Kaumil Gajrawala

Kaumil Gajrawala sought clarification on the Midwest Premium/aluminum passthrough impact and questioned the effectiveness of high marketing investment levels given continued volume declines, asking if there's a course correction for 2026.

Answer

CFO Diego Reynoso reiterated that the company is impacted by the Midwest Premium passthrough, which contributed to material cost increases last year, offset by savings. Founder and Chairman Jim Koch clarified that 'brand support' includes media and local market execution. He acknowledged volume declines despite increased spend, attributing some investment to mitigating overall beer category decline and highlighting significant, successful investment in Sun Cruiser as a 'star' brand.

Kaumil Gajrawala sought clarification on the impact of aluminum passthrough on costs and questioned the effectiveness of increased marketing investments given continued volume declines, asking if there were course corrections for 2026.

Answer

CFO Diego Reynoso confirmed that the company is impacted by the Midwest Premium passthrough, which contributed to material cost increases in the past year. Founder and Chairman Jim Koch explained that brand support includes media and local market execution, with significant investment in Sun Cruiser driving its growth from a new brand to a top-five RTD, justifying the spend despite overall volume declines.

Kaumil Gajrawala inquired about the specifics of the new compensation plan, which shifts focus away from total volume, and how it will incentivize new behaviors.

Answer

CEO Michael Spillane explained that the new incentive plans are designed to align with business objectives by encouraging the sales team to apply equal effort across all brand families, such as Angry Orchard, Twisted Tea, and Sun Cruiser, rather than focusing solely on total case volume. This is intended to drive a more sustainable and balanced revenue stream across the entire portfolio.

Kaumil Gajrawala asked about the drivers behind the increasing household penetration, particularly in Europe, questioning if it's due to innovations, general branding, or the new growth playbook, and the demographics of these new customers. He also inquired about Oatly's perspective on the 'whole milk craze' and new U.S. dietary guidelines, and their potential impact on the business or the plant-based category.

Answer

Daniel Ordoñez (Global President and COO) confirmed that the new growth playbook and portfolio, which brings coffee and food service signature drinks to retail, are driving new penetration, especially among Gen Z and Alpha consumers, making Oatly the only brand growing penetration in Europe and the U.S. Jean-Christophe Flatin (CEO) noted that while overall cow's milk volume declines, protein-enriched cow's milk sees an uptick. He expressed mixed feelings about the new U.S. dietary guidelines, appreciating the normalization of non-dairy milks in schools but finding the heavy push for whole cow's milk and animal proteins concerning for health and planetary reasons, citing Denmark as a positive example of sustainable dietary shifts.

Kaumil Gajrawala asked about the drivers behind the increasing household penetration for Oatly, particularly in Europe, questioning if it's due to innovations, general branding, or a shift in customer demographics. He also inquired about the potential impact of new U.S. dietary guidelines and the emerging "whole milk craze" on Oatly's business and the broader plant-based category.

Answer

Daniel Ordoñez, Global President and COO, confirmed that the new growth playbook and portfolio, which brings coffee and food service signature drinks to consumers' homes, is driving the inflection in household penetration, especially among younger Gen Z and Alpha consumers. He noted Oatly is the sole brand growing penetration in both Europe and the U.S. Jean-Christophe Flatin, CEO, clarified that cow's milk volume continues to decline, with only protein-enriched segments seeing an uptick. He expressed mixed feelings about the new U.S. dietary guidelines, appreciating the normalization of non-dairy milks in schools but raising concerns about the heavy push for animal proteins and fats due to health and environmental implications, citing Denmark as a positive example for sustainable dietary shifts.

Kaumil Gajrawala from Jefferies Financial Group inquired about the strategic review of Oatly's Greater China business, asking about the timing and the optimal potential outcome, such as a sale, joint venture, or strategic partnership. He also questioned the flat performance in North America, even after excluding one-off business losses, and asked what strategies could drive a turnaround.

Answer

CEO Jean-Christophe Flatin addressed the China review, stating the goal is to maximize shareholder value now that the business is leaner and stronger. He confirmed a range of options, including a potential carve-out, are being considered but declined to speculate on the final outcome. Global President & COO Daniel Ordoñez responded on North America, acknowledging the market softness but highlighting that the successful European playbook is being deployed, as consumer barriers like taste and evolving coffee trends are similar in both regions.

Kaumil Gajrawala inquired about the specific drivers of the fiscal 2025 gross margin expansion, recent promotional activity in the U.S., and the margin impact of reduced business from its largest U.S. foodservice customer.

Answer

CFO Marie-Jose David attributed the expected gross margin improvement to optimizing the production footprint, maximizing global sourcing, and managing product mix. Global President and COO Daniel Ordonez acknowledged short-term promotional volatility in the U.S. but highlighted that new distribution gains are the primary growth driver, despite a temporary drag from discontinued innovations. CEO Jean-Christophe Flatin clarified that while losing any volume impacts cost absorption, the company remains on its path of relentless gross margin improvement, noting the specific customer now represents about 7% of total company sales.

Kaumil Gajrawala sought to understand the implied slowdown in EPS growth for 2026 (7%-8% with 3% FX benefit) compared to 2025 (4% growth with 5% FX hit), asking about underlying reasons such as investment or conservatism.

Answer

John Murphy, President and CFO, explained that the 2026 guidance reflects the sum of many parts, with momentum in some markets and challenges in others, expecting recovery over the year. He also cited a bias to invest somewhat ahead of the curve in brands, markets, and capabilities, along with some structural cycling and below-the-line items, indicating a prudent approach given top-line dynamics.

Kaumil Gajrawala questioned the implied slowdown in 2026 EPS growth, after adjusting for FX benefits, asking if it's due to investment, conservatism, or other factors.

Answer

President and CFO John Murphy attributed the 2026 EPS outlook to several factors: the 4%-5% top-line guidance reflecting mixed market momentum and challenges, a bias to invest ahead of the curve in brands, markets, and capabilities, and structural cycling impacts, including below-the-line items like the Coke Consolidated divestiture. He concluded that the guidance reflects a prudent approach given top-line dynamics and the need to build volume momentum in key markets.

Kaumil Gajrawala from Jefferies Financial Group asked about the operating leverage across the P&L, considering the strong productivity performance and easing currency headwinds.

Answer

President and CFO John Murphy confirmed the company expects to continue delivering operating leverage in the second half. Regarding currency, he explained that their hedging strategy on G10 currencies partially offsets recent dollar weakness, but the updated guidance reflects an overall softening of the negative FX impact. He deferred a specific 2026 currency outlook to the next earnings call.

Kaumil Gajrawala asked if the company is planning for a potential end to the strong U.S. dollar cycle and how that might change its approach to future investments and capital returns.

Answer

President and CFO John Murphy responded that while the core objective remains growing U.S. dollar EPS, they are 'not quite there yet' on anticipating the dollar's decline. He noted that the main U.S. dollar index is narrow and doesn't cover many of their key market currencies, but they would adjust their strategy accordingly if a significant, broad-based change in currency trends were to occur.

Kaumil Gajrawala asked about the company's capital allocation strategy for 2026 and beyond, once significant cash payments like the transition tax are completed, particularly regarding buybacks and M&A.

Answer

CFO John Murphy responded that the primary focus will remain on supporting the underlying business and the dividend. He acknowledged that with the transition tax and some M&A payments concluding, the company will have an opportunity in 2026 to take a closer look at its M&A and share repurchase agenda. However, he noted it was premature to be specific, as the company will also consider the overall health of the balance sheet and the ongoing tax case.

Kaumil Gajrawala of Jefferies asked a direct question about the potential impact on Coca-Cola's business from the recent food contamination news concerning its largest customer, McDonald's.

Answer

Chairman and CEO James Quincey expressed support for their partner, McDonald's. He stated that based on the limited information available regarding the affected areas, he does not anticipate a 'large, significant impact' to Coca-Cola's business at this stage.

