Bonnie Herzog

Bonnie Herzog questioned the expected elasticities and volume impact from the excise tax increases and price adjustments in Japan, asking if the incremental pricing would be sufficient to drive margin expansion. She also asked for the key growth drivers underpinning the 2026 top- and bottom-line guidance and the assumed increase in planned investment spend.

Answer

Group CEO Jacek Olczak and CFO Emmanuel Babeau explained that the full impact of Japan's excise increases will be seen from April 1, with two steps in 2026. They anticipate long-term margin expansion through pricing and cost management. For 2026, key drivers include the dynamic smoke-free portfolio (despite Japan's one-off situation and U.S. ZYN's high comparison base) and the resilient combustible business (offsetting volume declines from Turkey, India, and Mexico excise increases). They noted that investment spend continues the trend of past years, leveraging existing IQOS infrastructure for ZYN and VEEV, with no significant rupture.

Bonnie Herzog asked about the expected elasticities and volume impact from Japan's excise tax increases, and whether incremental pricing would drive margin expansion and income growth in the region. She also sought clarification on the key growth drivers for the 2026 top- and bottom-line guidance and the planned increase in investment spend compared to the previous year.

Answer

Jacek Olczak (Group CEO, Philip Morris International) stated that consumer price impacts in Japan begin April 1, with two excise increase steps in 2026. He indicated that while margin expansion is a goal, he couldn't detail specific pricing strategies. Emmanuel Babeau (CFO, Philip Morris International) affirmed that the fundamental growth drivers remain consistent: a dynamic smoke-free portfolio (despite Japan's one-off situation and U.S. high base comparison), positive mix impact on margins, and a resilient combustible business (despite volume declines from Turkey, India, and Mexico excise increases). He confirmed continued strong investment in the smoke-free portfolio, with no significant rupture in investment trends.

Bonnie Herzog with Goldman Sachs inquired about the nature of stepped-up investments in the U.S., asking if they were solely ZYN-related or also for IQOS, and if they represented a pull-forward from next year or indicated continued high spending. She also sought to understand the drivers behind the full-year dollar EPS growth guidance raise despite lower operating income growth guidance, specifically asking about below-the-line factors and changes since the year's start. Additionally, she followed up on the ZYN free can promotion, asking if it attracted new consumers, the percentage of new consumers, and the rationale for a free can versus a BOGO offer, and if it led to competitive volume lift.

Answer

Emmanuel Babeau, CFO, confirmed U.S. investments are strategic for a unique growth market, supporting both ZYN's potential and preparing for IQOS Illuma, and are expected to continue beyond 2025. The EPS guidance raise, despite the Q3 investment impact on OI, was attributed to strong underlying OI growth, slightly better tax rate views, and favorable interest costs. Regarding the ZYN free can promotion, he stated it was a success in creating awareness and recruiting new customers (smokers/vapers), though specific percentages were not yet available. He explained the free can approach aimed for a 'big splash' to introduce new users to the category, differing from BOGO which targets existing consumers, and acknowledged potential competitive benefits but emphasized PMI as the primary beneficiary.

Bonnie Herzog from Goldman Sachs inquired about the stepped-up investments in the U.S., asking if they were solely ZYN-related or also included IQOS/Illuma, and if these were pull-forward investments from 2026. She also sought drivers for the full-year dollar EPS growth guidance raise despite lower operating income growth, and details on the ZYN free can promotion, specifically if it attracted new consumers, the rationale for its format versus BOGO, and any impact on competitive brands.

Answer

Emmanuel Babeau, Chief Financial Officer, confirmed that U.S. investments support both ZYN and future IQOS Illuma launches, reflecting the market's growth potential, and are not a pull-forward but ongoing. The EPS guidance raise, despite operating income adjustments, is driven by strong underlying OI growth, slightly better tax rate views, and favorable interest costs. Regarding the ZYN free can promotion, Babeau stated it was a success in creating awareness and recruiting new customers (primarily smokers and vapers), and explained its 'blast effect' aimed to introduce new users to the category.

Bonnie Herzog of Goldman Sachs questioned the realism of the high end of the ZYN full-year shipment guidance, asked for an update on production capacity, and inquired how the return to full stock levels will alter ZYN's pricing and promotional strategy.

Answer

CFO Emmanuel Babeau confirmed the full 800-840 million can guidance for ZYN remains achievable, citing powerful offtake growth. He stated that production capacity is now 'comfortable' for future growth. He also confirmed that with supply constraints resolved, the company will use all commercial levers, including increased promotions and advertising, to maximize ZYN's growth.

Bonnie Herzog asked for more detail on ZYN's out-of-stock issues in the U.S., the timeline for inventory replenishment, and the rationale behind the implied deceleration in full-year shipment guidance. She also inquired about the drivers of margin expansion and the margin gap between combustible and smoke-free products.

Answer

Chief Financial Officer Emmanuel Babeau explained that 2025 ZYN shipments reflect a mix of strong consumer offtake and gradual inventory replenishment, which is expected to normalize in Q3. He noted that the year-over-year growth comparison is skewed because Q1 2024 shipments were well below consumer offtake. For margins, Babeau stated that the smoke-free business, with a gross margin now over 70% and 5 points above combustibles, is the primary driver of expansion. This is fueled by the positive mix from ZYN, scale and productivity benefits for IQOS, pricing actions, and improving margins for VEEV.

Bonnie Herzog inquired about the primary drivers for the robust operating margin leverage guided for 2025, whether the guidance assumes a U.S. launch of ILUMA, and the potential margin profile for ILUMA in the U.S. She also asked about the gross margin gap between smoke-free and combustible products.

Answer

CEO Jacek Olczak and CFO Emmanuel Babeau detailed the drivers for margin expansion. Babeau highlighted the favorable product mix toward higher-margin smoke-free products like ZYN, robust pricing, and easing cost-of-goods-sold headwinds. Olczak added that while a U.S. ILUMA launch would initially be a margin headwind, it would not be material to the overall U.S. P&L and is expected to be a net contributor within 2-3 years. Babeau confirmed the gross margin gap between smoke-free and combustibles is expected to continue expanding.

Bonnie Herzog asked for clarification on the IQOS volume trajectory, noting the Q3 shipment growth deceleration, and inquired about the outlook for ZYN supply constraints and market share recapture.

Answer

Chief Financial Officer Emmanuel Babeau explained that the best metric for IQOS is adjusted in-market sales (IMS), which reaccelerated to nearly 15% growth, driven by Japan and a recovery in Europe. He attributed the shipment slowdown to timing differences that will normalize. For ZYN, he stated that supply should meet consumer demand at some point in Q4, but fully replenishing inventory will be a gradual process through 2025, making it difficult to predict the exact pace of market share recapture.

Bonnie Herzog asked about Murphy USA's long-term EBITDA guidance through 2028, particularly the drivers for faster growth implied in 2027 and 2028 to reach the $1.2 billion target, and where the company sees the most upside or downside. She also questioned the 30.5 CPG fuel margin outlook, noting it implies several years of flat to down margins, and asked about recent trends in break-even costs.

Answer

Mindy West, President and CEO, clarified that the EBITDA guidance reflects the timing and scale of the new store program, with 50+ new-to-industry (NTI) stores annually contributing $35 million to $40 million EBITDA after a three-year ramp. She stated that current new store openings create a temporary drag, but sustained NTI builds and execution of initiatives are key drivers, though the $1.2 billion target also depends on a more volatile fuel environment. Regarding fuel margins, Mindy West indicated the 30.5 CPG outlook assumes low volatility and stable, low fuel prices, which makes customers less price-sensitive. She emphasized that break-even costs are not decreasing, supporting the current margin levels for marginal retailers.

Bonnie Herzog inquired about the drivers for faster EBITDA growth in 2027 and 2028 to reach the long-term $1.2 billion target, including potential upside and downside factors. She also asked about the fuel margin outlook of 30.5 CPG, noting it implies several years of flat to down margins, and the recent trends in break-even costs.

Answer

Mindy West, President and Chief Executive Officer, attributed future EBITDA growth to the scaling of the new store program (50+ NTIs annually, contributing $35M-$40M EBITDA after a three-year ramp) and execution of internal initiatives. She noted that a more volatile fuel environment is also crucial but uncontrollable. For fuel margins, Ms. West indicated the 30.5 CPG outlook reflects a high probability of low volatility and stable, low fuel prices, which makes customers less price-sensitive. She confirmed that the cost to serve and break-even component are not decreasing industry-wide.

Bonnie Herzog from Goldman Sachs questioned the confidence behind the merchandise contribution guidance, which implies a back-half acceleration despite a challenging macro environment. She asked about specific growth initiatives and followed up on the outlook for the nicotine category, including the potential impact from a crackdown on illicit products.

Answer

President, CEO & Director Andrew Clyde expressed confidence, highlighting that excluding cigarettes and lottery, Murphy-branded merchandise contribution grew 8.9%, driven by strong performance in candy and packaged beverages. He also pointed to a significant increase in loyalty program enrollments. On nicotine, he stated they are more bullish for the second half due to a more favorable promotional cycle and were encouraged by recent FDA comments about cracking down on illicit vapor products.

