Scott Marks

Scott Marks asked for insights into the dog snack category's rebound, contrasting it with prior quarters' discretionary spending pressures. He also sought clarification on Uncrustables' distribution runway in traditional U.S. retail channels versus away-from-home, and the relative importance of velocity improvements versus innovation for growth.

Answer

CEO Mark Smucker explained that both pet categories are performing well, with dog snacks growing due to humanization and premiumization trends, supported by innovation and strong base biscuit performance. For Uncrustables, Mr. Smucker noted expanded distribution in traditional retail due to new capacity and marketing, stating the brand is generally 'everywhere,' with continued growth driven largely by innovation (e.g., high-protein sandwiches) and household penetration.

Scott Marks asked about the dog snack side of the business, specifically the category rebounding and what has changed relative to prior quarters where discretionary spending pressure was noted. He also inquired about the Uncrustables business, its distribution runway in away-from-home channels, and how to contextualize velocity improvements versus innovation in traditional channels.

Answer

CEO Mark Smucker stated that both pet categories are performing well, with dog snacks growing due to humanization and premiumization trends, supported by innovation and base biscuit performance. He emphasized winning across different segments. For Uncrustables, Mark Smucker noted expanded distribution in traditional U.S. retail channels due to new capacity and marketing, and that continued growth will be driven largely by innovation, such as high-protein sandwiches, and further household penetration.

Scott Marks asked about the company's stance on price reductions to offer consumer value, given competitors' actions, and if there are opportunities within the portfolio where this might be required. He also inquired about base business expectations for fiscal 2027, considering the tariff relief tailwind and potential for 'on algo' EPS growth.

Answer

Mark Smucker, Chief Executive Officer and Chair of the Board, highlighted the broad portfolio's ability to deliver varying degrees of value, from mainstream brands like Meow Mix to premium offerings. He noted that the absence of tariffs allows for holding coffee prices and that significant commodity deflation would be passed to consumers. Tucker Marshall, Chief Financial Officer, stated it's too early to provide a full FY27 outlook but indicated a path to 'on algo' EPS growth given a stabilizing commodity environment, no tariffs, cash generation, and debt paydown.

Scott Marks asked about the company's stance on price reductions to offer consumer value, given competitors' actions, and if there are opportunities within Smucker's portfolio where this might be required. He also inquired about base business expectations for fiscal 2027, considering the tariff relief and 'on algo' EPS growth.

Answer

Mark Smucker, CEO and Chair of the Board, emphasized that Smucker's broad portfolio allows for varying degrees of value, from mainstream brands like Meow Mix to premium offerings within Milk-Bone. He noted that the absence of tariffs affords the ability to hold coffee prices and that meaningful commodity deflation would be passed to consumers. Tucker Marshall, Chief Financial Officer, stated it's early to provide a full FY2027 outlook but indicated that with a stabilizing commodity environment, no tariffs, cash generation, and business momentum, there could be a path to 'on algo' growth, with a detailed outlook to be provided at the Q4 earnings call.

Scott Marks from Jefferies asked for clarification on the sales value represented by the Hostess SKUs being rationalized. He also inquired about the potential impact on winter pricing plans and P&L timing if a tariff exemption on coffee were to be granted.

Answer

CEO Mark Smucker advised against focusing on the sales impact of the SKU reduction, expressing confidence that growth in core sub-brands like Donettes will offset any losses. CFO Tucker Marshall explained that if tariff relief were granted, the full $0.50 negative EPS impact would not be immediately reversed due to timing and costs already realized. Any update to guidance would depend on the timing and nature of the relief.

Scott Marks asked for the financial magnitude of the pet inventory reduction in Q4 and whether it was driven by more than just consumer pullback. He also requested more insight into the company's expectation for fiscal 2027 to be an "on-algorithm" growth year for EPS.

Answer

CFO Tucker Marshall quantified the pet inventory destocking impact at approximately $20 million in Q4 and stated it was believed to be retailer-specific, not consumer-driven. He explained that the confidence in FY27 stems from the belief that the significant headwinds of FY26 (coffee elasticity, tariffs, marketing investment) are not expected to recur.

Scott Marks asked if there was retailer pushback on the sweet baked snacks category given recent performance. He also inquired about the sustainability of coffee supply and long-term commodity trends.

Answer

CEO Mark Smucker stated there has been no retailer pushback on sweet baked snacks and that the company is working closely with them on shelf sets and innovation. Regarding coffee, he described the high commodity costs as cyclical, driven by a supply deficit, and expressed confidence in long-term normalization due to industry-wide efforts in farming and crop science.

Scott Marks asked if there has been any retailer pushback on the sweet baked snacks category and inquired about long-term sustainability or supply concerns for the coffee commodity, similar to issues seen in cocoa.

Answer

CEO Mark Smucker stated there has been no retailer pushback on sweet baked snacks; on the contrary, the company is working closely with them on shelf sets and has a strong innovation pipeline. Regarding coffee, he characterized the high prices as a cyclical commodity issue driven by a supply deficit, expressing confidence that the market will normalize over time, aided by industry efforts to support farmers and develop climate-resistant crops.

Scott Marks asked about Vital Farms' revised expectations for the year compared to the Investor Day outlook, inquiring about the confidence behind changing the guidance now despite market volatility and winter storms. He also asked for clarity on the actual impact of the ERP implementation on shelf space and order patterns, and the expected magnitude of recovery.

Answer

Russell Diez-Canseco, Executive Chairperson, President, and CEO, explained that the revised guidance reflects intentionality, setting realistic expectations, and acknowledging the broader macro environment and short-term noise. Thilo Wrede, CFO, added that the company has a track record of beating initial expectations and aims to set clear, achievable targets. Regarding ERP, Russell Diez-Canseco noted that service levels have recovered, leading to positive retail conversations about growth and long-term plans, indicating a strong recovery process.

