty significantly so I guess the broader question that we're feeling this morning.

David Marberger: And so I guess the broader question that we're feeling this morning is like, why not address the dividends? You know, the payout ratio is very high. Again, you got to refi a lot. So maybe you can just touch on and in the prepared remarks, you said it twice, I think, on maintaining the dividends. why that is the best course, you know, over the next year. Thanks very much.

Speaker Change: Why not addressed the dividend payout ratio is very high but then you've got a refi a lot. So maybe you can just touch on it in the prepared remarks, you said it twice I think on maintaining the dividend.

Speaker Change: Why that is the best course over the next year. Thank you very much.

David Marberger: Yeah, for sure. So, as we said, and, you know, you know, I'll communicate again today, we're committed to paying an attractive dividend to the shareholders, in addition to paying down debt, and remaining investment grade credit rating. And so when you look at our fiscal 26 cash flow forecast, We talked about, you know, 90% conversion. So we're able to support the increase in investments that we talked about in our infrastructure with chicken. Our CapEx, we're expecting to be up 16%. We are forecasting to pay debt down by $700 million this year. That's $600 million from the proceeds from the divestitures of Chef and our fish brands, in addition to discretionary cash flow from the business of another $100 million.

Speaker Change: Yes for sure so as we've said.

Speaker Change: We'll communicate again today, we're committed to paying an attractive dividend to the shareholders. In addition to paying down debt and remaining investment grade credit rating and so when you look at our fiscal 'twenty six cash flow forecast.

Speaker Change: We talked about.

90% conversion, so we're able to support the increase in investments that we've talked about in our infrastructure with chicken our capex, we're expecting to be up 16%.

Speaker Change: Our forecasting to pay debt down by $700 million this year that $600 million from the proceeds from the divestitures of chef in our fish brands. In addition to discretionary cash flow from the business of another $100 million.

David Marberger: So we're investing in the business, we're paying debt down by $700 million, and that's with holding the dividend flat to where it is today. So we don't feel at all that we're compromising the investments we need to make in the business. We're continuing to pay down debt, which is our goal. The leverage ratio has gone the other way, and that's because of the impact on our profit and our EBITDA. But we feel very good about the way we're managing cash in this company, as you've seen the last two years. And we are forecasting that we're going to be able to continue to do that.

Speaker Change: So we're investing in the business, we're paying debt down by $700 million and Thats with holding the dividend flat to where it is today. So we don't feel at all that we're compromising the investments we need to make in the business, we're continuing to pay down debt, which is our goal the leverage ratio has gone the other way and Thats <unk>.

Speaker Change: Cause of the impact on our profit and our EBITDA, but we feel very good about the way we're managing cash in this company as you've seen in the last two years and we are forecasting that we're going to be able to continue to do that and as Sean talked about we see a lot of positive levers to drive profit margins back in fiscal 2007. So we look at this.

David Marberger: And as Sean talked about, we see a lot of positive levers to drive profit margins back in fiscal 27.

David Marberger: So we look at this as an investment year and transitory year, but we're still able to fund the business and fund the dividend and pay down debt.

Speaker Change: As an investment year and trends toward a year, but we're still able to fund the business and fund the dividend and pay down debt.

Unknown Executive: Thanks very much, guys.

Speaker Change: Thanks, so much guys.

Unknown Executive: Thank you.

Speaker Change: Thank you.

David Palmer: And your next question comes from David Palmer with Evercore ISI, please go ahead. Thanks. Another big-picture question. I'm wondering how you're thinking about price and promotion as the answer, or perhaps not the answer, in your major categories. By saying not the answer, I'm thinking maybe there's other types of growth spending that you would want to ramp up as you see what's going on in your key categories competitively and just per category. For example, in frozen vegetables, I would imagine there would be higher trade-down risk, and you might think about price promotion being more the answer on a category like that, whereas in some of your other categories where you have some brands that can win, there might be some premium brands that are also winning that are informing how you could perhaps adjust your innovation, other types of marketing to win in a way that doesn't speak to price promotion.

Speaker Change: And your next question comes from David Palmer with Evercore ISI. Please go ahead.

David Palmer: Thanks, and then another big picture question I'm wondering how you're thinking about price and promotion is the answer or perhaps not the answer in your major categories.

David Palmer: By saying not the answer I am thinking maybe there's other types of growth spending that you would want to ramp up as you see what's going on in your key categories competitively and just per categories. So for example in frozen vegetables, I would imagine there'll be higher trade down risk and you might think about price promotion being more the answer.

David Palmer: On a category like that whereas in some of your other categories, where you have some brands that can win there might be some premium brands that are also winning that are informing how you could.

David Palmer: Perhaps adjust.

David Palmer: Sure.

Speaker Change: Your innovation other types of marketing to win in a way that doesn't speak to price promotion. So.

David Palmer: Any comments on that?

Unknown Executive: I have a quick follow-up.

David Palmer: Any comments on that and I have a quick follow up.

Sean Connolly: David, the way I think about that is unlike some of the peer set, we are not in search of answers in terms of how to get to volume growth. We know how to get to volume growth. We were doing it for five consecutive quarters through the second quarter when we got to absolute growth for the total portfolio and very strong growth for frozen and snacks. So the model is clear. We just had to get through the supply constraints in the back half of this year and we are doing that. So what we have done, as you saw in the prepared remarks, around here, it always starts with modernizing the brands with a new slate of exciting innovation every year.

David Palmer: Yeah, David the way I would think about that is unlike some of the peer set we're not in search of answers in terms of how to get to volume growth. We know how to get the volume growth. We were doing it for five consecutive quarters through the second quarter. When we got to absolute growth for the total portfolio and very strong growth for <unk>.

David Palmer: And in snacks.

David Palmer: The model is clear, we just had to get through the supply constraints in the back half of this year and we are doing that so what we've done as you saw in the prepared remarks around here. It always starts with modernizing the brands with a new slate of exciting innovation every year, then we invest meaningfully with customers and high quality.

