Robert Moskow

Robert Moskow asked how Hershey forecasts the cumulative impact of multiple macro factors simultaneously, such as SNAP cuts, state waivers, GLP-1s, and elasticity from higher pricing, given the lack of historical precedence for such a combination. He also requested more specific examples of how Hershey plans to 'play offense' with retailers in states where SNAP waivers are being implemented.

Answer

SVP and CFO Steve Voskuil acknowledged the huge challenge of forecasting, explaining that small teams dig deep into each factor, gathering firsthand information (e.g., on-ground work with retailers for SNAP) to build risk-balanced models and run scenarios, while maintaining agility. CEO Kirk Tanner added that 'playing offense' involves driving insights around affordable price points, unique packages, and leveraging other channels like convenience and immediate consumption, working with customers on solutions as it's still early days for the waivers.

Robert Moskow asked how Hershey forecasts the cumulative impact of multiple macro factors simultaneously (SNAP cuts, state waivers, GLP-1s, elasticity from pricing), given the lack of historical precedence. He also asked for more specifics on what 'playing offense' means in response to SNAP waivers, particularly regarding working with retailers in affected states.

Answer

Steve Voskuil (SVP and CFO) acknowledged the huge challenge, explaining that small teams dig deep into each factor, gathering firsthand information (e.g., on-the-ground work with retailers for SNAP) to build risk-balanced models. Kirk Tanner (President and CEO) explained that 'playing offense' involves focusing on affordable price points, unique packages, and driving other channels like convenience and immediate consumption, emphasizing driving insights around these solutions with customers.

Robert Moskow asked about the factors determining double-digit EPS potential, specifically if elasticity is the biggest and most determining factor, and if the company would consider providing a wider range for 2026 guidance due to its unpredictability. He also inquired about price gaps in King Size products within the convenience channel, asking if they are temporary and expected to close soon.

Answer

SVP and CFO Steve Voskuil agreed that elasticity is likely the biggest factor and confirmed that the company would consider a wider range for 2026 guidance. Regarding King Size price gaps, he acknowledged their existence in some places, noting some are closing while others may linger, but in aggregate, they are not causing concern, reflecting the rational but not perfectly cadenced nature of the category.

Robert Moskow asked if elasticity is the biggest determining factor for achieving double-digit EPS potential and if Hershey would consider providing a wider range for 2026 guidance due to its unpredictability. He also inquired about price gaps in King Size products within the convenience channel, specifically between Hershey and its biggest competitor, asking if these gaps are temporary and expected to close soon.

Answer

Senior Vice President and CFO Steve Voskuil agreed that elasticity is probably the biggest determining factor and confirmed that the company would give thought to providing a wider guidance range for 2026. Regarding King Size price gaps, he acknowledged their existence but stated that Hershey looks at all pack types and retailers. He noted that some gaps are closing while others may linger, but in aggregate, they are not causing concern, reflecting the category's rational but not perfectly cadenced nature.

Robert Moskow asked for an assessment of Hershey's competitiveness in the instant consumable chocolate segment, where its growth was below the category, and requested specifics on the tough back-half comparisons.

Answer

Chairman, President & CEO Michele Buck clarified that Hershey is gaining share and growing ahead of the category in instant consumables, thanks to successful planogram partnerships with retailers. She noted the pressure is in the take-home segment, which the new Oreo launch is designed to address. She explained that the tough Q4 comparison is due to the ramp-up of major 2025 innovation that began at the end of 2024.

Robert Moskow questioned Hershey's competitiveness in everyday chocolate, noting its growth was below the category average, and asked for specifics on the tough second-half comparisons mentioned earlier.

Answer

Chairman, President & CEO Michele Buck clarified that while the 'take-home' segment faces pressure from private label, Hershey is gaining share in the 'instant consumable' segment. She noted the upcoming Oreo launch is targeted at strengthening the take-home business. The tough Q4 comparison is due to the ramp-up of major 2025 innovations that occurred late in 2024.

Robert Moskow of TD Cowen asked about Hershey's competitiveness in the instant consumable segment, where its growth lagged the category, and requested specifics on the tough year-over-year comparisons expected in the second half.

Answer

Chairman, President & CEO Michele Buck clarified that Hershey is now gaining share and growing ahead of the category in instant consumables due to successful planogram partnerships with retailers. She noted that the pressure has been in the take-home segment, which the Oreo launch aims to address. The tough Q4 comparison is due to the ramp-up of major 2025 innovation at the end of 2024.

Robert Moskow asked how Hershey justifies its recent capacity expansion financially, given that high cocoa prices and a weaker consumer environment likely imply a lower volume outlook than originally anticipated.

Answer

CEO Michele Buck explained the expansion provides agility, supply chain control, and vertical integration by producing chocolate paste. She noted that Hershey was capacity-constrained pre-COVID and the investment allows them to meet demand, particularly in seasons, enabling share gains and innovation.

Robert Moskow questioned the risk of distraction from integrating the Purell business, given existing weaknesses in other categories, and to what extent Purell would run itself before full integration.

Answer

Linda Rendle, Chairman and CEO, expressed strong confidence in the Purell acquisition, viewing it as leaning into Clorox's strong health and wellness performance and adding a business with tailwinds in B2B and retail. She highlighted Purell's strong management team and advanced operations, enabling seamless integration. She emphasized that Clorox's operating model, with dedicated business unit teams, prevents distraction, as the Purell integration team is separate from teams managing other brands like Glad. She reiterated the strategic and financial fit, building on the health and wellness business's 4% 10-year CAGR.

Robert Moskow questioned the risk of distraction from integrating the Purell business, given existing weaknesses in several core categories, and asked to what extent the Purell business would run itself before full integration.

Answer

Linda Rendle (Chairman and CEO) expressed strong confidence in integrating Purell, viewing it as an extension of Clorox's successful Health and Wellness segment and International business, which have strong tailwinds and a 4% to 10-year CAGR. She highlighted GOJO's strong management team and advanced operations, ensuring a disciplined integration focused on value-add. She reiterated Clorox's laser-focus on improving softer categories through back-half innovation and share results, emphasizing the company's operating model with dedicated business unit teams to manage multiple categories without distraction.

Robert Moskow sought confirmation on whether customer fill rates are back to normal or still below in Q2 following ERP issues. He also asked about the path for price mix to inflect positively, given three consecutive quarters of negative price mix and ongoing competitive pressures and value-seeking consumer behavior.

Answer

CEO Linda Rendle confirmed that Clorox is largely back to normal fill rates with retailers in Q2, having rebuilt inventories nearly everywhere, though professional distribution networks are taking slightly longer. CFO Luc Bellet stated that price mix was negative by about two points last year due to value-seeking behavior, channel shifting, and increased promotions. For the current year, a lesser headwind of about one point is expected, driven by continued value-seeking and channel shifting, with some benefits from net revenue management not fully offsetting these headwinds.

Robert Moskow asked for confirmation on whether customer fill rates are back to normal or still below in Q2 following the ERP issues. He also questioned the price mix trend, noting three consecutive quarters of negative price mix, and asked about the path to a positive inflection or if a modest negative environment is expected to persist.

Answer

CEO Linda Rendle confirmed that Q2 order fulfillment is largely back to normal, with inventories rebuilt nearly everywhere, though the Professional business is taking slightly longer. CFO Luc Bellet explained that negative price mix (about a 1-point headwind for the year) is due to continued value-seeking behavior and channel shifting, with stable promotions and some net revenue management benefits not fully offsetting these headwinds.

Robert Moskow from TD Cowen questioned the practice of excluding digital capability spending from adjusted earnings, asking why it's considered a one-time event with an endpoint when investments in areas like AI are typically ongoing.

Answer

CEO Linda Rendle acknowledged that technology investment is continuous but characterized the current project as a 'once in a generation reset' of a 25-year-old ERP system and its surrounding infrastructure. She explained this is why the significant, concentrated cost is treated as a one-time item, distinct from the normal course of business technology spending that will be included in future operating expenses and capital budgets.

Robert Moskow asked for clarification on what is included in the tariff impact estimate and sought evidence that consumer spending pull-forwards on items like electronics and autos impact grocery staple purchases.

Answer

CFO Luc Bellet stated the tariff exposure is mostly on packaging and raw materials, with limited impact from finished goods. CEO Linda Rendle explained that while a direct causal link is difficult to prove, evidence suggests consumers are adjusting their single wallet, shifting spending broadly and conserving in other areas. She noted that at-home behaviors in their categories haven't changed, indicating a shift in spending priorities rather than category deprioritization.

Robert Moskow of TD Cowen asked for more detail on the drivers behind the strong growth in the Professional and International businesses. He also requested quantification of raw material sourcing from Mexico and Canada.

Answer

CEO Linda Rendle attributed International growth to a stabilized portfolio, strong Cleaning business performance, and expansion in categories like Cat Litter. Professional growth was driven by penetrating new verticals such as government and healthcare. CFO Kevin Jacobsen quantified the company's raw material sourcing exposure from Mexico and Canada as being in the 'single digits.'

Robert Moskow sought clarification on the logic for the projected Q2 gross margin dip to 43% and asked if the significant Q1 EPS beat was far above internal estimates, given the relatively modest increase in full-year guidance.

Answer

CFO Kevin Jacobsen explained that the Q2 margin dip is driven by normal seasonality (e.g., the end of the high-margin charcoal season) combined with the impact of volume deleveraging. He acknowledged the Q1 EPS beat was stronger than internal forecasts but stated the modest guidance raise reflects prudence early in the year, ongoing monitoring of the consumer environment, and a desire to maintain financial flexibility.

