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

There he is.

How are you?

I'm doing well. How are you?

I'm very well. You are live, just let you know, not just -- I think you would say anything. I just want to always make sure that people know. There's a live feed. It's one of the parts of this process that I think is the only issue that I think that come about. But I think we're actually ready to go. So welcome, Jeff. I'm more appreciative than ever that you are joining us today in these unprecedented times. Over the years, General Mills has been ahead of the curve on so many trends going back to before whole grains and gluten-free were actually in vogue. With more than 25 years at General Mills and the last 3 as CEO, you've led General Mills through many of them, including a shift towards organic with the acquisition of Annie's and EPIC, the successful integration of Blue Buffalo, General Mills' consistent share gain in cereal and now being on the forefront of data and analytics. Again, I cannot thank you enough for joining us this afternoon. With that, I'm going to turn it over to you for some opening remarks and then we'll get right into Q&A after that. Again, thank you very much.

Again, thanks for having me. And I have been through a number of things, as you said, in 25 years, but never anything quite like the times we have right now. So again, thanks for letting me be here. And what I want to do is just say a few opening remarks and use a couple of slides to do that and then turn it over for Q&A. So if we can then turn it to the next slide and the one after that. Just a reminder, we have some forward-looking statements, what we'll be talking about. Important to note that among those is going to be potential impact of COVID-19 that could cause our future results to be different than what our current estimates are, which may be the understatement of the year. So if we turn the slide then. One of the things, I guess, I'll start with, back at the beginning, even though we're in a completely new environment than we started in fiscal 2020, I think it's important for people listening to realize that before COVID-19 hit, we were on track to achieve the priorities we set out at the beginning of the year. And so we have been improving our results, and now I'm very proud of what the team had done even before the COVID-19 impact. Year-to-date, through our third quarter, we had driven 11% growth in our pet business when our external guidance was 8% to 10%. Our holistic margin management and productivity efforts were really high, and we're driving good strategic revenue management. And importantly, we had been on track and still are on track to reduce our debt and get back to our leverage goals that we espoused at the beginning of the year with really good free cash flow conversion. And so the last quarter has seen our growth accelerate, and I'll talk about our revised guidance in a minute. But I think it's important to know even before this, General Mills was executing well and on track to, broadly speaking, achieve our priorities. So then let's transition to Slide 5, what's going on in the last couple of months. General Mills had performed very well, as we said in our most recent guidance. And the reason we have, I think, is, first and foremost, chalked up to our employees and the dedication of our employees. And the fact that we have made our employees and their health and safety and the health and safety of food our #1 objective is not just a throwaway line. It is more critical now than it ever has been. And whether it's keep employees safe in manufacturing and logistic sites by providing extra pay leave or providing pay for them when they can't make it to work, and sometimes in increments of an hour or half a day, or having temperatures checks or putting in social distancing, or having masks at facilities throughout the world. We've really taken care of our employees. In addition to that, we are one of the first companies to make sure employees can work from home all over the world. And we've put that announcement out on March 13, so exactly 2 months ago today. And even now at our world headquarters, 95% of the people who would normally occupy our world headquarters are successfully working at home. And that's allowed us to continue our manufacturing and distribution facilities. And none of them have been closed to date. They're all operating without significant disruption. It doesn't mean that there's -- it's always been perfect, but without significant disruption. And for those reasons, we've been able to fulfill unprecedented increase in demand for food at home. And that's in the U.S., that's in Europe, that's in China, that's in Brazil. Everywhere we operate we're seeing incredible amounts of demand for food at home and as well a significant reduction in food away-from-home in all those geographies. And what I would tell you, for those listening, is that all the trends we're seeing now, we thought these trends would take place when we gave our initial revised guidance at the end of our Q3 earnings call. I will say we didn't really -- we underestimated the impact and the severity of these changes in the fourth quarter. When we gave our earnings announcement in March, all the schools in the U.S. were open. All the schools in Europe were open. All restaurants were open all over the country and everywhere in Europe outside of Italy. And so while we anticipated some of the category trends, we must say that the reason we revised our guidance recently, raising sales, profit and earnings per share, is because the trends have been more significant and faster than what we had imagined. And I think faster than what many people had imagined. So if we then turn to the last slide, I think, that I have here. So we've revised our guidance up. You can see what the guidance was for 2020 that we issued at the end of the third quarter, which was in March. We provided that guidance upward on net sales and, importantly, on operating profit. And that's after spending tens of millions of dollars of increased costs to take care of our employees and provide sick leave and masks and thermometers, all of that. Even with all the spending, that spending, we have been able to operate efficiently and effectively and have increased our profit targets and, as such, our earnings per share as well. So with that, I guess, Ken, I will turn it over to you and not spend any more time and would love to hear what's on the minds of the people listening and the questions you have for me.

