Alexia Howard

Alexia Howard followed up on the SD&A line, asking if the Q3 trend of lower marketing/distribution but higher selling expenses signals a continuation or normalization. She also inquired about the pace of innovation, specifically new products as a percentage of sales, and if the company is meeting its targets.

Answer

CFO Tucker Marshall clarified that Q3 SD&A savings were due to timing and supported EPS over-delivery, with no substantial additional savings expected for Q4 due to top-line softness from the Emporia fire. CEO Mark Smucker confirmed that innovation is performing very well, driven by closer-in initiatives across pet, Hostess, Bustelo, and Uncrustables, and that the proportion of sales from new products is in line with expectations.

Alexia Howard asked for an update on Uncrustables trends, noting total company growth versus slower retail growth, and how the business is approaching its $1 billion revenue target. She also inquired about the SG&A line, specifically if lower marketing/distribution and higher selling expenses signal a continuation of this trend. Additionally, she asked about the pace of innovation, new products as a percentage of sales, and if the company is where it wants to be on the innovation front.

Answer

CEO Mark Smucker expressed continued confidence in Uncrustables as a key growth driver, citing distribution gains in away-from-home and C-store channels, new household additions, brand expansion, strong merchandising, marketing, and innovation. He noted the brand remains the category leader despite expansion by store brands. CFO Tucker Marshall explained that SG&A trends were largely driven by savings and timing in Q3, supporting EPS over-delivery, with no substantial additional savings expected in Q4. Mark Smucker confirmed that innovation is performing very well, driven by consumer insights and 'closer-in' innovation, and the proportion of sales from new products is in line with expectations.

Alexia Howard asked about the pace of innovation, seeking quantification (e.g., percentage of sales from new products) and identifying any areas where further acceleration is desired. She also questioned how quickly the company expects to reduce its net debt to EBITDA leverage from above four times to the target of three times by the end of 2027.

Answer

Mark Smucker, Chief Executive Officer and Chair of the Board, confirmed that the pace of innovation has accelerated across Hostess, pet, and Uncrustables, expressing pride in the speed to market. Tucker Marshall, Chief Financial Officer, stated a commitment to $975 million in free cash flow generation this fiscal year, supporting $500 million in debt repayment. He anticipates leverage will hover around four times through fiscal 2026, then begin to step down toward three times in fiscal 2027.

Alexia Howard asked about the pace of innovation, whether it has been accelerating, if it can be quantified (e.g., % of sales from new products), and if the current pace meets the company's desired level across the portfolio. She also inquired about the company's leverage, which has been above four times net debt to EBITDA, and how quickly it is expected to come down towards the three times target by the end of 2027.

Answer

Mark Smucker, CEO and Chair of the Board, confirmed that the pace of innovation has accelerated across Hostess, pet snacks, and Uncrustables, expressing pride in the speed to market and expecting a faster turnaround from pet and human snacks. Tucker Marshall, Chief Financial Officer, stated the company is committed to $975 million in free cash flow generation and $500 million in debt repayment this fiscal year, with an additional $500 million in fiscal 2027. He anticipates leverage to hover around four times through fiscal 2026, then begin to step down towards three times in fiscal 2027.

Alexia Howard from Bernstein asked if the company is pursuing tariff exemptions for coffee as a mitigating activity. She also questioned if there has been any discernible impact from GLP-1 drugs on the Hostess business and if there are concerns about future pressure from new pill versions.

Answer

CEO Mark Smucker responded that while the company advocates through industry associations, there is nothing to report regarding tariff relief at this time. On GLP-1s, Smucker stated that after monthly reviews, they still see no meaningful impact on their categories. He noted that consumers still seek small, indulgent rewards and the portfolio is well-positioned with various portion sizes and options to meet evolving consumer needs.

Alexia Howard inquired about the strength of the company's innovation pipeline, asking how the reported $100 million from recent launches compares to historical levels. She also asked how factors like GLP-1 drugs, health trends, and SNAP spending cuts are impacting the diagnosis and management of the Hostess business.

Answer

CEO & Chair of the Board Mark Smucker stated that $100 million in sales from one year of innovation is very strong, noting historical metrics were often cited over a three-year period. Regarding external pressures, he emphasized that snacking remains important and the company's strategy is to focus on consumer choice and options, including different portion sizes.

Alexia Howard questioned whether the decline in Hostess sales was due to temporary price elasticity or a more permanent shift in consumer demand, potentially from GLP-1 drugs. She also asked about the drivers of the sales decline in Jif and fruit spreads.

Answer

CEO Mark Smucker stated that data does not show a material impact from GLP-1s on the category, attributing the Hostess decline to a cautious consumer and internal executional missteps. For Jif and spreads, he explained the Jif decline was a matter of timing after a strong first half, while fruit spreads are seeing increased marketing to combat recent competitive activity.