Robert Moskow asked about BellRing Brands' M&A risk/reward perspective, specifically if any insurgent brands are expected to endure, and if there's potential for consolidation in the protein shake category akin to energy drinks.

Answer

Darcy Davenport, President and CEO, acknowledged the dynamic category and expects some insurgent brands to succeed. She confirmed they are actively monitoring repeat rates, consumer metrics, and incrementality to evaluate potential add-ons. She also stated that in any dynamic category, opportunities for consolidation always exist.

Robert Moskow inquired about BellRing Brands' M&A strategy, specifically regarding the longevity of insurgent brands and potential opportunities for mergers within the protein shake category, drawing parallels to the energy drink market.

Answer

President and CEO Darcy Horn Davenport acknowledged the dynamic nature of the category, expecting both winners and brands that will not endure. She stated that BellRing Brands is actively watching repeat rates and consumer metrics of other brands to evaluate potential inorganic growth opportunities. She concluded that in any dynamic category, there is always opportunity for strategic moves.

Robert Moskow sought to clarify the rationale for maintaining the guidance range, asking if management could have narrowed it higher even after accounting for the surprise retailer destocking.

Answer

President and CEO Darcy Davenport confirmed that they could have tightened the guidance range even with the destocking impact factored in. She reiterated that the decision to maintain the current range was a deliberate choice to remain cautious in light of general uncertainty in the consumer environment.

Robert Moskow of TD Cowen requested an update on plans for expanding into the convenience store channel and asked for new data on the impact of GLP-1 drugs on the business.

Answer

President and CEO Darcy Davenport described the convenience channel as a future, but not immediate, opportunity, noting the company is currently testing a hybrid 'ship via warehouse, merchandise like DSD' model. On GLP-1s, she stated they continue to be a tailwind, representing about a quarter of the company's growth. The newest data shows GLP-1 user penetration is stabilizing, with as many people starting the drugs as coming off them, but consumers continue to use RTDs both during and after treatment to maintain benefits.

On behalf of Robert Moskow, Jacob Henry asked about the observed consumer elasticities following the recent price increase on Premier Protein shakes compared to initial expectations.

Answer

President and CEO Darcy Davenport responded that while it is still early, elasticities have been modest and largely in line with expectations. She highlighted a positive, slightly higher-than-expected consumer trade-up from 4-count to 12-count packs, which suggests pantry loading and increased consumption.

Robert Moskow requested an update on the tests merging food and beverage distribution in Texas and Florida, asking what's working, what's difficult, and how this informs the broader strategic review for North America beverages distribution.

Answer

CEO Ramon Laguarta stated that eliminating duplications and integrating the two large U.S. businesses is a key focus. He reported positive initial numbers from integrated delivery and inventory points, indicating increased cost efficiency and flexibility for better customer service. He mentioned plans to update later in the year with specific details, highlighting ongoing learning, scaling solutions, technical IT system implementations, and innovation in vehicles. He emphasized that the approach will not be a one-size-fits-all for the U.S., considering regional nuances, and may include small refranchising models as complementary to the main assumption that integration drives significant value.

Robert Moskow asked for an update on the food and beverage distribution tests in Texas and Florida, specifically what's working, any execution difficulties, and how these learnings inform the broader strategic review for North America beverages distribution.

Answer

Ramon Laguarta, CEO, stated that the focus is on eliminating duplications and creating advantages through integration. He reported positive initial numbers from integrated delivery and inventory points, leading to cost efficiency and better customer service. He mentioned ongoing work on technical IT systems and vehicle innovation, with plans to update later in the year. He emphasized a nuanced, non-one-size-fits-all approach for the U.S., including potential small refranchising models.

Robert Moskow asked about PepsiCo's willingness to engage with an activist investor (Elliott), if any of their recommendations were particularly important for strategic direction, and specifically if establishing a margin target for Frito-Lay was considered constructive.

Answer

Chairman and CEO Ramon Laguarta described interactions with Elliott as constructive and collaborative, noting alignment on PepsiCo being undervalued and the need to improve valuation. He stated that most of Elliott's ideas are already part of PepsiCo's Strategy 2030 (portfolio transformation, cost reduction, etc.), and the company is acting with urgency. He mentioned areas for further education and conversation, expressing optimism for positive change and value creation.

Robert Moskow asked about PepsiCo's engagement with activist investor Elliott Investment Management, inquiring about the company's willingness to engage and whether any of Elliott's recommendations are particularly important for PepsiCo's strategic direction. Specifically, he asked if establishing a margin target for Frito-Lay is considered a constructive approach for the future.

Answer

Chairman and CEO Ramon Laguarta described interactions with Elliott Investment Management as constructive and collaborative, noting alignment on PepsiCo being undervalued and opportunities to improve valuation. He stated that most of Elliott's ideas are already included in PepsiCo's Strategy 2030, with the company acting with urgency on portfolio transformation, simplification, and cost reduction. Laguarta acknowledged a few areas requiring further education and conversation, expressing optimism that ongoing dialogues will drive positive change and value creation for the long term. He did not directly address the Frito-Lay margin target but implied that cost reduction and portfolio transformation are already underway.

Robert Moskow asked for an update on the strategy for more commoditized products like unflavored potato chips, which were previously targeted for more promotional activity, and whether management feels more value actions are needed on that part of the portfolio.

Answer

Chairman and CEO Ramon Laguarta confirmed the strategic principle remains the same: pricing must reflect the value provided. In areas with less consumer differentiation, revenue management must be more intentional about value, while more differentiated products can capture more value. He stated that the organization has become more nuanced and intelligent in understanding its value drivers and how pricing should reflect them for particular occasions and brands.

Robert Moskow of TD Cowen questioned why the impact of GLP-1 drugs wasn't mentioned as a factor in the salty snack slowdown. He also asked about PepsiCo's ambition to be more aggressive in the fast-growing protein drinks market.

Answer

CEO Ramon Laguarta confirmed a sense of urgency to expand in protein and functional beverages via brands like Muscle Milk, Gatorade, and Propel. Regarding GLP-1s, he stated that while they see 'very little direct impact' currently, they recognize a broader consumer trend toward health and wellness. This is being addressed through portion control, portfolio renovation (lower sodium/fat), and strategic M&A like the Sabra acquisition.

Robert Moskow asked two questions about Frito-Lay: first, about the status of planned promotions for Tostitos, and second, why 'Positive Choices' brands have been weak despite their perceived higher-income consumer base and what progress is being made on their turnaround.

Answer

Chairman and CEO Ramon Laguarta confirmed that incremental investments for Tostitos are planned for the fall season, including brand events and value offerings like bonus packs. Regarding 'permissible' brands, he explained that affordability is impacting all consumer segments and that the portfolio is democratizing beyond just premium. He stated the company is focused on adding distribution and targeted advertising to grow these platforms.

Robert Moskow asked about Colgate-Palmolive's U.S. strategy for lower and middle-tier price products, given economic uncertainty and competitive focus, and how it balances with the premiumization strategy.

Answer

Noel Wallace, Chairman, President, and CEO, explained the U.S. strategy involves optimizing couponing and price pack architecture for the lower end, innovating against strong core businesses to create excitement, and executing planograms successfully. He emphasized driving growth through innovation across all price points and matching competitive activity while focusing on constructive category growth.

Robert Moskow questioned Colgate-Palmolive's U.S. growth strategy, specifically how it balances the premiumization focus with economic uncertainty and the need to improve performance for lower and middle-tier price products, given competitors' increasing focus on these segments.

Answer

Chairman, President, and CEO Noel Wallace explained that the U.S. strategy involves a combination of approaches: optimizing couponing and price pack architecture for the lower end, innovating against strong core base businesses to create excitement, and executing successful planograms. He stressed the importance of a well-thought-through promotional strategy combined with aggressive innovation across all price points, while also matching competitive activity and driving the category through premium innovation.

Robert Moskow from TD Cowen asked about Colgate's pricing strategy in Brazil, noting that another CPG company cited pressure from rising food costs. He questioned the magnitude of the price increases and the company's confidence in their acceptance by consumers and competitors.

Answer

Chairman, CEO & President Noel Wallace explained that Brazil's market is historically accommodating to price increases. He expressed confidence that Colgate's strong brand health and premium innovation, like the new Colgate Total, would support pricing actions. He confirmed pricing was taken in late Q2 to offset foreign exchange headwinds and will flow through in the second half, despite short-term consumer cautiousness.

Robert Moskow of TD Cowen asked for a deeper dive into the Hill's business, specifically about any signs of consumer trade-down and how consumers view the more expensive wet food format amidst economic pressures.

Answer

Noel Wallace, Chairman, President and CEO, clarified that the trade-down he mentioned earlier was in North American toothpaste, not Hill's. He stated there is no trade-down in Hill's, which saw 5% organic growth ex-private label on a flat category. He highlighted broad-based strength across all formats (wet, dry, treats) and product lines (Prescription Diet, Science Diet), driven by strong innovation, investment, and growth in under-indexed areas like wet food and cat food. He also noted a 450 basis point margin improvement for Hill's.

Robert Moskow questioned the drivers behind Europe's strong quarterly performance, asking about market share trends and whether the current level of growth is sustainable, noting that a peer had cautioned against such expectations.