Scott Marks inquired about Vital Farms' revised 2026 outlook compared to Investor Day projections, asking why the company chose to adjust expectations now given market volatility. He also sought clarity on the actual impact of the ERP implementation on shelf space and order patterns, and the expected magnitude of recovery.

Answer

Russell Diez-Canseco, Executive Chairperson, President, and CEO, explained the intentionality behind setting achievable expectations amidst a volatile macro environment, emphasizing the company's track record of exceeding initial outlooks. Thilo Wrede, CFO, added that the revised guidance provides flexibility. Regarding the ERP, Mr. Diez-Canseco noted a short-term dislocation but highlighted recovered service levels and positive retail conversations for future growth and shelf space.

Scott Marks requested an update on the company's progress in rebuilding its internal inventories to target levels. He also asked about the potential impact of avian flu disruptions and price normalization in the broader commodity egg market on Vital Farms' business.

Answer

CFO Thilo Wrede stated that they are continuing to build inventory, aiming for two to three weeks of egg supply to improve operational efficiency and prepare for the Q4 busy season. CEO Russell Diez-Canseco asserted that commodity egg pricing has a very limited impact on their business, as they operate in a different part of the market and appeal to a different set of consumer needs.

Scott Marks asked about the observed pressure on units, specifically if it impacts certain categories, departments, or attribute-based items more than others, and how this affects margin mix. He also inquired how value creation strategies inform changes across different parts of the store.

Answer

CEO Jack Sinclair confirmed that unit effects are seen in categories with significant inflation, such as coffee and meat, and in produce where customers are buying fewer units due to volatile pricing. He emphasized the company's role in minimizing the impact of inflation on customers. President and COO Nick Konat added that there isn't significant mix pressure from sales movements. He clarified that the biggest unit challenge comes from less engaged customers, who were gained last year and are now putting fewer units in their baskets, rather than from core customers.

Scott Marks asked for an update on the cannibalization factor from new stores impacting existing markets, given the strong performance of new stores. He also inquired about Sprouts' exposure to SNAP spend and any impacts observed from policy changes or the potential government shutdown.

Answer

Curtis Valentine, Chief Financial Officer, stated that the cannibalization factor remained in the same general range (125-150 basis points) and was in line with expectations, noting it would grow as the number of new stores ramps up. Regarding SNAP, he indicated it represents about 2-3% of the business, a limited impact, and that the effects of policy changes or a shutdown were just starting to be seen, not a huge impact but certainly not helping.

Scott Marks inquired about the cannibalization factor of new stores on existing markets, asking for an update on that dynamic. He also asked about Sprouts' exposure to SNAP spend and any impacts from policy changes or potential government shutdowns.

Answer

CFO Curtis Valentine stated that the cannibalization factor remains in the 125-150 basis point range, in line with expectations, and will grow as new store count increases. He noted that SNAP spend is a limited impact, historically 2-3% of sales, and while not helping, it's not a huge impact to the business.

Scott Marks from Jefferies asked how Sprouts is approaching the increasing competition in attribute-based products like high-protein. He also inquired about the strategy for maintaining produce freshness as the company expands into new regions like the Northeast.

Answer

CEO Jack Sinclair affirmed that protein is a key trend and Sprouts is well-positioned with an expanding assortment, aiming to be a leader. Regarding freshness, he detailed the strategy of locating stores near distribution centers, empowering local sourcing teams, and managing inventory to ensure quality, even for products shipped long distances.

Scott Marks noted that Sprouts' broad-based category growth differs from traditional retailers and asked for detail on which areas were performing relatively better or weaker. He also asked for clarification on a comment from the investor deck about new store growth being offset by cannibalization, requesting insight on its magnitude.

Answer

CEO Jack Sinclair and President/COO Nick Konat explained that differentiated categories with strong attributes—like dairy, frozen, grocery, and vitamins—are outperforming. They emphasized that innovative and attribute-forward products are winning across the board, with no categories seen as laggards. CFO Curtis Valentine quantified cannibalization at approximately 100-150 basis points, primarily in established markets, but noted the strong performance of new stores entering the comp base creates a slight net benefit currently.

Scott Marks asked about the specific changes in heightened brand reinvestment for 2026 compared to previous efforts, and how Flowers Foods is navigating the competitive environment and consumer pressures, including competitors' actions and Flowers' promotional strategy.

Answer

Ryals McMullian, Chairman and CEO, clarified that while past investments focused on DKB, Simple Mills, and other innovative products, the *new* heightened investment for 2026 is specifically aimed at reigniting demand for *traditional loaf*, particularly Nature's Own. He noted a normal competitive environment in Q4 with no major bakery consolidation, described ongoing consumer pressures (GLP-1s, elevated prices, channel shifts), and explained Flowers' disciplined promotional strategy, which strategically pulled back in Q4 due0 to limited expandable consumption and poor ROI.

Scott Marks asked about Flowers Foods' outlook on consumer sentiment and category demand normalization, especially given Q3's low point, and what factors instill confidence in a recovery. He also inquired about the margin pressure from newer investments and potential offsets like supply chain efficiencies.

Answer

Chairman and CEO Ryals McMullian explained that while the exact timeline is uncertain, the large staple category is expected to stabilize over time, despite ongoing 'noise' from tariffs, the job market, and government shutdowns, with weakness potentially continuing into 2026. He emphasized continued investment in consumer-preferred value and better-for-you offerings. Regarding margins, McMullian noted that innovation typically pressures margins short-term but expects improvement with scale and targeted CapEx for efficiency.

