Q2 2026 The Campbell’s Co Earnings Call

March 11, 2026

Speaker #3: After the introductory remarks, we will open up the lines for questions. To ask a question, you'll need to press star, followed by the number 1 on your telephone keypad.

Speaker #3: As a reminder, this conference is being recorded. I will now turn the call over to Rebecca Gardy, Chief Investor Relations Officer, Ms. Gardy, you may begin.

Speaker #3: Good morning, and thank you for joining the Campbell's Company second quarter 2026 earnings question and answer session. Earlier this morning, we released our earnings press release, earnings slide presentation, and management's prerecorded remarks, including both a transcript and the audio of the remarks.

Rebecca Gardy: Good morning, and thank you for joining The Campbell's Company Q2 2026 earnings question and answer session. Earlier this morning, we released our earnings press release, earnings slide presentation, and management's prerecorded remarks, including both the transcript and the audio of the remarks. All of the Q2 earnings materials are available on our website. At the conclusion of today's live Q&A session, we will post a transcript and audio replay of this call.

Speaker #3: All of the Q2 earnings materials are available on our website. At the conclusion of today's live Q&A session, we will post a transcript and audio replay of this call.

Speaker #3: During today's call, we may make forward-looking statements which reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, which could be inaccurate and are subject to risk.

Rebecca Gardy: During today's call, we may make forward-looking statements which reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates which could be inaccurate and are subject to risk. Please refer to slide three of our earnings presentation or our SEC filings for a list of factors that could cause our actual results to vary materially from those anticipated in the forward-looking statements. Because we use non-GAAP measures that we believe provide useful information for investors, we have provided a reconciliation of each of these measures to the most directly comparable GAAP measure in the appendix of our earnings presentation. Non-GAAP measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Joining me today are Mick Beekhuizen, Chief Executive Officer, and Todd Cunfer, our Chief Financial Officer.

Speaker #3: Please refer to slide 3 of our earnings presentation or our SEC filings for a list of factors that could cause our actual results to vary materially from those anticipated in the forward-looking statements.

Speaker #3: Because we use non-GAAP measures that we believe provide useful information for investors, we have provided a reconciliation of each of these measures to the most directly comparable GAAP measure in the appendix of our earnings presentation.

Speaker #3: Non-GAAP measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Joining me today are Mick Beekhuizen, Chief Executive Officer, and Todd Comfer, our Chief Financial Officer.

Speaker #3: We will now open the call for questions. Operator? As a reminder to ask a question, please press star, followed by the number 1 on your telephone keypad.

Rebecca Gardy: We will now open the call for questions. Operator?

Operator: As a reminder, to ask a question, please press star followed by the number one on your telephone keypad. To withdraw any questions, please press star one again. Thank you. Our first question today comes from Andrew Lazar from Barclays. Please go ahead. Your line is open.

Speaker #3: To withdraw any questions, please press the 1 again. Thank you. Our first question today comes from Andrew Lazar from Barclays. Please go ahead. Your line is open.

Speaker #3: Great, thanks so much. Good morning and welcome, Todd. Maybe focusing in on snacks to start with. From a top-line standpoint, what are you seeing in the key areas here—Goldfish, Fresh, and Salty—and sort of, what's the plan for progress in the back half?

Andrew Lazar: Great. Thanks so much. Good morning and welcome, Todd. Maybe focusing in on snacks to start with, you know, from a top-line standpoint, what are you seeing in the key areas here of Goldfish, fresh and salty? What's the plan for progress in the back half? I guess for salty specifically, you called out heightened competitive intensity, and around which there's been plenty of discussion lately in the category. I'm trying to get a sense of what the solution is. Is it lower everyday prices, higher promotional spend, sort of bonus packs, et cetera? Kind of, what sort of magnitude are we talking about? Just on the margin side, the 7% snack segment margin was a bit of a shock.

Speaker #3: And I guess for salty specifically, you called out heightened competitive intensity around which there's been plenty of discussion lately in the category. I'm trying to get a sense of what the solution is.

Speaker #3: Is it lower everyday prices, higher promotional spend, sort of bonus packs, etc.? And what sort of magnitude are we talking about? And then just on the margin side, the 7% snack segment margin was a bit of a shock.

Andrew Lazar: Given the investments that need to be made, is that the sort of level we should be thinking about for the next few quarters? I know it's a lot, but was hoping we could dig into that a little bit.

Speaker #3: And then given the investments that need to be made, is that the sort of level we should be thinking about for the next few quarters?

Speaker #3: I know it's a lot, but I was hoping we could dig into that a little bit. Great. Yeah. Morning, Andrew. Thank you for the questions.

Mick Beekhuizen: Great. Yeah. Morning, Andrew. Thank you for the questions. We'll take them one by one. Snacks top line, salty, I'll comment on, and then Todd, if you can take the margin, and I'll give kind of the broader lead-in around the margin. If you look at the snacks top line, three key focus areas. First of all, Goldfish, second fresh bakery, and then salty. Let's go through kind of each of these different pieces. With regard to Goldfish, we need to make sure that we maintain the Goldfish momentum. We had momentum, as you saw in our prepared remarks, going throughout the first half. We need to see that sequential progress throughout the second half of the fiscal year, and that's really with regard to in-market consumption.

Speaker #3: We'll take them one by one. So snacks top line, salty, I'll comment on, and then Todd, if you can take the margin. And I'll give kind of the broader lead-in around the margin.

Speaker #3: But if you look at so the snacks top line, three key focus areas. First of all, goldfish. Second, fresh bakery. And then salty. Let's go through kind of each of these different pieces.

Speaker #3: So with regard to goldfish, we need to make sure that we maintain the goldfish momentum. We had momentum, as you saw in our prepared remarks.

Speaker #3: Going throughout the first half, we need to see that sequential progress throughout the second half of the fiscal year. And that's really with regard to in-market consumption.

Speaker #3: Then when I go to fresh bakery execution, we ran into execution challenges. As we described, when I look at the remainder of the year, I expect that in Q3 we'll likely see some continued headwinds.

Mick Beekhuizen: When I go to fresh bakery execution, we ran into execution challenges, as we described. When I look at the remainder of the year, I expect that in Q3 we'll likely see some continued headwinds, and that's partially self-inflicted as we reduce some in-market promotional activity in order to make sure that on-shelf availability and service levels are improving. By Q4, we are working towards back to more normalized levels. When I get to salty, we need to improve our overall competitiveness within that part of our snacks portfolio. It's really predicated upon three key focus areas. First of all, making sure that we improve our competitiveness from a pricing perspective. Second of all, we need to make sure we're focused on the daily blocking and tackling or the in-market execution, which is absolutely critical.

Speaker #3: And that's partially self-inflicted, as we reduced some in-market promotional activity in order to make sure that on-shelf availability and service levels are improving. And then, by the fourth quarter, we are working towards getting back to more normalized levels.

Speaker #3: And then when I get to salty, we need to improve our overall competitiveness within that part of our snacks portfolio. And that's really predicated upon three key focus areas.

Speaker #3: First of all, making sure that we improve our competitiveness from a pricing perspective. Second of all, we need to make sure we're focused on the daily blocking and tackling, or the in-market execution, which is absolutely critical.

Speaker #3: And then third, we need to evolve our portfolio with innovation, which is primarily focused on, on the one hand, premium, better-for-you, as well as flavor exploration.

Mick Beekhuizen: Third, we need to evolve our portfolio with innovation, which is primarily focused on the one in premium, better for you, as well as flavor exploration. All that being said, within salty, I expect that we're gonna make some progress throughout the second half, but it will take some time. Now, with regard to your specific question around salty pricing, and that really, my comments really comes back to the chip side of the business. Salty, as you might recall, consists for us of two key pieces. First of all, pretzels, and then and the second half is chips. That's really where we're seeing more of that competitive pricing dynamic playing out, and you've heard that also from some of the other players in the space. What are we doing there? It is really focused on the promotional activity.

Speaker #3: All that being said, within salty, I expect that we're going to make some progress throughout the second half. But it will take some time.

Speaker #3: Now, with regard to your specific question around salty pricing, and that's really my comments, really comes back to the chip side of the business.