Sean Connolly: Then we invest meaningfully with customers in high quality displays in the frozen section, as an example, it is the freezers at the end of the aisle where we can get real high quality visibility on those innovations and drive tremendous lifts. And we saw that consistently for five quarters. We then layer on A&P, which is focused really these days largely in social media, and that drives awareness and really kind of excitement around the products. And then we rely on the products themselves and the great work by our culinary team to drive repeat purchase. That's how the model works and it has worked very well when we have not had service issues.

David Palmer: <unk> in the frozen section as an example, it's the freezers at the end of the aisle, where we can get real high quality visibility on those innovations and drive tremendous lifts and we saw that consistently for five quarters. We then layer on A&P, which is focused really these days largely in social media and that drives awareness and.

David Palmer: Really kind of excitement around the products and then we rely on the products themselves and the great work by our culinary team to drive repeat purchase that's how the model works and it has worked very well when we have not had service issues now we did get through Q4 with service levels back to about 98%. So you don't get much better than that and that's why.

Sean Connolly: Now we did get through Q4 with service levels back to about 98%. So you don't get much better than that. And that's why we think we are in a very good position right now. If you look at the scanner data that came out this week, I think our volumes in total were down about 1%. So we are getting very close to crossing over into positive territory with our programming really just beginning to kind of come into light and some easier comps coming on the horizon. So we think we are very well positioned on the top line as we go into this year with these service issues behind us.

David Palmer: We think we're in a very good position right now if you look at the scanner data that came out this week I think our volumes in total were down about 1%. So we're getting very close to crossing over into positive territory with our programming really just beginning to kind of come into light and some easier comps coming.

David Palmer: Coming on the horizon. So we think we're very well positioned on the top line as we go into this year with the service issues behind US. We also think we're going to be very well positioned for fiscal 2007.

Sean Connolly: We also think we are going to be very well positioned for fiscal 27 because of the supply chain resiliency investments we have made. I have heard repeatedly from a number of our long-term investors to say, you guys got to get these supply service interruptions in the rearview mirror.

David Palmer: Because of the supply chain resiliency investments we've made.

David Palmer: I have heard repeatedly from a number of our long term investors to say you guys got to get the supply.

David Palmer: Service interruptions in the rearview mirror this year is going to be a tough year for the industry. We felt the timing was right to kind of bite the bullet make those investments put ourselves in a position to be able to service the very strong consumer pull that we've got.

Sean Connolly: This year is going to be a tough year for the industry. We felt the timing was right to kind of bite the bullet, make those investments, put ourselves in a position to be able to service the very strong consumer pull that we have got, particularly in our frozen business containing chicken. So we are doubling down on those investments this year, and that is going to set us up very well for fiscal 27. But make no mistake about it, the ability to drive volume growth is not a search for us. We have done it. We know how to do it.

David Palmer: Particularly in our frozen business containing chicken. So we are doubling down on those investments this year and that's going to set us up very well for fiscal 2007, but make no mistake about it the ability to drive volume growth is not a search for us we've done it we know how to do it we've got the service levels back and we're eager to.

Sean Connolly: We have got the service levels back, and we are happy now that we are in fiscal 26 and eager to get the top line in frozen and snacks moving again. And we will help pay for that with some targeted pricing on the canned business where we are just seeing a tremendous amount of inflation due to tariffs on tinplate steel. So that is how it all works out. Yeah, David, we don't guide to specific price mix and volume in our overall organic guidance. So we got it to down one to plus one. We did say that in the first half, we expect sales to be down slightly and in the second half to be up slightly.

David Palmer: We're happy now that we're in fiscal 'twenty, six and eager to get the top line in frozen and snacks, moving again, and we will help pay for that with some targeted pricing on the can business, where we're just seeing a tremendous amount of inflation due to tariffs on tin plate steel so.

David Palmer: That's how it all works out.

Speaker Change: And is your the way you're budgeting fiscal 'twenty six on <unk>.

David Palmer: <unk> mix.

David Palmer: Versus your cost.

David Palmer: As you see them today, and I don't know how to what degree you're hedged for the second half of 'twenty six but is it that youre going to have a crossover in price mix or at least keep.

David Palmer: Keep up with inflation in the second half of the year is this a first half second half type of thing as you see it.

David Palmer: Yes, David we don't guide to specific price mix and volume in our overall organic guidance. So we guided to down one to plus one we did say that in the first half we expect sales to be down slightly in the second half to be up slightly so if yet.

David Marberger: So if you know, that's kind of the general cadence that we're giving there. You know, obviously, we said we're going to make more investments in pricing and merchandising. But we also are going to have pricing in the second half. And so there's a lot of scenarios, how they net out, you obviously have the elasticity. So we don't like to give precise numbers on volume and price mix, because there's a lot of different outcomes. But we have both additional investment in merchandising, and we also have pricing in the second half. And so those things will kind of work through and then we'll see how that lands.

David Palmer: Kind of the general cadence that we're giving there obviously, we said we're going to make more investments in pricing and merchandising, but we also are going to have pricing in the second half and so there's a lot of scenarios how they net out you obviously have the elasticity. So we don't want to give precise numbers on volume and price.

David Palmer: Mix, because there is a lot of different outcomes, but we.

David Palmer: We have both additional investment in merchandising and we also have pricing in the second half and so those things all kind.

David Palmer: <unk>.

David Palmer: Worked through and then we'll see how that lands.

Speaker Change: Okay I'll pass it opex. Thanks.

Unknown Executive: Okay, I'll pass it on.

Leah Jordan: Thanks.

David Palmer: Thanks.

Leah Jordan: And your next question comes from Leah Jordan with Goldman Sachs, please go ahead. Thank you. Good morning. I just wanted to follow up on the last... Just curious what you've embedded within your guidance on elasticity on the back. Pricing Action in the Back Half, and maybe how that compares to your historical trends. And I guess, what gives you confidence in the ability to take pricing? As you've kind of called out, consumers have accelerated their value seeking right now, and data would suggest you're still losing dollar shares.

