General Mills - Earnings Call - Q4 2025 (Q&A)

Executive Summary

• Q4 2025 revenue was $4.56B, down 3% year over year; GAAP diluted EPS fell to $0.53, while adjusted EPS was $0.74. Organic sales declined 3% with a 2-pt headwind from trade expense timing; gross margin compressed 340 bps to 32.4%.
• Versus S&P Global consensus, GIS delivered an adjusted EPS beat (actual $0.74 vs $0.711)* but missed on revenue (actual $4.56B vs $4.60B); EBITDA was approximately in line ($750M vs $750M). Values retrieved from S&P Global.
• Management introduced FY26 guidance: organic net sales down 1% to up 1%, adjusted operating profit and adjusted diluted EPS down 10–15% (constant currency), free cash flow conversion ≥95%; plus ~$100M transformation savings and 5% HMM COGS savings, with divestitures/acquisitions/FX/53rd week reducing net sales growth ~4%.
• Strategic catalysts: Blue Buffalo “Love Made Fresh” national fresh pet launch later in calendar 2025 and Edgard & Cooper U.S. launch; Board raised the quarterly dividend to $0.61 (+2%).

What Went Well and What Went Wrong

• What Went Well

  • “The investments we made… to bring consumers more value worked as we expected, driving improved volume and pound share trends in the fourth quarter” — CEO Jeff Harmening, with organic pound volume flat YoY and improved share in 64% of top 10 U.S. categories.
  • Blue Buffalo fresh pet launch (“Love Made Fresh”) positions GIS to participate in a ~$3B subcategory, with multi-format recipes and national rollout later in 2025; Edgard & Cooper brand launching in PetSmart in July.
  • International segment delivered 11% revenue growth and +50% operating profit in Q4 on favorable price/mix, with strong growth in Brazil and distributor markets.

• What Went Wrong

  • Gross margin fell 340 bps in Q4 to 32.4% and adjusted gross margin fell 220 bps, driven by higher input costs, unfavorable mark-to-market, and price/mix; operating margin dropped 540 bps to 11.1%.
  • North America Retail net sales fell 10% (to $2.56B) and segment operating profit fell 29%, pressured by unfavorable price/mix, input inflation, and lower volume; trade expense timing was a 17-pt headwind to operating profit growth.
  • Combined after-tax JVs swung to a $6M loss (vs +$19M) due to a CPW non-cash impairment tied to supply chain simplification; full-year JV earnings declined to $58M (vs $85M).

Transcript

Speaker 5

Good morning and welcome to General Mills' fourth quarter fiscal 2025 earnings conference call. All participants are in a listen-only mode. After the speaker's remarks, we will conduct a question-and-answer session. To ask a question at this time, you will 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 of Investor Relations and Corporate Finance. Thank you. Please go ahead.

Speaker 1

Thank you, Julianne, and good morning to everyone. Thanks for joining us today for our Q&A session on our fourth quarter fiscal 2025 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. Please note that in this morning's 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 today with Jeff Harmening, our Chairman and CEO, Kofi Bruce, our CFO, and Dana McNabb, Group President of North America Retail and North America Pet. Before we open for questions, I'm going to hand it over to Jeff Harmening for a few opening remarks.

Speaker 3

Yeah, thanks, Jeff. I thought I'd start this morning. There's a lot going on up and down our P&L within our business, and certainly a lot going on in the broader world. I thought I'd just take a couple of minutes to summarize what we're trying to accomplish. The first and most important thing is really returning to volume growth, specifically in NAR. We're really encouraged by what we've seen. We started to invest in value in Q3 of last year with Pillsbury and Totino's, topped by really good advertising. We liked the results of that so much that we decided that we'd expand the value investments we made in soup and cereal and fruit snacks in the fourth quarter. We saw the results there that we expected.

As we go into this year, we're kind of just continuing the formula that we had in the fourth quarter, which is to expand some of the value investments on targeted businesses that we saw, but also, really importantly, backing that up by significant consumer news. In fact, I think our new product news and our core renovation news is the best that I have seen since I've been the CEO. We use our remarkable experience framework. We talked a lot about these in our prepared remarks. Certainly, our launch into fresh pet food, all the protein innovation we've seen in the NAR portfolio, renovating Häagen-Dazs stick bars and so forth, gives us confidence that we can get our business back to the kind of growth we're looking for.

