General Mills - Earnings Call - Q1 2026

Executive Summary

• Q1 FY26 net sales were $4.52B, down 7% reported and down 3% organic, as price investments and trade timing weighed; adjusted diluted EPS was $0.86 (down 20% constant currency) while GAAP EPS was $2.22 driven by a $1.05B gain on the U.S. yogurt divestiture.
• Versus S&P Global consensus, GIS delivered a slight beat on revenue ($4.52B vs $4.52B*) and adjusted EPS ($0.86 vs $0.82*), and EBITDA modestly above consensus ($0.84B vs $0.82B*).
• Management reaffirmed FY26 guidance: organic net sales -1% to +1%; adjusted operating profit and adjusted EPS -10% to -15% constant currency; ≥95% free cash flow conversion; and ~4% reported net sales headwind from divestitures, acquisitions, FX and the 53rd week.
• Call catalysts: early evidence price investments are restoring pound share (8 of top 10 U.S. categories) and household penetration gains; innovation/new products up ~25% in Q2 pipeline; Blue Buffalo fresh pet cooler rollout (target 5,000 by Q2) with margin phasing/timing benefits expected to unwind in Q2.

What Went Well and What Went Wrong

What Went Well

• “Our primary goal in fiscal 2026 is to restore organic sales growth… grow or hold pound share in 8 of our top 10 U.S. categories” (CEO Jeff Harmening).
• Innovation acceleration: “new product volumes are already up 25%… backed by strong plans in baking and soup” (CEO).
• International strength with timing benefits: segment net sales +6% and operating profit +214% (≈3% net sales timing to unwind later), aided by price/mix and FX.

What Went Wrong

• Organic net sales -3% on unfavorable price/mix and trade timing; adjusted gross margin -120 bps (34.2%), adjusted operating profit -18% constant currency.
• North America Retail net sales -13% to $2.63B; operating profit -24% to $564M, pressured by lower volume (including yogurt divestiture impact).
• Q2 outlook: “operating profit to be down more in Q2 than Q1” as inflation phasing and International timing headwinds unwind; no contribution from U.S. yogurt in Q2 (post-close).

Transcript

Operator (participant)

Good morning and welcome to General Mills' First Quarter Fiscal 2026 Earnings Conference Call. All participants are in a listen-only mode. After the speaker's remarks, we'll conduct a question-and-answer session. To ask a question at this time, you'll need to press star, followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Jeff Siemon, Vice President, Investor Relations, and Corporate Finance. Thank you. Please go ahead.

Jeff Siemon (VP of Investor Relations and Corporate Finance)

Thank you, Julianne, and good morning, everyone. Thanks for joining us today for this Q&A session on our First Quarter Fiscal 2026 Results. I hope everyone had time to review our press release, listen to our prepared remarks, and view our presentation materials, which we made available this morning on our Investor Relations website. It's important to note that in this Q&A session, we may make forward-looking statements that are based on management's current views and assumptions. Please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which may be discussed on today's call. I'm here with Jeff Harmening, our Chairman and CEO, Kofi Bruce, our CFO, and Dana McNabb, Group President of North America Retail and North America Pet. Now, let me turn it over to Jeff for some opening remarks. Jeff, go ahead.

Jeff Harmening (Chairman and CEO)

Yeah, thanks and good morning, everybody. Before we start the call today for questions, I'd just like to share a few thoughts summarizing some of our key messages. I think it's pretty evident there's a lot of change in the world, a lot of uncertainty. The same could be said of the food category, and there's even a lot of change within our business as you unpack the first quarter results and the Yoplait divestiture, which we're executing well, as well as our Whitebridge acquisition, which we're also executing well. There's a lot of change. What I want you to hear from me is that amidst all of this, we are staying laser focused and clear on our strategy, which is returning to profitable organic growth as the best way to create value for our shareholders. Importantly, we are increasingly confident that our approach is working.

I'll take you back as a reminder to Q3 of last year, when we told you we're going to make some significant investments to address price cliffs and gaps. We said we're going to do that on Pillsbury and Totino’s, and we saw really good results. That gave us more confidence so that in Q3 of last year, we told you that we would expand that to the cereal category, as well as soup and fruit snacks. Again, we saw pound share growth on that and a line or ahead of what we expected. Coming into this year, we had a heightened degree of confidence that our approach is working. At the same time, while addressing price is important, especially in this environment where consumers are looking for value, it's not sufficient to generate long-term growth.