Bonnie Herzog from Goldman Sachs asked for the drivers behind the confidence in the revised merchandise contribution guidance, which implies a back-half acceleration, and inquired about specific growth initiatives. She also followed up on the nicotine category, asking about the second-half outlook and any observed impact from the crackdown on illicit products.

Answer

President, CEO & Director, Andrew Clyde, stated that confidence is supported by strong underlying growth (up 8.9% ex-cigarettes/lottery) in categories like packaged beverages and candy. He also pointed to increased cigarette promotions in H2 and a 31% increase in new loyalty enrollments. On nicotine, he confirmed a more bullish outlook for the second half due to promotional timing and was encouraged by recent forceful comments from the FDA regarding a crackdown on illicit vapor products, viewing it as a positive sentiment.

Bonnie Herzog asked for details on the modest same-store fuel volume growth, the potential impact from recent hurricanes, and the strategy behind rebranding the tobacco business to 'nicotine,' including future margin potential.

Answer

CEO Andrew Clyde clarified that while quarterly growth was modest, the company is successfully retaining significant market share gains on a multi-year stack basis. He confirmed there was no material impact from the hurricanes. Regarding the nicotine category, Clyde noted the rebrand reflects growth in oral products and stated that upside exists from gaining share in traditional products, the mix shift to higher-margin oral nicotine, and potential regulatory action against illicit products.

Bonnie Herzog asked about potential EBITDA pressure if fuel margins don't increase, the levers available to offset this, and for more detail on traffic trends and consumer behavior during the quarter.

Answer

CEO Andrew Clyde explained that while the product supply margin is cyclical and was a headwind, the retail margin component is structurally growing. CFO Galagher Jeff added that new stores, in-store initiatives, and expense management are key levers to drive EBITDA. Clyde noted that traffic was impacted by episodic weather, but the company sharpened its value proposition with aggressive fuel pricing.

Bonnie Herzog asked about the flat growth outlook for the Americas segment for the fiscal year, seeking insights into the underlying performance, key contributing factors, and the expected cadence of growth, particularly whether it would be skewed towards the fourth fiscal quarter.

Answer

Stéphane de La Faverie, President and CEO, highlighted momentum in North America with volume market share gains and value share gains in skincare, driven by brands like The Ordinary. He noted channel rebalancing, including expansion on Amazon and MAC's upcoming launch at Sephora U.S., while acknowledging a slowdown in Latin America due to tariffs. Akhil Shrivastava, EVP and CFO, clarified that a stronger Q4 is expected for the company overall, influenced by travel retail adjustments, and Stéphane reiterated the objective to deliver the top end of the guidance.

Bonnie Herzog from Goldman Sachs inquired about the flat growth expectation for the Americas, seeking insights into the underlying performance, key contributing factors, and the anticipated cadence of growth, particularly if it would be skewed towards FQ4.

Answer

Stéphane de La Faverie, President and CEO, highlighted the momentum in North America, noting volume market share gains in calendar 2025 and value share gains in skincare. He discussed the rebalancing of channels, including rapid expansion on Amazon and upcoming MAC launch at Sephora U.S., while acknowledging a slowdown in Latin America due to tariffs. Akhil Shrivastava, EVP and CFO, clarified that a stronger Q4 is expected for the company due to travel retail adjustments, with the objective to deliver the top end of guidance.

Bonnie Herzog requested more color on Asia travel retail, specifically regarding inventory levels and movements in the quarter. She also asked about the overall demand backdrop and conversion trends, seeking to understand if the trough had passed and when better conversion trends, aided by activations, might be seen.

Answer

President and CEO Stéphane de La Faverie described travel retail as volatile but noted positive momentum in parts of Asia, like double-digit growth in Japan travel retail. He confirmed that inventory levels in the China travel retail ecosystem are 'right-sized' and managed based on demand. He observed positive traffic resuming in Hainan and strong market share gains during Golden Week due to retail activations, though conversion is still slightly down. EVP and CFO Akhil Shrivastava reinforced that travel retail inventory is significantly lower than a year ago, both in absolute terms and relative to forward-looking retail, allowing focus on business building. He also mentioned doubling down on travel retail in the West and Americas.

Bonnie Herzog inquired about inventory levels and movements in Asia travel retail, as well as the overall demand backdrop and conversion trends, seeking to understand if the business is past its trough.

Answer

President and CEO Stéphane de La Faverie described travel retail as volatile but noted positive momentum in Japan and other APAC markets. He confirmed that inventory levels in the China travel retail ecosystem are right-sized relative to demand, and while conversion is still slightly down, strong retail activations and resuming traffic during Golden Week showed market share gains. Executive Vice President and CFO Akhil Shrivastava reiterated that travel retail inventory is significantly lower than a year ago and in the right range.

Bonnie Herzog inquired about the key planning assumptions for fiscal '26, considering headwinds from inventory destocking, China trends, and U.S. consumption.

Answer

President & CEO Stephane de la Faverie expressed confidence in returning to positive growth in fiscal '26. He cited significant market share gains in the U.S., China, and Japan, the de-risking of the Travel Retail business, and efficiencies from the Profit Recovery and Growth Plan (PRGP) as key drivers. He acknowledged subdued consumer confidence as a risk but noted that the company's brands are performing well despite these external pressures.

Bonnie Herzog of Goldman Sachs inquired about the key assumptions and moving parts for the fiscal 2026 outlook, particularly concerning retailer inventory destocking, trends in China, and U.S. consumption, and whether end-market trends are expected to improve.

Answer

President and CEO Stephane de la Faverie expressed confidence in returning to positive growth in fiscal 2026. He cited significant market share gains in the U.S., China, and Japan, the de-risking of the Travel Retail business, and efficiencies from the Profit Recovery and Growth Plan (PRGP). He acknowledged external risks like subdued consumer confidence but emphasized the brand's strength and the rapid progress of the 'Beauty Reimagined' strategy.

Bonnie Herzog requested a deeper dive into Asia Travel Retail, asking about current retail inventory levels versus a year ago, the extent of further destocking expected, and the outlook for sell-in versus sell-out trends.

Answer

EVP and CFO Tracey Travis reported that inventory in the trade is lower than a year ago, though progress on destocking was slower than anticipated due to market deceleration. President and CEO Fabrizio Freda added that while inventory is at its lowest level in years, the market is also smaller, necessitating continued management, which is factored into the Q2 outlook.

Bonnie Herzog questioned the full-year guidance raise, noting that while net sales guidance increased by $46 million, Rhode's expected contribution rose by $60-$65 million, implying lower growth for the core e.l.f. brand. She asked what factors led to this change and if the outlook was conservative or reflected any concerns about recent innovation.

Answer

Mandy Fields, SVP and CFO, explained that the raised full-year guidance (22%-23% net sales growth) implies approximately 2% organic growth for the second half. This change is primarily due to a lower global consumption rate (6% currently versus 8% previously) and a 4-point pipeline headwind. Tarang Amin, Chairman and CEO, added that the outlook reflects current trends, with potential upside if consumption improves, and noted that spring resets are still underway, so a full read on innovation performance is pending.

Bonnie Herzog questioned e.l.f. Beauty's full-year guidance raise, noting that the implied e.l.f. brand growth appears lower despite Rhode's higher contribution. She asked if this outlook is conservative or if there are specific concerns influencing the projection.

Answer

Mandy Fields, SVP and CFO, explained that the raised full-year guidance (22%-23% net sales growth) implies an organic growth rate of approximately 2% for the second half. She attributed this to a shift in the global consumption rate, which is now observed at around 6% compared to the previously expected 8%. Tarang Amin, Chairman and CEO, added that there could be upside if consumption improves, and that the full impact of spring innovation will become clearer as resets conclude.

Bonnie Herzog of Goldman Sachs asked if the company could still generate earnings growth in a worst-case tariff scenario and how management would prioritize between protecting margins and gaining market share.

Answer

SVP & CFO Mandy Fields stated that the wide range of potential tariff outcomes makes it impossible to comment on a worst-case scenario, but confirmed a mitigation playbook is in place. Chairman and CEO Tarang Amin emphasized the company's history of balancing market share gains with margin progress and will provide guidance when tariff impacts are clearer.

Bonnie Herzog focused on the pressured organic sales and EBIT margins in the household segment, asking about Clorox's strategy for trash and litter, willingness to promote further, and the balance between growth and profitability.

Answer

Linda Rendle, Chairman and CEO, acknowledged the impact of cyber issues and competitive activity on trash bags and litter. She emphasized doubling down on innovation, with a full relaunch of the litter business including price pack architecture and formula upgrades, and robust innovation for Glad. She stated that while they have increased price promotion, they are disciplined to avoid destroying category value, focusing on benefits that improve consumer experience. She reiterated confidence in long-term category growth through innovation, strong demand spending, and margin management, balancing market share and profitability.

Bonnie Herzog focused on the pressured organic sales and EBIT margins in the household segment, asking about Clorox's strategy for trash and litter, willingness to further promote, and the balance between returning to growth and maintaining profitability.

