Chris Carey

Chris Carey asked if inflation should return to the 2% range next year, given this year's tracking to expectations, and if there are anomalies (pork/beef timing, tariff carryovers) preventing this. He also inquired about Conagra's latest approach to its portfolio (M&A, divestitures, separations) and how the balance sheet and leverage targets factor into medium-term objectives, given recent activity in the food sector.

Answer

CEO Sean Connolly expressed caution on inflation prognostication but noted that after unprecedented peaks in commodity supercycles, a downward slope usually follows. He mentioned Conagra's portfolio is heavily skewed toward proteins, which have remained high but should normalize, potentially leading to P&L relief. Regarding portfolio strategy, Sean Connolly highlighted Conagra's history of M&A, divestitures, and separations (e.g., Chef Boyardee divestiture). He stated that management and the board are always open to creating shareholder value and are not entrenched. He noted they are currently focused on debt reduction, making inbounds unlikely soon, but outbounds are always considered if there's a clear path to value creation.

Chris Carey asked if inflation is expected to return to the 2% range next year, considering current tracking and potential anomalies with protein inflation or tariff carryovers, and inquired about Conagra's latest approach to portfolio opportunities (changes, separations, combinations) and how the balance sheet and leverage targets factor into medium-term objectives.

Answer

CEO Sean Connolly expressed caution on inflation prognostication but noted that unprecedented peaks in commodities usually lead to downward slopes, and while Conagra is skewed towards proteins, normalization is expected. He stated that Conagra has a history of M&A, divestitures, and separations, and the board is always seeking ways to create shareholder value without entrenchment. He confirmed that debt reduction is a current focus, making inbound M&A unlikely soon, but outbounds (like the recent Chef Boyardee divestiture) remain an option for long-term portfolio reshaping.

Chris Carey inquired about The Campbell's Company's Q1 gross margin, noting it was historically low, and asked how it aligned with expectations. He also sought insight into the expected phasing of gross margin improvement throughout the rest of the fiscal year, considering Q1 was anticipated to be the peak inflation quarter.

Answer

CFO Todd Cunfer stated that Q1 gross margin was in line with expectations, driven by over 500 basis points of cost pressures, including approximately 200 basis points from tariffs and a similar amount from inflation. He praised the supply chain team for offsetting 70% of these costs. He expects similar gross margin pressure in Q2, with improvement in Q3 and particularly in Q4 as the company laps tariff impacts and cost improvement initiatives come to fruition. He acknowledged the need to achieve gross margins well above 30% over time.

Chris Carey asked about the updated thought process around strategic and fundamental options for the Home & Personal Care (HPC) business, including potential outcomes, the impact of the evolving tariff backdrop, and the path forward for the segment. He also inquired about the journey of the Global Pet Care (GPC) category, competitive activity, stabilization, and the outlook for returning to growth over the next 12 months.

Answer

CEO David Maura explained that discussing M&A opportunities on a live call is not possible, but noted that significant tariff headwinds had previously sidelined strategic processes for HPC. He highlighted the pivot to maximize cash, reduction in fixed expenses, and diversification of the supply chain to reduce reliance on China. Maura expressed excitement to resume strategic discussions for HPC as trade policy stabilizes, viewing the fragmented industry as ripe for consolidation. For GPC, Maura and CFO Faisal Qadir discussed new talent, a data-driven approach, improved shelf placement, and stabilizing POS and shipments. They noted that 'branded ankle biters' are receding, and products like Nature's Miracle are gaining market share. Both executives expressed a bullish outlook for GPC in fiscal 2026, anticipating a return to growth and significant M&A opportunities.

Chris Carey inquired about the journey of the Global Pet Care business, specifically regarding intense competitive activity from private label and branded 'ankle biters,' and the outlook for stabilization and return to growth over the next 12 months.

Answer

David Maura, Executive Chairman and CEO, expressed satisfaction with new talent, a data-driven approach, and improved trends after resetting shelf space. He noted the decline of smaller competitors and the market share gains of products like Nature's Miracle. Maura reiterated his vision for the pet business to reach $3 billion in revenue and $500 million in EBITDA, seeing more M&A opportunities at better prices. Faisal Qadir, EVP and CFO, added that Q4 showed stabilization and the business is well-positioned for growth, with expansion opportunities in adjacent categories.