Coming into this year, we also said we're going to invest significantly in innovation and new product news, new brand campaigns, and renovation across all of our top categories. We're going to support this with industry-leading cost savings and transformational benefits. The question is, how's that playing out? The reason we're increasing in confidence is it's playing out the way we thought that it would. So far, so good. We strengthened our pound share in eight of our top ten categories and now we're holding pound share in pet. We're continuing strong competitiveness in food services. As you probably saw, we've increased our growth and competitiveness in international all at the same time. On the P&L, we expected our profit results in Q1 would be pressured significantly by our increased investment profile, but also by the impact from the yogurt divestiture and a few phase-in comparisons.

We think that'll continue into Q2. Importantly, it'll improve in the back half of this year, certainly in Q4, but throughout the back half of the year. I want you to know from my perspective, just stepping back a little bit, we're really encouraged by the early signs of improvements we're seeing. We have great initiatives for Q2. I'm sure we'll talk about fresh pet food, but that's not the only thing. Our new product volumes are already up 25%. We have some other good new products coming in the second quarter, also backed up by really strong plans in baking and soup, and the fall and winter are key seasons for that. We plan to improve, continue our positive momentum in food service and international. With Q1 now in the rearview mirror and in line with what we expected and increased confidence, we reaffirmed our fiscal 2026 guidance.

With that, Jeff, let's open it up to Q&A.

Jeff Siemon (VP of Investor Relations and Corporate Finance)

Great. Thanks, Julianne. I think we can go ahead with the first question. Thank you.

Operator (participant)

Thank you. Just as a reminder to ask a question, press star, followed by the number one on your telephone keypad. Our first question comes from Andrew Lazar from Barclays. Please go ahead. Your line is open.

Andrew Lazar (Analyst)

Great. Thanks so much. Jeff, maybe picking up on your comments, the ongoing debate in the food space continues to be whether or not the current sort of challenging volume environment is more structural this time around than it has been in the past or whether more of it is just a result of the significant pricing the industry was required to take, combined with sort of a consumer that's under pressure. I realize it's super early in your efforts, but as you've gotten some of the key price points in the right place and the other marketing levers can kind of start to work, as you said, you're starting to see some volume share improvement in a bunch of categories more recently. Yet, I guess if we look at NAR, volume did not yet improve sequentially from fiscal fourth quarter.

What I'm wondering is, do you think recent results sort of support the thesis that while there are some external factors for the industry, maybe some of them are a little bit structural, there's still a lot more that is in the industry's control and your control in terms of getting sort of volume back to bright?

Jeff Harmening (Chairman and CEO)

Yeah, Andrew. I think it's a really good question and a really fair question. We believe it's largely in our control. If you look at the last year or so, volumes in our category are about flat, which is about 50 basis points below what we've seen historically, but not too far behind. There are a number of factors for that. Probably the most important we believe is that we saw a decade's worth of inflation in a couple of years. Consumers are still recovering that as wages have not yet caught up with all that inflation. We think that's the biggest driver. GLP-1 medications, we think, have had a small impact so far. Consumers taking value and a stressed consumer may be a little bit, but again, it's a 50 basis points gap versus what we have seen historically. The bigger gap is actually in price mix.

Historically, we see some price and mix. In this environment where consumers are feeling the way they are, that's actually the more difficult piece rather than the volume piece. Volumes are pretty stable. As we look at our year, we need to be able to hold share in our categories to achieve the results we suggested for the year, but we don't need to gain massive amounts of share to hit the guidance that we already said and get back to flat or a little bit of growth. We think it's mostly up to our control. Consumers, their habits change over time. We've been really good at changing with them. I'll give you an example. Like I mentioned, GLP-1 medications were a little bit of a headwind, but as a result of consumers looking for that, they want more protein.

There's a reason why Cheerios Protein is off to such a great start. Or Progresso Pitmaster, which is high in protein, is off to a really good start. We introduced Nature Valley Creamy Protein. We like what we've seen of that so far or that our granola business is doing well. Even though you can see something in a structure, you can maybe say, okay, is that a structural headwind? Companies who are focused on the consumer, we are right now, have means to seek opportunities in that. That's what we're doing.