Scott Marks asked about the company's outlook on consumer sentiment, expectations for category demand normalization as the economy strengthens, and the confidence in a category recovery. He also inquired about the impact of newer investments on margins and potential offsets like supply chain efficiencies.

Answer

Chairman and CEO Ryals McMullian stated that while the exact timeline is uncertain, the category is expected to stabilize over time, emphasizing continued focus on consumer investment and differentiated offerings. He acknowledged that innovation typically pressures short-term margins but anticipates improvement with scale and targeted CapEx. CFO Steve Kinsey added that they are focused on the long term.

Scott Marks asked how investment dollars would be spent on mainstream loaf brands, the current portfolio mix of differentiated products versus long-term goals, and what other changes retailers are making to address market pressures beyond adding small loaves.

Answer

Chairman & CEO A. Ryals McMullian explained that investments in mainstream brands like Nature's Own will be a mix of marketing and promotional support, which is consistent with past strategy. He stated that small loaves are a small but growing part of the portfolio. He confirmed that differentiated products will become a larger part of the portfolio over time. Regarding retailers, he noted significant space gains for organics like DKB, particularly in mass channels, but said that beyond small loaf segments, not many other major shelf reallocations have occurred yet, though he anticipates more changes to reflect consumer trends.

Scott Marks asked how investment dollars would be allocated for mainstream loaf brands, the current portfolio mix of differentiated products versus long-term goals, and what other changes retailers are making to address market pressures beyond adding smaller loaves.

Answer

CEO A. Ryals McMullian explained that investment in mainstream brands will continue to be a mix of marketing and promotional support. He stated that the differentiated part of the portfolio will continue to grow and become a bigger focus. Regarding retailer actions, he noted significant space gains for organic products like Dave's Killer Bread, particularly in mass channels, which highlights the market's bifurcation. He anticipates retailers will further reallocate shelf space to reflect new consumer trends in the future.

Scott Marks of Jefferies asked for details on the performance of the private label and away-from-home segments. He also inquired about a recent bakery closure and the consumer reception of smaller loaf sizes.

Answer

CEO Ryals McMullian explained that away-from-home weakness reflects a broader foodservice decline, though segment profitability is improving. For private label, he cited lost bid business as the driver of declines, which is now being refilled. The bakery closure was part of ongoing supply chain optimization. McMullian added that smaller loafs are performing well, meeting consumer needs for value and smaller households.

Scott Marks inquired about the SNAP disruption in early November, seeking clarity on why Utz Brands' core geographies were disproportionately affected compared to the broader category. He also asked for insights into the expected cadence of innovation launches, such as protein pretzels and new Boulder Canyon offerings, and how these would contribute to distribution wins throughout the year.

Answer

Howard Friedman, CEO, explained that the core Utz geographies (Maryland, Virginia, Washington D.C. area), representing about 20% of core sales, were more impacted by SNAP and government shutdown due to population characteristics. He detailed that distribution gains are expected to build through the year, with California expansion shelving starting soon and innovation rolling out in Q2, leading to a consistent volume year despite Q1/April anomalies from bonus bag laps. William Kelley, CFO, added that California distribution would contribute volume starting in Q2.

Scott Marks inquired about the disproportionate impact of SNAP disruption and government shutdown in early November on Utz's core geographies (Maryland, Virginia, Washington D.C.). He also asked for clarity on the cadence of innovation launches, such as protein pretzels and new Boulder Canyon offerings, and expected distribution wins throughout the year.

Answer

CEO Howard Friedman explained that the core of Utz's sales (20%) is in the Maryland, Virginia, D.C. area, which was more impacted by the SNAP disruption. He noted that distribution gains, including the California expansion, would start shelving in February/March, with innovation rolling out in Q2, leading to a consistent volume year, despite Q1 laps on bonus bags.

Scott Marks of Jefferies asked about the current state of the supply chain and future efficiency opportunities. He also requested color on marketing strategies across different geographies and channels.

Answer

CEO Howard Friedman described the supply chain optimization as nearing completion, having achieved key plant efficiency goals ahead of schedule while maintaining excellent service. CFO Bill Kelly added that these savings support the margin profile. On marketing, Friedman noted a 44% YoY increase in Q2 spending, utilizing retail media in expansion markets, social/digital campaigns, and planned support for Boulder Canyon, aiming to connect with consumers across various touchpoints.

Scott Marks asked if bonus packs were the primary driver of volume share gains in core geographies and about incremental distribution opportunities in those markets. He also questioned what consumer behavior metrics might prompt the company to bring back the bonus pack program.

Answer

CEO Howard Friedman confirmed bonus packs contributed to volume share gains but also highlighted that distribution gains for brands like On The Border and Boulder Canyon within core geographies were also key drivers. Regarding a return of bonus packs, Friedman stated the company is watching consumer value-seeking behavior and will use its full marketing mix, including pricing, promotion, and innovation, to deliver value as market conditions evolve.

Scott Marks asked about the impact of the end of avian influenza-driven pricing adders in foodservice and how the deflation in the egg market would pass through to both foodservice and refrigerated retail. He also inquired if the refreshed US dietary guidelines recommendations would change Post Holdings' portfolio strategy or necessitate adjustments.

Answer

Matt Mainer, CFO and Treasurer, explained that with rebalanced inventory, supply now matches demand, making them agnostic to egg prices, and a 90-day lag pass-through model minimizes historical volatility. Nico Catoggio, COO, stated that Post Holdings' portfolio is well-balanced with the guidelines and they will consider nutrients and price from an M&A perspective.

Scott Marks asked about the implications of avian influenza-driven pricing adders ending in Foodservice and how the pass-through of egg market deflation should be considered for both Foodservice and Refrigerated Retail. He also inquired if the refreshed U.S. dietary guidelines recommendations change Post's thinking about its portfolio or necessitate any adjustments.