Kaumil Gajrawala inquired if the divested snacks businesses were cash-burn operations and how the divestiture would impact future cash generation. He also asked about the company's flexibility and options regarding the upcoming debt maturity.

Answer

CFO Lee Boyce confirmed that the snacks business was not a significant cash-generating business due to its lower margin profile. He highlighted strong Q2 cash delivery, ongoing inventory reductions, and $26 million in insurance proceeds. Regarding debt maturity, Lee Boyce noted constructive dialogue with banks, the strategic review's role in strengthening the long-term position, and the pro forma leverage reduction from 4.9x to 4x, which is well below the 5.5x covenant.

Kaumil Gajrawala asked if the divested snacks businesses were cash-burn businesses and how their sale would impact Hain Celestial's ability to generate cash. He also sought insight into the company's flexibility regarding the upcoming debt maturity, weighing options like refinancing, equity, or strategic transactions.

Answer

CFO Lee Boyce stated that the snacks business was not a significant cash-generating business, implying the divestiture would improve ongoing cash generation. He highlighted strong Q2 cash delivery, ongoing inventory and payables reductions, and $26 million in insurance proceeds received in January. Regarding debt maturity, Lee emphasized constructive dialogue with the bank group, noting the divestiture significantly reduces pro forma leverage from 4.9x to 4x, providing headroom against the 5.5x covenant. He confirmed the company is evaluating refinancing, extensions, or capital raising.

Kaumil Gajrawala asked how Hain Celestial navigates the increasingly challenged consumer environment, especially given the price premium of its health and wellness portfolio, and how this calculus influences decisions regarding additional pricing.

Answer

Alison Lewis acknowledged the value-seeking consumer behavior and shifts to value channels (clubs, mass, dollar) and smaller package sizes. She emphasized that Hain's better-for-you brands offer value through great taste and nutritional profiles, which consumers are willing to pay for, leading to relatively low private label development. She stressed the importance of delivering value and ensuring price pack architecture offers various price points to accommodate different disposable income levels.

Kaumil Gajrawala questioned how The Hain Celestial Group navigates the increasingly challenging consumer environment, particularly given that its health and wellness portfolio often carries a price premium, and in the context of recent pricing actions.

Answer

Alison Lewis (Interim President and CEO) acknowledged the trend of value-seeking consumer behavior, including shifts to value channels and smaller package sizes. She emphasized that Hain's better-for-you brands offer inherent value through great taste and improved nutritional profiles, which consumers are willing to pay for, resulting in relatively low private label penetration across their categories. She highlighted the importance of delivering this value and maintaining a diverse price pack architecture to accommodate varying disposable income levels.

Kaumil Gajrawala asked about the flexibility of Hain Celestial's restructuring plan, particularly if it can succeed without relying heavily on a top-line recovery, given the current balance sheet.

Answer

Interim President and CEO Alison Lewis clarified that the restructuring aims to build financial flexibility to fuel growth, with a dual focus on cost reduction and strategic investments in product renovation, innovation, revenue growth management, and digital marketing to accelerate sales. CFO Lee Boyce added that controlling costs, unlocking significant operating model savings, and driving productivity provide fuel and contingency, reducing reliance on immediate top-line recovery.

Kaumil Gajrawala from Jefferies Financial Group asked about the resilience of Hain Celestial's restructuring plan, specifically to what extent it relies on top-line recovery. He questioned how much flexibility exists for the P&L and balance sheet restructuring to succeed if the top line does not recover as anticipated.

Answer

Alison Lewis, Interim President, CEO & Director, explained a twofold approach: building financial flexibility through cost structure work and investing for growth. She detailed growth drivers including product renovation/innovation, strategic revenue growth management (pricing, price pack architecture, promotion ROI), protecting marketing investment (social/digital-first), and doubling down on e-commerce. Lee Boyce, CFO, added that they are controlling what they can in the middle and lower parts of the P&L, unlocking significant savings from the operating model to provide 'fuel and contingency,' and continuing to drive productivity to support gross margin.

Kaumil Gajrawala asked about the extent to which the current restructuring relies on top-line recovery, and the flexibility within the P&L and balance sheet restructuring if top-line growth does not materialize as expected.

Answer

Interim President and CEO Alison Lewis explained that the work is twofold: building financial flexibility through restructuring and investing for growth via product renovation, revenue growth management, digital-first marketing, and e-commerce. CFO Lee Boyce added that they are controlling what they can in the middle and lower P&L, unlocking significant operating model savings, which provides fuel and contingency, and continuing to drive productivity to support gross margin.

Kaumil Gajrawala requested more details on the newly announced strategic review, asking about its specific mandate and scope. He also asked to what degree the company's struggles are self-inflicted versus the result of a difficult macro environment for snacks.

Answer

Chair of the Board Dawn Zier stated that the Board initiated a thorough evaluation of the company's strategy and portfolio to maximize shareholder value, but it is too early to comment on specifics. CFO Lee Boyce added that the performance issues are a mix of both softer category dynamics and company-specific execution challenges, noting the Snacks category is currently the most pressured.

Kaumil Gajrawala questioned the P&L flexibility to manage margins while shifting promotional activity towards conversion. He also asked for the initial logic behind the previous awareness-focused marketing strategy for snacks.

Answer

CEO Wendy Davidson clarified that the marketing shift is being executed within the existing budget, focusing on improving effectiveness rather than increasing spend. She explained the initial strategy was based on a belief that the brands needed greater awareness. However, learnings showed that awareness was already high, and the real opportunity was in driving purchase frequency and occasion-based conversion, leading to the strategic pivot.

Kaumil Gajrawala asked about the restructuring of the Presto and Hefty segments, seeking details on its purpose, potential people movement, and the underlying market logic for this strategic change. He also inquired about the stabilization point for the foam category, given ongoing challenges and the impact of consumer-driven factors versus regulatory changes.

Answer

Scott Huckins, President and CEO, explained that the restructuring aims for clarity and focus by dedicating business units to core categories, enhancing end-to-end management, efficiency, and growth opportunities without significant people movement. Nathan Lowe, CFO, added it's about achieving 'better outcomes with the same resources.' Regarding foam, Scott Huckins noted a 14% volume decline in 2025, expecting about half that rate in 2026, attributing current pressures more to consumer behavior and the cost of alternatives rather than new structural regulatory shifts.

Kaumil Gajrawala asked for more details on the restructuring of Presto and Hefty, including potential people movement, expected success metrics, and the underlying logic for this decision, considering market demand and competitive dynamics. He also inquired about the stabilization point for the foam category, comparing the current situation to previous impacts and the role of consumer-driven factors.

Answer

Scott Huckins, President and CEO, explained that the restructuring aims for clarity and focus, enabling end-to-end management, efficiency gains, and sharper growth opportunities without significant people movement. Regarding foam, he noted that 2025 saw a 14% volume decline, with 2026 expected to see about half that rate, driven more by consumer considerations like the cost of alternatives rather than new regulatory changes.

Kaumil Gajrawala asked about the 'grand plan' behind recent executive hires and operational changes, seeking clarification on their expected impact on the company's long-term growth algorithm, share gains, and category expansion.

Answer

Scott Huckins, President and CEO, explained that new hires like Chief Commercial Officer Carlen Hooker and Chief Operations Officer Scott Vail are key talent additions mapped specifically against the year's initiatives. These initiatives include driving growth through prioritized innovation, implementing revenue growth management tools, and increasing share at customer and product levels, as well as driving down manufacturing and supply chain costs.

Kaumil Gajrawala from Jefferies asked about the strategic rationale behind recent executive hires and operational capability enhancements, seeking to understand their impact on Reynolds Consumer Products' long-term growth algorithm, whether the focus is on share gain or category growth, and the expected future business implications.