Andrew Lazar (Analyst)

Great. Thanks so much.

Operator (participant)

Our next question comes from Robert Moskow from TD Cowen. Please go ahead. Your line is open.

Robert Moskow (Analyst)

Hi. Good morning, Jeff. A couple of questions. I just want to make sure I understand the path back to volume growth. Are you still expecting that to happen by the fourth quarter of this year? I'm also trying to reconcile. If your category volume is flat, but you're holding or gaining share in eight out of 10 categories, why is your volume reported down -1%? It would seem just optically that you would be a little bit above category volume growth, not a little bit below. That's my question.

Jeff Harmening (Chairman and CEO)

Let me have Dana McNabb kind of take that math question from you, which is probably an important one.

Dana McNabb (Group President of North America Retail and North America Pet)

All right. Good morning, Rob. Thanks for the question. It is true what you're saying in terms of our volume. If you look at our top ten categories, the volume improved by about a point in Q1 versus Q4. The total did not, and that is because flour and desserts were down, and they significantly over-indexed on pounds, not on dollars. What's important, I think, is that where we're putting the price investments, we're encouraged in almost every case that we're getting the volume response we expected. This is particularly on categories in Q1, like refrigerated dough, on fruit snacks, on salty snacks. I'd also call out our snack bars. Even though we're comping a period where our competitor lost distribution, the elasticities we've seen on the investments are at or ahead of model. We again are feeling very confident that these investments are working.

There are a few places where we still have work to do. Our Totino’s business volume was down a little bit in Q1, but we are in the middle of a price pack architecture change right now where we're moving from a bag to a box, and we need a little time to sort through that. Of course, our cereal business, we did see an improvement, second consecutive quarter of pound share growth. Really good momentum behind Cheerios Protein. Our granola business is up double-digits. Our Cinnamon Toast Crunch business, when you get remarkability right and have great advertising and great product news, it works. The pounds in that category were down. Our performance was still down, and we have a little more work to do. What we're encouraged by is that in our top ten categories, pounds have improved.

We believe our plans get better each quarter through the year.

Jeff Siemon (VP of Investor Relations and Corporate Finance)

Maybe, Rob, I'd just add one more point. If you get beyond North America Retail, we did see a shipment timing headwind in Pet to the tune of about 4 basis points. That's worth almost a full point to the company, about a little bit more than half a point to the company. That also weighed on total company pounds in the quarter.

Robert Moskow (Analyst)

Okay, I'll leave it there. Thank you.

Operator (participant)

Our next question comes from Leah Jordan from Goldman Sachs. Please go ahead. Your line is open.

Leah Jordan (Analyst)

Thank you. Good morning. Just seeing if you could provide more detail on your trends in dog food. I guess what do you attribute the slowdown in Wilderness to, and how are you thinking about your ability to drive an improvement there? I was just also curious on trends on pet treats, just excluding Whitebridge acquisition there, just given the discretionary nature. Thank you.

Dana McNabb (Group President of North America Retail and North America Pet)

Yes. If I think about, thanks for the question, our Blue pet business, our core pet business, our results in Q1 were generally in line with where we were last year. We held our pound share in Q1. Our dollar share was down just a little bit, about 15 basis points. In terms of what is working, we're really encouraged by our Blue Life Protection Formula business. This is our biggest business. It grew dollars and pounds. We have the value right. We have really good comparative advertising and strong in-store execution. Our cat feeding business is actually doing really well. BLUE Tastefuls, mid single-digit growth. We have a really good taste preference claim and the Kibble Engraving new product that's working well for us. Our Tiki Cat retail sales were up double-digits.

We've got good nutrition science formula that's launched across different cat life stages, really good omnichannel excellence. These big businesses are working really well for us. Our treats business that has been a challenge inflected some positive volume growth in Q1. There are some things that we're really encouraged are working well on our Blue business. The two areas that you rightly referenced that we need to see improvement on are our Wilderness business. This business, we have to improve our total product proposition. We're coming with protein news and new products, comparative advertising, stronger in-store execution. We have to get better there. We believe our plans are much stronger this year. More work to do. Our pet specialty channel continued to be a challenge. This year, we're bringing Edgar & Cooper. That's the super premium business that we had in Europe. We're launching an exclusive partnership with PetSmart.