Alexia Howard asked for evidence that the Hostess slowdown is temporary and not a permanent demand shift due to factors like GLP-1s. She also inquired about the cause of sales declines in the Jif and fruit spreads brands.

Answer

CEO Mark Smucker asserted that data does not show a material impact from GLP-1s, attributing the Hostess slowdown to a cautious consumer and internal execution issues. For Jif, he explained the Q3 softness was a matter of timing after a very strong first half. For fruit spreads, he cited competitive activity and noted that the company is increasing marketing support to stabilize the brand.

Alexia Howard asked how the company is gathering data and developing strategies to address the rise of GLP-1 weight-loss drugs and sought clarity on the financial impact and timing of the Voortman divestiture.

Answer

CEO Mark Smucker stated that while the company is actively researching GLP-1 trends, it has seen no material impact to its business and views it as an innovation opportunity. CFO Tucker Marshall explained the Voortman divestiture will have a $0.10 EPS impact this year based on a mid-Q3 close, with the $300 million in proceeds used for debt paydown, making the net effect on guidance immaterial.

Alexia Howard asked how the company is gathering information and developing strategies to address the growing trend of GLP-1 weight loss drugs. She also requested details on the timing and earnings impact of the Voortman divestiture.

Answer

CEO Mark Smucker stated that while the company is closely monitoring GLP-1 trends through ongoing research, it has seen no material impact on its business to date. He emphasized the company's history of adapting to diet trends through innovation in areas like portion size and sugar reduction. CFO Tucker Marshall clarified the Voortman divestiture is expected to close mid-Q3, with a full-year EPS impact of $0.25 and a current-year impact of $0.10, which will be partially offset by using proceeds for debt paydown.

Alexia Howard asked for Hershey's views on why price elasticity trends appear worse in international markets compared to the U.S., and the underlying differences between the two markets and their consumers.

Answer

CEO Kirk Tanner explained that the U.S. category is highly unique, with strong brand differentiation, variety, and mainstream affordability (75% of the portfolio under $4). In contrast, Europe has a high concentration of chocolate tablet bars, significant private label impact, and skews premium. SVP and CFO Steve Voskuil added that Hershey's international portfolio, being premium and having limited scale, naturally experiences higher elasticity.

Alexia Howard asked for views on why price elasticity trends seem worse in international markets compared to the U.S.

Answer

Kirk Tanner (President and CEO) reiterated that the U.S. category is highly unique with more brand differentiation, variety, and higher market share for top players, contrasting with Europe's high chocolate tablet bar market and private label impact. He emphasized the relative affordability and mainstream skew of the U.S. category (75% of portfolio under $4). Steve Voskuil (SVP and CFO) added that Hershey's premium market positioning and limited scale in international markets contribute to higher elasticity there.

Alexia Howard asked about the performance of the C Store channel, noting its recovery over the last few months and inquiring about its current strength. She also asked if the company could provide numbers around innovation, such as the percentage of sales from new products introduced over the last year or three years, and how that has ramped over time, given a perceived drop-off after the pandemic.

Answer

CEO Kirk Tanner expressed passion for the convenience channel, noting CMG is performing at +6% and highlighting the company's hyper-focus on execution, gold standard merchandising, innovation pipeline, and tentpole moments. He emphasized the importance of consistent innovation balanced with the core business, citing Reese’s Oreo's success in co-merchandising with core brands to elevate the entire portfolio.

Alexia Howard asked about the performance of the C-Store channel, inquiring if its recovery over the last few months was still going strongly. She also asked if Hershey could provide numbers around innovation, such as the percentage of sales from new products introduced over the last year or three years, and how that has ramped over time, noting a perceived drop-off after the pandemic.

Answer

President and CEO Kirk Tanner expressed passion for the convenience channel, noting CMG is performing at +6% and highlighting opportunities for stronger execution through gold standard merchandising and an innovation pipeline. He emphasized the importance of consistent innovation balanced with core business, citing REESE’S OREO's success in elevating core brands through co-merchandising. He stressed that innovation is critical and, when it helps build core brands, puts the company in a much better place.

Alexia Howard asked about the pace of innovation and whether it has reached the desired level. She also inquired about potential 2026 demand headwinds from GLP-1 drugs and SNAP benefit reductions.

Answer

Chairman, President & CEO Michele Buck confirmed that innovation has been significantly dialed up and is at a 'good stride' to compete for shelf space. Regarding headwinds, she stated that Hershey sees no material impact from GLP-1s and does not expect a significant one in 2026. Similarly, the planned SNAP rollout is not expected to have a material impact in 2026-2027.

Alexia Howard from Bernstein asked about the pace of innovation and whether it has reached the desired level. She also inquired about potential 2026 demand headwinds from GLP-1 drugs and changes to SNAP benefits.

