General Mills, Inc. (GIS) Earnings Call Transcript & Summary

Good morning, everyone. I'm Andrew O'Connor, and as this year's President of the CAGNY organization, it's my pleasure to welcome you to our 49th annual conference. It's an honor and a privilege to be on this stage, and I'd like to thank all of you for helping to continue the special tradition that is CAGNY. For those of you that are here for the first time, what makes this conference unique is the collegial atmosphere, which joins the sell side, buy side and consumer companies together. The format is relatively straightforward. We'll have presentations in the large space followed by breakout sessions in the room next door. On that note, the conference wouldn't be what it is without the generous support of the companies presenting and sponsoring events here this year. A special thanks to Conagra, who hosted the kickoff reception last night and supplied me with at least a month's worth of Slim Jims. I honestly promised I'd never be one of those people that walks out with an entire display, but I couldn't help myself last night. I won't [indiscernible] what I smuggled out of General Mills' breakfast this morning, but I do want to say thank you from the entire CAGNY organization for another great kickoff breakfast event. And of course, many thanks to our dedicated and resourceful conference Chairs: Andrew Lazar, Bryan Spillane and Jon Feeney, who worked tirelessly to make sure this event comes together seamlessly year in and year out. Now per usual, we have some rules of the road for the week. Please take a look at the screen behind me for our policies. Just a quick reminder around meals in particular: breakfast is open to all members and all guests. Lunch is for members only, and dinner is for members plus one adult guest. Also a quick reminder, just logistically, there are charging stations in the back of the room. And at the end of each day, please remember to take all of your belongings out of the room as the room will be cleaned. Lastly, just a quick reminder that I'll be hosting the President's reception this year on the 25th floor of the tower on Wednesday, immediately following Philip Morris' dinner. I hear the bouncer is strict but drop my name at the door, and we'll see if we can get you in. Now on to the heart of the conference. In keeping with a very long-standing tradition and a partnership that's lasted more than 40 years, General Mills will kick us off. Since taking over as General Mills' CEO in the summer of 2017, Jeff Harmening has refocused the company's efforts on restoring consistent, profitable top line growth behind their Compete, Accelerate and Reshape growth framework. Joining Jeff on stage today is General Mills' new CFO, Kofi Bruce, who recently took over from Don Mulligan after Don's 12-year run in the CFO chair. We look forward to all working with Kofi. Please join me once again in thanking General Mills for an awesome breakfast, and welcome Jeff Harmening to the stage.

Thanks for that kind introduction, Andrew, and good morning to everybody here in the room and listening on the webcast. On behalf of General Mills, it is a true honor to kick off the CAGNY conference again this year. Today, I'm joined on stage by our Chief Financial Officer, Kofi Bruce, who is a little over 2 weeks into his new job; and Jeff Siemon, our IR Officer. I'd also like to acknowledge Stephanie Spence, Hannah Marmorine, Kelsey Roemhildt and [ Michelle Sunbeam ] from our IR team who did fabulous work pulling together this morning's presentation and event. Before we begin, I'll remind you that our remarks this morning will include forward-looking statements that are based on management current views and assumptions. This slide lists factors that could cause our future results to be different than our current estimates. Let me start by sharing 3 key messages I hope you'll take away from our remarks this morning. First, our top priority continues to be top line growth. I show you how we're doing across our global platforms through increased brand investment, stronger innovation and enhanced capabilities. Second, we're going to continue to maintain our strong margin and cash discipline, which will provide fuel to invest while still driving bottom line growth. And third, narrowing the focus of this year, we remain on track to deliver our fiscal 2020 guidance. At General Mills, our consumers are at the center of everything that we do. At our core, we are a food company. It is this underpinning of why we do what we do every day. Our purpose is to make food people love. By doing this, we drive connection and trust with our consumers. Our goal is to create market-leading growth to deliver top-tier shareholder returns. We do this through our consumer-first strategy, which means we deeply understand the lives of our consumers and move quickly to meet those needs as they change. We engage with our consumers through our powerful portfolio of brands. This includes A brands from Cheerios to Häagen-Dazs to Blue Buffalo to Pillsbury that each generate more than $1 billion in retail sales. Over the years, we've continued to adapt and evolve our portfolio to serve our consumers and drive growth. In fiscal 2019, General Mills generated nearly $17 billion in annual net sales worldwide. Roughly 60% of those sales fell in our North America Retail segment, while our other 4 segments made up roughly 10% of our global business each. From a product platform perspective, about 1/3 of our portfolio is comprised of what we call our accelerator platforms which include wholesome natural pet