Great. So let me just first start out with, can you talk about the category dynamics? Some category -- I guess, which categories are seeing a true incremental consumption and which categories you think it's more of a stock up. And then within that, we've seen consistent share gains in cereal, refrigerated dough, but maybe not so much in yogurt and snacks bars. So can you compare and contrast and give us a little update on how you're thinking about the categories.

Yes, sure. And let me talk about the human food side first, and let me talk about the pet food side then. In our human food side, for businesses where we have demand at home and whether that's in Europe or the U.S. or China or Brazil, we initially saw some stocking up in March in those categories. But as you've seen over the past 6 weeks or so, even through the first week of May, we continued to see strong demand for food eaten at home. And so while I can't quantify the impact, it's fairly clear to us, given the strong trends. We continue to see that there hasn't been a lot of stocking up in food at home after the initial surge. And because demand has remained so strong for so long, we believe that consumers have largely eaten the food that they have purchased. And what they have told us is that they generally have 1 to 2 weeks of supply on hand, which wouldn't be that abnormal. We'll know by the time we announce our full year earnings at the end of June, we will be able to tell for sure. But on the human food side, we don't think there's a tremendous amount of extra stock that people have, and they're covered. When it comes to pet food, it's a little bit different because pets weren't eating at restaurants before [Audio Gap] from away-from-home to at-home. And so in March, we saw a big stock up similar to what you have seen in toilet paper. And we anticipated -- and you saw that category grow, and obviously, Blue Buffalo sales grew with that in March. That all came back down to Earth in April. We actually saw in measured channels, the category declined. Blue Buffalo was still gaining share, but the category declined, and we wouldn't be surprised if we saw that again in May. And so what we've seen on the pet food side is that after the initial stockup, we've seen that category decelerate rapidly. And we haven't seen that on the human side. And so that's why we're pretty confident what we've seen in pet is a stock up, followed by people taking down their inventory levels over the last couple of months. And in human food, that hasn't been the case. Then you asked about our trends in our category, specifically. We're seeing improved growth across all of our categories, with the exception of our bars category. And we're seeing the same thing in Europe that we're seeing in the U.S. on bars. But the -- mostly, that's because bars are eaten, to a large degree, on the go. And what we're seeing is consumption for food at home, particularly in our meals categories. And whether that meal is breakfast like cereal, whether it's lunch and dinner like Annie's Macaroni and Cheese or whether it's dinner occasions like Progresso or Totino's or Old El Paso, we're seeing the largest growth in our meals categories. In snacks, while our -- the category has decelerated, we actually gained a little bit of share over the last 2 months in snack bars and aggregate. And so our competitive positioning has improved, even if the category hasn't been -- hasn't gotten all the way back to health. And in yogurt, we're down a little bit on share so far this quarter. It was down about 30 basis points of share, which is what we were going in, even as we have seen the growth rate in yogurt improve.

There's been a lot of conflicting views on if consumers feel more comfortable with big brands, but then there's economics and logistics and out of stocks indicating that people are actually shifting to private label and then emerging brands, but maybe emerging brands aren't, and we've heard a lot about today in the last couple of days about that. What are your views on how consumers' behavior are shifting into either in terms of big brands versus emerging brands and then brands versus private label? And how is out of stocks actually affecting that?

Well, what I will say is that, for our brands, I mean, I think consumers are going back to brands they know and trust. In a world that's full of anxiety and uncertainty, the last thing you want to do is compound that by feeding your family something they didn't know before. And so the fact that General Mills has so many well-known brands, I think, serves us well right now. And whether those brands are Pillsbury or Betty Crocker or Nature Valley or Progresso or what have you, the fact that we have big brands that are known to consumers is certainly important. But the other thing is that our products are available. I mean our supply chain has been working well. Our case fill rates have been pretty good across the board. And with the exception maybe of soup, which has been a little bit tougher. But our -- because our products has been available and because we have brands that consumers know and trust, that's what we think has driven demand for us. Interestingly, in the categories where we compete in, private label is only up 10 basis points since the pandemic started. So there's been a lot of talk about trading down to private label. General Mills competed very effectively during the last recession. I happened to be around long enough that I actually -- I was running our cereal business during that, and our cereal business grew during that, and I think we'll grow it again. But importantly, we kept private label at bay during that time because we did the job that we need to do, which was focus on our marketing and our advertising and making sure products are available for people.