Answer

Chairman, President & CEO Michele Buck confirmed that innovation as a percent of net sales is up significantly versus 2019, hitting a good stride to compete for shelf space and deliver value. She stated that Hershey sees no material impact from GLP-1s in 2025 and is not expecting a significant impact in 2026. Regarding SNAP, she noted the current rollout plan is not expected to have a material impact in 2026-2027.

Alexia Howard asked about the pace of innovation, whether it has reached the desired level, and how the company is thinking about potential headwinds in 2026 from GLP-1 drugs and changes to SNAP benefits.

Answer

Chairman, President & CEO Michele Buck confirmed that innovation as a percent of net sales is up significantly versus 2019, reaching a good stride to compete for shelf space and deliver value. Regarding headwinds, she stated Hershey sees no material impact from GLP-1s in 2025 and is not expecting a significant impact in 2026. Similarly, the company does not expect a material impact from the slated SNAP changes in 2026 or 2027 but is monitoring it for future planning.

Alexia Howard asked for more precise timing on the major Reese's innovation planned for the fall and requested quantification of the sales proportion containing additives that may face future bans.

Answer

CEO Michele Buck stated the Reese's innovation will hit in the fall, with confidence in its scale based on consumer research. She identified the sweets, some refreshment, and coated chocolate portfolios as those most affected by additive regulations but noted they feel good about compliance.

Alexia Howard inquired about the drivers of Dymatize's international growth and its domestic share trends following a favorable Consumer Reports article.

Answer

Paul Rode, CFO, highlighted Dymatize International's strong performance across various global markets due to effective management and distributor partnerships, noting a potentially less intense competitive landscape internationally. Darcy Davenport, President and CEO, added that Dymatize's US share trends are flat, growing with the category, but facing headwinds from high whey pricing, which has led to reduced support to manage the P&L.

Alexia Howard asked about the drivers of Dymatize's international growth, which has been higher than expected, and the domestic share trends following a favorable Consumer Reports article regarding heavy metals.

Answer

CFO Paul Rode attributed Dymatize International's strong performance to a great management team, distributor partners, and a less intense competitive landscape compared to the US. President and CEO Darcy Horn Davenport added that Dymatize's US share trends are relatively flat, growing with the category, but the brand faces challenges from high whey pricing, which has led to reduced support to manage the P&L.

Alexia Howard inquired about pricing expectations, specifically the balance between price and volumes embedded in the guidance, considering a Dymatize price increase and potential downward pressure on pricing from increased promotional activity across the rest of the portfolio.

Answer

CFO Paul Rode stated that Premier Protein expects a low single-digit pricing headwind due to stepped-up trade investments, partially offset by favorable mix. For Dymatize, a price increase is planned, but mix effects from RTD shakes may make the overall pricing appear negative. Overall, BellRing expects a low single-digit pricing headwind.

Alexia Howard followed up by asking if Tyson had quantified the net savings from the beef plant closure and shift reduction, seeking to understand its effect on the segment's future profitability.

Answer

COO Devin Cole directed to the full-year guidance, stating that all quantifiable impacts are baked into it. He noted that the transition to the new footprint was recently completed, and the company aims to increase capacity utilization and operational benchmarks, but did not provide specific numbers.

Alexia Howard requested an update on heifer retention in the beef industry, seeking signals in the marketplace regarding the beginning of a beef cycle resolution and whether it is expanding.

Answer

COO Devin Cole reported that the USDA's annual report indicated the smallest herd since 1951, 9% lower than 2019, confirming continued tight cattle availability. He noted early signs of a rebuild, with replacement heifers up 1% and beef cow slaughter down 17.7% in 2025, but cautioned that cattle will remain extremely tight as the herd rebuilds. He also mentioned that the post-cycle herd is expected to be smaller than historical numbers, emphasizing the rationale behind Tyson's recent harvest footprint changes. Alexia Howard then asked for quantification of the net savings from the beef plant closure and shift reduction and its effect on segment profitability. Devin Cole directed her to the full-year guidance, stating that all quantifiable impacts are baked in, and that the company aims to increase capacity utilization and operational benchmarks, but did not provide specific numbers as the transition was recently completed.

Alexia Howard asked about the key uncertainties for fiscal year 2026, specifically prioritizing the top two or three factors that could positively or negatively impact Tyson Foods' forecast, considering consumer struggles and commodity volatility. She also inquired about any observed impact from delays or disruptions in SNAP benefit payouts on Prepared Foods' Q1 results.

Answer

Chief Growth Officer Kristina Lambert highlighted continued consumer demand for protein, with chicken being a preferred value choice. She noted Tyson's extensive product portfolio catering to diverse needs, strong market presence with 72% household penetration, and increased engagement with younger consumers. Regarding SNAP, she stated it's an evolving situation being closely monitored, but Tyson feels resilient due to its diverse product portfolio, strong brand trust (Tyson, Jimmy Dean, Hillshire Farm), and market adaptability in adjusting marketing and promotional strategies.