That's already in market in Q1. Our turns are in line or a little bit ahead of expectation. There's a lot that we like about our pet business that's working and two areas that we know we need to get better. We're encouraged by the plans that we have in place.

Leah Jordan (Analyst)

That's very helpful. Thank you. I just wanted to step back. I have a higher-level question. There just seems to be a bigger debate around the industry, you know, scale versus complexity and what's the right balance. You sound confident in the plan that you're putting forward today. You've been battling a number of fronts over the last few quarters. Maybe how do you think about what's the right balance? As you go through driving better remarkability across your portfolio, what have been advantages or disadvantages with your portfolio mix today? Thank you.

Kofi Bruce (CFO)

Yeah, I think the most important thing is to focus on the consumers and what they're looking for and what they want and then delivering that to them. Whether that's through better advertising or product news or new products or whatever the case may be, that is the most important thing. Whether you're in one category or 15, that's the most important thing to do. Scale has some advantages for us. It's allowed us to invest in our capabilities, like digital technology, digitizing our supply chain and SRM, and doing bundling consumer offerings across categories of stores, especially in the fall and back to school, are really important for us. We do see some scale advantages from that, especially working across categories.

We kind of understand the consumer, I think, more deeply than many others can who are only in one category because we see the consumer from many different angles. Having said that, we've never been a believer in scale just for the sake of scale. I don't think that just because you have scale, it automatically accrues benefits. You have to be able to use the scale that you have to advantage and to make sure you're, through all of the complexity that you have, that you're staying focused on what the consumer wants in that particular occasion and that particular demand space, if you will.

Leah Jordan (Analyst)

That's very helpful. Thank you.

Operator (participant)

Our next question comes from David Palmer from Evercore ISI. Please go ahead. Your line is open.

David Palmer (Analyst)

Thank you for the great commentary in the prepared remarks. It looks like you continue to expect very strong growth from innovation and contribution to growth from innovation. It also looks like there's a little bit more of an elongated timetable of the price promotion investments stretching into the second half of fiscal 2026, perhaps more than you might have thought a few months ago. Where are the biggest changes in your reality when it comes to certain categories where the price promotions or investments are sticking around a little longer? What are the categories where you're seeing what you would hope to see, where you can get a little bit more balance with price versus volume? I have a quick follow-up.

Dana McNabb (Group President of North America Retail and North America Pet)

Thank you for the question. I think I'll start first with the price investment. I think it's important to understand that initially, as Jeff said in his opening remarks, last year, when we knew we had to improve value for the consumer, we had to move fast. The way we did that was we adjusted depth and frequency of promotion. We are encouraged by the positive response that we saw. As we shifted to this fiscal year, our focus has been on adjusting our base shelf price, trying to get below key cliffs or to make sure that we have a gap that's manageable to the competition. We need to do this across 2/3 of our portfolio. We got the majority of that done in Q1. Results are ahead of what we expected. We saw really good results on bars, on fruit snacks, on salty snacks.

We will complete the remainder of the base price adjustments in Q2. That is going to make sure that we have the right market-leading execution on our baking and on our soup season. All of this gives us a guidance that we're on the right track. As you pointed out when you started the question, price is just one element of remarkability. Once we get the price right, we're really focused on elevating our work on new products. We're moving from about 3.5% of net sales on new products to 5%. We feel really encouraged about the performance that we're seeing on things like Cheerios Protein or Mott's bars. We have a lot of really good new products coming through the remainder of the year. This just gives us confidence that this focus on remarkability and getting the total proposition right is the right thing to do.

David Palmer (Analyst)

Great, thanks for that. Just to follow up on Pet, you mentioned the 5,000 coolers going into initially. A big competitor out there has well over 30,000. How does that work where you get past this first step? Is it in the plans that this will continue to ramp, or are you digesting this first sleeve of coolers, seeing how it goes, and we'll modulate the growth from there? I'll pass it on. Thank you.