Speaker #3: So salty, as you might recall, we have consisted for us of two key pieces. First of all, pretzels. And then the second half is chips.

Speaker #3: That's really where we're seeing more of that competitive pricing dynamic playing out. And you've heard that also from some of the other players in the space.

Speaker #3: What are we doing there? It is really focused on the promotional activity. It's going to be very surgical. And we're going to make sure that we are going to be competitive in the areas that matter during the times it also really matters.

Mick Beekhuizen: It's gonna be very surgical, and we're gonna make sure that we are going to be competitive in the areas that matter during the times it also really matters. Again, just making sure that we're competitive in key moments. There is always a continued opportunity around some of the price pack architecture. However, that's gonna take a little bit longer. From a margin perspective, obviously very poor performance, down 390 basis points in the quarter. As we mentioned in the script, about a quarter of that was the bakery performance that Mick just mentioned.

Speaker #3: So again, just making sure that we're competitive in key moments. There is always a continued opportunity around some of the price pack architecture. However, that's going to take a little bit longer.

Todd Cunfer: From a margin perspective, obviously very poor performance, down 390 basis points in the quarter. As we mentioned in the script, about a quarter of that was the bakery performance that Mick just mentioned.

Speaker #3: From a margin perspective, obviously very poor performance, down 390 basis points in the quarter. As we mentioned in the script, about a quarter of that was the bakery performance that Mick just mentioned.

Speaker #3: And three quarters, three quarters of it, quite frankly, is just when you're when net sales are down 6%, there is a very large deleverage, both in our plant network and also as we continue to invest in marketing and SG&A, when you're down 6%, that math and margin is challenging.

Mick Beekhuizen: Three-quarters of it, quite frankly, is just when net sales are down 6%, there's a very large deleverage, both in our plant network and also we, you know, as we continue to invest in marketing and SG&A, when you're down 6%, that math and margin is challenging. For the second half, we will do a bit better on snacks margin in Q3. We are still in the process of stabilizing bakery. We are still gonna have a fair amount of spending.

Todd Cunfer: Three-quarters of it, quite frankly, is just when net sales are down 6%, there's a very large deleverage, both in our plant network and also we, you know, as we continue to invest in marketing and SG&A, when you're down 6%, that math and margin is challenging. For the second half, we will do a bit better on snacks margin in Q3. We are still in the process of stabilizing bakery. We are still gonna have a fair amount of spending.

Speaker #3: For the second half, we will do a bit better on snacks margin in Q3. We are still in the process of stabilizing bakery. We are still going to have a fair amount of spending particularly in marketing in Q3.

Todd Cunfer: It's particularly in marketing in Q3, so we will see some margin improvement in Q3, but nothing dramatic. I think we'll see a lot better performance in Q4, because we feel very strongly we will have the bakery performance stabilized much more greatly at that point. We will have lower marketing year-over-year, and then we have a lot of activity on Goldfish in the quarter, which is by far our highest margin product line in the snacks portfolio, so that should help margin as well.

Speaker #3: So, we will see some margin improvement in Q3, but nothing dramatic. I think we'll see a lot better performance in Q4, because we feel very strongly we will have the bakery performance stabilized much more greatly at that point.

Speaker #3: We will have lower marketing year over year. And then we have a lot of activity on goldfish in the quarter. Which that is by far our highest margin product line in the snacks portfolio.

Speaker #3: So, that should help margin as well.

Speaker #1: Great. Great. Thanks so much.

Operator: Great. Thanks so much. Our next question comes from Tom Palmer from JPMorgan. Please go ahead. Your line is open.

Andrew Lazar: Great. Thanks so much.

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

Speaker #3: Our next question comes from Todd Palmer from JPMorgan. Please go ahead. Your line is open.

Speaker #4: Good morning. Thanks for the question. Maybe to start off, I wanted to maybe get a little more detail on the fresh bakery challenges. The remarks to Andrew and in the prepared remarks indicate that they did emerge before the winter storms.

Tom Palmer: Good morning. Thanks for the question. Maybe to start off, I wanted to maybe get a little more detail on the fresh bakery challenges. The remarks to Andrew and in the prepared remarks indicate that they did emerge before the winter storms. It seems like they're related to execution challenges. I'm just trying to understand where you're seeing this. Is this like a production issue? Is it a challenge with route to market in terms of servicing customers? And then just how you're addressing it in terms of resolving it here over the next couple quarters. Thanks.

Speaker #4: It seems like they're related to execution challenges. I'm just trying to understand where you're seeing this. Is this like a production issue? Is it a challenge with route to market in terms of servicing customers?

Speaker #4: And then just how you're addressing it in terms of resolving it here over the next couple of quarters. Thanks.

Speaker #2: Yeah. Okay. Let me address it. So with regard to fresh bakery, I mentioned this in my prepared remarks as well. It's really focused on both the manufacturing as well as distribution disruptions.

Mick Beekhuizen: Yeah. Okay. Let me address it. With regard to fresh bakery, I mentioned this in my prepared remarks as well. It's really focused on both the manufacturing as well as distribution disruptions. It was exacerbated by the January winter storm. You're right, we already started to see that throughout the quarter. It's really coming back to making sure that we have product available on the shelf. That comes back to service as well as the in-market execution piece. We deployed a cross-functional team, and we're already seeing measurable improvements across the board. At the same time, I'm also very conscious that we need to make sure that we are making sustainable improvements, so as a result, we're investing in the business so that the changes that we're making are sticking so that we can service this business better going forward.

Speaker #2: And that was exacerbated by the January winter storm. But you're right. We already started to see that throughout the quarter. And it's really coming back to making sure that we have product available on the shelf.

Speaker #2: So that comes back to service as well as the in-market execution piece. We deployed a cross-functional team, and we're already seeing measurable improvements across the board.

Speaker #2: At the same time, I'm also very conscious that we need to make sure that we are making sustainable improvements. So as a result, we're investing in the business so that the changes that we're making are sticking.

Speaker #2: So that we can service this business better going forward. As I mentioned, we already started to see progress over the past, call it, four weeks.

Mick Beekhuizen: As I mentioned, we already started to see progress over the past, call it four weeks. We gotta continue to work through that in Q3, and then we're working towards normalization in Q4.

Speaker #2: We’ve got to continue to work through that in the third quarter, and then we’re working towards normalization in the fourth quarter.

Speaker #4: Okay. Thank you. And then on capital allocation priorities, you noted the plans to focus more on debt reduction. Versus share repo there's the dividend, which equates to a little over two-thirds of EPS at guidance this year.

Tom Palmer: Okay, thank you. On capital allocation priorities, you noted the plans to focus more on debt reduction versus share repo. There's the dividend, which equates to a little over two-thirds of EPS at guidance this year, and then you have the La Regina acquisition soon to close. It seems like there also might be some investments needed to maybe support the business. Maybe just kind of an update on how you see this all balancing out.

Speaker #4: And then you have the La Regina acquisition soon to close. So it seems like there also might be some investments needed to maybe support the business.

Speaker #4: Maybe just kind of an update on how you see this all balancing out.

Speaker #2: Yeah, I'll take that one. So, look, cash flow obviously has become extremely imperative for us, just given the debt leverage we are currently at and the takedown in the earnings.

Todd Cunfer: Yeah, I'll take that one. Look, cash flow obviously has become extremely imperative for us, just given the debt leverage we are currently at and the takedown in the earnings. We will continue to invest in our business. We will reallocate some of our marketing money, as we've mentioned, into promotional activity to get sharper price points, but the net effect of that will be that that is part of the reason why it's impacting our earnings. Look, we're gonna have to get really tight on CapEx. As you know, we already took it down $50 million for the year. Working capital is gonna have to be really tight. We're gonna have no more share buybacks, even anti-dilutive share buybacks. We will not do.

Speaker #2: We will continue to invest in our business. We will reallocate some of our marketing money as we've mentioned into promotional activity to get sharper price points.

Speaker #2: But the net effect of that will be that that is part of the reason why it's impacting our earnings. But look, we're going to have to get really tight on CapEx.

Speaker #2: As you know, we already took it down 50 million dollars for the year. Working capital is going to have to be really tight. We're going to have no more share buybacks, even anti-dilutive share buybacks we will not do.