Alexia Howard from Bernstein asked about the significance of the New World Screwworm threat and its potential to deter U.S. herd rebuilding. She also questioned Tyson's ability to shift its chicken feed mix to soybean meal if the proposed renewable fuel standard alters grain prices.

Answer

Group President Brady Stewart stated that while there is a supply impact from reduced Mexican cattle imports, Tyson has not seen U.S. producers alter herd rebuilding plans due to the screwworm threat, expressing confidence in USDA containment. President & CEO Donnie King explained that the chicken feed ratio is fairly fixed to achieve nutritional targets and he does not foresee a significant change, especially given his outlook for steady grain prices.

Alexia Howard of Bernstein questioned why Tyson Foods did not raise its full-year guidance despite a Q2 profit beat and asked for clarification on the implied second-half decline in the Chicken segment's operating income.

Answer

CEO Donnie King and CFO Curt Calaway explained that Q2 results met internal expectations and the current guidance already considers risks like tariffs and consumer pressure. For the Chicken segment, Group President Devin Cole noted that while the first half was strong, the full-year guidance accounts for planned investments in the second half to strengthen market share, along with macroeconomic uncertainties.

Alexia Howard from AllianceBernstein asked about the potential impact of deportation activities on labor availability and the reasons for the year-over-year decline in free cash flow and the outlook for capital expenditures.

Answer

CEO Donnie King stated that all employees are legally authorized to work and the company has seen no change in attendance, having done scenario planning for policy changes. CFO Curt Calaway explained the free cash flow decrease was due to less favorable working capital timing compared to the prior year and affirmed the current CapEx range of $1B-$1.2B is in line with long-term averages, unlike the inflated spending in '22 and '23.

Alexia Howard questioned McCormick's confidence in its long-term objectives, given a number of tailwinds (consumer trends, easing tariffs, picking up reformulation) but also five consecutive years of earnings expectations falling below the long-term algorithm. She asked when the company expects to return to the algorithm and if the 2028 goals remain realistic. She also followed up on the reformulation activity, asking if it's still in an investment phase and when revenue streams from commercialization are expected to pick up.

Answer

Brendan Foley, President and CEO, clarified that Investor Day targets were set before recent global trade uncertainty and the McCormick de Mexico acquisition. He expressed confidence in hitting 2028 sales targets but acknowledged the need to offset substantial incremental costs in 2025 and 2026, promising more color on target adjustments at CAGNY. Regarding reformulation, he expects development activity to continue picking up in 2026, with commercialization (revenue streams) likely delayed until late 2026 for early indicators and more significantly in 2027, especially for large CPG customers, though emerging brands move faster.

Alexia Howard questioned how McCormick reconciles its long-term objectives, given tailwinds like health and wellness trends and easing tariffs, with five consecutive years of earnings expectations falling below the long-term algorithm. She asked when the company expects to return to its algorithm and if the 2028 goals from Investor Day 2024 remain realistic. She also followed up on reformulation activity, asking if it's still in an investment phase and when the revenue stream is expected to pick up.

Answer

Brendan Foley, Chairman, President, and CEO, acknowledged that Investor Day targets were set before recent uncertainties and the McCormick de Mexico acquisition. He expressed confidence in hitting top-line targets by 2028 but noted the need to address substantial incremental costs. He indicated that more details on target adjustments would be provided at CAGNY. Regarding reformulation, he expects development activity to increase in 2026, with commercialization and revenue streams likely picking up in late 2026, but more significantly in 2027, especially for large CPG customers, while emerging brands may see faster market entry.

Alexia Howard inquired about the types of customers and categories driving new wins and increased share in McCormick's Flavor Solutions segment due to reformulation activities, particularly in light of Walmart's announcement to eliminate 30 additives from private label products. She also sought insight into McCormick's M&A strategy, including the magnitude of potential deals and specific areas of interest within consumer (condiments/sauces, herbs/spices) and flavor solutions (technology, taste competencies).

Answer

Chairman, President, and CEO Brendan Foley stated that new customer wins and increased share are primarily with high-growth innovators, emerging brands, and private label customers. He confirmed that heightened reformulation activity focuses on natural colors, reduced sugar/salt, and eliminating ingredients of concern, aligning with broader consumer trends and retailer announcements like Walmart's. Regarding M&A, he reiterated a focus on both consumer (global herbs, spices, seasonings, condiments, sauces) and flavor solutions (enhancing technology and taste competencies), considering both bolt-on and transformative opportunities, while declining to comment on specific market speculation.

Alexia Howard asked about McCormick's reformulation comments, specifically which customers or categories are driving new wins in Flavor Solutions, and if the recent Walmart announcement on additive elimination will accelerate reformulation efforts in private label and branded CPG. She also inquired about McCormick's acquisition strategy, asking if they are interested in the large taste elevation company splitting from Kraft Heinz, or if they prefer bolt-on condiment deals or Flavor Solutions capabilities.