Answer

President and CEO Scott Huckins explained that new hires, including Chief Commercial Officer Carlyn Hooker and Chief Operations Officer Scott Vale, are strategic additions to drive growth and cost-saving initiatives. He reiterated the focus on prioritizing innovation, implementing revenue growth management tools, and increasing market share, alongside efforts to reduce manufacturing and supply chain costs, expecting these leaders to enhance execution and results.

Kaumil Gajrawala inquired about the specific areas for capital deployment, such as new and incremental opportunities, and whether innovation was extending further from the company's core business.

Answer

CFO Nathan Lowe identified a multi-year pipeline of high-return automation projects and the onshoring of manufacturing for smaller product categories as key investment priorities. CEO Scott Huckins added that innovation efforts are focused on both scaling proven successes like Hefty Fabuloso bags and developing new platforms like Hefty EcoSave cutlery to deliver "affordable sustainability."

Kaumil Gajrawala inquired about the nature of retailer destocking, asking if it was a temporary adjustment or a permanent shift, and sought clarification on whether strategic expenses overlap with capital expenditures.

Answer

CEO Scott Huckins explained that the company assumes the Q1 retailer destocking is a permanent change that will flow through the balance of the year. He also clarified that strategic investments are P&L expenses focused on revenue growth management, procurement, and supply chain efficiency, separate from capital investments. CFO Nathan Lowe added that capital is being directed towards manufacturing automation.

Kaumil Gajrawala asked about the expected benefits and their cadence from the completed ERP implementation, including top-line drivers, savings, and whether there should be a new gross margin goal given the hard work is behind them.

Answer

Luc Bellet (VP and CFO of the Health and Hygiene division) confirmed that the large digital transformation investment concludes at the end of Q3. The immediate focus is on stabilizing and optimizing service levels, with associated incremental costs disappearing by Q4. Optimization benefits, including supply chain efficiencies (manufacturing, logistics, balance sheet) and admin automation, will feed into cost savings over the next few years, contributing to the goal of expanding EBIT margin by 25-50 basis points, with gross margin generally expanding in line to fund reinvestment.

Kaumil Gajrawala inquired about the benefits expected from the completion of the ERP's big phases, including top-line drivers, savings, and whether there should be a new gross margin goal given the hard work is behind them.

Answer

Luc Bellet, VP and CFO, confirmed the completion of the digital transformation investment by Q3, with the remainder of the year focused on stabilizing and optimizing service levels, expecting incremental costs to disappear by Q4. He stated that optimization benefits will primarily be in supply chain (manufacturing, logistics, balance sheet) and admin through automation and accelerated adoption of global business services. These benefits will feed into cost savings pipelines, contributing to the goal of expanding EBIT margin by 25-50 basis points, with gross margin generally expanding in line to fuel reinvestment.

Kaumil Gajrawala asked for an assessment of Clorox's market share trends given the ERP implementation and other moving parts, and whether the company has the infrastructure clearance to pursue more demand-creating activities, requesting details on these activities and their expected contribution.

Answer

CFO Luc Bellet clarified that Q1 organic sales declined 3%, with an underlying performance of negative 1% when excluding timing shifts and out-of-stock impacts. CEO Linda Rendle acknowledged that the ERP ramp-up caused greater-than-anticipated market share loss, particularly in August, but noted improvements in September and October. She emphasized the company's laser focus on growing market share in the back half through innovation and spending, highlighting stable household penetration for mega brands and higher consumer value metrics compared to pre-COVID levels.

Kaumil Gajrawala asked for clarification on market share trends, adjusting for the noise from the ERP implementation and shipments. He also questioned the company's readiness from an infrastructure perspective to pursue demand-creating activities and sought more details on these initiatives and their expected contribution.

Answer

CFO Luc Bellet clarified that Q1 organic sales, excluding ERP and timing shifts, had an underlying decline of about 1%. CEO Linda Rendle acknowledged greater-than-anticipated market share loss due to ERP, particularly in August, but expressed confidence in back-half plans, innovation, and spending levels to drive share growth, noting stable household penetration and strong consumer value metrics.

Kaumil Gajrawala from Jefferies Financial Group asked for insight into why the consumer appears to be under more pressure in the household goods sector compared to other industries where more strength is being reported.

Answer

CEO Linda Rendle attributed the dynamic to high consumer "uncertainty" and "volatility," which is causing rapid trade-offs, rather than fundamental weakness. She noted that while consumers are making sharp spending choices, they are also still paying for convenience and experiences, evidenced by strong growth in products like wipes and the premium Scentiva line. She concluded that brand superiority is critical in this environment.

Kaumil Gajrawala questioned why the consumer slowdown appeared to impact the Household division more significantly than others and asked if there might be excess inventory in consumers' pantries.

Answer

CEO Linda Rendle clarified that the discrepancy was in reported sales, not retail sales, which were similarly impacted across the portfolio. The Household segment's reported sales were uniquely affected by retailer inventory adjustments, timing issues with Easter and weather impacting Kingsford, and lapping a promotion in Litter. She stated that these factors were timing-related and not indicative of a structural difference in consumer behavior for those categories.

Kaumil Gajrawala of Jefferies requested a practical explanation of how the upcoming ERP implementation will generate a 1% to 2% sales benefit, questioning if it's a one-time inventory shift or an ongoing improvement.

Answer

Incoming CFO Luc Bellet explained that the sales impact is a temporary timing issue. To ensure a smooth transition to the new U.S. ERP system in July, Clorox plans to ship products ahead of consumption in Q4 to build retailer inventory levels. This inventory build will create a one-time sales lift in Q4 that will then reverse in the first half of the next fiscal year.

Kaumil Gajrawala asked about the company's ERP implementation, inquiring about learnings from the Canada rollout and the timeline for the U.S. He also asked about the marketing strategy for winning back Litter consumers beyond just promotional pricing.

Answer

CEO Linda Rendle reported that the ERP implementation in Canada went very well with no significant customer disruptions. She noted the more complex U.S. rollout is planned to begin at the end of the fiscal year, with more details to be shared in the next earnings release. Regarding Litter, she emphasized a multi-faceted approach beyond promotions, including new advertising, targeted digital messaging, and a strong focus on innovation to communicate superior value.

Kaumil Gajrawala questioned if the current promotional and competitive environment in the protein category feels irrational, comparing it to energy drinks, and whether the 'protein boom' is unfolding profitably.

Answer

Darcy Davenport, President and CEO, clarified that the category is typically not highly promotional (25-30% on deal), but this year is elevated due to insurgent brands seeking trial, some of whom she described as 'less rational' in their spending. She believes this is a temporary 'point in time' and not the new normal, expecting promotions to eventually normalize as retailers consolidate brands, but it's factored into current guidance.

Kaumil Gajrawala asked if the current promotional activity and competition in the protein category feel irrational, especially compared to energy drinks, and whether the 'race for protein' is unfolding in a healthy way from a profit perspective.

Answer

President and CEO Darcy Horn Davenport noted that the protein category is typically not highly promotional (25-30% on deal), but this year is higher due to insurgent brands spending to gain trial. She believes this is a 'point in time' rather than a new normal, expecting retailers to eventually consolidate around best-performing brands, which should lead to a reduction in heightened promotional activity. She acknowledged some insurgent brands are acting less rationally.

Kaumil Gajrawala of Jefferies Financial Group questioned why the company narrowed its guidance rather than raising it after a strong Q3, and why consumption growth wasn't significantly higher than shipment growth given the destocking.

Answer

CEO Darcy Horn Davenport attributed the narrowed guidance to minor offsetting factors, including a short-term club pallet gain being balanced by assumed competitive pressure. CFO Paul Rode clarified that the consumption-shipment gap was masked by a heavier-than-expected e-commerce inventory load-in during Q3, which is expected to reverse in Q4.