Importantly, as we're doing all this work in NAR, we did see share growth in our international businesses this past year, as well as food service and healthcare and pet. That gives us a lot of confidence. We're backing up all of this investment with record levels of holistic margin management and also productivity initiatives. We're not sitting still on that front. We know that it's an investment year, but we're very confident that these investments will pay off given what we've seen over the last couple of quarters. With that, let's open the floor to questions.

Speaker 1

Great. Julianne, you can go ahead.

Speaker 5

Thank you. As a reminder, to ask a question, please press star followed by the number one on your telephone keypad. Our first question comes from Ken Goldman from JPMorgan. Please go ahead. Your line is open.

Hi, good morning, and thank you. It's certainly exciting to see Blue go national from a refrigerated standpoint. One of the things you had talked about previously in the past, to paraphrase, is you were always, I think, confident in the revenue opportunity. It was a little more on the margin and cash story that was less tested. I'm trying to get a better sense, if possible, of if something has changed or you've learned a little bit more about the margin potential there. As a corollary to that, just trying to get a little bit of sense for your merchandising strategy for that, just given the obviously limited shelf space for that particular category. Thank you.

Speaker 3

Yes. Let me talk a little bit about this with Jeff. Let me talk a little bit about the past and Dana, if you have any follow-on comments to follow on a little bit about our marketing plans. Yeah, we're very excited about this launch, this big national launch. We learned a couple of important things in that last test market. One was that the Blue Buffalo brand really resonated. The second, we can make great products. Our repeat rates were really good. I mean, we had dogs standing in front of refrigerators because they were so excited to eat this stuff. We know that that works. What we did not, because we launched regionally, we really did not have the scale to market the way we needed to to generate trial.

As we go into this national launch, this gives us the opportunity to launch at scale. You ask about the financials. We have learned a lot. It's been many years since we tried that test. We have actually been studying the market ever since. One of the things we've grown quite a bit more comfortable with is that over time, I mean, this investment will take a couple of years in generating trial. That's the most important job to do. Having done that and achieving scale, we're confident that we can build a profitable and growing business. If we weren't, we wouldn't get involved in this endeavor. It'll take a little bit of investment, but we believe that we have the right activities to do it. Dana, you want to give any insights into that?

Speaker 5

Yeah. As you said, the learning really helped us to build a stronger consumer proposition. We really think that we have a path to an attractive financial model for a fresh business at scale. What we are coming with is launching Love Made Fresh nationally. It will be in all 50 states. We have a wide variety of formats and flavors to drive appeal. These formats have been designed for maximum flexibility. Why that is important is because we know that 80% of pet parents who use fresh use it with other food formats. They will top it, they will mix it, they will sometimes use it on its own. Then 55% of those users want to use kibble and fresh from the same brand. We are really confident that Blue Buffalo has a right to win here, that we have got a unique proposition.

As Jeff said, we have improved our go-to-market approach, and we're committed to investing in building quality trial and awareness. We have had really strong reception from retailers. As we come to market, we're going to be the biggest pet brand that's across dry, across wet, treats, and fresh. We are still early days, but we're excited to share more about this launch as we get closer to the date.

Speaker 1

Great. Thank you both.

Speaker 5

Our next question comes from Andrew Lazar from Barclays. Please go ahead. Your line is open.

Great. Thanks. Good morning, everybody.

Speaker 3

Morning.

Jeff, I think the level of reinvestment planned for fiscal 2026 is certainly deeper than most had anticipated. I understand the organic top-line growth priority and the investment behind fresh. My question is, how do you ensure that the margin profile that comes with this reinvestment is being done in a sort of responsible way, rather than giving up too much margin that may be tougher to ultimately rebuild? I guess, are there certain aspects of the reinvestment that maybe you see as more one-off or temporary in nature that give you confidence that you can rebuild this margin in a reasonable timeframe versus being maybe at a structurally lower level sort of going forward, if you will? Thank you.

Sure. Andrew, this is Kofi. Good morning, and thanks for the question. Let me give you just a few thoughts. I think we see a few of the factors. There's certainly a lot going on underneath the hood, and we provided a fair amount of that detail in the prepared remarks. Underneath the hood, there are a couple of factors that we would see as maybe more temporary in nature. First, as Jeff alluded to, the fresh investment, while a multi-year investment, we would expect that once we build scale, we'll be at a point of profitability and return on that investment. Second, as we think about the nature of tariffs, we expect to be able to mitigate some of the effects of tariffs, but not all within the year. That will put a little bit of drag from a timing perspective.