Speaker #2: Look, the dividend is extremely important to us, but we will not be increasing that dividend anytime soon. And so we're and look, we mentioned we mentioned a $100 million cost reduction in overhead.

Todd Cunfer: Look, the dividend is extremely important to us, but we will not be increasing that dividend anytime soon. Look, we mentioned, you know, a $100 million cost reduction in overhead that's gonna take over the next couple years. That, you know, is in place to help cash flow as well. The La Regina acquisition in the near term is not gonna be significant from a cash flow perspective. We will make one payment of roughly $140 to $150 million here before the close of the year. If you remember, that second payment, we have the option of issuing equity. That second payment comes a year from now. If we need to issue equity instead of cash, we have that ability.

Speaker #2: That's going to take over the next couple of years. And so that is in place to help cash flow as well. The La Regina acquisition in the near term is not going to be significant from a cash flow perspective.

Speaker #2: We will make one payment of roughly $140 million, $150 million here before the close of the year. If you remember, that second payment, we have the option of issuing equity.

Speaker #2: That second payment becomes a year from now. So if we need to issue equity instead of cash, we have that ability. And then the second half of buying out the 51% is probably a few years off.

Todd Cunfer: The second half of buying out the 51% is probably a few years off. Rest assured, capital cash flow preservation is heightened for us right now. Getting that leverage down closer to 3 than to 4 is imperative for us.

Speaker #2: But rest assured, capital cash flow preservation is heightened for us right now. And getting that leverage down closer to three, then to four, is imperative for us.

Speaker #4: Okay. Thanks, Todd, for all the detail.

Tom Palmer: Okay. Thanks, Todd, for all the detail.

Speaker #3: Our next question comes from Peter Galbo from Bank of America. Please go ahead, your line is open.

Operator: Our next question comes from Peter Galbo from Bank of America. Please go ahead, your line is open.

Speaker #5: Hey, good morning, guys. Thanks. Thanks for the question. I actually wanted to go back just on the salty snacks points, Mick, that you were making.

Peter Galbo: Hey, good morning, guys. Thanks for the question. I actually wanted to go back just on the salty snacks points, Mick, that you were making. I think if I heard you correctly, the focus is really to be more, I guess, on promotional within chips versus maybe moving the every day, and obviously, your largest competitor is making it more of an every day shift. Why is promotional, you know, the right route or right tactic for that from that perspective within chips when, you know, you have, I guess, the 800-pound gorilla that's doing a more permanent shift or at least seems like a more permanent shift on the price side?

Speaker #5: I think if I heard you correctly, the focus is really to be more, I guess, on promotional within CHIPS versus maybe moving the every day.

Speaker #5: And obviously, your largest competitor is making it more of an everyday shift. So just, why is promotional the right route or right tactic from that perspective within CHIPS, when you have, I guess, the 800-pound gorilla that's doing a more permanent shift, or at least seems like a more permanent shift, on the price side?

Speaker #2: Yeah, yeah. Okay. So let me give you a little bit more context around it. And listen, as I mentioned, we're going to take a surgical approach.

Mick Beekhuizen: Yeah. Yeah. Okay. Let me give you a little bit more context around it. Listen, as I mentioned, we're gonna take a surgical approach. That is important, and the other aspect of it is we're gonna make sure that we continue to be competitive with our brands.

Speaker #2: That is important, and the other aspect of it is we're going to make sure that we continue to be competitive with our brands. If we look at the brands that we have with Cape and Kettle, that are both playing more in the Kettle brand subcategory, we believe that, with the brand positioning itself, we have a right to win with these brands.

Todd Cunfer: If we look at the brands that we have with Cape Cod and Kettle Brand that are both in the—like, more in the Kettle Brand sub-category, we believe that with the brand positioning itself, we have a right to win with these brands. That is important, obviously, to kind of recognize and accordingly, we need to make sure that we continue to lean into that brand's right to win. Now back to your point around value, values are absolutely critical, obviously. We've been pretty diligent in the past about making sure that we continue to maintain a competitive position. We are going, as I mentioned, we're gonna continue to look at key channels, and if I look at what the competition is doing, making sure that we stay competitive within those channels.

Mick Beekhuizen: If we look at the brands that we have with Cape Cod and Kettle Brand that are both in the—like, more in the Kettle Brand sub-category, we believe that with the brand positioning itself, we have a right to win with these brands. That is important, obviously, to kind of recognize and accordingly, we need to make sure that we continue to lean into that brand's right to win. Now back to your point around value, values are absolutely critical, obviously. We've been pretty diligent in the past about making sure that we continue to maintain a competitive position. We are going, as I mentioned, we're gonna continue to look at key channels, and if I look at what the competition is doing, making sure that we stay competitive within those channels.

Speaker #2: That is important obviously to kind of recognize and accordingly we need to make sure that we continue to lean into that brand's right to win.

Speaker #2: Now, then back to your point around value. Value is absolutely critical, obviously. And we've been pretty diligent in the past about making sure that we continue to maintain a competitive position.

Speaker #2: We are going, as I mentioned, we're going to continue to look at key channels and if I look at what the competition is doing, making sure that we stay competitive within those channels.

Speaker #2: When I look at what we are seeing right now, most of the time, it can be resolved with our overall promotional strategy. There could be instances where we have to reset some of the pricing more permanently.

Todd Cunfer: When I look at what we're seeing right now, most of the time it can be resolved with our overall promotional strategy. There could be instances where we have to reset some of the pricing more permanently, and if so, then we'll do that. I don't want you to take away that we are just going to solve this with pure promotional activity. I think it's gonna be that surgical approach that I kind of said in my lead-in.

Mick Beekhuizen: When I look at what we're seeing right now, most of the time it can be resolved with our overall promotional strategy. There could be instances where we have to reset some of the pricing more permanently, and if so, then we'll do that. I don't want you to take away that we are just going to solve this with pure promotional activity. I think it's gonna be that surgical approach that I kind of said in my lead-in.

Speaker #2: And if so, then we'll do that. So I don't want you to take away that we are just going to solve this with pure promotional activity.

Speaker #2: I think it's going to be that surgical approach that I kind of said in my lead-in.

Speaker #4: Okay, no, thanks for the additional context there. And Todd, I think you gave some color around just the EPS cadence for the back half, but just wanted to clarify that.

Peter Galbo: Okay. No, thanks for the additional context there. Todd, just, I think you gave some color around just the EPS cadence for the back half, but just wanted to clarify that. I believe it's Q3, looks similar to Q2, and then you kind of see a normal step down in Q4 just to kind of hit the $0.90 you need to deliver in the back half to hit the midpoint. Do I have that math kind of right?

Speaker #4: I believe it's Q3. Looks similar to Q2. And then you'd kind of see a normal step down in Q4, just to kind of hit the $0.90 you need to deliver in the back half to hit the midpoint.

Speaker #4: Do I have that math kind of right?

Todd Cunfer: You have it correct.

Speaker #2: You have it correct.

Mick Beekhuizen: You have it correct.

Speaker #4: Okay. Perfect. Thanks very much, guys.

Peter Galbo: Okay. Perfect. Thanks very much, guys.

Speaker #3: Our next question comes from Megan Klopp from Morgan Stanley. Please go ahead, your line is open.

Operator: Our next question comes from Meg Gallagher from Morgan Stanley. Please go ahead. Your line is open.

Speaker #6: Hi, good morning. Maybe we could just pick up there on the Q3 to Q4 cadence, and Todd, maybe follow up on some of the margin commentary you gave, Andrew, in the first question.

Meg Gallagher: Hi. Good morning. Maybe we could just pick up there on the Q3 to Q4 cadence. Todd, maybe follow up on some of the margin commentary you gave Andrew in the first question. If Q3 kind of operating EBIT growth performance looks similar to Q2, obviously an improvement expected in Q4, I think as you think about the margin profile too, it would imply an improvement in margins as we get into Q4. I think typically Q3, Q4 is a lower margin quarter for you. Can you just from a whether you do it by segment or just a consolidated basis, kind of unpack the expectations as we go sequentially from Q3 to Q4 that would imply that step up in margins sequentially? Thank you.

Speaker #6: So if three Q kind of operating EBIT growth performance looks similar to two Q, obviously an improvement is expected in the fourth quarter. I think, as you think about the margin profile too, it would imply an improvement in margins as we get into the fourth quarter.