Kaumil Gajrawala asked for clarification on whether the retailer destocking is a one-time event and requested initial metrics or returns on the recent increase in marketing spend.

Answer

CFO Paul Rode confirmed their guidance assumes the inventory destocking is a 'one and done' event. President and CEO Darcy Davenport added that while a full ROI on marketing is pending, early KPIs are strong, with impressions up 30% and web traffic up over 25%, exceeding benchmarks.

Kaumil Gajrawala from Jefferies inquired about how BellRing is managing the pace of its numerous demand-driving initiatives, such as marketing, innovation, and repackaging, to avoid moving too fast and creating new supply constraints.

Answer

President and CEO Darcy Davenport acknowledged the need for a balanced pace, explaining that the company is 'pressing the accelerator consistently' but not all at once. She detailed a phased approach, starting with promotions, then layering in innovation and advertising, while still pacing marketing spend below the long-term target of 4-5% of sales. This deliberate acceleration is designed to drive consistent growth without risking supply issues. The packaging redesign is an evolution, not a revolution, expected in the second half.

Kaumil Gajrawala asked for more details on the double-digit shelf space gains, specifically where they are coming from within a typical grocer, given Frito-Lay's existing shelf space, and if it's incremental space in other parts of the store.

Answer

CEO Ramon Laguarta described the double-digit shelf space gains as a great achievement resulting from commercial team partnerships with customers. He explained that the gains are occurring in multiple parts of the store, including the main shelf and the perimeter. This expansion is a consequence of increased unit sales driven by affordability initiatives, requiring more in-store capacity to fulfill online orders and enhance the in-store consumer experience. He confirmed that both main shelf and perimeter expansions have been tested, and capacity will be critical for continued volume and unit growth.

Kaumil Gajrawala asked for more details on the double-digit shelf space gains for Frito-Lay, specifically where this incremental space is coming from within a typical grocer, given Frito-Lay's existing presence.

Answer

Ramon Laguarta, CEO, confirmed that the gains are a significant achievement of commercial teams and will be in multiple parts of the store, including the main shelf and the perimeter. He explained it's a consequence of increased units driven by affordability, necessitating more capacity in stores to fulfill online orders and enhance the in-store experience.

Kaumil Gajrawala asked about PepsiCo's openness to refranchising some beverage operations, particularly on a regional basis. He suggested that such an initiative could help accelerate the company's goals related to agility, speed, innovation, and right-sizing its operations.

Answer

Chairman and CEO Ramon Laguarta stated that PepsiCo is open to all ideas and perspectives to create shareholder value, emphasizing that the solution for the U.S. supply chain and go-to-market will be nuanced and not a "one-size-fits-all." He outlined three key considerations: solving for future demand (concentrated retailers, pickup/delivery, digital), leveraging technology investments to manage complexity and eliminate bottlenecks, and optimizing the full PepsiCo P&L. Laguarta affirmed that the company will drive different solutions in different parts of the country, always seeking what is best for PepsiCo long-term, and will engage in constructive dialogues.

Kaumil Gajrawala asked about PepsiCo's openness to franchising some beverage operations, particularly from a regional perspective, suggesting it could accelerate intentions around agility, speed, innovation, and right-sizing.

Answer

Chairman and CEO Ramon Laguarta stated that PepsiCo is open to all ideas to create shareholder value and will do what's best for the company. He emphasized that the solution for the U.S. supply chain and go-to-market will be nuanced and not 'one-size-fits-all,' considering three factors: solving for future demand (concentrated retailers, pickup/delivery, digital), leveraging technology investments for agility, and optimizing the full PepsiCo P&L. He assured that the company will listen to all perspectives for the long-term best solution.

Kaumil Gajrawala of Jefferies Financial Group asked for more details on the teased 'big launch in protein' and for an update on the company's progress in offering more value to consumers.

Answer

Chairman and CEO Ramon Laguarta confirmed that protein is a fast-growing segment and that PepsiCo plans to use its major brands to offer solutions at scale, with more details to be announced in a few months. EVP and CFO Jamie Caulfield added that 'value' is a multi-dimensional lever including affordability, availability, and variety, which the company is deploying with greater precision thanks to improved data analytics.

Kaumil Gajrawala asked about the company's strategy regarding the launch of oral GLP-1 medications and how PepsiCo is positioned to adapt to the dietary changes of consumers using these drugs.

Answer

Chairman and CEO Ramon Laguarta stated that PepsiCo will continue to provide offerings for all dietary preferences. He noted that GLP-1 users are consuming more protein, fiber, and hydration. While PepsiCo is well-positioned in fiber and hydration, he acknowledged it is less positioned in protein and is actively innovating in that space. He added that these consumers tend to eat smaller portions, keeping PepsiCo's brands relevant through its portion-control offerings.

Kaumil Gajrawala from Jefferies asked if the company's recent restructuring could be a precursor to a larger strategic move, such as splitting the beverage and snack businesses, and whether current M&A activity is paused during this realignment.

Answer

CEO Ramon Laguarta clarified the restructuring is not a prelude to a split. He explained its purpose is to sharpen focus on international growth by separating beverage and food units, and in the U.S., to capitalize on prior technology investments to reduce duplication and harmonize future infrastructure decisions. The goal is to accelerate growth and margin expansion within the current structure.

Kaumil Gajrawala followed up on productivity, asking if PepsiCo could still achieve 8% EPS growth if organic revenue growth were to remain in the low single-digit (e.g., 1%) range for a sustained period.

Answer

Chairman and CEO Ramon Laguarta responded that the company is not planning for a long-term 1% growth scenario, expressing confidence that category investments and innovation will yield higher growth. He emphasized that the company's focus is on controlling productivity and building the long-term health of its categories, which they believe have strong global growth potential.

Kaumil Gajrawala sought deeper insights into the category slowdown, particularly regarding pantry destocking and promotional activity, and why historically consistent categories are slowing. He also asked for clarification on whether the foreign exchange benefit on the top line is fully intended for reinvestment or if some leverage is expected on the P&L.

Answer

Chairman, President, and CEO Noel Wallace attributed the category sluggishness, especially in the U.S., to consumer uncertainty, leading to less pantry filling and more promotional buying. He emphasized the need for accelerated innovation across multiple price points to re-energize categories. CFO Stan Sutula reiterated that the low single-digit FX benefit to the top line in 2026 (primarily H1) would be used flexibly for both reinvestment and bottom-line contribution, as part of the overall guidance, acknowledging continued volatility.

Kaumil Gajrawala asked for a deeper understanding of the category slowdown, including pantry destocking and promotional activity, especially in historically consistent categories, and sought clarification on whether FX benefits would be fully reinvested or contribute to P&L leverage.

Answer

Noel Wallace, Chairman, President, and CEO, attributed U.S. category sluggishness to consumer uncertainty, leading to less pantry filling and more promotion-driven buying. He emphasized the need for accelerated innovation across multiple price points to drive vibrancy. He believes categories have bottomed out but expects a slow return, with premiumization offering upside. Stan Sutula, CFO, reiterated FX as a low single-digit top-line benefit in H1 2026, used for flexibility (investment and bottom-line contribution), and noted its expected volatility.

Kaumil Gajrawala from Jefferies Financial Group inquired about the drivers behind the acceleration in the Hill's Pet Nutrition business, questioning whether it was due to macro factors or company-specific initiatives amid a potentially fading pet food category.

Answer

Chairman, CEO & President Noel Wallace attributed Hill's strong performance (5% organic growth ex-private label) to specific company initiatives within a flat category. He emphasized that the therapeutic side of the business is growing faster than wellness, consistent with their strategy. He also confirmed that Colgate stopped producing private label products for the brand as of July.

Kaumil Gajrawala from Jefferies Financial Group Inc. asked for the company's perspective on the 'why' behind the consumer slowdown in February and whether they are reassessing inflation and pricing forecasts in commodity-linked emerging markets.