Again, not something that we see as structural necessarily long-term. Third, just a reminder that on the divestiture of Yoplait, we expect there to be a little bit of stranded cost drag as we are getting at some of the costs and eliminating some of those costs this year, but we will have a tail end of fiscal 2027. Those are the factors that I think are important to take in, even as you measure what is an important and significant investment behind getting growth restarted.

Got it. Great. Okay. Thank you for that. Appreciate it.

You bet.

Speaker 5

Our next question comes from Peter Galbo from Bank of America. Please go ahead. Your line is open.

Speaker 0

Hey, guys. Good morning. Maybe just a quick clarification and then a question. Kofi, I think on pet specifically in Q4, you talked about the inventory build at retail that you're expecting to reverse. Is that a full reversal in Q1? I just want to kind of understand the magnitude there. Jeff, there's been obviously a lot of lumpiness, I think, in the reported figures on pet. Maybe you can just give us a broader sense from your prepared remarks on just the state of underlying pet and how you're thinking about the different verticals within that, just again, given some of the lumpiness that we've seen quarter to quarter. Thanks very much.

Speaker 3

Yeah. Thanks for the question. You asked Kofi the first one and me the second one, but I'm going to take one for the team here and answer both of those. As we look at inventory levels, first, our inventory levels in pet are in a good place, kind of broadly speaking. As we looked throughout all of last year, there was relatively very little movement as you look across the year in our levels of inventory at retail for our pet food business. Our pet food business, since we bought it, has really had a lot more lumpiness, as you're terming, in the levels of retail inventory. That's really largely due to the fact that it has a high proportion in e-commerce sales, which tend to be more volatile than do things going through grocery stores and mass merchants and so forth.

I would expect that the lumpiness quarter to quarter will continue. To the extent, will it reverse in the next quarter or not? Maybe. We just wanted to be transparent about last quarter and that we saw three points of inventory build last quarter as we head into this quarter. Whether that will dissipate at the end of this quarter or not, we'll see. One thing I have decided to do is to not predict what's going to happen with pet inventory from quarter to quarter, having been fooled a couple of times. It is a fair question, but I want you to know our inventory is in a good place, both on our retail business, our human food business, and our pet food business. There is always going to be some level of variability as we go quarter to quarter.

Speaker 1

Great. Thanks, Jeff. Anything on the underlying pet kind of performance, how you're doing?

Speaker 3

Oh, yeah. Sorry. I got so excited about that answer. I forgot. Look, I'm really encouraged that we got our pet business back to stability. And we grew it a little bit this past year in our share held. And some of the things we've done have really worked well. The advertising on Life Protection Formula has worked well. Our cat business is back to mid-single digit growth. And the cat population is growing, so that's important. We've integrated Tiki Cat effectively, and that's growing well. Edgard & Cooper is growing well in Europe and bringing back that to the U.S. So we have a lot of things that are working really well. I think pointed in the right direction. Our marketing is quite good in the pet food business now. There are some things we still have to work on.

Wilderness improved, but it is not all the way back to bright. Certainly, our treats business would be the same. I like the direction of travel of our pet food business, even without this launch of fresh pet food. It is important because our goal this year is to grow the core of our Blue Buffalo business and add this new fresh launch on top of that. We are encouraged by what we see. There is still more work to do, but we have gone from a business that had declined the prior year to one that we grew a little bit, and now we are looking to build on the successes and continue to work on the things that are not working exactly the way that we had thought.

Speaker 1

Great. Thanks very much, guys.

Speaker 5

Our next question comes from Peter Graham from UBS. Please go ahead. Your line is open.

Thanks, operator. Good morning, everyone. I was just hoping to get an understanding on just kind of the organic revenue phasing for the year, just in the context of the down 1%, the plus 1%, and kind of starting off, I think, in kind of this down 3% range. Just curious how you're thinking about the phasing of growth as you move through the year. I guess specifically, do you expect to see a return to growth at some point in time? Just related, in the prepared remarks, you outlined an expectation for category growth to be similar. Not to get too specific, are you simply assuming what we're seeing today continues, or do you expect to see some sequential improvement, but where you land for the year ultimately is similar to what we saw in 2025? Thanks.