food, snack bars, superpremium ice cream, Mexican food and our portfolio of natural and organic brands. These platforms are in faster-growing categories where we have leading position -- positions, advantaged capabilities and a unique right to win. In addition, we have 2 large global platforms in cereal and yogurt that combine to make up more than 1/4 of our reported net sales. And that doesn't include our roughly $1 billion share of net sales from our Cereal Partners joint venture. The remainder of our businesses are comprised of regional snacks and meals and dough and baking mix businesses. These platforms include trusted brands that we have considered local gems such as Pillsbury, Totino's, Yoki and Wanchai Ferry. The goal of our organization is to create growth that translates into top-tier shareholder returns over the long term. There are 4 levers we focus on to drive returns: sales growth, margin expansion, cash conversion and cash returns. While all 4 levers are important, we know that sales growth drives majority of shareholder value over the long term. Since taking over as CEO in fiscal 2018, having come out of a 3-year period when General Mills and our industry were focused heavily on margins and cost cutting, I have made it our priority to restore consistent, profitable growth. With that in mind, I'll spend the rest of my time sharing examples of how we are accelerating our top line growth, before turning it over to Kofi to tell you how we'll continue our successful track record on margins and cash. Over the last 2 years, we've been executing against our framework for restoring consistent, profitable sales growth. Our global growth framework has 3 key elements: first, we compete effectively by driving superior execution across our brands and geographies. Doing this means growing with or ahead of our categories, whether that's in our large global platforms or the local gems I mentioned earlier. Second, we'll accelerate our growth on the 5 platforms I mentioned earlier. We believe that with the right level of focus and investment, our accelerate platforms can collectively grow at mid-single-digit rates or better over the long term. And third, we will reshape our portfolio for growth by adding businesses that enhance our growth profile and divesting those that are growth dilutive. We've made progress in each of these areas in the last 2 years, including significantly increasing the number of categories where we're holding or gaining share as well as reshaping our portfolio with the acquisition of Blue Buffalo. That said, we have more work to do. I'll share in a moment how we're working to compete better in yogurt and to step up our performance in snack bars within our accelerate platforms. And we continue to look for opportunities to reshape our portfolio through divestitures that enhance our growth profile and increase our focus on our fastest-growing, highest-returning brands. So importantly, we remain committed to only pursuing transactions that will create long-term value for our shareholders. While thoughtfully reshaping our portfolio to enhance where we play is important, we know that our ability to accelerate our growth is going to hinge even more on how we play. With that in mind, we've outlined 4 key growth enablers that define how we will step up our growth and deliver on our long-term goals. First, we will boldlyh build our brands. Whether it's our compare-and-decide advertising on Blue Buffalo or Cheerios' heart health advertising, bold brand building means engaging with consumers where they are on their terms with compelling ideas and high-quality execution, supported with differential levels of investment. In fact, General Mills has a long history of being at the leading edge of the way we build our brands. We were the first to create a radio jingle and the first to put prices on a cereal box. And in that spirit, General Mills is 1 of 10 initial partners in Quibi, a mobile platform designed exclusively for phones, offering quick bites of content. As with the jingle, we are following where the consumer is going and serving them along the way. Second, we will relentlessly innovate to meet ever-changing needs of our consumers. We are utilizing our new consumer-first design process to significantly increase the number of tests we put into market, allowing us to refine them through an iterative process until we identify the ideas with the greatest chance for success. We are also changing the way we innovate by creating small cofounder teams of fewer than 5 people who function like a start-up with the objective of discovering and building new growth businesses for General Mills. These teams are assigned a consumer problem to solve and experiment quickly and inexpensively gain insights and accelerate toward a solution. We also look to the outside world for innovation. Our 301 Inc. venture capital arm provides us with an opportunity to stay close to developing food trends and participate in the growth of emerging food trends. The third way we'll accelerate is by leveraging our scale to create new competitive advantages that will drive growth and efficiency across our enterprise. And then finally, we will unleash the power of our people by fostering a culture of belonging that brings out the best from every one of our talented employees around the world. With that as a backdrop, let me share some examples of how we're bringing these growth enablers to life across our business. I'll start by highlighting the role of brand building innovation plays on our global platforms, and I'll begin with cereal. I am very pleased