Answer

Noel Wallace, Chairman, President and CEO, attributed the February slowdown to consumer anxiety caused by macroeconomic uncertainty, leading to pantry destocking even in non-discretionary categories. He expects consumption to return as confidence improves. CFO Stan Sutula addressed inflation, stating that excluding tariffs, they still expect modest raw material inflation, with rising palm and tallow offsetting lower oil prices. He confirmed they will manage this through productivity and supply chain efficiencies.

Kaumil Gajrawala asked about the Hill's Pet Nutrition business, specifically the volume trends in Europe, and requested an explanation of the 'RGM 2.0' (Revenue Growth Management) initiative.

Answer

CEO Noel Wallace explained that Hill's underlying volume growth was strong at around 3% after accounting for a 200 basis point drag from exiting private label business. He noted some category softness in Europe but expressed confidence in the brand's strong fundamentals. CFO Stan Sutula described RGM 2.0 as leveraging new capabilities in analytics, digital, and data to design more effective and precise pricing and promotion strategies in the market.

Kaumil Gajrawala followed up on advertising effectiveness, asking for more detail on the specific strategic and tactical changes made that are contributing to strong results, especially in markets where peers have struggled.

Answer

Noel Wallace, Chairman, President and CEO, detailed a shift from a 'democratic' spending approach to a more strategic one, pinpointing areas with the best ROI and growth opportunities. He highlighted a focus on building reach and frequency on select media platforms and leveraging a central digital team to share best practices globally, which has improved ROI and supported broad-based growth across categories like Bodywash and Home Care.

Kaumil Gajrawala asked about the trends in actual household usage and volume during the first half of the fiscal year, and whether these metrics have declined or remained stable amidst other market dynamics.

Answer

CFO Andre Schulten stated that usage volume growth has been slow, flat in the first half and last quarter in both the U.S. and Europe. He emphasized that re-accelerating household penetration and user growth is a major focus. While past growth was price-driven, the future opportunity lies in improving value propositions to attract more households. The H2 U.S. value growth assumption of 2% largely anticipates volume remaining slow. CEO Shailesh Jejurikar reinforced that future growth will be founded on user growth, which typically leads to usage growth.

Kaumil Gajrawala asked about household usage and volume trends, specifically whether actual usage has declined in the first half of the fiscal year or if it remains stable amidst other market noise.

Answer

CFO Andre Schulten stated that usage volume growth is slow, remaining flat in the first half in both the U.S. and Europe. He emphasized that re-accelerating household penetration and user growth is a key focus, as past growth was largely price-driven. He noted that the second-half growth trajectory assumes the volume component will remain slow, as this is a long-term effort. CEO Shailesh Jejurikar reinforced that future growth will be founded on user growth, which typically drives usage growth.

Kaumil Gajrawala sought clarification on tariff exemptions for natural products and whether the threat was lower than estimated, and on China, if distribution changes provided one-time benefits or reflected consumption improvement.

Answer

Andre Schulten, CFO, explained that tariff changes were due to broad exceptions granted for materials not grown in the U.S. (e.g., eucalyptus pulp, psyllium). Regarding China, he confirmed that distribution network interventions made in the summer and fall of the previous year were not one-time gains but a streamlining and incentive system change for fewer, better-aligned distributors, which is now starting to pay dividends and is expected to slowly accelerate.

Kaumil Gajrawala asked clarifying questions regarding tariff exemptions for natural products and whether recent distribution changes in China resulted in any one-time benefits or reflect a sustained improvement in consumption.

Answer

CFO Andre Schulten clarified that tariff changes involved broad exceptions for natural materials not grown in the U.S. (e.g., eucalyptus pulp, psyllium), which were highly appreciated. Regarding China, he stated that the distribution network interventions (streamlining, changing incentive systems, fewer distributors) were made last summer/fall and are not a one-time gain but rather the 'new go-to-market approach starting to pay dividends,' with expected benefits to slowly accelerate over time.

Kaumil Gajrawala of Jefferies asked if the CEO change signals a philosophical pivot and questioned if the loss of superiority in some categories was due to recent complexities or other factors.

Answer

President, CEO & Chairman Jon Moeller stated there is no philosophical pivot associated with the CEO change. He explained that superiority gaps were often caused by external competitive dynamics, such as new, high-quality, low-cost supply from China, rather than internal limitations, and that P&G has active plans to restore its advantage.

Kaumil Gajrawala of Jefferies asked if macroeconomic pressures are slowing the rollout or expected contribution from the heavy back-half innovation pipeline, given that consumers under pressure may be hesitant to try new things.

Answer

Executive Andre Schulten stated that the company remains committed to its innovation plans, believing it is the most important driver of category growth. He stressed the importance of simplifying the product proposition and working with retailers to reduce shelf complexity, making the benefits of new innovations clearer to consumers, which is especially critical in the current environment.

Kaumil Gajrawala of Jefferies asked for more detail on the Personal Health Care category's performance, noting that its growth slowed despite an easier comparison.

Answer

Jon Moeller, Chairman, President and CEO, explained that the category's trends are most impacted by the severity of the cough/cold season, which was not significant through December. He noted that while this leads to slower growth in a mild season, P&G continues to build share within the cough/cold space and sees strong growth in its other health care brands.

Kaumil Gajrawala asked about price points and promotions, noting negative mix in Beauty and Grooming and questioning if consumers were trading down. He also inquired about any signs of retailer inventory destocking.

Answer

Executive Andre Schulten described the promotional environment as stable and stated there are no signs of consumer trade-down. He explained the negative mix in Beauty was driven by SK-II's decline, while Grooming's mix was due to a shift from high-priced appliances to razors compared to a record prior year. He also confirmed no issues with retailer inventory levels.

Kaumil Gajrawala inquired about Celsius Holdings' pricing strategy for Celsius, Alani Nu, and Rockstar Energy, especially in light of industry pricing announcements and ongoing cost headwinds like tariffs and commodity prices, and then asked for more detail on Q4 timing and integration impacts.

Answer

CEO John Fieldly stated that pricing is a 'hot topic' due to headwinds, and they are contemplating various strategies, including promotional adjustments and building a revenue management team, but made no formal announcements. CFO Jarrod Langhans clarified that Q4 will be 'messy' due to Alani Nu's phased transition into the PepsiCo DSD network starting December 1st, which will ramp up across December and Q1 2026, differing from Celsius's quicker 2022 integration.

Kaumil Gajrawala asked about Celsius Holdings' pricing strategy for Celsius, Alani Nu, and Rockstar Energy, given industry trends, and sought more detail on the expected timing and integration complexities for Q4.

Answer

Chairman and CEO John Fieldly stated that pricing is a 'hot topic' being contemplated due to headwinds like tariffs and commodity costs, with promotional strategies and a new revenue management team being evaluated. CFO Jarrod Langhans clarified that Q4 will be 'messy' due to the Alani Nu transition on December 1st, involving a phased inventory build and proximity to resets, differing from the quicker Celsius integration in 2022.

Kaumil Gajrawala inquired about the drivers behind the energy drink category's acceleration amid a broader CPG slowdown and asked for specifics on Celsius's strategy to improve product velocity.

Answer

CEO John Fieldly attributed the category's strength to its resilience, consumer focus on health and wellness, and a high level of innovation driving excitement. To boost velocity, Fieldly explained that Celsius is taking a more balanced promotional approach this year based on learnings from 2024 and is launching new marketing programs built around its 'Live Fit' brand identity to attract more consumers.

Kaumil Gajrawala inquired about the brand positioning of Celsius versus the newly acquired Alani Nu, potential consumer overlap, and the future distribution strategy, specifically whether Alani Nu's distribution would be consolidated into the Pepsi network.