Answer

CFO and Treasurer Matt Mainer stated that with rebalanced inventory, Foodservice is agnostic to egg prices, operating on a 90-day lag pass-through model without significant annual volatility. COO Nico Catoggio believes Post's portfolio is well-balanced with the guidelines and will consider nutrient and price from an M&A perspective.

Scott Marks inquired about Post Holdings' targeted investments for fiscal 2026, seeking details on innovation potential and specific categories for investment. He also asked about the foodservice business, particularly the demand for value-added products, and what gives confidence in sustained momentum, along with comments on the overall backdrop for operators.

Answer

COO Jeff Zadoks explained that investments would be typical brand innovation and line extensions across retail categories, including protein and granola products in cereal, and efforts directed towards the Nutrich relaunch in pet. For foodservice, Mr. Zadoks cited a long history of moving customers up the value chain due to labor dynamics and the stickiness of conversions to liquid eggs, especially after avian influenza-driven pricing.

Scott Marks inquired about Post Holdings' targeted investments for fiscal 2026, seeking details on innovation potential and specific categories for investment. He also asked about the foodservice business, particularly the demand for value-added products, and what gives confidence in sustained momentum, along with comments on the overall backdrop for operators.

Answer

COO Jeff Zadoks explained that investments would be typical brand innovation and line extensions across retail categories, including protein and granola products in cereal, and efforts directed towards the Nutrich relaunch in pet. For foodservice, Mr. Zadoks cited a long history of moving customers up the value chain due to labor dynamics and the stickiness of conversions to liquid eggs, especially after avian influenza-driven pricing.

Scott Marks asked about the impact of higher input costs from product reformulations and regulatory changes on the portfolio, and also inquired about the potential competitive impact of the W.K. Kellogg acquisition.

Answer

COO Jeff Zadoks explained that Post will use innovation to address new trends and take a pragmatic, tactical approach to reformulating ingredients over time, without major changes expected in fiscal 2026. Regarding the Kellogg deal, President and CEO Rob Vitale suggested the acquirer's scale could enhance the category but was hesitant to comment further until the transaction closes.

Scott Marks inquired about Post's stance on increasing promotional activity in the cereal category and asked for initial learnings from the recent acquisition of PPI.

Answer

COO Jeff Zadoks stated that cereal promotions are at normal levels and Post's strategy is to focus on programs that drive value, not just promotions for their own sake. Regarding PPI, he noted the integration ramp-up was slower than expected due to employee disruption but that the deal will fit well and has uncovered some longer-term synergies.

Scott Marks asked for clarification on 2026 cocoa costs, specifically if the 'stable commodity basket' implies 2026 cocoa costs are in line with 2025, given previous comments about hedging above 2025 rates but with flexible structures. He also inquired about how Hershey is thinking about investment in 'tail brands' (smaller brands within the chocolate portfolio) going forward, given the current focus on largest brands like Hershey and Reese's.

Answer

Steve Voskuil (SVP and CFO) clarified that cocoa costs are 'up just a little versus 2025' and hedged above current market levels, not materially above 2025. He noted flexible hedging structures allow for some downside participation in 2026, and 2027 hedging would suggest deflation. Kirk Tanner (President and CEO) described investment in tail brands as 'world-class portfolio management,' investing across the entire portfolio with a clear understanding of each brand's role to target consumers effectively, aiming for smaller brands to become 'next billion-dollar brands' and leveraging non-working media.

Scott Marks sought clarification on Hershey's cocoa costs for 2026, asking if the 'stable commodity basket' comment implies 2026 cocoa costs are in line with 2025, given previous statements about hedging above 2025 rates and flexible structures. He also inquired about Hershey's strategy for investing in 'tail brands' (smaller brands) within the chocolate portfolio, considering the increased focus on its largest brands like Hershey and Reese's.

Answer

SVP and CFO Steve Voskuil clarified that cocoa costs for 2026 are up slightly versus 2025 and hedged above current market levels, with flexible structures allowing for some downside participation. He noted that current hedging for 2027 would suggest deflation compared to 2026. Regarding tail brands, Steve Voskuil explained that Hershey employs world-class portfolio management, investing across the entire portfolio, not just large brands. The goal is to grow smaller brands into 'next billion-dollar brands' by leveraging non-working media and deliberate strategies based on each brand's role and potential.

Scott Marks asked about Hershey's observations on consumer health, given broader weakening U.S. consumer sentiment, and how the company is thinking about this heading into the holidays and 2026. He also inquired about potential headwinds from changes to the SNAP program, including both policy and temporary government shutdown-related issues, asking for context on their impact to the business.

Answer

President and CEO Kirk Tanner acknowledged a challenging consumer market but noted the CMG category remains resilient, running at historic levels despite pressures, expressing confidence in Hershey's position. Regarding SNAP, he stated that about 2% of SNAP dollars are in the CMG category and that Hershey has seen minimal impact so far. He expects a minimal impact in 2026 due to state and federal dynamics, emphasizing continuous monitoring of consumer behaviors.

Scott Marks asked about the company's observations regarding consumer health and weakening U.S. consumer sentiment, and how Hershey is thinking about this heading into the holidays and 2026. He also inquired about potential headwinds from changes to the SNAP program, including policy changes and government shutdown-related issues, and their context for the business.

Answer

CEO Kirk Tanner acknowledged a challenging consumer market but stated that the category remains resilient, running at historic levels despite pressures, and expressed confidence in the company's position. Regarding SNAP, he noted that about 2% of SNAP dollars are in the CMG category, and while it's early days, the company expects a minimal impact on the category in 2026, continuously monitoring consumer behaviors.