To what extent are you seeing new buyers into your categories? One of your peers even went as far as saying 40% to 80% of the new brand users have strong appetite to continue purchasing their brands. We had McKinsey on earlier today, and they did indicate that people are trying new brands and coming to new categories. What are you seeing as new buyers come into your categories? And how do you retain them if you're seeing that?

So we are seeing penetration gains. People ask me, are you seeing penetration gains? Or is it frequency? And it's too early to tell about frequency and repeat rates to be -- really. But we've seen penetration gains across the board for our categories and even more so for our brands, which is why we're gaining share in this environment, and holding on to them. I think the job for holding on to consumers actually began a few years ago when we started improving the quality of our products. And so that, I think, is going to pay really big dividends for us now. So the idea that we added more fruit to Yoplait Original, and when people come back and try that, I think they'll be impressed. We improved the quality of many of our Progresso soups, and when they try that for the first time or they'd come back for the first time in many years, I think people will like that. When we have increased the quality of many of our Pillsbury refrigerated dough products, when people come and try that, we know that they are pleasantly surprised about what they find. And so the job to do -- the first job and how to retain consumers is having done the job for the last few years, which is increasing the quality of our products. The next job to do is make sure we keep on advertising and marketing. There's been a lot of discussion, should you cut advertising during this period? And the answer for us is a wholeheartedly no. This is the time when you make sure that people know what your brands are and what they stand for. We've got really good marketing. And the key really is to make sure you're solving problems for consumers. And for many of our consumers now, they initially loaded up their pantry with things maybe they hadn't bought in a while, and they weren't exactly sure how to use some of them. And our traffic to our Betty Crocker and Pillsbury websites is up about 100% since the pandemic hit. And as people looking for solutions, okay, I've got yeasts, I've got bananas and I've got flour, how exactly do I make banana bread? And look, it may seem -- I smile and I think that's kind of -- it's funny, but it's also true people have all these things. And so that's how Betty Crocker actually got started in the 1950s was helping people solve problems. And so we're kind of back to that.

Okay. And just staying with that line of thinking, I get the advertising staying. Can you talk about the tailwinds from lower merchandising, potentially streamlining your SKUs and production lines and maybe limiting new products in the near term? And then how does that structurally change in 2000 -- year 2021 is coming up already, but calendar 2021 as well.

Well, what's happened so far is very clear what's happening coming up. I can speculate -- I'll speculate a little bit, but I don't have a complete crystal ball. But what I will say about what's happened so far is that we have not taken price increases, but our average prices have gone up, and that's because we've reduced the amount of promotional spend. I mean the reason why you have promotional spend in the first place is either to promote switching or to stock pantries. And it occurs to us that may be encouraging pantry loading in a time when there's a pandemic is probably not a great idea because consumers are doing that already. So we've reduced our -- the merchandising we have, along with our -- and our retail customers, too. Our main focus and the focus of our retail partners has been to keep the shelves stocked. And so that's what we have done throughout all of our categories. In terms of the number of SKUs. There have been a couple of categories where we've significantly reduced the number of SKUs to meet demand. Soup is one of those, where we normally would have about 90 SKUs, and now we're focusing on probably the top 50 of those. But for most of our categories, while we may have reduced the number of SKUs by a few, we haven't dramatically reduced the number of SKUs because it, frankly, wouldn't have helped us with our throughput anymore. As we look to innovation, what I will say is that our big innovations, new product innovations that we're planning for this summer will continue to do. And as consumers stay at home and they've eaten the same thing for a few months on end, it occurs to us that perhaps something new might be a good idea for them. The key, though, is to make sure we do that in a way that doesn't clog up either our distribution or manufacturing system or that of our customers. And so what you may see fewer new items from us, because the 150th item we're going to launch is probably not going to be a great idea in this environment. But the big launches, the big ideas, the new big product innovations we will continue with this summer.