Answer

CEO John Fieldly explained that Alani Nu's consumer base is unique and complementary to Celsius, targeting a younger, female demographic focused on health and wellness, resulting in low cannibalization risk. Regarding distribution, Fieldly stated that the immediate focus is on closing the transaction and maintaining business continuity with Alani Nu's existing partners, deferring specifics on long-term network changes.

Kaumil Gajrawala of Jefferies requested more details on the new incentive structure with PepsiCo and why it is expected to drive acceleration. He also asked for confirmation on whether PepsiCo's inventory destocking was complete.

Answer

CEO John Fieldly described the PepsiCo incentive program as creating a more cohesive and aligned approach for 2025, focusing on priority periods to expand product availability. CFO Jarrod Langhans clarified that while the sell-in and sell-through correlation has improved in Q4, it is not yet fully aligned. He projected a potential Q4 revenue impact ranging from a slight benefit to a headwind of up to $15 million, contingent on November and December performance.

Kaumil Gajrawala asked if the recently announced restructuring is just a first step, implying that bigger restructuring efforts might be forthcoming, or if the current changes are considered sufficient.

Answer

CEO Rahul Goyal indicated that the short-term action taken in the Americas was to set up the business well for 2026, moving with pace. He stated that more details on the total plan, including cost and efficiency elements, will be shared in the coming months, suggesting a broader review is ongoing.

Kaumil Gajrawala noted that Molson Coors' announced restructuring seemed modest compared to typical changes during management transitions in struggling industries. He asked CEO Rahul Goyal if this was merely a first step or if the company believes everything is now in place.

Answer

CEO Rahul Goyal indicated that more details on the total strategic plan would be shared in the coming months. He clarified that the recent restructuring action in the Americas was taken with urgency over the last 30 days to ensure the business unit is well-positioned for 2026, implying it was a focused initial step.

Kaumil Gajrawala asked about the company's approach to pricing and promotions, given the macroeconomic environment and consumers' focus on value.

Answer

CEO Gavin Hattersley acknowledged that the company continues to see some value-driving consumer behavior. However, he stated that based on current observations, they do not expect anything 'unusual' regarding the promotional environment. He characterized the typical heightened competition heading into the summer as a normal seasonal pattern that was also seen in the prior year.

Kaumil Gajrawala of Jefferies questioned the company's M&A strategy, contrasting partnerships with full ownership, and asked for more detail on the drivers of the strong performance in Canada.

Answer

CEO Gavin Hattersley described the Canadian success as broad-based and sustained, citing 23 consecutive months of share growth driven by core brands, premiumization, and RTD expansion. On M&A, he framed partnerships as a core competency and the Fever-Tree investment as fitting their 'string-of-pearls' approach, allowing them to leverage distribution strengths while participating in the brand's value creation.

Kaumil Gajrawala asked about the rationale for choosing Apollo and KKR as partners, the role of their board member (on both future companies or one), and the risks considered under the new structure, including flexibility if things don't go as intended.

Answer

SVP of Finance Jane Gelfand expressed excitement about partnering with Apollo and KKR, citing their strategic merit, conviction in successor companies, and experience in complex transactions. Lead Independent Director Pam Patsley confirmed the intent to propose Brian Driscoll for the board, but stated a robust process is underway to establish two fully independent, best-in-class boards for the future companies, focusing on diversity of background and skills.

Kaumil Gajrawala asked about the rationale for partnering with Apollo and KKR, including the role of their incoming board member (whether on both future company boards or one). He also inquired about the risks considered under the new structure and the flexibility available if things do not proceed as intended.

Answer

SVP of Finance Jane Gelfand highlighted the strategic merit of partnering with Apollo and KKR, citing their expressed conviction in the successor companies and the upside opportunity. She noted the benefit of leveraging their financial expertise and experience in complex transactions. Lead Independent Director Pam Patsley explained that while Brian Driscoll (from Apollo/KKR) is intended to be put forward for election to the KDP board, the company is undertaking a robust search process for two fully independent boards post-separation, and specific board assignments for new members are not yet determined. CEO Tim Cofer briefly reiterated the commitment to flexibility.

Kaumil Gajrawala questioned the recent move to take over Dr Pepper distribution in California and other regions, asking if the DSD infrastructure is sufficient and if this signals a broader trend of brand repatriation.

Answer

CEO Tim Cofer described the move as a 'unique opportunity' to build on existing scale in those specific regions, rather than a signal of a widespread strategy. He emphasized that KDP views its DSD network as a critical competitive advantage and continuously invests in it. Cofer acknowledged that while such transitions involve short-term investment and disruption, these factors are included in the company's outlook.

Kaumil Gajrawala's son, Cameron, asked about the new Dr Pepper Blackberry flavor, noting its rapid achievement of 1% market share and questioning how significant its contribution would be for the full year.

Answer

Chief Executive Officer Timothy Cofer praised the question and confirmed the strong performance of the Dr Pepper brand, which is on track for its eighth consecutive year of market share growth. He stated that the Dr Pepper Blackberry launch is on par with the company's most successful recent innovations, having achieved nearly a point of market share in just eight weeks. He expressed confidence in the continued strength of Dr Pepper, supported by innovation, distribution gains, and the Zero Sugar platform.

Kaumil Gajrawala noted Keurig Dr Pepper's success with partnerships and asked how the company plans to participate in the emerging 'modern soda' category and what kind of deal structures it might consider.

Answer

Chief Executive Officer Tim Cofer responded by referencing KDP's vision to offer a beverage for every need and its track record of shaping its portfolio with brands like Electrolit and La Colombe. He confirmed that the company actively evaluates all potential entry avenues, including organic development and partnerships, to participate in durable, high-potential white spaces like modern soda, ensuring its portfolio remains growth-accretive.

Kaumil Gajrawala asked for details on how Keurig Dr Pepper's energy drink portfolio, including C4, GHOST, Black Rifle, and Bloom, will work together and whether there is a risk of brand overlap.

Answer

CEO Timothy Cofer explained that KDP is employing a complementary portfolio strategy to target distinct consumer needs within the growing energy category. He detailed that C4 focuses on performance energy, GHOST on lifestyle occasions, Black Rifle on mainstream and coffee-hybrid consumers, and Bloom on the female demographic. Cofer stated this approach creates a multifaceted energy platform that builds scale for KDP's direct-store-delivery (DSD) system.

Kaumil Gajrawala of Jefferies Financial Group asked about the progress on the e-commerce channel's retooling and the inventory reduction efforts, questioning if those initiatives are now complete. He also inquired about the drivers behind the recent increase in Net Promoter Scores (NPS), noting the improvement seems early in the transformation process.

Answer

CEO Joel Anderson stated that the e-commerce improvement is just beginning, with a new leader focused on fundamentals like site speed and appointment scheduling. CFO Sabrina Simmons noted that while inventory was down 9.5%, they will pursue continuous improvement. Anderson attributed the higher NPS scores to a wide range of operational improvements and reinvestments in the store teams and experience, which are beginning to resonate with customers.

Kaumil Gajrawala of Jefferies inquired about the target same-store sales growth needed for Petco to begin leveraging its new, lower cost base.

Answer

Executive Joel Anderson explained that the immediate focus is on making structural cost reductions permanent, and long-term leverage targets would be addressed in March. CFO Brian LaRose added that SG&A costs have already been reduced through G&A actions and simplified store tasks, even while making strategic investments in store labor.

Kaumil Gajrawala asked if new CEO Joel Anderson planned any notable refinements to the current strategy or if there were areas he wanted to accelerate. He also inquired about potential refinements to the current store format.

Answer

CEO Joel Anderson responded that the primary change is to move faster and with more urgency on execution, prioritizing projects that have a meaningful impact. Regarding store formats, he acknowledged opportunities for improvement, citing the Union Square store as a model, but stressed that the immediate focus must remain on improving profitability and managing debt leverage before turning to a broader portfolio review.

