Nik Modi

Nik Modi inquired about the specific drivers behind Kimberly-Clark's strong quarterly outperformance and the basis for the company's confident outlook for the second half of the year, especially as competitors moderate their expectations.

Answer

Chairman and CEO Mike Hsu explained that performance was driven by a strategy to serve consumers across all value tiers and the essential nature of their categories, which show resilient demand. He emphasized that 85% of organic sales growth came from innovation, and a strong product pipeline underpins their confidence for the second half of the year.

Nik Modi inquired about how the company is managing its innovation strategy across different price tiers, its price/mix, and margin cadence, especially given the increasing value-seeking behavior from consumers.

Answer

CEO Michael Hsu clarified that the revised outlook is primarily driven by cost headwinds, not mix degradation. He emphasized that while consumer affordability is paramount, demand remains resilient. The company's strategy is to cascade innovation from premium products down through all tiers, prioritizing winning the consumer first and then managing the resulting mix.

Nik Modi asked for an update on market share performance and the competitive environment. He also questioned the role of innovation, citing high cannibalization rates for new products and asking if the primary goal is market share gain or expanding the category's value.

Answer

CEO Michael Hsu stated the company's goal is to both grow market share and expand the category. He noted strong progress in the U.S., with market share up or even in 7 of 8 categories. Regarding innovation, he explained the strategy is to delight consumers across all price tiers ('good, better, best') and that driving trade-up through premium products like Skin Essentials is a key part of the plan, even if it involves some cannibalization.

Nik Modi asked about agentic commerce, how P&G plans to leverage its brick-and-mortar advantages in this new digital world (referencing OpenAI and Walmart), and how suppliers can ensure their products are selected when consumers shop through prompts.

Answer

Andre Schulten, CFO, viewed agentic commerce as an opportunity, akin to past shifts from print to digital media. He emphasized that success hinges on fundamental principles: understanding the consumer, how agents find and extract product information, and collaborating with retail partners to ensure superior brand propositions are communicated effectively through algorithms. He expressed confidence in P&G's data infrastructure and consumer understanding.

Nik Modi asked for Procter & Gamble's perspective on agentic commerce, specifically how the company plans to leverage its brick-and-mortar advantages in this new digital world, and how suppliers can ensure their products are selected when consumers shop through prompts.

Answer

CFO Andre Schulten viewed agentic commerce as an 'opportunity,' similar to past shifts in retail and media. He stressed that success hinges on fundamental principles: deep consumer understanding, knowing how agents find and extract product information, and collaborating with retail partners to ensure superior brand propositions are communicated effectively through algorithms. He expressed confidence in P&G's data infrastructure, consumer insights, and retail partnerships to navigate this new environment.

Nik Modi of RBC Capital Markets asked for clarification on which categories experienced destocking and requested specific outcomes from the test markets where the new organizational design was piloted.

Answer

CFO Andre Schulten confirmed the inventory destocking was broad-based across categories. President, CEO & Chairman Jon Moeller explained that the organizational design pilots demonstrated the ability to operate at a significantly lower cost, make faster decisions, and improve the employee value proposition by creating roles with broader, end-to-end scope.

Nik Modi asked for an update on disruptive innovations like Olay Melts and Tide evo and inquired about the pipeline for similar platforms. He also asked if the guidance accounts for potential store closures in the U.S. drug channel.

Answer

Executive Andre Schulten confirmed the guidance does not assume major store closures. He reported that both Olay Melts and the Tide evo test market are performing at or above expectations, with progress being made on scaling up evo production for a national launch. He deferred further details on disruptive innovation to the upcoming Investor Day in November.

Nik Modi inquired about the timing and nature of increased promotional spending, particularly for Twisted Tea and local marketing, and explored the company's strategy regarding smaller pack sizes for core brands.

Answer

CFO Diego Reynoso confirmed increased investment in brands for the balance of the year and into 2026. Founder, CEO, and Chairman Jim Koch detailed surgical promotional spending for Twisted Tea, including a new 4x16oz pack under $10 and pricing adjustments for 12-packs, while expressing less appeal for very small pack sizes due to value and margin concerns.

Nik Modi asked about the timing of increased promotional and local marketing spend, inquiring if it would extend into the next year. He also questioned the company's strategy regarding smaller pack sizes for core brands, citing success in the carbonated soft drink industry and by Constellation.

Answer

CFO Diego Reynoso confirmed continued investment in brands for the balance of the year and into next year, with more details for 2026 to follow. Founder, CEO, and Chairman Jim Koch elaborated on surgical promotional spending for Twisted Tea, including a new 4x16oz pack priced under $10 and refining 12-pack pricing. He explained that smaller beer pack sizes are less appealing due to value and margin considerations.

