Kevin Grundy

Kevin Grundy pivoted to the pet food business, specifically the fresh segment. He asked about learnings from the Prime100 acquisition (performance, expansion potential) and Colgate-Palmolive's updated view on the attractiveness of the fresh pet food subsegment and Hill's potential role within it.

Answer

Chairman, President, and CEO Noel Wallace reported that the Prime100 acquisition in Australia is performing ahead of plan, being a science-driven, vet-endorsed brand focused on the derm space. He highlighted its profitability and ongoing efforts to drive efficiency and improve the supply chain. While currently a "watch and learn" situation for global application, the focus remains on ensuring its success in Australia and understanding its potential to complement the broader Hill's portfolio.

Kevin Grundy asked about the pet food business, specifically the fresh subsegment, inquiring about learnings from the Prime100 acquisition (performance, expansion potential) and updated thoughts on the attractiveness of fresh pet food and Hill's role within it.

Answer

Noel Wallace, Chairman, President, and CEO, reported Prime100 (Australia acquisition) results are ahead of plan, praising the team's execution. He highlighted its science-driven, vet-endorsed nature, fitting Colgate's narrative, and its derm-space positioning. He noted it's a profitable business, with ongoing learning to potentially apply innovation globally, but the current focus is on Australia's success.

Kevin Grundy from BNP Paribas asked about the North America business, focusing on the balance between driving top-line growth and restoring profit margins, which have seen considerable erosion in recent years.

Answer

Chairman, CEO & President Noel Wallace stated that restoring North American profit margins, in both dollar and percentage terms, is a 'significant priority.' He outlined a strategy to achieve this through enhanced innovation, particularly on the premium side, and by allocating resources from the new productivity program to the region. The focus extends across all categories, including Oral, Personal, and Home Care.

Kevin Grundy from BNP Paribas asked for details on the sources of the $200 million tariff exposure and the company's ability to offset it, questioning if pricing was the preferred path for mitigation.

Answer

CFO Stan Sutula explained the $200 million incremental impact is from tariffs announced since Q4, primarily on goods moving between China and the U.S., and is spread across Q2-Q4. He emphasized that mitigation will come from a combination of productivity, revenue growth management, formulation, sourcing, and supply chain optimization, not just pricing. Noel Wallace, CEO, added that the response will be tailored by country and category, with a primary focus on productivity and innovation to protect margins and investments.

Kevin Grundy asked about advertising levels for 2025, questioning the rationale for maintaining spending as a percent of sales rather than increasing it further to potentially accelerate top-line growth, given strong recent returns.

Answer

CEO Noel Wallace responded that the focus for 2025 is on optimizing advertising spend and improving ROI through technology, data analytics, and more precise, tactical deployment. He emphasized that after significant increases in prior years, the company is in a much healthier position regarding brand health. The strategy is now centered on efficiency and maximizing the impact of the current investment level rather than simply increasing the total spend.

Kevin Grundy requested insights into the building blocks for gross margin development over the next 12 months, especially as pricing contributions step down, and what this implies for reinvestment further down the P&L.

Answer

Stanley Sutula, Chief Financial Officer, expressed satisfaction with the Q3 gross margin performance, which exceeded expectations. He noted that while pricing contributions will mitigate, productivity from the 'funding the growth' program and overhead absorption from higher volumes will continue to support margins, enabling reinvestment in advertising and innovation to drive top and bottom-line growth.

Kevin Grundy asked for an overall assessment of P&G's portfolio strategy after a decade, questioning if the company is still in the right segments and if any businesses might make less sense in the current portfolio given the transitional phase of reinvention.

Answer

CEO Shailesh Jejurikar affirmed P&G's commitment to daily use categories where performance drives brand choice, which integrates well with their superiority strategy. He mentioned a 'day-one look' that drove recent restructuring to exit underperforming businesses and a continuous review to ensure presence in higher-growth segments, including e-commerce and social commerce. He also noted ongoing opportunities to build a stronger presence in health and beauty.