Dana McNabb (Group President of North America Retail and North America Pet)

We are excited to be moving from the planning phase of the fresh launch to the execution phase. The plant production has started up really well. Our initial products are looking really strong. As you mentioned, we're in the middle of installing coolers as we speak. We will have 1,000 coolers in place by the end of this month, 5,000 coolers by the end of our fiscal Q2, and our plan is to ramp up that distribution into the next calendar year in 2026. So far, everything is going really well. We are encouraged by what we're seeing with cooler distribution. I should remind you that we have over 50 years' experience in the refrigerated channel when you think about our Pillsbury business and our yogurt business. We feel like we have a very strong product and a measured plan for getting coolers that will increase.

Again, we're feeling very good about this launch right now.

Operator (participant)

Our next question comes from Matt Smith from Stifel. Please go ahead. Your line is open.

Matt Smith (Analyst)

Hi. Good morning, Kofi. Just, and Jeff, Kofi, I wanted to talk about the margin performance in the quarter. It was above your expectations. Can you provide a little more detail on the gross margin composition? I believe you called out the international timing benefit was about 3 basis points of that segment's net sales, or is that like 50 basis points to the overall company? How should we think about the phasing of inflation investment through the year from here? Thank you.

Kofi Bruce (CFO)

Sure. I appreciate the question, Matt. I think, as you rightly pointed out, we did flag that our profit performance in the quarter was a little bit better than expected on operating profit and EPS. Some of that coming through gross margin. The first factor, probably in slightly heavier measure, was that our inflation phasing was a little bit lighter than we expected in the quarter, probably closer to 2% and a little bit below the annual run rate of 3% that's sitting in our annual guidance. That factor first, followed by the trade expense timing benefit in international, which would put it at about $20 million on the top and the bottom line. We expect both of these to kind of unwind largely in Q2.

Given that these are timing-related items, as we see them unwind in Q2, I'd expect our operating profit to be down more in Q2 than in Q1. I expect that doesn't change our outlook for the sort of first half aggregate profit looking roughly in line with Q4 of fiscal 2025. We do think just as we look at the Q2 profit decline, it's important to think the supply chain phasing costs on inflation. I'd expect Q2 to be a little bit higher, probably maybe even above the annual run rate as we step into some of the inflationary pressure plus some inflation or some inventory absorption headwinds. It's important to note we won't have any contributions from yogurt in the quarter as well. This quarter, we had one month of sales and profit in our results from the recently divested U.S. yogurt business.

We'll start to see normalization of our comp and incentive comp benefits in Q2. Obviously, the international trade expense timing benefits will unwind. There is a bit of a transitory effect here, both on margin and profit growth as you think about how to digest this.

Matt Smith (Analyst)

Thanks, Kofi. As a follow-up, you called out the trade expense phasing in North America Retail was about a point of drag in the first quarter. Is that similar as we get into the second quarter and then normalizes as we get into the second half? Thank you. I'll leave it there.

Kofi Bruce (CFO)

Yes, you have it largely right. I would expect it to be a big drag in Q1 and Q2 as we're comping last year where we had Q1 and Q2 with effectively no trade expense. It was a benefit relative to the other quarters in last year. A modest headwind in Q3 last year and a huge headwind in Q4. We expect those comps to turn favorable as we step into Q3 modestly and then a pretty significant tailwind in Q4.

Operator (participant)

Our next question comes from Michael Lavery from Piper Sandler. Please go ahead. Your line is open.

Michael Lavery (Analyst)

Thank you. Good morning. Can you touch on what categories or brands drove the household penetration gains, and maybe how broad that was, and how much you feel like was driven maybe by pricing adjustments versus innovation or other factors?

Dana McNabb (Group President of North America Retail and North America Pet)

Good morning. Thanks for the question. As you stated, we did see our household penetration grow overall for NAR for the first time since fiscal 2022, really encouraged by that result. In terms of where we saw penetration improvements, we saw it on bars, on fruit snacks, on salty snacks, on our cereal business. We do believe that getting our price value, and again, this is about getting below key cliffs on the shelf, making sure we have manageable gaps relative to the competition, that that was a driver of that penetration improvement. Also, it's not a coincidence that where we had a great remarkability approach, where we had good advertising, really good new product innovation or product quality, price pack architecture, that is where we saw the best results. We called out in the presentation Cinnamon Toast Crunch as a really good example, really good product news, great advertising.