Answer

Noel Wallace, Chairman, President and CEO, attributed Europe's success to significant investment, strong volume growth, and improved brand health, leading to record-high Oral Care market shares. While acknowledging the region's inherent challenges, he confirmed the business is in good shape with high gross margins and strong advertising support.

Robert Moskow questioned the confidence in gross margin expansion for 2026, given that 2025 saw unexpected input costs and negative pricing due to a competitive environment. He asked what prevents a similar competitive dynamic in 2026 and how much cushion is built into the model.

Answer

CFO Nelson Urdaneta explained that 2026 projections include neutral input costs (compared to $200 million headwinds in 2025) and strong productivity around 6%. He noted that strategic price-pack architecture investments made in late Q4 2024 will be lapped in 2026, changing the year-on-year pricing dynamic. Chairman and CEO Mike Hsu added that the company focuses on innovation and marketing effectiveness rather than renting share through promotion, which has driven strong volume-plus-mix growth in recent years.

Robert Moskow questioned the confidence in gross margin expansion for 2026, given unexpected input costs and negative pricing in 2025, asking about the competitive environment and the model's cushion against similar pressures.

Answer

CFO Nelson Urdaneta explained that 2026 margin expansion is driven by projected neutral input costs (vs. $200M in 2025), 6% gross productivity, and lapping strategic price-pack investments from late Q4 2024. Chairman and CEO Mike Hsu emphasized that Kimberly-Clark focuses on a 'virtuous cycle' of innovation across all tiers and effective advertising/marketing, rather than renting share through promotion, which has driven strong volume-plus-mix growth.

Robert Moskow asked about the source of the outstanding productivity savings, whether they offset pulp costs in 2024, and if similar savings are factored into 2025 commodity estimates, along with the outlook for PNOC (Pricing Net of Cost).

Answer

CFO Nelson Urdaneta clarified that the historical productivity savings were driven by manufacturing optimization, not procurement, and that 2025 productivity is targeted in the 5% range. He affirmed the goal of maintaining a neutral PNOC. CEO Michael Hsu added that strong visibility into productivity is a key driver for fueling investment and bottom-line growth.

Robert Moskow questioned whether data showing a substantially higher percentage of P&G products sold on promotion (200-300 basis points) accurately reflects a need to move volume or if it's an inaccurate depiction of efforts to improve volume.

Answer

CFO Andre Schulten acknowledged that promotion levels are returning to pre-COVID levels (around 30%) due to competitive, retailer, and consumer dynamics. He clarified that while P&G's promotion volume is increasing, it's often for trial of innovations and not always deep price discounting. The objective is to grow categories by driving user and usage growth, which requires generating trial. CEO Shailesh Jejurikar added that strengthening product propositions should improve promotion elasticities, making P&G less impacted by promotions.

Robert Moskow noted P&G's high percentage of products sold on promotion, asking if this accurately reflects their strategy to grow categories through innovation or if it indicates a need to move volume.

Answer

CFO Andre Schulten acknowledged that promotion levels are returning to pre-COVID levels (~30%) due to competitive dynamics, and P&G's promotion volume is increasing, partly to drive trial for innovations. He clarified that not all promotions involve deep price discounting. He emphasized that the objective is to grow categories by increasing users and usage. CEO Shailesh Jejurikar added that strengthening propositions should improve promotion elasticities, making P&G less impacted while remaining competitive.

Rob Moskow (question asked by Victor) asked how the reduced tariff impact affects P&G's pricing strategy, given previous plans for mid-single-digit pricing on U.S. SKUs, and how P&G is performing amidst consumer weakness and a challenging macro backdrop.

Answer

Andre Schulten, CFO, stated that U.S. pricing announced in July and effective in September was primarily innovation-driven (2-2.5% across the portfolio), with tariffs being a contributor but not the main driver. He noted that retaliatory tariff changes (e.g., Canada) were linked to pricing adjustments, limiting the net P&L effect. He reiterated P&G's sequential progress in absolute U.S. share and commitment to integrated superiority to deliver better value propositions.

Robert Moskow of TD Cowen asked directly if P&G will raise prices more in the U.S. in fiscal 2026 due to tariffs and if the wide top-line guidance reflects a wide range of pricing scenarios.

Answer

CFO Andre Schulten stated that pricing on tariff-impacted SKUs would be mid-single digits, but the average price increase across the entire U.S. portfolio would be about 2.5%, in line with inflation. He confirmed that pricing variability is a factor in the guidance range, but the biggest uncertainty remains underlying consumer strength.

Robert Moskow of TD Cowen asked for clarification on whether the commodity inflation guidance includes tariffs and if falling resin prices could create a cost benefit heading into fiscal '26.

Answer

Executive Andre Schulten clarified that the $200 million commodity inflation guidance is separate from and excludes the newly announced tariff impacts. He declined to comment on the potential for commodity benefits in fiscal '26, stating that guidance is based on spot prices at the time of planning and that the range of outcomes will be wide.

Robert Moskow of TD Cowen asked if there was any scenario where pricing could turn negative and what was driving the positive mix contribution in the quarter.

Answer

Jon Moeller, Chairman, President and CEO, stated that negative pricing is not part of the company's thought process, as the focus is on value creation. Andre Schulten, an executive, explained that the positive mix is a healthy dynamic driven by consumers trading up within categories to higher-performing, premium products like unit-dose detergents, which is exactly what P&G wants to encourage.

Robert Moskow asked how the company plans to use the benefit from an improved commodity cost outlook, questioning whether it would be held back or reinvested into competitive areas.

Answer

Executive Andre Schulten clarified that the outlook is still for a $200 million after-tax headwind for the year, not a net benefit. He explained that decisions on how to manage costs and reinvestments are decentralized and made by individual business units based on what is best for their categories and regions, rather than through a corporate mandate.

Robert Moskow asked for specific insights into Nielsen tracking data for U.S. spice and seasonings, noting weakening sales growth and declining shares in both volume and value over the last 12 weeks, and whether this aligns with McCormick's internal observations. He also inquired about any implications for the sell-through of holiday shipments in the fourth quarter.

Answer

Brendan Foley, Chairman, President, and CEO, confirmed that inventory in the channel was in line with expectations, with no unusual anomalies regarding Q4 holiday shipments. He noted good holiday performance in the Americas for sales (price and volume) and reasonably good consumption. He mentioned a temporary broad market slowdown related to SNAP funding news, followed by a rebound closer to the holiday season, reflecting value-seeking consumer behavior. He added that Q1 post-holiday consumption and price elasticity impacts are being monitored, with elasticities operating as expected, though Q1 may see more variability due to additional pricing.

Robert Moskow asked about the Nielsen tracking data for U.S. spice and seasonings, noting weakening sales growth and declining shares in volume and value over the last 12 weeks. He sought clarification on whether this reflects McCormick's internal observations and any implications for sell-through from holiday shipments in Q4.

Answer

Brendan Foley, President and CEO, confirmed that inventory in the channel was in line with expectations, with no unusual anomalies. He noted good holiday performance in the Americas for both price and volume. He observed a broad market slowdown for a couple of weeks related to SNAP funding news, followed by a recovery closer to the holiday season, reflecting consumer budget control. He stated that price elasticities are operating as expected, with more variability anticipated in Q1 due to additional pricing actions.

Robert Moskow noted McCormick's emphasis on differentiated volume-led growth while needing more pricing, and asked about the priority balance and willingness to let volume dip temporarily to offset costs. He also inquired if customers are less willing to raise prices for tariffs due to their potential impermanence, and if temporary measures are discussed.

Answer

Brendan Foley, Chairman, President, and CEO, stated that McCormick balances both volume-led growth and pricing, taking a long-term view. Their goal is to maintain volume-led momentum, meet consumer needs for value and health/wellness, and offset discrete new costs while sustaining healthy volume-driven growth, with the same ambition for 2026. He clarified that McCormick views tariffs as a discrete, one-time impact that will remain in the cost structure. He added that they collaborate with customers on real input costs and continued volume growth, finding mutual alignment.

Robert Moskow asked McCormick to articulate its priorities between volume-led growth and pricing to offset higher costs, questioning the company's willingness to accept temporary negative volume. He also inquired about customer discussions regarding tariff-related pricing and whether temporary measures are being considered, given the potential impermanence of tariffs.

Answer

Chairman, President, and CEO Brendan Foley emphasized McCormick's long-term view and consistent goal of volume-led momentum, balancing this with the need to offset discrete new costs. He stated the ambition is to maintain positive volume growth, with specific levels to be shared in January. He clarified that McCormick views tariffs as a discrete, one-time impact that will likely stay in the cost structure, and customer conversations are collaborative, focusing on both affordability and cost offsets.

Robert Moskow questioned how McCormick can find less expensive sourcing options to mitigate tariffs without compromising its high-quality standards and asked for specifics on the commodity cost pressures and the rationale for using SG&A to offset them.

Answer

Chairman, President & CEO Brendan Foley stated there is 'no trade-off' on quality, as the company's sourcing organization procures ingredients that meet its industry-leading standards. EVP & CFO Marcos Gabriel added that the commodity pressure stems from expected cost decreases not materializing. He explained that the company is using SG&A savings to mitigate this impact to protect its strong volume momentum by avoiding broader price increases.

Robert Moskow questioned if the Q1 organic growth mix, with Flavor Solutions stronger and Consumer weaker than anticipated, was in line with expectations, and asked about the profitability of an incremental chili promotion.

