Peter Grom

Peter Grom asked about Energizer's confidence and visibility regarding the implied ramp needed to achieve full-year targets following a challenging first quarter, and the level of flexibility or cushion embedded in the outlook.

Answer

Mark LaVigne, President and CEO, highlighted the success of Project Momentum in restoring gross margins and enhancing free cash flow over three years, noting the organization's agility in adjusting to tariffs. John Drabik, EVP and CFO, detailed the Q1 top-line challenges from storm comps, display timing shifts, and category decline, but projected improvements from Q2 onwards driven by international growth, APS business transition, e-commerce, and innovation. He also explained that gross margins would benefit from overcoming transitional operational inefficiencies and APS integration. Mark LaVigne added that the 2026 outlook is clear-eyed, assumes a down battery category, and includes some downside protection.

Peter Grom asked about the confidence and visibility in Energizer's implied ramp to hit full-year targets after a challenging first quarter, and the level of flexibility or cushion embedded in the fiscal year 2026 outlook.

Answer

Mark LaVigne, President and CEO, highlighted the achievements of Project Momentum over three years, including $200 million in savings and 350 basis points in gross margin recovery. John Drabik, EVP and CFO, detailed the Q1 top-line impacts from a storm comp and display timing shift, expecting category improvement and growth from international markets, APS integration, e-commerce, and innovation. He projected low single-digit top-line growth and normalized gross margins for Q2-Q4, driving low double-digit EPS growth. Mark LaVigne added that the outlook is clear-eyed about the current environment, assuming a down 2% battery category for the year and building in some downside protection.

Peter Grom from UBS Group AG followed up on the Q4 organic sales forecast, asking if the expected slowdown is due to shipment timing or a deterioration in underlying category trends. He also asked for the anticipated growth composition between the battery and auto care segments in Q4.

Answer

President and CEO Mark LaVigne attributed the Q4 outlook partly to the shipment shift from Q4 to Q3, but noted that underlying POS trends are consistent with the full-year outlook. EVP and CFO John Drabik reiterated the full-year organic growth guidance of flat to 2% and stated that for Q4, he expects auto care to perform slightly better than batteries, with both segments benefiting from pricing actions.

Peter Grom from UBS requested a detailed breakdown of the company's tariff mitigation plan, seeking clarity on how to model the $150 million gross impact against the expected offsets over the next 12 months, particularly concerning fiscal year 2026.

Answer

Executive Mark LaVigne and Executive John Drabik explained that the fiscal '25 impact is fully mitigated. For the longer term, Drabik broke down the $150 million gross headwind, noting that for tariffs already in place (steel, aluminum), impacts are neutralized. For announced reciprocal tariffs, the company plans to reduce its China sourcing from 5% to 2-3% of COGS within 12 months and is using sourcing changes and commercial actions for other tariffs. They anticipate offsetting 60-70% of the new tariffs within a year and believe the gross impact on FY26 could be cut by at least half, though it will be a transitional year.

Peter Grom asked for an update on input cost trends across key baskets like zinc, copper, and lithium, and how these factor into the gross margin outlook for the rest of the year. He also followed up on whether sourcing differences could create an opportunity to gain business with retailers.

Answer

John Drabik, EVP and CFO, described the input cost environment as mixed, with pressure on zinc and copper offset by benefits from lithium and silicone, resulting in a net modest benefit. He noted continued pressure from energy, labor, and freight, but reaffirmed the full-year gross margin expansion guidance of 50 basis points. Mark LaVigne, President and CEO, responded that while sourcing differences could present opportunities, the company's first priority is to mitigate any internal impact from trade changes before looking to capitalize on them externally.

Peter Grom asked about the top-line phasing for fiscal 2025, questioning the strong Q1 start compared to other CPG companies, and requested a breakdown of the organic sales outlook by volume, price, and business segment.

Answer

John Drabik, CFO, attributed the strong Q1 start to approximately $10 million in incremental sales from two hurricanes, which added 100-150 basis points to growth. For the full year, he projected 200-300 basis points of volume growth, offset by about 100 basis points of pricing headwind, with this dynamic being consistent across both the Battery and Auto Care segments.

Peter Grom asked about the market share discussion, focusing on insurgent brands, their potential to achieve similar market shares to category leaders, and whether any could become significant competitive threats over time.

Answer

Darcy Davenport, President and CEO, BellRing Brands, acknowledged that building a national supply chain and expanding beyond one retailer is complex and takes time. She expects a few insurgent brands to succeed but many more to fail due to high thresholds and different skill sets required for national expansion. Davenport believes the category will consolidate around a handful of successful brands, with Premier as the leader, and that leading brands will continue to win while declining legacy brands remain share donors.

Peter Grom asked about the potential for insurgent brands to achieve market shares similar to category leaders, and whether any of these brands could become significant competitive threats over time, in the context of market consolidation.

Answer

President and CEO Darcy Davenport emphasized the complexity and time required to build a national supply chain and expertise. She expects some insurgent brands to succeed but many more to fail, leading to market consolidation around a handful of successful brands, with Premier being a key leader.

Peter Grom from UBS Group requested specifics on the expected Q4 gross margin pressure and asked which headwinds were transitory versus those likely to persist into fiscal 2026.

Answer

CFO Paul Rode projected a Q4 EBITDA margin decline of approximately 300 basis points, driven by gross margin pressure from higher promotions and input cost inflation, particularly for protein. He identified a 100 basis point headwind from one-time items. He specified that elevated whey protein costs are expected to continue into fiscal 2026, along with new headwinds from tariffs, which the company is actively working to mitigate.

Peter Grom inquired about BellRing's approach to guidance amid a dynamic backdrop, asking if the company is building in more cushion due to uncertainty.

Answer

President and CEO Darcy Davenport confirmed they are being more cautious due to consumer uncertainty. She highlighted that they chose not to tighten their guidance range this quarter, which they might have done historically, to maintain flexibility and account for potential unknowns in the consumer environment despite strong underlying business trends.

Peter Grom inquired about the planned use of proceeds from the feminine care divestiture, specifically how quickly Edgewell plans to deploy the funds for debt reduction and balance sheet strengthening, and the potential impact on earnings per share once the acquisition officially closes.

Answer

Rod Little, President and CEO, stated that proceeds from the feminine care sale, expected to close in early calendar 2026, along with operational cash flow, will be directed towards debt reduction to achieve a leverage target of two to three times. He noted a high bar for any potential value-creating M&A. Fran Weissman, CFO, estimated that approximately 80% of the net proceeds, after taxes and transaction fees, will be converted into cash and primarily focused on near-term debt paydown.

Peter Grom asked about the planned deployment of proceeds from the Feminine Care divestiture, specifically how quickly the company intends to use the funds and the potential impact on earnings per share once the transaction closes.

Answer

Rod Little, President and CEO, stated that the Fem Care sale is expected to close in early calendar 2026, with net proceeds and operational cash flow directed towards debt reduction, aiming for a leverage ratio of around three times. He emphasized a disciplined approach to M&A, with a high bar for value creation. Fran Weissman, CFO, estimated that approximately 80% of the proceeds, after taxes and transaction fees, will be converted into cash and primarily focused on near-term debt paydown.

Peter Grom from UBS Group asked for a high-level overview of the puts and takes for fiscal 2026, focusing on whether the Q4 exit rate for organic sales is a fair run rate and which profit headwinds are transitory versus persistent.

Answer

President and CEO Rod Little stated that while not providing 2026 guidance, the implied 2.5% organic growth for Q4 is on track, driven by improvements in Fem Care and a renewed focus on Shave. He affirmed confidence in the company's long-term 2-3% growth algorithm. COO Daniel Sullivan characterized the current fiscal year as challenging and transitory due to tariffs, currency fluctuations, and a poor Sun Care season. He emphasized that core business strengths like international growth, productivity savings, and cash flow generation remain solid, providing a strong foundation for the future.

