Q1 2027 General Mills Inc Earnings Call

September 23, 2026

Operator: Hello, everyone. Thank you for joining us, and welcome to General Mills' Fiscal 2027 Q1 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Jeff Siemon, Vice President, Investor Relations and Corporate Finance. Jeff, please go ahead.

Speaker #1: Hello, everyone. Thank you for joining us, and welcome to the General Mills Q1 2027 earnings call. After today's prepared remarks, we will host a question-and-answer session.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Jeff Seaman, Vice President, Investor Relations and Corporate Finance.

Speaker #1: Jeff, please go ahead.

Speaker #2: Thank you, Warren, and good morning to everyone. Thanks for joining us today for this live Q&A session on our first quarter FY27 results. I hope you all had time to review our press release, listen to the prepared remarks, and view our presentation materials, which we made available this morning on our investor relations website.

Jeff Siemon: Thank you, Warren, and good morning to everyone. Thanks for joining us today for this live Q&A session on our Q1 fiscal 2027 results. I hope you all had time to review our press release, listen to the prepared remarks, and view our presentation materials, which we made available this morning on our investor relations website. Please note that in our Q&A session, we may make forward-looking statements that are based on management's current views and assumptions. Please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which we may discuss on today's call. I am here this morning with Jeff Harmening, our Chairman and CEO, Dana McNabb, our COO, and Kofi Bruce, our CFO. With that, we will go ahead and open it up for Q&A. Warren, can you please get us started?

Speaker #2: Please note that, in our Q&A session, we may make forward-looking statements that are based on management's current views and assumptions. So, please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which we may discuss on today's call.

Speaker #2: I'm here this morning with Jeff Harmening, our Chairman and CEO, Dana McNabb, our COO, and Kofi Bruce, our CFO. With that, we'll go ahead and open it up for Q&A.

Speaker #2: So, Warren, can you please get us started?

Speaker #1: We will now begin the Q&A session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press *1 to raise your hand.

Operator: We will now begin the Q&A session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Andrew Lazar with Barclays. Your line is open. Please go ahead.

Speaker #1: To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #1: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Andrew Lazar with Barclays.

Speaker #1: Your line is open. Please go ahead.

Speaker #3: Great, thanks so much. Good morning, everybody.

Andrew Lazar: Great. Thanks so much. Good morning, everybody.

Dana McNabb: Good morning.

Speaker #4: Good morning.

Speaker #3: Nice. Nice to see some sequential improvement starting to show through. I guess I'd like to get a sense of the pace of improvement in NAR specifically, going forward.

Andrew Lazar: Nice to see some sequential improvement starting to show through. I guess I would like to get a sense of the sort of pace of improvement in NAR specifically going forward. I know this quarter you saw retail trends improve sequentially. In Q2, I guess, would you expect further sequential improvement from the -2% retail consumption that we saw this quarter? Or should we expect more of a stabilization at this point? Again, I am talking about retail takeaway, which excludes all the timing issue and whatnot.

Speaker #3: I know this quarter you saw retail trends improve sequentially. In Q2, I guess, would you expect further sequential improvement from the minus 2% retail consumption that we saw this quarter?

Speaker #3: Or should we expect more of a stabilization at this point? And again, I'm talking about, you know, retail takeaway, which excludes the, you know, all the timing issue and whatnot.

Speaker #4: Good morning, Andrew. Thanks for the question. Our focus is really on continuing to improve dollar share trends. I'm not going to get into quarterly Nielsen estimates, but we are pleased with the improvement we saw—a two-point improvement in dollar sales.

Dana McNabb: Good morning, Andrew. Thanks for the question. Our focus is really on continuing to improve dollar share trends. I am not going to get into quarterly Nielsen estimates, but we are pleased with the improvement. We saw a 2-point improvement in dollar sales. We did improve our share performance in the majority of our categories. But as you probably noticed, we are not all the way to growth yet, so we still have work to do. Where we are focused is really the first thing you will see is we expect an improvement in price mix. If you recall, in Q1, we had not lapped our base price investments yet. We will start to do that in Q2, and we like the plans we have against product mix, premium innovation, and price pack architecture. We also will see accelerated innovation and renovation, and we really like how our marketing is performing right now.

Speaker #4: We did improve our share performance in the majority of our categories, but as you probably noticed, we're not all the way to growth yet.

Speaker #4: So, we still have work to do. Where we're focused is really the first thing you'll see: we expect an improvement in price mix.

Speaker #4: If you recall, in Q1 we hadn't lapped our base price investments yet. We will start to do that in Q2, and we like the plans we have against product mix, premium innovation, and price pack architecture.

Speaker #4: We will also see accelerated innovation and renovation, and we really like how our marketing is performing right now. We'll continue to focus on that.

Dana McNabb: We will continue to focus on that. Again, we still have work to do. We had the Totino's business that was a problem for us all last year. We have cut those declines in half. That is an area we will continue to focus on, and we expect to see improved dollar performance throughout the year.

Speaker #4: So again, we still have work to do. We had the Totino's business that was a problem for us all last year. We've cut those declines in half.

Speaker #4: That's an area we'll continue to focus on, and we expect to see improved dollar performance throughout the year.

Speaker #3: Great. And then, you know, I guess focusing in on the share piece, in NAR a year ago, it seemed like General Mills was showing sort of negative IM in share.

Andrew Lazar: Great. I guess, focusing in on the share piece. In NAR a year ago, it seemed like General Mills was showing negative volume and share across a pretty wide swath of categories. What does that look like today versus a year ago? If it is far smaller number of categories today where the issues are, what is the plan fix for those? Thanks so much.

Speaker #3: Really across a pretty wide swath of categories. What does that look like today versus a year ago? And if it's far smaller number of categories today where the issues are, what's the sort of the planned fix for those?

Speaker #3: Thanks so much.

Speaker #4: Well, as you'd mentioned, we were in a tough spot last year, and this year we have seen pretty good improvement. We're encouraged by the momentum.

Dana McNabb: Well, as you had mentioned, we were in a tough spot last year, and this year we have seen pretty good improvement, and we are encouraged by the momentum. We saw improvement in the majority of our categories, and I will give you a couple examples. I look at cereal, where last year in Q1, our share was down 0.9. This year in Q1, we are only down 0.1. Soup, another big business, we were down 0.4 in share. This year, we are only down 0.1. So, we really do like what we are seeing, and we are not to growth yet. We know we still have more work to do, and that is going to be an emphasis on price mix and innovation and renovation. The two spots that we are keeping our eye on where we need to see more improvement is Totino's, which I have already talked to.

Speaker #4: We saw improvement in the majority of our categories, and I'll give you a couple of examples. I look at cereal, where last year in Q1, our share was down 0.9.

Speaker #4: This year in Q1, we're only down 0.1. Soup, another big business, we were down 0.4 in share. This year we're only down 0.1. So we really do like what we're seeing, and we're not to growth yet.

Speaker #4: We know we still have more work to do, and that's going to be an emphasis on price mix. And innovation and renovation. The two spots that we're keeping our eye on where we need to see more improvement is Totino's, which I've already talked to.

Speaker #4: Please, again, that we cut those declines in half, but we have more work to do, and we have really good product innovation, blasted roles, we have some better merchandising, we have strong innovation or sorry, strong renovation coming, so we feel good about that.