Nik Modi asked about the ongoing debate regarding structural versus cyclical volume growth, specifically for Constellation Brands, and the impact of the overall macro consumer slowdown and suppressed sentiment among Hispanic consumers, including the effect of ICE activities on sales volume.

Answer

CEO Bill Newlands explained that consumer sentiment is the key factor, with 80% of surveyed consumers concerned about the socioeconomic environment and 70% about personal finances, indicating a cyclical consumer pullback. He noted increased loyalty for Corona in the general market and Modelo among Hispanic consumers, and strong Gen Z share, positioning the company well for when consumer comfort returns.

Nik Modi asked about the primary drivers of volume growth, specifically debating structural versus cyclical factors. He inquired about the impact of the overall macro consumer slowdown and suppressed sentiment among Hispanic consumers, particularly in relation to ICE activities, and whether volumes would have grown without these activities.

Answer

CEO Bill Newlands emphasized that consumer sentiment, with 80% of surveyed consumers concerned about the socioeconomic environment and 70% about personal finances, is the key cyclical factor. He noted increased loyalty for Corona in the general market and Modelo among Hispanic consumers, highlighting Constellation Brands' strong Gen Z share, suggesting a good position for when consumer confidence improves.

Nik Modi of RBC Capital Markets asked for perspective on the socioeconomic pressures affecting the Hispanic consumer, questioning how long these challenges might persist and if there is a potential breaking point.

Answer

President & CEO Bill Newlands acknowledged the difficulty in predicting consumer behavior but emphasized that brand loyalty with the Hispanic consumer remains very strong. He stated the company's strategy is to 'control the controllables' by investing in the business, gaining shelf share, and driving innovation to be prepared for when consumer behavior normalizes.

Nik Modi asked for perspective on the Hispanic consumer, inquiring about the potential duration of pressures from external factors like raids and how this key demographic's behavior is being affected.

Answer

CEO Bill Newlands explained that while it's hard to predict the timeline, brand loyalty with Hispanic consumers remains very strong. He emphasized the company's focus on 'controlling the controllables,' such as driving share gains and new product development, to navigate the current environment.

Nik Modi questioned the rationale behind the significant reduction in the long-term beer outlook, from 7-9% to 2-4%, noting it seemed extreme given the temporary nature of current challenges and strong underlying brand momentum.

Answer

CEO William Newlands stated that while brand health metrics are strong, it is difficult to predict the duration of socioeconomic pressures affecting the Hispanic consumer, leading to more conservative guidance. CFO Garth Hankinson supported this by sharing positive brand health data, including increased awareness and consideration for Modelo, Corona, and Pacifico.

Nik Modi asked for an explanation of the Corona brand's weaker performance in the quarter, questioning if it was a result of cannibalization from Modelo and Pacifico or other factors.

Answer

CEO William Newlands acknowledged Corona was slightly softer than expected, attributing it partly to macro factors like challenging weather on the East Coast, where the brand is over-indexed. However, he pointed to a recent pickup in scanner data and excitement for the upcoming Corona Sunbrew launch. Newlands reiterated the full-year outlook for Corona to be slightly up and noted it will be a major beneficiary of increased marketing spend in the second half.

Nik Modi of RBC Capital Markets asked for an update on the post-merger integration, inquiring about the progress of route and facility consolidation and seeking clarity on what management means by operations returning to 'normal' by September.

Answer

CEO Robbert Rietbroek explained that 48 of a planned ~60 facilities have been closed and 1,600 full-time roles have been reduced. He stated that prioritizing integration speed led to temporary supply disruptions. He clarified that 'normal' signifies the daily service rate returning to a target of 95% or higher; it has already recovered from below 80% to 92%. He anticipates most challenges will be resolved by September, with some supply constraints lingering for another 8-10 weeks.

Sought clarification on whether top-line growth would accelerate through the year due to distribution gains and asked for context on the minimal price/mix growth, questioning the competitive environment and potential timing issues.

Answer

The company confirmed that top-line growth is expected to ramp up due to new distribution and shelf resets. The low price/mix in Q1 was a strategic choice to focus on volume and maintain a competitive consumer value proposition, which resulted in market share gains. EBITDA margin expansion was driven by cost controls and synergies rather than pricing. Some price harmonization is expected later in the year, particularly in the direct delivery channel.

Nik Modi asked for clarification on the expected top-line acceleration from new distribution and shelf resets, and questioned why the price/mix contribution was nearly flat in the quarter.

Answer

CEO Robbert Rietbroek confirmed sales will ramp due to over 5% incremental distribution points and new offerings. He explained the flat price/mix was a strategic choice to prioritize volume and gain market share in a competitive environment. CFO David Hass added that price harmonization, especially in direct delivery, is expected in future quarters to balance the full-year growth drivers.