Peter Grom inquired about the confidence level in the implied acceleration for second-half organic sales growth, asking for a breakdown of expectations for U.S. versus international markets and the underlying category growth assumptions.

Answer

COO Daniel Sullivan detailed the drivers for the second-half growth, citing approximately 1.5 points of transitory tailwinds from the Easter shift and cycling prior supply disruptions. He stated the remaining growth to reach the +2% forecast is based on continued international strength (4.5-5% organic growth), modest U.S. Sun Care category growth, and sequential improvement in Fem Care. CEO Rod Little added that improving U.S. market share and momentum in the Billie and Hawaiian Tropic brands support this confidence.

Peter Grom asked for quantification of the Sun Care timing shift's impact on the Q2 outlook and for insights into the expected evolution of U.S. versus international growth, particularly if U.S. scanner data would improve.

Answer

President and CEO Rod Little confirmed that U.S. scanner data, representing about 35-40% of the business, is expected to show sequential improvement. COO Daniel Sullivan quantified the Q2 impact, stating the organic sales growth outlook was lowered to approximately 1%, reflecting a $6-7 million sales shift into Q3. Sullivan reiterated that they always anticipated a sequentially improving growth profile for the full year, driven by international strength and the Right to Win portfolio.

Peter Grom inquired about the expected evolution of the energy drink category's top-line growth trajectory into 2026, considering current strong performance and potential moderation. He also asked about any ordering pattern shifts impacting October 2025 sales due to pricing adjustments.

Answer

Hilton Schlosberg, CEO, confirmed no benefit from pricing adjustments in October 2025 sales. He highlighted key category growth drivers including value proposition, increasing household penetration, strong brand image, innovation, and the growing acceptance of energy drinks as an affordable luxury.

Peter Grom inquired about the expected top-line trajectory for the energy drink category in 2026, specifically whether the strong growth seen in 2025 would moderate or continue, and asked if the October sales figures benefited from ordering shifts due to pricing adjustments.

Answer

Hilton Schlosberg (CEO) clarified that the October sales did not benefit from the November 1st price increase. He highlighted key drivers for category growth, including value proposition, increasing household penetration, strong brand image, innovation, and the growing societal acceptance of energy drinks, suggesting these factors could sustain momentum into 2026.

Peter Grom followed up on advanced purchases ahead of the price increase, asking why it was more difficult to estimate the impact this time versus 2018, and also requested an outlook on commodity inflation.

Answer

Hilton Schlosberg, Vice Chairman and Co-CEO, explained that the mid-October cutoff for the old price made it a very difficult exercise to isolate the pull-forward impact. On commodities, he noted significant increases in aluminum, which is subject to tariffs, while other inputs present a mixed but 'relatively manageable' cost environment.

Peter Grom asked about CEO Rahul Goyal's initial perspective on the biggest opportunities and challenges after 30 days in the role, and requested color on the implied improvement for the fourth quarter embedded in the top-line guidance.

Answer

CEO Rahul Goyal highlighted a strong foundation, great brands, and a healthy balance sheet as opportunities, while acknowledging challenges in economy and flavor categories. He emphasized urgency in addressing these. CFO Tracey Joubert explained that Q4 top-line improvement is expected from better performance in EMEA, APAC, and Canada, along with lapping softer contract brewing comps in the U.S., which also translates to better bottom-line performance due to lower G&A.

Peter Grom asked Molson Coors' new CEO, Rahul Goyal, about his initial perspective on the biggest opportunities and challenges after 30 days in the role. He also asked CFO Tracey Joubert for color on the implied Q4 top-line guidance improvement, considering tougher category comparisons and expected Americas shipments trailing STRs.

Answer

CEO Rahul Goyal highlighted opportunities in strengthening core and economy brands, transforming above-premium (Peroni's growth, Blue Moon's challenges), and expanding Beyond Beer (Fever-Tree's success), while acknowledging challenges in volatile categories. CFO Tracey Joubert attributed Q4 top-line improvement to better performance in EMEA, APAC, and Canada, lapping softer contract brewing comps in the U.S., and lower G&A due to incentive compensation.

Peter Grom from UBS Group AG inquired about the key drivers behind the updated 2025 guidance, asking for details on top-line pressures, profit headwinds from the Midwest aluminum premium, and the implications for second-half performance and fiscal 2026.

Answer

President and CEO Gavin Hattersley attributed the guidance reduction to three primary factors: a softer-than-expected U.S. beer industry, an unforeseen 180% spike in the Midwest aluminum premium, and market share performance that did not meet expectations. He emphasized that the company views the industry downturn as cyclical and highlighted long-term strengths, including the retention of core brand share, the growth of Coors Banquet, and the eventual easing of contract brewing headwinds.

Peter Grom asked for perspective on whether the current softness in the beer category is more cyclical or structural, and inquired about the potential timing for an improvement in industry trends.

Answer

CEO Gavin Hattersley stated that it is "certainly clear" to the company that the incremental industry softness is macro-driven and therefore cyclical. He noted that while the timing of a recovery is difficult to predict, the company's guidance is built on the expectation that industry trends will normalize and move back toward historical performance over the balance of the year.

Peter Grom of UBS sought clarification on the underlying category growth assumptions for key geographies that are embedded within the company's 2025 top-line guidance.

Answer

CEO Gavin Hattersley indicated that while economies in Canada and the U.K. are showing signs of improvement, the company's guidance is built on multiple factors. These include the known headwind from exiting contract brewing, the benefit from the new Fever-Tree partnership, and continued progress on core brand health and premiumization strategies, rather than just a single assumption on category growth.

Peter Grom followed up on the category outlook, asking what assumptions about recent industry strength are embedded in the Q4 guidance and whether it allows for flexibility if trends weaken again.

Answer

CEO Gavin Hattersley responded that the company has a good handle on the key drivers for its Q4 top line, including shipments, the remaining Pabst contract unwind, and pricing. He expressed confidence in their understanding of how these factors will play out for the remainder of the year, referencing his earlier comments on the long-term algorithm for the broader outlook.

Peter Grom asked about the organic sales cadence for the second quarter and the balance of the year, seeking clarity on embedded category growth assumptions and the drivers behind the confidence in a back-half inflection in sales and consumption growth due to the demand creation plan. He also inquired about specific Q2 consumption trends, particularly what was observed through October.

Answer

CFO Luc Bellet explained the full-year phasing, noting negative low single-digit organic sales growth in the front half and positive low single-digit growth in the back half, assuming muted U.S. retail category growth of 0-1%. He attributed back-half improvement to major innovations, expansion of existing platforms, strong demand plans, and lapping negative trends from the prior fiscal year. CEO Linda Rendle clarified October consumption dynamics, noting a rebound in the latter half of the month to low single-digit declines after initial comparison issues.

Peter Grom asked about the organic sales cadence for the second quarter and the balance of the fiscal year, seeking clarity on embedded category growth assumptions and the drivers behind the confidence in a back-half sales inflection from the demand creation plan. He also inquired about specific consumption trends observed through October.

Answer

CFO Luc Bellet explained that excluding ERP impacts, organic sales growth would be negative low single digits in the front half and positive low single digits in the back half, with U.S. retail category growth assumed at 0-1%. He attributed back-half improvement to major innovations and lapping negative trends. CEO Linda Rendle clarified October consumption dynamics, noting a rebound in the latter half of the month to low single-digit declines in MULO.

Peter Grom from UBS Group AG questioned the Q4 sales performance, asking for clarification on the gap between the underlying organic sales decline and consumption data, and inquired about the drivers behind the company's confidence in an improved performance in the second half of fiscal 2026.