Answer

Brendan Foley, Chairman, President, and CEO, stated that new customer wins in Flavor Solutions are primarily from high-growth innovators, emerging brands, and private label customers. He noted that reformulation activity focuses on natural colors, reduced sugar/salt, natural/healthy ingredients, and eliminating ingredients of concern, aligning with consumer trends. He viewed the Walmart announcement as positive and consistent with broader industry movements. Regarding acquisitions, Brendan Foley declined to comment on speculation but broadly outlined their strategy: for Consumer, focus on herbs, spices, seasonings, and condiments/sauces globally (bolt-on or transformative); for Flavor Solutions, seek enhancements in technology, taste competencies, and talent. He emphasized their current focus on closing the Mexico JV in early 2026.

Alexia Howard asked about the potential impact of a proposed Texas law on food additive labeling and whether the ongoing SAP transition would cause a significant step-up in IT investment next year.

Answer

Chairman, President & CEO Brendan Foley noted that the company is working with industry partners to advocate for a national standard on labeling to avoid state-by-state disruption. EVP & CFO Marcos Gabriel explained that the company pivoted its ERP implementation to a de-risked, functional deployment, which smooths out spending over a longer period. As a result, a significant peak in IT investment is not expected next year.

Alexia Howard asked for details on the growth drivers within Flavor Solutions, specifically the contribution from new customers versus QSRs, and whether there's an uptick in product reformulation efforts.

Answer

Chairman, President and CEO Brendan Foley explained that while he couldn't quantify the specific contributions, Flavor Solutions growth in the Americas was driven by both high-growth innovator customers and QSR innovation wins, which offset softness from large CPGs. In Asia Pacific, growth was led by QSR promotions. Foley also confirmed an uptick in reformulation activity from customers, driven not just by concerns over artificial colors but also by broader health trends like sodium reduction, high protein, and functional foods.

Alexia Howard inquired about the progress of the pivot in Flavor Solutions toward faster-growing innovative customers and how McCormick is positioned to capitalize on potential industry-wide product reformulations.

Answer

CEO Brendan Foley stated that while not providing a specific sales breakdown, they are seeing faster performance with innovative customers in categories like snacks, beverages, and performance nutrition. He also highlighted strong growth in branded foodservice. Regarding reformulation, Foley confirmed they are already actively working with customers on projects like sodium reduction and removing artificial ingredients, positioning them well to benefit from this trend.

Alexia Howard asked about the drivers of margin recovery in the Flavor Solutions segment, specifically the role of product mix and the potential for further improvement. She followed up by asking if the strength in branded foodservice was due to improving QSR traffic or other factors like share gains.

Answer

EVP and CFO Mike Smith attributed the margin improvement to a portfolio migration towards higher-margin areas like Branded Foodservice and specific flavor categories, supported by CCI cost savings. Incoming CFO Marcos Gabriel added that future growth would also drive leverage. President and CEO Brendan Foley clarified that the branded foodservice growth is driven by market share gains and tabletop placements, not improved traffic, which remains subdued. He highlighted the success of using brands like Frank's RedHot in limited-time offers with operators.

Alexia Howard inquired about the potential impact of a proposed Texas law on food additives and the company's SAP transition plan, including future IT investment levels.

Answer

CEO Brendan Foley stated they are working with industry groups to advocate for a national approach to additive regulations to avoid state-by-state disruption. CFO Marcos Gabriel explained the ERP implementation was pivoted to a de-risked, functional deployment, which smooths out spending. As a result, no significant peak in ERP investment is expected next year compared to current levels.

Alexia Howard asked how Lamb Weston is improving execution through increased discipline, accountability, and metrics, particularly what can be managed and monitored now that couldn't be a couple of years ago, and how this aids smooth operations.

Answer

President and CEO Michael Smith explained that the "Focus to Win" strategy, particularly the executional excellence and cost savings program, has established clear accountabilities and KPIs across the supply chain. He mentioned using AlixPartners to help set up scorecarding and tracking, and investing in additional support for demand and supply planning to improve accuracy and predictability.

Alexia Howard asked how Lamb Weston is improving execution through increased discipline, accountability, and metrics, specifically what can be managed and monitored now that was difficult a couple of years ago, and how this contributes to smoother operations.

Answer

CEO Michael Smith detailed that the 'Focus to Win' strategy, particularly the executional excellence and cost savings program, has established clear accountabilities and KPIs across the supply chain, tracked regularly with assistance from AlixPartners. He also mentioned investments in demand and supply planning tools to enhance predictability and accuracy.

Alexia Howard from Sanford C. Bernstein & Co. asked what drove Lamb Weston's better-than-expected Q4 results and if those trends could continue. She also inquired about the company's exposure to the QSR burger channel and the potential impact of GLP-1 weight-loss drugs.