What do you do with the incremental pricing that you're getting through and even the less -- again, the 150 first, a new product that you don't do because, again, that's still cash to you. How do you reinvest that? Or do you hold it for the rainy day? Do you let it fall to the bottom line? How do we think about that from an investor's point of view?

Well, the first piece I would say is that we've invested money, I think money very well spent on making sure our people are safe; and through additional leave policies and policies that keep them at home if they're sick; and PPE, like temperature checks; and on mask. And we'll continue to do some of those things. And so the most important thing is maintaining supply. And to do that, you have to take care of your people. And so we have certainly done that. The other investments, we continue to make investments in brand marketing, as I've talked about, and we'll continue that into the future. We've got great brands and great marketing. And for us, building your brands is not something you turn on and off, and we'll continue to market our brands. So you'll continue to see us do that. I think over the last few years, I have talked about staying in the middle of the boat with regard -- you can't just chase growth for the sake of growth, and taking everything to the bottom line and not growing is certainly not an option. I would submit that in a middle of a pandemic, staying in the middle of the boat is probably the best thing you can do. And so we'll continue to invest in our people. We'll continue to invest in our brands, and importantly, we'll continue to invest in our capabilities. We've been building our data and analytics capabilities, and we'll continue to do that. But at the end, our shareholders need to get money back too. And so making sure that we can do all those things and continue some growth, while making sure that we take care of the bottom line is also going to be important.

If you don't mind, you can actually -- your camera went off. And it's okay if you don't want to, but you can just press on the bottom. There's like a little thing that just said put the camera back on. But again, you're coming -- you're crystal clear, so it's perfect. So just changing a little bit from human to pet. You gave us a little bit update on the -- a little bit of pantry loading on Blue Buffalo. But really, what I think what's more important is what's the next leg of growth look like for Blue Buffalo, right? I mean you've done a good job integrating it. And getting into new distribution channels, but what happens next? And thinking about it in 2021, 2022, how do I think about that?

Well, the first I would tell you is that, I mean we've gotten great -- as you say, we've gotten great distribution. And thank you. We feel good about the way we've executed on Blue Buffalo so far. And by the way, we don't think all of the growth on Blue Buffalo is behind us. We think there's quite a bit ahead of us. And the first task is going to be to make sure we keep accelerating growth in places where we are. And some people write about, well, once we have full distribution, then we'll stop growing. Well, I mean, I don't think so. I mean consumers keep finding Blue Buffalo at new points of distribution. And we know from our human food business, people can find new things up to 2 years after you actually get it on the shelf. And so the idea that just because you have it on the shelf means that everybody has found it is just not true. So we'll keep growing our business where we have it, increasing our velocities, increasing our advertising. The second is that there's a good opportunity for us to keep growing in e-commerce. The e-commerce channel has just exploded, as you well know, for human food, and even more so for pet food. And before the COVID-19 pandemic, probably 25% of our business was online. Now it's roughly 35% of our business online. And we have a leading brand online. And so for us -- and we over-index online. So for us, making sure we keep growing in the e-commerce channel is going to be important. And then finally, but not lastly, is making sure we turn on the innovation engine that General Mills has. And so in pet, General Mills has about a 7 share of the pet category, but about 10% of dry dog food and a lot less of wet and treat. And so over the next year, you'll see us come with some significant innovation in the wet and treat area. And just order of magnitude, if we can get our wet and treats business up to the same 10% market share we have in dry dog food, that's about $1 billion opportunity. So when we talk about innovating, we're not talking about the 45th flavor of Wilderness. I mean this is really true innovation, which we think can work in the category. So you'll see that in the coming year as well.

So you led with it, so it's good, the e-commerce, or that was probably your second point. But thinking about it going back to the human side, distribution channels. We talk a lot about retail. 2 or 3 pieces of it is e-commerce and obviously, C-store and foodservice. So I guess, first, let's talk about how you're set up for e-commerce on the human side. And then on the other side, C-store and foodservice is a major channel for General Mills. I'm assuming that's been a little bit more under pressure. How do you kind of size that and how do we think about that? But first, if we could just stick with e-commerce just because it was a good point to start with.