Answer

Chairman, President and CEO Brendan Foley responded that Flavor Solutions was slightly stronger than expected due to QSR performance, but he viewed the Consumer segment's volume as quite strong and a continuation of Q4 momentum. He characterized the overall results as 'roughly in line' with expectations. He also confirmed that the incremental recipe mix promotion was a 'financially smart' decision, implying it was profitable and strategically beneficial.

Robert Moskow sought more specific details on the 1-3% organic sales guidance, particularly regarding assumptions for China at the low end. He also asked why strong Q4 consumer volumes did not translate to stronger operating income.

Answer

CEO Brendan Foley clarified the low end of the guidance prudently factors in the risk from China's market, which has underperformed expectations in the past. CFO Marcos Gabriel added that the Q4 operating income was in line with their internal plans, as it included an expected shift of technology and R&D expenses from Q3 into Q4, which increased SG&A for the quarter.

Robert Moskow asked for quantification of the EPS benefit from favorable FX and the discrete tax item. He also inquired if Q3 brand investment grew at the high-single-digit rate guided for the full year, and asked about the role of pricing in the long-term algorithm given the end of hyperinflation.

Answer

President and CEO Brendan Foley indicated the guidance raise to the high end of the range reflects the tax and FX benefits. EVP and CFO Mike Smith noted they discuss brand spend in terms of halves, not quarters, but confirmed a ramp in the second half. Regarding long-term pricing, Foley and Smith emphasized that pricing remains a key lever in their revenue management toolbox to address costs, while incoming CFO Marcos Gabriel highlighted the holistic approach of using CCI savings to fund investments first.

Robert Moskow asked how McCormick finds less expensive sourcing options without sacrificing quality, and for specifics on commodity pressures being mitigated through SG&A.

Answer

CEO Brendan Foley asserted there is 'no trade-off' on quality, which remains a top priority. CFO Marcos Gabriel added that their sourcing organization achieves both cost and quality. He explained that expected cost relief from supply/demand dynamics did not materialize, and SG&A savings are being used as the primary mitigation lever to protect operating profit without broad pricing actions that could harm volume momentum.

Robert Moskow inquired about the decision to reopen more North American capacity, seeking clarification on whether utilization rates became too high and if this move would negatively impact profitability. He also asked if this decision to keep lines open is permanent or a temporary measure.

Answer

CEO Michael Smith explained that North American utilization rates in the low 90s necessitated reopening additional capacity to meet customer fill rates, and that plants are running well with no expected cost drag. He confirmed that North America is in a solid position with more predictability, and the company plans to keep these lines open for the foreseeable future. CFO Bernadette Madarieta added that improved absorption from restarting North American lines would be a net positive for factory burden in the second half, offsetting international headwinds.

Robert Moskow asked for clarification on the decision to reopen more North American capacity, specifically whether high utilization rates in Q1 necessitated reopening lines to lower them, the potential impact on profitability, and the expected duration of this decision.

Answer

President and CEO Michael Smith explained that North American utilization rates were in the low 90s due to strong volume, necessitating additional capacity to meet customer fill rate expectations. He stated that running lines more frequently leads to better run rates and potato utilization, so no cost drag is expected. CFO Bernadette Madarieta added that improved absorption from restarting lines would be a net positive for factory burden in the back half, offsetting international headwinds. Michael Smith confirmed these lines are expected to remain open for the foreseeable future due to North America's solid position and predictability.

Robert Moskow from TD Cowen asked for more specifics on the competitive capacity situation in North America, questioning if competitor projects are still ramping up and if any of the previously mentioned delayed projects were in the region. He aimed to understand the timeline for potential pricing stabilization.

Answer

President & CEO Mike Smith clarified that the 1 to 1.5 billion pounds of delayed or canceled capacity were not in North America. He acknowledged some competitor projects are in their final stages in the region but emphasized that the majority of new capacity is international. CFO Bernadette Madarieta added that Lamb Weston's strategy is to focus on premium segments where not all new capacity can effectively compete.

Robert Moskow from TD Cowen asked about the future of the closed Connell plant, including the possibility of a sale, and the status of competitor capacity expansions in the U.S.

Answer

CEO Mike Smith confirmed that after exploring a potential sale of the Connell facility's building, the company decided against it for now and is reviewing other options. He also shared his belief that some competitor capacity additions have been delayed, but could not provide specific details on their plans.

Robert Moskow asked if the back-half guidance assumes the regaining of customers lost during the ERP disruption and questioned if there is a reputation risk following another chain customer loss in North America.

Answer

CFO Bernadette Madarieta confirmed the back-half guidance includes line of sight to existing customer wins and does not rely on a large amount of unknown new business. President and CEO Thomas Werner acknowledged that repairing some relationships has taken time but feels the company is through the most challenging discussions with its large customers.

Robert Moskow inquired if North American pricing would turn negative for the rest of the year due to incentives to regain foodservice customers post-ERP disruption. He also asked if the company's capacity cuts alone could rebalance the industry if demand remains flat over the next year.

Answer

CEO Tom Werner and CFO Bernadette Madarieta confirmed that while the pricing environment is competitive, it remains disciplined and in line with expectations. They anticipate greater, but planned, pricing investments in the coming quarters, which will lead to some negative price/mix. Werner declined to speculate on the broader industry rebalancing, stating Lamb Weston's actions are for its own benefit and the industry's path depends on traffic trends.

Robert Moskow inquired about the assumption of a 100 basis point headwind in Q2 reversing in Q3 due to retailers ordering more, and whether there's a risk that retailers might maintain lower inventory levels for efficiency, particularly in frozen.

Answer

CEO Sean Connolly explained that Conagra's portfolio has a steady baseline volume plus a seasonal promotional build, especially for traffic-building products. He noted that seasonal inventory builds and promotional volume always come, with the timing (Q2 vs. Q3) influenced by Thanksgiving, promotional calendars, and unique factors like the government shutdown and SNAP pause. He confirmed that December orders are consistent with the anticipated shift, as retailers delayed builds due to expected consumer slowdowns.

Robert Moskow asked about the assumption of a 100 basis point headwind in Q2 reversing in Q3 due to retailers not ordering as much in relation to consumption. He questioned if there's a risk that retailers might decide to go forward with less inventory than normal for the rest of the year, especially in the frozen area, to be more efficient.

Answer

CEO Sean Connolly explained that seasonal promotional builds are essential for retailers to meet volume targets, and this promotional volume and seasonal inventory build always occur. He stated it's usually a timing dynamic between Q2 and Q3, sometimes linked to Thanksgiving or promotional calendars. This year, the government shutdown and SNAP pause also influenced retailers to delay inventory builds, but December orders are shaping up consistently with expectations for a Q3 build.

Robert Moskow of TD Cowen asked whether Conagra's extensive innovation in the frozen category is successfully translating into premiumization and higher pricing, noting it has been difficult to see evidence of this.

Answer

President & CEO Sean Connolly strongly refuted the premise, stating that premiumization has been central to their strategy for a decade. He cited the example of Banquet meals evolving from a sub-$1 item to a high-quality, ~$4 product with a superior value proposition. He also highlighted the recent success of the premium-priced Banquet Mega Chicken Filets, which exceeded all expectations before hitting capacity limits, reinforcing the consumer appetite for their premium innovations.

Robert Moskow questioned the apparent clash between the need to raise soup prices to cover costs and the importance of providing value, especially given share losses in eating soups. He asked if Campbell's plans to improve affordability for eating soups and how competitors have reacted to recent price increases.

Answer

CEO Mick Beekhuizen explained that while cooking soups (broth, condensed cooking varieties) are performing well, eating soups, particularly ready-to-serve (RTS) and some condensed eating-focused products, are under pressure. He attributed RTS pressure to general eating soup trends and surgical pricing actions taken due to disproportionate inflation. He noted that elasticities materialized as expected and that selective incremental actions have been taken for the soup season to remain competitive, with recent L4 trends showing slight RTS growth and subdued share declines.

Robert Moskow asked if the heightened competitive intensity in crackers requires price investments for Goldfish similar to those in salty snacks, potentially resetting the brand's margin. He also inquired about the potential financial impact of new tariffs on steel can costs.

Answer

CEO Mick Beekhuizen differentiated the competitive dynamics, stating the plan for Goldfish is not a margin reset but a focus on reinforcing its value proposition through marketing, innovation, and price-pack architecture. On tariffs, he described the situation as fluid and multifaceted, noting the company is working on mitigation plans with suppliers but may need to take other actions, including pricing, depending on the final scope and duration of the tariffs.

Robert Moskow of TD Cowen questioned the Snacks division's low quarterly margin, the feasibility of achieving the full-year margin target, and the viability of the long-term 17% margin goal amid concerns that the salty snacks category may require a price correction.

Answer

CEO Mark Clouse defended the long-term margin goal, citing an intact cost-savings roadmap and the company's focus on value-added segments that are less susceptible to major price recalibrations. CFO Carrie Anderson outlined the path to second-half margin improvement for Snacks, which includes better volume trends, favorable mix from leadership brands, a more neutral pricing impact, and accelerated productivity savings from plant restructuring and DSD optimization.

Robert Moskow asked about the profit results in sweet baked snacks, noting a sequential step down despite SKU rationalizations, and sought reasons for this. He also inquired about expectations for the pet treats business in the back half, given an improving category but declining business, and plans for market share improvement.