Speaker Change: And your next question comes from Leah Jordan with Goldman Sachs. Please go ahead.

Leah Jordan: Thank you good morning, I just wanted to follow up on the last discussion just curious what you've embedded within your guidance on elasticity on the back of your planned pricing action in the back half and maybe how that compares to your historical trends and I guess, what gives you confidence in the ability to take pricing as you've kind of called out consumers have.

Speaker Change: Their value seeking right now and data would suggest you're still losing dollar share across many categories.

Sean Connolly: Hi, Leah, it's Sean. First of all, in terms of elasticities planned, within our categories, Conagra's average elasticity is a little bit lower than our competitors across channels. And further, at a company level, if you look at total pricing versus total volume change, you'll also see that the elasticity has been a touch better than most peers over the last year.

Speaker Change: Hi, Lisa it's Sean first of all in terms of elasticity as planned within our categories. Conagra is average elasticity is a little bit lower than our competitors across channels and further at a company level. If you look at total pricing versus total volume change Youll also see that the elasticity.

Speaker Change: Been a touch better than most peers over the last year. So we baked in for our grocery business.

Sean Connolly: So we've baked in for our grocery business what would be for us a fairly standard elasticity, basically close to a minus one for that business. And as for the decision to take price on that business, we actually are very thoughtful in our pricing approach based on the strategy for the business.

Speaker Change: What would be for us a fairly standard elasticity basically close to a minus one for that business and as for the decision to take price on that business, we actually are.

Speaker Change: Very thoughtful in our pricing approach based on the strategy for the business. So we have to consumer.

Sean Connolly: So we have two consumer domains that represent about 70% of our retail business that's frozen as snacks. Those are our growth businesses. Those are the strategic businesses that we need to grow over time, and we are investing margin to drive volume growth in those businesses.

Speaker Change: Consumer domains it represent about 70% of our retail business such as frozen and snacks. Those are our growth businesses. Those are the strategic businesses that we need to grow over time, and we are investing margin to drive volume growth in those businesses are canned food business, which is really the one that's most impacted by that.

Sean Connolly: Our canned food business, which is really the one that's most impacted by the tariff piece, that business is a business that is a cash generator within our portfolio. We are looking for those businesses to be roughly stable on the top line and maximize cash, because the cash on those businesses fund the growth investments we make in frozen and snacks. So volume is not the name of the game on that business. Cashflow is. And we will take inflation-justified pricing on those businesses to maximize that cash and help claw back some of the gross margin that we're investing on the other pieces of the business.

Speaker Change: Tariff piece that business is business that is a cash generator within our portfolio. We are looking for those businesses to be roughly stable on the topline and maximize cash because the cash on those businesses fund the growth investments, we make in frozen and snacks. So volume is not the name of the game on that business.

Speaker Change: Cash flow is and we will take.

Speaker Change: Just inflation justified pricing on those businesses to maximize that cash and help maintain a help claw back some of the gross margin that we're investing on the other pieces of the business. So so it's horses for courses so to speak we tailor our approach to pricing to what we need strategically out of the business and frankly the growth busy.

Leah Jordan: So it's horses for courses, so to speak. We tailor our approach to pricing to what we need strategically out of the business. And frankly, the growth businesses, this whole sector has been under volume pressure for a number of years now, and we think it's time to get volume on growth businesses back to positive territory, as we felt last year. And that's what we're going to do. Very helpful. Thank you.

Speaker Change: <unk>.

Speaker Change: This whole sector has been under volume pressure for a number of years now and we think it's time to get volume on growth businesses back to positive territory as we felt last year and Thats what were going to do.

Speaker Change: Very helpful. Thank you.

Max Gumport: And your next question comes from Max Gumport with BNP Paribus, please go ahead. Thanks, Sean. The inflation paper cycle had initially largely played out as you expect. And I think that was all very much in line with what you had seen in past cycles, and it was viewed as predictable.

Speaker Change: And your next question comes from Max Comfort with BNP Paribas. Please go ahead.

Speaker Change: Thanks, Sean and patient pay per cycle.

Speaker Change: Largely played out as you expect.

Speaker Change: A few years, so that with the gross margins getting hit hardest pricing I shouldn't.

Speaker Change: But then ultimately recovering as pricing cost inflation.

Speaker Change: I think that was all very much aligned with what you had seen in past cycles. That's predictable. However, now youre heading into a year and that you expect 7% inflation in this time feels a bit different doesn't sound like there's much in the way of pricing coming on given where the consumer is I'm trying to get a sense for how you expect this cycle to now play out.

Max Gumport: However, now you're heading into a year in which you expect 7% inflation, and this time feels a bit different. It doesn't sound like there's much in the way of pricing coming on, given where the consumer is. So I'm trying to get a sense for how you expect this cycle to now play out. I think you touched on it a bit in response to Andrew's question, but I'm hoping to get a bit more color on how you expect to see the business progress from the 11% to 11.5% operating margin you expect for this year over the next few years, and if there's a view on where the underlying margin or the normalized margin for the business now is in the timeline to get back to that margin.

Speaker Change: You've touched on a bit.

Speaker Change: Bonds to Andrew's question, but I'm, hoping to get a bit more color on how you expect to see the business progressed from the 11 to 11, 5% operating margin you expect for this year over the next few years and if there is a view on where the underlying margin or the normalized margin for the business that way.

Speaker Change: The timeline to get back to that margin thanks very much.

Max Gumport: Thanks very much.

Sean Connolly: All right, Max, let me try to tackle that. Frankly, these cycles are pretty mechanical. The way it works is if inflation comes in, the P&L gets hit initially because your costs go up faster than you can take price. And we, a few years ago, referred to that as the lag. And then most companies, when they're faced with above normal inflation, will take inflation justified pricing. And after the lag, they claw back most of the dollar profit that they've given up by virtue of that pricing. And frankly, that is exactly the boat we were in when we were at the end of our fiscal 24, where we had been through the lag, we had taken broad-based pricing, we clawed back most of that profit in terms of dollars that we had given up temporarily by virtue of our productivity and our pricing actions.

