The operator welcomes participants to the General Mills Fourth Quarter Fiscal 2024 Earnings Conference Call. The call will include a question-and-answer session and will be recorded. The Vice President of Investor Relations and Treasurer introduces the speakers and reminds listeners of potential forward-looking statements. The CFO and CEO are present to answer questions. The first question is from Ken Goldman regarding the dynamics in International and the potential impact on volume and price-mix.

Kofi Bruce, in response to a question from Kenneth Goldman, explains that the decline in International sales in Q4 was due to a reclassification and difficult market conditions in Brazil and China. He also mentions that Q1 results are expected to be lower due to increased investments and a tough comparison to the previous year's strong performance. Andrew Lazar from Barclays is the next to ask a question.

Jeffrey Harmening, CEO of General Mills, discusses the company's mission to improve value for consumers and drive better volume results through reinvestment. He mentions that the company plans to optimize price points and increase coupon spending by 20% in order to improve competitiveness. The company saw an improvement in category performance in the fourth quarter of the previous fiscal year, and Harmening attributes this to the lapping of pricing from a year ago, lapping of SNAP benefits, and better on-shelf availability of private-label and smaller brands. The company's focus now is to increase competitiveness in the face of higher inflation.

The company is focused on creating value for consumers in a macroeconomic environment with inflation. They plan to increase spending on brand communication and have seen success in pet food and cereal categories. They have new advertising and taste news for their products and are sponsoring the Olympics in many countries. The company is confident in their brand investment and believes taste is crucial in their categories.

The company is focused on creating great-tasting products and investing in new product development, with a 40% increase in new product activity. They are also increasing coupon spending and targeting effectively with first-party data. Some price points may need to be adjusted, but the company is confident in their ability to create value for consumers. There is also potential for gross margin flexibility to reinvest in the future.

During a recent conference call, Kofi Bruce and Jeff Harmening of General Mills discussed the company's plans for reinvestment and the potential impact on gross margins for the full year. When asked if the company's guidance for fiscal year 2025 was low enough, Bruce and Harmening stated that they have enough flexibility to see a modest amount of gross margin expansion despite the increased investment. They also acknowledged the current volatility and uncertainty in the market but did not indicate a desire to increase their guidance at this time.

The speaker discusses how the market has been evolving and how they have prepared for potential volatility. They express confidence in their marketing support and new products, and expect to improve their volume performance in the coming year. They also mention their commitment to competitiveness and reinvesting in growth. The speaker cannot speak for competitors, but believes everyone is looking for more growth.

The speaker discusses the current rational environment in which there is some inflation, but it is expected to remain rational. Promotional spending has increased slightly compared to the previous year, but is back to pre-pandemic levels. The company will focus on creating value for consumers through marketing and product news. In terms of price and volume contributions, the company expects them to be roughly equal throughout the year and across all business segments.

The speaker discusses the importance of price mix and volume growth across different segments. They mention opportunities for improvement in foodservice and the impact of pricing in the first quarter of the previous fiscal year on the current year's first quarter. They expect gradual improvement in sales and profitability throughout the year, with the first quarter being the toughest. They also mention challenges in Brazil and China and their expected contribution in the year ahead.

Jeff Harmening, CEO of General Mills, discusses the company's expectations for volume improvement in all segments, particularly in Brazil, China, EU, AU, and GEMS markets. He also addresses concerns about the company's ready-to-eat cereal segment, stating that they have seen rational pricing behavior and are focused on their own game and improving their core brands. They have had success with new product innovation and have more planned for the second half of the year.

The speaker discusses the company's plans for growth in the back-to-school season, including a program with Box Tops and new products. They also mention the importance of returning to core growth and improving innovation. In response to a question, they suggest that organic sales growth may have been affected by inventory reductions and trade accrual, but measured retail sales have remained consistent.

In the fourth quarter of the year, there was a modest decline in retailer inventory for NAR and Pet, resulting in a net tailwind. There was also an adjustment in net sales to COGS in Brazil, causing a drag on earnings. Overall, there was about five points of drag from these factors. In NAR, trade expense comparisons and retailer inventory adjustments had a significant impact, while Pet saw headwinds from trade expenses and SKU losses. The company's capital allocation priorities prioritize M&A over share repurchases, and the decline in share count for the year takes into account the use of free cash flow for share repurchases. The company's M&A criteria and appetite for deals of various sizes have remained consistent.

The speaker discusses the company's plans for allocating investment capital, which includes internal growth, increasing dividends, and potential M&A opportunities. They mention that M&A is not a regular part of the plan, but the company remains open to opportunities that align with their strategic priorities and can add value and improve margins. They also mention their strong filters for evaluating potential M&A opportunities and their disciplined approach to investing.

The speaker is discussing the profitability of the company's Pet segment, which remained strong despite a decline in volume. The speaker credits this to a more stable supply chain and increased investment in the wilderness brand. They also mention a focus on driving improved volume trends and reinvesting gross margin improvement back into the business. The CEO praises the Blue Buffalo team for restoring the margin profile and mentions that margins over the past year have been around 20%.

The company's focus is now on improving their top-line performance without relying on volume leverage. They plan to double down on their Life Protection Formula and Tastefuls cat business, which has already shown growth after increased advertising. The next focus is on their wilderness line, which will receive advertising in July. The goal is to get Blue Buffalo back to growth, which will help maintain good margins while increasing top-line performance. There have been some distribution losses in the Pet division, but they are not significant and are expected to improve in the coming year.

David Palmer from Evercore ISI asks about the Specialty Pet segment and its impact on revenue growth in fiscal year 2025. CEO Jeffrey Harmening acknowledges the segment's drag on performance, but expresses confidence in improving it through better performance and collaboration with retailers. Palmer also asks about the Baking segment, which saw a decline in the current quarter despite its success during COVID. Harmening remains optimistic about the segment's future and its high-margin potential.

Jeffrey Harmening, CEO of a food company, discusses the performance of the At-Home occasions category, which has seen a high percentage of food consumed at home due to inflation and challenges faced by consumers. He does not see a drag on category performance and mentions that the volume of the category has remained steady. However, the company's share position, particularly in the Pillsbury brand, has been challenged due to the return of private-label products. Harmening shares that the company has plans to improve the Pillsbury business, including bringing back the Doughboy and introducing product and taste improvements. He believes that the company has the ability to return to growth in the Pillsbury brand and is confident in their plans.

Jeffrey Harmening, the CEO of a CPG company, discusses the strategy of premiumization and convenience to create value and improve margins. He believes that it is possible to do both at the same time and that there is no trade-off between volume and premiumization. He gives examples of successful premium offerings, such as Blue Buffalo and Pillsbury, and emphasizes the importance of good marketing and messaging for these brands. While the company's volumes were down, Harmening believes that premiumization can still be achieved. He also clarifies that value is not just about price, but also about the brand itself.

The speaker discusses the importance of volume and premiumization in the current economic environment, and how the company is focused on increasing both. They also mention that gross margins may be down in the first quarter due to increased couponing, but they expect them to improve as the year progresses. The speaker also mentions that the company is anticipating an acceleration in sales, and attributes this to factors such as SRM, couponing, and other initiatives.

The speaker discusses the expected decrease in complexion for Q1 and the use of SRM toolkit to address this. They mention the focus on price and mix, but cannot provide specific details. They also mention that prices have been less of a driver of sales this year and they will continue to use the SRM toolkit in its entirety next year. The call is then concluded.

This summary was generated with AI and may contain some inaccuracies.