with the way we're competing in cereal around the world. In U.S. retail channels, we took over share leadership in the category nearly 2 years ago, and we feel great about our performance so far this year. Our success is grounded on strong performance against fundamentals, including innovation, great marketing and excellent in-store execution, which have combined to drive our fiscal year-to-date retail sales up 2%. And we've seen the cereal category improve significantly in recent years. In fact, we estimate retail sales for the $8 billion U.S. category were flat in calendar 2019, when including non-measured channels compared to low single-digit declines just a few years ago. We believe this category improvement has been driven by a combination of our stronger performance and some improving macro and demographic trends, including a stabilization in the balance of breakfast eaten at home versus away from home as well as a return to growth in the number of households of kids in the U.S. We're growing our U.S. cereal business in away-from-home channels as well. In fact, cereal net sales for our Convenience Stores & Foodservice segment were up mid-single digits through the first half of fiscal 2020 behind strength in schools, due in large part to our new 2-ounce equivalent grain cereal cups, which are an easy way for schools to meet the USDA nutritional requirements while requiring less storage and labor. Finally, CPW has returned to growth after a couple of years facing challenging category trends. This 50/50 joint venture with Nestlé, which competes in the $14 billion cereal category outside of North America, posted constant currency net sales growth of 2% in the first half of our fiscal '20. We continue to like CPW's advantage position, faster-growing emerging cereal markets, where we have leading market shares and benefit from continued growth in per capita consumption. Our strategy to drive continued cereals growth is centered on launching compelling innovation that offers taste, convenience and health benefits, while investing in brand building that engages consumers and gives them another reason to walk down the aisle. As I mentioned, we're taking these actions against the backdrop of a strengthening category that should continue to see more supportive macro and demographic trends going forward. We've delivered a strong slate of innovation in our cereal business in recent years. In fact, 5 of the top 6 new cereals in the U.S. in the first half of our fiscal '20 were Big G products, including Blueberry Cheerios. Just last month, we launched Hershey Kisses and Trix Trolls cereals in order to further strengthen our position in the fast-growing taste cereal segment in the U.S. And we're innovating in new product forms that command premium price points, including our new Morning Summit Cereal, which has almond as a first ingredient and sales for $13 a box in the Club channel. In K-12 schools, we'll continue to broaden distribution of our new cereal cups, an innovation is also central to CPW's plans, including the new line of GoodBelly probiotic cereals we recently launched in the U.K. Bold brand building is a second key to continued cereal growth. We're connecting our consumers through compelling marketing ideas like our Cheerios heart health campaign. With more than 100 million Americans having some form of heart disease, Cheerios is on a mission to inspire happy hearts. For a limited time, we're changing some of the iconic Os into hearts, supported by new advertising, an updated package design and a modern social media campaign. Early results are quite promising, with Cheerio retail sales up 5% in the U.S. over the last 13 weeks. Let me show you a quick clip from our recent advertising designed to inspire happy hearts. Let's roll the video. [Presentation]

We also like the growth we're seeing on Cinnamon Toast Crunch behind our unlike (sic) [ unlock ] the Cinnaverse campaign and our Cheerios innovation with year-to-date retail sales up 8%. We remain optimistic that the combination of meaningful innovation, smart marketing ideas and executional excellence will drive growth for our cereal business now and in the future. Now let's turn to yogurt where we compete under the Yoplait brand, primarily in 4 markets: the U.S., Canada, France and the U.K., with total category retail sales in those markets totaling $16 billion. While we've improved our performance in the U.S. retail category compared to double-digit declines a few years ago, there is clearly still work to do to return that business and our European yogurt business to growth. Across the world, we feel good about our results on our core, including Original Style Yoplait, Go-Gurt and Oui by Yoplait in the U.S. and Petits Filous, Yop and Perle de Lait in Europe. However, distribution declines in our tail are more than offsetting those core gains, translating into year-to-date sales declines in fiscal '20. In contrast, we're driving net sales growth for our yogurt in our convenience and foodservice segment in fiscal '20, leveraging operator-first solutions like our Parfait Pro bulk yogurt. Our growth strategy on yogurt centers on continuing to grow our core lines through brand building and product news, while at the same time, innovating into faster-growing spaces that will soon become sizable enough to offset declines in our tail. On our core, we'll continue to invest in brand-building executions like our little big wins campaign in the U.S. We'll also bring taste news to our core, including 4 new Starburst flavors of Original Style Yoplait, which launched in the U.S. last