Speaker Change: Alright, So let me try to tackle that.

Speaker Change: Frankly, the cycles are pretty mechanical the way. It works is if inflation comes in the P&L gets hit initially because your costs go up faster than you can take price and we a few years ago referred to that is the lag and then most companies when they are faced with above normal inflation will take inflation justified.

Speaker Change: Pricing and after the lag the claw back most of the dollar profit that they've given up by virtue of that pricing and frankly that is exactly the boat. We were in when we were at the end of our fiscal 'twenty four where we had been through the lag we had taken broad based pricing, we clawed back most of that.

Speaker Change: Profit in terms of dollars that we had given up temporarily by virtue of our productivity and our pricing actions, but by that point in time the industry had been looking at multiple years like three plus years of negative volume and investors rightfully asked the question.

Sean Connolly: But by that point in time, the industry had been looking at multiple years, like three plus years of negative volume. And investors rightfully asked the question, how long can you let volumes in your strategic businesses continue to erode? We are, after all, in the business of selling food brands to consumers. And so that's where we were one of the first companies to say, it's time to get volume moving north again. And we invested last year to do that. And we got a tremendous response before we ran into the unfortunate supply constraints. But that's really where we are this year.

Speaker Change: How long can you let volumes in your strategic businesses continue to erode we are after all in the business of selling food brands to consumers and so that's where we were one of the first companies to say, it's time to get volume moving North again, and we invested last year to do that and we got a tremendous response before we ran into the unfortunate supply.

Speaker Change: <unk>.

Speaker Change: But that's really where we are this year so.

Sean Connolly: So we weren't looking for another 7% total inflation this year, but we've got it. And the question is, what do we do in response to that? We don't think broad-based pricing that triggers a whole new cycle of broad-based elasticity and volume declines across the portfolio is in the best interest of the branded portfolio. We don't think it's in the best interest of brand equity. And therefore, we don't think it's in the best interest of long-term shareholder value creation. We think it's important that these brands have a strong connection this year with our consumers because that's going to maximize future cash flows.

Speaker Change: We werent looking for another 7% total inflation this year, but we've got it and the question is what do we do in response to that we don't think broad based pricing that triggers a whole new cycle of broad based elasticity and volume declines across the portfolio is in the best interest of the branded portfolio.

Speaker Change: We don't think it's in the best interest of brand equity and therefore, we don't think it's in the best interest of long term shareholder value creation. We think it's important that these brands have a strong connection this year with our consumers because that's going to maximize future cash flows.

Sean Connolly: Now, we do have a pathway back clearly to recapturing that margin, just like we did after fiscal 22 and 23. And it's a combination of the things that I referenced from productivity to other pricing actions to this new initiative that we're commencing to relook at our core processes to operate them more efficiently. But just as we have in the past, when you go through these mechanical cycles and you get that margin pinch this year in particular, because we're investing quite a bit more to get through the supply chain resiliency on top of the inflation, you do see the margins bounce back.

Speaker Change: Now we do have a pathway back clearly to recapturing that margin just like we did after fiscal 'twenty, two and 'twenty three and it's a combination of the things that I referenced from productivity to other pricing actions to this new initiative that we are commencing to re look at our core business processes to operate them more efficiently.

Speaker Change: But just as we have in the past when you go through these mechanical cycles and you get that margin pinch this year in particular, because we're investing quite a bit more to get through the supply chain resiliency on top of the inflation you do see the margins bounce back and that's what we.

Sean Connolly: And that's what we are expecting going forward. And if we get relief on the inflation side, that could come pretty material. Great, thank you.

Speaker Change: We are expecting going forward and if we get relief on the inflation side that could come pretty materially.

Speaker Change: Yeah.

Speaker Change: Great. Thank you and related to that.

Max Gumport: And related to that, the bit We've gone through several years now, I think four or so, of volume declines and it sounds like FY26. could potentially have a modest volume decline as well. So it's hoping to get a bit more color on. the operating de-leverage that you've seen the business face over the last several years and whether at this point you see any need to rationalize your manufacturing footprint or right-size the organization. Anyway, I'll leave it there. Thanks very much.

Speaker Change: Yeah.

Speaker Change: Countries. Several years now I think for us volume declines and it sounds like FY 'twenty six.

Speaker Change: Could it potentially have a modest volume decline as well so I was hoping to get a bit more color on.

Speaker Change: The operating deleverage that you've seen the business space over the last several years and whether at this point do you see any need to rationalize your manufacturing footprint or right size the organization.

Speaker Change: I'll leave it there thanks very much.

Sean Connolly: Well, the first comment I'll make is not all volume declines are at this juncture are created equal. We want to avoid volume declines in our growth businesses of frozen snacks, which is why we're investing margin to do that. So that business is about growth. The cash business is about cash. And that's kind of the way we've set up our actions. And as for anything else we need to do to kind of structurally, I think we're in good shape. We just have to deliver this year, get volumes healthy and frozen snacks, maximize the cash flow on that canned food business, and then continue to the momentum that we've got on innovation as we go into next year, we start getting some relief on the margin side.

Speaker Change: Well the first comment I'll make is not all volume declines are at this juncture are created equal.

Speaker Change: We we want to avoid.

Speaker Change: Volume declines in our growth businesses frozen snacks, which is why we are investing margin to do that so that that business is about growth.

Speaker Change: Cash business is about cash and thats kind of the way we've set up our actions.

Speaker Change: And as for anything else, we need to do to kind of structurally I think we're in good shape. We just have to deliver this year get volumes healthy in frozen and snacks maximize the cash flow on that can food business and then continue the momentum we've got on innovation as we go into next year, we start getting some relief on the margins.

David Marberger: Dave, you want to add to that? Yeah. So I would say, in terms of kind of ongoing network structure, we have a supply chain that's constantly looking at our network. If over time we see volumes declining in any particular manufacturing area, we will always look to try to consolidate our network to minimize overhead costs relative to the volume that's being produced. So that's an ongoing thing that we do. One thing in this year, and then in terms of fiscal 25 and then fiscal 26 forecast that we just gave, there is definitely an additional absorption headwind because of the investments that we're making both in our baked chicken production and our fried chicken production, because we have to move production to a third-party manufacturer in order to make the that slows down and obviously stops production at some point.