We have the price right on that business, and we gained pound dollar share and penetration. Again, we still have more work to do, but we believe that we are on the right track with these investments, and we're confident in what we're seeing so far.

Michael Lavery (Analyst)

Okay. That's helpful. I just wanted to follow up on some of the comments in the prepared remarks around demand planning. I think it can be maybe an underappreciated challenge, but it sounds like you've got improvement there. Can you maybe elaborate on kind of how that worked and what some of the benefits are? It's maybe a little surprising that the human touch seems unhelpful. Can you just kind of bring that to life a little bit?

Jeff Harmening (Chairman and CEO)

Yeah. Let me take that one a little bit, Michael. I'm going to start by saying, I mean, we have a phenomenal supply chain, as you well know. During COVID, we showed that. We continue to show it. We showed it in Q1 this year, whether it's productivity or service or low cost. Our supply chain is fantastic. We've got a great marketing team, too. Over time, our forecasting has been pretty good. It's just taken us a lot to get to an accurate forecast. What you see us doing now is that we're using AI and leveraging technology to get to good forecasting much more efficiently. The importance of that is it frees up our marketing team to do better demand generation.

I think that's why you're seeing some of these better ideas that we're talking about right now because our marketers are having more time doing marketing than forecasting. Our supply chain people, they're not double-checking numbers that people give and spending all their time in meetings looking at forecasts. They're just trying to figure out, okay, making the right stuff at the right time in the right place. You see our waste elimination improve. What we wanted to highlight is that it seems small, but it's actually quite large. It's a great way for technology to enable a little bit better accuracy, but a lot more efficiency. That frees up the talented people we have. We have a really talented team, really talented people to do what they do best. That's what we wanted to highlight in this particular case.

Michael Lavery (Analyst)

Very helpful. Thanks.

Operator (participant)

Our next question comes from Alexia Howard from Bernstein. Please go ahead. Your line is open.

Alexia Howard (Analyst)

Great. Thank you very much for the question and good morning, everybody. Can I ask about your efforts on reformulation? You're obviously ahead of the game on the elimination of the artificial dyes, getting rid of those by next summer. There are other state-level legislations that have been approved. For example, in Texas, I think there's something that's already been ratified by the governor and gone through that's about 44 additives. It's a broader list. First of all, I guess as you've gone through your remarkable efforts with some of these brands, are the ingredient lists and additives coming up as concerns for some group of consumers? Is that something that you're working through the portfolio to actively drive out, not just the dyes, but maybe other additives that people are concerned about?

Are you going to wait until the regulations and the legislation settles, which could be a year or two down the line, and then you'll do it once everything's very, very clear? I'm just trying to get a sense for how aggressively you're going after that or whether it's really not something beyond the artificial dyes that you're focused on at the moment. Thank you.

Jeff Harmening (Chairman and CEO)

Yeah, Alexia, I would start by saying we're always, we always do our best when we follow what the consumers are looking for. That's kind of our North Star and why we have this remarkability framework. As you know, 10 years ago, we took some certified colors out of Trix, and that didn't work so well here in the U.S. By the way, it worked really well in Canada. Canadian mom loved it. It didn't work as well here. That's because consumers in the U.S. weren't quite ready for it yet. 10 years later, the reason why we made the commitments we have is that consumers are more ready for this. An increasing number of consumers don't want the certified colors in some of their foods. That's why we look to remove those. We have better technology now than we did 10 years ago.

We can get consumers what they want, whether it's the colors they want or the shapes they want or the texture or what have you. That's why we're undertaking our efforts. When it comes to the regulatory environment, I'll start with a couple of things. One is that we've been around for 160 years and navigating global, federal, and state regulation for more than a century. I have high confidence we can do that now. When it comes to things like colors, 98% of our K through 12 school offerings don't have certified colors now, and 85% of our retail doesn't. We're talking about a relatively small sample. What I will say without commenting on any particular state is that there are a lot of state regulations being brought up now.