Answer

CFO Luc Bellet explained the sales gap was due to lower-than-anticipated market share. CEO Linda Rendle added that while some execution fell short in a dynamic quarter, brand health remains strong. For the H2 2026 outlook, Rendle stated confidence is driven by company-controlled factors, including a strong innovation pipeline and adjusted plans to meet evolving consumer behavior, rather than assuming a major shift in the macroeconomic environment.

Peter Grom questioned the drivers behind the implied tough Q4 gross margin guidance and asked if there were new factors to consider for fiscal '26. He also inquired about the impact of retail destocking.

Answer

CFO Luc Bellet clarified that the implied Q4 gross margin of about 44% is close to the full-year average. He noted drivers include the timing shift of manufacturing expenses from Q3 to Q4, stronger-than-expected cost savings, and a $10-$20 million tariff impact. Regarding destocking, CEO Linda Rendle stated it was limited to the Household business late in Q3. Luc Bellet added the Q3 impact was modest, with most of the effect expected in Q4 and embedded in the outlook.

Peter Grom of UBS asked for perspective on the organic sales outlook, particularly the variability in the Q4 exit rate after accounting for the ERP shipment benefit. He also questioned if underlying operational changes were offsetting the benefit from a lower tax rate in the earnings guidance.

Answer

CFO Kevin Jacobsen detailed the quarterly sales cadence, projecting low single-digit organic growth for Q3 and mid-to-high single-digit growth for Q4, with the latter heavily influenced by the ERP transition. He confirmed that while a tax benefit and lower supply chain inflation were positive, they were offset by FX headwinds and increased trade spending, keeping the base business outlook on track.

Peter Grom questioned the phasing of the sales guidance, asking for the drivers behind the expected 3-5% organic growth in the second half of the year, especially as peers report weaker category growth. He also asked if the Q1 gross margin beat was solely due to fixed cost absorption.

Answer

CFO Kevin Jacobsen reaffirmed the back-half growth outlook, attributing it to continued strength in International and Clorox Professional businesses, benefits from recent divestitures, and a strong innovation pipeline. He confirmed the Q1 gross margin outperformance was primarily driven by better fixed cost absorption from higher-than-expected shipment volumes, with other cost elements performing in line with expectations.

Peter Grom from UBS questioned the stronger-than-expected North America performance in Q3 2025 compared to external scanner data, seeking clarification on the factors driving this discrepancy and whether similar trends are anticipated in Q4.

Answer

CEO Mike Hsu, CFO Nelson Urdaneta, and President & COO Russ Torres explained that the gap was due to Kimberly-Clark's skew towards untracked larger customers, the timing of promotional expenses, and lapping prior year hurricane impacts. They highlighted significant growth in less-tracked e-commerce and club channels, where Kimberly-Clark holds a strong digital share, contributing to the divergence from traditional scanner data.

Peter Grom questioned the stronger-than-expected North America performance in Q3 relative to scanner trends, asking about the drivers of this gap (including hurricane shipment dynamics) and whether a similar gap is anticipated in Q4.

Answer

CEO Mike Hsu noted discrepancies between external scanner data and internal data due to untracked larger customers and live feeds. CFO Nelson Urdaneta explained that year-to-date shipments align with consumption, but Q3 saw a 50 basis point year-on-year impact from lapping last year's hurricane-related shipments and the timing of promotional expense realization. President and COO Russ Torres added that significant consumer migration to less-tracked e-commerce and club channels contributes to the disconnect, highlighting 100% digital growth in North America this year and a 7-point higher share in digital versus brick and mortar.

Peter Grom asked for more details on the lower frequency of product use in Latin America and Asia, and followed up on the phasing of growth given the different first-half versus second-half comparisons.

Answer

CEO Michael Hsu explained that reduced usage frequency is a dynamic seen in informal economies where consumers with tighter budgets may use fewer products per day rather than exit the category. CFO Nelson Urdaneta added that while 2025 growth will be driven by volume and mix, the year-over-year growth rate will be impacted by a tougher comparison in Q1, which was the strongest quarter of 2024.

Peter Grom first asked if Reynolds is observing a similar dynamic to other food companies where the return on promotions is not in line with historical trends in the categories where it competes. He then followed up on gross margins, seeking clarification on the 2-4% commodity and tariff headwind estimate and how the expected Q4 gross margin exit rate informs the outlook for 2026.

Answer

Scott Huckins, President and CEO, stated that Reynolds' focus is on optimally deploying promotional dollars through its robust revenue growth management capability, without calling out structural changes in trade effectiveness. Nathan Lowe, CFO, confirmed the 2-4% estimate for commodity and tariff headwinds and pricing, noting that Q3 pricing was roughly 4 points, aligning with expectations. He expressed satisfaction with the sequential gross profit progression and expected Q4 to show the strongest EBITDA performance for the year, with more details for 2026 to follow in February.

Peter Grom from UBS asked about the effectiveness of Reynolds Consumer Products' promotions, specifically if the company observes a declining return on investment similar to other food companies. He also sought an update on commodity and tariff headwinds, confirming the 2-4% estimate, and requested insights into the Q4 gross margin outlook and its implications for 2026.

Answer

President and CEO Scott Huckins noted no specific structural changes in promotional effectiveness, emphasizing the company's focus on optimizing revenue growth management (RGM) investments. CFO Nathan Lowe confirmed the 2-4% commodity and tariff headwind estimate remains valid, with pricing actions designed for full recovery. Lowe expressed satisfaction with sequential gross profit improvement and anticipated Q4 to be the strongest EBITDA quarter, with further 2026 details in February.

Peter Grom questioned whether the company's thinking on category growth for the remainder of the year had evolved and asked about any impact from retail inventory destocking in the quarter.

Answer

CEO Scott Huckins affirmed that the company's full-year view on category performance remains intact. CFO Nathan Lowe added that while the price/volume mix may shift, the retail revenue outlook is unchanged. Regarding inventory, Huckins stated that destocking was a neutral factor in Q2, with the inventory reduction seen in Q1 persisting but not worsening.

Peter Grom asked for more detail on the revised category growth expectations within the new guidance and requested insight into the phasing of cost headwinds and mitigation efforts throughout the year.

Answer

CFO Nathan Lowe stated that the updated guidance reflects lower retail volume expectations due to Q1 retailer destocking (a ~1% full-year headwind) and increased pressure on consumers. He noted that the guided pricing range is tied to the expected cost headwinds for the year and that cost impacts typically flow through the P&L over a two to six-month period.

Peter Grom requested more color on category growth, specifically asking what drove the difference between the strong Q4 exit rate and the softer Q1 outlook. He also asked if the projected decline in the foam category was expected to be phased differently throughout the year.

Answer

President and CEO Scott Huckins explained that the Q1 outlook is impacted by the timing of Easter, which shifts from Q1 in the prior year to Q2 in the current year. He clarified that the overall 2025 category forecast, which includes a double-digit decline in foam and flat performance elsewhere, is for the full year and not uniquely phased. The Q4 strength was broad-based, with 1% retail volume growth.

Peter Grom requested details on retail volume performance, asking which areas were better or more challenged, and sought to understand the assumptions behind the wide range of the Q4 retail volume guidance.

Answer

President and CEO Lance Mitchell noted that category growth rates have been sequentially improving across the business. CFO Scott Huckins clarified the Q4 guidance, stating the full-year retail volume outlook is roughly flat and that the Q4 range reflects an expected sequential improvement, with the midpoint of the guidance at +1% volume growth.

Peter Grom inquired if the long-term coffee algorithm of low single-digit top-line growth to high single-digit EPS growth is inclusive of synergies. He also asked about the Q3 coffee volume mix, distinguishing between mix components and stable shipments, and the elasticity outlook for the rest of the year.