David Palmer: Dave you want to add to that yes, so I would say in terms of kind of ongoing network structure.

David Palmer: We have a supply chain that is constantly looking at our network. If over time, we see volumes declining at any particular manufacturing area. We will always look to try to consolidate our network to minimize overhead costs relative to the volume Thats being produced and that that's an ongoing thing that we do one thing and this year and then.

David Palmer: And next in terms of.

David Palmer: Fiscal <unk> 45, and then fiscal 'twenty six forecast that we just gave there is definitely an additional absorption headwind because of the investments that we're making both in our baked chicken production and our fried chicken production because we have to move production to a third party manufacturer in order to make the investments.

David Palmer: So that slows down and obviously stopped production at some point.

David Marberger: You can try to manage overhead. you know, somewhat in that situation, but you are going to have absorption hits. And so that's that was in our twenty five numbers. It's forecasted in our fiscal twenty six numbers. It's part of that investment that we talk about. That's why we're encouraged with fiscal twenty seven, because as we get those investments completed and we can be less reliant on the third party manufacturers and we can bring that volume back in-house, that absorption is not as much of a headwind anymore and it can actually become a tailwind. And so that's part of the levers for fiscal twenty seven.

Speaker Change: Can try to manage overhead.

Speaker Change: Somewhat in that situation, but you are going to have absorption hits and so that was in our 25 numbers its forecasted in our fiscal 'twenty six numbers thats part of that investment that we talk about that's why we're encouraged with fiscal 2007, because as we get those investments completed and we can be less reliant on the third party.

Speaker Change: Manufacturers and we can bring that volume back in house that absorption is not as much of a headwind anymore and it can actually become a tailwind and so that's part of the the levers for fiscal 2007. So hopefully that gives you a little color.

Max Gumport: So hopefully that gives you a little color. It does. Thanks very much.

Speaker Change: It does thanks very much I'll pass it on.

Bryan Adams: And your next question comes from Bryan Adams with UBS. Please go ahead. Hey, morning, guys. Thanks for the question. Just going off what you've said so far, Sean, along with the prepared remarks, it's pretty clear that the doubling down on the volume growth as a priority is key here. And even if that comes at the expense of profitability near term. So just through that lens, there's a lot of moving pieces as we look at the 26 BDAT on the inflation side, or obviously, as you guys know better than most on the tariff side. How do you think about balancing if things change in those two pieces of the outlook?

Speaker Change: And your next question comes from Brian Adams with UBS. Please go ahead.

Brian Adams: Hey, good morning, guys. Thanks for the question.

Brian Adams: Just going off what you've said so far Sean along with the prepared remarks, it's pretty clear that the doubling down on the volume growth is a priority.

Brian Adams: The key here.

Brian Adams: Even if that comes at the expense of profitability near term. So just through that lens. There's a lot of moving pieces as we look out to 2006 speed up.

Speaker Change: <unk> side, obviously as you guys know better than most on the tariff side, how do you think about balancing.

Speaker Change: Things changed in those two pieces of the outlook, how do you think about balancing.

Sean Connolly: How do you think about balancing further investment to drive growth versus maybe flowing some of that through to the bottom line at this point? Well, I think our strategy, you know, is to maximize value for the long haul. And to do that, we need our hero brands to be heroes, and that's frozen and snacks. And we need them to be resonant with consumers. Because if you if you if you milk a business like that, and you don't invest to drive volumes after a period, several periods, several years of weaker volumes, then the brand atrophies. And if the brand atrophies, the valuation of that asset has declined, and we want to maximize the value of our brand assets for long term, maximum value creation and cash flow.

Speaker Change: Our investment to drive growth versus may be slowing some of that through to the bottom line at this point.

Speaker Change: Well.

Speaker Change: I think our strategy is to maximize value for the long haul and to do that we need our hero brands to be heroes, and thats frozen and snacks, and we need them to be resident with consumers because if you. If you if you milk a business like that and you don't invest to drive volumes after a period several.

Period of several years of weaker volumes than the brand atrophies in if the brand atrophies with valuation of that asset has declined and we want to maximize the value of our brand assets for long term maximum value creation and cash flow and Thats. What we think we're going to do now obviously.

Sean Connolly: And that's what we think we're going to do. Now, obviously, you know, Okay, got it.

Speaker Change: If we were to speculate and say we were having cost runaway again, we'll have to revisit everything real time.

Speaker Change: And try to strike a balance there, but based on where we sit today with the call. We have today for inflation in the call. We have today for tariffs, which are obviously moving around by the minute.

Speaker Change: Hi.

Speaker Change: This is what we think the right course of action is if those inputs change we'll update our game plan and then we'll make sure to update you on it as well.

Speaker Change: Okay got it and then just one more kind of big picture, one theres, obviously been some pruning of the portfolio.

Bryan Adams: And then just one more kind of big picture one, there's obviously been some pruning of the portfolio of late. And then also just looking across the industry, more probably recently, there's been some reshuffling in the packaged food landscape, from an M&A standpoint.

Speaker Change: And then also just looking across the industry more recently, there's been some reshuffling in the packaged food landscape from.

Speaker Change: From an M&A standpoint, so just as you think as you think about like.

Sean Connolly: So just as you think that, as you think about like, you know, looking out to 27, at this point, getting back to maybe more on algorithm growth, are there any other like categories or businesses within the portfolio that you're looking at in terms of maybe reevaluating the fit as part of Conagra at this point? Yeah, I think if you do look at the big picture in terms of what we've done with portfolio reshaping in the last, you know, eight to nine years, it's been a humongous amount of portfolio reshaping in terms of what the portfolio makeup is today versus what it used to be.

Speaker Change: Looking out to 2007 at this point getting back to maybe more on algorithm growth are there any other categories or businesses within the portfolio that youre looking at in terms of maybe reevaluating the fit as part of Conagra at this point.