Answer

Linda Rendle (Chairman and CEO) acknowledged the impact on trash bag and litter categories from cyber issues and competitive activity. She emphasized doubling down on innovation, with a full relaunch of the litter business and new Glad ForceFlex technology, to drive sustainable growth through superior consumer value. She stated that while some price promotion has been used, it's done strategically to avoid destroying category value, balancing market share and profitability. She expressed confidence in long-term growth through innovation, demand spending, and margin work.

Bonnie Herzog asked for more color on the organic sales growth guidance of -5% to -9%, specifically the puts and takes, and whether the high end of this range is achievable and its drivers. She also sought clarification on any greater-than-expected inventory unwind in specific business areas.

Answer

CFO Luc Bellet confirmed good inventory positioning at the end of Q1 and refined the ERP transition's negative sales headwind estimate to 7.5 points. He explained that achieving the high end of the organic sales growth range would require all assumptions to hit, including higher category growth, excellent innovation execution, and no extraneous issues, acknowledging the range's deliberate breadth for agility.

Bonnie Herzog sought further clarification on Clorox's organic sales growth guidance of negative 5.9%, including the puts and takes, and whether the high end of this range is achievable and its drivers. She also requested a clarification on whether there was a greater-than-expected inventory unwind in any specific business areas.

Answer

CFO Luc Bellet confirmed good inventory positioning at the end of Q1 and a refined ERP shipment estimate of 7.5 percentage points of negative sales headwind for fiscal year 2026. He explained that achieving the high end of the wide organic sales growth range would require all assumptions to hit, including higher category growth, excellent innovation and demand creation execution, and no unforeseen supply or extraneous issues.

Bonnie Herzog from Goldman Sachs asked if the ERP-related inventory build was concentrated in specific business segments and requested an update on the performance and strategic positioning of the Kingsford charcoal business.

Answer

CEO Linda Rendle stated there were no material differences in the ERP inventory build across business segments. On Kingsford, she attributed a weak Q4 to execution misses around the Memorial Day holiday, not price gaps with competitors. She noted that plans were adjusted for July 4th, leading to improved trends, and further adjustments are being made for the upcoming Labor Day holiday.

Bonnie Herzog requested an update on the upcoming ERP transition, its impact on shipments and inventory builds, and the expected short- and long-term margin implications.

Answer

CEO Linda Rendle confirmed the ERP transition is on track and that the updated outlook reflects refined inventory plans from retailers. CFO Luc Bellet specified that retailers are expected to build 1.5 weeks of inventory, with the reversal occurring in the first half of the next fiscal year, mostly in Q1. Linda Rendle added that the ERP and related technology investments support the company's long-term EBIT margin expansion goal of 25-50 basis points annually.

Bonnie Herzog of Goldman Sachs asked for clarification on the ERP-related inventory build, questioning if it was to mitigate risk. She also inquired about the company's sourcing exposure to potential tariffs and whether this risk was included in the current guidance.

Answer

CEO Linda Rendle confirmed the inventory build is a standard risk-mitigation procedure for ERP transitions to ensure no disruption for consumers. CFO Kevin Jacobsen stated that potential tariffs are not specifically included in guidance but noted that Clorox's exposure is limited due to short supply chains and previous onshoring efforts, with exposure from Mexico and Canada in the single digits.

Bonnie Herzog asked if the heavy promotional spending in the Litter category is generating an adequate return and questioned the risk of a 'prisoner's dilemma' of sustained high promotions. She also inquired about channel shifts and performance differences between tracked and untracked channels.

Answer

CEO Linda Rendle defended the Litter promotions as a strategic and temporary measure to win back consumers, expressing confidence that long-term category growth will be driven by innovation, not discounting. She noted that observed channel shifts are a predictable result of consumer value-seeking (e.g., moving to club stores for larger sizes) and are not related to the company's cyber-attack recovery.

Bonnie Herzog asked about PepsiCo's accelerated PFMA affordability initiatives, seeking color on the strategy, what's working, expected price point reductions, and how productivity will fund these plans while balancing growth and profitability for PFMA operating margins.

Answer

Steve Schmitt, CFO, explained that PepsiCo is playing offense with these initiatives, expecting benefits in volume and sales growth, and that the investment is manageable and included in guidance, funded by productivity. Ramon Laguarta, CEO, added that this is a multi-vector strategy, very surgical and focused on low/middle-income consumers, with good ROI from tests, leading to significant space gains and innovation investments, all funded by productivity and right-sizing efforts.

Bonnie Herzog asked about PepsiCo Foods North America's (PFNA) accelerated affordability initiatives, seeking more color on the strategy, what's working, and the expected reduction in average price points. She also inquired how productivity gains would fund these plans and if PFNA operating margins are expected to expand, asking how growth and profitability would be balanced.

Answer

EVP and CFO Steve Schmitt explained that PepsiCo is playing offense with these manageable investments, expecting benefits in volume and sales growth, funded by productivity progress. CEO Ramon Laguarta added that this is a surgical, multi-vector strategy, tested at scale, focused on low and middle-income consumers where affordability is a friction point. He noted good ROI from tests, significant space gains with partners, and comprehensive investment in innovation, all funded by productivity and right-sizing efforts to drive accelerated category growth.

Bonnie Herzog asked about the volume pressures in PepsiCo's food and beverage businesses, seeking clarification on the impact of smaller pack sizes versus category softening or market share losses, and inquiring about the outlook for volume growth, especially with robust innovation.

Answer

Chairman and CEO Ramon Laguarta explained that beverage volume grew when excluding case-packed water, with Pepsi showing positive development. For foods, a changed promo strategy impacted Q3 volume but led to better revenue realization. He expressed optimism for future volume growth due to improved service levels (97-98%), innovation rollout, and a balanced approach to volume and price. CFO Jamie Caulfield added that as recent acquisitions like Siete, Poppi, and Alani Nu anniversary, their volume and net revenue will reflect organic sales growth.

Bonnie Herzog inquired about the factors contributing to volume pressures in PepsiCo's food and beverage segments, specifically differentiating the impact of smaller pack sizes from broader category softening or market share shifts. She also sought clarity on the outlook for volume growth and the potential for an inflection point, considering the company's innovation pipeline.

Answer

Chairman and CEO Ramon Laguarta clarified that beverage volumes actually grew in the quarter when excluding case-packed water, highlighting strong performance in major brands like Pepsi. For foods, he attributed volume impact to a changed promotional strategy focusing on everyday low value. Laguarta expressed optimism for future volume growth driven by improved service levels, innovation rollout, and a balanced approach to volume and price realization. He noted that the food business was close to flat and grew in the last four weeks. EVP and CFO Jamie Caulfield added that as recent acquisitions like Siete and Poppi anniversary, their organic sales growth will be reflected in future volume and net revenue figures.

Bonnie Herzog from Goldman Sachs asked for details on PepsiCo's accelerated productivity initiatives, the strategy for rightsizing its asset footprint, and how these efforts are balanced with ensuring long-term growth.

Answer

Chairman and CEO Ramon Laguarta explained the multi-year productivity strategy, highlighting the integration of North American businesses and the use of global capability centers. EVP and CFO Jamie Caulfield added that second-half productivity would be 70% higher than the first half, driven by plant closures, shuttering manufacturing lines, and rightsizing the workforce, particularly within the Frito-Lay division.

Bonnie Herzog asked for an update on Frito-Lay's strategic investments, particularly regarding price pack architecture and the away-from-home channel, and whether the current consumer pressure necessitates a change in strategy or increased investment to spur growth.

Answer

Chairman and CEO Ramon Laguarta explained that Frito-Lay is executing a three-pillar playbook: granular value investments, portfolio transformation, and operational excellence. He noted early positive returns from a dual-size single-serve strategy and expanded 10-count multipacks. Laguarta also mentioned that the business is improving operational excellence post-SAP implementation, which will enhance service levels and that PepsiCo will continue to invest for long-term growth.

Bonnie Herzog of Goldman Sachs inquired about the 2025 EPS guidance, noting it implies less leverage than in prior years. She asked if this suggests a significant ramp-up in investments and if the guidance range format is intended to provide greater flexibility.

Answer

CEO Ramon Laguarta confirmed a cautious approach, citing global volatility. He said the plan involves reinvesting productivity savings into areas like new price partitions for Frito. CFO Jamie Caulfield added that below-the-line headwinds, including Forex, higher interest expenses from recent acquisitions and debt rollovers, and increased pension costs, will cause sector operating profit to grow faster than guided EPS.

Bonnie Herzog inquired about the elevated promotional environment in HPC categories, its impact on price mix, and what is factored into the company's guidance regarding expected promotional levels for the year.

Answer

Rick Dierker (CEO) acknowledged the elevated promotional environment but highlighted Arm & Hammer's strong performance in the value segment, gaining share without outspending competitors. He expects promotional levels to gradually return to normalcy, emphasizing that brand value and effective advertising are more crucial than just promotion for sustained growth.

Bonnie Herzog asked about the elevated promotional environment in HPC categories, its impact on price mix, and how expectations for promotional levels are factored into the company's 2026 guidance.