Kaumil Gajrawala from Jefferies Financial Group Inc. asked for insights into consumer behavior based on the revenue mix between services and supplies, looking for signs of consumer strength or weakness.

Answer

CEO Joel Anderson responded that the services business continues to lead growth, driven by internal productivity improvements like optimizing the online grooming appointment software. He highlighted that needs-based categories, which constitute a large part of Petco's business, remain resilient and are a key driver of performance.

Kaumil Gajrawala from Jefferies asked about the revenue mix between services and supplies and what this indicates about current consumer health and discretionary spending habits.

Answer

CEO Joel Anderson responded that the services business continues to lead, driven by internal productivity improvements like grooming software upgrades. He emphasized that needs-based categories are driving performance, which demonstrates the resilience of the overall pet category, as two of Petco's three main categories are needs-based or consumable.

Kaumil Gajrawala of Jefferies Financial Group Inc. asked about differing consumer behavior between services and supplies and what the revenue mix suggests about the health of the consumer, particularly regarding discretionary spending.

Answer

CEO Joel Anderson responded that the services business continues to lead, driven by internal productivity improvements such as enhanced grooming scheduling software. He highlighted that needs-based categories are driving performance, which underscores the overall resilience of the pet category.

Kaumil Gajrawala from Jefferies Financial Group Inc. asked about the revenue mix between services and supplies, and what these trends suggest about the current consumer environment, particularly regarding discretionary spending on pets.

Answer

CEO Joel Anderson responded that the services business continues to lead growth, driven by internal productivity improvements such as grooming software upgrades. He emphasized that needs-based categories are driving performance, which demonstrates the overall resilience of the pet category, as two of Petco's three main categories are needs-based.

Kaumil Gajrawala from Jefferies Financial Group Inc. asked for commentary on the performance of services versus supplies and what the revenue mix indicates about the current state of the consumer.

Answer

CEO Joel Anderson responded that the services business continues to lead, driven by internal productivity improvements like grooming software upgrades that increase appointment availability. He noted that needs-based categories are driving the business, which he sees as a testament to the resilience of the overall pet category.

Kaumil Gajrawala from Jefferies Financial Group asked about the revenue mix between services and supplies and what this mix indicates about the current consumer environment and discretionary spending habits.

Answer

CEO Joel Anderson responded that the services business continues to lead, driven by internal productivity improvements like upgraded grooming appointment software. He emphasized that needs-based categories are driving performance, which highlights the overall resilience of the pet category.

Kaumil Gajrawala of Jefferies Financial Group asked for an update on the pet specialty distributor issue from Q1 and the timeline for the club channel expansion. He also questioned why EBITDA guidance was maintained despite a lower sales forecast.

Answer

CEO Billy Cyr stated the distributor issue is now largely resolved. Regarding the club channel, he confirmed the expansion to 125 stores is factored into guidance and that early results are very encouraging. CFO Todd Comfort explained that EBITDA guidance was maintained because of significant operational outperformance, highlighting that the Ennis facility is now the company's most profitable plant and quality-related costs are much lower than anticipated.

Kaumil Gajrawala requested an update on the pet specialty distributor issue from Q1 and the expansion timeline in the club channel. He also asked how EBITDA guidance was maintained despite a reduced sales forecast.

Answer

CEO Billy Cyr reported that the pet specialty distributor issues were largely resolved in Q1 and had no material impact on Q2. He confirmed the club expansion plan is factored into the updated guidance. CFO Todd Cunfer attributed the steady EBITDA outlook to significant outperformance in operations, highlighting that the Ennis facility is now the company's most profitable plant and quality-related costs have fallen well below expectations.

Kaumil Gajrawala asked how the company is managing its P&L to avoid significant deleverage on lower sales and inquired about the competitive landscape, including increased promotions and DTC players.

Answer

CEO William Cyr explained they are managing costs by controlling production line staffing and leveraging strong plant performance to protect margins, still targeting EBITDA margin expansion for the year. President & Co-Founder Scott Morris noted that while competitor discounting is at historic levels, Freshpet will not participate. He views the growth of the overall fresh category, including DTC, as a positive sign that validates their market opportunity.

Kaumil Gajrawala asked for confirmation that the change in CapEx guidance was purely timing and posed a broader question about marketing effectiveness as the company approaches $1 billion in revenue.

Answer

CEO William Cyr confirmed the CapEx change was almost entirely due to project timing. Co-Founder and President Scott Morris addressed marketing by highlighting that the company's Customer Acquisition Cost (CAC) has remained remarkably stable for nearly a decade, which he views as proof of the marketing model's effectiveness and the large size of the total addressable market.

Kaumil Gajrawala sought confirmation that the change in CapEx was purely timing-related and asked how the company thinks about marketing effectiveness now that it is approaching $1 billion in revenue.

Answer

Executive William Cyr confirmed the CapEx change was almost all timing. Executive Scott Morris added that marketing effectiveness is a key focus, noting that the company's customer acquisition cost (CAC) has remained remarkably stable for nearly a decade. This stability gives them confidence in their model and the total addressable market as they scale.

Kaumil Gajrawala of Jefferies inquired about the primary drivers of strong revenue, asking to distinguish between inventory replenishment and organic sales growth. He also asked about the national rollout status of Vita Coco Treats and the margin implications of the rapidly growing international business.

Answer

CEO Martin Roper clarified that Q2's strong retail scan data was not due to easy comparisons from inventory issues, which will be a factor in Q3. He confirmed Vita Coco Treats is now nationally distributed. Executive Chairman Michael Kirban added that growth is fueled by rising household penetration and consumption. CFO Corey Baker noted that international growth is consumer-driven and that SG&A investments are being made slightly ahead of the growth curve to support European expansion and supply chain needs.

Kaumil Gajrawala from Jefferies asked about the company's long-term supply chain capacity to support ambitious goals like doubling the business and also questioned the strategy for implementing price increases without hindering strong sales momentum.

Answer

Executive Chairman Michael Kirban stated that coconut supply is plentiful and the key is planning for new production capacity, which they are accelerating to support long-term mid-teens growth. CEO Martin Roper addressed pricing, explaining that since the category is anchored by private label, they tend to adjust prices based on long-term cost changes, like the current tariffs, rather than temporary fluctuations, to maintain a stable pricing structure.

Kaumil Gajrawala of Jefferies Financial Group inquired about the timing and financial impact of delayed international export permits and sought more detail on the stabilization of the Canadian cannabis market.

Answer

CEO & Chairman Irwin Simon confirmed a line of sight on resolving permit issues in Portugal and Spain, which impacted revenue by approximately $8 million in Q4, with a recovery expected in Q1/Q2. He attributed Canadian market stabilization to retail expansion, product innovation beyond flower, and potential regulatory reforms. Chief Strategy Officer Denise Faltischek and Managing Director of International Rajnish Ohri concurred on the permit outlook.

Kaumil Gajrawala of Jefferies Financial Group Inc. inquired about the completion timeline for the beverage SKU rationalization and the primary drivers behind the enterprise-wide gross margin improvement.

Answer

Chairman and CEO Irwin Simon explained that the SKU rationalization will mostly finish this fiscal year but extend into 2026. He noted the margin gains stem from cost-cutting programs, not price increases, highlighting a focus on profitability that reduced the adjusted net loss to just $2 million.

Kaumil Gajrawala sought clarification on whether the Atkins decline is purely from distribution cuts or if the underlying brand is also weakening. He also asked about Quest's capacity expansion and target locations for out-of-aisle growth.

Answer

CEO Geoff Tanner reiterated that the Atkins brand is 'ostensibly flat' when excluding distribution and merchandising cuts, indicating core brand health. For Quest, he confirmed they are pulling forward capacity planning for Salty Snacks to meet strong demand and identified key expansion areas as new channels like club stores, mainline salty aisles, and increased secondary placements.