Answer

Tucker Marshall, Chief Financial Officer, stated that sweet baked snacks' Q2 top line exceeded expectations, but the bottom line did not, primarily due to costs absorbed during the bakery network transition. He expects Q3 and Q4 to improve, with a $10 million benefit in Q4 from the Indianapolis facility closure. Mark Smucker, Chief Executive Officer and Chair of the Board, anticipates Milk-Bone returning to growth in Q3 due to marketing campaigns, innovation, and upcoming collaborations. Tucker Marshall added that the pet portfolio is expected to see low single-digit growth in Q3 and Q4.

Robert Moskow asked about the profit results in sweet baked snacks, noting a sequential step down despite SKU rationalizations, and sought reasons for the lack of improved profitability in Q2. He also inquired about expectations for the pet treats business in the back half of the year, given an improving category but Smucker's business being down, and plans for marketing to improve market share.

Answer

Tucker Marshall, Chief Financial Officer, stated that while the sweet baked snacks top line exceeded expectations, the bottom line did not, primarily due to costs absorbed during the bakery network transition. He expects improvement in Q3 and Q4, with a $10 million benefit from the Indianapolis facility closure in Q4. Mark Smucker, CEO and Chair of the Board, anticipated a strong lap for pet treats in Q3, with Milk-Bone returning to growth driven by marketing campaigns, innovation (Peanut Buttery Bites, upcoming Jif collaboration), and seasonal items. Tucker Marshall added that the pet portfolio is expected to see low single-digit growth in Q3 and Q4.

Robert Moskow from TD Cowen questioned if SKU rationalization impacted the volume decline in Sweet Baked Snacks during the quarter and requested more detail on the newly established dedicated sales organization for the segment.

Answer

CEO Mark Smucker clarified that the SKU rationalization did not impact Q1 volume, with the process expected to conclude in Q2. He explained that the new dedicated sales force is designed to enhance focus and execution at the store level. Smucker also highlighted positive signs in the segment, such as improving convenience channel traffic and strong growth in the donut brand.

Robert Moskow pointed to strong May retail data for coffee volume and asked if the company expects a reversal, given its elasticity assumptions. He also requested more detail on why the elevated trade recognition for Sweet Baked Snacks in Q4 was unexpected.

Answer

CEO & Chair of the Board Mark Smucker attributed coffee's strength to the affordability of at-home coffee and the performance of brands like Café Bustelo. CFO Tucker Marshall explained the trade accrual issue in Sweet Baked Snacks was related to the year-end true-up process and the integration onto a new combined system post-acquisition.

Robert Moskow asked for a divisional profit outlook for fiscal '26 across Coffee, Pet Food, and Sweet Baked Snacks, and inquired about the drivers of the implied profit decline in the Q4 guidance.

Answer

CFO Tucker Marshall declined to provide a divisional profit outlook for FY'26 but provided color on synergy timing, noting about $70 million of the $100 million run-rate objective would be achieved by year-end. He attributed the implied Q4 profit decline to the highest coffee cost basket of the year, continued investments in frozen handhelds and spreads, and the sales call-down in Sweet Baked Snacks.

Robert Moskow requested a divisional profit outlook for fiscal 2026 and asked for the drivers behind the substantial year-over-year profit decline implied in the Q4 2025 guidance.

Answer

CFO Tucker Marshall declined to provide a divisional FY26 forecast but clarified that stranded overheads impact the total company and not all Hostess synergies flow to the segment. For the Q4 profit decline, Marshall attributed it to three main factors: the coffee segment facing its highest cost basket of the year, continued investments in frozen handhelds and spreads, and the ongoing sales pressure in Sweet Baked Snacks.

Robert Moskow asked for more detail on the specific execution weaknesses for the Hostess brand and whether there were concerns that marketing for indulgent snacks could be less effective amid potential public health initiatives.

Answer

CEO Mark Smucker identified a lack of sufficient in-store display as a key execution weakness, which the company will address by ramping up efforts across channels. He expressed confidence that snacking trends, including indulgent snacking, remain strong and that the Hostess brand can meet consumer needs through various innovations like portion control, regardless of the external messaging environment.

Robert Moskow asked for more detail on the specific execution weaknesses for the Hostess brand and questioned if there were concerns about marketing indulgent snacks in a potentially more health-focused political environment.

Answer

CEO Mark Smucker identified a need for better in-store display execution as a key area for improvement, noting that the entire convenience channel has seen some softness. Regarding the marketing environment, Smucker expressed confidence that snacking trends, including indulgent snacking, remain strong as consumers continue to seek rewards. He stated the company's focus is on connecting the brand with consumer needs, including different portion sizes and value offerings.

Robert Moskow asked if the national marketing for Coors Light and Miller Lite is considered effective despite multi-year share losses, or if there are opportunities for improvement, with regional execution being the primary focus for stabilization.

Answer

CEO Rahul Goyal acknowledged opportunities for how Coors Light and Miller Lite show up, noting work on Miller Lite's 50-year campaign and Coors Light's share losses in Q3 versus Q2. He emphasized focus on getting the right national campaigns for these big brands, citing Coors Banquet's success as an example of effective execution, and mentioned upcoming live sports programming.

Robert Moskow sought clarification on Molson Coors' national marketing versus regional execution for Coors Light and Miller Lite. He asked if the national marketing for these major brands is considered effective despite multi-year share losses, or if improved regional execution is the primary key to stabilization.

Answer

CEO Rahul Goyal acknowledged opportunities for how Coors Light and Miller Lite show up, referencing Miller Lite's 50-year campaign and Coors Light's Q3 share performance. He emphasized focusing on national campaigns for big brands and leaning in differently, citing Coors Banquet's success as an example of effective execution, with more to play out with live sports.

Robert Moskow of TD Cowen asked at what point the accelerating volume deleverage would necessitate a re-evaluation of the company's asset footprint, including manufacturing and distribution.

Answer

President and CEO Gavin Hattersley reiterated that the company is pleased with its current brewery footprint. He emphasized that strategic moves, such as exiting contract brewing for Pabst, have been beneficial by reducing complexity and freeing up capacity for growth priorities like Peroni and the Yuengling partnership, suggesting a major review is not imminent.

Robert Moskow asked for a more detailed outlook on how the company's sales expectations for North America have changed for the second, third, and fourth quarters.

Answer

CFO Tracey Joubert declined to provide specific quarterly guidance but outlined the key drivers for the year. She reiterated the top-line forecast assumes 1-2% net price increases in North America. She also noted that the headwind from exiting contract brewing would be similar in Q2 as in Q1, and that the alignment of shipments (STWs) with depletions (STRs) is expected to occur primarily in Q3, not Q2.

Robert Moskow of TD Cowen questioned the Q4 slowdown in the EMEA & APAC segment, which was attributed to competition and consumer softness, and asked about the division's growth outlook for 2025.

Answer

CEO Gavin Hattersley acknowledged softer U.K. consumer demand and confirmed a 'value-over-volume' strategy for the Carling brand. However, he expressed long-term optimism for the segment, pointing to the successful expansion of Madrí into new markets and stating that he sees no reason why the EMEA & APAC business won't eventually grow faster than the North American business.

Rob Moskow questioned the confidence in achieving high single-digit EPS growth for coffee with only low single-digit net sales, implying significant leverage. He also asked about the discrepancy between USDA's 5-year coffee volume growth and Keurig Dr Pepper's/JDE Peet's declining volume, asking where the volume is going.

Answer

SVP of Finance Jane Gelfand explained that identifiable and actionable cost synergies, along with deleveraging, provide confidence for HSD EPS growth, especially in the initial years. President of U.S. Coffee Olivier Lemire attributed past volume declines to a post-COVID return to normal life, but expressed confidence in returning to growth through strong marketing campaigns, innovation, and new coffee systems, targeting millions of high-value households.

Rob Moskow questioned the confidence in achieving a high single-digit EPS growth target for coffee with only low single-digit net sales, asking about the implied operating leverage. He also highlighted a discrepancy between overall coffee volume growth (per USDA charts) and KDP/JDE Peet's declining volumes, asking where the market volume is going.

Answer

SVP of Finance Jane Gelfand stated that the high single-digit EPS growth is supported by identifiable, actionable near-term cost synergies, longer-term top-line opportunities, continuous productivity, and deleveraging. President of U.S. Coffee Olivier Lemire explained that KDP's at-home consumption spiked during COVID, then declined as life normalized, but has since stabilized. He expressed confidence in returning to volume growth through strong marketing campaigns and innovation, targeting high-value households not yet in the Keurig system.

Robert Moskow sought clarification on the top-line guidance, specifically if Quest and OWYN are projected to grow high single digits in fiscal 2026, and if a deceleration in Quest's growth is embedded in the outlook.

Answer

CFO Chris Bealer confirmed that Quest is expected to be up high single digits and OWYN in the double-digit range, while Atkins is projected to decline by about 20% in consumption. He noted that the first half will be impacted by price elasticity, Atkins' trade inventory reductions, and tough prior-year merchandising laps for Quest and OWYN.

Robert Moskow sought clarification on the top-line guidance, specifically questioning if Quest and OWYN are projected to grow at high single-digit rates in fiscal year 2026, which would imply a deceleration for Quest given its recent performance.

Answer

CFO Chris Bealer confirmed that Quest is expected to grow in the high single-digit range and OWYN in the double-digit range, while Atkins is projected to decline by about 20% in consumption. He explained that the overall top-line guidance is impacted by price increases (with initial elasticity effects heaviest in H1), anticipated reductions in Atkins' trade inventories, and tough prior-year laps for Quest and OWYN in the first half.