I think there's a challenge in that, and it's a challenge really for consumers because there's a cost associated with trying to do something state by state rather than at a federal level. Ultimately, consumers will pay the cost for that, as well as confusion. How can something be good in one state and not good in another state? We've always been a believer in working at a federal level, working with Health and Human Services, as we have been, working with the FDA and the USDA to work on federal legislation and regulation that really makes sense for consumers. We believe that's the best approach that we have right now. We're confident we can navigate this environment. We're making really good changes, really good progress. I think there's a challenge for the whole industry with the state-by-state approach. It's certainly not just our challenge.

Ultimately, I think it's better if we can get to something that's consistent on a federal level.

Alexia Howard (Analyst)

Great. As a quick follow-up, thank you for that. You mentioned that the pace of innovation is stepping up, I think, 25%. I believe that was in North America Retail. Are you able to say what percentage of sales are now coming from new products introduced over the last year or over the last three years? Where are you at in absolute terms on that front?

Jeff Harmening (Chairman and CEO)

Yeah, I'm glad you asked. I'm really proud of the way our entire team's innovating. We're at about 5%, we're at roughly 5% of new products coming from new product innovation, where we were at 3.5%, you know, a year ago. I think there are a couple of important things that lie beyond that, which I want you to know. First, it's not that we're introducing more things. It's that really what we're introducing, we think has bigger and better ideas with more staying power, which is not only good for this year, but in years to come. That is true in North America Retail. When you look at Cheerios Protein, for example, some of the granolas that we're bringing to market, some of the Mott's fruit snacks that we're bringing to market, really good new product innovation.

It's true in our pet food business, bringing fresh pet food to the market and investing behind that. It's true in International, where, I mean, look, we grew Häagen-Dazs retail double-digits in China in the first quarter. The reason we did that was because we introduced stick bars. Now we're taking that all over China, and it's really working well. In Food Service, we have, you know, we again, we picked up share in Food Service. I have continued great momentum there behind some biscuit innovation. What I'm pleased with is it's not just one part of the company that's innovating better. We have all of the segments innovating better. By better, I mean, I think bigger, more on-consumer trend ideas. We're supporting those with investment. That's what's exciting to me.

Alexia Howard (Analyst)

Great. Thank you very much. I'll pass it on.

Operator (participant)

Our next question comes from Megan Clapp from Morgan Stanley. Please go ahead. Your line is open.

Megan Clapp (Analyst)

Hi. Good morning. Thanks so much. I have a quick follow-up and then another question for Kofi, if that's okay. The first is just following up on some of the earlier line of questioning. Jeff, I think you mentioned you don't need massive share gains to hit the guide. Based on some of the things I think Dana mentioned later, it sounds to me like maybe some category trends are softer than you expected. Can you just clarify how category performance has evolved thus far year to date relative to your initial expectations and whether we need to see improvement in areas like cereal, for instance, to deliver on the guide? Just related as well, since you brought it up, Jeff, can you maybe just expand a little bit on the GLP-1 comment in terms of what you're seeing in the data that you track? Thank you.

Jeff Harmening (Chairman and CEO)

Okay. I'm going to try to get to all your questions. You had a lot of good ones. I'm fine with the next one. It's not because I'm trying to avoid it. I just forgot. I would say that the year so far, it's played out as we thought it would. The consumer environment is what we thought it would be. In terms of how our progress looks in Nielsen, our top 10 categories in North America Retail are about a point better than what we expected. When you get beyond that, like flour and Betty Crocker desserts and things like that, you see a little bit softer. For those, key baking season starts in September. We'll see when the weather gets colder. What our top 10 are performing at is actually a little bit better than what we anticipated. I would say broadly, consumer sentiment is what we anticipated.

The growth in our categories is about what we anticipated. Certainly, our performance within those categories and growing share in NAR and Food Service and International and holding it in Pet is kind of what we anticipated. I would say so far so good. It's as we expected. With GLP-1, there's been some impact on our categories, but not significant yet. I would expect GLP-1 usage will continue to grow. Everything I read says that it will continue to grow. With that comes reduced calories, obviously, clearly for those who are using GLP-1s. There's opportunity because we know that people taking those medications, we know a couple of things. One is that they are looking for more protein because people tend to lose muscle mass when they're reducing their calories. They need more macronutrients, things like fiber. Things like breakfast cereal are high in protein.