Answer

President & CEO Mike Smith attributed the Q4 beat to improved customer engagement and early progress on the 'Focus to Win' strategy. CFO Bernadette Madarieta added that strong volume growth (4% NA, 16% Intl) was a key factor. Regarding GLP-1s, Smith stated they see no material impact currently, citing strong retail data and fry attachment rates remaining above pre-pandemic levels.

Alexia Howard from Bernstein asked for any surprising findings from the new turnaround plan and for a diagnosis of the weakness in burger chain traffic, questioning potential drivers like consumer cohorts or GLP-1 drugs.

Answer

CEO Mike Smith noted that while it's early, the opportunities are in expected areas like operations and procurement, and he praised the data-driven approach of their advisers. Regarding burger chain weakness, he admitted they don't have a specific reason but highlighted that french fry attachment rates remain robust and above pre-pandemic levels.

Alexia Howard inquired about the reasons for weak consumer demand, including the potential impact of GLP-1 drugs, and asked for more details on the new Total Addressable Market (TAM) opportunities mentioned.

Answer

CFO Bernadette Madarieta attributed weak demand to consumer pressure from inflation and a trade-down in serving sizes, stating they have not seen a large impact from GLP-1 drugs. President and CEO Thomas Werner added that fry attachment rates remain steady. On new TAM opportunities, he declined to offer specifics but described them as leveraging proprietary technology to serve non-traditional fry customers.

Alexia Howard asked about the current state of Conagra's innovation performance, whether it's at a comfortable and sustainable level, and how the company is leaning into health and wellness trends, including protein, clean label, vegetable nutrition, and potential GLP-1 on-pack labels.

Answer

CEO Sean Connolly expressed satisfaction with improving innovation performance year-over-year, noting progress in TPDs and velocity per TPD. He highlighted that health and wellness, particularly protein, clean label, and vegetable nutrition, is a major driver of innovation success. He emphasized Conagra's strong positioning with brands like Bird's Eye, Healthy Choice, and meat snacks, which align with current consumer focus on health and wellness, especially among young consumers who over-index with Conagra's value products.

Alexia Howard asked about Conagra's innovation performance, including any quantifiable numbers, and if the current level is sustainable or expected to increase. She also inquired about how Conagra is leaning into health and wellness trends, specifically mentioning protein, clean label, vegetable nutrition, and the focus of young consumers.

Answer

CEO Sean Connolly expressed satisfaction with innovation performance, noting continuous improvement year-over-year in both TPDs and velocity per TPD. He linked much of this success to health and wellness trends, emphasizing protein as a major benefit, along with clean label and vegetable nutrition. He highlighted brands like Birds Eye, Healthy Choice, Slim Jim, and FATTY as well-positioned, noting that young consumers' increased focus on health and wellness, combined with value, is a positive tailwind for the company.

Alexia Howard asked about recent shifts in consumer behavior and whether the rise in state-level bans on certain food additives poses a major burden for the company.

Answer

CEO Sean Connolly described the current value-seeking consumer behavior as a continuation of a multi-year trend, not a recent deterioration. Regarding food additives, he stated it is not a material concern as over 90% of Conagra's portfolio is free of synthetic dyes, though he noted that navigating state-by-state legislation is inherently challenging for manufacturers.

Alexia Howard inquired about General Mills' reformulation efforts beyond artificial dyes, specifically regarding other additives and the company's approach to state-level legislation versus waiting for federal regulation. She also asked about the percentage of sales from new products, given the stated increase in innovation pace.

Answer

Jeff Harmening, Chairman and CEO of General Mills, stated that reformulation efforts are guided by consumer demand, noting that while Trix's dye removal didn't initially work in the U.S. a decade ago, consumers are now more ready for such changes, supported by better technology. He highlighted that 98% of K-12 school offerings and 85% of retail products already lack certified colors. He expressed concern about the cost and confusion of state-by-state regulations, advocating for consistent federal legislation. He confirmed that new product innovation now accounts for roughly 5% of sales, up from 3.5% a year ago, emphasizing bigger, more impactful ideas across all segments.

Alexia Howard inquired about General Mills' reformulation efforts beyond artificial dyes, specifically regarding other additives and state-level legislation, and followed up on the pace of innovation and the percentage of sales from new products.

Answer

Jeff Harmening, Chairman and CEO, stated that General Mills follows consumer demand, noting increased readiness for certified color removal. He highlighted that 98% of K-12 school offerings and 85% of retail products already lack certified colors. He expressed confidence in navigating regulations but noted challenges with state-by-state approaches, advocating for federal consistency. He confirmed that new product innovation now accounts for roughly 5% of sales, up from 3.5% a year ago, emphasizing bigger, more impactful ideas across all segments.

Alexia Howard asked about General Mills' reformulation efforts, specifically regarding artificial dyes and other additives, consumer concerns, and whether the company is proactively driving out additives or waiting for regulatory clarity, especially concerning state-level legislation versus a federal approach. She also asked about the absolute percentage of sales from new products.