Chris Carey asked for clarification on Edgewell's Q4 productivity number, which was the lowest disclosed, and the gross margin coming in below expectations. He sought confidence in the company's ability to use productivity as an offset for future challenges and reconcile comments on back-half pricing versus limited North American price increases to ensure gross margin improvement throughout the year.

Answer

Rod Little, President and CEO, outlined a second-half-oriented plan driven by higher expected sales growth, distributor timing, pricing in Japan, and North American planogram resets. Fran Weissman, CFO, clarified that Q4 productivity was in line with expectations, with the core issue being transitory inventory adjustments from the Mexico plant consolidation and higher trade promotions. She reiterated confidence in delivering 260 basis points of core productivity and 310 basis points with mitigation in 2026, with tariffs disproportionately impacting the first half and mitigation efforts reaching run rate in the second half.

Chris Carey asked for clarification on Edgewell's productivity numbers, noting that the Q4 figure was the lowest disclosed, and sought confidence in the company's ability to use productivity to offset gross margin declines. He also questioned the apparent contradiction between comments on pricing in North America and expectations for pricing in the second half of the year, aiming to understand the drivers of anticipated gross margin improvement.

Answer

Rod Little, President and CEO, outlined a second-half-oriented plan, expressing confidence in its profile. He attributed gross margin delivery to higher expected sales growth in the second half, driven by distributor timing and pricing in international markets (e.g., Japan), and positive planogram changes, new brand campaigns, and A&P spend in North America. Fran Weissman, CFO, clarified that Q4 productivity was in line with expectations, with the core issue being transitory inventory adjustments from the Mexico plant consolidation and higher trade promotions, not productivity itself. She affirmed consistent productivity delivery (250 bps historically, 260 bps expected in 2026, 310 bps with mitigation) and explained that 2026 productivity would be equally phased, with tariff mitigation efforts gaining run rate in the second half.

Chris Carey inquired about Molson Coors' expected distributor inventory levels for 2025, specifically if lower absolute inventory but consistent days of inventory would pose a risk if category consumption improves. He also asked CEO Rahul Goyal if he perceives a need for significant reinvestment in the business or if it's currently underinvested.

Answer

CEO Rahul Goyal stated that distributor inventory levels are in a healthy place, with good capacity to pivot for Q1 supply. Regarding reinvestment, he affirmed commitment to building brands across all segments, championing beer, and strategically deploying capital for portfolio gaps while maintaining shareholder returns, without indicating a need for massive new investment.

Chris Carey inquired about the expected distributor inventory levels for 2025, specifically if lower absolute levels would mean lower than average inventory if category consumption improves, and whether the new leadership sees a need for massive reinvestment in the business.

Answer

CEO Rahul Goyal stated that distributor inventories are in a healthy place, with days of inventory expected to be good going into next year, and capacity to pivot supply. Regarding reinvestment, he committed to building brands, supporting them appropriately across all segments, and using the balance sheet to fill portfolio gaps while returning cash to shareholders.

Chris Carey asked how the second-half spending plans have evolved since the start of the year, specifically whether they are funded by incremental cost savings or aim for broader outcomes beyond innovations, and the balance between promotional activity and advertising. He followed up on the company's perspective on portfolio actions, given its diverse portfolio, clean balance sheet, and category volatility, and how it thinks about future portfolio evolution.

Answer

CEO Linda Rendle explained that spending plans were refined based on consumer behavior and real-time insights, adjusting retail media, advertising, and promotional kickoffs (e.g., Kingsford). She emphasized strong ROIs and empowered business units for real-time adjustments. On portfolio, she stressed a long-term focus on strengthening the core and active board review of all options, including past divestitures (Argentina, VMS) and potential future tuck-ins or transformational moves, leveraging a strong balance sheet.