Nik Modi questioned the drivers behind the 3-5% organic sales growth guidance for 2025, given the strong exit to 2024, and asked for the reasons behind the increased cost synergy target.

Answer

CEO Robbert Rietbroek affirmed the 3-5% guidance is achievable, citing strong tailwinds from health trends and consumer demand, and noted the guidance is balanced between volume and price/mix. CFO David Hass explained the synergy upside resulted from accelerated integration planning post-merger, particularly in route network reengineering, depot optimization, and leveraging Primo Water's private fleet, which allowed for faster and larger cost savings identification.

Nik Modi asked for clarification on the 3% to 5% organic net sales growth guidance for 2025, questioning if it was conservative given the strong exit rate from 2024, and inquired about the drivers of the increased synergy target.

Answer

CEO Robbert Rietbroek affirmed the strong business momentum and positive tailwinds but confirmed the 3% to 5% guidance, highlighting a balanced contribution from volume and price/mix. CFO David Hass added that the synergy target was increased due to accelerated integration planning post-merger, which identified additional opportunities in route network engineering and procurement.

Nik Modi asked about supply chain dynamics, specifically the risks from reduced shipments from China and the potential opportunity if competitors who manufacture in China face disruptions.

Answer

CEO Thibaut Mongon and CFO Paul Ruh addressed this by stating that Kenvue is actively mitigating tariff impacts through dual sourcing and other adjustments. They emphasized that China represents a relatively small part of U.S. imports (~10% of foreign source exposure) due to their 'in region for region' production strategy. They also see a potential opportunity and noted that their resilient supply chain is a key advantage with retail partners.

Nik Modi asked about the structure of incentive compensation for regional managers, specifically whether targets are adjusted for foreign exchange impacts, expressing concern that a strong dollar could lead to reduced spending.

Answer

CEO Thibaut Mongon explained that Kenvue has a 'One Kenvue' approach where metrics are 'all in,' and teams are not given dispensations for foreign exchange. He highlighted rigorous hedging programs for predictability and noted the 2025 guidance already incorporates a mid-single-digit EPS headwind from currency. He firmly stated that the company will not reduce brand investment to meet targets, but will instead cut non-value-added costs.

Nik Modi asked about portfolio complexity within the Neutrogena brand, questioning what the 'hero products' are and if there is an opportunity to streamline the portfolio to better focus resources.

Answer

Executive Thibaut Mongon responded that the team prioritizes the largest parts of the portfolio, such as Sun and Face for Neutrogena, which constitute 80% of its U.S. revenue. The strategy focuses on promoting 'mega-platforms' like Hydro Boost, unifying the brand's messaging, and improving in-store shopability and navigation for consumers, with progress already being made with retail partners.

Nik Modi asked about the company's innovation strategy in the wellness and functional beverage space, particularly regarding the use of popular ingredients like Ashwagandha and whether clinical studies are needed for claims.

Answer

Chairman and CEO James Quincey explained that while they follow consumer trends, taste remains the primary factor, and adding certain ingredients can compromise it. He expressed skepticism about consumers wanting to combine functional ingredients with beverages, suggesting trends are more likely around macro ingredients like protein. He confirmed the company is not in the business of running its own clinical studies.

Nik Modi asked for perspective on consumption trends among Hispanic and Latino consumers in the U.S. and questioned what the beverage industry's response is to state-level initiatives potentially banning certain beverages from SNAP eligibility.

Answer

Chief Executive Officer Timothy Cofer acknowledged observing softening trends among Hispanic consumers but stated the impact is not yet sufficient to affect enterprise-level results, classifying it as a 'watch point.' Regarding SNAP, he noted that recipients' purchasing habits are similar to non-SNAP households and that the industry advocates for consumer freedom of choice, highlighting that KDP's exposure is in line with peers and that the industry has made significant strides in offering low and no-calorie options.

Nik Modi asked for perspective on why promotional lifts across the broad grocery channel seem to be underperforming historical levels. He also posed a long-range question about Utz's capability to produce snacks with new substrates, such as cauliflower or edamame.

Answer

CEO Howard Friedman acknowledged that consumers are responding differently to value, but noted some improvement in promotional elasticity in Q3 versus Q2. On new substrates, he confirmed Utz has the technical capability to produce them, but the primary considerations are consumer insight, addressable market size, and managing potential allergens, which could require different capital strategies. He added that ongoing supply chain investments increase this flexibility.

Nik Modi asked for the company's outlook on the upcoming holiday season, considering the broader economic environment and the consumer shift from out-of-home to in-home consumption.

Answer

President and CEO Lance Mitchell acknowledged that the consumer remains challenged but stated the company is confident in its holiday season plans, promotions, and new product innovations. He noted that early reads on the holiday season are positive and that the company is confident in its Q4 guidance.