Dana McNabb: Pleased again that we cut those declines in half, but we have more work to do, and we have really good product innovation, Blasted Shreds. We have some better merchandising. We have strong renovation coming, so we feel good about that. We have some challenges on fruit snacks. The category is growing remarkably fast. It is up about 13% in Q1. But we are really seeing some small insurgent brands enter and drive that with increased distribution, and so we need to up our game there. We are going to really leverage our Annie's brand to bring some very strong new products to market. We just launched Annie's Organic Nature Pals, which is a high-fiber fruit snack, great taste, with some great renovation coming on our core business. So Totino's and fruit is where we will focus on, and then we expect to see continued improvement in the rest of our brands.

Speaker #4: And then we have some challenges on fruit snacks. Now, the category is growing remarkably fast. It's up about 13% in Q1, but we're really seeing some small insurgent brands enter and drive that with increased distribution.

Speaker #4: And so we need to up our game there. We're going to really leverage our Annie's brand. To bring some very strong new products to market, we've just launched Nature Pals, which is a high-fiber fruit snack, great taste.

Speaker #4: We have some great renovation coming on our core business, so Totino's and fruit are where we'll focus, and then we expect to see continued improvement in the rest of our brands.

Speaker #3: Got it. Thanks so much.

Andrew Lazar: Got it. Thanks so much.

Speaker #1: Your next question comes from the line of Peter Galbo with Bank of America. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Peter Galbo with Bank of America. Your line is open. Please go ahead.

Speaker #5: Hey, guys. Good morning. Thanks for taking the questions. Kofi, I was hoping you could shed a little bit more light on the inflation guidance.

Peter Galbo: Hey, guys. Good morning. Thanks for taking the questions. Kofi, I was hoping you could shed a little bit more light on the inflation guidance. Obviously, having moved up towards the higher end of the 4% to 5% range. I think it might be helpful just to outline maybe where inflation came in in Q1 and then just how you kind of see it pacing over the balance of the year and where that kind of exit rate on inflation might be as things currently stand today.

Speaker #5: Obviously, having moved kind of up towards the higher end of the 4 to 5 range, I think it might be helpful just to outline maybe where inflation came in during Q1, and then how you kind of see it pacing over the balance of the year, as well as where that exit rate on inflation might be as things currently stand today.

Speaker #2: Sure. Pete, thanks for the question. Just to give you some texture, we did see inflation roughly within the range, maybe a touch lower than we expected in Q1, but at the low end of our range, around 4%. If I look forward and take into account our hedge positions, I would expect Q1, Q2, and Q3 to be roughly similar, and Q4 to be just a touch outside the range, at around 6%, based on everything in front of us right now.

Kofi Bruce: Sure. Pete, thanks for the question. Just to give you some texture, we did see inflation roughly within the range, maybe a touch lower than we expected in Q1, but at the low end of our range, around 4%, which, if I look forward and take into account our hedge positions, I would expect Q1, Q2, Q3 to be roughly similar, and Q4 to be just a touch outside the range at around 6%, based on everything in front of us right now.

Speaker #5: Got it. Okay, that's very helpful. I wanted to dig in a little bit on PET. I know there were a couple of, maybe, timing elements that happened in the quarter.

Peter Galbo: Got it. Okay. That's very helpful. I wanted to dig in a little bit on pet. I know there were a couple of maybe timing elements that happened in the quarter, the extra month of Whitebridge. But maybe the other thing that stood out was just the retailer inventory headwind wasn't maybe as dramatic as you all would have anticipated in Q1. I just wanted to pressure test a little bit on the go forward. How much of that low single digit headwind is maybe conservatism in pet versus Q1 being a bit of an anomaly from a retailer headwind standpoint? Thanks very much.

Speaker #5: The extra month of White Bridge. But maybe the other thing that stood out was just, you know, the inventory—the retailer inventory headwind wasn't maybe as dramatic as you all would have anticipated in Q1.

Speaker #5: And I just wanted to pressure test a little bit on the go-forward. How much of that low single-digit headwind is maybe conservatism in Pet versus Q1 being a bit of an anomaly from a retailer headwind standpoint?

Speaker #5: Thanks very much.

Speaker #2: Sure. Let me start with White Bridge first. I think, as is consistent with most of our past acquisitions of any size, we generally are on a one-month lag until we hit systems integration, and then we do a catch-up that almost always has flowed through organic sales.

Kofi Bruce: Sure. Let me start with Whitebridge first. I think as is consistent with most of our past acquisitions of any size, we generally are on a one-month lag until we hit systems integration, and then we do a catch-up that has always flown through organic sales. So that was expected at some point, one month. And then the other point I would tell you is that it was worth about a point of growth on pet, maybe 15 basis points for the company. So not frankly all that large. On inventory, what I would tell you is we have been doing this long enough and the challenge is just on pet, there is a lot of volatility quarter to quarter.

Speaker #2: So, that was expected at some point—one month. And then, the other point I would tell you is that it was worth about a point of growth on PET, maybe 15 basis points for the company, so frankly not all that large.

Speaker #2: On inventory, what I would tell you is, you know, we've been doing this long enough and the challenge is just, on PET, there's a lot of volatility quarter to quarter.

Speaker #2: I do think, based on the customer mix progression, that we still expect a low single-digit headwind from inventory over the course of the year, mainly as our mix skews more and more toward customers who carry lower inventory levels.

Kofi Bruce: I do think, based on the customer mix progression, that we still expect a low single digit headwind from inventory over the course of the year, mainly as our mix skews more and more towards customers who carry lower inventory levels. Cannot probably get too precise on a quarterly basis about how that is going to flow. So we would still stand by that forecast for the full year, however.

Speaker #2: We probably can't get too precise on a quarterly basis about how that's going to flow. So, we would still stand by that forecast for the full year, however.

Speaker #5: Great. Thanks very much.

Peter Galbo: Great. Thanks very much.

Speaker #2: You bet.

Kofi Bruce: You bet.

Speaker #1: Your next question comes from the line of Robert Moscow with TD Kellen. Your line is open. Please go ahead.

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

Speaker #6: Hi, thanks. I was hoping to drill down on the high single-digit decline in dog food. Love Made Fresh, I believe, was entirely incremental in the quarter.

Robert Moskow: Hi, thanks. I was hoping to drill down on the high single digit decline in dog food. Love Made Fresh, I believe, was entirely incremental in the quarter. Can you tell us how incremental it was? Because it was not in there a year ago, and what is driving the declines? Is it just Wilderness or are there other factors?

Speaker #6: So can you tell us how incremental it was? Because it wasn't in there a year ago. And what's driving the decline? So is it just wilderness, or is there other factors?

Speaker #4: Hi, Rob. Thanks for the question. You're right. When you look at our PET business right now, we're really pleased with the growth that we're seeing in our cat business. Our treats business has inflected to growth, and we've seen significant improvement in Love Made Fresh.

Dana McNabb: Hi, Rob. Thanks for the question. You are right. When you look at our pet business right now, we are really pleased with the growth that we are seeing on our cat business. Our treats business has inflected to growth, and we have seen significant improvement in Love Made Fresh. But the area that we are having challenge is in our dry dog business. From a dry dog perspective, the category was down about mid single digits, as you said. Life Protection Formula pretty much hung in there with the category, and it was Wilderness where we saw declines accelerate. Wilderness is a place you will have heard on the prepared remarks where we have actually applied our Remarkability Framework testing to that business to try and diagnose the challenges. We see that we really have to relook at the entire proposition, the product, the packaging, the marketing, the communication.

Speaker #4: But the area that we're having challenges in our dry dog business, from a dry dog perspective, the category was down about mid-single digits, as you said, life protection formula pretty much hung in there, with the category, and it was wilderness where we saw declines accelerate.