Speaker #6: I think typically four Q is a lower margin quarter for you. So can you just from a whether you do it by segment or just a consolidated basis kind of unpack the expectations as we go sequentially from three Q to four Q that would imply that step up in margins sequentially?

Speaker #6: Thank you.

Speaker #2: Yeah, absolutely. So, a couple of factors give us more confidence that the Q4 profile will be better than Q2 and Q3. One, if you remember, that Sovos ERP conversion—that brought volume into Q3 last year out of Q4—we will lap that.

Todd Cunfer: Yeah, absolutely. A couple of factors give us more confidence that Q4, that Q4 profile will be better than in Q2 and Q3. One, if you remember that, Sovos ERP conversion that brought volume into Q3 last year out of Q4, we'll lap that. We'll get a benefit organically. We'll get a benefit from that volume coming back into Q4 this year. We do anticipate snacks stabilization. We're not gonna be all the way to bright, but we do believe the snacks margin will improve sequentially as we get into Q4. Tariffs, we will start to lap some of the tariffs in Q4 of last year, so that year-over-year hurt will not be as great in Q4 as it has been in the first three quarters of the year. We will have lower advertising spend in Q4.

Speaker #2: So, we'll get a benefit organically. We'll get a benefit from that volume coming back into Q4 this year. We do anticipate snacks stabilization. We're not going to be all the way to bright, but we do believe the snacks margin will improve sequentially as we get into Q4.

Speaker #2: Tariffs we will start to lapse some of the tariffs in Q4 of last year. So that year-over-year hurt will not be as great in Q4 as it has been in the first three quarters.

Speaker #2: Of the year. And we will have lower advertising spend in Q4. It'll be up in Q3. It will be down year-over-year in Q4, and that will help, obviously, the margins.

Todd Cunfer: It'll be up in Q3. It will be down year-over-year in Q4, and that will help obviously the margins.

Speaker #6: Okay. Great. And maybe just one follow-up on what you just said on the stabilization and snacks. Can you just from an org sales perspective, three Q to four Q, can you just help us understand what you're expecting now for snacks for the year?

Meg Gallagher: Okay, great. Maybe just one follow-up on what you just said on the stabilization in snacks. Can you just from an organic sales perspective, Q3 to Q4, you know, can you just help us understand what you're expecting now for snacks for the year? You know, I know the comparator does ease in both segments in Q4 on the top line perspective, but should we still be thinking about snacks as kind of declining in Q4?

Speaker #6: I know the comp period does ease in both segments in the fourth quarter from a top-line perspective, but should we still be thinking about Snacks as kind of declining in the fourth quarter?

Speaker #2: Yeah. It's going to take a while to look. We have a lot of good activity going on, but snacks will probably be down about 4% in the second half.

Todd Cunfer: Yeah. It's gonna take a while. Look, we have a lot of good activity going on, but snacks will probably be down about 4% in the second half. That's gonna be fairly balanced between Q3 and Q4. Probably a little bit better in Q4 than Q3, but we are not anticipating, you know, a big sequential increase, benefit in the net sales line. We do think we'll stabilize margins. They will get better. They will not be all the way to right, but we do think the margin profile will get better as we end the year.

Todd Cunfer: Yeah. It's gonna take a while. Look, we have a lot of good activity going on, but snacks will probably be down about 4% in the second half. That's gonna be fairly balanced between Q3 and Q4. aProbably a little bit better in Q4 than Q3, but we are not anticipating, you know, a big sequential increase, benefit in the net sales line. We do think we'll stabilize margins. They will get better. They will not be all the way to right, but we do think the margin profile will get better as we end the year.

Speaker #2: And that's going to be fairly balanced between Q3 and Q4. Probably a little bit better in Q4 than Q3, but we are not anticipating a big sequential increase benefit in the net sales line.

Speaker #2: We do think we'll get we'll stabilize margins. They will get better. They will not be all the way to bright, but we do think the margin profile will get better as we end the year.

Speaker #6: Okay. Great. Thank you so much.

Meg Gallagher: Okay, great. Thank you so much.

Speaker #3: Our next question comes from Michael Lavery from Piper Sandler. Please go ahead. Your line is open.

Operator: Our next question comes from Michael Lavery from Piper Sandler. Please go ahead. Your line is open.

Speaker #5: Thank you. Good morning. Just to understand a little bit better—you said that some of the marketing spending will shift to promo spend. I get the need for some of the pricing adjustments or stepped-up promo spending, but it seems like the ideal is to walk and chew gum.

Michael Lavery: Thank you. Good morning.

Todd Cunfer: Good morning.

Michael Lavery: Just wanted to understand a little bit better, you said that, you know, some of the marketing spending will shift to promo spend. I get the need for some of the pricing adjustments or stepped up promo spending, but it seems like the ideal is to walk and chew gum. I guess why not both? Is it just maybe handcuffed by where you are on the leverage, or is there a way to get, you know, do you have the right marketing spending level and how do you think about balancing the need for that versus the pricing?

Speaker #5: I guess, why not both? Is it just maybe handcuffed by where you are on the leverage, or is there a way to get—do you have the right marketing spending level?

Speaker #5: And how do you think about balancing the need for that versus the pricing?

Speaker #2: Yeah. Yeah. I mean, to be clear, our anticipation is marketing spend year-over-year will be up. So, as we started the year, we were hoping it was going to be up a bit more than now.

Todd Cunfer: To be clear, our anticipation is marketing spend year-over-year will be up. You know, as we started the year, we were hoping it was gonna be up a bit more than now we're forecasting, but it will be up year-over-year. Look, I'd love to be spending more marketing money versus trade if, you know, the kind of market would allow it right now. We just think it's prudent to be competitive in certain areas where we have price gaps in the marketplace, whether it's on broth, whether it's on chips. We're not talking about dramatic changes in our trade philosophy or spend. We will spend more. Some of that will get funded by marketing.

Speaker #2: We're forecasting, but it will be up year-over-year. Look, I'd love to be spending more marketing money versus trade if kind of the market would allow it.

Speaker #2: Right now, but we just think it's prudent to be competitive in certain areas where we have price gaps in the marketplace, whether it's on broth, whether it's on chips.

Speaker #2: And we're not talking about dramatic changes in our trade philosophy. Or spend—we will spend more. Some of that will get funded by marketing.

Todd Cunfer: There will be an incremental hit to the P&L, as we've mentioned. The anticipation is marketing will still be up, but we are gonna lean in a little bit more heavily into price.

Speaker #2: There will be an incremental hit to the P&Ls as we've mentioned. But the anticipation is marketing will still be up, but we are going to lean in a little bit more heavily into price.

Mick Beekhuizen: Yeah. I think maybe to add to that kind of where you go through the year is we're taking a very balanced approach, right? I just wanna make sure that we reiterate that because core brands, we're gonna continue to make sure that we build them. If there is, for instance, one brand that we will continue to support is Rao's on the meals and beverages side. You see the positive effects from that in the results. Another brand on the snack side that we've got to make sure we continue to support with marketing is Goldfish. We're being very selective how we are allocating our dollars or our support between trade and marketing.

Speaker #5: Yeah. And I think maybe to add maybe to add to that kind of where you go through the year, we're taking a very balanced approach.

Speaker #5: Right? I just want to make sure that we reiterate that because core brands we're going to continue to make sure that we build them.

Speaker #5: And if there is, for instance, one brand that we are continuing to support and we will continue to support, it's Rayos. On the meals and beverages side.

Speaker #5: And you see the positive effects from that in the results. Another brand on the snack side that we’ve got to make sure we continue to support with marketing is Goldfish.

Speaker #5: So we're being very selective how we are allocating our dollars or our support between trade and marketing. Okay. That's helpful. And just to follow up on the pricing approach, obviously, you touched on the promo increases.

Michael Lavery: Okay, that's helpful. Just to follow up on the pricing approach. Obviously, you touched on the promo increases, but then, you know, you've also just talked about sharpening value architecture and some of the price pack architecture. Then you just, in the previous question, touched on at least considering some list price adjustments. Can you maybe give a sense of phasing and kinda where you are in that process? Would I've heard it correctly that any list price adjustments aren't decided but just under consideration? Then on the price pack architecture, maybe some of how much is underway versus under consideration.