Speaker 3

Yep. I think it's important to note that as we exit this year, we had about 2 points of trade expense phasing in our organic sales number as we exit the quarter. As you think about kind of the setup for next year, we will have trade expense phasing comps as we work our way through the first half of the year. Obviously, as we have made investments in the second half of this year, those comps will ease. I would expect that to be reflected in the progression of our top line. I think that's a critical point. The second is, as we think about categories, we are laser-focused on what we can control, which is our competitiveness. We're not counting on a significant rebound in categories as we work our way through the year.

Speaker 5

Our next question comes from Chris Carey from Wells Fargo. Please go ahead. Your line is open.

Hey, guys. How are you? I think kind of a holistic question and then more of a quantitative follow-up. From the more holistic side, you're probably the most intentional when it comes to pricing reinvestments in the space. I think it's really a couple of questions related to that. First, what are you seeing from a competitive response to some of these early actions? Secondly, how do you ensure that this isn't a race to the bottom with branded competitors or private label? The more quantitative question is, in the context of really strong 5%, you've got the incremental $100 million of savings, but obviously, substantial pricing reinvestments. Can you just frame kind of like gross margins versus SG&A and how you see those lining up, stacking up through the year? Thanks so much.

Speaker 3

Let me take the first part of that question. Then when it comes to margin versus SG&A, I'll pass it on to Kofi, and he can tackle that. On the pricing, it's a really good question, and I appreciate it. The things I think there are a couple of things to keep in mind is that the first is that even in the fourth quarter, as we looked at our price mix, it was down 3% in North America retail and down 1% as an enterprise. We talk about pricing actions and is it going to be a race to the bottom? It's not going to be a race to the bottom. The order of magnitude is about that much. We're also investing a lot in advertising this coming year and new products and all the rest. It's not just about pricing.

It's about investment in making sure that we get trial on all of our good marketing initiatives. The other is that in every category, it's not as if we are leading pricing actions down across the board. We're taking targeting actions in specific categories. I've talked about this before, but just to give another example, for example, in pet food, we were over a price cliff on our wet pet food, and we got under that price cliff back in line with competition. We didn't have any pricing action on Life Protection Formula because that was in a good place, and the same with our cat food business. As we look across our categories, the actions really are targeted to specific items, specific areas, and specific categories. Really, just to get us back in the zone of where our marketing is going to be effective.

Our brands are generally premium brands, and they should be because we've got great brands. The marketing works really well when the price is kind of in the zone. Kind of getting that in the zone is the first step. Even more important than that, really, is that once having done that, how good is our marketing? How good are our new products? How good is our core news? That's what we're really excited about because it's that combination of getting the pricing in, but then also making sure that your marketing is great on top of that, that's going to lead to better outcomes. We saw that with Pillsbury. We saw that with Totino’s. We're confident we'll see that with many of our other businesses as we head into this year. In fact, we already have.

I mean, if you look at North America Retail, we're just three weeks into the year, but I think about 80% of our North America Retail business is gaining pound share already in this quarter.

Speaker 0

On your question on SG&A, we would expect SG&A to grow a little faster than our top line as a result of reinvestment, a portion of the reinvestment going back into increased media behind our fresh pet launch and certainly behind our brands and innovation in North America retail. In addition, just as a reminder, the incentive reset will be a big drag as you look at the corporate unallocated line in SG&A. Those factors will be the primary drivers of the increase.

Speaker 1

I'll just add this to Jeff's team and add one clarification. As Jeff said, our price mix in the quarter, North America Retail and Nielsen, was down about 3%. For the quarter at the company level, excluding the trade timing, price mix was down 1%. I think that was the point. Down 3% in total, 2% of that was trade timing. Excluding trade timing, price mix was down about 1% in the quarter.

Okay. Thank you, all three of you. Thank you so much.

Speaker 5

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

Hi. Thanks for the question. Jeff, I wanted to know if you think pricing can get back into positive territory at some point during the course of the year. It's hard to get the algorithm to work without having some pricing power to some degree. Maybe you could talk about your philosophy in that regard. Secondly, I wanted to ask about the assumptions on how big the fresh business can get in pet. When you started working on this, the category was probably growing at around 25%, but our channel checks indicate that it's more like 12-13% now, including DTC. Does that have any impact on your expectations for how big this business can get longer term? Thanks.