month and are off to a very nice start. Finally, we'll continue to renovate the core with products such as mess-free sports cap and a No Added Sugar variety on Petits Filous in the U.K. The second element of our yogurt growth strategy is to innovate in spaces where the consumer is going. For example, we recently entered the dairy-free segment of the category with the launch of a coconut-based line of Oui by Yoplait products in the U.S. and almond and coconut-based Panier and offerings in France, both of which squarely align with growing consumer interest in plant-based foods. We'll also look for innovative ways to continue to bring operator-first solutions to drive growth for our yogurts in away-from-home outlets, such as YoGo coffee coolers in K-12 schools. As we said in our second quarter earnings call, we expect to drive sequential improvement in our U.S. yogurt sales in the second half of fiscal '20 as we continue to grow our core, expand our innovation and face less of a distribution headwind on our tail. That will be an important step in our effort to return our overall yogurt business to growth. Shifting to our accelerate platforms. In the interest of time, I'll touch on just a few examples, starting with snack bars. This is a large, growing category, and we're the global leader with great brands and advantaged capabilities. We had a long track record of global growth on bars through fiscal '18, driven by innovation, strong marketing campaigns and expanded availability in many international markets. Our U.S. bar business had a downturn in fiscal '19, primarily driven by declines in Nature Valley and Fiber One. Our focus in fiscal '20 is to put our U.S. bars business back on a path to growth through stronger innovation, renovation and in-store execution. Our new Nature Valley Wafer Bar has been a great success thus far. In fact, it's the biggest launch in the U.S. snack bar category this year. And we have additional marketing support on Nature Valley in the back half of the year. We're also encouraged by the early results on our Autumn's Gold, a grain-free granola bar; and our new Ratio Bar, a great-tasting, keto-friendly bar that delivers 12 grams of protein with only 2 net carbs. And our treat bars, including Lucky Charms, Cinnamon Toast Crunch and Reese's Puffs are absolutely on fire with retail sales up more than 100% in the first half of our year. Our U.S. Fiber One business has also gained traction since we relaunched the brand last summer. We renovated 70% of the product line to lower the sugar, lower the net carbs and lower the calories, while maintaining the great taste that delivers permissible indulgence for Fiber One consumers. And we launched a new marketing campaign to support the news. While we haven't yet lapped some significant distribution declines from last year, we're quite encouraged by the end market improvement we're seeing on Fiber One, including turns per point of distribution improving from down double digits to up double digits since the renovated products hit store shelves. In total, retail sales trends for our U.S. bars business improved sequentially in each of the last 3 fiscal quarters, a period in which our distribution was down high double digits. We are just beginning to lap a significant portion of the distribution declines as we speak this month, which should drive further improvement in our trends in the remainder of the back half of our fiscal year. Outside of the U.S., we're still an emerging player in a large and growing category, and we see significant growth opportunities ahead as we drive increased distribution and brand awareness while continuing to bring innovation to market. In Europe and Australia, year-to-date retail sales for our snack bars were up 6%, driven by new varieties of Fiber One cake bars and further distribution expansion. We also launched our new regional purpose-driven campaign, encouraging Nature Valley consumers to get out more. This included TV, digital, social, PR and influencers. Now let's turn to Old El Paso, which is the global leader in the $4 billion Mexican food category. We're investing to grow this great brand behind innovation, brand building and in-store activations that will drive increased brand awareness and make it easy for consumers to add another taco night to their menus. In the U.S., we're continuing our anything goes in Old El Paso campaign, introducing new varieties of bowls and kits, and refreshing our packaging and in-store presence of our Old El Paso taco stands. In Europe and Australia, we're increasing category visibility through our Make Some Noise campaign, which focuses on bringing friends and families together for taco night. We're also pleased with the performance of our expanded Day of the Dead omnichannel event amplified by the right mix of out-of-home messaging, social influencer engagement and point-of-sale execution, both online and in the store. These efforts are working, driving year-to-date retail sales up 5% in both the U.S. and Europe and Australia. Let's roll a quick clip from our Make Some Noise campaign, a key driver behind our recent success in Europe and Australia. [Presentation]

