EBITDA Guidance Factors

Q: What key factors could affect reaching your EBITDA guidance?

A: We face uncertainties from ERP conversions in several locations and need to address pressure on Bob Evans side dishes to restore growth. While opportunities exist to exceed guidance, these factors could present risks. We ended the year strongly, making us comfortable with the higher end of our range, though the lower end appears softer due to our strong finish. -

Foodservice Growth Drivers

Q: What are the growth levers for Foodservice EBITDA in the upcoming year?

A: The key drivers are foot traffic volume in quick-service restaurants and a shift towards more value-added products. We are confident in meeting our growth targets within Foodservice. However, avian influenza remains an uncertainty and impacts pricing rather than being planned for. -

Pet Segment Optimization

Q: What efficiencies are expected from pet segment network optimization?

A: We're evaluating the network inherited from Smucker and Perfection acquisitions to optimize our manufacturing footprint. The Perfection acquisition gives us access to Western facilities. We plan to reduce some contract manufacturing business and move operations westward to better serve customers. This optimization is included in our FY '25 guidance, with additional benefits expected in FY '26 upon completion. -

Aseptic Shake Manufacturing Delays

Q: What's the progress on aseptic shake manufacturing output?

A: We have significant room for improvement; currently, output is below expectations. We anticipate reaching our target run rate by the second half of FY '25, which is a year later than planned due to equipment challenges, delays in receiving critical parts, and labor issues causing about a year's delay. -

Weetabix Margin Recovery

Q: Can you regain previous Weetabix margins, and how long will it take?

A: It's a multi-year journey. We've identified cost-cutting measures and opportunities to simplify the portfolio. The ERP conversion will pressure margins in Q4 and the first half, but we expect to regain momentum in the back half of the year. We anticipate a 2-3 year path to return to our 30% margin level. -

Cereal Category Outlook

Q: What's the outlook for cereal category growth?

A: We expect the cereal category to experience a long-term very low single-digit decline, between 0% and 1%. We've been more bearish for FY '25, but longer term, we believe it will stabilize within that range. Other categories are projected to grow 0% to 2%. -

Impact of Starbucks and Dunkin' on Foodservice

Q: How does performance at major customers like Starbucks and Dunkin' affect your Foodservice business?

A: Growth in these accounts benefits us through increased volume, better absorption, and favorable mix due to their use of more value-added products. While we don't anticipate major short-term changes, any uptick in their performance would meaningfully benefit us in the longer term. -

Pet Segment Investment Strategy

Q: How will you invest in and develop the pet segment?

A: In the short term, we're focused on revitalizing our existing portfolio and relaunching premium brands that need attention. A significant investment is included in our FY '25 guidance. Long term, we're considering asset utilization in other channels like private label and contract manufacturing, or potentially reducing assets for greater productivity. We see opportunities for both organic and inorganic growth in this category. -

Cereal Promotions and Profit Potential

Q: Are promotional levels in cereal changing, and what's the profit potential if the category improves?

A: If cereal returns to flat or slight growth, it would be meaningful for our business. Currently, competitors are rational with promotions. Retailers are pushing for more promotions, but any increase would aim for returns like additional shelf space or distribution. The environment remains rational for now. -

Rebalancing EBITDA Growth Algorithm

Q: How have you adjusted the drivers of your 3%-4% EBITDA growth algorithm?

A: We've recalibrated pet growth to 2%, driven by category growth and cereal flattening. Cost reductions through network optimization continue. Foodservice growth is updated to 5%, aligning with historical rates. We're addressing challenges with the shake co-manufacturing startup, which will contribute growth over five years. Weetabix faces margin pressures due to ERP conversion, but other segments align with our growth algorithm. -

Egg Price Volatility Impact

Q: How does egg price volatility affect your business and pricing strategy?

A: We're less susceptible to market volatility than shell egg producers due to our value-added offerings. We face cost pressures and respond by adjusting prices or allocating to customers. While not immune to avian influenza effects, our value-added pricing model mitigates impacts on both pass-through and market basis. -

Refrigerated Retail Challenges

Q: What's the impact of distribution losses in refrigerated retail, and how will you address it?

A: For eggs and cheese, we've lapped cheese distribution losses in Q2 and will lap egg losses in Q1. Avian influenza and elevated egg prices are pressuring the egg business, but we've improved supply. Opportunities exist if egg pricing normalizes. We continue to evaluate alternatives, focusing on shifting to more profitable areas. -

Potato Business Fundamentals

Q: How do industry challenges in frozen potatoes affect your refrigerated potato business?

A: Our category differs from frozen; we succeed by converting fresh users to value-added products and see no pressure on this trend. Foodservice refrigerated potatoes remain a growth segment in both margin and volume. We are experiencing pressure on the retail side due to volume trends and competitive dynamics, but we feel comfortable with the food service trend. -

Volume Trends and Revenue Outlook

Q: Will revenue growth improve as volume pressures abate during the year?

A: We're not forecasting significant changes in current volume trajectories, maintaining a status quo in our plan. Some pressures are transitory; for example, cereal has improved from a 4%-5% decline to around 2% recently. Our guidance doesn't assume significant category lifts, but we believe conditions may improve in the back half of the year. -

Private Label Volume Trends

Q: Have you seen private label volumes decline in your categories?

A: We haven't observed erosion in private label penetration within our categories. In fact, we've seen some growth in private label cereal and at Eighth Avenue. It's a category-specific situation, and we expect volumes to revert to normal as conditions stabilize post-election and inflation eases. -

Top-Line Declines Concerns

Q: Are top-line declines in segments other than Foodservice a concern for EBITDA growth?

A: We aggressively manage lower-margin businesses and aren't worried about volume reductions there. Regarding cereal, we have a flexible footprint and are optimizing our network. We believe trends will return closer to flat over time. It becomes an issue only if plants become deleveraged and we can't reduce capacity further, but we're far from that point due to our portfolio structure. -