Scott Marks from Jefferies inquired about cocoa supply dynamics, specifically the balance of recovery from West Africa versus new origins. He also asked about the C-store channel outlook and retailer response to new initiatives.

Answer

SVP & CFO Steve Voskuil noted positive signs in the cocoa market, including lower grinds and a potential surplus, with other origins outside West Africa playing a larger role. Chairman, President & CEO Michele Buck added that C-store retailers have responded strongly to initiatives like the 'gold standard planogram,' which has driven high single-digit category growth for them, creating momentum despite lower channel traffic.

Scott Marks inquired about cocoa supply dynamics, specifically the expected recovery from West Africa versus new origins, and asked about the response from convenience store retailers to Hershey's new initiatives.

Answer

SVP & CFO Steve Voskuil noted positive signs in the cocoa market, including lower grinds and a potential surplus, driven by better farming practices and growth in origins outside West Africa. Chairman, President & CEO Michele Buck added that retailer response in the convenience channel has been very strong, with new planograms driving high single-digit category growth for partners, creating strong momentum for Hershey's business despite lower channel traffic.

Scott Marks asked about cocoa supply dynamics, specifically the balance of recovery from West Africa versus new origins, and about the response from convenience store retailers to Hershey's new initiatives.

Answer

SVP & CFO Steve Voskuil noted positive signs in the cocoa market and stated that a larger surplus could be achieved through both better farming in West Africa and continued growth in new origins. Chairman, President & CEO Michele Buck added that convenience retailers have responded very strongly to initiatives like the 'gold standard planogram,' which has driven significant category growth for them.

Scott Marks asked how Hershey would reinvest in the business if cocoa prices were to fall significantly and inquired about performance trends in retail channels beyond convenience stores.

Answer

SVP and CFO Steve Voskuil said they would continue investing in brands and capabilities, which haven't been short-changed, and would also deploy cash to shareholders. CEO Michele Buck noted a continued consumer shift to value channels like club and dollar, with the take-home segment showing strong mid-single-digit growth.

Scott Marks inquired about the company's perspective on GLP-1 medications, including recent developments like oral options, and an update on investments in cocoa-growing regions outside West Africa.

Answer

Dirk Van de Put, Chairman and CEO, stated that GLP-1 modeling does not significantly alter previous estimates, with no short-term impact due to modest adoption and benign calorie reduction. Over a 10-year horizon, with 10%-20% U.S. adoption, the estimated effect on overall volumes is a negligible 0.5%-1.5%. He explained that balancing cocoa supply across Latin America and Asia (e.g., Ecuador, Brazil, India, Indonesia) is a long-term risk management strategy to reduce reliance on concentrated regions like Ghana and Ivory Coast. He also mentioned investing in and supporting lab-grown cocoa due to its environmental and social benefits.

Scott Marks asked about Mondelēz's perspective on GLP-1 medications, including recent developments like oral medications and price reductions, and their expected impact on the business for the current year and beyond. He also inquired about updates on investments in cocoa-growing regions outside West Africa and how these strategies compare to traditional regions.

Answer

Chairman and CEO Dirk Van de Put stated that Mondelēz models GLP-1 impacts quarterly but does not foresee a significant change to previous estimates, which indicated a modest adoption rate and benign calorie reduction. He projected a negligible long-term impact of 0.5%-1.5% on overall volumes over 10 years. Regarding cocoa investments, Van de Put explained the strategy to balance supply from different regions, primarily Latin America (Ecuador and Brazil) and Asia (India, Indonesia), to mitigate risk from over-reliance on West Africa. He also mentioned investing in and supporting lab-grown cocoa due to its potential benefits in addressing supply chain negatives.

Scott Marks asked for a global outlook, seeking details on encouraging regions, current challenges, and expected growth profiles for different parts of the world in 2026.

Answer

Brendan Foley, President and CEO, provided a regional breakdown: In Asia-Pacific, he expects gradual improvement in China (strong retail grocery, middle China cuisine, QSR, but soft high-end food service), with good growth continuing in Australia and Southeast Asia. For EMEA, he anticipates strengthening consumer business with volume growth and pricing, and a stronger year for flavor solutions due to QSR market stabilization. In the Americas, he expressed optimism for both consumer and flavor solutions segments. Lastly, he expects a good year for the McCormick de Mexico business in Latin America, primarily driven by the consumer segment.

Scott Marks asked for a detailed overview of McCormick's global regional performance and outlook, specifically inquiring about encouraging trends, challenges, and growth profiles for 2026 across Asia-Pacific, EMEA, Americas, and Latin America.

Answer

Brendan Foley, Chairman, President, and CEO, provided a regional breakdown: In Asia-Pacific, China is expected to see gradual improvement in 2026, with strength in retail grocery, middle China business, and QSR, but softness in higher-end Western food service. Australia and Southeast Asia show good growth. In EMEA, the consumer business is expected to strengthen with volume growth and pricing, driven by brand marketing, distribution, and e-commerce, while flavor solutions anticipate a stronger year due to QSR market stabilization. The Americas are expected to show reasonable optimism for both consumer and flavor solutions. Latin America, particularly the McCormick de Mexico consumer segment, is projected to have a good year.

Scott Marks asked for insights into the softness in China food service and what gives McCormick confidence in a gradual recovery for the rest of this year and stronger performance next year. He also inquired about the magnitude of impact from reformulations, specifically potential pressure on legacy branded products, to gauge offsets to broader food softness.