Kevin Grundy asked CEO Shailesh Jejurikar for his assessment of P&G's overall portfolio strategy, questioning if the company is pleased with its current portfolio and if certain businesses might be less relevant today given the transitional phase.

Answer

CEO Shailesh Jejurikar affirmed P&G's commitment to daily use categories where performance drives brand choice, which aligns with its superiority strategy. He mentioned a continuous 'day-one look' review, which led to recent restructuring and exits from non-growth segments. He also highlighted strengthening the portfolio by playing in fast-growing segments, such as e-commerce and higher price points, and continuing to build presence in health and beauty.

Kevin Grundy of BNP Paribas asked about consumer trade-down risk given P&G's premium portfolio, citing share gains by value-priced competitors in categories like U.S. Fabric Care, and questioned if this indicates commoditization.

Answer

CFO Andre Schulten countered the idea of commoditization by highlighting high consumer dissatisfaction rates in key categories, which creates significant opportunity for performance-based innovation. President, CEO & Chairman Jon Moeller added that the success of premium innovations like TideEVO demonstrates that consumers will pay for superior performance that solves their problems.

Kevin Grundy of BNP Paribas asked about the slowdown in Enterprise Markets, seeking to understand the split between industry-wide trends and P&G-specific issues, and inquired about long-term growth expectations for these markets.

Answer

Executive Andre Schulten acknowledged the slowdown from previously high growth rates. He detailed regional dynamics: Latin America remains strong, Europe Enterprise is weighed down by Turkey, and the Asia, Middle East, Africa region is impacted by Middle East tensions but sees strength in markets like India. He emphasized these markets are inherently volatile and declined to provide a fiscal '26 forecast.

Kevin Grundy of BNP Paribas pivoted to capital allocation, asking for updated thoughts on M&A and whether P&G has considered accelerating share repurchases given the stock's relative valuation.

Answer

Jon Moeller, Chairman, President and CEO, reiterated that P&G's M&A approach remains disciplined and focused on attractive, fragmented categories like Personal Health Care and Specialty Beauty. Andre Schulten, an executive, added that the capital allocation policy is unchanged: fund growth, pay the dividend, consider strategic M&A, and return the rest to shareholders via buybacks, which are an outcome of this process rather than a target.

Kevin Grundy highlighted the decline in the number of top markets where P&G is holding or growing share (now 28 of 50) and asked about the importance of this KPI and the key opportunities to improve market share performance.

Answer

Executive Andre Schulten explained that the decline was not a surprise, as leading on necessary pricing actions can have unfavorable short-term share effects. He emphasized that the primary goal is to grow markets by increasing household penetration, for which volume share is a key early indicator. He expressed satisfaction with share progress in the U.S. and stabilizing trends in Europe.

Kevin Grundy asked for an assessment of the company's cost structure, particularly supply chain and brewery optimization, and whether incremental productivity would enable higher investment levels or act as a near-term drag on margins.

Answer

CEO Rahul Goyal confirmed an ongoing focus on making the brewery network efficient, considering transportation costs and seasonality, but stated no brewery closures are currently planned. He emphasized that cost management, both fixed and G&A, remains a priority. He does not anticipate a large spike in investment to drive productivity, but rather a focus on ensuring CapEx, people, and technology investments yield the right ROI and returns.

Kevin Grundy asked CEO Rahul Goyal for his assessment of Molson Coors' broader cost structure, including supply chain and brewery optimization, and if the fixed cost structure is appropriately sized for the current market reality. He also inquired if incremental productivity would enable higher investment or act as a near-term drag on margins.

Answer

CEO Rahul Goyal confirmed an ongoing focus on brewery network efficiency, considering transportation costs and seasonality, but stated that brewery closures are not currently deemed necessary. He emphasized that cost management remains a priority across fixed and G&A expenses. He does not believe a high level of elevated investment is required to drive productivity, stressing the need for appropriate ROI on CapEx and effective returns on people and technology investments.