Chris Carey asked for clarification on the 2026 algorithm conversation, specifically if more pricing would have been necessary if cocoa costs had not come down, despite similar commentary on the outlook. He also inquired about the reorientation of the tax rate, asking for details on what's driving it and Hershey's medium-term tax planning and opportunities.

Answer

Senior Vice President and CFO Steve Voskuil stated that Hershey would not anticipate taking more prices in 2026 even if cocoa remained at prior levels, focusing instead on other levers like productivity and transformation. President and CEO Kirk Tanner added that Hershey retains flexibility to invest for the long haul and recover margin. Steve Voskuil explained the tax rate changes were due to adjustments in reserves, less tax-efficient procurement strategies for cocoa, and fewer attractive tax credit investment opportunities, promising more guidance for next year.

Chris Carey asked for clarification on the 2026 algorithm conversation, specifically if the company would have needed to take more pricing if cocoa had not come down, and if that situation is now avoided. He also inquired about the tax rate, its reorientation, and medium-term tax planning opportunities.

Answer

SVP and CFO Steve Voskuil stated that the company would not anticipate taking more prices in 2026, even if cocoa remained at prior levels, though pricing remains a long-term lever. CEO Kirk Tanner emphasized retaining flexibility to invest in the business for the long haul, balancing momentum with future growth opportunities and margin recovery. Steve Voskuil explained tax rate impacts from reserve adjustments, less tax-efficient procurement strategies for cocoa, and fewer attractive tax credit investment opportunities, promising more guidance for 2026 later.

Chris Carey asked about Kimberly-Clark's response to promotional activity in North America, the performance of Q4 initiatives, their impact on competitiveness, and associated margin implications. He also inquired about the commodity outlook (excluding tariffs), its drivers, and the evolving tariff backdrop.

Answer

President and COO Russ Torres stated that promotion is a tactic for trial, not category expansion, focusing on strengthening value propositions and innovation across all tiers, citing North America's 2.2% YTD volume mix growth (2.9% two-year stack). CEO Mike Hsu noted that earlier deeper competitive discounts had less impact than expected, and their innovation-driven trial promotions are gaining traction. CFO Nelson Urdaneta expects Q4 gross margins to expand due to supply chain investments and tariff mitigation. Operating profit margins are expected to be similar to last year's Q4 due to stepped-up marketing investments, aiming for full-year operating profit margin expansion. On tariffs, gross tariffs are down to $100M from $170M, with $50M mitigated, expecting full mitigation by next year, and noted an exclusion for Brazilian eucalyptus.

Chris Carey from Wells Fargo probed Kimberly-Clark's response to increased promotional activity in North America, its impact on competitiveness and Q4 performance, and the resulting margin implications. He also inquired about the commodity outlook, excluding tariffs, and the evolving tariff landscape, including any specific exclusions.

Answer

President & COO Russ Torres and CEO Mike Hsu explained that Kimberly-Clark views promotion as a trial-driving tactic, focusing on innovation and value propositions across all tiers, noting resilient demand and durable brands. CFO Nelson Urdaneta detailed expectations for Q4 gross margin expansion due to supply chain investments and tariff mitigation, while aiming for full-year operating profit margin expansion. He also updated on reduced gross tariffs and the benefit of a Brazilian eucalyptus exclusion.

Chris Carey inquired about the implied Q4 gross margin, specifically if Brazil tariffs were heavily concentrated in Q4 and their impact. He also asked about key markers for tariff headlines related to Brazil, when further pricing might be needed for early next year, and how long the company would assess the tariff backdrop before making that decision. Additionally, he asked for an update on the international journey, its growth runway, and Vita Coco's capacity to service that market.

Answer

Mike Kirban, Co-founder and Executive Chairman, discussed hopeful signs for tariff relief, including potential waivers for natural resources and ongoing trade deal discussions. Corey Baker, Chief Financial Officer, clarified that August tariffs had minimal impact on Q3, with the 23% rate expected to ramp up late in Q4. Martin Roper, Chief Executive Officer, explained that pricing decisions for Q2 next year would be made in Q1, monitoring elasticity, competitive actions, and mitigation strategies like diverting Brazil production. He also noted that Vita Coco is adding 1-2+ factories annually, ensuring sufficient capacity for international growth, and views Europe as being in early innings with significant long-term potential.