Speaker #4: And Wilderness is a place you will have heard in the prepared remarks, where we've actually applied our Remarkable Experience Framework testing to that business to try and diagnose the challenges.

Speaker #4: And we see that we really have to relook at the entire proposition: the product, the packaging, the marketing, the communication—we have work to do.

Dana McNabb: We have work to do. We had the same challenge on our Tastefuls business a few years ago, and it took us about 18 to 24 months to improve it, and that business is back to growth now. The main challenge we see is on Wilderness. On Life Protection Formula, we have some really good product news and renovation and new products coming in the H2 that will really emphasize our ingredient superiority with benefits we know pet parents are looking for, and I really like the plans that are coming in the H2.

Speaker #4: And we had the same challenge on our Cat Tastefuls business a few years ago, and it took us about 18 to 24 months to improve it. That business is back to growth now.

Speaker #4: So the main challenge we see is on Wilderness, and on Life Protection Formula. We have some really good product news and renovation and new products coming in the back half that will really emphasize our ingredient superiority with benefits we know pet parents are looking for, and I really like the plans that are coming in the back half.

Speaker #6: Okay, just a quick follow-up. Wet dog food is a small part of your business, but how's that doing? I heard that there might be some shelf changes at specialty retailers in wet.

Robert Moskow: Okay, just a quick follow-up. Wet dog food, small part of your business, but how is that doing? I heard that there might be some shelf changes at specialty retailers in wet.

Speaker #4: Wet dog food is performing as we expected. It is down about 4%, but that is not worse than we had planned. And I'm actually not familiar with the challenges that you're referring to.

Dana McNabb: Wet dog food is doing as we expected. It is down about 4%, but that is not worse than we had planned. I am actually not familiar with the challenges that you are talking to. As far as I know, our plans are on track.

Speaker #4: As far as I know, our plans are on track.

Speaker #6: Got it. Okay. Thank you.

Robert Moskow: Got it. Okay. Thank you.

Speaker #1: Your next question comes from the line of Leah Jordan with Goldman Sachs. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Leah Jordan with Goldman Sachs. Your line is open. Please go ahead.

Speaker #7: Thanks for taking my question. Good morning. It sounds like the step-up in innovation and renovation you've done this year has been working. Just seeing if you could provide more detail on what's tracking better than expected, and what that's telling you about the consumer?

Leah Jordan: Thanks for taking my question. Good morning. It sounds like the step-up in innovation and renovation you have done this year has been working. Just seeing if you could provide more detail on what is tracking better than expected, and what is that telling you about the consumer? On the acceleration data that you noted that is still to come, what should we be looking for? I think you called out cereal specifically, for later this year, but any detail there as well? Thank you.

Speaker #7: And then on the acceleration data that you noted that is still to come, what should we be looking for? I think you've called out cereal specifically.

Speaker #7: For later this year, but any detail there as well. Thank you.

Speaker #4: So, thanks for the question. From a new products perspective, we're really encouraged with what we're seeing. We've stepped up the amount of new products.

Dana McNabb: Thanks for the question. From a new products perspective, we are really encouraged with what we are seeing. We have stepped up the amount of new products. We have increased by about 50% over the last two years. We have gone from 3% of net sales to 5% of net sales. We really are focused on bringing new products with benefits we know the consumer values and will pay for. When we look at the new products that have launched in Q1, we have seen really strong performance behind our protein cereals, particularly Honey Nut Cheerios.

Speaker #4: We've increased by about 50% over the last two years and have gone from 3% of net sales to 5% of net sales. And we really are focused on bringing new products with benefits we know the consumer values, and will pay for.

Speaker #4: So when we look at the new products that have launched in Q1 that we've seen really strong performance behind our protein cereals, particularly honey nut Cheerios, our blasted Totino's rolls that are bringing new bold flavors are doing really well.

Dana McNabb: Our Blasted Totino's rolls that are bringing new bold flavors are doing really well. Our La Tiara launch is also working really well in the Mexican category. Of course, we have seen Love Made Fresh improve pretty significantly. Again, we are still one quarter in, but we are encouraged by the trial and repeat that we are seeing on those new products. As we look more to the back half of the year, I already mentioned that Life Protection Formula has some great innovation coming with benefits we know the consumer values. We are leaning into significant new products in our snacks categories. Our bars categories, we are going to lean into more protein innovation there on Nature Valley, on LÄRABAR. We are scaling up our Ghost Bars business, and we are even launching a meat snack in our EPIC business. We will continue to bring really strong marketing behind all of that.

Speaker #4: Our La Tiara launch is also working really well in the Mexican category. And of course, we've seen Love Made Fresh improve pretty significantly. So again, we're still one quarter in, but we're encouraged by the trial and repeat that we're seeing on those new products.

Speaker #4: And as we look more to the back half of the year, I already mentioned that Life Protection Formula has some great innovation coming with benefits.

Speaker #4: We know the consumer values. We are leaning into significant new products in our snacks categories. So, in our bars categories, we're going to lean into more protein innovation there—on Nature Valley, on Larabar. We're scaling up our Ghost Bars business, and we're even launching a meat snack in our EPIC business.

Speaker #4: And we'll continue to bring really strong marketing behind all of that. So I really think we understand what the consumer values, and we are bringing them appropriately to the categories that we play in. We'll continue to see improved momentum going forward.

Dana McNabb: I really think we understand what the consumer values, and we are bringing them appropriately to the categories that we play in, and we will continue to see improved momentum going forward.

Speaker #7: Thank you. And then, for a follow-up to Kofi, just seeing if you could talk about gross margin and maybe the puts and takes as we go through the year—just putting together the input cost inflation commentary you highlighted, which accelerated in the fourth quarter. As you think about that balancing versus the productivity efforts you have on the come, is there any flow-through we should keep in mind as that mixed piece ramps?

Leah Jordan: Thank you. For a follow-up to Kofi, just seeing if you could talk about gross margin and maybe puts and takes as we go through the year, just putting together the input cost inflation commentary you highlighted, which accelerated in Q4 as you think about that balancing versus the productivity efforts you have on the comm and any flows that we should keep in mind as that mix piece ramps. Thank you.

Speaker #7: Thank you.

Speaker #2: Yeah. So, in aggregate, sort of at the macro level, if you take our inflation guide and our guidance on cost savings, those are still roughly what we expect to offset over the full year.

Kofi Bruce: Yeah. In aggregate, at sort of at the macro level, if you take our inflation guide and our guidance on HMM cost savings, those still roughly will, we expect to offset over the full year, set aside any of the phasing commentary I gave you. I think the other important thing to call out are the mechanical factors around 53rd Week, which will obviously have an impact on gross margins as we move through the back half of the year, just solely on that comparison. If you strip that out, actually, we would expect our gross margins net to be roughly flat, ex that mechanical factor. At operating margin, we would just add the incentive comp reset as an additional mechanical factor on top of that. But all things equal, those are kind of the big puts and takes I would be watching.

Speaker #2: Set aside any of the phrasing commentary I gave you. I think the other important thing to call out are the mechanical factors around the 53rd week, which will, you know, obviously have an impact on gross margins as we move through the back half of the year, just solely on that comparison.

Speaker #2: If you strip that out, actually, we would expect our gross margins net to be roughly flat, excluding that mechanical factor. And then, at operating margin, we would just add the incentive comp reset as an additional mechanical factor on top of that.

Speaker #2: But all things equal, those are kind of the big puts and takes I'd be watching.