Robert Moskow asked about the competitive environment in the ready-to-drink (RTD) protein shake category and its impact on the new Quest shake launch, including its potential for distribution in club stores.

Answer

CEO Geoff Tanner acknowledged increased competition in the RTD space but expressed satisfaction with the Quest beverage launch, which has achieved ~22-23% ACV. He noted the 45-gram protein shake is performing well. Regarding club stores, he stated it's early and the ideal strategy is to build the brand in other channels first before launching a large club-sized pack.

On behalf of Rob Moskow, an analyst asked about the Quest bar category, noting that tracking data suggests it is underperforming the broader category. The question focused on what actions, beyond the new Overload bar, are being taken to return to the brand's low single-digit growth target for bars.

Answer

CEO Geoff Tanner responded by emphasizing that the bar category is highly responsive to new news and innovation. He highlighted the new Overload platform as a key initiative, noting its positive early consumer reviews and retailer acceptance. Tanner asserted that the company has significantly stepped up its innovation efforts and has a strong pipeline, which is crucial for driving growth in the bar segment. He also pointed to positive recent trends in the C-store channel as a sign of strength.

Robert Moskow from TD Cowen asked about the performance of Quest bars, the differentiation of its upcoming innovation, and whether the broader Quest innovation pipeline includes new category extensions.

Answer

CEO Geoff Tanner explained that Quest only requires low single-digit growth from bars to meet its targets, with chips and other platforms driving most of the growth. He expressed excitement for the new 'Overload' bar platform to bring excitement to the category. He also confirmed the innovation pipeline includes both building out existing platforms and extending into new categories by 'flipping the macros'.

Robert Moskow asked for clarification on the expected path back to volume growth by Q4 and sought to reconcile reported negative one percent volume with holding or gaining share in eight out of ten categories.

Answer

Chairman & CEO Jeffrey Harmening deferred to Group President Dana McNabb, who explained that while top 10 categories improved, total volume was impacted by declines in flour and desserts, which over-indexed on pounds. She highlighted encouraging volume responses where investments were made. VP - IR & Treasurer Jeff Siemon added that a four-point shipment timing headwind in Pet also weighed on total company pounds.

Robert Moskow asked for clarification on General Mills' expected timeline for returning to volume growth, specifically if it's still anticipated by Q4, and sought to reconcile why reported volume was down 1% despite holding or gaining share in eight out of ten categories.

Answer

Dana McNabb, Group President of North America Retail and North America Pet, explained that while top ten categories saw volume improvement, total volume was impacted by declines in flour and desserts, which over-index on pounds. She highlighted positive volume responses to price investments in refrigerated dough, fruit snacks, and snack bars, noting ongoing work in Totino’s and cereal. Jeff Siemon, VP of Investor Relations and Corporate Finance, added that a shipment timing headwind in Pet also weighed on total company pounds.

Robert Moskow asked about General Mills' expected timeline for returning to volume growth by Q4 and sought clarification on why reported total volume was down 1% despite holding or gaining share in eight out of ten categories.

Answer

Dana McNabb, Group President of North America Retail and North America Pet, explained that while volume improved in top ten categories, total volume was impacted by declines in flour and desserts, which over-index on pounds. She noted positive volume responses to price investments in refrigerated dough, fruit snacks, and salty snacks. Jeff Siemon, VP, Investor Relations, and Corporate Finance, added that a 4% shipment timing headwind in Pet also weighed on total company pounds.

Robert Moskow asked if pricing could return to positive territory during the year and questioned the long-term size of the fresh pet food opportunity, given that category growth has slowed.

Answer

CEO Jeffrey Harmening stated that while a mix of price and volume is needed long-term, the current environment requires leaning into volume. Regarding fresh pet, he and Group President Dana McNabb noted the category is now twice the size it was during the initial test, and the long-term humanization trend supports a path for the segment to grow from $3 billion to a projected $10 billion in ten years.

Robert Moskow from TD Cowen questioned if pricing could return to positive territory during the year and whether the slowing growth of the fresh pet food category impacts the company's long-term expectations for its new launch.

Answer

Chairman & CEO Jeffrey Harmening stated that while the long-term growth algorithm needs both volume and price, the current environment requires leaning into volume growth. On fresh pet, he noted the category is now twice the size it was a few years ago, making the addressable market larger, and that double-digit growth is still very strong. Group President Dana McNabb added that the segment is projected to grow from $3 billion to $10 billion in ten years.

Robert Moskow questioned the company's price gaps relative to other pasture-raised competitors following the recent price increase. He also asked for clarification on how potential tariffs might influence promotional plans in the second half.

Answer

CEO Russell Diez-Canseco expressed comfort with current pricing, stating the brand's strength allows it to resonate beyond being a commodity. CFO Thilo Wrede clarified that pricing was taken to protect gross margin from anticipated costs, including tariffs. If tariffs are less impactful than expected, it could create flexibility to increase promotional spending beyond current plans.

Robert Moskow asked about the rationale behind Vital Farms' low double-digit price increase, questioning if a larger increase was considered given that retailers have already raised prices significantly, and inquired about the current on-shelf availability compared to the rest of the egg category.

Answer

President and CEO Russell Diez-Canseco explained that the price increase was primarily to protect gross margins and ensure the company meets its guidance, not to match retailer pricing, which Vital Farms doesn't control. He added that the egg category is still not fully servicing demand and that Vital Farms' volumes are increasing as planned, with hopes for a more normalized market in the second half of the year.

Robert Moskow inquired about Vital Farms' recent low double-digit price increase, questioning why it wasn't higher to match retailer actions and the potential for further retail price hikes. He also asked for an update on egg supply levels on shelves compared to the peak of the avian influenza disruption.

Answer

President and CEO Russell Diez-Canseco explained that the price increase is primarily to protect gross margins and support long-term growth, not to mirror retailer pricing strategies, which Vital Farms does not control. He added that the egg category is still facing supply constraints and has not fully returned to normal, though Vital Farms' own volumes are increasing as planned.

Robert Moskow asked about the drivers of price/mix, the company's pricing strategy amid high shelf prices, and the impact of out-of-stocks on the brand.

Answer

CFO Thilo Wrede clarified that reported price/mix was about 7%, attributing the discrepancy with scanner data to retailer-led price increases. President and CEO Russell Diez-Canseco stated that list price increases are not planned to be a meaningful growth driver in 2025. CMO and GM, Butter Kathryn McKeon noted that brand loyalty remains strong, with consumers often choosing other breakfast items over competing egg brands when Vital Farms is unavailable.

Robert Moskow of TD Cowen questioned the degree of flexibility in Vital Farms' production capacity, given that volume growth is set to significantly outperform initial annual guidance. He also asked if retail stockouts had a quantifiable impact on sales and could be used as leverage for increased shelf space.

Answer

CEO Russell Diez-Canseco explained that while the company builds in some operational flexibility, there are limits to short-term upside as they do not source from the wholesale market due to high standards. CFO Thilo Wrede added that while they can push capacity for short periods, it's not sustainable long-term. Regarding stockouts, Russell Diez-Canseco noted that the company is running at full capacity to meet strong demand, which itself contributes to tight supply, viewing it as a 'good problem to have' that demonstrates brand strength.

Robert Moskow from TD Cowen asked for clarification on the company's employee count, which appeared to have increased since a 2023 restructuring. He also requested more detail on the specific goals and focus areas for the newly appointed interim Chief Transformation Officer, John Boken.

Answer

Founder, President, and CEO Ethan Brown clarified that the change in employee count was not due to administrative 'creep' but rather a shift in workforce composition, primarily from insourcing manufacturing activities after reducing the number of co-packers from thirteen to one. CFO and Treasurer Lubi Kutua added that prior international investments also contributed. Regarding John Boken, Brown stated his key objectives are to right-size the operational footprint to match current revenue, accelerate gross margin expansion by addressing issues like fixed cost absorption, and improve overall operational efficiency.

Robert Moskow sought more clarity on the decision to pull full-year 2025 guidance, questioning if it was due to specific factors like tariffs or general demand uncertainty. He also asked for a run-rate SG&A figure excluding Q1's one-time expenses.

Answer

CEO Ethan Brown clarified the guidance withdrawal is due to broad uncertainty in consumer spending, stating the priority is to focus the team on achieving profitability rather than an arbitrary revenue target. CFO Lubi Kutua added that while direct tariff impact seems minimal, the resulting consumer skittishness negatively affects the category. Regarding SG&A, Kutua confirmed about $7 million in Q1 extraordinary items and noted that while legal fees should normalize, costs from the China operations suspension will continue.

Robert Moskow from TD Cowen questioned the flat Q1 sales forecast given recent momentum, asked about visibility into new distribution, and inquired about the timeline for a more profound balance sheet recapitalization.

Answer

CEO Ethan Brown attributed the flat Q1 forecast to temporary tightness from network consolidation and a distribution loss at a major customer that will be regained in Q2. CFO Lubi Kutua clarified that distribution gains refer to expanding presence in existing stores. Regarding the balance sheet, Kutua acknowledged the need to address the convertible debt maturing in two years and stated they are evaluating alternatives, pointing to the recent use of their ATM program as part of their ongoing plan.