Chris Carey asked about the implied Q4 gross margin, specifically how Brazil tariffs would concentrate in Q4, and sought insight into the company's strategy for potential future pricing decisions given the fluid tariff headlines and mitigation efforts.

Answer

Co-founder and Executive Chairman Mike Kirban discussed hopes for Brazil tariff relief and exclusions in other trade deals. CFO Corey Baker clarified minimal August tariff impact in Q3, with the 23% rate hitting late Q4. CEO Martin Roper detailed July pricing to cover baseline tariffs, ongoing monitoring of elasticity and competitive actions, and mitigation plans for Brazil production, indicating reluctance to rush further pricing decisions amidst uncertainty.

Chris Carey questioned Mondelēz's North America strategy, asking about the balance between investing in value to drive long-term volume and protecting the profit pool. He sought clarification on the company's confidence in its current approach and whether profit protection and value offerings are mutually exclusive. He also asked about any pull-forward of 2026 investments into Q4 and the sufficiency of planned 2026 spending.

Answer

Chairman and CEO Dirk Van de Put explained that the current strategy balances dealing with cocoa costs and a slower U.S. market, noting that earlier promotional strategies didn't yield expected volume. He stated that current price increases and promo changes optimize the situation rather than solely protecting profit. He expressed skepticism about a broad 'value play' in the U.S., favoring PPA adjustments for lower price points with good margins. CFO Luca Zaramella confirmed Q4 AUC investments are locked in. He emphasized that 2026 investments are part of a continuous virtuous cycle, with sufficiency of spending for new initiatives like Biscoff launches, and not a one-time replenishment.

Chris Carey asked about the North America strategy, comparing Mondelez's approach of protecting the profit pool with pricing and offering value through innovation/pack changes to competitors investing in value for long-term volume growth. He questioned the confidence in this strategy and whether profit protection and value offerings are mutually exclusive. He also inquired if any planned 2026 investments were pulled forward into Q4 and if the 2026 earnings outlook embeds sufficient spending to avoid further needs in 2027.

Answer

Dirk Van de Put (Chairman and CEO) explained that 2025 was unique due to cocoa and a slower U.S. market, necessitating profit pool protection. He noted that initial promotional strategies in North America didn't yield expected volume, impacting margins. The current shift is to optimize the situation. For 2026, improved chocolate conditions allow more investment, but he's not convinced a pure 'value play' is the best solution, as consumers don't solely react to value. Instead, their PPA strategy offers lower price point products with good margins. Luca Zaramella (CFO) stated Q4 AUC investment plans are locked in and align with guidance. He emphasized the company's virtuous model of continuous investment in brands and execution, citing examples like Biscoff launches requiring meaningful spending. He doesn't believe they will be 'done' with investment in 2026, as they aim for continuous growth and will 'go all in' on incremental initiatives.

Chris Carey sought clarity on the 2026-2028 free cash flow outlook, asking if it implies net income growth or conversion, and if high single-digit EPS growth is underwritten for that period. He also inquired about the conditions for tapping additional financing paths, given potential EBITDA risks from green coffee inflation.

Answer

SVP of Finance Jane Gelfand stated the free cash flow outlook is a three-year view to provide clarity on the vision, with 2026 specifics to be unpacked later. She confirmed the company has solved for solid balance sheets, reducing leverage from 5.6x to 4.6x at close, and aims for deleveraging at half a turn per year. She added that all options would be evaluated flexibly to maximize value.

Chris Carey asked for clarification on the 2026-2028 free cash flow outlook, specifically if it implies net income growth aligned with the longer-term high single-digit EPS algorithms. He also questioned the conditions under which KDP would tap into additional financing paths like a Beverage Co IPO or selling minority stakes, especially if EBITDA risks arise from green coffee inflation.

Answer

SVP of Finance Jane Gelfand stated that the free cash flow projections for BevCo (over $6 billion) and Global Coffee Co (over $5 billion) represent a three-year view to provide clarity for planning. She noted that the company will evaluate all options for additional capital, including a Beverage Co IPO or monetizing non-core assets, only if they unlock maximum value and better outcomes, emphasizing flexibility in response to market variability.