Speaker #7: Very helpful. Thank you.

Leah Jordan: Very helpful. Thank you.

Speaker #2: You bet.

Kofi Bruce: You bet.

Speaker #1: Your next question comes from the line of Chris Carey with Wells Fargo Securities. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Chris Carey with Wells Fargo Securities. Your line is open. Please go ahead.

Speaker #5: Hi everybody. Thank you for the questions. Dana, you mentioned that pricing was—you know—you were constructive about pricing. I can't remember exactly how you framed it over the course of the year.

Chris Carey: Hi, everybody. Thank you for the questions. Dana, you mentioned that pricing was you were constructive about pricing. I cannot remember exactly how you framed it over the course of the year. Do you have a different expectation for pricing relative to where you started the year? I am just conscious that food service pricing came in better, pet pricing came in better, although I assume mix was partly a factor there. I am just wondering if your pricing plans are similar, namely in the context of the current inflation backdrop, and then I have a follow-up.

Speaker #5: Do you have a different expectation for pricing relative to where you started the year? I'm just confident, you know, conscious that food service pricing came in better, pet pricing came in better, although I assume mix was partly a factor there.

Speaker #5: So I'm just wondering if your pricing plans are similar—you know, namely in the context of the current inflation backdrop. And then I have a follow-up.

Speaker #4: Good morning, Chris. Thanks for the question. Well, as you know, we did a lot of work last year to adjust our everyday prices, and that was really important to stabilize our base volume and to help us get back to household penetration growth.

Dana McNabb: Well, good morning, Chris. Thanks for the question. As you know, we did a lot of work last year to adjust our everyday prices, and that was really important to stabilize our base volume and to help us get back to household penetration growth. With that investment behind us, as we move to fiscal 2027, we are really focused on driving positive price mix. That is with particularly strong contributions from product mix, from premium innovation, from price pack architecture, and we are seeing that work on things like Cheerios Protein, Love Made Fresh, Chex Mix Tubs, et cetera. That is where we are focused. As Kofi did mention in his prepared remarks, though, we expect input cost inflation in the higher end of what we previously communicated in the 4% to 5%.

Speaker #4: And so, with that investment behind us as we move to fiscal '27, we're really focused on driving positive price mix. And that's with particularly strong contributions from product mix, from premium innovation, and from price pack architecture.

Speaker #4: And we're seeing that work on things like Cheerios Protein, Love Made Fresh, Chex Mix Hubs, et cetera. So that is where we're focused. As Kofi did mention in his prepared remarks, though, we expect input cost inflation in the higher end of what we previously communicated, in the 4% to 5% range.

Speaker #4: And as we always do, we're going to work on all levers to address higher costs, whether that's through cost savings or through price mix.

Dana McNabb: As we always do, we are going to work on all levers to address higher costs, whether that is through cost savings or through price mix. HMM is always our first defense against inflation. Then we have some transformation, but we have a very strong strategic revenue management toolkit as well. Given this level of inflation, I would assume all levers in that toolkit are on the table, trade, mix, list pricing, et cetera.

Speaker #4: So is always our first defense against inflation, and then we have some transformation, but we have a very strong strategic revenue management toolkit as well.

Speaker #4: And given this level of inflation, I would assume all levers in that toolkit are on the table: trade, mix, list pricing, et cetera.

Speaker #5: Okay, thank you. The follow-up is on the inflation outlook. Kofi, I think you had mentioned inflation would be somewhat similar in fiscal Q1, Q2, and Q3.

Chris Carey: Okay. Thank you. The follow-up is the inflation outlook. Kofi, I think you had mentioned inflation would be somewhat similar in fiscal Q1, Q2, and Q3, and then step up in fiscal Q4. Clearly, you have just nice hedging and good visibility over the course of the first few quarters of the year and then that step up. I mean, this is way too early, but it is going to be such a strong year for HMM this year.

Speaker #5: And then step up in fiscal Q4. Clearly, you have just nice hedging and good visibility over the course of the first few quarters of the year.

Speaker #5: And then that step up, I mean, this is way too early, but it's going to be such a strong year for this year. You know, can you get ahead of, you know, delivering this level of performance as we think, you know, more medium term if this inflation is sticky, you know, going into out years, and just, you know, now that you've reset some price points and value in your portfolio, you know, how do you view and it's a little bit of a carrying through a Dana just said, but how would you view pricing as a lever if you need, you know, that over the next few years as you think about medium term objectives after the work that you've done over the past 18 months?

Chris Carey: Can you get ahead of delivering this level of performance as we think more medium term if this inflation is sticky going into out years and just now that you have reset some price points and value in your portfolio, how do you view and it is a little bit of carrying through what Dana just said, but how would you view pricing as a lever if you need that over the next few years as you think about medium-term objectives after the work that you have done over the past 18 months? Thanks so much.

Speaker #5: Thanks so much.

Speaker #2: Yep. So look, obviously I'm not going to get into guidance for next fiscal year, given we're still in the first quarter of this one.

Kofi Bruce: Yep. So look, obviously, I am not going to get into guidance for next fiscal year, given we are still in the first quarter of this one. I would tell you our construct over the long term is still built around HMM being the primary bulwark against inflationary pressures. If I just take the last three to four years, we have run an HMM at the high end of the 4% to 5% range. I have every confidence that is the range that we would expect to carry with us as we go forward from here. Now, obviously, anything related to SRM and the combination of price and mix, we would expect to be in the mix of how we manage through the year, and frankly, how we drive growth at the top line.

Speaker #2: I would tell you our construct, over the long term, is still built around being the primary bulwark against inflationary pressures. If I just take the last three to four years, we have run in at the high end of the 4% to 5% range.

Speaker #2: I have every confidence that that is the range we would expect to carry with us as we go forward from here. Now, obviously, anything related to SRM and the combination of price and mix, we would expect to be in the mix of how we manage through the year and, frankly, how we drive growth at the top line.

Speaker #2: What I can't do is give you a sense of what '28 is going to look like from an SRM perspective, other than to just acknowledge what Dana said, which is we will use all the tools in our toolkit and, you know, the environment remains, frankly, a little volatile with respect to costs.

Kofi Bruce: What I cannot do is give you a sense of what 2028 is going to look like from an SRM perspective other than to just acknowledge what Dana said, which is we will use all of the tools in our toolkit. And the environment remains, frankly, a little volatile with respect to cost. So it is probably a little early for us to get too deep into the discussion beyond that.

Speaker #2: So it's probably a little early for us to get too deep into the discussion beyond that.

Speaker #5: Very fair. Thank you so much.

Chris Carey: Very fair. Thank you so much.

Speaker #2: You bet.

Kofi Bruce: You bet.

Speaker #1: Your next question comes from the line of Alexia Howard with Bernstein. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Alexia Howard with Bernstein. Your line is open. Please go ahead.

Speaker #6: Good morning, everyone, and thank you for the question. Can I just start with the marketing spend question? You said that the marketing spend was up significantly this quarter.

Alexia Howard: Good morning, everyone, and thank you for the question. Can we just start with the marketing spend question? You said that the marketing spend was up significantly this quarter. How much is it up year-on-year? How do you expect that to play out over the course of the year? Is it going to stay similarly up for the remaining quarters?

Speaker #6: How much did it increase year-on-year? How do you expect that to play out over the course of the year? Is it going to set the stage similarly for the remaining quarters?

Speaker #4: Good morning, Alexia. Thanks for the question. From a media standpoint, in Q1 we were up modestly, not significantly. And we are expecting our media spend to be up low single digits throughout the year.