Speaker 3

Yeah. We'll have a couple of answers to those really important questions. Look, I'm about to tell you things that I know you already know because you've been doing this a long time, as I have. Over the long term, to get an algorithm to work in the food space, what you need is about half your growth from volume and half your growth from pricing. I mean, you get pricing and mix and all that. You need both of those things over time. There's a period of time where we saw a record in—there's a dog in the background. I'm sure seeing Fed Blue Buffalo is probably asking for Blue Buffalo. If you look over time, you need a mix of price mix and volume.

We saw when we had record inflation for a period of about three years, all we had was pricing, and there was no volume. Now we're in a little bit of a period where there's a lot more volume than there is price mix, given the consumer sentiment and kind of where we are. Over time, those things tend to level out. You're right. Over the course of time, to get the P&L to really work the way you want it to, you need a mix of pricing, and you need a price mix and a little bit of volume as well. This is a period where we're going to lean more on volume just as we did more on price mix when we had record inflation a few years ago.

You're right, but we're in a period of time where we know what we need to do. In terms of what comes next and tariffs and inflation, I mean, your guess is kind of as good as mine. I mean, what's going to happen with that? We're not really sure. All of our options are still open as to how we deal with the inflation we see in front of us. If inflation continues to pick up, then yes, we go to productivity and all those things, but we have a great strategic revenue management toolkit. We'll be very willing to work with that as well to the extent that we need to.

It's a pretty unpredictable environment right now, so we're not really sure how that's going to play out, but know that we're agile enough with enough of the capabilities to make that work. Your second question about fresh pet food, you talked about the growth rates and how they've slowed to 12%, I might add, and how we think about that. The first, I would say, vis-à-vis where we started looking at fresh pet food a few years ago, the category is about twice the size. So the pool, the pond of which we'll be fishing in, will be about twice the size as it was a few years ago. That would be the starting point, which gives us reason to believe that our fresh offering has a chance to be a really big offering. Growing 12% is nothing to sneeze at.

The continuation of humanization of pets is an ongoing trend. It is a 20-year trend. It manifests itself in a lot of different ways versus how treating works to wanting natural pet food, which Blue Buffalo serves, to wanting fresh offerings, which we are about to get into. We are confident that this humanization of pet food is going to continue, especially because it is particularly relevant among Gen Z and millennial consumers. As they form households more and more and they buy pets, we are confident that this trend will continue.

Speaker 2

The only thing I'd add to that is that the fresh segment is a $3 billion segment now. Our data indicates it'll be $10 billion in 10 years. There is still significant growth in this segment to get. We believe Blue Buffalo has a right to win here, and it can help spur on that category growth.

Okay. Thanks, Dana. Thanks, Jeff.

Speaker 5

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

Thanks. First, a quick one and a clarification off of a line in slide number 38. You said category growth below long-term expectations and similar to fiscal 2025, reflecting lower price mix. What was your category growth all in for fiscal 2025? And I ask that because it looks like lately, the category growth on a weighted basis for Mills would be over 2% lately, just looking at the MULO Plus data, which would be in line with your algo. It looks like, hearteningly, the categories that you're in are doing pretty well. Just curious about what sort of category growth assumptions you are seeing.

Speaker 1

Hi, Dave. It's Jeff Siemon. Yeah, that references our global growth exposure, kind of take our categories and geographies combined. Yes, in the U.S., human food, I'd say our categories are a little bit shy of maybe where we would expect our long-term growth to be with volume in line and price mix not quite maybe to the level that we would have expected normally based on our go-forward category mix. Pet category-wise is growing, but modestly, less than what we would expect long-term. Maybe it's about 1% today. We'd expect 3% plus long-term. Some of our international categories, China in particular, and even Europe growing a bit less. China down and Europe maybe a bit less than long-term.

When you take that in aggregate, that was the remark about overall category growth across our enterprise being a bit below where we would expect long-term, that 2-3% growth rate.

If we were to kind of keep it simple and thinking about your business in terms of getting your sales trends in line or better than your categories, 2026 versus 2025, for all of us trying to think about how you're thinking about the musket rights for this year, what categories and brands perhaps will get the most improved awards, what are going to be those? It looks like from your slides, you had a lot in snacks, Totino’s, maybe even cereal. You mentioned pets on firmer footing. What are really going to be the musket rights from a total sales perspective that you're looking for improvement into 2026? Thanks.