That's why cereal protein, I think, is doing so well. It's good in protein. It's high in fiber. By the way, oats is also high in fiber. Even though there's a macro trend of GLP-1 usage that we think will continue and will put some macro pressure on some categories over time, there's also a lot of opportunity in that. I want you to make sure that you hear that for us as well. One of the things, we're introducing a lot of new products that we think will meet this demand. We feel good about that.

Megan Clapp (Analyst)

Great. That's super helpful. Thank you. Just a follow-up for Kofi as we think about pet phasing into the second quarter, just because there seem to be a lot of puts and takes. Can you just help us understand a little bit what these, how to frame these puts and takes just to keep in mind? There was lumpiness in Tiki Cat last year. Wilderness is maybe a bit softer. You also have the fresh pet launch. I also think maybe the shipment headwind was a bit bigger in the first quarter than you had talked about last quarter. With all those things in mind, if you could just help us think about how to frame phasing in Tiki Cat, that would be helpful.

Kofi Bruce (CFO)

Sure. I think it's fair to say we expected the shipment timing issue at Q4. It might be modestly larger than we expected. We're not expecting a change to the overall outlook for the year. I'm not going to get in the business of making quarterly predictions on pet just because I've failed at that multiple times. There is some volatility quarter to quarter on that business just inherently in shipment timing. I think broadly, you have the contours right. We will start to see a modest contribution in revenue as we ramp up behind shipments on fresh pet. I think we're expecting some modest improvement as we step into Q2 and then into the back half of the year.

Megan Clapp (Analyst)

Okay, that's helpful. Thank you.

Kofi Bruce (CFO)

You bet.

Operator (participant)

Our last question will come from Peter Galbo from Bank of America. Please go ahead. Your line is open.

Peter Galbo (Analyst)

Hey, guys. Good morning. Thanks for taking the question. Kofi, maybe just one clarification. I think you said, based on the puts and takes on Q2, you know, operating profit in the first half of this year would be down kind of similar to Q4. I think that lands Q2 operating profit down like 25% but I just wanted to make sure that my math on that was correct.

Kofi Bruce (CFO)

Yeah, I think your math largely works.

Peter Galbo (Analyst)

Okay. Super. Thank you. Jeff, maybe just a broader question, and this probably goes back to Andrew's first question. Dana spent a lot of time talking about getting below certain price cliffs, driving value. I guess what we haven't really talked about is your competition, not so much on the shelf at retail, but the away-from-home channel is getting a lot sharper in terms of price points, in terms of trying to drive value in their messaging and even in the pricing that they're charging, whether it's $5 boxes, $8 boxes. Is the industry or is the retail packaged food industry adapting fast enough in your mind to be able to compete effectively against away-from-home that, again, seems to be much more focused on driving a value price point? Have you noticed any share shift there that's become more pronounced as we've gotten just a plethora of these offerings?

Thanks very much.

Jeff Harmening (Chairman and CEO)

Yeah. As far as speaking for the, I probably won't speak for the whole packaged food industry, but I always like us to go faster rather than slower. I would say that as I look at away-from-home eating, the traffic has been quite stable. Despite all the efforts of quick-serve restaurants and all, the traffic's been stable over time. If you look at it, the trends that we see are that low and middle-income consumers are, traffic is declining. What we call the commercial channel or restaurants and high-income consumers, call it $200,000 or more a year, is growing. It nets out to flat. The challenge that that particular portion of the business has with the value meals is that the inflation is growing faster than food at home and quite a bit faster than food at home driven by labor.

Even though you may see a lot of advertising about value deals and so forth, just know that the traffic in commercial remains very flat. There is growth in the non-commercial channel, which is where General Mills over-indexes in its food service business. We are very well positioned to capture the growth there. The non-commercial means things like K through 12 schools and hospitality and business and industry with people going back to work. Those channels are growing about 2% or so, and we're gaining share. Any growth you would see would really be in that place. We are very well positioned through our food service business to take advantage of that growth, and we are. That's one of the reasons why you see our food service business continue to perform well.

Peter Galbo (Analyst)

Great. Thanks, Jeff.

Jeff Siemon (VP of Investor Relations and Corporate Finance)

Okay, Julianne, I think we'll have to wrap it up there. Thanks, everyone, for the good questions and the good engagement. Our team is available all day for follow-ups. We look forward to talking to you next quarter. Thanks.

Operator (participant)

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.