Dana McNabb: Good morning, Alexia. Thanks for the question. From a media standpoint, in Q1, we were up modestly in Q1, not significantly. We are expecting our media spend to be up low single digits throughout the year. What I am most excited about when it comes to media is just how we are modernizing our approach to marketing and communications. We have stood up a content studio that is allowing us to make more content faster and at higher quality. We have stepped up our use of influencers to maximize reach and engagement, almost doubled that. That will get even more used over the course of the year. We have brought on new creative agencies. Then we are also stepping up our readiness for agentic and really accelerating in e-commerce.

Speaker #4: But what I'm most excited about when it comes to media is just how we're modernizing our approach to marketing and communications. We have stood up a content studio that's allowing us to make more content, faster, and at higher quality.

Speaker #4: We have stepped up our use of influencers to maximize reach, and engagement almost doubled. That will get even more use over the course of the year.

Speaker #4: We've brought on new creative agencies and then we're also stepping up our readiness for agentic and really accelerating in e-commerce. So while media spend is up modestly, I think what is what I'm more encouraged by is just the work that we've done in order to show up to consumers in a more relevant way in culture.

Dana McNabb: While media spend is up modestly, I think what I am more encouraged by is just the work that we have done in order to show up to consumers in a more relevant way in culture.

Speaker #6: Perfect. Very helpful. And then as a follow-up, this is probably for Kofi. Where are we at with leverage at the moment? I know that your goal is to bring it down to three times net.

Alexia Howard: Perfect. Very helpful. As a follow-up, this is probably for Kofi. Where are we at with leverage at the moment? I know that your goal is to bring it down to 3x net debt to EBITDA. Will it tick up just because the EBITDA is obviously down year-on-year? How quickly do we expect that to come down towards that goal level? Thank you, and I will pass it on.

Speaker #6: That's either DAR, but will it tick up just because the EBITDA is obviously down year-on-year, and how quickly do we expect that to come down towards that goal level?

Speaker #6: Thank you and I'll pass it on.

Speaker #2: Yep, appreciate the question, Alexia. I would expect it will take us on pace with the combination of all the work we're doing on transformation savings.

Kofi Bruce: Yep. Appreciate the question, Alexia. I would expect it will take us on pace with the combination of all the work we are doing on HMM and transformation savings, at least a couple of years to work ourselves back to our target of 3x net debt to EBITDA, setting aside any impact from extraordinary items like, for example, divestitures, which we have in the course of the past couple of years used to help reduce leverage. So all things equal, we expect to make sequential progress over the next couple of years. I cannot give you an exact end date, but just know that in the back of our transformation goals through 2030 is our planned reduction back to target.

Speaker #2: At least a couple of years to work ourselves back to our target of three times net debt to EBITDA, setting aside any impact from extraordinary items like, you know, for example, divestitures—which we have, in the course of the past couple of years, used to help reduce leverage.

Speaker #2: So, all things equal, we expect to make sequential progress over the next couple of years. I can't give you an exact end date, but just know that, in the back of our transformation goals through 2030, is our planned reduction back to target.

Speaker #6: Thank you. And where are you at the moment? Is it a little over four?

Alexia Howard: Thank you. And where are you at the moment? Is it a little over four?

Speaker #2: Yeah. Yeah, just a touch.

Kofi Bruce: Yeah, just a touch.

Speaker #6: Thank you very much. I'll pass it on.

Alexia Howard: Thank you very much. I will pass it on.

Speaker #2: You bet.

Kofi Bruce: You bet.

Speaker #1: Your next question comes from the line of Scott Marks with Jefferies. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Scott Marks with Jefferies. Your line is open. Please go ahead.

Speaker #7: Hey, good morning all. Thanks very much for taking the questions. I wanted to ask first a little bit about the transformation initiatives. I think in the comments, you called out working with a partner to stand up a new packaging facility to help with some flexibility there.

Scott Marks: Hey, good morning, all. Thanks very much for taking the questions. Wanted to ask first a little bit about the transformation initiatives. I think in the prepared remarks, you called out working with a partner to stand up a new packaging facility to help with some flexibility there. Wondering if you can just give us a little more detail around that as well as share any other plans that you are currently working through and how we should be thinking about the benefits flowing through over the next few years. Thanks.

Speaker #7: Wondering if you can just give us a little more detail around that, as well as share any other plans that you're currently working through, and how we should be thinking about the benefits flowing through over the next few years.

Speaker #7: Thanks.

Speaker #4: Well, good morning, and thanks for the question. I think first, just stepping back, you'll remember in the prepared remarks that we committed to delivering $750 million of cost savings in this fiscal year, and $3 billion in total by fiscal '30.

Dana McNabb: Well, good morning, and thanks for the question. I think first, just stepping back, you will remember in the prepared remarks that we committed to delivering $750 million of cost savings in this fiscal year and $3 billion in total by fiscal 2030. How that breaks out is $2 billion of HMM and $1 billion of transformation. The way we are thinking about transformation is not just about cutting costs. It is about how do we get our organization to a place that is fit for future growth. Part of that will be reimagining our supply chain, and that is looking at capacity utilization, our manufacturing network logistics. Part of it is the example that you just called out in terms of what do we need to stand up in order to get at growth faster. Our way of doing packaging innovation today is quite inefficient.

Speaker #4: And how that breaks out is $2 billion of efficiency and $1 billion of transformation. And the way we're thinking about transformation is not just about cutting costs.

Speaker #4: It's about how we get our organization to a place that’s fit for future growth. Part of that will be reimagining our supply chain, and that’s looking at capacity utilization, our manufacturing network, logistics, and part of it is the example that you just called out in terms of what we need to stand up in order to get at growth faster.

Speaker #4: And so, our way of doing packaging innovation today is quite inefficient. We have just recently signed on a partner, an external partner, in order to help us get at more packaging innovation, more efficiently and effectively, and at a better pace.

Dana McNabb: We have just recently signed on a partner, an external partner, in order to help us get at more packaging innovation more efficiently and effectively and at better pace. That will allow us to accelerate our growth in e-commerce, where we know the majority of the food growth is going. We are still very early days. I do not have a lot more details to share with that, but I really like the approach the team is taking.

Speaker #4: And that will allow us to accelerate our growth in e-commerce, where we know the majority of the food growth is going. So we're still in very early days.

Speaker #4: I don't have a lot more details to share with that, but I really like the approach the team is taking.

Speaker #7: Appreciate the thoughts there. You know, next, I just wanted to ask a little bit about some of the price pack architecture initiatives. Specifically, you know, in the prepared remarks, you called out innovating cereal around, you know, lower entry price points as well as larger tubs and larger formats.

Scott Marks: Appreciate the thoughts there. Next, just wanted to ask a little bit about some of the price pack architecture initiatives. Specifically, in the prepared remarks, you called out innovating cereal around lower entry price points as well as larger tubs and larger formats. Are there any other areas of the business where you've been that active with making those changes?

Speaker #7: You know, are there any other areas of the business where you've been that active with making those changes, and have you seen similar results as you have with the cereal portfolio in NAR?

Jeff Harmening: As you have with the cereal portfolio in the arc. Thanks.

Scott Marks: As you have with the cereal portfolio in the NAR. Thanks.

Speaker #7: Thanks.

Speaker #4: Well, first, thanks for calling out the progress that you've seen in cereal. We're encouraged by the two-point improvement we saw in Q1 and the team has done a very good job with packaging innovation.