Speaker Change: Yes.

Speaker Change: I think if you do look at the Big picture in terms of what we've done with portfolio reshaping in the last eight to nine years, it's been a humongous amount of portfolio reshaping in terms of what the portfolio makeup is today versus what it used to be and the strategy is to have more and more of our portfolio.

Sean Connolly: And the strategy is to have more and more of our portfolio every year focused on the growth areas of frozen and snacks, and less on the grocery business. And that's what we've done with the Chef Boyardee, Divestiture, fish is a little bit of a different animal in that it was frozen, but really to operate well in the fish industry, you almost need to be vertically integrated, which we were not. And we did sell our Indian joint venture. So those were businesses that were not part of our strategic growth areas. That's been our strategy for some time.

Speaker Change: Every year focused on the growth areas of frozen and snacks and.

Speaker Change: Yes on the the grocery business and that's what we've done with the chef Boyardee divestiture fishing, a little bit of a different animal in that it was frozen, but really to operate well in the fish industry, you almost need to be vertically integrated which we were not.

Speaker Change: And we did sell our Indian joint venture. So those were businesses that were not part of our strategic growth areas. That's been our strategy for some time there are probably other candidates that I won't get into on this call that we could look at it as as exit candidates in that grocery business overtime, but smartly.

Sean Connolly: There are probably other candidates that I won't get into on this call that we can look at as exit candidates in that grocery business over time, but smartly and methodically, because those businesses also do play an important role in the portfolio by throwing off cash, absorbing a lot of overhead and funding a lot of the investments we make in the growth business. So we always take a thoughtful approach to that action. And we're certainly not flat-footed there as we've done more divestitures than most people in our space over the last decade.

Speaker Change: And methodically because those businesses also do play an important role in the portfolio by throwing off cash absorbing a lot of overhead and funding a lot of the investments we make in the growth business. So so we always take a thoughtful approach to that action and we're certainly not flat footed there as we've done more divestitures and most people in our space over the last.

Speaker Change: Decades, So we will continue to look at it and we will continue to post you as we we have new ideas.

Bryan Adams: So we'll continue to look at it, and we'll continue to post you as we have new ideas. Very helpful. Thanks, Sean. Thanks, Dave.

Speaker Change: Very helpful. Thanks, Shawn Thanks, Dave.

Speaker Change: Thank you.

Chris Carey: And your next question comes from Chris Carey with Wells Fargo, please go ahead. Hey, everyone. Hope you're well. The two questions. The first question is On our math, it does appear that you potentially need productivity to kind of run. you know, twice the rate that you've historically driven, you know, as a benefit to gross margins. I wonder if that, you know, checks out on your math, this idea that you do need, you know, substantial step up in productivity.

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

Chris Carey: Hey, everyone hope you're well.

Speaker Change: Hi, Chris.

Chris Carey: The.

Chris Carey: Two questions. The first question is.

Chris Carey: On our math it does appear that you potentially would need productivity to kind of run.

Chris Carey: Twice the rate that you have historically driven.

Chris Carey: It's a benefit to gross margins I wonder if that.

Chris Carey: Checked out on <unk> this idea of that.

Chris Carey: You do need it.

Chris Carey: A substantial step up in productivity.

Chris Carey: And I just wonder if you could give a little bit more detail on some of the drivers around, you know, that step up just as a starting point. Well, I think, you know, as we mentioned in our prepared remarks today, Chris, the productivity has been running very strong. We have no reason to believe it will be less strong. If anything, it'll be stronger. But we ran total productivity last year north of 4%. That's a good number. This year, including the tariff mitigation efforts, the number is north of 5%, which is a very strong number. So obviously, if we continue to deliver that kind of productivity, juxtaposed up against inflation that normalizes, we'll be fairly flush at that juncture.

Chris Carey: And I just wonder if you could.

Chris Carey: Give a little bit more detail on some of the drivers around that step up just as a starting point.

Chris Carey: Well I think.

Chris Carey: We mentioned in our prepared remarks today, Chris the productivity has been running very strong we have no reason to believe it will be less strong if anything it will be stronger, but we ran total productivity last year north of 4%. That's a good number this year, including the tariff mitigation efforts the <unk>.

Chris Carey: Or is north of 5%, which is a very strong number. So obviously, if we continue to deliver that kind of productivity juxtaposed up against inflation that normalizes, we're going to we'll be fairly flush it that at that juncture, but we've got a tremendous amount of modernization work, that's going on within supply chain to drive productivity.

Sean Connolly: But we've got a tremendous amount of modernization work that's going on within the supply chain to drive productivity, some of which we've talked about before, like the connected shop floor work. Basically, in the food industry, what you've got going on these days is a lot of automation and modernization of factories that in the past were not that. And as you do that, you become more efficient and you can run with better throughputs at lower costs. And that's what we've seen.

Chris Carey: All of which we've talked about before like the connected shop floor work basically in the food industry, what you've got going on these days, there's a lot of automation and modernization of factories that in the past, we're not that and as you do that you become more efficient and you can run with better throughput and lower cost and that's what we've seen Dave do you want to add to that.

David Marberger: Dave, you want to add to that? Yeah, I just I'm going to kind of tie it back to the way that I laid out slides in my section with the EPS bridge, because what we did, we looked at 4% core inflation, and then commented that we expect our productivity to be 4%. So and we feel very good about that, as Sean just mentioned, as a continuation of the acceleration we saw in fiscal 25. We have a very robust program, by the way, on our core productivity programs around manufacturing efficiencies and yields and product design, material negotiation, just all the details.

Chris Carey: Yes.

Speaker Change: I'm going to kind of tie it back to the way that I laid out slides in my section with the EBIT EPS bridge, because what we did we looked at 4% core inflation and then commented that we expect our productivity to be 4%, so and we feel very good about that as Sean just mentioned is a continuation of the acceleration we saw.

Chris Carey: In fiscal 'twenty five.