Answer

CEO Tim Cofer confirmed the algorithm is inclusive of synergies, which are a near-term enabler. SVP of Finance Jane Gelfand noted sequential volume improvement in coffee, manageable elasticity despite record pricing, and expected volume trade-off. President of U.S. Coffee Olivier Lemire added that pods are resilient, brewers show more elasticity, and strong marketing and innovation will drive a return to volume growth.

Peter Grom asked if the long-term coffee algorithm of low single-digit top-line growth to high single-digit EPS growth is inclusive of synergies, or if other factors drive the operating leverage. He also questioned the Q3 coffee volume mix, specifically the split between mix component and stable shipments, and the elasticity outlook for the balance of the year.

Answer

CEO Tim Cofer confirmed that the long-term algorithm is inclusive of synergies, which serve as a near-term enabler. SVP of Finance Jane Gelfand noted sequential volume improvement in the coffee category despite record pricing, with manageable elasticity. She explained that Q3 saw some volume trade-off due to pricing, but favorable mix within the U.S. Coffee segment, with pods showing resilience and brewers experiencing more elasticity. President of U.S. Coffee Olivier Lemire added that while at-home consumption spiked during COVID and then declined, it has stabilized, and KDP is confident in returning to volume growth with strong marketing and innovation.

Peter Grom inquired about the U.S. Coffee segment, seeking context on its Q2 performance versus expectations and asking for more specific guidance on what 'subdued performance' means for the second half of the year.

Answer

CEO Tim Cofer stated he was pleased with the sequential improvement in Q2 but cautioned that the second half will face challenges. He cited building commodity inflation, prominent tariff impacts, tight retailer inventory management, and uncertainty around price elasticity as reasons for the 'subdued' outlook. He anticipates some operating income pressure for the segment in H2, which is factored into the full-year enterprise guidance.

Peter Grom asked about the performance and expected contribution of the GHOST energy brand for the remainder of the year, and also inquired about the drivers behind the accelerating growth seen in the broader energy drink category.

Answer

Chief Executive Officer Timothy Cofer confirmed that the energy category is one of the fastest-growing in liquid refreshment beverages. He detailed the momentum across KDP's energy portfolio, including C4 and Bloom. Regarding GHOST, he highlighted a smooth distribution transition and strong alignment with the GHOST team, confirming that KDP expects the brand's momentum to continue building throughout 2025 and that the company is on track to deliver on its plan for the brand.

Peter Grom asked for a retrospective on the U.S. Coffee segment's performance in 2024, questioning why growth was subdued and what drove the stronger exit rate in Q4, while also seeking clarity on visibility for 2025.

Answer

Chief Executive Officer Tim Cofer stated that while coffee remains a long-term attractive category, the focus in 2024 was on stabilizing volume, which was successful. He explained that 2025 presents a different challenge due to record green coffee costs, shifting the primary objective to preserving profit dollars through pricing, mix, and productivity, even if it means accepting some volume elasticity. Consequently, KDP is planning for the U.S. Coffee segment to remain subdued in 2025.

Peter Grom asked about the company's top-line growth outlook for the next 12-18 months, specifically if Sun Cruiser's strong contribution would continue next year. He also questioned the balance between reinvestment and allowing savings to flow to the bottom line, given that current reinvestment hasn't immediately shifted depletion performance.

Answer

CFO Diego Reynoso affirmed strong hopes for Sun Cruiser's continued growth and other innovations. Founder, CEO, and Chairman Jim Koch discussed strategies to maintain share for Samuel Adams, Dogfish Head, and Angry Orchard, while addressing challenges for Twisted Tea and Truly. He projected significant growth for Sun Cruiser in 2026 due to full chain presence and targeted market penetration. Both executives emphasized a bias towards growth and strategic investment in the 'fourth category' while also improving profitability.

Peter Grom sought insight into the company's top-line growth trajectory for the next 12-18 months, specifically questioning the potential for Sun Cruiser's continued strong contribution and the strategic balance between brand reinvestment and bottom-line savings.

Answer

CFO Diego Reynoso expressed strong hopes for Sun Cruiser's continued runway. Founder, CEO, and Chairman Jim Koch outlined a strategy to maintain share for Samuel Adams, Dogfish Head, and Angry Orchard, while aiming to regain share for Twisted Tea and Truly through increased marketing and innovation. He projected significant double-digit to triple-digit growth for Sun Cruiser in 2026 due to expanded distribution. Both executives emphasized a bias towards growth and market responsiveness in capital allocation.

Peter Grom questioned why the updated guidance implies a significant sequential worsening of trends and asked if structural headwinds, such as moderation, are having a larger impact than initially anticipated.

Answer

CFO Diego Reynoso clarified that the guidance reflects the necessary rebalancing of shipments to depletions, which is a larger adjustment now due to softer-than-expected Q2 industry trends. Founder & Chairman C. James Koch added that long-term structural headwinds are performing as expected, with the recent greater decline stemming from temporary factors like weather and economic pressure on the Hispanic community.

Peter Grom from UBS inquired about the drivers behind the strong Q1 gross margin, asking to distinguish between the impact of higher shipments versus ongoing margin initiatives. He also requested clarification on the new tariff headwinds, asking about the specific cost pressures and whether the financial impact is a gross figure or net of mitigation.

Answer

CEO Michael Spillane acknowledged that stronger shipments provided a 'little bit of an uplift' to Q1 gross margin but emphasized that the primary driver was the company's underlying margin initiatives. Regarding tariffs, he identified the cost of aluminum for cans and point-of-sale materials from China as the key pressures, confirming the current guidance reflects the gross impact before any potential mitigation efforts.

Peter Grom requested a breakdown of the drivers for the 2025 gross margin guidance, its expected phasing throughout the year, and more specific timing for the increased marketing spend in the first half.

Answer

CFO Diego Reynoso explained that gross margin improvement is driven by a multiyear plan focused on procurement, brewery performance, and network optimization. Reaching the high end of guidance depends on accelerating these programs and volume leverage. Regarding phasing, he noted Q4 is typically the lowest margin quarter. He declined to give specific quarterly marketing spend, stating that a portion of the budget is flexible and will be deployed based on real-time opportunities.

Peter Grom asked about the extent to which Helen of Troy's recovery depends on volume stabilization, inquiring if the outlook assumes steady or recovering volumes, especially given conservative elasticity assumptions. He also asked for insights into the broader consumer backdrop, specifically if trade-down behavior is still observed, and whether Helen of Troy is seeing similar improvements in the beauty segment as reported by other public companies.

Answer

Assistant CFO Tracy Schuerman stated that the outlook assumes a consistent soft demand trend from the first half, with a conservative stance on elasticity. She noted that tailwinds in the second half are expected from retailers rebalancing inventory and a recovery in direct imports. CFO Brian Grass explained that while broad beauty might not show overall trade-down, it is evident within specific categories, particularly affecting younger consumers. He cited mixed results in average unit revenue across brands (e.g., up for Curlsmith/Hot Tools, down for Revlon/Drybar), indicating category-specific dynamics rather than a broad beauty trend. He emphasized adjusting to the market through new product development.

Peter Grom asked about the extent to which Helen of Troy's recovery depends on volume stabilization, and whether the outlook assumes volume holds steady or recovers, particularly as a pull-through dynamic. He also sought insights into the broader consumer backdrop, including continued trade-down behavior, and whether the company is observing similar improvements in the beauty segment as reported by other public companies.

Answer

Tracy Schuerman (Assistant CFO) stated that the outlook assumes consistent soft demand trends and conservative elasticity assumptions, with a back-half tailwind from retailer inventory rebalancing and direct import recovery. Brian Grass (CFO) noted that while broad beauty might not show overall trade-down, it is evident within specific categories, especially for younger consumers, and cited mixed average unit revenue performance across beauty brands. He acknowledged broader beauty improvement but stressed category-specific dynamics and the importance of new product development.