Kevin Grundy of BNP Paribas requested an update on the CEO search process, given the planned retirement of Gavin Hattersley, asking about timing, desired attributes for the successor, and whether the search includes internal and external candidates.

Answer

President and CEO Gavin Hattersley confirmed the search process is well underway for his planned retirement by year-end. He stated the Board of Directors is conducting a thoughtful process, considering both internal and external candidates. The key attributes being sought are relevant business leadership experience and a strong cultural fit, with the Board remaining supportive of the company's current long-term strategy.

Kevin Grundy asked about capital deployment, questioning what the market underappreciates about the Molson Coors story and whether the company would consider a larger M&A deal beyond its 'string of pearls' strategy.

Answer

CEO Gavin Hattersley opined that investors may underappreciate the strength of the company's balance sheet, its strong cash generation, and the successful share retention of its core brands. He reaffirmed the 'string of pearls' M&A strategy but noted that with a healthy balance sheet, 'the size of those pearls can get a little bit bigger,' citing the recent Fever-Tree partnership as an example of this evolution.

Kevin Grundy of BNP Paribas asked about the implied volume in the 2025 guidance and posed a broader question on long-term demand headwinds from changing consumer habits, GLP-1 drugs, and health advisories.

Answer

CFO Tracey Joubert clarified that while they don't give specific volume guidance, there is a 1.9 million hectoliter headwind from exiting contract brewing. CEO Gavin Hattersley addressed the long-term trends by emphasizing the company's 'total beverage' strategy, which includes a growing portfolio of no- and low-alcohol options like ZOA and the new Fever-Tree partnership to meet evolving consumer preferences for moderation.

Kevin Grundy inquired about the company's thinking on run-rate EPS, specifically whether the entirety of the ERP transition impact should be added back for future earnings. He questioned the comfort with this thinking given current market share, ramping promotions, higher cost of business, and slower categories, and asked about the adequacy of current investment levels and potential needs for higher investment.

Answer

CEO Linda Rendle stated that the year is largely playing out as expected, with confidence in navigating the environment and accelerating value-adding activities. She believes current investment levels are appropriate and sees opportunities for brands to lead and deliver value even with lower top-line growth. CFO Luc Bellet confirmed that the $0.90 ERP impact should be added back to the current year's EPS as a starting point for next year, due to sales shifting between fiscal years.

Kevin Grundy asked about the run rate EPS, specifically whether the entirety of the ERP transition costs should be added back when considering future run rate earnings, and the adequacy of current investment levels given market share challenges, ramping promotions, higher cost of business, and slower categories, questioning if investment levels might need to increase.

Answer

CEO Linda Rendle affirmed that the year is largely playing out as expected, with the consumer, categories, and competitive environment in line with prior expectations, aside from the ERP implementation blip. She expressed confidence in Clorox's ability to navigate the environment and deliver expected performance, believing current investment levels are appropriate. CFO Luc Bellet confirmed that the $0.90 impact from the ERP transition should be added back to the current year's EPS as a starting point for the next fiscal year, as FY26 sales and EPS are understated due to a shift of two weeks of sales.

Kevin Grundy from BNP Paribas asked a long-term question about the company's path to achieving an 18% operating margin, how quickly this could be reached after the ERP-related noise subsides, and whether current market pressures might require more reinvestment of potential gains.

Answer

CFO Luc Bellet stated that on an underlying basis, the company is already close to its 18% operating margin target, primarily due to gross margin recovery, and expects to be there in the next year as the noise settles. CEO Linda Rendle added that the significant digital and supply chain investments were made precisely to create a 'flywheel' for reinvestment and growth, and she is confident in the current investment levels.

Kevin Grundy asked how the current environment of slowing category growth affects the company's and the Board's thinking on capital deployment, particularly regarding the potential for M&A to move into higher-growth areas.