Kaumil Gajrawala from Jefferies Financial Group asked about the potential for a permanent shift in consumer behavior, wondering if the current reduction in beer consumption occasions might persist even after socioeconomic conditions improve.

Answer

President & CEO Bill Newlands expressed confidence that behavior will revert to normal. He reasoned that the core consumer's interest in beer remains high; the current issue is a temporary reduction in consumption occasions due to economic factors, not a fundamental change in product preference.

Kaumil Gajrawala posed a question about long-term consumer behavior, asking if there's a risk that consumption patterns might not revert to previous norms even if socioeconomic conditions improve, similar to permanent shifts seen after COVID.

Answer

CEO Bill Newlands expressed confidence that behavior will revert to normal. He argued that the core Hispanic consumer's interest in beer remains high; it's the number of consumption occasions that has temporarily decreased due to economic pressures, a trend he expects to reverse as the macro environment improves.

Kaumil Gajrawala questioned if structural factors, such as the law of large numbers or revised expectations for Hispanic population growth, were contributing to the changed long-term algorithm beyond the stated macro issues.

Answer

CEO William Newlands responded that he does not believe structural factors are the issue. He asserted that the company still has significant runway for growth through gaining shelf space, increasing brand awareness, and expanding brands like Modelo into the non-Hispanic community. He reiterated the belief that current challenges are primarily socioeconomic and will moderate over time.

Kaumil Gajrawala inquired about Constellation's capital allocation strategy, specifically questioning the deployment of CapEx for new capacity amid a slowdown and how the company weighs the returns on these investments against larger share buybacks.

Answer

CEO William Newlands and CFO Garth Hankinson explained that their capacity expansions are modular, providing flexibility to delay projects if needed. They reaffirmed their commitment to consistent capital allocation priorities, highlighting significant share repurchases and an upcoming cash flow inflection point that will likely favor returning more capital to shareholders.

Kaumil Gajrawala asked about Constellation Brands' capital allocation strategy, specifically the potential for more aggressive share repurchases now that the company has reached its leverage target, and inquired about the board's process for authorizing such programs.

Answer

CFO Garth Hankinson confirmed the achievement of their leverage target and noted the company accelerated buybacks in Q2, repurchasing $249 million in shares. He stated that with $2.2 billion remaining under the current authorization, they will continue to be opportunistic in the second half of the year. Hankinson added that discussions for new authorizations typically occur in the latter half of the fiscal year.

Kaumil Gajrawala of Jefferies Financial Group probed deeper into the decision to reduce marketing spend, asking if it was driven by the potential unprofitability of new customers under tariff pressure, or purely a reaction to falling consumer sentiment. He also asked about the company's capital allocation strategy regarding share buybacks versus conserving cash.

Answer

Co-Founder and CEO Matt Meeker confirmed the decision was driven by both factors: a recognition that acquiring customers for a discretionary product was untenable amid consumer pressure and high tariffs, and a strategic imperative to protect the company's positive EBITDA by diversifying more urgently. Regarding capital, Meeker noted that while BARK has been aggressive with buybacks, it wants to maintain 'dry powder' for potential M&A and investments in new product lines given the uncertain environment.

Kaumil Gajrawala asked whether the recent growth in new DTC subscribers was driven by a market recovery or by BARK's internal initiatives, such as the Shopify platform migration. He also inquired about the expected impact on EBITDA from the fiscal 2026 top-line growth outlook.

Answer

Matt Meeker, Co-Founder and CEO, attributed 99% of the new subscriber growth to internal initiatives, especially the improved conversion on the new Shopify platform, stating the market remains a slight headwind. Zahir Ibrahim, CFO, addressed the outlook, stating that for fiscal 2026, BARK expects a "good year-over-year improvement in EBITDA" and steady margin expansion over the long term as the business scales.

Kaumil Gajrawala inquired about the specific financial impact of supply chain optimizations and bottler purchase timing on Monster Beverage's Q1 2025 results.

Answer

Executive Hilton Schlosberg explained that Q1 was negatively impacted by bottler ordering patterns, adverse foreign exchange rates, lower alcohol segment sales, weather, and one less selling day. He contrasted this with a very strong April, which reflected a catch-up. Schlosberg also noted that supply chain optimization, along with pricing actions, were primary drivers for the improved gross profit margin in the quarter.

Kaumil Gajrawala asked if Beyond Meat was experiencing retailer destocking similar to other CPG companies and inquired about any other significant one-time items to expect in coming quarters.

Answer

CEO Ethan Brown acknowledged hearing some discussion of destocking but could not quantify its impact. CFO Lubi Kutua added that while weakening category data increases destocking risk, it is not a broad issue currently. For future one-time items, Kutua clarified that the only significant recurring charge will be the accelerated depreciation related to the suspension of China operations, which will impact results quarterly through the end of 2026.

Kaumil Gajrawala from Jefferies inquired about the evolution of Beyond Meat's core consumer, asking about changes in demographics or income levels as the company refines its products and marketing message.

Answer

CEO Ethan Brown stated that the company is increasingly focused on a more educated, health-oriented consumer who can see through the "manufactured narrative" about processed ingredients. He noted that this consumer is driving the company's return to growth. Brown expressed confidence that long-term trends, such as challenges in animal agriculture, favor plant-based meat and that educating consumers on the product's simple, healthy attributes will ultimately broaden the consumer base over time.

Kaumil Gajrawala inquired about the sustainability of the strong dietary supplements growth and the specific drivers behind the softness in procedure revenue, including competitive pressures.

Answer

CEO Bret Christensen explained that the robust supplement performance was driven by sustained strength in the e-commerce channel, not one-time events. He attributed the procedure revenue softness primarily to the disruptive rollout of the new clinical decision support software (CDSS), which temporarily slowed new clinic starts and reduced volume from the existing base. He noted that competition is an ongoing, but not escalating, factor.

Kaumil Gajrawala requested more specifics on the new capabilities of the updated software and asked for an update on the company's position and offerings related to GLP-1s, considering the evolving FDA regulatory environment.

Answer

CEO Teresa Weber detailed that the new software uses advanced science and lab tests to create highly specific, individualized treatment plans, making recommendations across the entire product portfolio and broadening Biote's appeal. Regarding GLP-1s, she stated that BioteRx offers legally available compounded options (Tirzepatide, Semaglutide) as long as they are on the FDA shortage list, but it is not a primary focus. CFO Bob Peterson reiterated that the GLP-1 business is immaterial to overall results.

Kaumil Gajrawala questioned if the company's strategic view on the VMS (vitamins) category has changed given its competitiveness and recent struggles, and asked if it still makes sense for Church & Dwight to own the business.

Answer

Matthew Farrell (executive) acknowledged the VMS category is highly competitive with low barriers to entry and that the business has been a struggle. Richard Dierker (CFO and Head of Business Operations) added that the category is still normalizing post-COVID. Regarding divestiture, Farrell stated that all businesses are evaluated annually but declined to comment further.

Inquired about the reasons for wholesalers' negative outlook and resulting inventory corrections, and asked how much of the guidance is based on incremental distribution growth.

Answer

Wholesalers are reacting to prolonged softness from retailers who are managing their own inventory cautiously. Duckhorn believes this will normalize as their brands are still growing. Account growth remains a key part of their strategy, but it's supported by other pillars like D2C, innovation, and acquisitions.

Sought clarification on the 2024 gross margin guidance, questioned the marketing spend strategy, and later followed up on the M&A environment, asking if seller valuation expectations have changed due to market conditions.

Answer

The company confirmed the 50 basis point gross margin expansion target. On marketing, they will continue investing while returns are strong. Regarding M&A, their approach is asset-specific, not driven by macro trends, and they remain highly selective, passing on deals with unrealistic valuations.