Answer

CEO Rick Dierker explained that while competitors promote to gain share when consumers are pressed, brand value is crucial. He highlighted that Arm & Hammer Laundry grew share in Q4 2025 without outspending the category, benefiting from its value positioning and advertising halo effect. He anticipates promotional levels will drift back to normalcy, noting they are currently below long-term historical levels.

Bonnie Herzog from Goldman Sachs inquired about the promotional environment in Church & Dwight's categories and its impact on net price realization. She also asked for a breakdown of the puts and takes on the gross margin guidance, particularly for the expected decline in Q3.

Answer

President and CEO Rick Dierker described a divergent promotional landscape: litter promotions have spiked due to competitive activity, while laundry promotions remain rational and consistent with historical levels. CFO Lee McChesney explained the Q3 gross margin pressure is due to a timing shift of tariff costs into the back half and sticky inflation. CEO Rick Dierker added that he was pleased they maintained the full-year outlook despite absorbing costs from a product recall and business exits.

Bonnie Herzog requested more color on the increased marketing investments for Q4 and the full year, asking about the types of spend, strategic changes, international allocation, and if this higher level would be the new norm to support long-term growth.

Answer

CFO Rick Dierker explained the significant investment increase (to over 11% of sales) is funding innovation like Deep Clean and POWER SHEETS, as well as international expansion for brands like THERABREATH and HERO. CEO Matthew Farrell noted that 85% of ad spend is digital, providing flexibility. Dierker stated that the ~11% level is appropriate for the future as long as the company continues to gain market share.

Bonnie Herzog questioned the organic growth guidance, asking if it assumes a further slowdown and how the balance of price/mix and volume is expected to play out. She also asked about the nature of the Q3 marketing investment step-up.

Answer

Matthew Farrell (executive) stated the guidance reflects a step-change down in category growth seen in June/July, which is expected to persist. Richard Dierker (CFO and Head of Business Operations) affirmed that growth will remain volume-driven and explained that the Q3 marketing increase is a planned phasing shift from Q4 to better support new product launches throughout the year.

Bonnie Herzog questioned Colgate-Palmolive's ad spend strategy, noting a slight decrease last year after prior increases, especially given the challenged consumer backdrop and below-historical category growth. She asked if increased A&P this year aims to improve market share and about the flexibility to adjust A&P to meet EPS guidance.

Answer

Chairman, President, and CEO Noel Wallace stated that while advertising as a percentage of sales was slightly down in Q4, dollar-based ad spend was up 5% year-on-year, focusing on efficiency through omni-channel demand generation. He emphasized continued investment in areas and brands that benefit from increased advertising to drive market share, penetration, and category growth, while maintaining flexibility to optimize spend.

Bonnie Herzog questioned Colgate-Palmolive's ad spend, noting a slight decrease in 2025 after prior increases, and asked if increased A&P for 2026 aims to improve market share and about the flexibility to adjust A&P to meet EPS guidance.

Answer

Noel Wallace, Chairman, President, and CEO, stated that past success was driven by brand building and advertising acceleration. He explained that scaling back advertising in H2 2025 was prudent due to category sluggishness. He emphasized new omni-channel demand generation capabilities for efficiency. While ad spend as a % of sales was down in Q4, dollar spend was up 5% year-on-year. He confirmed a focus on optimization and efficiency, with increased advertising in specific areas to drive market share, penetration, and category growth.

Bonnie Herzog of Goldman Sachs questioned the company's confidence in its low single-digit EPS growth guidance for fiscal 2025, given slowing markets, promotional intensity, and tariff pressures, and asked for the key underlying growth drivers.

Answer

Chairman, CEO & President Noel Wallace expressed confidence in the guidance based on current raw material and FX outlooks, supported by strong investment and innovation plans for the second half. CFO Stanley Sutula added that while slowing categories and higher raw material costs are headwinds, they are balanced by lower tariffs and favorable FX, with the team's ability to manage productivity underpinning the forecast.

Bonnie Herzog from The Goldman Sachs Group, Inc. asked about the updated guidance for flexible advertising spending, questioning if it reflects changes in innovation timing due to market softness, and if innovation plans are shifting more towards value products.

Answer

Noel Wallace, Chairman, President and CEO, clarified there is no change to innovation plans; in fact, they are considering accelerating innovation to stimulate consumption. The revised ad spend guidance is a function of focusing on ROI and prudently managing P&L flexibility amid category softness. He stressed that local currency advertising will still be strong and likely up for the year, and the focus remains on premiumization, not just value.

Bonnie Herzog questioned the outlook for the North America business, asking for the expected contribution from price versus volume in 2025, whether pricing would remain negative, and the state of the promotional environment.

Answer

CEO Noel Wallace explained that while prior price adjustments will continue to have an effect, he expects pricing to improve through the back half of 2025. He noted that the underlying Oral, Personal, and Home Care businesses in North America performed well, with sequential improvement in Q4. He also highlighted that the segment's results now include the Skin Health business, which experienced softness, but he remains optimistic due to new leadership and strategic initiatives.

Bonnie Herzog asked about the emerging markets business, noting that strong organic growth was largely driven by pricing to offset FX pressures and questioned how this translates to net growth and what the future contribution from volume and mix might be.

Answer

Noel Wallace, Chairman, President and CEO, described the emerging market performance as 'terrific,' with positive volume and pricing even excluding Argentina. He emphasized that key markets like Brazil, India, and Mexico are performing strongly and that the strategy of driving household penetration and premiumization is working, though the company is not immune to FX volatility.

Bonnie Herzog asked if Altria's aggressive promotional strategy for Basic, which impacts net price realization and smokable OCI growth, is intended to be offset by ramping import-export activity with KT&G. She also questioned if a lack of significant import-export activity could lead to negative smokable dollar profit growth and place Altria at the low end of its EPS guidance. Additionally, she inquired about Altria's strategy for Marlboro, given its retail share dropped below 40%, and whether Basic's promotions are cannibalizing Marlboro.

Answer

CEO Billy Gifford clarified that the Basic strategy and duty drawback are independent decisions. He explained that Basic's strategy, deployed in over 30,000 stores, addresses consumer economic pressures and captures deep discount consumers, allowing for future adjustments. He stated that the EPS guidance range is typical for the start of the year. Regarding Marlboro, Billy Gifford affirmed the strategy to maximize long-term profitability while investing in Marlboro and growth categories. He attributed Marlboro's Q4 share decline to e-vapor enforcement impacting dual consumers and stated analytics suggest Basic is not significantly cannibalizing Marlboro.

Bonnie Herzog asked if Altria's aggressive promotional strategy for Basic cigarettes, impacting net price realization, is intended to be offset by import-export activity. She also questioned the implications for smokable dollar profit growth and the EPS guidance range, and sought clarification on Altria's strategy for Marlboro given its retail share drop below 40%, and potential cannibalization from Basic.

Answer

CEO Billy Gifford clarified that the Basic strategy and duty drawback are independent decisions. The Basic strategy targets approximately 30,000 stores where consumers face economic pressures, aiming to capture deep discount consumers. He noted the EPS range is typical for the start of the year. For Marlboro, Billy Gifford emphasized maximizing long-term profitability in the smokable segment and investing in growth categories, stating that analytics suggest Basic is not cannibalizing Marlboro.

Bonnie Herzog questioned Altria's satisfaction with ON's performance and positioning amidst an intensifying competitive nicotine pouch environment, asking about initiatives to improve performance, potential increases in promotional spend, and early feedback on the ON+ rollout, including national expansion plans. She also sought more details on the KT&G partnership's operational efficiencies, duty drawback opportunities, alternative revenue streams, and international expansion.

Answer

CEO Billy Gifford acknowledged the intense competitive environment, noting ON's retail price increase contrasted with the category's decline, and expressed satisfaction with ON's steady retail takeaway volume. He stated it was too early for ON+ feedback but highlighted its differentiation. Regarding KT&G, Mr. Gifford outlined three prongs: international modern oral expansion (including Loop), U.S. non-nicotine opportunities leveraging KT&G's product expertise and Altria's commercial strength, and operational efficiencies in traditional tobacco, including duty drawback benefits.

Bonnie Herzog from Goldman Sachs inquired about the intensifying competitive landscape in the nicotine pouch category, Altria's satisfaction with on!'s performance and positioning, potential initiatives to improve performance, and the necessity of increased promotional spending. She also sought early feedback on the on! PLUS rollout and the likelihood of a national launch. Additionally, Herzog asked for more details on the KT&G partnership, specifically regarding operational efficiencies like duty drawback, alternative revenue streams, and international expansion opportunities.

Answer

CEO Billy Gifford acknowledged the intense competitive environment, noting on!'s retail price increase against a declining category average, and expressed satisfaction with on!'s steady retail takeaway volume. He stated it was too early for extensive on! PLUS feedback but highlighted its differentiation and future expansion plans. Regarding KT&G, Gifford outlined a three-pronged strategy: international modern oral expansion (on!, on! PLUS, LOOP), U.S. non-nicotine opportunities leveraging KT&G's product expertise and Altria's commercial strength, and operational efficiencies including duty drawback and future international market access.