Chris Carey: A very robust program by the way on our core productivity programs around manufacturing efficiencies and yields.

Chris Carey: Product design material negotiation just all the details we have a team of people that work on this like many companies do and so we feel really good about the progress the investments in technology. We've made in order to yield that what I also put with that though when we looked at total inflation, we had 4% core and 3% tariffs and.

David Marberger: We have a team of people that work on this, like many companies do. And so we feel really good about the progress, the investments in technology we've made in order to yield that. What I also put with that, though, when we looked at total inflation, we have 4% core and 3% tariffs. And of the 3% tariff bucket, we are forecasting that we can mitigate 1% of that, and we are calling that productivity as well. And that's our ability to look at alternate supplies, potentially to negotiate with the suppliers to share in this cost, and just other ways to potentially reduce the usage of the items that are being tariffed.

Chris Carey: The 3% tariff bucket, we were forecasting that we can mitigate 1% of that and we're calling that productivity as well and that's our ability to look at alternate suppliers potentially to negotiate with the suppliers to share in this cost and just other other ways to potentially reduce the usage of.

Chris Carey: <unk>.

Chris Carey: The items that are being tariff and so that all goes into the mitigation bucket and that's 1% of the 3%. So they're all built into our forecast of our EPS number.

Chris Carey: And so that all goes into the mitigation bucket, and that's 1% of the 3%. And so they're all built into our forecast of our EPS number, and we feel comfortable with those pieces of productivity. So I don't know if you're referring to something else, but that's what we laid out. No, that that makes total sense.

Chris Carey: We feel comfortable with those pieces up productivity. So I don't know, if you're referring to something else, but that's what we laid out.

Chris Carey: No that makes total sense I think there is.

Chris Carey: I think there's, you know, a bit of a difference between the gross productivity and the net productivity, inclusive of operational offsets. And, you know, that's probably a broader, you know, conversation.

Chris Carey: A bit of a difference between.

Chris Carey: The gross productivity as the net productivity inclusive of operational offsets.

Chris Carey: Ed.

Speaker Change: That's probably a broader.

Chris Carey: Conversation.

Chris Carey: Productivity ramps it that makes sense.

Chris Carey: But the follow up would be Private Label is going to be seeing a lot of inflation as well. Presumably, that should be maybe improving your competitive stance vis-a-vis Private Label. Presumably, Private Label will need to take pricing given the amount of pressure that, you know, this cohort will be under.

Chris Carey: Just the follow up would be.

Chris Carey: Private label is going to be seeing a lot of inflation as well.

Chris Carey: Presumably that should be maybe improving your competitive stance vis vis private label, presumably private label, we will need to take pricing given the amount of pressure.

Chris Carey: Yes.

Chris Carey: Cohort will be under I was just wondering if you have any thoughts about some of the opportunities that this sort of inflation might give you.

Sean Connolly: I just wonder if you have any thoughts about some of the opportunities that this sort of inflation might give you from a competitive standpoint, specifically relative to Private Label. Thanks. You know, overall, Chris, we don't have, we're below average in terms of private label development in our categories, but obviously, it differs by category, we will be taking targeted pricing in the canned food business, because we've got a major amount of inflation there due to tariffs. Tomatoes is part of the canned food business. Tomatoes is basically hunts and private label. So, you know, how we perform there typically has a lot to do with what our competition does, so it's something that we always watch, we will watch there, and we'll see if the environment proves to be rational.

Chris Carey: From a competitive standpoint, specifically relative to private label. Thanks.

Chris Carey: Overall, Chris we don't have.

Speaker Change: We're below average in terms of private label development in our categories, but obviously it differs by category we will be.

Speaker Change: Be taking targeted pricing in the canned food business, because we've got a major amount of inflation there due to tariffs.

Speaker Change: Tomatoes, as part of the canned food business Tomatoes, as basically hunts and private label so.

Speaker Change: How we perform there typically has a lot to do with with what our competition does so it's something that we always watch we will watch there.

Speaker Change: And we will see if the environment proves to be rational, but that's that's one of the there are really only a couple of categories in our portfolio, where we really got we got to look at it and monitor that I would say would be tomatoes.

Chris Carey: But that's one of the, there are really only a couple of categories in our portfolio where we really got to look at it and monitor that. I would say it would be tomatoes, it would be our whipped topping business, and our cooking spray business. Those are the three that we really monitor price gaps, price thresholds on, and we're very agile in terms of making adjustments. But it's very early innings right now. We'll see how that unfolds and keep you apprised as we see it. Okay. All right. Thanks so much.

Speaker Change: B R R whipped topping business and our cooking spray business those are the three that we really.

Speaker Change: Monitor price gaps price thresholds on and we're very agile in terms of making adjustments, but it's very early innings right now, we'll see how that unfolds and keep you apprised as we see it.

Speaker Change: Okay, alright, thanks, so much.

Speaker Change: Thanks.

Robert Moskow: And your next question comes from Robert Moskow with TD Cowan. Please go ahead.

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

Robert Moskow: Robert, your line may be on mute, you're up for questions. Sorry about that. Can you hear me now? Yes. Okay, sorry.

Speaker Change: Robert Your line, maybe on mute Europe up for a question.

Robert Moskow: Sorry about that can you hear me now.

Speaker Change: Yes, Okay alright.

Robert Moskow: Sean, I want to know about all the innovation that you're doing in Frozen. I mean, no one does more than Conagra and Frozen to help try to grow the category. But I think it's been difficult to see evidence that the innovation helps you premiumize or raise price. And, you know, you see it in other consumer staples categories where they use the innovation to justify higher pricing. Of all the new products you're introducing this year, were you able to do that in any instances? Or is it just too hard in this environment?

Speaker Change: I wanted to know about.

Speaker Change: The innovation that Youre doing in frozen I mean, no one does more than conagra and frozen to help try to grow the category.

Speaker Change: I think it's been difficult to see evidence that the innovation helps you.

Speaker Change: Premium eyes or raise price.

Speaker Change: And you see it in other consumer staples categories were.

Speaker Change: Use the innovation to justify higher pricing.