Answer

CEO Linda Rendle stated the company's focus is on controlling what it can, primarily by delivering strong earnings performance and remaining competitive. While acknowledging the company has a strong balance sheet and is ready for opportunities at the right value, she emphasized that the number one job is ensuring the core business is healthy. She pointed to recent divestitures as actions taken to strengthen the company's financial profile, reinforcing a focus on optimizing the current portfolio.

Kevin Grundy of BNP Paribas asked how Clorox plans to return to its 3-5% growth target from the current 0-1% environment, given a fatigued consumer. He also asked incoming CFO Luc Bellet about his priorities and potential opportunities.

Answer

CEO Linda Rendle explained that a return to historical growth rates depends on improved consumer confidence, which encourages trade-ups to premium, innovative products. Incoming CFO Luc Bellet emphasized continuity in strategy and financial discipline, noting the company is now in a strong position to focus on growth and transformation, particularly the ERP implementation.

Kevin Grundy asked about the company's potential risk exposure to broader tariffs that could emerge after the upcoming election, specifically inquiring about the portion of cost of goods sold that is sourced from outside the U.S.

Answer

CFO Kevin Jacobsen stated that the company has been actively working to mitigate supply chain risks by nearshoring and onshoring production. While he declined to provide a specific percentage of internationally sourced COGS, he expressed confidence in the company's diversified supplier network and preparedness for various outcomes, noting that no specific impacts from potential tariffs are currently baked into the outlook.

Kevin Grundy inquired about the strategic rationale for the chosen deal structure, specifically why a combination with JDE Peet's was preferred over a spin or sale of the coffee business. He also asked about the board's learnings from the market reaction regarding capital allocation and shareholder communication.

Answer

Chairman Bob Gamgort explained that selling the coffee business lacked a willing buyer at a fair price, and spinning off Keurig alone would destroy value by losing scale and synergies. He emphasized that the combination with JDE Peet's creates a global coffee leader. Lead Independent Director Pam Patsley acknowledged significant learnings from market feedback, leading to today's updated approach, and highlighted the board's rigorous governance and consideration of alternatives.

Kevin Grundy questioned the board's rationale for the deal structure (acquisition and separation) over a spin or sale of the coffee business, and what learnings the board took from the market reaction regarding capital allocation and shareholder communication.

Answer

Chairman Bob Gamgort explained that all alternatives were considered, but selling was difficult due to the asset's size, and spinning Keurig alone would destroy value. He emphasized that the combination creates a global coffee leader. Lead Independent Director Pam Patsley noted that the board learned to take more time, solicited outside input, and maintained rigorous governance, including a separate committee for JAB-related analysis.

Kevin Grundy questioned the suitability and sustainability of the 39-40% beer operating margin target, particularly if volumes remain in low single digits. He expressed concern about operating deleverage given historical high single-digit growth and the potential for mean reversion in share gains.

Answer

CFO Garth Hankinson affirmed that 39-40% operating margins are best-in-class, even with some deleveraging. He stated that the company is not providing guidance beyond FY2026, awaiting macroeconomic and socioeconomic conditions to play out. He mentioned factors like depreciation, footprint review, and a robust savings agenda as ongoing influences on margins, expressing belief in a return to growth.

Kevin Grundy questioned the suitability and sustainability of the 39%-40% beer operating margin target if volumes remain in the low single digits, considering historical high single-digit volume growth, operating leverage, and concerns about mean reversion and slowing share gains in a declining category.

Answer

CFO Garth Hankinson affirmed that 39%-40% operating margins are best-in-class, and even with some deleveraging, margins will remain strong. He stated that the company is not providing guidance beyond FY2026, preferring to assess macroeconomic conditions and consumer response. He mentioned factors like depreciation, footprint review, and a robust savings agenda as ongoing influences on future margins, with an expectation to return to growth.

Kevin Grundy questioned the decision not to increase marketing spend to boost top-line growth and asked if this signals a philosophical shift toward prioritizing margins over growth.

Answer

CFO Garth Hankinson defended the marketing investment level, noting it's based on the team's needs and improved efficiency, and highlighted opportunistic spending increases in the prior year. CEO William Newlands firmly denied any philosophical shift, citing the company's strong growth track record and stating the goal remains to deliver both top-line growth and strong margins.