Speaker #5: But then you've also just talked about sharpening value architecture and some of the price pack architecture. And then you just, in the previous question, touched on at least considering some list price adjustments.

Speaker #5: Can you maybe give a sense of phasing and kind of where you are in that process? And would I have heard it correctly that any list price adjustments aren't decided, but just under consideration?

Speaker #5: And then on the price pack architecture, maybe some of how much is underway versus under consideration?

Mick Beekhuizen: Let me unpack it. First of all, some of the price pack architecture is gonna take. If it requires changing some of our package formats, that's obviously gonna take a little bit longer. It might also mean, and I'll give you an example around, for instance, Goldfish. It might also mean for us to make sure that we lean in to an area that we see is actually working and it's providing value to the consumer, such as multi-packs within Goldfish. That's been working, and we need to make sure that we continue to lean into that space because we have a moment here with that particular pack. That's also coming back to when I mentioned price pack architecture.

Speaker #2: So let me unpack it. So first of all, some of the price pack architecture is going to take if it's required changing, some of our package formats that's obviously going to take a little bit longer.

Speaker #2: But it might also mean and I'll give you an example. Around, for instance, Goldfish, it might also mean for us to make sure that we lean in to an area that we see is actually working and it's providing value to the consumer, such as multi-packs within Goldfish.

Speaker #2: That's been working, and we need to make sure that we continue to lean into that space because we have a moment here with that particular pack.

Speaker #2: And that's also coming back to when I mentioned price pack architecture. Then there might be some of the larger pack sizes that we have within Goldfish where we're leaning a little bit more into promotional activity.

Mick Beekhuizen: There might be some of the larger pack sizes that we have within Goldfish, where we're leaning a little bit more into promotional activity in order to make sure that we hit a good price point that's providing that value for the consumer. Obviously, the promotional activity, as I mentioned, is a bit more of the focus right now, again, being very surgical. I can see if, for instance, on chips to the earlier point, if we're finding ourselves that certain list price gaps are just too large, we might selectively adjust. The latter I expect to be smaller than the trade component.

Speaker #2: In order to make sure that we hit a good price point that's providing that value for the consumer. Obviously, the promotional activity, as I mentioned, is a bit more of the focus right now.

Speaker #2: Again, being very surgical. And then I can see if, for instance, on chips—to the earlier point—if we're finding ourselves that certain list price gaps are just too large, we might selectively adjust.

Speaker #2: But the latter, I expect to be smaller. Then the trade component.

Todd Cunfer: Michael, this work is underway. We'll do some things in the shorter term, but some of the activity that we're doing is gonna take a little bit of time. As we look at some of the price slopes, particularly in our snacks business, some of them are just out of whack. You know, we just have, you know, price per ounce in some sizes that are below where they should be, and conversely, some that are above. We just need to get those aligned. It's gonna take a little bit of time, but if we can execute that really well, there's some margin to be had.

Speaker #4: Yeah. And Michael, this work is underway. We'll do some things in the shorter term, but some of the activity that we're doing is going to take a little bit of time.

Speaker #4: As we look at some of the price slopes, particularly in our snacks business, some of them are just out of whack. We just have price per ounce in some sizes that are below where they should be.

Speaker #4: And conversely, some that are above. So we need to get those aligned it's going to take a little bit of time, but if we can execute that really well, there's some margin to be had.

Michael Lavery: Okay, great. Thanks so much.

Speaker #5: Okay. Great. Thanks so much.

Operator: Our next question comes from Max Gumport from BNP Paribas. Please go ahead. Your line is open.

Speaker #3: Our next question comes from Max Gumpert from BNP Paribas. Please go ahead. Your line is open.

Max Gumport: Hey, thanks for the question. Another one on snacks for me. It's really just on this recovery. It's been ongoing for some time now. We've not seen the volume grow in a couple years. At what point do you stop talking about a recovery to the what you view as a normalized level of growth and maybe reset your expectation for what normalized growth is? Asked differently, what's giving you the confidence that this is still a segment where there is a reasonable chance of growing sales organically at the levels you've discussed at, you know, past investor days? Thank you very much.

Speaker #2: Hey. Thanks for the question. Another one on snacks for me. It's really just on this recovery. It's been an ongoing for some time now.

Speaker #2: We've not seen volume grow in a couple of years. At what point do you stop talking about a recovery to the what you view as a normalized level of growth?

Speaker #2: And maybe reset your expectation for what normalized growth is? And ask differently: What's giving you the confidence that this is still a segment where there is a reasonable chance of growing sales organically at the levels you've discussed at past Investor Days?

Speaker #2: Thanks very much.

Mick Beekhuizen: Yeah. When I look at, let me unpack that. With regard to Goldfish, based on the brand that we have, we have a right to win, and we believe that we have an opportunity to grow that business. We're seeing that sequential improvement. We're obviously not all the way back to bright yet, but feel pretty confident around that. Also because of the differentiated positioning of the brand. I mean, in the end, it also has good, better-for-you credentials, and we need to make sure that we amplify those. It's a brand that I think fits well with what consumers are generally looking for.

Speaker #4: Yeah. So when I look at so let me unpack that. So with regard to Goldfish, based on what we are based on the brand that we have, we have a right to win, and we believe that we have an opportunity to grow that business.

Speaker #4: And we are seeing that sequential improvement. We're obviously not all the way back to bright yet, but, too, pretty confident around that. Also because of the differentiated positioning of the brand.

Speaker #4: And I mean, in the end, it also has good better-for-you credentials. And we need to make sure that we amplify those. So it's a brand that I think fits well with what consumers are generally looking for.

Mick Beekhuizen: Yeah, we need to make sure that we tell that story and we provide, you know, the value in the marketplace, and net-net, we can, as a result, grow that business. That's one. I feel pretty good about the Goldfish side of things. If I look at bakery as a whole, people continue to focus on moments of indulgence, and that comes back with cookies. We've been able to grow our cookies business now for four quarters in a row, with the Milano innovation, and we've got some incremental innovation that recently came out with Chessmen. I feel pretty good about our overall cookies business. Now, the cookies category hasn't been growing, so we need to make sure that we continue to differentiate our cookies business and that, as a result, fuels the growth.

Speaker #4: And yeah, we need to make sure that we tell that story and we provide the value in the marketplace and net-net we can as a result grow that business.

Speaker #4: So that's one. I feel pretty good about the Goldfish side of things. Then if I look at bakery as a whole, people continue to focus on moments of indulgence and that comes back with cookies and we've been able to grow our cookies business.

Speaker #4: Now for four quarters in a row. With the Milano Innovation. And we've got some incremental information innovation that recently came out with Jasmine. So I feel pretty good about our overall cookies business.

Speaker #4: Now, the cookies category hasn't been growing, so we need to make sure that we continue to differentiate our cookies business, and that that, as a result, fuels the growth.

Mick Beekhuizen: With regard to fresh bakery, as I described earlier, we need to make sure that we get the execution right, and at that point in time, I believe we should be able to get that back to, call it, at least a flattish set of top line. That's with regard to bakery. When I get to salty, if I look at the two pieces of our business, we are playing in subcategories that are growing with our salty brands. That's first of all, within pretzels, the pretzel subcategory has been growing, and we have two great brands with Snack Factory as well as Snyder's of Hanover. Snack Factory has been growing. We've made some sequential progress on Snyder's of Hanover. We got more work to do on it in order to get that back to growth.

Speaker #4: Then, with regard to fresh bakery as I described earlier, we need to make sure that we get the execution right. And at that point in time, I believe we should be able to get that back to, call it, at least a flattish set of top line.

Speaker #4: So that's with regard to bakery. Then when I get to salty, if I look at the two pieces of our business, we are playing in subcategories that are growing with our salty brands.

Speaker #4: That's first of all within pretzels. The pretzel subcategory has been growing, and we have two great brands with Snack Factory as well as Snyder's of Hanover.

Speaker #4: Snack Factory has been growing. We've made some sequential progress on Snyders of Hanover. We got more work to do on it in order to get that back to growth.