Peter Grom from UBS Group asked about the long-term earnings power of the business, seeking to understand how much of the current pressure is a timing mismatch versus a new ongoing baseline. He also questioned the second-half earnings outlook and which contributing factors are within the company's control.

Answer

CEO Brian Grass clarified that the year's earnings cadence has shifted significantly due to changes in tariff mitigation strategies, with a greater reliance on price increases in the second half. He stated that the existing full-year consensus estimate is 'not unreasonable' but the first-half/second-half split is different than previously expected. Grass detailed second-half tailwinds including stabilizing retail inventory, distribution gains, and favorable comparisons, noting that while consumer response to pricing is a variable, the company's assumptions are conservative.

Peter Grom sought clarification on the building blocks for fiscal 2026, asking if Project Pegasus savings are incremental to other mitigation efforts, whether the 70-80% mitigation is a fiscal 2026 figure, and for more detail on Q1 margin and earnings expectations.

Answer

CFO Brian Grass clarified that existing Pegasus savings were already planned to fund growth investments and are not incremental to the 70-80% tariff mitigation figure. He confirmed the 70-80% mitigation is specific to fiscal 2026, with fiscal 2027 expected to see further benefits as diversification costs abate. Regarding Q1, both Grass and CEO Noel Geoffroy stated they are being very cautious with spending, implementing reversible measures like T&E reductions, in response to revenue trends and macro uncertainty.

Peter Grom inquired about the underlying drivers for the wide Q4 top-line guidance range and the key variables for performance. He also asked for an update on the 'reset and revitalize' strategy and whether the long-term growth targets from the Investor Day are still achievable, particularly looking ahead to fiscal 2026.

Answer

CEO Noel Geoffroy explained that the Q4 outlook reflects continued strength in Home & Outdoor, but the primary driver for the revised guidance is the historically weak global illness season impacting the Wellness business. CFO Brian Grass added that the wide range accounts for high variability in consumer and retailer behavior. Regarding long-term targets, Geoffroy affirmed they still stand, with a detailed fiscal 2026 outlook to be provided in April, noting that Home & Outdoor and International are moving in the right direction while Beauty requires more work.

Peter Grom of UBS Group AG inquired about the key drivers behind the Q2 outperformance, specifically parsing out the impact of category trends versus Helen of Troy's strategic initiatives. He also sought clarity on the category assumptions baked into the full-year outlook and the company's plans for its newly authorized share repurchase program.

Answer

CEO Noel Geoffroy attributed the performance more to the company's own actions, such as new product launches and distribution gains, rather than broad category strength, which she described as a "mixed bag." CFO Brian Grass added that category assumptions for the rest of the year remain largely unchanged from the previous quarter. Regarding the buyback, Grass clarified it was "good housekeeping" to refresh an expiring authorization and there were no immediate, specific execution plans.

Peter Grom followed up on earlier commentary regarding PBNA's expected return to flat organic sales performance in Q4 and its growth in the last month, asking if this improvement was due to lapping prior periods or actions around innovation and everyday execution, and what specifically drove the confidence.

Answer

Chairman and CEO Ramon Laguarta stated that the sequential improvement in PBNA was primarily related to 'being brilliant at the basics' – better service, pricing, execution, and customer engagement, especially after system transitions earlier in the year. He emphasized that this improvement was sustainable and not a one-off, leading to optimism about the business direction.

Peter Grom followed up on earlier commentary regarding PBNA's expected return to flat organic sales in Q4 and reported growth in the last month. He asked whether this improvement was primarily a function of easier year-ago comparisons or more directly related to recent actions in innovation and everyday execution, seeking color on the drivers of this confidence.

Answer

Chairman and CEO Ramon Laguarta stated that the sequential improvement in PBNA is primarily related to "being brilliant at the basics," focusing on core drivers like service, price, execution, and customer engagement. He emphasized that improved customer relations and service levels, following earlier system transitions, are sustainable. Laguarta expressed optimism about the business direction, noting that while things can evolve, the current signs are positive and not merely a one-off event.

Peter Grom from UBS Group asked about management's level of confidence in returning to the low end of its long-term organic growth algorithm and what factors are driving this confidence now compared to previous months.

Answer

Chairman and CEO Ramon Laguarta expressed confidence based on the combination of sustained international growth and sequential improvement in the North American business. He stated that the company is becoming more competitive across various sub-segments and that investments in value, innovation, and the away-from-home channel are expected to drive this return, though he did not provide a precise timeline.

Peter Grom requested an update on the energy drinks category and PepsiCo's partnership with Celsius, particularly regarding PepsiCo's willingness to distribute a new brand recently acquired by Celsius.

Answer

Chairman and CEO Ramon Laguarta stated that PepsiCo feels good about its energy strategy and partnerships. He confirmed that conversations with Celsius are underway regarding their new brand acquisition but noted that it is still too early in the discussions to make any public comment on potential participation.

Peter Grom of UBS noted that while management seems encouraged by recent salty snack trends, past recovery periods have reversed. He asked what is fundamentally different this time that provides greater confidence in the category's footing for 2025.

Answer

CEO Ramon Laguarta positioned 2024 as a 'normalization year' following three years of exceptional 8% compound growth for Frito-Lay. His current confidence stems from seeing more consumption occasions returning to the category in the last three months of the year, with growth occurring at both the value and premium ends. He asserted that PepsiCo's 2025 commercial plans are designed to address both segments effectively.

Peter Grom asked a housekeeping question regarding the full-year organic revenue guidance, seeking clarity on where the company expects to land within the implied Q4 range and the underlying assumptions about the consumer environment.

Answer

EVP and CFO Jamie Caulfield provided a direct response, stating that the company does not anticipate a 'huge inflection up or down' from the operating conditions that were present in the third quarter.

Peter Grom from UBS Group AG asked about the company's level of confidence and visibility in achieving its on-algorithm or better growth target for fiscal 2027. He also requested details on the expected phasing of top-line price versus volume/mix for the current fiscal year, particularly the ramp-up in coffee pricing.

Answer

CFO Tucker Marshall stated that confidence for fiscal 2027 is supported by a strong coffee margin exit rate in Q4, stabilization in the Hostess portfolio, and continued momentum in growth brands like Uncrustables and Meow Mix. For pricing, Marshall noted coffee pricing will be in the mid-20s for Q2 and Q3 and slightly higher in Q4, with overall company sales expected to improve sequentially through the year.

Peter Grom asked for a breakdown of the SD&A guidance, noting that benefits from cost-saving initiatives seem muted after accounting for higher marketing. He also requested more detail on the expected phasing of EPS throughout the year, beyond the tough start in Q1.

Answer

CFO Tucker Marshall explained that SD&A is also impacted by lapping TSA income and the reset of incentive programs, alongside the planned marketing increase. Regarding phasing, he stated Q1 will be the lowest EPS quarter, Q2 and Q3 will see declines but be consistent with each other, and Q4 is expected to show growth.

Peter Grom from UBS Group asked about the level of confidence and visibility management has in its fiscal 2026 guidance, given the numerous moving parts, and whether a cushion has been factored in for potential risks.

Answer

EVP and CFO Akhil Shrivastava expressed confidence, citing positive data points such as stabilizing retail growth in China, a better shipment base in Travel Retail after FY25 inventory actions, and positive retail momentum in North America. President and CEO Stéphane de La Faverie added that the provided guidance ranges offer flexibility to navigate volatility. He underscored the team's commitment to delivering on the outlook, pointing to their over-delivery on PRGP initiatives in fiscal 2025 as evidence of their determination.

Peter Grom sought clarification on whether the fiscal '26 sales growth outlook was a full-year comment and asked for guardrails on growth if tariffs remain in place.