Answer

Brendan Foley, Chairman, President, and CEO, explained that Q3 was impacted by austerity measures affecting high-end dining, leading to consumption shifts to lower-cost/greater-value out-of-home channels. McCormick is diversifying and expanding distribution in these shifting channels, seeing strength in its retail business (smaller format stores). This, combined with an easier Q4 comparison, provides confidence in slight to gradual growth for China, and he reiterated a long-term belief in the market's opportunity. Regarding reformulations, Brendan Foley viewed them as addressing consumer needs, having a positive impact on all brands. He emphasized the timing aspect, noting that larger projects take time (e.g., 2027 for some announcements) and it's a continuation of industry innovation to keep brands relevant.

Scott Marks inquired about the specific factors contributing to the softness in McCormick's China food service business and the basis for confidence in a gradual recovery for 2025, potentially strengthening into 2026. He also asked about the magnitude and timing of the impact of reformulations on legacy branded products, seeking to understand their role in offsetting broader food softness.

Answer

Chairman, President, and CEO Brendan Foley explained that China food service softness was due to austerity measures impacting high-end dining, leading to a consumption shift to lower-cost channels. He expressed confidence in recovery based on diversification into high-growth channels, expanded distribution in smaller format stores, and strong retail business performance, noting an easier Q4 comparison. Regarding reformulations, he viewed them as a continuation of industry innovation to address consumer demands (e.g., natural ingredients), expecting a positive impact on brands over time, but with a longer validation and launch timeline.

Scott Marks inquired about the expected growth cadence for the Flavor Solutions segment in the second half of the year and asked about the current nature of discussions with retailers regarding innovation and pricing.

Answer

Chairman, President & CEO Brendan Foley stated that for Flavor Solutions, he expects H1 trends to be sustained in the Americas and APAC, with EMEA likely stabilizing as it laps weaker prior-year results. EVP & CFO Marcos Gabriel added that more surgical pricing will occur in the segment in H2. Foley described conversations with retailers as 'very positive and collaborative,' focused on mutual category growth, with recent distribution gains serving as proof of the strong partnership.

Scott Marks asked about the expected growth cadence for the volatile Flavor Solutions segment in H2 and the nature of current conversations with retailers on innovation and pricing.

Answer

CEO Brendan Foley expects Flavor Solutions trends in the Americas and APAC to be sustained, while EMEA should stabilize against weak prior-year comparisons. CFO Marcos Gabriel added that more pricing will occur in this segment in H2. Foley described retailer conversations as 'positive' and 'collaborative,' with their strong category performance, innovation, and brand support leading to productive discussions and distribution gains.

Scott Marks asked about the Price/Mix dynamic in North America, specifically regarding the trade support component, and whether current support levels are comfortable or if incremental support is warranted. He also asked for clarification on previously paused international capacity plans versus recently added capacity in international markets.

Answer

President and CEO Michael Smith stated that 90% of large chain contracts are settled, and while some pricing defense was needed for long-term customer success, the Price/Mix decline is largely due to mix shifts (branded to private label retail, and shifts between QSR customers). CFO Bernadette Madarieta added that Price/Mix headwinds are expected to moderate in the second half as they lap fiscal 2025 pricing actions. Michael Smith clarified that the pace of newly announced capacity has slowed, and the "added capacity" refers to what was built over the last year in developing markets, impacting European exports. He believes the industry will be rational and has seen postponements/delays/cancellations.

Scott Marks asked about the price mix dynamic in North America, focusing on the trade support component. He questioned the current level of customer support, whether incremental support is warranted, or if current levels are comfortable. He also sought clarification on previously paused international capacity plans versus recently added capacity in the market.

Answer

CEO Michael Smith stated that 90% of large chain contracts have been settled, and the company feels good about its position, having defended pricing for long-term success with growing customers. He reiterated that the price mix decline includes a significant mix component. CFO Bernadette Madarieta added that price mix headwinds are expected to moderate in the second half. Michael Smith clarified that the pace of newly announced international capacity has slowed, and recent discussions refer to capacity added over the last year in developing markets, expressing belief in industry rationality despite hearing of postponements and delays.

Scott Marks asked about the drivers behind recent business wins with QSR customers, C-stores, and other away-from-home categories, specifically whether price support or other factors were key. He also sought an update on the overall traffic environment in the U.S. and internationally, and customer expectations for the remainder of the calendar and fiscal year.

Answer

CEO Mike Smith attributed business wins to improved customer engagement, joint business planning, and a cross-functional approach, emphasizing that customers are prioritizing service quality, consistency, and innovation over just price. He noted QSR traffic was flat overall, with Burger QSR down and Chicken QSR up, and expressed interest in new value meal offerings. CFO Bernadette Madarieta added that international QSR traffic was mixed, with the UK down 4% and other markets showing varied performance.

Scott Marks asked about the primary drivers behind Lamb Weston's recent business wins, including expansion with QSR customers and in C-stores and other away-from-home categories, questioning if price support or other factors were more influential. He also inquired about the overall traffic environment in the U.S. and internationally, and what customers are communicating for the remainder of the calendar and fiscal year.

Answer

CEO Mike Smith attributed the business wins to a changed approach in customer engagement, emphasizing joint business planning and a cross-functional strategy. He noted that North American customers are increasingly prioritizing service quality, consistency, and innovation over just price, leading to high contract retention rates and tailwinds from new customers. Regarding traffic, Mr. Smith mentioned flat overall QSR traffic, with Burger QSR down (though improving sequentially) and Chicken QSR up, and expressed interest in new value meal offerings. CFO Bernadette Madarieta added that international QSR traffic was mixed, with the UK down 4% but some markets like France, Germany, and Spain showing slight increases.

Scott Marks from Jefferies sought clarification on management's comments about announced international capacity additions being potentially canceled or delayed. He also asked for more detail on the fiscal 2026 capital expenditure guidance and the long-term outlook for CapEx as a percentage of sales.