Dana McNabb: Well, first, thanks for calling out the progress that you've seen in cereal. We are encouraged by the 2-point improvement we saw in Q1, and the team has done a very good job with packaging innovation. We have the cups that allow us to have an opening price point for consumers. We have large sizes. We have bags. We are launching granola in tubs. All of this innovation just allows us to deliver unique benefits that the consumer is willing to pay for. I would say we have taken that approach across every business. As part of our strategic revenue management plans, what we do is we have to have a minimum 3-year pipeline of ideas, with price pack architecture. You will see that come in our salty snacks business, where we put our snacks in tubs, and that was highly incremental.

Speaker #4: We have the cups that allow us to have an opening price point for consumers. We have large sizes. We have bags. We are launching granola in tubs, and all of this innovation just allows us to deliver unique benefits that the consumer is willing to pay for.

Speaker #4: And I would say we've taken that approach across every business. As part of our strategic revenue management plans, what we do is we have to have a minimum of a three-year pipeline of ideas with price pack architecture.

Speaker #4: And so you will see that come in our salty snacks business, where we put our snacks in tubs, and that was highly incremental. You will see it come in our Pillsbury business, where we know single-family households that don't have a lot of kids are looking for portion sizes to be better.

Dana McNabb: You will see it come in our Pillsbury business, where we know single-family households that do not have a lot of kids are looking for portion sizes to be better, and we have launched unique innovation there. Old El Paso dinner for two, great innovation there. Really, I would say the team has applied this strategic principle across every category. It starts first with understanding what the consumer will value and then, figuring out how to launch it in a way that maximizes total consumer benefit.

Speaker #4: And we've launched unique innovation there: Old El Paso Dinner for Two. Great innovation there. And so, really, I would say the team has applied this strategic principle across every category.

Speaker #4: It starts first with understanding what the consumer will value and then figuring out how to launch it in a way that maximizes total consumer benefit.

Speaker #7: Appreciate it. We'll pass it on.

Scott Marks: Appreciate it. We will pass it on.

Speaker #1: Your next question comes from the line of Michael Labrie with Piper Sandler. Your line is open. Please go ahead.

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

Speaker #5: Thank you. Good morning. I just wanted to come back to some of the cost side and drill into wheat specifically. Obviously, we get your color on how it all rolls up into all the commodities, but how much are higher wheat costs impacting you?

Michael Lavery: Thank you. Good morning. Just wanted to come back to some of the cost side and drill into wheat specifically. How much are higher wheat costs impacting you? How covered are you in terms of maybe, how to think about if costs keep going up, when that might become a pain point and how conservative in your assumptions may be? I know in food service there is pass-through pricing for the flour, so maybe how much of a lift from wheat index pricing is there as well?

Speaker #5: How covered are you in terms of, maybe, how to think about if costs keep going up—when that might become a pain point? And how conservative are your assumptions?

Speaker #5: And I know in food service, there's pass-through pricing for the flour. So maybe, how much of a lift from wheat index pricing is there as well?

Speaker #2: Yeah, I appreciate the question. Wheat is a touch higher than our inflation expectations for the year. Obviously, it's part of the basket of things, along with freight and fuel, fats and oils, and maybe packaging, where we're seeing that incremental pressure that puts us at the higher end of the range.

Kofi Bruce: Yep. No, appreciate the question. Wheat is a touch higher than our inflation expectations for the year, obviously, as part of the basket of things, along with freight and fuel and fats and oils and maybe packaging, where we are seeing that incremental pressure that puts us to the higher end of the range. I would say broadly that on our food service business, this is a dollar margin neutral exercise where the wheat, or the flour that we sell on the market effectively is index priced, and changes on a pretty regular basis, roughly weekly, to market and is passed through straight just based on the commodity price. So that does have an inflationary impact. It has been about a low single-digit headwind the past year. We would expect that to be flipped to a tailwind this year in a roughly similar range of low single digits.

Speaker #2: You know, I would say broadly that on our food service business, this is a dollar-margin-neutral exercise, where the wheat or the flour that we sell on the market is effectively index-priced and changes on a pretty regular basis, roughly weekly.

Speaker #2: It went to market and was passed through straight, just based on the commodity price. So that does have an inflationary impact. It's been about a low single-digit headwind over the past year.

Speaker #2: We'd expect that to be flipped to a tailwind this year in a roughly similar range of low single digits. So, that is probably still roughly unchanged with a touch higher, but we were expecting that coming into the year.

Kofi Bruce: So that is probably still roughly unchanged or a touch higher, but we were expecting that coming into the year. I would expect, obviously, as we work our way through the year, we are mostly hedged on wheat, just similar to the rest of the commodity complex. We are about three-quarters hedged through the year and have visibility that far out, and obviously beyond that, then the spot and future prices become a little bit more inflationary in the back end of our year.

Speaker #2: I would expect, obviously, as we work our way through the year, we are mostly hedged on wheat, just similar to the rest of the commodity complex.

Speaker #2: We're about three-quarters hedged through the year and have visibility that far out. And, obviously, beyond that, the spot and future prices become a little bit more inflationary in the back end of our year.

Speaker #5: Okay, that's helpful. Thank you. Just one on the consumer and how to think about maybe an AI piece of it. There are things like Instacart's AI shopping list creator, and Kroger is doing similar things now.

Michael Lavery: Okay. That is helpful. Thank you. Just one on the consumer and just how to think about maybe an AI piece of it. There are things like Instacart's AI sort of shopping list creator, and Kroger's doing similar things now. It is all quite new, but in terms of just how consumers are making decisions and maybe not even getting to the physical shelf where point-of-sale activation is always important, how do you just think about making sure you do not miss opportunities there or you are kind of on the right side of getting picked by some of these AI-generated shopping lists, for example?

Speaker #5: It's all quite new, but in terms of just how consumers are making decisions and maybe not even getting to the physical shelf where point of sale activation is always important, how do you just think about making sure you don't miss opportunities there or your kind of on the right side of getting picked by some of these AI-generated shopping lists, for example?

Speaker #4: Well, thanks for the question. It is an important one. I think first let's start with e-commerce and omnichannel. We know that whether it's human food or pet food, e-commerce is driving the majority of the growth.

Dana McNabb: Well, thanks for the question. It is an important one. I think first let us start with e-commerce and omni-channel. We know that whether it is human food or pet food, e-commerce is driving the majority of the growth. We see that over 20% of sales in human food and at 30% in pet food, and we expect that to accelerate. We have really been focused on making sure that we have stood up the organization with the capabilities necessary to win there. So far in Q1, we saw our e-commerce positions improve even faster than bricks and mortar. As it relates to agentic, we are really working hard to stay ahead on that. We know just in this last month alone that 40% of consumers use an AI tool to make a purchase in food. Right now, who knows?

Speaker #4: We see that over 20% of sales are in human food, and at 30% in pet food. And we expect that to accelerate. We've really been focused on making sure that we have stood up the organization with the capabilities necessary to win there.

Speaker #4: And so far in Q1, we saw our e-commerce positions and our performance improve even faster than bricks and mortar. As it relates to agentic, we are really working hard to stay ahead on that.

Speaker #4: We know that, just in this last month alone, 40% of consumers used an AI tool to make a purchase in food. And right now—I mean, who knows—but our early estimates are that agentic commerce will be about 20% of food sales by 2030.