Robert Moskow of Mizuho Securities inquired about the drivers behind the increased CapEx and strong demand for the SaveGreen program and whether the permitting environment for gas infrastructure in the Northeast is improving, prompting interest in new projects.

Answer

SVP & COO Patrick Migliaccio attributed the SaveGreen success to strong residential and commercial demand for efficiency programs and excellent execution, highlighting its benefits for customers, decarbonization, and shareholders via timely cost recovery. CEO Stephen Westhoven responded that NJR has consistently invested in system reliability and expansion to meet growth and expects to continue doing so.

Robert Moskow of TD Cowen asked about the performance of the Spices and Flavor Solutions business and whether sourcing changes could mitigate tariff impacts.

Answer

CEO Casey Keller acknowledged that the spices business was slightly below expectations but should turn positive in the second half. He explained that while they are exploring alternative sourcing, options are limited for key items like garlic, where China supplies 80% of the world's market. Therefore, the company will need to implement pricing to recover tariff costs.

Robert Moskow inquired about the company's internal reaction to the significant stock drop, whether it would accelerate portfolio changes or cost-cutting, the composition of the negative 2% consumption trend in April, and the timing of the $15 million retailer inventory deload.

Answer

CEO Kenneth Keller explained that the company was already accelerating its portfolio shaping and cost reduction efforts prior to the stock's reaction, and the market's response only strengthened that conviction. He noted that while the April consumption trend included some benefit from the Easter shift, the underlying trend is improving. He clarified the $15 million inventory reduction occurred mostly in late January and into February.

Robert Moskow from TD Cowen asked about the company's free cash flow performance in 2024 and the outlook for 2025, particularly concerning working capital. He also questioned why year-end debt levels were relatively flat compared to the prior year despite cash generation.

Answer

CFO Bruce Wacha directed him to the cash from operations figure in the press release, explaining that 2025 cash flow should be comparable to or slightly better than 2024, but would not replicate the large inventory-driven benefit of 2023. He acknowledged that while net debt did decline slightly in 2024, leverage did not decrease as much as planned due to lower-than-expected EBITDA for the year.

Robert Moskow of TD Cowen asked about rising competitive intensity from Wesson and Taco Bell, its potential impact in 2025, and whether increased aggression from Quaker poses a risk to the hot cereal business.

Answer

CEO Casey Keller confirmed B&G is increasing resources for Crisco and Ortega to counter competitive pressures, with plans for innovation and marketing to improve trends in 2025. He dismissed the risk from Quaker, stating there is very little consumer substitution between Cream of Wheat and Quaker's oatmeal products.

Robert Moskow of TD Cowen requested more detail on the new advertising campaign, specifically its messaging that distinguishes fresh food from kibble and whether this could create confusion for consumers who use Freshpet as a mixer.

Answer

COO Nikki Beatty clarified that the company recognizes mixing is a common consumer behavior. The new advertising aims to educate on the health benefits of feeding fresh, whether as a main meal or a topper. She assured that the creative will be nuanced to appeal to different consumer subsets and will build on the brand's established story without alienating mixers.

Robert Moskow inquired about the new advertising strategy, specifically its focus on differentiating fresh food from kibble, and whether this could create confusion for consumers who use Freshpet as a mixer.

Answer

COO Nikki Beatty acknowledged that mixing is a common consumer behavior. She explained the new messaging aims to educate on the health benefits of fresh food, regardless of whether it's used as a main meal or a topper. The strategy is designed to grow both usage occasions by showcasing the value of adding fresh food to a pet's diet, with creative tailored to different consumer segments.

Robert Moskow asked for details on the company's contingency plan if growth slows further, specifically regarding flexibility in capital expenditures and the impact on free cash flow and margins, and also asked if media spending dollars were increasing.

Answer

CFO Todd Cunfer explained they have flexibility to manage costs, having already reduced the 2025 CapEx forecast from $250M to $225M, and can adjust line staffing to protect margins. He reiterated the commitment to being free cash flow positive in 2026 by pushing out capital projects if needed. CEO William Cyr confirmed that media spending dollars are planned to go up slightly versus the original plan.

Robert Moskow asked if the company's evaluation of its long-term guidance includes setting targets beyond 2027 and whether achieving those would necessitate expanding its manufacturing footprint.

Answer

CEO William Cyr responded that while all options are being considered for a potential guidance update, the company's existing three manufacturing sites provide enough capacity to reach well over $2 billion in net sales. Therefore, any decision on a new footprint would impact the business in the 2029-2030 timeframe, well beyond the current 2027 targets.

Robert Moskow asked if the company is considering a new long-term guidance timeline beyond 2027 and whether that would require capital spending to expand its manufacturing footprint beyond the three existing sites.

Answer

Executive William Cyr clarified that while all options are being considered for a potential guidance update, the existing three manufacturing sites provide enough capacity to reach over $2 billion in net sales. Therefore, any decision to expand the physical footprint would impact a period well beyond 2027, likely not being needed until 2029 or 2030.

Robert Moskow from TD Cowen requested an update on the international business, specifically on the progress of expanding U.S. brands like Hero and TheraBreath into global markets.

Answer

President and CEO Rick Dierker expressed high satisfaction with the international segment's mid-to-high single-digit growth. He attributed this largely to the rapid and successful rollout of recent acquisitions, highlighting that the Hero brand was launched in 50 countries within 12 months. He noted strong global demand for these brands is allowing them to gain share even in slowing economies, and that they are in the 'early innings' of this expansion.

Robert Moskow asked if the company has had to shift its tactics in any categories, aside from vitamins, in response to the changing economic environment, specifically regarding promotional levels.

Answer

Executive Richard Dierker responded that there has not been a significant shift in promotional tactics. Instead, the primary pivot has been in advertising, where the company is adjusting its messaging to emphasize the value proposition of its brands more explicitly to appeal to the currently pressed consumer.

Robert Moskow asked if the new product pipeline for next year is expected to be as strong as this year's and whether the company needs to tweak its mix of premium versus value products in light of a value-seeking consumer.

Answer

Matthew Farrell (executive) expressed confidence in the 2025 pipeline, noting that this year's successful launches will have a full year of contribution next year, supplemented by new ideas. He stated that the company's long-standing 60/40 premium-to-value portfolio split is well-suited for changing consumer habits and is unlikely to change significantly.

Robert Moskow of TD Cowen questioned if the SG&A investment spending for distribution would continue in the second half of the year and asked if the Boulder Canyon brand carries a higher margin that could aid overall margin expansion.

Answer

CEO Howard Friedman confirmed that SG&A spending as a percentage of sales will be modestly higher in the back half to support westward expansion and peak summer marketing, funded by gross margin expansion. He also affirmed that Boulder Canyon is a premium, higher-margin brand, and its growth contributes a positive mix benefit that supports the back-half EBITDA outlook.

Robert Moskow asked about the primary building blocks for expanding EBITDA margin in 2025, seeking specific drivers for the strong productivity gains. He also requested an outlook for the non-branded side of the business following its significant decline in Q4.

Answer

CFO Ajay Kataria stated that 2025 EBITDA margin expansion will be driven by a strong productivity program, targeting approximately 80 basis points of improvement. Both Kataria and CEO Howard Friedman highlighted that productivity gains stem from capital investments in automation, increased capacity, procurement efficiencies, and network optimization, including the new RDC. Friedman also clarified that the double-digit decline seen in the non-branded business should not be expected to repeat in 2025.

Robert Moskow asked if promotional tactics in salty snacks are shifting from price discounting toward bonus bags, and whether the potato chip category remains aggressively competitive. He followed up by asking if Utz feels the need to change its own tactics in response.

Answer

CEO Howard Friedman observed that the potato chip promotional environment is normalizing away from deep discounting and toward different value constructs, including bonus bags. In response to the follow-up, he stated that while Utz feels good about its current plans, the company will always evaluate its tactics and is building the capability to make changes at speed if necessary.

Robert Moskow asked if the bonus pack program was a limited-time offer and how its duration would be evaluated. He also questioned how to think about the balance of price/mix versus volume for the remainder of the year.

Answer

CEO Howard Friedman confirmed the bonus pack program was intended as a limited-time test to deliver value and drive trial, and that it is now winding down as the company transitions to summer merchandising plans. CFO Ajay Kataria added that going forward, investors should expect a more normal course with about one point of price investment.

Robert Moskow of TD Cowen asked for a detailed update on the coffee and broth categories. He questioned if TreeHouse is seeing strong demand in ground coffee and the potential impact of tariffs, and also asked about the progress in regaining market share in broth following previous plant issues.

Answer

CEO Steven Oakland confirmed strong demand and opportunity in ground coffee, noting the Northlake facility expansion is nearly complete, enabling new business bids. On broth, he reported that service levels have been 'fantastic' and that the business is on the verge of returning to pre-pandemic growth levels as they prepare for the peak season.

Robert Moskow of TD Cowen asked for clarification on the plan to increase working media spend in 2026, questioning if it was a catch-up. He also probed whether raising prices in the U.S. was a significant risk given consumer pressure.

Answer

Chairman & CEO Dirk Van de Put stated the 2026 media investment is not a catch-up but a strategic necessity to support the chocolate category after major price hikes and to bolster brands in the weak U.S. market. CFO Luca Zaramella added that the upcoming U.S. price increases are 'surgical,' designed to protect key price points and popular formats, thereby minimizing the risk of significant volume loss.

Robert Moskow of TD Cowen asked for clarification on the plan to increase media investment in 2026 and questioned the strategy of raising prices in the U.S. given the pressure on consumers.