Mick Beekhuizen: Again, because we are participating within a growing subcategory, I feel if we gain our fair share, we should be able to grow that business. On the salty side, sorry, on the chips side, that's obviously, as we've just been talking, a more competitive space as we're all experiencing. Although the subcategories that we are in with on the kettle chips side, Cape Cod as well as Kettle Brand, those two brands are well-positioned within that subcategory of kettle chips, which is the growing part of chips. However, the competition has increased over the past 12 to 24 months, and as a result, we've got more pressure and we're losing share there, and that's why we need to do the work that I described earlier in order to make sure that we get our fair share of that growing subcategory.

Speaker #4: But again, because we are participating within a growing subcategory, I feel if we gain our fair share, we should be able to grow that business.

Speaker #4: Then, on the salty side—sorry, on the chip side—that's obviously, as we've just been talking, a more competitive space, as we're all experiencing.

Speaker #4: And although the subcategories that we are in with on the cattle chip side, Cape as well as cattle chips, those two brands are well positioned within that subcategory of cattle chips, which is the growing part of chips.

Speaker #4: However, the competition has increased over the past, call it 12 to 24 months. And as a result, we've got more pressure. And we're losing share there.

Speaker #4: And that's why we need to do the work that I described earlier in order to make sure that we get our fair share of that growing subcategory.

Mick Beekhuizen: Finally, you got Late July, and Late July with its positioning is exactly what consumers are looking for. It is growing. It's a little wonky between different quarters because of some promotional activity, but overall, I feel very good about that brand. Hopefully, that gives you a little bit of context if I really unpack our overall snacks portfolio around, like, why do we believe we should be able to grow it? It's because the brands that we have and the subcategories that we're in, they are well-positioned with what the evolving consumer is looking for, and the consumer is looking for that premium, better for you, and flavor exploration experience, and our brands can provide that.

Speaker #4: And then finally, you got late July. And late July, with its positioning, is exactly what consumers are looking for. It is growing. It's a little wonky between different quarters because of some promotional activity, but overall, I feel very good about that brand.

Speaker #4: So, if I kind of—hopefully that gives you a little bit of context about, really, unpacks our overall snacks portfolio around why do we believe we should be able to grow it.

Speaker #4: It's because the brands that we have and the subcategories that we're in, they are well positioned with what the evolving consumer is looking for.

Speaker #4: And the consumer is looking for that premium, better-for-you, and flavor exploration experience. And our brands can provide that.

Max Gumport: Great. Thank you. On Goldfish, back in 2023, you announced you were investing about $160 million in the Richmond manufacturing facility to expand Goldfish capacity. Since then, at least based on what we're seeing in tracked channel data, volumes have been in decline. Can you talk about any, you know, capacity utilization impacts you've seen, as a result of that expansion and just your view on your ability to fill that capacity going forward? Thanks very much.

Speaker #2: Great, thank you. And then on Goldfish—so back in '23, you announced you were investing about $160 million in the Richmond manufacturing facility to expand Goldfish capacity.

Speaker #2: Since then, at least based on what we're seeing in track channel data, volumes have been in decline. So can you talk about any capacity utilization impacts you've seen as a result of that expansion and just your view on your ability to fill that capacity going forward?

Speaker #2: Thanks very much.

Mick Beekhuizen: Yeah. I mean, look, this is what you just described, unfortunately, is part of the reason why we had a 7% margin in Q2. There has been one of the issues, not everything, but one of the issues is deleverage in the P&L. To your point, we have invested in particularly Goldfish, but in other areas, coming out of the pandemic, where we thought the volume would continue to grow. It obviously has not, and when you have higher fixed costs and your business is in decline a bit, that's really bad for margins, and that's what you're seeing. Our job as a management team is to make sure we can get that volume back and the P&L really starts to improve if we can do that. Look, that's as simple as that.

Todd Cunfer: Yeah. I mean, look, this is what you just described, unfortunately, is part of the reason why we had a 7% margin in Q2. There has been one of the issues, not everything, but one of the issues is deleverage in the P&L. To your point, we have invested in particularly Goldfish, but in other areas, coming out of the pandemic, where we thought the volume would continue to grow. It obviously has not, and when you have higher fixed costs and your business is in decline a bit, that's really bad for margins, and that's what you're seeing. Our job as a management team is to make sure we can get that volume back and the P&L really starts to improve if we can do that. Look, that's as simple as that.

Speaker #4: Yeah. Yeah. I mean, so look, this is what you just described, unfortunately, is part of the reason why we have a 7% margin in Q2.

Speaker #4: There has been one of the issues, not everything, but one of the issues is the leverage in the P&L. To your point, we have invested in particularly Goldfish, but in other areas coming out of the pandemic where we thought the volume would continue to grow.

Speaker #4: It obviously has not. And when you have higher fixed costs and your business is in decline a bit, that's really bad for margins. And that's what you're seeing.

Speaker #4: So our job as a management team is to make sure we can get that volume back. And the P&L really starts to improve if we can do that.

Speaker #4: And look, it's as simple as that. We've got to get Goldfish volume going in the right direction or we will continue to have these margin hurts.

Mick Beekhuizen: We gotta get Goldfish volume going in the right direction, or we will continue to have these margin hurts.

Todd Cunfer: We gotta get Goldfish volume going in the right direction, or we will continue to have these margin hurts.

Max Gumport: Great. Thanks very much. Appreciate it.

Speaker #2: Great. Thanks very much. Appreciate it.

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

Speaker #1: Our next question comes from Robert Moscow from TD Cowen. Please go ahead. Your line is open.

Robert Moskow: Hey, thanks for the question. Just a couple more add-ons. I wanted to ask about distribution first for your snack business. You know, your competitor has talked about double-digit gains, and I wanted to know if you've seen distribution losses as a result of that. Secondly, Todd, you know, there's oil jumping all over the place. It's gonna have an impact on diesel, and I wanted to know if you could talk about how that may impact the cost structure of the DSD network. You know, these are independent routes, so it's a little complicated. Wanted to know if you could help us. Thanks.

Speaker #5: Hey, thanks. For the question, just a couple more add-ons. I wanted to ask about distribution for your snack business. Your competitors talked about double-digit gains.

Speaker #5: And I wanted to know if you've seen distribution losses as a result of that. And then secondly, Todd, oil is jumping all over the place.

Speaker #5: It's going to have an impact on diesel and I wanted to know if you could talk about how that may impact the cost structure of the DSD network.

Speaker #5: These are independent routes, so it's a little complicated. Wanted to know if you could help us. Thanks.

Mick Beekhuizen: Yes. Yeah, great. Thank you. Todd, why don't you take the second one, and then I'll come back on the first one.

Speaker #2: Yeah. Great. Thank you.

Speaker #5: Todd, why don't you take the second one and then I'll come back on the first one.

Todd Cunfer: Yeah. No, absolutely. Obviously incredibly fluid situation. Oil's bouncing all over the place right now, and I don't think anyone knows how this is really gonna play out in the next few weeks and more importantly, months and years. The good news is, right now, you know, we are about 85% hedged on all commodities, including things like diesel for freight, resins, other plastics, and aluminum that could obviously get impacted by what's going on in the Middle East right now. There could be some impact to this year. It's not going to be significant. If this continues for several months, if oil remains where it is as we start the fiscal year, obviously things are different.

Speaker #2: Yeah, no, absolutely. So, obviously, it's an incredibly fluid situation. Oil's bouncing all over the place right now, and I don't think anyone knows how this is really going to play out in the next few weeks, and more importantly, months and years.

Speaker #2: The good news is right now, we are about 85% hedged on all commodities, including things like diesel for freight and resins. And other plastics and aluminum that could obviously get impacted by what's going on in the Middle East right now.

Speaker #2: So there could be some impact to this year. It's not going to be significant. If this continues, for several months, if oil remains where it is, as we start the fiscal year, obviously, things are different.

Todd Cunfer: This will start to have an impact on our business and everyone's business, if oil remains elevated, not just on freight, but on other products that leverage oil in their products as well. More to come on that. Hopefully, this will get resolved. As I mentioned in the prepared remarks, we have nothing, no incremental costs embedded in our forecast from it. There is a little bit of risk there, but nothing substantial. Look, if we're sitting here three or four months and it's still elevated, we're gonna have to address it either through pricing or really sharpen our pencils on getting more cost out of the system.