Answer

President & CEO Stephane de la Faverie confirmed the return-to-growth outlook is for the full fiscal year '26, citing sequential net sales improvement and anniversarizing a low base in Travel Retail. EVP & CFO Akhil Shrivastava addressed the tariff risk, reiterating three mitigation strategies: optimizing supply routes, surgical pricing, and additional PRGP savings. He acknowledged the impact could be material but stated they are actively managing it.

Peter Grom from UBS sought clarification on whether the fiscal 2026 sales growth commentary was for the full year or a specific point within it, and asked for guardrails on how unresolved tariffs might impact this return to growth.

Answer

President and CEO Stephane de la Faverie confirmed the return-to-growth comment is for the full fiscal year 2026, citing sequential net sales improvement and the anniversary of low Travel Retail comps. EVP and CFO Akhil Shrivastava addressed the tariff risk, stating that while the impact could be material, they are mitigating it by optimizing goods flow, considering surgical pricing actions, and identifying further PRGP opportunities. He noted consumer sentiment remains the biggest variable.

Peter Grom asked Interim CEO Kirk Perry about his biggest surprises upon joining and where he sees the most significant opportunities and challenges for a top-line turnaround across Kenvue's portfolio.

Answer

Interim CEO Kirk Perry stated his biggest surprise was the level of 'self-induced complexity.' He expressed excitement for the potential of iconic brands like Tylenol and Aveeno Baby, citing their strong performance when focused. Perry identified the long tail in Skin Health & Beauty and performance in APAC and North America as key challenges, while highlighting EMEA and LatAm as successful models to replicate.

Peter Grom asked Interim CEO Kirk Perry about his biggest surprises since taking the role and where he sees the most excitement versus the biggest challenges for a top-line turnaround across Kenvue's brands, categories, and regions.

Answer

Interim CEO & Director Kirk Perry stated his biggest surprise was the level of 'self-induced complexity' inhibiting agility. He expressed excitement about pockets of the business where focus is already yielding results, such as Tylenol and Aveeno Baby, and noted encouraging performance in EMEA and Latin America. Perry identified North America and APAC as the most challenged regions, but believes successful strategies from winning brands can be scaled across the portfolio.

Peter Grom inquired about the expected phasing of organic growth for the second quarter and the company's degree of confidence in the anticipated growth acceleration in the second half of the year.

Answer

CEO Thibaut Mongon explained that while Kenvue does not provide quarterly guidance, the first half is expected to remain muted due to headwinds from Asian destocking and U.S. price investments. He expressed confidence in a second-half acceleration driven by lapping these headwinds, a strong pipeline of innovation and marketing, and enhanced revenue growth management. He acknowledged that a weaker-than-expected category demand is a potential risk.

Peter Grom inquired about the 2-3% category growth assumption for 2025, asking for a U.S. versus international breakdown. He also sought clarity on the expected sales cadence, particularly for Q2 and the assumptions for Q4.

Answer

CEO Thibaut Mongon attributed slower category growth to a reduced impact from pricing, while noting resilient consumer demand for trusted health brands. CFO Paul Ruh projected an acceleration in organic sales growth in Q2 into positive territory, though still moderated by the China disruption. For Q4 2025, he confirmed the guidance assumes a normal cold and flu season, meaning the absence of the significant headwinds experienced in Q4 2024.

Peter Grom asked how the potential for persistent weak category growth and a prolonged Skin Health recovery could impact Kenvue's ability to return to its long-term growth algorithm next year.

Answer

Executive Paul Ruh stated that while not providing 2025 guidance, the company expects to accelerate top-line growth from 2024 levels, with income growing faster than sales. He explained that the ongoing transformation and continued brand investment will fuel this acceleration. He noted that 2024 has become a 'new base' from which future performance will be assessed, and the company will consider various category scenarios.

Peter Grom asked for details on the Q2 gross margin outperformance relative to guidance and the expected margin trajectory for the rest of the year, considering tariff impacts.

Answer

CFO Jarrod Langhans attributed the strong 51.5% gross margin to higher-margin Alani LTOs, favorable product mix, and early savings on raw materials and freight. He noted that while FIFO accounting delayed tariff impacts, they are expected in Q3 and Q4. However, he guided for margins to remain in the 'low fifties,' above the prior model, thanks to cost initiatives and operational efficiencies. CEO John Fieldly added that vertical integration initiatives are helping the company leverage its scale.

Peter Grom asked for a reconciliation between the modest retail sales growth and the high single-digit decline in North American revenue, seeking to understand the underlying shipment and depletion trends after accounting for various factors.

Answer

CEO John Fieldly acknowledged a slow start to the quarter due to increased competition and tough comps from significant 2024 launches. CFO Jarrod Langhans clarified that scanner data showed a 4% decline, while reported revenue was down 7%. He attributed the difference to a couple of percentage points from promotional allowances and distributor incentives, plus some timing issues in the non-DSD channel where there was a Q4 2024 load-in.

Peter Grom inquired about expectations for the upcoming spring shelf resets, asking about anticipated space gains for the core Celsius brand, particularly given recent velocity challenges, and whether there was any visibility on shelf space gains for Alani Nu.

Answer

CEO John Fieldly stated that Celsius expects a 15% to 20% expansion in distribution within retail sets, driven by large format retailers leaning more heavily into the energy category. He emphasized the focus on securing more cold placements to disrupt the path to purchase. For Alani Nu, he noted that the brand is expecting 'sizable distribution gains,' especially in the convenience channel, during the reset season.

Peter Grom of UBS asked for clarity on the assumptions behind the potential $15 million Q4 inventory headwind and whether the company's visibility has improved. He also questioned what differentiates Celsius's strategy from competitors and if the company is prepared for potential year-over-year market share declines.

Answer

CFO Jarrod Langhans stated that visibility has improved and that the Q4 outcome is more dependent on overall category trends than further distributor optimization. CEO John Fieldly addressed the competitive question by highlighting key initiatives like Gen Z marketing, foodservice expansion, and major sponsorships. He emphasized that the team is focused on driving both increased market share and velocity through its evolving strategies.

Peter Grom of UBS asked for clarity on the expected level of growth for the newly acquired Rhode brand and whether the company's goal to 'double the business' was a broad comment or tied to a specific timeframe. He also inquired about anticipated margin performance in the second half of the year.

Answer

CEO & Chairman Tarang Amin did not provide a specific growth rate for Rhode but highlighted its rapid ascent to $212 million in sales DTC-only and its significant potential with the upcoming Sephora launch. He clarified that the goal of doubling the business applies to the entire e.l.f. Beauty portfolio over the coming years. Senior VP & CFO Mandy Fields noted that second-half margin visibility depends heavily on tariff outcomes and the success of mitigation efforts.

Peter Grom of UBS Group sought to understand the drivers behind the consumption slowdown seen earlier in the year and what is fueling the recent improvement.

Answer

Chairman and CEO Tarang Amin attributed the earlier slowdown to lapping the exceptionally strong viral launch of lip oils in the prior year. He credited the recent rebound to the strength of the marketing engine and new, community-requested innovation like the Melting Lip Balms, expressing confidence in the fall pipeline.

Peter Grom asked for perspective on a reasonable long-term growth run rate for the business, expectations for market share performance, and the drivers of SG&A leverage in Q4.

Answer

Chairman and CEO Tarang Amin deferred specific FY'26 guidance to May but asserted that Q4 is an anomaly and the true run rate is higher, citing significant white space in cosmetics, skin care, and international markets. He expressed high confidence in continued market share gains, pointing to the brand's >20% share at Target as a benchmark. CFO Mandy Fields explained that the significant Q4 SG&A leverage is driven primarily by marketing spend normalizing compared to an unusually high 34% of net sales in the prior-year Q4.

Peter Grom requested clarification on the company's shift in guidance approach, specifically the comment about prioritizing 'consistency of delivery versus the magnitude of top line beats.'