Dana McNabb: But our early estimates are that agentic commerce will be about 20% of food sales by 2030, so it is really about making sure that we are staying ahead on the basics. That is about making sure that our products are discoverable. It is making sure that the information is accurate and that they are easy to buy. If we focus on those three areas first, we will stay ahead. But again, it is still very early in the agentic space, and we have lots to learn.

Speaker #4: And so it's really about making sure that we are staying ahead on the basics. That's about making sure that our products are discoverable.

Speaker #4: It's making sure that the information is accurate, and that they're easy to buy. And if we focus on those three areas first, we will stay ahead.

Speaker #4: But again, it is still very early in the agentic space, and we have lots to learn.

Speaker #5: Really helpful. Thank you.

Michael Lavery: Very helpful. Thank you.

Speaker #1: Your next question comes from the line of Nick Modi with RBC Capital Markets. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Nik Modi with RBC Capital Markets. Your line is open. Please go ahead.

Speaker #6: Thank you. Good morning, everyone. Kofi, maybe I could just do a quick clarification on the inflation basket. When you think about the ag complex, given everything that's going on with fertilizer costs and the super El Niño, I would just love your thoughts on how we should be thinking about that, or how you're thinking about that.

Nik Modi: Thank you. Good morning, everyone. Tilfy, maybe I could just do a quick clarification on just the inflation basket. When you think about the ag complex, just given all that is going on with fertilizer costs and the super El Niño, I just would love your thoughts on kind of how we should be thinking about that or how you are thinking about that over the next kind of 12 to 18 months. I know you are not going to get into full-year guidance, but just wanted to get your thoughts on how you see the implications. Then I just have a bigger picture question on pet.

Speaker #6: Over the next 12 to 18 months, I know you're not going to get into forward guidance, but I just wanted to get your thoughts on how you see the implications.

Speaker #6: And then I just have a bigger picture question on pet.

Speaker #2: Yeah, it's a fair ask. Without getting too specific, what I would tell you is fertilizer costs, given where we are in the planting cycle, are more likely to be a headwind and affect crop planting decisions as you go into late spring next year.

Kofi Bruce: Yeah. No, it is a fair ask. Without getting too specific, what I would tell you is, fertilizer costs, given where we are in the planting cycle, more likely to be a headwind and affect crop planting decisions as you go into late spring next year, next calendar year. So that would be the place where, as farmers are making trade-off decisions about their input costs, they might switch to lower fertilizer reliant crops such as soybeans, and swap out of grains, which obviously that affects the supply of some of the grain complex which are more fertilizer reliant. So I would expect that is how it plays out, and that you would start to see that pressure show up maybe with more clarity as we work our way through and into the calendar year next year.

Speaker #2: Next calendar year. So that would be the place where, as farmers are making trade-off decisions about their input costs, they might switch to lower fertilizer-reliant crops such as soybeans and swap out of grains. Obviously, that affects the supply of some of the grain complex, which are more fertilizer reliant.

Speaker #2: So I would expect that's how it plays out and that you'd start to see that pressure show up, maybe with more clarity, as we work our way through and into the calendar year next year.

Speaker #6: Great, super helpful. And then, Jeff, Dana, maybe on just pet—there's obviously some macro dynamics going on. People are feeling some pressure, and vet appointments are down year over year.

Nik Modi: Great. Super helpful. Jeff, Dana, maybe on just pet. There are obviously some macro dynamics going on, people feeling some pressure, vet appointments are down year-over-year. There is also, I think, some structural dynamics that I would love to get your thoughts on, which is, you have where a lot of the margin sits, big dogs, obviously, many of them are passing away. The older consumers that own them are not replacing them. The younger consumer is taking on smaller pets like cats and smaller dogs. Just curious on your thoughts about that, just general viewpoint and how you can manage the business over time to protect margins and capitalize on growth in the smaller segment.

Speaker #6: But there's also, I think, some structural dynamics that I'd love to get your thoughts on, which is, you have where a lot of the margins— that's big dogs, obviously, many of them are passing away, right?

Speaker #6: And the older consumers that own them are not replacing them. And the younger consumer is taking on smaller pets, like cats and smaller dogs.

Speaker #6: So, just curious on your thoughts about that—just your general viewpoint—and how you can manage the business over time to kind of protect margins and capitalize on growth in the smaller segment.

Speaker #2: Yeah, Nick, this is Jeff. Let me take that one. I think I would start off by saying that the biggest trend in pet food is the same one that it has been for the last couple of decades—which is humanization.

Jeff Harmening: Nick, this is Jeff. Let me take that one. I think that I would start off by saying that the biggest trend in pet food is the same one that it has been for the last couple of decades, which is humanization. Which is why we are really thrilled with the development of Love Made Fresh and how that has worked. Why we bought Tiki Cat, and that has grown double digits since we bought it. Again, it is growing strongly this year, and we just gained distribution on that one. That is really taking off, and we even have our treat business back to growth, and we have a good fall lineup of innovation on that. I think that the biggest trend as we think about what is going to drive our business forward is this humanization trend.

Speaker #2: Which is why we're really thrilled with the development of Love Made Fresh and how that's worked, why we bought Tiki Cat, and that's grown double digits since we bought it.

Speaker #2: And again, it's growing strongly this year, and we're just getting distribution on that one, so that's really taking off. And we even have our treat business back to growth, and we've got a good fall lineup of innovation on that.

Speaker #2: And so, I think that the biggest trend, as we think about what's going to drive our business forward, is the humanization trend. And Dana mentioned briefly some innovation we have coming on Life Protection Formula in the second half, and that'll hit on that trend as well.

Jeff Harmening: Dana mentioned briefly, some innovation we have coming on Life Protection Formula in the second half, and that will hit on that trend as well. We feel great about that. As you say, in the short term, there is a shift in dynamics in that there are fewer dogs being purchased than there were before. There are smaller dogs rather than larger dogs. Blue Buffalo actually over-indexes to smaller dogs, and so we will see how that plays out. There are more cats, and certainly as people return back to the office and the economics of cat works out. We have a strong cat business. As I mentioned, Tiki Cat. Dana referenced Tastefuls earlier that one time was a headwind for us, but we have kind of redone all the pieces of the Remarkability Framework and got that going again.

Speaker #2: So, we feel great about that. As you said, in the short term, there's a shift in dynamics in that there are fewer dogs being purchased than there were before.

Speaker #2: And there are smaller dogs rather than larger dogs. And we actually, Blue Buffalo actually over-indexes to smaller dogs. And so we'll see how that plays out.

Speaker #2: But there are more cats. And that, certainly, as people return back to the office and the economics of cat works out, we have a strong cat business—as I mentioned, Tiki Cat.

Speaker #2: Dana referenced Tastefuls earlier—that at one time was a headwind for us—but we've kind of redone all the pieces of the Remarkability Framework and got that going again.

Speaker #2: And so as we think about our pet business, we're encouraged by the start to the year. There is work to do, certainly, on Wilderness.

Jeff Harmening: As we think about our pet business, we are encouraged by the start to the year. There is work to do certainly on Wilderness. We do not deny that, but we feel as if we have got good offerings and we see some momentum in places where pet humanization is taking place and where we like our innovation for the second half of the year.

Speaker #2: So, we don't deny that. But we feel as if we've got good offerings, and we see some momentum in places where pet humanization is taking place, and where we like our innovation for the second half of the year.

Speaker #6: Great, thanks. I'll pass it on.

Nik Modi: Great. Thanks. I will pass it on.

Speaker #7: Thank you. We have time for one more, Warren.

Jeff Siemon: I think we have time for one more, Warren.