Speaker #2: This will start to have an impact on our business and everyone's business if oil remains elevated, not just on freight, but on other products that leverage oil in their products as well.

Speaker #2: So, more to come on that. Hopefully, this will get resolved. We have, as I mentioned in the prepared remarks, we have nothing—no incremental cost—embedded in our forecast from it.

Speaker #2: There is a little bit of risk there, but nothing substantial. So look, if we're sitting here three or four months and it's still elevated, we're going to have to address it either through pricing or really sharpen our pencils on getting more costs out of the system.

Mick Beekhuizen: When I look at overall distribution, Rob, I see with the strength of our brands, you continue to see one distribution opportunities, and we're also gaining some of that distribution. It is more profound in areas like Goldfish, where we have a right to win. It's a well-positioned brand, and we continue to work with our retail partners in growing that brand. In some of the more competitive areas, such as chips, I see a mix of, you know, some gains and losses and probably as a result, a little bit more net neutral around the distribution side. When I think about what are we doing about areas like that, if we have great innovation, we find that our retail partners are excited about making sure that we gain that incremental distribution. You see that, for instance, in cookies.

Speaker #5: And when I look at overall distribution, Rob, I see in with the strength of our brands, you continue to see one distribution opportunities. And we're also gaining some of that distribution.

Speaker #5: It is more profound in areas like Goldfish where we have a right to win. It's a well-positioned brand. And we continue to work with our retail partners, in growing that brand.

Speaker #5: In some of the more competitive areas, such as chips, I see a mix of some gains and losses and probably as a result, a little bit more net neutral around the distribution side.

Speaker #5: When I think about what are we doing about areas like that, if we have great innovation, you find we find that our retail partners are excited about making sure that we gain that incremental distribution.

Speaker #5: And you see that, for instance, in cookies. Cookies done really well with the Milano as well as the Jasmine innovation. And as a result, we've seen continued distribution gains in those areas.

Mick Beekhuizen: Cookies done really well with the Milano as well as the Chessmen innovation, and as a result, we've seen continued distribution gains in those areas.

Todd Cunfer: Hey, Rob, just one more.

Mick Beekhuizen: Thank you.

Robert Moskow: Thank you.

Todd Cunfer: Are you?

Mick Beekhuizen: Oh, go ahead.

Robert Moskow: Oh, go ahead.

Speaker #5: Thank you.

Todd Cunfer: Rob, you mentioned independent DSD impact there, just so we're clear. Look, they're independent operators. They are responsible for their fuel costs and other operating costs. There's no direct impact to us. Obviously, if they don't have a competitive route where they can make money, ultimately, at some point in time, it impacts our ability to grow these businesses as well. We'll have to be cognizant of that, but they are responsible for their fuel costs.

Speaker #4: Rob, you mentioned Rob, you mentioned independent DSD. Impact there, just so we're clear. They are look, they're independent operators. They are a responsible for their fuel costs and other operating costs.

Speaker #4: So there's no direct impact to us. But obviously, if they don't have a competitive route where they can make money, ultimately, at some point in time, it impacts our ability to grow these businesses as well.

Speaker #4: So we'll have to be cognizant of that. But they are responsible for their fuel costs.

Robert Moskow: Thanks for that.

Speaker #5: Thanks for that.

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

Speaker #1: Our next question comes from David Palmer from Evercore ISI. Please go ahead. Your line is open.

David Palmer: Thanks. I'm wondering if there's, you know, a bigger long-term comment to be made about the snacks business. You know, sometimes when you have a margin of a segment get down towards what looks like maybe 10% this fiscal year, you know, the implied valuation of it is compressed. There's something perhaps liberating about that, you know, in terms of how you're thinking about it. You have Mohit, he's joining from a company that spun out DSD and sold cookies, and in other words, they rethought that business more completely. I'm just wondering if you think that this is maybe a time when you can really think about the complexity of the business, what you own in it, so you can put the resources you want against the good stuff within it.

Speaker #2: Thanks. I'm wondering if there's a bigger long-term comment to be made about the snacks business. Sometimes when you have a margin of a segment get down towards what looks like maybe 10% this fiscal year, the implied valuation of it is compressed.

Speaker #2: There's something perhaps liberating about that. In terms of how you're thinking about it, you have Mohit who's joining from a company that spun out DSD and sold cookies.

Speaker #2: And in other words, they rethought that business more completely. And I'm just wondering if you think that this is maybe a time when you can really think about the complexity of the business, what you own in it, so that you can put the resources you want against the good stuff within it.

David Palmer: I know there's limited detail that you could share, but maybe you can make a comment on that and have a quick follow-up.

Speaker #2: I know there's limited detail that you could share, but maybe you can make a comment on that and have a quick follow-up.

Mick Beekhuizen: Yeah. And I know, David, we've spoken about this in the past. I mean, we are obviously operating the portfolio that we currently have. We are big believers in the brands that we have. We'll obviously always continue to make sure if there's alternatives that provide, create better shareholder value, that we take those into consideration. Now, I'd say that when I look at our current snacks portfolio, another way of looking at some of what we're just talking about, and particularly with regard to the margin, is. My perspective is, look, there's a lot of opportunity here. You see that hopefully also throughout our commentary, really that action orientation and making sure that we go after these different areas. Now, obviously, making sure, as Todd also mentioned, that we are stabilizing our top line is absolutely critical.

Speaker #5: Yeah. So and I know that we've spoken about this in the past. I mean, we are obviously operating the portfolio that we currently have.

Speaker #5: We are big believers in the brands that we have. We're obviously always continuing to make sure, if there are alternatives that create better shareholder value, that we take those into consideration.

Speaker #5: Now, I'd say that when I look at our current snacks portfolio, another way of looking at some of what we're just talking about, and particularly with regard to the margin, is my perspective is like there's a lot of opportunity here.

Speaker #5: And you see that hopefully also throughout our commentary really that action orientation and making sure that we go after these different areas now obviously making sure as Todd also mentioned that we are stabilizing our top line is absolutely critical.

Mick Beekhuizen: Growing areas like Goldfish, which will help from an overall mix perspective, and of course, making sure we get that fresh bakery execution right. Are all gonna help margins, but we're not gonna stop with those initiatives. Continue to focus on that elevated productivity level is really important. That's both within the plants as well as within our logistics network. Finally, Todd already mentioned the cost savings, whether they are with regard to our network or whether they are within our SG&A, we're gonna continue to work on those different areas, although some of them might obviously take a little bit longer. Listen, we are, you know, always gonna be continuing to look at all the different alternatives, but we are focused on the portfolio that we have and make sure that we work that as hard as we possibly can.

Speaker #5: Growing areas like Goldfish, which will help from an overall mixed perspective, and of course, making sure we get that fresh bakery execution right, are all going to help margins.

Speaker #5: But we're not going to stop with those initiatives continue to focus on that elevated productivity level is really important. That's both within the plants as well as within our logistics network.

Speaker #5: And then finally, Todd already mentioned the cost savings, whether they are with regard to our network or whether they are within our SG&A we're going to continue to work on those different areas although some of them might obviously take a little bit longer.

Speaker #5: So, listen, we are always going to continue to look at all the different alternatives, but we are focused on the portfolio that we have and making sure that we work that as hard as we possibly can.

David Palmer: Thanks. Just a quick one on the other side of the business. You know, I think a lot of your comments on your prepared remarks are really true about the cooking behaviors of the younger generation, and you're leaning in on that with this new condensed sauces business. I wonder about how incremental you think that can be. On the other side, you know, how much we should be worried about ongoing market share slippage on the broth side. You know, that broth business has flattened out lately. I'm just wondering how you're thinking about perhaps reviving growth there, or at least forestalling whatever progress is being made by private label getting back on shelf. Thanks.

Speaker #2: And thanks. Just a quick one on the other side of the business. I think a lot of your comments in your prepared remarks are really true about the cooking behaviors of the younger generation, and you're leaning in on that with this new condensed sauces business.

Speaker #2: I wonder about how incrementally you think that can be. And on the other side, how much we should be worried about ongoing market share slippage on the broth side.