Bonnie Herzog questioned Altria's confidence in achieving its long-term mid-single-digit EPS growth algorithm through 2028, noting that growth would need to accelerate. She also asked for details on the strategy for the 'Basic' cigarette brand, including its promotional changes and its role in capturing discount share versus retaining consumers.

Answer

CEO Billy Gifford reaffirmed the mid-single-digit CAGR as a management goal, expressing confidence in the company's disciplined market moves and noting that consumers can adapt to stable, albeit high, economic pressures. He explained that the 'Basic' brand repositioning is a targeted, data-driven strategy to keep value-conscious consumers within Altria's portfolio, which is more cost-effective than re-acquiring them later.

Bonnie Herzog from Goldman Sachs questioned the drivers of lost shipment and retail share, why the price gap metric was removed, and how Altria is managing wide price gaps to prevent further consumer down-trading.

Answer

CEO William Gifford responded that the company's strategy is to maximize long-term profitability, not react to single-quarter trends, and that they use RGM tools to manage consumer pressures at a local level. He explained the national price gap metric was removed because it caused confusion and did not reflect how the business is managed at the store level, where price gaps for specific Marlboro brand segments can be significantly smaller.

Bonnie Herzog from Goldman Sachs inquired about the strategic options for NJOY following the ITC ruling, including a potential settlement with JUUL, and questioned whether the 2025 guidance accounts for pulling NJOY ACE from the market.

Answer

CEO William Gifford outlined several pathways for NJOY, including a review by the U.S. Trade Representative and ongoing work to engineer around the patents, while noting any settlement would require discipline. CFO Salvatore Mancuso confirmed the EPS guidance range incorporates numerous scenarios and potential market variabilities, including those related to NJOY.

Bonnie Herzog questioned why Altria maintained its full-year guidance without narrowing the range despite a strong Q3 and being late in the year. She also asked about the widening price gap for Marlboro and if there's a change in pricing strategy given consumer pressures.

Answer

CEO William Gifford reaffirmed confidence in the guidance range, citing the dynamic market with illicit products and normal quarter-to-quarter fluctuations. Regarding pricing, he explained that the company uses revenue growth management (RGM) to manage price gaps at a local store level, not just nationally, and remains focused on maximizing long-term profitability for the combustible category while investing in growth areas.

Bonnie Herzog asked about the state of the consumer, Kimberly-Clark's strategy for volume growth in a challenging environment, and expectations for 2026 category growth, specifically if improved market growth is necessary to achieve mid-to-high single-digit EBIT guidance.

Answer

Chairman and CEO Mike Hsu explained that Kimberly-Clark anticipated consumer pressure and focused on delivering superior propositions across all price tiers, driving volume growth through innovation. President and COO Russ Torres added that the company meets consumer demand with innovation, marketing, and targeted price-pack adjustments, noting strong North America volume-mix growth. CFO Nelson Urdaneta clarified that the 2026 category outlook is around ±2% globally, with Kimberly-Clark's categories being resilient.

Bonnie Herzog asked about Kimberly-Clark's strategy for growing volumes amidst a challenging consumer environment, expectations for 2026 organic sales growth relative to category growth, and whether improved end-market growth is necessary to achieve mid-to-high single-digit EBIT growth guidance.

Answer

Chairman and CEO Mike Hsu explained the focus on delivering superior propositions across all price tiers and expanding categories globally through innovation. President and COO Russ Torres added that meeting consumer demand with compelling value propositions, targeted price-pack adjustments, and strong innovation pipeline are key. CFO Nelson Urdaneta clarified that the 2026 outlook implies a global category growth of around 2%.

Bonnie Herzog asked how the joint venture with Suzano, which divests the International Family Care and Professional (IFP) business, will affect Kimberly-Clark's long-term algorithm for growth, margins, and EPS. She also sought to verify that strong Q2 volume was not a pull-forward.

Answer

Chairman and CEO Mike Hsu confirmed their commitment to the long-term algorithm, stating the transaction will enhance their ability to deliver consistent growth by focusing on higher-margin Personal Care. He noted the deal will accelerate progress toward their margin milestones. Regarding volume, he emphasized that performance is based on strong global consumption, not short-term inventory shifts. CFO Nelson Urdaneta added that the remaining business has a higher underlying category growth rate.

Bonnie Herzog requested a detailed bridge from the prior EPS guidance to the new guidance, seeking to quantify the puts and takes beyond the tariff impact, and asked about the risk of needing further investments to maintain competitiveness.

Answer

CFO Nelson Urdaneta and CEO Michael Hsu clarified that the guidance change to roughly flat EPS growth is almost entirely due to the ~$200 million net headwind from tariffs. They confirmed they are preserving their investment plans for innovation and marketing. Urdaneta highlighted that SG&A savings are already coming through, providing flexibility and fuel for reinvestment to navigate headwinds without compromising the strategic plan.

Bonnie Herzog requested color on the expected phasing of financial results in 2025, considering various factors like retailer destocking, foreign exchange, and the exit from a private label business.

Answer

CFO Nelson Urdaneta explained that lapping the 2024 retailer destocking should provide a modest tailwind in 2025. He guided that for 2025, both revenue and profits are expected to be more evenly distributed between the first and second halves compared to the prior year, with growth being consistently driven by volume and mix.

Bonnie Herzog asked about the sustainability of the company's significant gross margin expansion, especially given soft organic sales and the potential need for increased promotions. She also sought clarity on the expected impact from input costs and productivity savings.

Answer

CFO Nelson Urdaneta expressed strong confidence in reaching the long-term goal of at least 40% gross margin, citing accretive innovation, proactive cost management, and a strong pipeline of supply chain productivity savings. CEO Michael Hsu added that the company is focused on volume and mix-driven growth and uses promotions strategically as a trial driver for innovation rather than to chase volume.

Bonnie Herzog asked for more color on the grooming segment's flat organic sales, negative volumes, and 300 basis point margin contraction, seeking insights into volume weakness, other margin factors, and the outlook for the second half.

Answer

CFO Andre Schulten attributed the margin and bottom-line impact to slowing top-line volume in a high-margin business, noting that investment in the segment was not curtailed. He explained that quarterly profiles are influenced by initiative timing. CEO Shailesh Jejurikar highlighted significant opportunities in Venus (female grooming) and appliances, with innovation planned for calendar 2026, and efforts to improve the shopping experience in U.S. retail stores.

Bonnie Herzog inquired about the drivers behind the weakness in the grooming segment, including flat organic sales, negative volumes, and a nearly 300 basis point margin contraction, and the outlook for the segment's acceleration and innovation in the second half.

Answer

CFO Andre Schulten attributed the margin and bottom-line impact to the slowing top line in the high-margin grooming business, influenced by initiative timing. He expects modest acceleration in H2, primarily from U.S. activation and execution. CEO Shailesh Jejurikar highlighted significant upside in Venus (female grooming) across regions, growth in appliances, upcoming innovation in calendar 2026, and efforts to improve the in-store shopping experience for grooming in the U.S.

Bonnie Herzog of Goldman Sachs inquired about the reasons for the wider-than-usual fiscal 2026 guidance range, the implied operating deleverage at the midpoint, and the expected phasing of EPS growth throughout the year.

Answer

CFO Andre Schulten explained the wide guidance range reflects significant uncertainty in category growth, tariff impacts, and foreign exchange volatility. He confirmed that EPS growth is expected to be back-half weighted, as pricing actions to offset tariffs and savings from the restructuring program will materialize later in the fiscal year.

Bonnie Herzog of Goldman Sachs questioned the implied acceleration in Q4 guidance versus Q3 results, given the context of softer consumption trends, and asked about the potential for further risk to the outlook.

Answer

Executive Andre Schulten explained that the wide Q4 organic growth guidance range of 0.5% to 4.5% reflects the high uncertainty in consumer behavior and market growth. He noted that a key headwind from Q3, retailer inventory reductions, is not expected to repeat in Q4 as shipments are now aligned with consumption. However, he does not assume the lost inventory will be rebuilt.

Bonnie Herzog of Goldman Sachs asked about P&G's flexibility to deliver on its EPS guidance if organic sales come in at the low end, and whether the company might need to reduce reinvestment levels to protect the bottom line.

Answer

Jon Moeller, Chairman, President and CEO, firmly stated that P&G's mindset is to fully support its strong innovation pipeline with investment, even if it means landing at the lower end of the earnings range. He referenced past periods of significant headwinds where P&G increased spending on innovation and commercialization while still growing earnings, emphasizing this as the company's core strategy.

Bonnie Herzog asked about the implied sequential deceleration in EBITDA growth for the second half of the fiscal year, seeking drivers beyond the FICOS acquisition lap. She also requested an update on Casey's M&A strategy, current market conditions, and the company's activity in pursuing further acquisitions.

Answer

Steve Bramlage, Chief Financial Officer, clarified that the expected deceleration in EBITDA growth for the second half is primarily a mechanical effect due to lapping the FICOS acquisition, resulting in a higher prior-year base. He stated there's no change in expectation for the 'mothership' or FICOS performance. Darren Rebelez, Chairman, President, and Chief Executive Officer, reiterated that Casey's M&A strategy remains unchanged, focusing on small, tuck-in acquisitions with opportunistic larger deals. He emphasized a high bar for asset quality, ensuring stores can accommodate Casey's kitchens and operational model, leading to more 'no's than 'yes's.