So now let's now turn to natural pet food -- wholesome natural pet food and Blue Buffalo, our newest accelerate platform. The pet food category is one of the largest food categories in the U.S., with retail sales of roughly $31 billion, and it has grown at a steady, low single-digit rate in recent years. We're playing in the best part of the category: premium wholesome natural, which has outpaced overall category growth, including high single-digit growth in calendar 2019, driven by the continued humanization of pets in the U.S. Blue Buffalo is by far the leader in the wholesome natural segment at more than 3x the size of its largest competitor. Everything at Blue started with a simple but powerful idea that we love our pets like family, so we should feed them like family. At -- all Blue Buffalo products meet the True Blue Promise and pet parents recognize the brand for high-quality recipes with natural and recognizable ingredients. In less than 20 years, Blue has grown to be a $1.5 billion brand, with the first $1 billion built almost exclusively in pet specialty and online channels. With only 13% household penetration, and many of those households not yet everyday users of Blue products, we see tremendous potential for continued growth. We will drive this growth in a few ways: first, by attracting new pet parents with the Blue brand; second, by innovating across both feeding and treating occasions; and third, by leveraging General Mills' capabilities to unlock future growth. As I mentioned earlier, Blue has seen tremendous growth since launching in 2002. This track record for growth has continued into fiscal '20 with double-digit all-channel retail sales growth in the first half of our year. Over the last 2 years, we've successfully expanded the brand into the food, drug and mass or FDM channel, reaching more than 75% distribution. With Blue now available in most places pet parents shop, our communication and education efforts, leveraged against our incredibly broad product portfolio, will be that much more effective in attracting new pet parents. This first step in attracting new pet parents is through best-in-class communications. We invest in media to promote our ingredient superiority, and we leverage differentiated signage and display to drive awareness at the point of sale. In fact, in calendar 2019, the Blue brand accounted for roughly 1/4 of the media spend in the entire category, which is 3x greater than the next largest brand. Blue's media campaigns have always been differentiated and compelling. Let me show you 2 recent ads that put the spotlight on the ingredients and continue to build the purpose of the Blue Master brand. Let's go ahead and roll these 2 ads. [Presentation]

We also see a lot of room for innovation in this brand. In the back half of the year, we will have an exciting lineup of innovation in feeding, including Baby Blue, which focuses on bringing new solutions to new and younger pet parents at a time when they are the most engaged and then keeping them in the Blue family for the lifetime of their pets. We'll also launch our new True Solutions product line, featuring natural and nutritional solutions for pets with specific health needs formulated with ingredients preferred by veterinarians. We'll also innovate in treating with new licensing opportunities like Scooby Snacks, and we'll further develop our portfolio of cat treats with new Cat Bursts. And we're not done yet. With the depth of insights and technical expertise in research and development, we're leveraging General Mills' capabilities to build out an innovation pipeline of different -- more differential new products across both feeding and treating. Look for launches from Blue in this space in the second half of fiscal '21. Looking at our full portfolio, inclusive of the new items I just mentioned, Blue has product lines tailored to meet all the breed size, life stage and special needs of today's pets. We offer the broadest range of offerings under a single brand in the category, with formulas geared to meet preferences of all pets and pet parents, including grain-containing and grain-free pet foods. We know some investors have questions about product formulations and pet health. We take all concerns about pet health very seriously and stay connected with pet parents to understand their latest preferences. We have deep pet industry expertise in the team, including veterinarians and PhDs and animal nutrition. We're committed to the health and well-being of all pets. And we're well positioned to quickly make any adjustments to our portfolio and messaging need if pet parents' preferences evolve. I am proud of the success we've had with Blue over the last 2 years, and I am confident in our ability to drive growth in fiscal '21 and beyond by capitalizing on the humanization and premiumization trends in the category, continuing to build Blue's awareness and household penetration and innovating to expand our portfolio and bring new benefits to pets and pet parents. In addition to brand building and innovation, we think another key enabler of growth will be leveraging our scale through enterprise capabilities that create competitive advantage for General Mills. One of the most important ways we'll do this is by making data and analytics a strategic priority for our company. We've begun investing this year to enhance our sources of data, improve our analytical tools and build a dedicated team with unique skills to unlock significant data-driven opportunities for our business. This capability has a potential for far-reaching benefits. And in recognition of its strategic importance, we recently brought in Jaime Montemayor to lead this effort and join my leadership team as our Chief Digital and Technology Officer. Jaime's wealth of external CPG experience will help us deepen our connection with consumers through data and ultimately, enable us to win in the marketplace. We've identified a number of applications across our organization where enhanced data and analytics, or