Speaker #1: Understood. Thank you. Your next question comes from the line of Matt Gumfort with BNP Paribas. Your line is open. Please go ahead.

Operator: Understood. Thank you. Your next question comes from the line of Max Gumport with BNP Paribas. Your line is open. Please go ahead.

Speaker #8: Hey, thanks for the question. Last year during the back half of the fiscal year, you observed consumers waiting to buy on promo, which brought along a higher cost to compete in.

Max Gumport: Hey, thanks for the question. Last year, during the back half of the fiscal year, you observed consumers waiting to buy on promo, which brought along a higher cost to compete. I am just curious for what the latest is on that front and to what degree that could present an easy comparison for the H2 of this fiscal year if you have seen some relief there. Thanks very much.

Speaker #8: Just curious what the latest is on that front, and to what degree that could present an easy comparison for the second half of this fiscal year, if you've seen some release there.

Speaker #8: Thanks very much.

Speaker #4: Yeah, thanks for the question. I think this all stems from the fact that we still see the consumer being very stressed, especially the middle- and lower-income consumer.

Dana McNabb: Yeah, thanks for the question. I think this all stems from the fact that we still see the consumer being very stressed, especially the middle and lower income consumer. How that translates into behaviors is, yes, they are still waiting to buy products on sale rather than waiting to buy them on everyday shelf price. We haven't seen that accelerate. We'd say it's pretty similar to what we saw in the back half of last fiscal. When we set our guidance for this year, we assumed that would continue throughout the fiscal year.

Speaker #4: And how that translates into behaviors is, yes, they are still waiting to buy products on sale, rather than buying them at the everyday shelf price.

Speaker #4: We haven't seen that accelerate. We'd say it's pretty similar to what we saw in the back half of last fiscal. And so, when we set our guidance for this year, we assumed that would continue throughout the fiscal year.

Speaker #8: Okay, great. And just to follow up on pricing: clearly, last year was all about reducing base prices to get them in a better place.

Max Gumport: Okay, great. Just to follow up on pricing. Clearly, last year was all about reducing base prices to get them in a better place. You've signaled this year that you'll leave your list prices largely untouched. Obviously, you will leverage to some degree innovation, renovation, price pack architecture, and other strategic revenue initiatives to get some positive mix out of the business. Plenty of your peers are discussing list price increases that we might see as soon as next month. To what degree are you factoring in potential market share gains that could come as a consumer shifts from businesses where there has been pricing taken to businesses like yours where there are stable list prices? Thanks very much.

Speaker #8: You've signaled this year that you'll leave your list prices largely untouched. Obviously, you will leverage, to some degree, innovation, renovation, price pack architecture, and other strategic revenue initiatives to get some positive mix of the business.

Speaker #8: But plenty of your peers are discussing list price increases that we might see as soon as next month. To what degree are you factoring in potential market share gains that could come as the consumer shifts from businesses where there has been pricing taken to businesses like yours, where there are stable list prices?

Speaker #8: Thanks very much.

Speaker #4: Well, as you mentioned, we really focused on improving our base prices last year to bring more value to consumers, and we saw it worked.

Dana McNabb: Well, as you mentioned, we really focused on improving our base prices last year to bring more value to consumers, and we saw it worked. Our base stabilized, our penetration grew. As you rightly pointed out, the environment is more inflationary, so we operate in 25 categories. Each one requires a specific set of actions. So what we do is we use the Remarkability Framework. We'll assess the price value relative to the competition, and we'll continue to adapt as the environment adapts. That's where the talks through our strategic revenue management toolkit is really important because we will lean in mix. That's the primary lever we want to use. We'll also continue to evaluate both trade and list pricing going forward.

Speaker #4: Our base stabilized, our penetration grew, but as you rightly pointed out, the environment is more inflationary. We operate in 25 categories, and each one requires a specific set of actions.

Speaker #4: So what we do is use the remarkability framework, assess the price-value relative to the competition, and continue to adapt as the environment adapts.

Speaker #4: And that's where, as I talked about, our strategic revenue management toolkit is really important. Because we will lean in on mix. That's the primary lever we want to use.

Speaker #4: But also, we'll continue to evaluate both trade and list pricing going forward.

Speaker #2: And I would say just to add on to what Dana said, as we think about the momentum for the rest of the year, and she talked about our continuing momentum, the thing I'm most excited about really is that having got our prices in line is the rest of the elements of the remarkability framework.

Jeff Harmening: I would say, just to add onto what Dana said, as we think about the momentum for the rest of the year, she talked about our continuing momentum. The thing I'm most excited about really is that having got our prices in line is the rest of the elements of the Remarkability Framework, particularly our innovation and renovation on our core. Our Pillsbury business, 70% of it is being renovated, and we've got really good innovation in Q2. We talked about Life Protection Formula and the good innovation we have coming on that, as well as distribution increases on Tiki Cat. The marketing on Big G has been phenomenal. Lucky Charms is back to growth, Reese's Puffs is back to growth, and Cinnamon Toast Crunch is back to growth. That has nothing to do with pricing.

Speaker #2: Particularly our innovation and renovation on our core. I mean, our Pillsbury business, 70% of it is being renovated. We've got really good innovation in the second quarter.

Speaker #2: We talked about the Life Protection formula and the good innovation we have coming on that, as well as distribution increases for Tiki Cat. The marketing on Big G has been phenomenal.

Speaker #2: I mean, Lucky Charms is back to growth, and Reese's Puffs is back to growth, and Cinnamon Toast Crunch is back to growth. And that has nothing to do with anything related to pricing.

Speaker #2: It has to do with really good marketing and really good product news. And so, as I look at the rest of the year, while I'm encouraged by the first quarter, I'm also encouraged by what we're doing on the rest of the elements of the remarkability framework that don't tie back to value.

Jeff Harmening: It has to do with really good marketing and really good product news. As I look at the rest of the year, while I am encouraged by the Q1, I am also encouraged by what we are doing on the rest of the elements of the Remarkability Framework that don't tie back to value. Whether it is more protein, as you talked about, whether it is bold flavors, whether it is more fun on certain categories. That is what got me excited about our ability to compete increasingly effectively as the year goes on.

Speaker #2: And whether it's more protein, as you talked about, whether it's bold flavors, where it's more fun on certain categories. So that's what got me excited about our ability to compete increasingly effectively as the year goes on.

Speaker #7: All right, I think that's a good place to start.

Jeff Siemon: All right. I think that is a good place to end it.

Jeff Harmening: Great. Thank you very much. I will leave it there.

Max Gumport: Great. Thank you very much. I will leave it there.

Speaker #8: I'll leave it there.

Speaker #7: Thanks, Max. And Warren, I think we can wrap it up here.

Jeff Siemon: Thanks, Max and Warren. I think we can wrap it up here.

Speaker #1: Thank you. We have reached the end of the question-and-answer session. I will now turn the call back to Jeff Seaman for closing remarks.

Operator: Thank you. We have reached the end of the question and answer session. I will now turn the call back to Jeff Siemon for closing remarks.

Speaker #7: All right, Warren. Thank you. I appreciate everybody's good interest and discussion this morning. The IR team is available throughout the day for anyone who has follow-ups.

Jeff Siemon: All right, Warren, thank you. Appreciate everybody's good interest and discussion this morning. The IR team is available throughout the day for anyone that has follow-ups. We look forward to continuing to show good traction as we go through the rest of the year. Have a great day, everyone.

Speaker #7: We look forward to continuing to show good traction as we go through the rest of the year. Have a great day, everyone.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.