Bonnie Herzog of Goldman Sachs followed up on the phasing of the fiscal year, recalling previous expectations for a second-half weighting due to the Fikes Wholesale acquisition. She asked how Q1 performance compared to internal expectations and if its strength suggested conservatism in the full-year guidance. She also inquired about quantifying promotional spend levels this quarter versus prior periods, and how much promo spend has increased.

Answer

CEO Darren Rebelez reiterated that the company will update guidance after Q2, maintaining consistency with past practices. CFO Steve Bramlage clarified that seasonality dynamics haven't changed, but year-over-year comparisons in the first half are heavily influenced by the absence of Fikes in the prior year. Darren Rebelez explained that a large portion of promotional activity is vendor-funded, so direct company spend doesn't fully reflect the increased absolute level of promotions.

Bonnie Herzog followed up on the fiscal year's earnings phasing, which was expected to be second-half weighted due to the Fikes acquisition, asking how Q1 performance compared to internal expectations and if it suggests conservatism in current guidance. She also asked about promotional spend levels.

Answer

Darren Rebelez, President, CEO & Board Chair, reiterated that Casey's had a strong Q1 and August, and guidance will be updated after Q2. Steve Bramlage, CFO, clarified that while seasonality hasn't changed, year-over-year comps are significantly influenced by the Fikes acquisition timing in the first half. Mr. Rebelez also explained that a large portion of promotional activity is funded by vendor partners, so it doesn't directly impact Casey's financials, though the absolute level of promotions has increased with business growth.

Bonnie Herzog asked for color on why full-year fiscal 2025 inside sales fell slightly short of the lowered guidance and questioned the potential negative impact from illicit vape products on traffic and sales.

Answer

CEO Darren Rebelez attributed the full-year result to a softer-than-expected Q1 and a challenging February in Q4, which was impacted by adverse weather and a leap day effect. He highlighted strong momentum in March and April. He acknowledged that illicit vapes are negatively impacting the category but noted this is being countered by strong growth in nicotine alternatives like pouches, which were up 54% in the quarter due to merchandising efforts.

Bonnie Herzog asked for an explanation of why full-year FY25 inside sales fell slightly short of the company's lowered guidance. She also questioned the degree to which illicit vape sales are negatively impacting traffic and sales.

Answer

President and CEO Darren Rebelez attributed the full-year result to a softer-than-expected Q1 and a difficult February impacted by weather and the leap day effect, while highlighting strong momentum in March and April. He acknowledged that illicit vape sales are impacting the category but noted that this headwind is being countered by a 54% quarterly growth in nicotine alternatives, driven by merchandising resets.

Bonnie Herzog asked about Casey's positioning in a potential recessionary environment and whether the company has increased promotional activity in response to QSR competitors.

Answer

CEO Darren Rebelez explained that Casey's historically performs well in recessions by providing low-cost daily necessities and serving as a value-oriented trade-down from QSRs. He clarified that while overall promotional spending has not increased, the company is using new data capabilities to deploy more targeted and efficient offers to specific customer segments.

Bonnie Herzog questioned the drivers for the implied acceleration in second-half inside sales to meet the 3-5% annual guidance. She also asked about traffic trends during the quarter and into November/December, and the overall health of the consumer.

Answer

CFO Steve Bramlage noted that Q2 and November sales were right at the midpoint of the annual range, giving them confidence. He mentioned upcoming initiatives and favorable comps as reasons for maintaining the guidance. CEO Darren Rebelez added that consumer behavior is stable, with some softness in the lower-income demographic, but the majority of their customer base remains resilient.

Bonnie Herzog asked about the softer-than-expected inside same-store sales, particularly in grocery, and requested an update on private label performance and strategy.

Answer

CEO Darren Rebelez attributed the softer sales to cycling a strong prior-year quarter and a lottery jackpot anomaly that negatively impacted traffic. He noted consumer behavior remains stable, evidenced by strong premium fuel sales. Regarding private label, he stated performance is steady and a tiered offering is still in development. CFO Stephen Bramlage added that private label contributes over 100 basis points to the grocery margin.

Bonnie Herzog asked about the moderation of U.S. growth for Il Makiage and SpoiledChild, questioning the feasibility of sustaining low 20% U.S. growth and whether repeat rates are also moderating.

Answer

Oran Holtzman, Co-founder and CEO, ODDITY, stated that growth is managed across brands and geographies to maximize overall potential, not targeting specific brand or country growth rates. Lindsay Drucker Mann, CFO, ODDITY, reiterated the company's commitment to 20% compounded durable growth at the Oddity level, managing the portfolio (Il Makiage, SpoiledChild, Methodic) to achieve this. She confirmed that repeat rates continue to be very strong.

Bonnie Herzog asked about the moderation of Il Makiage and SpoiledChild's U.S. growth year-to-date compared to last year, questioning the sustainability of low 20% growth for these brands, particularly Il Makiage. She also asked if repeat rates for these brands were moderating.

Answer

Oran Holtzman, Co-founder and CEO of ODDITY, stated that growth is managed across brands and geographies to maximize overall potential, not to meet fixed targets for individual brands or regions. Lindsay Drucker Mann, CFO of ODDITY, reiterated the company's commitment to 20% compounded durable growth at the ODDITY level, managing the portfolio to achieve this. She confirmed that repeat rates for both Il Makiage and SpoiledChild continue to be very strong and are not moderating.

Bonnie Herzog followed up on pricing, asking about the net price realization expected from current actions compared to the 5% increase taken last year. She also inquired about the drivers behind the strong gross margins in Q3 2025, which exceeded expectations.

Answer

Rob Gehring, CGO, noted it's too early to provide an exact net price realization number due to market complexity. Hilton Schlosberg, CEO, attributed the strong gross margins to pricing actions, supply chain optimization, and favorable product sales mix, partially offset by higher promotional allowances, increased aluminum can costs, and geographical sales mix.

Bonnie Herzog followed up on the net price realization expected from the November 1st pricing actions compared to last year's 5% increase, and also inquired about the drivers behind the stronger-than-expected gross margins in the quarter.

Answer

Rob Gehring (CGO) indicated it was too early to provide an exact net price realization number due to market complexities, with more details expected at Investor Day. Hilton Schlosberg (CEO) attributed the strong gross margins primarily to pricing actions, supply chain optimization, and a favorable product sales mix, partially offset by higher promotional allowances and aluminum can costs.

Bonnie Herzog asked for an update on the company's supply chain optimization efforts and for commentary on the drivers behind the strong U.S. energy drink category growth and its potential sustainability.

Answer

Hilton Schlosberg, Vice Chairman & CEO, explained that supply chain optimization has achieved an effective balance between in-house production and a co-packing model to ensure the lowest landed cost. Regarding category strength, he attributed the double-digit growth to innovation, favorable pricing against other beverages, strong consumer demand for functionality, and a cultural shift away from alcohol, which he believes supports sustained growth.

Bonnie Herzog of Goldman Sachs asked how Q1 reported sales compared to internal expectations and questioned the timing of innovation shipments, particularly comparing the first half of the year to the second half.

Answer

Executive Hilton Schlosberg stated that more innovation was rolled out in Q1 than is planned for Q2, which included some initial inventory loading by distributors. CEO Rodney Sacks added that additional innovation is also planned for the second half of the year, ensuring a continued pipeline of new products.

Bonnie Herzog asked for more detail on the drivers of Q4 gross margin expansion, questioning the specific impact of the November price increase, in-house production, and the potential risk from aluminum tariffs.

Answer

Executive Hilton Schlosberg explained that the primary drivers were reduced input costs, partially offset by geographical sales mix. He confirmed the price increase was a positive factor, though somewhat counteracted by promotional allowances. Schlosberg noted it was premature to comment on tariffs but stated the company is significantly hedged on aluminum for 2025.

Bonnie Herzog inquired about the puts and takes on gross margins in the quarter, the outlook moving forward, the impact of tariffs, Midwest premium inflation, and the company's hedging strategy.

Answer

CEO John Fieldly identified gross profit as an opportunity area, noting impacts from Midwest premium (they do forward buys but no long-term hedging yet) and increasing tariffs. He stated they are offsetting these with scale, synergies from Alani production, and vertical integration. CFO Jarrod Langhans added that raw material savings are still possible due to scale, and freight savings are expected, with Rockstar margins improving in H1 2026 and Alani by end of Q1 2026, though Q4 will see pressure from scrap and returns.

Bonnie Herzog inquired about the puts and takes affecting gross margins in the quarter, specifically asking for details on the impact of tariffs, Midwest premium inflation, and the company's hedging strategy.

Answer

Chairman and CEO John Fieldly noted that gross profit is an area of opportunity, with Midwest premium impacting costs. He stated that Celsius Holdings does not currently hedge but does forward buys, and is evaluating long-term hedging. He also mentioned increasing tariff impacts (Q2, Q3, Q4) being offset by scale, synergies from Alani Nu integration, and vertical integration. CFO Jarrod Langhans added that raw material savings and freight savings are expected, with Rockstar margins improving in H1 2026 and Alani margins by end of Q1 2026, though Q4 will see pressure from scrap and returns.