Answer

Chairman & CEO Jeffrey Harmening stated that General Mills follows consumer demand, noting increased readiness for certified color removal, leveraging better technology. He expressed confidence in navigating regulations but highlighted challenges with state-by-state legislation, advocating for consistent federal regulation. He reported that new product innovation now accounts for roughly 5% of sales, up from 3.5% a year ago, emphasizing bigger, better ideas across all segments.

Alexia Howard asked why the snacks category is underperforming in the current economic environment compared to past slowdowns, and questioned if factors like GLP-1 drugs or health concerns might be playing a larger role than value-seeking.

Answer

CEO Jeffrey Harmening attributed the weakness primarily to heightened consumer value consciousness. He explained that unlike in 2008, food-at-home consumption is already elevated, leading consumers to cut back on discretionary items like snacks in favor of staples. He downplayed the quarter-over-quarter impact of GLP-1s, noting that dog treats are seeing similar weakness.

Alexia Howard asked why the snacks category is behaving differently in the current economic slowdown compared to past recessions and questioned if factors like GLP-1 drugs or health concerns are contributing to the weakness beyond value-seeking.

Answer

CEO Jeffrey Harmening attributed the snack category's weakness primarily to heightened consumer value-consciousness. He explained that unlike in 2008, at-home food consumption is already elevated, limiting its ability to grow further as a value-seeking behavior. He downplayed the impact of GLP-1s, noting similar weakness in dog treats where such drugs are not a factor.

Alexia Howard from Bernstein inquired about the recent weakness in the international foodservice channel, which had previously been a source of strength. She also asked about the company's strategy for re-engaging lapsed flexitarian consumers who may have tried the products in the past but no longer purchase them.

Answer

Founder, President, and CEO Ethan Brown attributed the international foodservice softness to lapping significant promotional activity from the prior year and macroeconomic pressures in certain markets. To win back consumers, Brown stated the immediate priority is stabilizing the business by aligning operating expenses with current demand. He then detailed a strategy focused on communicating the health benefits of products (high protein, low saturated fat), countering misinformation, and expanding the brand's appeal with items like Beyond Ground, which emphasize nutritional value over direct animal protein mimicry.

Alexia Howard of Bernstein asked about the company's comfort with its price gaps to animal meat and the status of its price parity goal. She also inquired about growth rates in Europe versus the U.S. and potential U.S. growth catalysts.

Answer

CEO Ethan Brown stated that the price parity goal remains but is now more differentiated, pursued aggressively in foodservice while focusing on premium, healthy products in retail. He noted that volume is the main barrier to achieving broader parity. Regarding growth, he said Europe has strong pockets but also some headwinds, and the primary catalyst for U.S. growth is not new technology like hybrids, but rather educating consumers on the simplicity and health benefits of the current products to overcome misinformation.

An analyst on behalf of Alexia Howard asked about consumer reception to the Beyond IV innovation and whether recent positive sales results were driven by the new platform or legacy products.

Answer

CEO Ethan Brown confirmed that the Beyond IV platform is a significant driver of the positive results, citing increased velocity for key products like the 2-pack burger. He attributed this success to the platform's entire narrative, including its premium ingredients, health benefits, and endorsements, which he believes also explains the favorable price elasticity.

Alexia Howard asked about the pace of innovation, inquiring about its current level as a percentage of sales, the long-term goal, and the timeline to achieve it.

Answer

CEO & Director Carlos Abrams-Rivera stated that innovation, which includes core product renovations, grew from ~1.6% of sales in 2022 to ~3% by the end of last year. He highlighted successful examples like Taco Bell at home and Heinz pasta sauce, indicating a continued focus on bringing meaningful, long-term innovation to market.

Alexia Howard from Bernstein inquired about the company's capital allocation strategy, specifically the use of debt to fund share repurchases. She also asked about the potential impact of GLP-1 drugs on North American snacking volumes.

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CFO Luca Zaramella explained that reported debt levels are influenced by foreign exchange effects, which are mitigated by hedges, and affirmed the company's pragmatic and opportunistic approach to share buybacks. Chairman & CEO Dirk Van de Put stated that analysis shows GLP-1 drugs currently have no real impact on volumes, citing low penetration and modest calorie reduction, and he does not foresee a significant effect in the coming years.

Alexia Howard from Bernstein inquired about the company's capital allocation strategy, specifically the use of debt to fund share repurchases, and asked about the potential impact of GLP-1 drugs on North American snacking volumes.

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CFO Luca Zaramella stated the company remains pragmatic on share buybacks, viewing them as a good use of capital, and noted that reported debt levels are influenced by foreign exchange effects. CEO Dirk Van de Put asserted that GLP-1 drugs currently have no real impact on volumes, attributing weakness solely to economic factors. He calculated the current net effect on total calorie intake is minimal and not expected to be significant in the future.