D&A, as we call it, can drive differential growth and efficiency for our business. From an efficiency standpoint, we have opportunities to leverage data to change how we work, including utilizing tools that will enhance our global sourcing capabilities and machine learning to improve the accuracy of our demand forecast, resulting in lower supply chain costs. Even more importantly, we see data and analytics as an advantaged source of growth for our business. For example, data and analytics will improve the way our sales organization partners with customers to develop customized solutions by category and geography. It will amplify our Strategic Revenue Management capability to unlock price/mix opportunities at a channel and SKU level. And it will enhance our marketing efforts by delivering better insights that lead to personalized consumer communications. One small example to bring this to life more fully is Box Tops for Education. We recently digitized the 23-year-old platform, making it easier for today's consumers to redeem box tops and give back to their communities. We've already seen 1.5 million consumers download the app, and we believe we can unlock future growth by better understanding consumer preferences allowing us to personalize offerings, fully leverage the power of our portfolio and improve both in-store and online experiences. As I mentioned, differential data-driven insights will only strengthen our core capabilities, such as Strategic Revenue Management, or SRM, and e-commerce. We've established dedicated teams to guide these practices and share learnings around the world, enabling a global approach that can be customized for local needs. SRM uses advanced analytics to proactively identify opportunities to drive positive net price realization for our brands, which we've seen play out for our business in fiscal '19 and again, in the first half of our fiscal '20. Our global e-commerce net sales were up nearly 30% through the first half of the year, and we continue to see our market share online over index compared to bricks-and-mortar channels. One of the key advantages that General Mills brings to e-commerce is a broad range of our portfolio. That breadth allows us to bring differential solutions to consumers and customers, like our Tailgate Nation event, which integrates our in-store event expertise with our enhanced online capabilities, bringing a cohesive look and feel to the event wherever consumers choose to shop. Another way we'll leverage our scale is by increasing our impact as a force for good in the world. It's no surprise that as a food company, our business depends on the earth and its resources. Threats to land, threats to water and threats to our climate pose risk to our business and could compromise our ability to feed a growing population. We believe that it is no longer enough to sustain our planet. We must regenerate the natural systems upon which we all depend. To that end, last year, we announced a bold commitment to advance regenerative agriculture practices on 1 million acres of farmland by 2030. I am very proud of the leadership that General Mills has demonstrated in this arena over many decades. In fact, 2019 represents our 50th year of reporting social and environmental performance to stakeholders. And we remain committed to disclosing our progress as well as our challenges at the enterprise level. It's also critical we connect these efforts to our brands. And recently, you've seen us leverage purpose-driven consumer messages on brands like Cheerios and Nature Valley and Annie's. We know that purpose-driven brands are a force for good in the world and create stronger consumer engagement and ultimately deliver faster growth. Being a force for good also drives stronger engagement with our employees. We launched a global inclusion strategy in fiscal '19 focused on creating a culture of belonging where every employee is empowered to bring his or her best to work every day. We do this because we know that a highly engaged, inclusive workforce will deliver better outcomes for our business. We're seeing the results from our efforts recognized externally, and we firmly believe the investments we're making in our people will create differential value for our shareholders. Our focus on people and culture goes all the way to the top. We brought in leaders with diverse backgrounds as experiences to fill our Board, including 5 women out of 11 independent directors. And I'm incredibly proud of my leadership team that you can see on this slide. For those of you who had a chance to meet some of them, you'll know the depth and diversity of talent, experiences and insights that they bring to our businesses. Equally importantly, they are great examples of the culture of belonging that I just described. Our transition as CFO is just the latest example of our strong depth of talent. After having the pleasure as CEO of working aside Don Mulligan for nearly 3 years, I'm pleased to have Kofi Bruce step into the new CFO role. Kofi has been with our company for 10 years in a variety of leadership roles, including Treasurer, CFO for Convenience and Foodservice segment, and most recently as VP of Financial Operations and Principal Accounting Officer. He brings a wealth of external perspective from both -- from prior experiences at Ecolab and the Ford Motor Company. Kofi's breadth of experience, track record of delivering exceptional results and passion for developing talent makes him the perfect candidate for his new role. I'm confident you'll all enjoy working with him. And with that, I'll pass it over to Kofi.