Kevin Grundy of BNP Paribas pressed on the promotional environment, highlighting a narrative conflict between Church & Dwight's benign view and competitor/data indications of ramping activity. He also asked how the company will balance timeliness and value in the vitamin business review while protecting it from further decline.

Answer

President and CEO Rick Dierker stood by his assessment that laundry promotions are within historical norms, noting back-half plans are set and that net pricing must be considered. For the vitamin business, he stated they are running it 'like we're gonna own it forever' to maintain its health and value, with no change to innovation or programming. He added that the disproportionate management time the business requires is a key factor in the strategic review.

Kevin Grundy asked if the announced portfolio pruning was the extent of divestitures for the year and questioned the long-term commitment to the vitamin business. He also asked new CFO Lee McChesney for his early impressions of the company and potential areas for enhancement.

Answer

Executive Richard Dierker explained that while the portfolio review is annual, the company is always evaluating its brands, and a decision on the vitamin business's future would be better assessed after Q2 results. CFO Lee McChesney shared his positive impressions of the company's culture and execution, stating his belief in the existing strategy and his focus on contributing his experience, particularly in M&A, to the successful model.

Kevin Grundy questioned the company's response to the intense promotional environment in cat litter and asked for an update on the company's stance on potential portfolio pruning.

Answer

Management stated they are pleased with their position in litter, having retained significant share gained during a competitor's outage. Both CFO Rick Dierker and CEO Matthew Farrell confirmed they will not chase share by matching a competitor's highly uneconomical promotions, instead focusing investment on their Hardball innovation. On portfolio pruning, Dierker said that while the current strategy is sound, they conduct annual brand reviews and will address underperformers, with more details potentially coming next year.

Kevin Grundy asked for commentary on the recent departure of executive Barry Bruno, inquiring about the priority to refill the role and the potential skill set being sought.

Answer

Matthew Farrell (executive) acknowledged Barry's significant contributions over his 11 years with the company and noted he will be with the company through early October. He stated it is 'business as usual' and the company has time to determine how to fill the position, but declined to provide further detail on the search process.

Kevin Grundy from BNP Paribas asked for an update on PepsiCo's energy drink strategy, its satisfaction with brands like Rockstar, and what success in the category would look like over the next three to five years, including the role of Celsius.

Answer

Chairman and CEO Ramon Laguarta described PepsiCo's energy strategy as multi-faceted, involving brand ownership, distribution partnerships like Celsius, and the successful Starbucks JV. He stated that the goal is to create long-term value by participating across these different models and innovating as the category evolves, such as at the intersection of sports drinks and energy.

Kevin Grundy asked for the strategic context behind the decision to recast financial segments, questioning if it could be a precursor to larger strategic moves and what investors might underappreciate that the new reporting makes more evident.

Answer

Chairman and CEO Ramon Laguarta explained the changes are about maximizing future growth by providing more focus. For international, it separates the franchise business from company-owned operations to better position it for long-term growth. In North America, the change recognizes how the business is already run and creates an integration opportunity to drive efficiency and new growth models by leveraging scale across the supply chain and go-to-market for specific channels.

Kevin Grundy of BNP Paribas asked for management to reaffirm its long-term 4-6% organic sales growth guidance, questioning if the current issues in the snacks business are viewed as transitory and if confidence in achieving that target remains high.

Answer

CEO Ramon Laguarta expressed strong confidence in the 4-6% long-term target, stating an ambition for the upper end. He views current challenges as transitory and expects the North American business to accelerate, complemented by high growth internationally and new opportunities like away-from-home. He noted that PepsiCo has delivered above its long-term top and bottom-line guidance for the past five years and sees no reason that trend shouldn't continue.

Kevin Grundy asked for an update on the energy drink category, inquiring about its recovery path and PepsiCo's ability to help the CELSIUS brand regain momentum amid a market share slowdown.