Answer

President & CEO Mike Smith stated that based on competitive intelligence, they believe 1 to 1.5 billion pounds of international capacity have been canceled or delayed, noting the industry has historically been rational. CFO Bernadette Madarieta clarified the $500 million CapEx plan for FY26, explaining it reflects a shift from growth to modernization and maintenance, which she expects to be around 3% and 2% of sales respectively, plus an additional $100 million for environmental projects.

Scott Marks asked about the cadence of repatriating production from the completed baked chicken facility and the expected magnitude and cadence of margin improvement from these actions, and inquired about details regarding a sizable impairment charge taken in the quarter.

Answer

CEO Sean Connolly highlighted the importance of chicken in the portfolio, noting the completion of the baked chicken project fixed quality inconsistencies and that additional investments are being made to increase capacity for fried chicken products like Banquet Mega Filets, which will be a tailwind for margins. CFO Dave Marberger confirmed the baked chicken line completion at the end of Q2 and the transition of volume back from third parties, all incorporated into fiscal 2026 guidance. Dave Marberger explained the impairment charge was due to a sustained decline in stock price and market cap, triggering an analysis that led to an increased discount rate, marking book value down to fair value, despite the business performing in line with expectations.

Scott Marks asked about the cadence of repatriating production from the completed baked chicken facility and the magnitude and cadence of margin improvement from these actions. He also inquired about details surrounding a sizable impairment charge taken in the quarter, as it was not detailed in the press release.

Answer

CEO Sean Connolly highlighted the importance of chicken in the portfolio, noting the baked chicken project is complete and quality inconsistencies fixed. He also mentioned new investments to increase capacity for Banquet MEGA Filets (fried chicken), which is a strong tailwind. CFO Dave Marberger confirmed the line completion at the end of Q2 and the transition of bringing volume back, all incorporated into FY26 guidance. Regarding the impairment charge, Dave Marberger explained that a sustained decline in stock price and market cap triggered a goodwill and brand impairment analysis (normally done in Q4). Due to the macro backdrop impacting stock price, they increased their discount rate, which drove the impairment, essentially marking book value down to fair value, while reiterating confidence in the business direction and guidance.

Scott Marks from Jefferies asked for more details on Project Apollo's second phase, focusing on automation and efficiencies within remaining facilities, including its timeline and expected benefits. He also inquired about the challenges in the retail frozen novelty business and the company's plans for stabilization.

Answer

CFO Shawn Munsell outlined that Project Apollo's second phase, focusing on automation and process improvement within plants, is likely to materialize in late 2026 or more likely 2027, aiming to optimize efficiency further after consolidation. CEO Dan Fachner addressed the frozen novelty challenges, attributing them to cautious consumer sentiment, particularly in July, and highlighted ongoing efforts in marketing and trade spend, expressing confidence in a recovery over the next year. Shawn Munsell added that the closure of the Colton plant and consolidation into a nearby California facility already involves a shift from manual to almost fully automated production.

Scott Marks inquired about the challenges faced by J&J Snack Foods' frozen novelty business in retail and the company's strategy for stabilization.

Answer

CEO Dan Fachner attributed the challenges to cautious consumer sentiment, particularly impacting July sales. He highlighted efforts in increased marketing and trade spend, which are showing improving trends, and expressed confidence in a recovery over the next year, supported by a strong innovation pipeline for 2026.

Scott Marks of Jefferies inquired about the retail segment's performance, specifically the reasons for reduced promotional activity in frozen novelties and the plans to restore capacity for the handhelds business following a plant fire. He also asked for details on the cost structure, particularly marketing and distribution expenses.

Answer

CEO Dan Fachner explained that promotional efforts for frozen novelties were not as deep as needed but have been course-corrected. Regarding handhelds, he stated the fire-damaged plant will be closed as another facility has successfully increased its production capacity to meet future demand. CFO Shawn Munsell added that higher marketing costs were due to seasonal summer promotions for frozen beverages and Dippin' Dots, while distribution costs are trending down due to freight optimization and exiting third-party logistics facilities.

Scott Marks from Jefferies LLC asked for more detail on the general weakness in the pretzel category, inquired about recent performance trends in the convenience channel, and questioned the company's exposure and response to new regulations on artificial ingredients.

Answer

Executive Daniel Fachner explained that while the overall pretzel category is down, the company is gaining share and reformulating its product to align with the growing Bavarian-style segment. He noted the convenience channel remains weak, down about 7% in the quarter. Regarding regulations, Fachner stated the team is proactive and has already removed red dye #3 from all products, staying ahead of legislative changes.

The analyst asked for clarification on the allocation of restructuring charges, the drivers of lower retail profitability and future marketing spend expectations, and the reasons for the volume decline in the foodservice segment.

Answer

The restructuring charges were unallocated as the facility served both segments. Retail profitability was impacted by a strategic increase in marketing spend, a difficult year-over-year comparison, and negative price/cost from ag inflation; margins are expected to be flat to growing going forward. The foodservice volume decline was primarily due to lapping LTO pullbacks from large customers, which was partially offset by growth elsewhere and is expected to be lapped in the back half of the year.

Asked about the journey to achieving the strong Q2 gross margin and its sustainability. He also inquired about the specific drivers behind the volume growth in Lancaster's owned brands (Marzetti, New York Bakery). Lastly, he asked for perspective on the current promotional environment.

Answer

The executive explained that margin recovery is due to overcoming prior inflation and a renewed focus on productivity. They expect to continue building on this margin level. Owned brand growth was attributed to specific product successes and strong retail execution. Regarding promotions, the company is cautious about increasing trade spend, as data shows it doesn't always drive significant incrementality.