Thanks, Jeff, and good morning to everyone. It's my pleasure to attend my first CAGNY conference, and I'm proud to be taking the reins from Don Mulligan as the new Chief Financial Officer at General Mills. As I step into this role, my mandate is clear: continue General Mills' strong track record of financial stewardship, while advancing its growth agenda. I am fully aligned with Jeff in the belief that top line growth remains the foundation of sustainable, long-term shareholder returns for General Mills. Jeff mentioned 4 levers we use to drive shareholder returns. I'd like to share more detail on our long-term targets for each lever. First, we have a goal of consistent low single-digit organic sales growth. A modest amount of margin expansion will turn that low single-digit sales growth into mid-single-digit adjusted operating profit growth. From there, we look to convert earnings into cash with the goal of at least 95% of adjusted after-tax earnings converted to free cash flow, as we look to return at least 90% of that free cash flow to shareholders through dividends and net share repurchases over the long term. As Jeff mentioned earlier, we are on a path towards restoring consistent top line growth. We and the industry spent a few years with the focus primarily on cost and margins. During that time, we took some important actions to streamline our structure and improve our efficiency, but the considerable resources and focus required to execute those initiatives made it difficult to also execute on innovation and growth ideas, culminating in a very disappointing top line result in our fiscal 2017. Jeff took over as CEO in fiscal 2018, launching our global strategies and our Compete, Accelerate, Reshape growth framework. And we've seen a significant improvement in our in-market competitiveness since then. This year, we expect to return to positive organic sales growth. And our #1 priority is to continue our upward trajectory until we are consistently delivering organic sales growth toward the upper end of that low single-digit range. Yet, we haven't lost sight of our efficiency during this period of top line improvement. In fact, we've expanded our adjusted operating profit margin 120 basis points between fiscal '15 and fiscal '19, even while volume deleverage has been a significant headwind. During this time, we've maintained a competitive margin profile with our fiscal '19 adjusted operating profit margin ahead of the U.S. food peer median. As we improve our top line and drive efficiency, we are starting to see a virtuous cycle return. It starts with top line growth and importantly, volume growth to drive leverage in our operations. On top of that, we add Holistic Margin Management, or HMM, which is core to our efficiency efforts and continues to generate significant savings in our cost of goods sold. We delivered over $2.1 billion in cost of goods sold HMM savings over the past 5 fiscal years, including record levels in fiscal 2019. And we expect to continue generating ongoing HMM savings of approximately to 4% of COGS in the years ahead. Our Strategic Revenue Management capability also contributes to margins as we unlock data-driven insights that drive positive price/mix. And we continue to pursue efficiency opportunities by leveraging our scale and optimizing our structure, including route-to-market changes we're implementing in certain international markets this year as well as efficiency initiatives we'll unlock through our data and analytics initiative that Jeff mentioned earlier. The combination of volume leverage, HMM, SRM and scale efficiencies acts as our first line of defense against input cost inflation and allows for investment behind our brands and our capabilities. For example, over the past 2 years, we invested to build critical growth-enabling capabilities in SRM and e-commerce. In fiscal '20, we're investing to accelerate data and analytics capabilities, and we're significantly increasing investment behind our brands, including a mid-teens percent increase in media spending in the back half of this fiscal year. Our goal is to increase brand investment, inclusive of media spending and other brand-focused activities at or ahead of the rate of sales growth in fiscal '21 and beyond. To close the loop, stronger investment behind great ideas will drive healthier top line growth and continue the virtuous cycle. Now let's shift gears from margins to cash. Our long-term target is to convert at least 95% of adjusted net earnings into free cash flow. In recent years, we've consistently exceeded that goal, thanks in large part to our core working capital reductions. From fiscal '14 to fiscal '19, we've driven core working capital down by more than 70% through improvements in accounts payable as well as reductions in inventory, generating over $1 billion in cash over that same period. And we expect core working capital to be a source of cash again in fiscal '20. Our progress on core working capital has been a key contributor to our success on free cash flow conversion in recent years. We've generated $6.2 billion cumulatively in free cash flow at 109% conversion rate over the last 3 years and that's because -- before seeing the full benefit of adding Blue Buffalo to our portfolio. We're maintaining our strong cash discipline in fiscal '20, with free cash flow expected to be at least 105% of adjusted after-tax earnings. And we see continued opportunity to drive strong free cash flow conversion beyond fiscal '20 by delivering further improvements in inventory and accounts payable. With strong cash generation as a foundation, our capital allocation priorities reflect our thoughtful approach to utilizing that cash to drive attractive returns for our shareholders. Having