Answer

CFO Mandy Fields explained that the core guidance strategy remains consistent. However, as e.l.f. becomes a larger company, the law of large numbers means the absolute magnitude of revenue beats and guidance raises will naturally become smaller. The focus remains on consistent, reliable delivery against their stated annual guidance.

Peter Grom of UBS Group AG questioned the organic sales outlook, noting that Church & Dwight's commentary on improving consumption seemed more positive than that of its peers. He asked for clarification on why the full-year guidance wasn't raised despite a strong start to Q3 in July.

Answer

President and CEO Rick Dierker explained that they were early in calling the Q2 slowdown and have since seen category growth improve to around 2.5%. He attributed their relative strength to their specific category mix and consistent share gains. While acknowledging a strong July, he cited the month's easy comparison and overall market volatility as reasons for maintaining a conservative full-year outlook for now. CFO Lee McChesney added that they feel comfortable with the implied 2.5% organic growth for the second half.

Peter Grom asked for an explanation of why Q2 domestic sales are expected to be similar to Q1's negative performance. He also questioned why the category slowdown is happening so rapidly and why the company's commentary on April trends differs from some peers.

Answer

CFO Lee McChesney clarified that while the Q1 retailer destocking impact will lessen in Q2, it will be offset by a new negative from slowing category consumption. Executive Richard Dierker attributed the rapid slowdown to a pressed consumer, a trend he noted the company had been flagging since late 2024, which has now been exacerbated by tariff uncertainty. He expects more peers will begin to report similar trends.

Peter Grom sought clarification on the specific category growth assumption for Q4 and asked what was driving the sequential slowdown in the organic sales outlook.

Answer

CEO Matthew Farrell clarified that the company is assuming Q4 category growth will average 2.5%. He explained that they view the strong October results as an anomaly and expect November and December to revert to the slower trends seen over the summer. This cautious assumption, consistent with their view from July, underpins the Q4 organic sales outlook of 2% to 3%.

Peter Grom asked for details on the retail inventory reductions that caused domestic consumption to outpace sales, and also inquired about the performance and outlook for the international business.

Answer

Richard Dierker (CFO and Head of Business Operations) explained the consumption-sales disconnect was due to a prior-year HERO pipeline fill and a surprise retail inventory adjustment, primarily in laundry. For international, Matthew Farrell (executive) noted strong performance so far, with Richard Dierker adding that the back-half outlook is around 7% growth, aligning with the full-year target of 8%.

Peter Grom asked for a quantification of how much of the guided sales improvement is driven by internal initiatives versus category growth expectations, and also inquired about the long-term margin progression as sales eventually recover.

Answer

CEO Chris Peterson clarified that the entire downward revision to the full-year core sales guidance was due to a weaker category growth outlook, implying confidence in their internal distribution and innovation plans remains intact. CFO Mark Erceg discussed long-term margins, reiterating targets for gross margin (37-38%) and A&P spending (6.5%). He highlighted that overheads as a percentage of sales will begin to decline in Q3, serving as a new catalyst for operating margin expansion.

Peter Grom inquired about the degree of prudence or flexibility within the 2025 guidance, especially considering the significant operating margin outperformance in 2024. He also asked about the expected phasing of operating margin expansion throughout 2025 and if a strong exit rate could accelerate the path to long-term margin targets.

Answer

CEO Christopher Peterson explained that while the guidance is what they are reasonably confident in delivering, they have higher internal targets and are focused on over-delivering. He noted the P&L has more flexibility now, with a higher A&P budget that provides a discretionary lever. CFO Mark Erceg declined to give quarterly margin guidance but expressed high confidence in continued expansion, attributing recent gains to structural improvements like automation and mix management. He reiterated the long-term goal of a 13-15% operating margin.

Peter Grom of UBS Group asked for more detail on the expectation for 'modestly better' category growth in the second half. He questioned whether this outlook was broad-based or concentrated in specific markets or product categories.

Answer

Chairman, CEO & President Noel Wallace confirmed that the expectation for modest improvement is a broad-based comment. He noted that global categories are currently growing around 2-3% with slightly positive volume. He anticipates a modest acceleration across the board, suggesting that daily-use categories like toothpaste may recover sooner than home care categories where consumers can delay purchases.

Peter Grom from UBS Group AG inquired about the consumption trends observed throughout Q1 and into April, particularly concerning consumer pressure, and asked for the outlook on category growth for the remainder of the year.

Answer

Noel Wallace, Chairman, President and CEO, acknowledged that while 2025 guidance anticipated a slowdown, the volume growth in their categories has slowed more than expected. He noted that U.S. categories were down sequentially through February, with mixed results in March but signs of improvement and stability in April. Wallace expressed confidence that consumers will return to these everyday-use categories, expecting more normalization in the back half of the year, though Q2 will likely remain soft.

Peter Grom asked for color on the fourth-quarter gross margin performance relative to expectations, the expected cadence of margin expansion in 2025, and the contribution from the 'Funding the Growth' productivity program.

Answer

CEO Noel Wallace noted that gross margin rose 70 basis points year-over-year despite significant FX headwinds. CFO Stan Sutula added that margin expansion in 2025 will be driven by positive mix from the faster-growing Hills and Oral Care businesses, the 'Funding the Growth' program, and enhanced Revenue Growth Management (RGM 2.0) capabilities. Noel Wallace also mentioned a more moderate raw material environment provides better visibility.

Peter Grom of UBS Group asked for a long-term perspective on the salty snacks category growth beyond 2025 and inquired about the company's view on the emerging protein chips segment.

Answer

CEO Howard Friedman expressed a bullish long-term view on the category, citing strong and growing household penetration and repeat purchase rates. He believes a return to brand building and innovation will drive future growth. On protein chips, he acknowledged the high consumer interest and noted it's an area the company evaluates, emphasizing the challenge is to deliver the desired benefit without sacrificing taste, similar to how they approach other consumer trends.

Peter Grom from UBS Group sought clarification on the gross margin bridge to the mid-30s target, specifically the cadence of cost savings and pricing benefits. He also asked about the potential impact from mix and innovation, and whether the U.S. Consumer business could achieve its 3% growth target next year.

Answer

EVP & CFO Mark Scheiwer confirmed the framework of ~100 bps from savings and ~100 bps from price annually, noting potential for outperformance. CEO James Hagedorn stated there is no reason the U.S. Consumer business wouldn't see 3% growth, discussing the internal dynamic of balancing conservative public targets with the desire for higher investment to fuel faster growth. President & COO Nate Baxter added that innovation benefits would be realized over a multi-year period.

Peter Grom requested a breakdown of the 2% core U.S. growth guidance and an explanation for the increased investment spend, questioning why the top-line guidance wasn't higher given the larger investment.

Answer

CEO James Hagedorn explained that the modest 2% growth guidance accounts for the removal of non-recurring items like the discontinued AeroGarden business and prior-year bulk sales, which offset underlying growth from pricing and volume. An executive added that 75-80% of the incremental $40M+ investment is for immediate brand support, with the rest for mid-term capabilities. CFO Matt Garth noted the guidance is intentionally conservative, reflecting a prudent approach to rebuilding the business and investing for long-term franchise value.

Peter Grom of UBS Group asked for perspective on the recent deceleration in category growth and the drivers behind it, and questioned the likelihood of further deceleration as reflected in the new guidance.

Answer

CFO Andre Schulten observed that consumers are reacting to economic volatility by being more cautious with spending, leading to slower consumption. He stated P&G's job is to create its own growth through innovation. President, CEO & Chairman Jon Moeller added that the wide guidance range is a prudent reflection of this macroeconomic uncertainty.

Peter Grom from UBS requested more perspective on international market growth, asking for a breakdown of category growth versus market share in Europe and Latin America, and for details on consumption trends across Latin America.