Answer

CEO Dirk Van de Put explained that the 2026 media investment is a strategic necessity to support brands after significant price hikes, not a 'catch-up'. CFO Luca Zaramella added that the upcoming U.S. price increases are 'surgical,' designed to protect key price points and popular pack sizes while targeting less-sensitive, non-core brands to minimize volume impact.

Victor, on behalf of Robert Moskow from TD Cowen, asked for the outlook on international growth for the next fiscal year, clarification on the value of trapped shipments, and details on the remaining steps for the 'Project 420' cost-savings initiative.

Answer

CEO & Chairman Irwin Simon clarified that $8 million in shipments were delayed and are expected to be recognized in Q1/Q2. He expressed confidence in significant international growth from markets like Germany, Poland, and the UK. For Project 420, he outlined ongoing efforts including manufacturing and distributor consolidation, regaining lost retail space, and improving operational efficiencies in brew pubs.

Robert Moskow from TD Cowen asked how the beverage segment's quarterly sales performed against internal expectations and inquired if the timing of new marketing and consolidation efforts was a factor in recent lagging retail sales data for the brands.

Answer

CEO Irwin Simon acknowledged the beverage business was 'off a bit' compared to internal plans, attributing it to the timing of new product launches and distributor uptake. He noted that current activities include SKU rationalization and brand integration, which require upfront investment but are expected to yield benefits over the year. Simon expressed confidence in the growth plan, citing high hopes for new innovations and the recently acquired Molson Coors brands.

Robert Moskow of TD Cowen asked if the beverage shipment and innovation timing issues from the previous quarter had been resolved and requested more details on the upcoming innovation pipeline.

Answer

Chairman and CEO Irwin Simon confirmed that Q1 integration challenges with ABI brands were resolved, contributing to 36% beverage revenue growth. Ty Gilmore, President of Tilray Beverages North America, added that the innovation pipeline for the next 7-8 months is finalized and has been positively received by distributors.

Robert Moskow of TD Cowen asked about the company's level of conviction in a return to positive concentrate volume in the second half, and inquired about the phasing, noting a potentially tough Q4 comparison.

Answer

President and CFO John Murphy expressed confidence that positive volume growth would return in the second half, as reflected in the full-year guidance. He downplayed the Q4 comp, stating the company's ability to influence results is more important. He pointed to good underlying business momentum outside of the Q2 anomalies and a robust investment plan for the back half of the year.

Robert Moskow asked for an update on the company's efforts to clear up recent misconceptions about its trademark Coke brand and for more detail on the current state of the Hispanic consumer.

Answer

Chairman and CEO James Quincey said the impact from a false video is now 'largely in the rearview mirror,' and recovery efforts are focused on localness and affordability. Regarding the Hispanic consumer, he noted a pullback in purchasing, likely due to caution from geopolitical tensions. He believes this will abate and that the company's strategy of local execution will see it through.

Robert Moskow pressed for more detail on the strategy of changing packaging mix to react to higher aluminum costs, asking about the magnitude of a shift to plastic that would be necessary to influence the cost structure.

Answer

CEO James Quincey cautioned against exaggerating the impact, stating that while not insignificant, the aluminum price increase is a manageable problem within the multi-billion dollar U.S. business. He explained that a combination of mitigating factors, including sourcing, can weights, potential price increases, and shifts to other packages, would be used. He stressed that it is not a huge swing factor and the company will manage through it.

Robert Moskow from TD Cowen asked if the expected deceleration in price/mix for 2025 would provide a corresponding benefit to volume, based on elasticity assumptions.

Answer

Chairman and CEO James Quincey expects 2025 to be the 'inverse of the third quarter,' with emerging markets resuming their faster growth trajectory compared to developed economies. This dynamic will contribute to overall volume growth but will have a less positive mechanical effect on price/mix, leading to a more normalized balance between volume and pricing.

Robert Moskow asked for an update on the plan to stabilize the Special K brand, given its health credentials, and questioned the company's strategy for competing with small, emerging, protein-forward brands.

Answer

CEO Gary Pilnick acknowledged Special K's weak quarter but outlined a plan to lean into its health equity with a stronger food focus, on-pack claims, a new protein granola, and a relaunch of Special K Zero. He stated the company will both revitalize its existing health-oriented brands and use its IP to create new, competitive products to challenge emerging brands.

Robert Moskow asked for an update on plans to stabilize the Special K brand, given its historical health credentials. He also inquired whether the company's strategy to compete with small, emerging protein-forward brands is through internal portfolio improvements or potential acquisitions.

Answer

Chairman and CEO Gary Pilnick acknowledged Special K's weak quarter but outlined plans to leverage its health equity with a stronger focus on food, nutrient density, and new products like a protein granola and a restaged Special K Zero. He described the strategy against emerging brands as an 'and' approach: improving their existing portfolio while also using their extensive IP to launch new, competitive products internally.

Robert Moskow asked for an evaluation of the 2024 market share loss and whether the long timeline for plant closures helps mitigate execution risk.

Answer

CEO Gary Pilnick positioned the share performance within the context of meeting financial goals and executing strategic priorities. He specified the U.S. share loss was driven by Special K, while other core brands were stable. He affirmed the supply chain timeline is deliberate to ensure careful planning and execution without disrupting the commercial business.

Asked about the inflation picture for 2024 and 2025, including specific drivers like grains and labor, and the implications for pricing.

Answer

The company described 2024 as a year of stabilization at elevated cost levels, with benefits from lower grain prices being offset by inflation in other areas like sugar, rice, and labor. They expect this dynamic of stabilization at high levels, with various puts and takes, to continue into 2025.

Robert Moskow asked about the net impact of inflationary headwinds in 2024, the outlook for costs including labor in 2025, and the company's corresponding pricing strategy.

Answer

David McKinstray, CFO, characterized the 2024 cost environment as a 'stabilization at these higher levels.' He noted that benefits from lower grain costs were offset by inflation in other areas like sugar and rice. He included labor within this overall net stabilization and suggested this dynamic would likely continue into 2025, with costs remaining elevated but stable.

Robert Moskow asked about the inflationary environment, inquiring about the net impact of headwinds in 2024, the outlook for 2025, and how the company is thinking about pricing in that context.

Answer

CFO Dave McKinstray characterized 2024 as a 'stabilization at these higher levels.' He explained that while the company benefited from deflation in grains like corn and wheat, this was offset by continued inflation in other areas such as sugar, rice, and labor. He indicated that this stabilization at elevated costs is the current expectation moving into 2025.

Robert Moskow attempted to quantify the tariff impact on aluminum can costs, asking if his calculation method was accurate.

Answer

CFO Garth Hankinson declined to confirm the specific financial impact, stating that the effect of tariffs is fully baked into the comprehensive guidance provided for revenue growth and operating margins. He noted these figures also include assumptions for productivity, cost savings, and other inflationary pressures.

Robert Moskow noted the increased price competitiveness in the light beer segment and asked if Constellation plans to respond with more aggressive promotions. He also questioned if the industry can sustain normal pricing power amid overall weak volumes.

Answer

CEO William Newlands confirmed they are assessing the competitive dynamics in the light beer segment. However, he maintained that the company's long-standing 1% to 2% pricing algorithm remains the correct strategy. He emphasized this pricing is applied selectively by market and SKU, which is more consumer-friendly and sustainable than broad, reactive price changes.

Robert Moskow commented that the marketing plans for the Wine and Spirits business seem slow to materialize and asked if the turnaround strategy includes more acquisitions of up-and-coming brands like the recent Sea Smoke purchase.

Answer

CEO William Newlands reiterated that the initiatives would take 9-12 months to fully play out and that sequential improvement is expected in the second half of the year. He stated definitively that the company does not plan to acquire more wine properties at this time. The current focus is entirely on improving the operational performance of the existing business and engaging more with distributor partners.

Robert Moskow of TD Cowen inquired about the scope of customer conversations informing the 2025 outlook and the potential risk of smaller craft distillers failing. He also asked about the strategy for driving growth in the Branded Spirits segment in 2025, considering distributor destocking and the lapping of the Penelope brand launch, and questioned the commitment of major distributors to MGP.

Answer

CEO David Bratcher stated that the commercial team has engaged with all customers to build the 2025 forecast, which focuses on more stable, multinational contracts. He explained that 2025 branded growth will be driven by portfolio diversification into high-growth categories like premium tequila, leveraging the company's agility. Bratcher also suggested that rumored distributor cutbacks are focused on their wine portfolios, which could be a net positive for spirits as they reallocate resources to more profitable categories.

Robert Moskow of TD Cowen asked about price sensitivity in North America, specifically regarding pack sizes and absolute price points, referencing a competitor's comment that prices above $4 were causing consumers to exit categories.

Answer

Chairman, President and CEO Steven Cahillane agreed with the premise, stating that while price-package architecture has always been important, the absolute dollar price is under more pressure now due to the strained consumer environment. He noted this sensitivity is particularly heightened for households with children and incomes under $100,000, and that it varies throughout the monthly pay cycle.

Inquired about the timing and expected impact of the return to full innovation and merchandising in North America, asking when the currently weak retail tracking data would show improvement.

Answer

The improvement will be cumulative throughout the year, not a single inflection point. It will be driven by a return to full innovation, increased brand building, and better quality merchandising. The most notable improvement in retail tracking is expected in the third quarter, with momentum building throughout the year.