Scott Marks from Jefferies asked for more details on SG&A savings and targeted overhead reductions, and also inquired about the innovation pipeline and its expected contribution to sales growth for the current year and beyond.

Answer

CFO Ruben Baldew explained that SG&A savings were driven by overhead reductions, including bonus releases and a focus on indirect cost competitiveness, with these efforts continuing into 2026. CEO Stéfan Descheemaeker added that innovation and renovation are expected to nearly double their contribution from 2024's 10% level. He highlighted renovation's role in defending against private labels and new innovations in snacking, such as protein balls and fish strips, which will be scaled across countries.

Scott Marks inquired about the specifics of the retailer destocking, asking which countries or categories were most affected, and requested an updated outlook on category growth and Nomad's expected market share performance.

Answer

CFO Ruben Baldew explained that the destocking was broad-based across most of their European markets and product segments, but he believes the majority of the impact is now complete. CEO Stéfan Descheemaeker added that the frozen category remains healthy and that he expects Nomad to gain market share as the year progresses, driven by growth initiatives scheduled for later quarters, while noting the UK faces tougher comparisons.

Scott Marks asked for more detail on the retailer inventory destocking, inquiring which specific countries or categories were most affected, and for an updated outlook on category growth and market share for the year.

Answer

CFO Ruben Baldew explained that the destocking was broad-based, affecting 12 to 13 of the 15 countries they track, and was not concentrated in any specific segment. CEO Stéfan Descheemaeker added that the frozen category remains healthy, and while the company's top-line guidance was slightly reduced, they expect to grow market share in the upcoming quarters. He noted that Q1 was expected to be the softest quarter due to the timing of growth initiatives.

Scott Marks of Jefferies inquired about the extent to which tariff impacts could be mitigated through pricing and other actions, and whether the revised guidance was driven by divestitures or underlying performance.

Answer

CFO Bruce Wacha stated that the guidance reduction was almost entirely due to divestitures. CEO Casey Keller explained that while there will be a lag, the company expects to recover most tariff impacts through targeted pricing, particularly in the spices category, supplemented by productivity efforts.

Scott Marks asked if the company expects to recoup any of the volume lost from retailer inventory reductions and sought clarity on the confidence that the company will soon lap changing consumer behaviors, especially given contrary sentiment from peers.

Answer

CEO Kenneth Keller responded that he believes the retailer inventory reduction is largely permanent as retailers seek greater operational efficiency. Regarding consumer behavior, he stated it will be a gradual process rather than a single event, but the company expects to lap the largest negative comps around the middle of the year, based on its own brand and category data.

Scott Marks of Jefferies asked for a breakdown of the Q3 guidance for an organic volume/mix decline in the high single digits, which seemed weaker than anticipated. He also inquired about the specific categories where pricing actions are being implemented.

Answer

CFO Patrick O'Donnell attributed the Q3 volume outlook to consistent consumer trends combined with the impact of margin management actions. CEO Steven Oakland clarified the timing, noting that business exits impact Q3, while the significant benefit from the griddle recovery will primarily be seen in Q4. O'Donnell confirmed pricing actions are largest in coffee, with minor impacts from cocoa, oils, and tariffs.

Scott Marks asked for commentary on the pressure observed in snacking categories during Q1 and sought the rationale for the conviction in a material improvement in organic volume/mix in the second half of the year.

Answer

CFO Patrick O'Donnell acknowledged that some snacking categories faced difficult year-over-year comparisons but stated the consumer trend towards snacking remains intact. He explained that the expected second-half acceleration in volume is driven by normal business seasonality and, importantly, the full recovery of the frozen griddle facility. CEO Steven Oakland added that the griddle business recovery will create a favorable lap in the fourth quarter.

Scott Marks asked about the performance of new protein-focused innovations and whether the company's price investment strategy is steady-state or focused on key seasons.

Answer

Group President Dana McNabb highlighted that protein is a strong consumer trend and that new products like Cheerios Protein have exceeded expectations. Regarding pricing, she explained the strategy is to maintain the right value proposition year-round while also increasing investment and innovation around key seasons, noting a 50% increase in seasonal innovation is planned.

Scott Marks from Jefferies asked about the performance of recent protein-focused innovations and how the company approaches price investments, comparing steady-state versus seasonal or event-driven strategies.

Answer

Group President Dana McNabb highlighted that protein is a strong consumer trend and that new products like Cheerios Protein have exceeded expectations. Regarding pricing, she explained the strategy is to maintain the right value proposition year-round while also capitalizing on key seasons with a 50% increase in planned seasonal innovation, as consumers are often willing to spend more during those times.

Scott Marks from Jefferies asked if Kroger has observed any strategic changes from national brand suppliers in response to the continued outperformance of 'Our Brands'. He also inquired about the potential impact of regulations on artificial food ingredients.

Answer

Interim CEO & Chairman Ronald Sargent stated that there has been no significant change in strategy from CPG suppliers, with their pricing and promotional activities remaining steady. Regarding regulations, he acknowledged the trend toward eliminating artificial ingredients, which CPGs and Kroger are addressing through reformulation. However, he noted that the company is currently more focused on mitigating the potential impact of tariffs.

Scott Marks of Jefferies inquired if Kroger has observed any change in strategy from its branded CPG suppliers in response to the continued outperformance of 'Our Brands'. He also asked about the potential impact of regulations, such as bans on artificial food dyes, on the center store.

Answer

Interim CEO & Chairman Ronald Sargent stated that the selling strategies of CPG suppliers have remained in a 'steady state' with no notable increase in promotional aggressiveness. Regarding regulations, he acknowledged the trend towards eliminating artificial ingredients, which both CPGs and Kroger are addressing through reformulation. However, he noted that the company is currently more focused on mitigating the potential impact of tariffs, which has been minimal so far.