Speaker 3

Yeah. Let me take that. I'm kind of looking for improvement across the board, to be honest with you. I think we can get there because our marketing is better, our new products are better, our value is going to be in the right place. I mean, we win when our biggest, most important categories get better. As you look across our global brands and our local gems, that's where we expect to see the improvement. I mean, you can't really get the growth we're kind of looking at by growing your small businesses really well. You really need to grow your biggest, most important business as well. That's where I would expect to see improvement, but I would also expect it to see a broad base. I think we have the initiatives to back that up.

We feel good about the start to the year, and we'll see how it progresses. Importantly, what we have to do is grow in line with our categories. We think if we do our job right, we can hopefully get our categories to grow a little faster, but we're not counting on that. What we're counting on is just being more competitive within our categories. Because we're the leader in so many categories, to the extent that our marketing efforts really stick well, hopefully we can drive a little bit more improvement in category growth as well. We're not counting on that.

Okay. Thank you.

Speaker 5

Our next question comes from Scott Marks from Jefferies. Please go ahead. Your line is open.

Speaker 0

Hey, good morning, guys. Thanks so much for taking our questions. I have two quick ones. The first, I guess, on the innovation front, I guess we saw a lot of products that are putting protein front and center. Just wondering how those are performing thus far in kind of initial launches and markets where you're getting into. Secondly, on the price investment front, we've heard some of your competitors speak to investing around key events and key seasons as opposed to more kind of steady state investment. Just wondering how you're thinking about that and whether you see different consumer responses throughout the year at different points in time. Thanks so much.

Speaker 2

Yeah. I think from a new product standpoint or a news standpoint, you're absolutely right. Protein is a trend that people are really looking for right now. We see mid to single-digit growth across the grocery store from protein items. While I'm biased, we make protein taste incredibly good. What you're going to see in the plan coming this year is almost $100 million worth of ideas. We have really strong protein across most of our big categories. I'll use Cheerios Protein as an example. That's only been in the marketplace for six months and has far exceeded our expectations. We are bringing new SKUs into the marketplace starting now. We really believe that this is a trend that is here to stay and that we are well-positioned to win with this trend. That is how we're thinking about new products.

Speaker 3

Price, steady state versus kind of seasonal.

Speaker 2

Right. I mean, as Jeff has said, the plan for this year is really to make sure that we have really the right price value and then very strong news, innovation, and advertising across the entire year. We also know that when the consumer is struggling, parents will not sacrifice spending in the seasons. They want their families to have a good Halloween or a good Valentine's. We will make sure that we are leveraging seasons where appropriate. We have about 50% more seasonal innovation in our plan this year. I think that will be important to complement the innovation and news that we have throughout the entire 52 weeks.

Got it. Thank you.

Speaker 5

Our next question comes from Max Gumpert from BNP Paribas. Please go ahead. Your line is open.

Speaker 0

Hey, thanks for the question. You're clearly stepping up your investment posture as you're prioritizing turning volumes positive. It's nice to see that in the platforms that you started investing earlier, like refrigerated dough and Totino's and dog food, you're seeing that improved volume performance. The question is, though, taking refrigerated dough as an example, that improved volume is not outpacing the price decline. Even though refrigerated dough is a great example of a place where you've turned volumes positive, dollar sales really are still struggling, at least in the Nielsen data we're looking at. Given the midpoint that your guidance calls for flat organic sales growth, I'm trying to get a sense for what's giving you the confidence that as you roll out these investments more fully, you'll see a more favorable relationship between volume and price. Thank you.

Speaker 3

Yeah. So you're right, Max. The fact that our volumes have increased ahead and our volume shares have increased ahead of our dollar shares is certainly true. It's something that we expected and something that we had modeled. In fact, the modeling that we did has turned out to be very, very accurate to what has actually transpired. The modeling does not just end with how you invest in price. What we would expect is that over the course of the first half of this coming year, our volume shares will outpace our dollar shares for the very reasons that you talked about. That is why, though, it is so important that as we get into the second half of the year, particularly the fourth quarter, starting in the second half of the year, we keep our marketing investment up, that we have improved our new product profile.