Speaker #2: And it’s been that broth business has flattened out lately. I’m just wondering how you’re thinking about perhaps reviving growth there, or at least forestalling whatever progress is being made by private label getting back on shelf.

Speaker #2: And thanks.

Mick Beekhuizen: Yeah. Thank you for asking the question, of course. We didn't talk as much about the meals and beverage side of the business, but with the in-market growth that we generated during Q2, and the strong performance of Rao's, it's obviously something that we're very excited about. The other thing that is really working within the M&B portfolio, as you're describing, is the overall focus on cooking occasions, and our portfolio is catering very well to that. Also our products within the soup aisle, and on the one end, broth. I'll get back to broth in a minute.

Speaker #5: Yeah. So and thank you for asking the question, of course. We didn't talk as much about the meals and beverage side of the business, but with the in-market growth that we generated during the second quarter, and the strong performance of rails, so obviously something that we're very excited about.

Speaker #5: The other thing that is really working within the M&B portfolio, as you're describing, is the overall focus on cooking occasions. And our portfolio is catering very well to that.

Speaker #5: Also, our products within the soup aisle and on the one hand, within our condensed so on the one hand, broth. I'll get back to broth in a minute.

Mick Beekhuizen: Then the other piece is our condensed portfolio has actually been doing relatively well because of the part of the business of the condensed portfolio that's focused on cooking and is being used as an ingredient. It's a little over half of that condensed portfolio in Q2. That's been the growing part of the portfolio. On the flip side, the eating side has been declining, so net-net condensed has been relatively flat during the quarter. That being said, we are seeing that differentiated proposition that we can provide with our condensed cooking soups, which are being used as an ingredient like Cream of Mushroom, Cream of Chicken, and we are now expanding that into Campbell's Condensed Sauces. We believe we have a right to win with that. What does that do?

Speaker #5: And then the other piece is our condensed portfolio has actually been doing relatively well because of the part of the business of the condensed portfolio that's focused on cooking and is being used as an ingredient.

Speaker #5: And it's a little over half of that condensed portfolio in the second quarter. That's been the growing part of the portfolio. On the flip side, the eating side, has been declining.

Speaker #5: So net-net, condensed has been relatively flat during the quarter. That being said, we are seeing that different shaded proposition that we can provide with our condensed cooking soups, which are being used as an ingredient like cream of mushroom, cream of chicken, and we are now expanding that into Campbell's condensed sauces.

Speaker #5: And we believe we have a right to win with that. So what does that do? It basically allows us to start transforming more and more of the soup aisle into an ingredient that we're providing and it provides convenience at a very and comfort at a very attractive value proposition.

Mick Beekhuizen: It basically allows us to start transforming more and more of the soup aisle into an ingredient that we're providing, and it provides convenience, and comfort at a very attractive value proposition. I'm very excited about the Campbell's Condensed Sauces. We're gonna introduce that in June, as you saw. I think it will be incremental to what we're currently providing, and I think we're gonna learn a lot with that introduction. It's a great complement to our condensed cooking soups as well as broth. Now, with regard to broth has obviously been a growing category. Two great brands we have within that category is Pacific as well as Swanson.

Speaker #5: So I'm very excited about the Campbell's condensed sauces. We're going to introduce that in June, as you saw. I think it will be incremental.

Speaker #5: To what we're currently providing. And I think we're going to learn a lot with that introduction. And it's a great compliment to our condensed cooking soups as well as broth.

Speaker #5: Now, with regard to broth, broth has obviously been a growing category to great brands we have within that category. It's specific as well as Swanson.

Mick Beekhuizen: Both of them continued to grow during this past quarter, albeit as you're pointing out, a little bit of share pressure, which we anticipated because of that private label recovery. You know, we're gonna continue to make sure that we, on the one hand, stay competitive within the space, but also that we're continuing to focus on how can we grow that business as it is a very attractive value proposition that fits right within that cooking behavior. Pacific has been growing double digits. The pressure's probably been a little bit more on Swanson. Todd also mentioned earlier that we're watching very closely the price gaps to some of the private label participants and making sure that as a result, we stay competitive during key drive periods like the holiday period.

Speaker #5: Both of them continue to grow during this past quarter, albeit as you're pointing out, a little bit of share pressure, which we anticipated because of that private label recovery. We're going to continue to make sure that we, on the one hand, stay competitive within the space, but also that we're continuing to focus on how we can grow that business, as it is a very attractive value proposition that fits right within that cooking behavior.

Speaker #5: Pacific has been growing double digits. The pressure is probably being a little bit more on Swanson and Todd also mentioned earlier that we're watching very closely the price gaps to some of the private label participants and making sure that as a result, we stay competitive during key dry periods like the holiday period.

Operator: Our last question comes from Jim Salera from Stephens. Please go ahead, your line is open.

Speaker #1: Our last question comes from Jim Solera from Stevens. Please go ahead. Your line is open.

Jim Salera: Guys, good morning. Thanks for taking our question. Mick, I wanted to build on David's question there and maybe just ask if you could give us some details around how we should think about meals and beverages in the back half of the year, particularly what we should expect on pricing, given some of the competitive dynamics you just highlighted. I mean, is there still opportunity for modest net price realization in the back half of the year? Embedded in your updated guidance, do you have incremental at-home consumption given some of the pressures on the consumer? Typically, that benefits that portion of the business. Any detail on that would be helpful.

Speaker #4: Yeah, good morning. Thanks for taking our question. Nick, I wanted to build on David's question there, and maybe just ask if you could give us some details around how we should think about Meals and Beverage in the back half of the year, particularly what we should expect on pricing given some of the competitive dynamics you just highlighted.

Speaker #4: I mean, is there still opportunity for modest net price realization in the back half of the year and is that embedded in your updated guidance? Do you have incremental at-home consumption, given some of the pressures on the consumer? Typically, that benefits that portion of the business.

Mick Beekhuizen: Yeah. I'll take the pricing first. We will have still

Todd Cunfer: Yeah. I'll take the pricing first. We will have still

Speaker #4: Any detail on that would be helpful.

Speaker #5: Yeah, I'll take the pricing first. We will have still positive net price realization in the second half. It won't be as great as it's been as just because of some of the investments we've made in broth.

Todd Cunfer: Positive net price realization in the second half. It won't be as great as it's been just because of some of the investments we've made in broth. We're actually making a little bit in Rao's as well, but we still will have positive price.

Speaker #5: We're actually making a little bit in rails as well, but we still will have positive price.

Mick Beekhuizen: I think from a consumption perspective, you're probably gonna see a little bit of pressure in the second half. You saw that in Q2. We did really well from an in-market consumption perspective, driven by the holiday period. Our products typically do very well during that period, and that was also very evident again during this holiday period. On top of it, as you saw, we had very healthy growth with regard to Rao's. Rao's grew in-market consumption 14.5% during Q2. As I mentioned in the past, we expect for the full year high single digits, and that's still what I'm expecting. You know, a little bit of that disproportionate growth during Q2. Overall, I expect continued growth with the Rao's brand.

Speaker #4: I think from a consumption perspective, you're probably going to see a little bit of pressure in the second half. You saw that in Q2—we did really well from an in-market consumption perspective.

Speaker #4: Driven by the holiday period, our products typically do very well during that time. And that was also very evident again during this holiday period.

Speaker #4: And then on top of it, as you saw, we had very healthy growth with regard to rails rails grew in-market consumption 14 and a half percent during the second quarter.

Speaker #4: As I mentioned in the past, we expect for the full year high single digits. And that's still what I'm expecting. So a little bit that disproportionate growth during the second quarter.

Speaker #4: But overall, I expect continued growth with the rails brand. However, that leads to a little bit lower overall consumption growth in meals and beverage in the second half of this fiscal year.

Mick Beekhuizen: However, that leads to a little bit lower overall consumption growth in meals and beverage in the second half of this fiscal year. I think you're hovering probably, you know, to 0 to slightly to -1 to 0 is my hunch. That's probably what you're gonna see in and around the second half.

Speaker #4: So I think you're hovering probably to 0 to slightly to minus 1 to 0 is my hunch. That's probably what you're going to see in and around the second half.

Operator: We are out of time for questions today. This will conclude today's conference call. Thank you for your participation. You may now disconnect.

Q2 2026 The Campbell’s Co Earnings Call

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