increased our leverage in fiscal '18 to help fund the Blue Buffalo acquisition, our near-term capital allocation priorities have focused on deleverage. But whether near or long term, our first call on cash is always to maintain healthy capital investment to fuel both cost savings and growth initiatives in our core business. Since closing the Blue Buffalo acquisition, we've maintained our dividend at $0.49 per share. At this dividend rate, our yield remains strong at more than 3.5%, which is among the top quartile of global CPG peers. We've also put large-scale M&A and share repurchases on hold, and we've used excess cash to make important progress in reducing our leverage. We've paid down over $1.3 billion of debt in fiscal '19 and over $650 million in the first half of this fiscal year. We closed fiscal '19 with a net debt-to-adjusted EBITDA ratio of 3.9x, which was ahead of our planned expectations and commitment to the rating agencies. And we expect the combination of further debt reduction and earnings growth this year will help us achieve our fiscal '20 leverage target of 3.5x. Moving forward, once we approach 3x leverage, we will begin shifting back to our long-term capital priorities, which you can see on the right-hand side of this slide. This includes capital investments at roughly 4% of net sales. We'll also look to grow dividends in line with earnings over time, continuing our 121-year track record of uninterrupted dividend payments. Next, we'll pursue strategic acquisitions if we see opportunities with a clear path to value creation for our shareholders. And then we'll use any excess cash remaining for share repurchases. Historically, we've averaged about a 2% reduction in share count over a multiyear time frame. With all of this in mind, and as I reflect on our first half results, I'm proud to say we are making good progress on all 3 of our fiscal '20 priorities. First, we are on track to deliver accelerated organic sales growth in fiscal '20. We improved organic sales growth in North America retail in the first half compared to fiscal '19. And we generated double-digit top line growth in the Pet segment. Our second priority is to maintain strong margins. With excellent results on HMM and SRM and disciplined management of our costs, we finished the first half a bit ahead of our plan on the bottom line, and we're reinvesting that favorability in the back half to strengthen our top line growth. Our final F '20 priority is to maintain our focus on cash to achieve our leverage target, and you heard me say, we are well on track to meet that goal. I'll turn now to our full year targets. As you saw in the press release this morning, we reiterated our full year fiscal '20 outlook across our key metrics. Specifically, we expect organic net sales to increase 1% to 2%. We continue to expect the combination of currency translation, the impact of divestitures executed in fiscal '19 and contributions from the 53rd week in fiscal '20 to increase reported net sales by roughly 1%. Constant currency adjusted operating profit is expected to increase 2% to 4%. The benefit of the extra fiscal week is being reinvested in capabilities and brand-building initiatives to drive improvement in our organic sales rate in 2020 and beyond. Constant currency adjusted diluted earnings per share are expected to increase 3% to 5% from the base of $3.22 earned in fiscal '19. We continue to estimate that foreign currency will be immaterial to our adjusted operating profit and adjusted diluted earnings per share. As I said earlier, we're targeting at least 105% of free cash flow conversion and a 3.5x net debt-to-adjusted EBITDA ratio. Let me add that this outlook does not include the impact from COVID-19, the coronavirus in China. Since the rapidly evolving situation makes it difficult to quantify the full year impact of the outbreak at this time. It's important to note that the safety of our consumers, employees and other stakeholders is our top priority. So we are following government and health organization guidance regarding all safety precautions. Nearly half of our company-owned Häagen-Dazs shops in Greater China have been temporarily closed, and the remaining shops are operating under severely restricted hours. For context, the Greater China region represents approximately 4% of the company's total net sales, of which approximately 40% are net sales from Häagen-Dazs shops and other foodservice outlets. Important to note that the shops are retail store formats with high fixed cost bases, so a decline in shop sales has a more significant impact on profit relative to the Asia and Latin America segments' overall profitability. We are continuing to access the ongoing impact of the outbreak on our Asia business, and we'll provide more information in several weeks during our Q3 earnings call in March. To close, our #1 priority is to improve our top line growth. We're doing this by investing to boldly build our brands and relentlessly innovating across our global platforms. We're also building capabilities that leverage our scale to drive competitive advantage and unleashing the power of our people to be a force for good, highlighted by our shift in focus from sustainability to regeneration, which is good for our planet and good for our business. Finally, we're continuing our important margin and cash discipline work, which will allow us to unlock investment to fuel that virtuous cycle of growth. I look forward in my new role to reporting on our progress as we drive profitable growth and strong shareholder returns in the years ahead. That concludes our prepared remarks for this morning, but I think we have more than a little bit of time for Q&A. So Jeff, will you direct questions from the audience?