Answer

Chairman and CEO Ramon Laguarta stated that the consumer need for energy will remain strong long-term, attributing the current category weakness to a cyclical downturn in convenience store traffic. Regarding CELSIUS, he affirmed the strength of the partnership, stating that PepsiCo is executing its distribution and service commitments with high standards and remains optimistic.

Kevin Grundy from BNP Paribas asked about the competitive pricing dynamics, noting a key competitor hasn't followed price increases, and questioned management's satisfaction with its U.S. market share performance.

Answer

Executive Hilton Schlosberg asserted that Monster determines its pricing strategy independently of competitors and sees a strong value proposition for energy drinks compared to CSDs. Regarding market share, he acknowledged the goal is to regain share and expressed confidence in the company's plans, innovation pipeline, and the encouraging sales trends despite recent price increases.

Kevin Grundy requested commentary on the overall pricing environment in the energy drink category, noting competitor actions, and asked about Celsius's own pricing and promotion plans for the remainder of the year.

Answer

CEO John Fieldly stated that while there are opportunistic chances for pricing, the company is being cautious due to consumer behavior, such as shifting to multipacks and seeking promotions. He confirmed Celsius took a price increase in Q4 2024, which provides flexibility for promotional activities amid consumer uncertainty. The company will leverage pricing opportunities where possible while closely monitoring consumer purchasing habits.

Kevin Grundy asked for details on the $50 million in cost synergies from the Alani Nu deal, a comparison of the combined company's potential EBITDA margin to Monster's, and an explanation of how management plans to limit integration risk.

Answer

CFO Jarrod Langhans detailed that the synergies are 'hard costs' derived from COGS, leveraging purchasing scale, utilizing Celsius's 500-person sales force, and supply chain efficiencies. CEO John Fieldly addressed integration risk by highlighting the company's successful Pepsi integration, the continued involvement of Alani Nu's founders through consulting agreements, and the alignment of interests via their stock ownership in Celsius.

Kevin Grundy of BNP Paribas asked if Celsius has considered issuing formal guidance to improve visibility. He also questioned if the company should accelerate its international expansion to offset U.S. deceleration and whether the right leadership team is in place to execute such a strategy.

Answer

CEO John Fieldly stated that the company is not providing formal guidance at this time but may reevaluate in the future. Regarding international expansion, he confirmed it is a key focus with recent launches in Europe and Australia/New Zealand, though the rollout is being carefully sequenced. CFO Jarrod Langhans added that the company is establishing a new center of excellence in Ireland to support global supply chain, innovation, and marketing efforts at scale.

Kevin Grundy asked about how the company is striking the right balance in North America between delivering very strong margins and achieving higher levels of volume growth, given that volumes have been flattish recently.

Answer

President and CFO John Murphy positioned the current state as part of a multi-year journey to improve North America's margin profile through better revenue growth management and portfolio mix, such as the addition of Fairlife. He indicated that they still see an opportunity to improve the segment's margin to be more in line with other developed markets while continuing to invest for growth.

Kevin Grundy of BNP Paribas asked for key learnings from the company's alcohol strategy after a few years and which opportunities appear most scalable on a global basis.

Answer

Chairman and CEO James Quincey emphasized that it is still 'early days,' as brands often take 7-10 years to reach scale. A key learning is that the alcohol ready-to-drink (ARTD) category requires a diverse portfolio rather than a single 'killer SKU.' He sees the path to success as a combination of partnered offerings like Jack and Coke and owned brands like Simply Spiked.

Kevin Grundy questioned the company's visibility on results, given the recent quarterly miss and significant ongoing organizational changes. He asked why investors should not view this as a setback for the company's ability to convey reliable guidance to the market.

Answer

CEO Michael Hsu responded that the company is managing controllables well and that the new organizational structure has actually improved visibility into key markets, allowing for quicker diagnosis and response. CFO Nelson Urdaneta reinforced that the company remains disciplined in its focus on driving profitable consumption and will not chase volume, and that the team is executing well through the transformation.