Answer

Executive Andre Schulten expressed satisfaction with Latin America's 6% organic sales growth, driven by strong results in Brazil and Mexico despite consumer volatility. For Europe, he noted the significant negative impact from France. Globally, he reiterated that category growth has slowed from 3.5% to 2.5% but is expected to recover, though the timing is uncertain.

Peter Grom of UBS asked for perspective on the input cost environment, seeking details on key cost buckets and whether P&G anticipates input cost deflation in the second half of the fiscal year.

Answer

Andre Schulten, an executive, explained that the majority of the fiscal year's commodity cost impact was already incurred in the first half. He noted that due to contract structures, any current volatility in raw materials like oil will likely not impact the current fiscal year's P&L but rather the first half of the next fiscal year, providing stability for the second half of FY25.

Peter Grom sought clarification on the path to the midpoint of the organic growth guidance, asking if simply annualizing headwinds in China and the Middle East would be sufficient to reach 4% for the year, given the 2% start in Q1.

Answer

Executive Andre Schulten clarified that reaching the midpoint requires a combination of two factors: the mathematical benefit of annualizing the significant headwinds, and the core 85% of the business maintaining and slightly accelerating its current strong run rate, which would be amplified by easier year-over-year comparisons.

Peter Grom of UBS Group AG followed up on Fairlife, seeking confirmation that its growth moderation is due to capacity constraints, not competition, and asked for perspective on the competitive landscape.

Answer

Chairman and CEO James Quincey confirmed the moderation in Fairlife's growth is a function of the 'law of big numbers' and capacity constraints, not a weakening competitive position. He stated they could sell more product if they had more capacity. He acknowledged that the brand's success naturally attracts competition, which keeps the company focused on strong execution and innovation.

Peter Grom followed up on the Q2 commentary, asking if the description of the environment as 'choppy' reflects a change in expectations based on recent performance or if it is simply a reminder of the tough comparison.

Answer

Chairman and CEO James Quincey clarified that the commentary is partly a reminder of Q2 being the strongest quarter last year. The 'choppy' description refers to an 'increased number of known unknowns,' such as potential broad economic supply chain disruptions that could impact consumer sentiment, even if not affecting Coca-Cola directly. He reiterated that they believe the situation is manageable.

Peter Grom sought clarification on the 2025 outlook, asking if the commentary about growth being more weighted to price implied that volume growth would fall short of the typical 2-3% range, despite strong momentum exiting Q4.

Answer

CEO James Quincey confirmed the interpretation was correct, stating that 2025 volume growth would likely be in the range of the 1-2% seen in 2024, with a compensating factor on price to reach the 5-6% organic growth target. He acknowledged the momentum coming into the year but also noted the dynamic environment and a tougher cycling quarter, expressing confidence that volume performance would be slightly better than 2024 overall.

Peter Grom inquired about the slowdown in Owen's retail takeaway, whether it was anticipated, and asked for clarification on the brand's growth outlook for fiscal 2026. He also asked how the Q4 profit decline should inform expectations for next year.

Answer

CEO Geoff Tanner explained that the deceleration in Owen's growth was fully anticipated as the company laps significant prior-year distribution gains. CFO Chris Bealer clarified that they expect Owen's consumption growth in FY26 to be similar to Q3's ~24%. Regarding the Q4 outlook, Bealer advised that while H1 FY26 will be challenged by cost pressures, H2 should see improvement as productivity and pricing benefits are realized.

Peter Grom sought to understand the expected phasing of organic revenue growth throughout the fiscal year, given the guidance range. He also asked if the assumption for category growth implies a continuation of current trends or an improvement.

Answer

CFO Kofi Bruce explained that top-line growth phasing will be impacted by tough comparisons in the first half of the year due to trade expense timing, with comps easing in the second half. He clarified that the company is not counting on a significant rebound in category growth and is instead focused on its own competitive performance.

Peter Grom from UBS Group AG asked about the expected phasing of organic revenue growth throughout the upcoming fiscal year and the assumptions behind the outlook for category growth.

Answer

CFO Kofi Bruce explained that the top-line progression will be affected by challenging trade expense phasing comparisons in the first half of the year, which are expected to ease in the second half. He also noted that the company's guidance does not assume a significant rebound in category growth, instead focusing on improving its own competitive performance.

Peter Grom from UBS asked for a framework to quantify the gross and net financial impact of the tariffs and questioned if the M&A commentary signaled a pivot in capital allocation priorities away from buybacks.

Answer

CFO Jeremy Smeltser explained that providing a precise net impact is difficult as the company has pivoted its operating model by halting new orders from China, making gross calculations on prior sourcing volumes irrelevant. He expects Q3 to be similar to Q2, with Q4 being the most uncertain. CEO David Maura clarified that capital allocation is not a pivot; the company is still actively repurchasing its undervalued stock but is also preserving its strong balance sheet to capitalize on M&A opportunities, particularly to expand the Pet division into higher-growth, higher-multiple categories.

Peter Grom asked about the company's willingness to more aggressively pursue share buybacks given the stock's valuation and low leverage. He also sought clarity on what potential partners in the HPC transaction need to see before a deal can proceed.

Answer

CEO David Maura stated that the company's undervalued stock price is its 'biggest opportunity' and they will continue to capitalize on it while investing in the business. Regarding the HPC transaction, Maura explained that the recent and fluid tariff situation creates uncertainty for potential buyers trying to price cash flows. He believes it will take a couple of months for the 'dust to clear' and for the new 'rules of the road' to become certain before more fruitful conversations can resume.

Peter Grom of UBS asked for details on the geopolitical factors delaying the Home & Personal Care (HPC) transaction and inquired about the conservatism embedded in the fiscal 2025 guidance, seeking color on EBITDA growth expectations by segment.

Answer

Chairman and CEO David Maura explained that improving the HPC business's fundamentals was the first priority, noting its EBITDA grew from $40M to over $75M. He stated that the U.S. election and Middle East conflict caused a general M&A slowdown but confirmed active talks with two buyers. Regarding guidance, Maura highlighted that significant Q4 ad spend impacted reported EBITDA but is vital for future growth. CFO Jeremy Smeltser added that the low single-digit sales growth forecast is consistent across segments but driven by different factors: a tough premium environment for Global Pet Care (GPC), a difficult comparison for Home & Garden, and historical trends for HPC. He also noted headwinds from ocean freight and an expired tariff exclusion.

Peter Grom sought a near-term perspective on beer top-line growth, asking how to frame the guidance progression from the challenging Q4 exit rate and what to anticipate for the price versus volume mix.

Answer

CEO William Newlands highlighted that Q1 of the prior year was the strongest quarter for both the company and the industry, creating a very difficult comparison. He advised to expect volatility as the year progresses due to this tough overlap and the ongoing socioeconomic pressures, while reiterating that the company's brand health remains a key long-term strength.

Peter Grom asked for clarification on modeling considerations for the fourth quarter beer guidance, specifically regarding the alignment of shipments and depletions for the full year and whether the performance gap between tracked and non-tracked channels is expected to persist.

Answer

CFO Garth Hankinson confirmed that the company still expects full-year shipments and depletions to be largely aligned. Regarding the gap to Circana data, he reiterated that Circana only captures about half of their sales activity and has shown significant volatility, suggesting that questions about the data's methodology are better directed to Circana.

Peter Grom asked for clarification on the timing of the expected reversal of shipments outpacing depletions. He also questioned whether the high end of the beer top-line guidance range should now be considered aspirational given this dynamic.

Answer

CFO Garth Hankinson explained that the quarterly share of volumes should align with fiscal '24, with a reversal occurring in Q3 as shipment growth is expected to be below depletion growth due to maintenance activities. CEO William Newlands disagreed with the characterization of the high end of guidance as 'aspirational,' stating that the range is provided to account for both positive and challenging scenarios.