Alexia Howard asked about the potential impact of recent Texas legislation requiring warning labels on certain food additives and how much of the company's portfolio might be affected.

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CEO Geoff Tanner stated that the company is 'much better insulated' than many peers, with a very small and manageable impact on its portfolio. He assured that any necessary reformulations would not be material or costly. He also highlighted that the Owen brand is particularly well-positioned against these regulatory trends due to its clean-label profile.

On behalf of Alexia Howard, an analyst asked for more detail on OWYN's velocities and sought to understand the balance of its growth between new store distribution versus sales from recurring customers, especially given the brand's low awareness.

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CFO Shaun Mara provided a direct breakdown, stating that OWYN's growth is driven roughly 50% by new distribution (new doors and SKUs) and 50% by velocity increases from existing customers. He highlighted that it is unusual and a sign of brand strength to see parallel growth in both distribution and velocity, as expanding distribution typically dilutes velocity rates.

Alexia Howard from Bernstein asked for more detail on the company's strategy to capitalize on the GLP-1 trend and requested specific data on repeat purchase rates for the OWYN brand.

Answer

CEO Geoff Tanner detailed a strategy positioning products as companions for consumers on GLP-1 drugs and as an 'off-ramp' for weight maintenance, supported by targeted Atkins advertising and new products like 'Atkins Strong'. For OWYN, he reported that repeat rates have improved significantly and now stand at approximately 40%, which he attributes to continuous product improvements.

Alexia Howard asked if the headwinds facing the Atkins brand mean it is not expected to return to positive organic growth until fiscal 2026. She also requested quantification of the benefit from the expanded Quest club customer rollout.

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CEO Geoff Tanner confirmed it was fair to assume an Atkins recovery would take until fiscal 2026, stating the difficult but necessary investment cuts in FY25 will position the brand for long-term health. CFO Shaun Mara added that half of the expected FY25 decline is due to these planned choices. Regarding the Quest rollout, Tanner declined to give specific numbers but called it a 'significant customer' and noted the upside potential is 'significant' if the nationwide test is successful.

Alexia Howard asked for any early indications from the first few weeks of the third quarter that the new promotional and marketing pivot in snacks is working. She also inquired about the impact of the new distribution center on cost savings and service levels in the second half.

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CEO Wendy Davidson responded that the company is already 'seeing improved consumption trends in market' for snacks. On the new distribution center, she confirmed it has a dual benefit: it is a key part of the productivity pipeline that will drive back-half margin expansion, and more importantly, it will improve speed-to-shelf and fill rates for customers.

Alexia Howard of Bernstein asked if Hain would begin reporting a price/volume breakdown for organic sales in fiscal 2025 and for color on that mix. She also inquired about the sourcing strategy for infant formula and efforts to build supply chain resilience.

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CFO Lee Boyce confirmed that a price/volume/mix breakout will begin in Q1 2025, with growth expected to be driven primarily by volume and mix. CEO Wendy Davidson stated that for infant formula, the company uses multiple supply options, is building up inventory of core SKUs as a buffer, and is focused on ensuring consistent supply for retail partners.

Alexia Howard of Sanford C. Bernstein & Co. asked for a specific number on the percentage of sales from innovation this year and whether the current level represents a long-term target or if further step-ups are expected. She also inquired about the timing of 2025 guidance.

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Chairman, President and CEO Steven Cahillane stated that while the company doesn't release specific numbers, innovation contribution is back to pre-pandemic levels and is expected to improve further with launches like Cheez-It and Pringles Mingles. He confirmed that 2024's innovation contribution is beating 2019 levels. He also affirmed that full-year 2025 guidance will be provided, as is customary, during the February earnings release.

Alexia Howard of AllianceBernstein questioned why Kellanova did not raise its full-year guidance despite a strong Q1 performance. She also asked about the company's appetite for M&A, given its low leverage and the fading impact of the TSA.

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Chairman, President and CEO Steven Cahillane explained that while confident, it is only the first quarter, and the strong start provides flexibility for increased reinvestment in route-to-market, digital transformation, and brand building, such as the Pop-Tarts movie promotion. Regarding M&A, he confirmed Kellanova has the balance sheet capacity for value-creating deals in snacks but is equally focused on high-ROI organic opportunities like Pringles capacity expansion and the international launch of Cheez-It.

Asked if the return to normal promotional activity in 2024 could lead to modestly negative pricing in developed markets as they lap a period of lower promotions. She also inquired about the company's M&A aspirations, criteria, and target geographies given its comfortable leverage.

Answer

The company does not expect pricing to turn negative; instead, they will see a return to 'quality merchandising' on top of the current higher list prices. On M&A, the immediate priority is organic growth and capacity expansion. While they will evaluate disciplined M&A opportunities in snacking and emerging markets, it is not the primary focus.