Bonnie Herzog sought further insight into the pressures affecting the beer category, asking why Molson Coors believes these are cyclical rather than structural. She also questioned the company's expectations for category growth this year, potential recovery next year, and identified the biggest opportunities and risks.

Answer

CEO Rahul Goyal explained that while structural issues like health and wellness exist, the incremental pressure this year (category -4% to -6%) is due to macro factors like economic impacts and tariffs, which he views as cyclical. He sees opportunities in the underindexed U.S. above-premium segment and improving performance in flavors and economy brands.

Bonnie Herzog asked for more color on the pressures facing the beer category, why management believes they are cyclical versus structural, and expectations for category growth this year and next, including drivers, opportunities, and risks.

Answer

CEO Rahul Goyal noted that while structural issues exist, the incremental pressure this year (category down -4% to -6% vs. pre-2025 -3%) is due to macro issues like economic impacts and tariffs, suggesting it's cyclical. He expects a return to pre-2025 levels once macro issues subside, highlighting opportunities in underindexed U.S. above-premium and addressing share losses in flavors and economy.

Bonnie Herzog of Goldman Sachs Group Inc. inquired about the company's outlook on pricing and the promotional environment for the rest of the year, considering the pressures on the beer category and consumers.

Answer

President and CEO Gavin Hattersley explained that while the summer promotional environment is competitive, this is typical and expected to ease in the shoulder months. He reaffirmed that the company anticipates net pricing to fall within the historical 1% to 2% range for the year, noting that consumers are seeking value through channel and pack size shifts rather than trading down on brands.

Bonnie Herzog requested an update on market share retention for core brands and asked for color on month-to-month performance trends during Q1 and into April to gauge the business's current run rate.

Answer

CEO Gavin Hattersley stated that the company has retained nearly all of the significant share its core brands gained in 2023, with combined share moving from 13.5% to 15.4%. He noted that total share loss trends have sequentially improved since Q3 2024. He attributed a brief acceleration in share loss in mid-March to a packaging change for Blue Moon and timing of innovation for the Simply brand, adding that the overall industry showed some improvement in April.

Bonnie Herzog of Goldman Sachs requested a more detailed breakdown of the operating leverage implied in the 2025 guidance, asking for more color on the expected cost savings and efficiency drivers.

Answer

CFO Tracey Joubert outlined several key drivers for operating leverage. These include efficiency gains from recent brewery investments, cost benefits from exiting lower-margin contract brewing, optimizing marketing ROI by reallocating funds from divested craft brands, and significant savings from onshoring Peroni production, which will in turn be used to fund that brand's marketing.

Bonnie Herzog asked for a breakdown of the Americas financial volume decline, separating the impact of shipment timing, macroeconomic pressures, and the Pabst contract unwind, and questioned the drivers behind the implied Q4 sales acceleration.

Answer

CEO Gavin Hattersley explained that the revised guidance was primarily due to a soft U.S. beer industry in July and August, though trends improved in September and into Q4. He noted the inventory unwind was largely complete. CFO Tracey Joubert provided specifics, stating U.S. shipments were down 17.9%, with brand volume down 6.2% and the Pabst contract contributing a 2.6% negative impact.

Bonnie Herzog asked for more color on the beer operating margin expansion in the quarter and the key headwinds expected for margins in the back half of the year, given that guidance implies a decent step down compared to the first half.

Answer

CFO Garth Hankinson explained that the second half is typically a lower volume period with scheduled maintenance, leading to lower margins. He cited approximately 100 basis points of headwinds from fixed costs and incremental tariffs, and another 60 basis points from maintaining marketing investment, partially offset by lower comp benefits.

Bonnie Herzog requested more details on the beer operating margin expansion observed in the quarter and sought insights into the key headwinds anticipated for margins in the second half of the fiscal year, given that guidance implies a significant step down from the first half.

Answer

CFO Garth Hankinson explained that the second half of the year traditionally has lower volumes and includes maintenance activities, leading to lower margins. He identified approximately 100 basis points of margin headwinds from fixed costs and incremental tariffs, plus another 60 basis points related to maintaining marketing investment, partially offset by lower comparable benefits.

Bonnie Herzog of Goldman Sachs asked about the potential upside from the rebuild following last year's California wildfires and whether this impact was already included in the company's guidance.

Answer

President & CEO Bill Newlands confirmed that such events typically create a long-term tailwind from rebuilding jobs and that this potential is factored into guidance. EVP & CFO Garth Hankinson tempered this by noting that California still faces macro headwinds, including higher Hispanic unemployment and a year-over-year decline in construction jobs.

Bonnie Herzog inquired about the impact of last year's California wildfires, asking about the expected upside from the rebuilding efforts and whether this potential tailwind is included in the company's guidance.

Answer

CEO Bill Newlands confirmed that such events typically create a long-term tailwind from rebuilding activities and that this is factored into guidance. CFO Garth Hankinson added a note of caution, pointing out that California still faces short-term macro headwinds like unemployment, which could temper the benefit.

Bonnie Herzog asked about the underlying assumptions for beer category growth in the medium-term forecast and requested details on the drivers that will allow the company to maintain best-in-class beer margins of 39-40% despite slower growth and tariff risks.

Answer

CEO William Newlands projected the overall beer industry would be flat to down 2% in the medium term, with Constellation continuing to gain share. CFO Garth Hankinson explained that margins will be supported by a combination of modular capacity expansion to limit depreciation, incremental volume, a 1-2% pricing algorithm, and ongoing cost savings initiatives.

Bonnie Herzog questioned the wide guidance range for the beer business given that only two months remain in the fiscal year. She asked for the key drivers that would lead to results at the low versus high end of the range and whether the California fires were factored in.

Answer

CEO William Newlands attributed the wide range to significant market volatility and uncertainty. He explained that the low end reflects potential risks like worsening unemployment or tariffs, while the high end reflects the opportunity if macroeconomic headwinds subside. He confirmed that the guidance does account for the unfortunate situation with the California fires.

Bonnie Herzog asked if the lift from spring shelf space and distribution gains met expectations and inquired about any potential shelf space gains from the fall reset. She also asked how these gains factor into the beer top-line guidance, which implies an acceleration in the second half.

Answer

CEO William Newlands confirmed that the double-digit share gains from spring resets were beneficial, especially in markets with growing awareness. He explained that the impact will be amplified by significant incremental marketing investments in the second half, funded by better-than-expected cost savings. Newlands believes this combination of shelf gains and increased marketing will be highly beneficial for results through the rest of the year.

Bonnie Herzog asked about Q3 trends, specifically whether seasonal businesses like sun care saw a pickup after a weak Q2, and inquired about other H2 factors like retailer inventory destocking and China disruptions.

Answer

CFO Amit Banati reported that July trends were similar to Q2, with consumption outpacing organic sales and seasonal businesses remaining weak, all of which is factored into the revised guidance. He highlighted that the second half outlook benefits from softer comps in Q4 related to prior-year trade accruals and weakness in China.

Bonnie Herzog asked about Q3 trends, specifically whether the seasonal businesses have seen a pickup after a late start in Q2, and what other factors like retailer destocking are underpinning the full-year organic sales guidance.

Answer

CFO Amit Banati stated that July trends were similar to Q2, with consumption continuing to outpace organic sales and seasonal businesses remaining weak. He confirmed these trends have been incorporated into the full-year guidance. Banati also reiterated that the company faces softer comparisons in Q4 related to trade accruals and China weakness from the prior year, which are factored into the outlook.

Bonnie Herzog asked about Kenvue's innovation plans and spending strategy for 2025, questioning if they have evolved given the current macroeconomic environment and consumer pressures.

Answer

CEO Thibaut Mongon stated that Kenvue's core innovation plans remain unchanged, as consumers seek efficacy and trust in challenging times. However, he noted the company is augmenting its strategy by adjusting its value equation through targeted price and trade investments, offering varied pack sizes for different cash outlays, and ensuring presence across all shopping channels to meet evolving consumer needs.

Bonnie Herzog asked about the significant margin contraction in the Self Care segment during Q4 and the full year, seeking more color on the segment's margin trajectory given subdued pricing and reinvestment plans.

Answer

CEO Thibaut Mongon advised against overemphasizing quarterly segment margins due to fluidity and mix impacts, such as the decline in the lower-margin pediatrics business. He pointed out that the consolidated operating margin of 21.5% was within guidance. For 2025, he anticipates some acceleration in Self Care gross margin, with continued investment in Skin Health and margin enhancement from Essential Health, all supported by company-wide efficiency programs.

Bonnie Herzog questioned the drivers behind the implied Q4 organic sales growth acceleration, given the lowered full-year guidance, and asked for visibility amid consumer pressures and October shipment trends.