Our new products are up 25%. That would be our expectation in North America retail and 30% overall as a company. We have more core news because once we lobby the pricing, our assumption is that our dollar shares would then begin to grow. That really happens when you get your investments in the right zone on value. When you add on top of that really good marketing, which we have. The first half of the year, we would expect that our volume growth will outpace our value growth, our sales growth. That will start to reverse as we continue to invest in new product marketing and great advertising and core business news.

Speaker 0

Great. Thank you. Your guidance, it's clearly embedding a pretty big step up in investment spend in FY 2026. It feels like a portion of that is around the national expansion into fresh pet food. Is there any way you could quantify just how much investment is going behind that national expansion into fresh pet food? I'll leave it there. Thank you very much.

Speaker 3

It's a fair question, but we're going to pass on that for now. Just know that this is not a test market. It's a national launch. We fully intend to make pet parents aware of this launch with our marketing investment. We're going to spend the money required to get the trial because we know the repeat's going to be really good. We're not going to give a number on that, but just know that it's important to get the trial. That really comes with good marketing, but significant levels of marketing investment.

Speaker 0

Okay. Thanks very much.

Speaker 5

Our last question today will come from Michael Lavery from Piper Sandler. Please go ahead. Your line is open.

Speaker 0

Thank you. Good morning. Two quick ones. Maybe just following up on the launch spending comment, can you give a sense of how you evaluate and balance organic innovation versus acquiring a fresh pet business? Obviously, the consideration set is extremely limited to go acquire. How do you just think about which is the better way to go or what drove you to come back after a test a couple of years ago to launch now?

Speaker 3

Yeah. Look, in general, the ways to grow are grow your own brands organically, to buy in to grow through M&A, which we've also done successfully, or use equities that other people have to enter categories that we have with Ghost and cereal, for example, for protein. We've done all three of those things effectively. As we think about what profile it'll take, we ask ourselves, do we have the right to win to do this organically? With Blue Buffalo, the answer has resulted yes. We found that out during the first phase of the trial. The second is, do we have the capabilities in order to win? We've been doing refrigerated products since the beginning of time, I think since the 1950s. This idea of getting refrigerated, we know how to run a refrigerated network.

We certainly know how to do that. Then we look at the investment profile. Do we think we have the investment profile to be able to enter a category successfully? In this case, we think we do. That is what we evaluate as we look at all of our growth opportunities. We'd like to be able to grow organically. That is the most important thing for us to do. We're really pleased that we think we have an offering in this case that will be significant, that will be innovative, that ties really well with the Blue equity. In other areas, you've seen us do M&A over time because we felt like we needed to enter a category like we did with Blue Buffalo originally, and we're thrilled that we did that.

Speaker 0

I know that's helpful. Can I just come back to one other comment you said about hoping for improvement across the board? Where does Salty Snacks fit into that? It did not really get much mention. I know it is a smaller piece of the portfolio. Is that just more challenged because of a discretionary component or some reason that it is not maybe getting some of the same investments? How does that just fit into your thinking and strategy for the year?

Speaker 2

Yeah. Thanks for the question. What I would say for snacks broadly overall in a tough economic environment, we see that it's a bit more of a discretionary spend. Our categories and our businesses have had a tougher time this year. The onus on us is really to do what Jeff talked about, which is to get our value proposition right across all our snacks portfolio and then make sure that we have the best marketing, new products, and news to make sure that we're worth it for the consumers to buy. From a Salty Snacks standpoint, it did not have a great year this year because we just had undersized participation in some of the largest growth trends.

What's working in Salty Snacks right now is really bold flavors, having the right value sizes, and then, of course, making sure that you use that news to ground merchandising and display. I think we're all really excited about the Salty plans that are coming this year. We renovated three of our top flavors, significantly increasing flavor intensity. We have spicy innovation coming. Think spicy dill and Chex Mix and hot and spicy Chex Mix. We've got a partnership with Tabasco and Bugles. We've got value coming in tubs for Chex. We've just got really good Salty innovation. I think you'll see our performance improve significantly in the upcoming fiscal year.

Speaker 0

Okay. Thanks so much.

Speaker 1

Okay. I think we're going to go ahead and wrap there. Appreciate the time and attention. As always, we'll be available for follow-up calls today. Julianne, I'll pass it back to you.

Speaker 5

Thank you. This concludes today's conference call. You may now disconnect.