Speaker Change: Of all the new products, you're introducing this year, where you're able to do that in any instances or is it just too hard in this in this environment.

Sean Connolly: Hey, Rob, I'm glad you asked that question. That actually is the opposite of what has unfolded over the last 10 years. So let me take you back down memory lane to where frozen food consumer pricing was circa 2015. If you went into a mass merchandiser, you would find banquet meals being sold at maybe 88 cents, maybe 98 cents, depending upon the week. Today, when you walk into a grocery store, you will find the name banquet, but the execution will look radically different. And the price of that product is closer to $4. And so you've got a multi-turn increase in the price point over the course of 10 years.

Rob: Hey, Rob I'm glad you asked that question.

Speaker Change: That actually is the opposite of what has unfolded over the last 10 years. So let me take you back down memory lane to where frozen food consumer pricing was circa 2015.

Speaker Change: If you went into a mass merchandiser, you would find banquet meals being sold at maybe 88.

Speaker Change: Maybe 98, depending upon the week today.

Speaker Change: Today, when you walk into a grocery store you will find the named banquet, but the execution will look radically different than the price of that product is closer to $4 and so you've got a multi turn increase in the price point over the course of 10 years, but interestingly the consume.

Sean Connolly: But interestingly, the consumer assessment of the value proposition at that higher price point is that it's a superior value versus what was offered before. Because the quality of the product before was very weak, the quality of the product now is excellent, and the quantity is larger. So I could give you example after example of how that's changed, whether it's banquet or Marie Callender or high end brands like PF Chang's Bistro and things like that. But just to give you a contemporary example of this past year that really was lost in the news of supply constraints on our chicken business, our most successful innovation in fiscal 25 was a new product called Banquet Mega Chicken Filets.

Speaker Change: <unk> assessment of the value proposition at that higher price point is that it's a superior value versus what was offered before because of the quality of the product before was very weak the quality of the product now is excellent and the quantity is larger so I could give you example, after example of how thats changed whether its banquet or Murray calendar or high end <unk>.

Speaker Change: <unk> like P F Chang's bistro and things like that but just to give you. A contemporary example of this past year that really was lost in the news of supply constraints on our chicken business. Our most successful innovation in fiscal 'twenty five was a new product called banquet Mega Chicken Flays banquet Mega chicken plays as a bank.

Sean Connolly: Banquet Mega Chicken Filets is a bag of fried chicken filets that basically mimics what you would buy at Chick-fil-A, which is the hottest QSR that you can find that the kids all love, obviously. We launched this product after our demand science team came up with the idea, and we expected good results. We got results massively beyond our expectations. And by the way, when you sell, I think it's six chicken filets in a bag, it's a much higher dollar ring than a typical single serve meal. So it is a premium product in terms of realization per unit.

Speaker Change: <unk> fried chicken fillet, that's basically mimics what you would buy a chick Fil, a which is the hottest <unk> that you can find that the kids all love. Obviously, we launched these this product after our demand science team came up with the idea and we expected good results we got results massive.

Speaker Change: Lead beyond our expectations and by the way when you sell I think it's six chicken fillet has in our bag. It's a much higher dollar ring than a typical single serve meals. So it is a premium product in terms of realization per unit.

Sean Connolly: But the sales of this Banquet Mega Chicken Filet absolutely blew away our expectations, and then we completely ran out of capacity on because we had to shut down our chicken processing facility. And so we now have decided to double down on our investment in fried chicken capacity. It's going to be more costly this year because we're going to do it on the outside, but then we'll repatriate that on the inside. But these are just all examples of how our innovation machine is entirely focused on premiumization, and that has a double meaning to it. Higher quality in every bite, but also higher dollar ring and more focus going forward and frozen on our multi-serve packaging instead of single serve, because we are still very underdeveloped in multi-serve relative to what we've done in single serve, and that's entirely white space for us.

Speaker Change: But these these the sales of this bandwidth banquet Mega chicken fillet, absolutely blew away our expectations and then we completely ran out of capacity on them because we had to wait.

Speaker Change: Basically to shut down our our chicken processing facility and so so we now have decided to double down on our investment in fried chicken capacity, it's going to be more costly next this year, because we're going to do it on the outside but then we will repatriate repatriate that on the inside but these are just all examples of how our innovate.

Speaker Change: <unk> machine is entirely focused on premium <unk> and that has a double meaning to it higher quality in every bite, but also higher dollar ring and more focus going forward and frozen on our multi serve packaging instead of single serve because we are still very underdeveloped in multi serve relative to what we've done in single serve.

Speaker Change: And thats entirely white space for us and what we will do there will be significantly higher quality and more premium than the incumbents that are already in the multi serve space that kind of have been milking their businesses for a long long time. So we're excited about that really pleased with what we saw with banquet Mega plays this year and we're going to we're going to step on the gas on that because we know consumer.

Sean Connolly: And what we'll do there will be significantly higher quality and more premium than the incumbents that are already in the multi-serve space that have been milking their businesses for a long, long time. So we're excited about that, really pleased with what we saw with Banquet Mega Filets this year, and we're going to step on the gas on that because we know consumers absolutely love it.

Speaker Change: Absolutely love it.

Unknown Executive: Okay, thank you. This concludes our question and answer session.

Speaker Change: Okay. Thank you.

Speaker Change: Thanks.

Speaker Change: Yeah.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Matthew Nics for any closing remarks.

Matthew Neisius: I would like to turn the conference back over to Matthew Neisius for any closing remarks.

Matthew Neisius: Thank you, Michael, and thank you all for joining us today. Please reach out to Investor Relations with any additional questions. Have a great day.

Matthew Nieces: Thank you Michael and thank you all for joining US today, please reach out to Investor relations with any additional questions.

Speaker Change: Great day.

Unknown Executive: The conference is now concluded. Thank you for attending today's presentation.

Speaker Change: The.

Speaker Change: <unk> has now concluded. Thank you for attending today's presentation you may now disconnect.

Unknown Executive: You may now disconnect.

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