Answer

Thibaut Mongon, an executive, acknowledged external headwinds like a slow allergy season and soft Skin Health category but confirmed expectations for Q4 to be the strongest growth quarter. This is attributed to the cumulative impact of the new 'Kenvue playbook' and easier year-over-year comparisons. Paul Ruh, an executive, added that despite a softer top line, the company is confident in its full-year adjusted EPS guidance, fueled by strong productivity and efficiency gains.

Bonnie Herzog from Goldman Sachs questioned the full-year guidance, noting the implied top-line acceleration in H2 against stable bottom-line growth, which suggests higher OpEx, and asked for drivers of this dynamic.

Answer

CEO Damian Gammell confirmed an expected H2 acceleration driven by continued volume growth and established pricing. CFO Ed Walker clarified that H2 growth would be more volume-driven with less benefit from geographic mix, and noted that OpEx phasing between the halves explains the stable profit delivery forecast.

Asked for clarification on the full-year guidance, specifically why the top-line implies back-half acceleration while the bottom-line suggests stable growth, implying higher OpEx. Also inquired about the expected drivers (price/mix vs. volume) for the second half.

Answer

Management confirmed that the business is accelerating into the second half, driven by returning volume growth and strong price/mix. The stable bottom-line growth reflects that more of the H2 growth will come from volume rather than revenue per case, along with some OpEx phasing between the two halves.

Bonnie Herzog from Goldman Sachs inquired about the updated full-year guidance, questioning the drivers behind the implied second-half top-line acceleration versus stable bottom-line growth.

Answer

CEO Damian Gammell confirmed the expected acceleration, citing a return to volume growth and established pricing. CFO Ed Walker clarified that second-half profit growth would be similar to the first half due to OpEx phasing and a greater contribution from volume versus revenue per case.

Asked for an update on volume trends through Q4 and into the new year, any recent changes in consumer elasticities, and the outlook for the away-from-home versus at-home channels.

Answer

Volumes improved in Q4 and started 2024 in line with expectations, with upcoming events expected to provide momentum. The consumer environment has been consistent, and volumes are holding up. The away-from-home channel has started the year strongly. Profitability has been improved in the at-home channel, making the company less sensitive to channel shifts.

Bonnie Herzog from Goldman Sachs questioned the updated guidance, noting that while the top line was raised, EBITDA guidance was maintained, implying less operating leverage. She sought clarity on the drivers for the expected acceleration in EBITDA growth in the second half of the year and the reasons for the high SG&A in Q2.

Answer

CEO Martin Roper attributed the top-line confidence to strong brand momentum and favorable Q3 comparisons, while gross margin is facing headwinds from higher ocean freight and a lag in pricing actions to offset tariffs. CFO Corey Baker explained that SG&A was front-loaded in the first half due to marketing for the Treats launch, increased people costs, and unique items like bad debt reserves and temporary double rent, which are expected to normalize in the second half.

Bonnie Herzog inquired about the key drivers for the accelerated Q4 top-line and EBITDA growth guidance, the outlook for container availability into next year, and the degree to which supply constraints impacted the private label versus branded businesses.

Answer

CFO Corey Baker and CEO Martin Roper explained that the strong Q4 outlook is driven by inventory replenishment at retail and distributor warehouses following earlier shortages. While higher ocean freight costs will pressure Q4 margins, significant volume growth is expected to provide leverage. They noted that supply constraints affected the entire business, but private label was impacted more severely due to having lower inventory levels entering the quarter.

Bonnie Herzog asked for the rationale behind widening the shipment and depletion guidance ranges, questioned why second-half shipment guidance is so negative, and sought clarity on the implied outlook for Twisted Tea.

Answer

CFO Diego Reynoso explained that the guidance range was widened due to the recent, drastic volatility in industry depletions, making it a prudent measure. The negative shipment forecast is a direct result of the need to rebalance inventory with these uncertain depletion trends. President & CEO Michael Spillane added that for Twisted Tea, the company expects to maintain market share, but the macro environment makes it difficult to predict a return to growth.

Bonnie Herzog of Goldman Sachs followed up on tariffs, asking if the company hedges its aluminum exposure. She also asked management to reconcile the increased marketing spend with the 1% decline in depletions, questioning when the investment would yield better results and if depletions would have been worse without it.

Answer

CEO Michael Spillane confirmed the company does not hedge aluminum, instead using a pass-through pricing model with its can suppliers. Chairman Jim Cook stated his expectation that depletions will turn positive in the second half of the year and that performance would have been worse without the increased brand support, given the weaker-than-expected beer category. Mr. Spillane added that awareness spending for new brands like Sun Cruiser does not immediately translate to depletions in the same quarter.

Bonnie Herzog requested more detail on the increased advertising spend, the rationale behind it, the expected timing of its impact, and asked about Truly's volume performance and 2025 outlook.

Answer

Founder and Chairman C. Koch explained the advertising increase is a cautious investment, with spending contingent on measurable returns tracked via mixed media modeling. On Truly, CFO Diego Reynoso stated they were unhappy with 2024 volume and are forecasting conservatively for 2025, not assuming growth but aiming to improve trends. CEO Michael Spillane added that Truly's trends are improving.

Bonnie Herzog of Goldman Sachs requested more detail on initiatives to improve Truly's performance, including marketing changes, the mix of lighter flavors, and potential SKU pruning. She also asked if other brands could offset Truly's weakness if it fails to stabilize.

Answer

Founder and Chairman C. Koch stated that the focus for Truly is on lighter flavors, the higher-ABV Unruly line, and the convenience store channel, with a new marketing push planned. He affirmed the company's expectation is to successfully grow Truly and that they see growth opportunities across the entire portfolio, not just as offsets.

Bonnie Herzog asked about Keurig Dr Pepper's ability to achieve its mid-single-digit growth algorithm post-Ghost acquisition without further M&A, and questioned the operating deleverage despite strong sales growth.

Answer

CFO Sudhanshu Priyadarshi reaffirmed the company's long-term growth algorithm, stating it is achievable through the established growth targets for each segment. Regarding margins, he acknowledged the Q2 contraction but noted gross profit dollars grew. He confirmed that some operating margin pressure is expected in the second half due to inflation and tariffs, but this will be countered by pricing and productivity to deliver profit dollar growth.

Bonnie Herzog from Goldman Sachs requested more detail on why productivity initiatives came in ahead of schedule in the first half and what to expect for the remainder of the year.

Answer

Chairman and CEO James Quincey attributed the accelerated productivity to two main factors: 1) realizing efficiencies from the ongoing marketing transformation sooner than planned, and 2) disciplined and frugal management of operating expenses that yielded benefits ahead of schedule. He described it as getting things done quicker than anticipated.

Bonnie Herzog asked about the performance of the Away-from-Home channel in Q1, the outlook for the channel for the rest of the year, and the potential impact on revenue and margins if it were to slow down.

Answer

Chairman and CEO James Quincey stated that globally, both at-home and away-from-home channels grew, with away-from-home growing slightly faster. He specified that in developed markets like the U.S. and Europe, recent weakness was more concentrated in the take-home channel, while immediate consumption held up better, highlighting the importance of affordability in retail.

Bonnie Herzog inquired about the potential impact of regulatory changes on the domestic portfolio and how the company is thinking about the effects of GLP-1 drugs on consumer consumption.

Answer

CEO James Quincey stated that the company conducts scenario planning for various potential changes and will adapt as needed. Regarding GLP-1s, he noted that while there is anecdotal evidence of impact, it is not a significant aggregate factor for the nonalcoholic beverage industry, as evidenced by sustained momentum in North America. He emphasized that as a total beverage company, Coca-Cola is positioned to adapt its portfolio to meet evolving consumer needs, whatever the cause.

Bonnie Herzog from Goldman Sachs requested more detail on North America's strong 12% organic sales growth, asking for a breakdown of rate versus mix, its sustainability, and whether pricing had been pushed too far.

Answer

Chairman and CEO James Quincey clarified that the North American price/mix was roughly half price (rate) and half mix. He attributed the strong mix to a strategic focus on premium brands like fairlife and Topo Chico, balanced with deprioritizing some case pack water. He anticipates pricing will normalize toward CPI levels going forward.

Bonnie Herzog asked about the drivers behind Zevia's full-year guidance, which implies second-half acceleration, and sought more detail on the brand's performance and growth runway at Walmart.

Answer

CEO Amy Taylor expressed confidence in the guidance, citing strong execution, marketing momentum from the Jelly Roll campaign, a robust innovation pipeline hitting shelves in Q2, and new distribution wins at Walmart, Albertsons, and Walgreens. She confirmed the initial Walmart channel fill is complete, sell-through is encouraging, and the partnership remains collaborative with new products planned.

Bonnie Herzog from Goldman Sachs Group, Inc. asked about the phasing of fiscal '26, specifically if H1 would see continued declines and about the timing and impact of a new blockbuster launch in H1.

Answer

CFO Laurent Mercier confirmed the company expects a sales decline in H1 fiscal '26, though better than Q4, with gradual improvement throughout the year, driven mainly by Consumer Beauty weakness. CEO Sue Nabi added that a major new blockbuster innovation, part of a return to the successful fiscal '23-'24 strategy, will launch and have an impact in Q1 of fiscal '26.