Chris Carey followed up on China, asking if improvements were broad-based beyond Skin and Personal Care, and whether these signs of improvement were durable or influenced by specific quarter factors.

Answer

CFO Andre Schulten confirmed that while Skin and Personal Care in China is accelerating, other categories are also picking up pace, including fabric care (up 5%), fem care, hair care, and baby care (20% growth). He attributed this broad-based improvement to P&G's integrated superiority approach, better consumer understanding, innovation, and improved retail execution, expressing confidence in the durability of these trends despite expected market volatility.

Chris Carey followed up on China, asking if improvements were observed in businesses beyond Skin and Personal Care, and if the positive trends were durable or influenced by specific quarterly factors.

Answer

Andre Schulten, CFO, confirmed that while Skin and Personal Care continued to accelerate, other categories like fabric care (up 5%), fem care, hair care, and baby care (20% growth) were also picking up pace. He attributed the breadth and consistency of results to P&G's integrated superiority approach, grounded in consumer understanding, innovation, and improved retail execution, expressing confidence in continued business building despite expected volatility.

Chris Carey asked for Ramon Laguarta's thoughts on the cyclical versus structural dynamics of consumer behavior, comparing the U.S. (shifting preferences, value seeking) with international markets, specifically whether international consumers are behaving similarly economically and if their preferences are evolving like North American consumers.

Answer

Chairman and CEO Ramon Laguarta identified several structural global trends: consumers moving to digital purchasing (changing industry dynamics), increased consumer information about food/drink ingredients leading to choices based on clean labels and type of food (influencing brand relaunches), and affordability/value seeking due to stretched low/middle-income households. He noted these trends vary in speed but are generally moving in the same direction across most markets.

Chris Carey asked for Ramon Laguarta's perspective on the interplay between cyclical and structural factors influencing consumer behavior, particularly comparing North America with international markets. He sought to understand how much of the North American shift is due to structural preferences (healthier eating) versus cyclical (value seeking) and whether international consumers exhibit similar economic behaviors and evolving preferences.

Answer

Chairman and CEO Ramon Laguarta identified several structural trends impacting consumers globally: the shift to digital purchasing (changing industry dynamics, delivery expectations), increased consumer information about food/drink ingredients (driving demand for clean labels, specific ingredients beyond taste), and the reality of affordability (stressed low/middle-income households, need for value/price points). He stated that these trends, while varying in speed, are generally moving in the same direction across most markets, guiding PepsiCo's rapid portfolio transformation and cost structure adjustments to compete effectively in the future demand landscape.

Chris Carey followed up on beer margins, asking if inflation is expected to pick up in the second half. His main question focused on wine and spirits margins, inquiring about the drivers for improvement in the second half to meet full-year guidance and the feasibility of achieving a low 20% operating margin in fiscal 2027.

Answer

CFO Garth Hankinson clarified no inflation pickup for beer in H2. For wine and spirits, H2 sees the bulk of volume and sales, along with vintage releases that drive higher sales and margins, offsetting a 'messy' H1 due to distributor payments and inventory adjustments. CEO Bill Newlands added that the wine and spirits business has focused on top-line growth, beating the market for six consecutive months, driven by brands like Kim Crawford and Meiomi, and is pleased with its development.

Chris Carey followed up on beer margins, asking if inflation is expected to pick up in the back half. He then focused on wine and spirits margins, questioning what factors would drive the necessary improvement in the second half to meet full-year guidance and whether a low 20% operating margin for fiscal 2027 remains a plausible expectation.

Answer

CFO Garth Hankinson clarified no inflation pickup for beer. For wine and spirits, he noted that the bulk of volume and sales occur in the second half, benefiting from additional volume and higher-margin vintage releases from the DTC business. He also mentioned that first-half 'messiness' was due to distributor payments and post-transaction inventory trips. CEO Bill Newlands added that the wine and spirits business has focused on top-line growth, beating the market for six straight months with strong brand performance.