Sure. On the e-commerce side, we've been investing in e-commerce for about 5 years now. I mean even before I was CEO and running our U.S. business, we started putting heavy investment behind e-commerce. And not only pure-play e-commerce, but our current brick-and-mortar customers that are doing e-commerce. So whether that's direct-to-home delivery or whether that's a click-and-collect model, we've been investing for quite some time. And those investments are really paying off now. We actually over-index online versus off-line. And it's because we've made the investments, but also because we have really big brands. And big brands tend to play well online. And so as we look in the future, we anticipated growth from e-commerce. The recent pandemic has probably sped up by 3 years, the penetration we're seeing. About 4.5% to 5% of our business in the U.S. is on -- was online before the pandemic. It's now probably 6.5% to 7%. And so a meaningful increase in a very short period of time. Now that means that still 94% or 93% is still through bricks and mortar. We haven't forgotten that either. But e-commerce has grown. We're advanced there. We don't need to make additional investments in things like packaging lines and other things to be competitive in e-commerce. And in our profitability and e-commerce channel is roughly what it is in other channels. And so we're excited about the growth of e-commerce and we think it's a great opportunity for General Mills because we have leading brands because we have good capabilities. As I pivot to the other question you asked about the convenience and foodservice channel, that's about as challenged -- that's about as challenged on the tough side as food from home is advantage for us. Fortunately for General Mills, 85% of our business is food eaten at home and 15% is in the foodservice business. But if you think broadly speaking, in the U.S., which is our biggest foodservice business, about 15% of our foodservice business is in convenience and foodservice. And the other 85% is split between the education channels, so K-12 schools and colleges and universities and then restaurants. And look, when schools aren't in session, you're not going to sell much to schools. And when restaurants are closed, you're not going to sell much there. The only bright spot on that part really has been the -- we do sell a lot of flour to pizzerias. And so to the extent that the pizza business has not suffered as greatly as some other businesses, that is helpful. But it's been a tough quarter for our foodservice team. We're gaining share in the markets we compete. So I love the way we're competing. I love the spirit with which we're competing. We have a little bit of excess capacity and we're using some of that to donate food for the Second Harvest Heartland and to Feeding America. But it's been a tough quarter. The other good thing for us on foodservice is a lot of our products we make in foodservice, we can also make in retail. And so the -- we -- there are packaging lines that are different. So there are idle lines. So from a cost standpoint, we're not using all of our assets. But when we make Cheerios, we kind of make it in one place. We can put it in a retail container, we can put it in small cups for schools. Go-GURT, we can make for -- we've made for quick-serve restaurants, but we can redo that for the at-home demand. So there are a lot of products we can actually switch pretty quickly. The ones that are tougher for us, we've got big frozen dough businesses and things like that, that that we serve a lot of restaurants. Those businesses are really tough to repurpose in the short term for retail consumption.

Two pieces of that. What percentage of the 15% can get repurposed? And then have you seen any sort of -- obviously, education, there's no inflection point. I mean it is closed, can't -- unless it's reopened, it's kind of binary. But have you seen any sort of inflection point in any of the other either C-stores or restaurants?

C-store business is still pretty slow, although I would anticipate when consumer -- when economy starts to reopen as it is starting right now and people get out a little bit more, I think we'll see a little bit more growth in our convenience business. In schools, we probably hit the bottom of the trough on that. They aren't in session, but there are so many kids in need that a lot of school districts that have a meal or feeding programs in conjunction with our distributors in the USDA. And so we're participating in those. So demand is not 0. It's just relatively low. And then the restaurant business is going to be tough. Even if some restaurants are allowed to reopen, which we're starting to see right now, there's going to be a lot more limited seating. And at least from our experience in China, consumers weren't exactly thrilled about the idea of going into crowded restaurants right away in the midst of a pandemic. So I would anticipate that our convenience and foodservice business for at least for the next period of time will be challenged even if we're competing effectively.

And how much of your business can be repurposed?

I'm sorry. The -- I can't give you an exact number on that right now. But I would say it's a decent amount. A decent amount of our foodservice business can be repurposed. What you don't get back is that there are costs that you have on packaging lines and things that you have no matter where the business goes.

We're going to go continue around the world a little bit. Can you provide an update on China? I think on the last update, General Mills had roughly 90% of the Haagen-Dazs stores opened. Sales were still down about 50% to 60%. Most restaurants have pointed to trends improving every week. How do we think about that for you guys? Have you seen any inflection there? And do you feel a little bit better about that? And the parallel to that is, are there any learnings from China that might help you with other recoveries?

Yes. So our China business is about split 50%, our Wanchai Ferry Dumpling business, which is an at-home business and 50% Haagen-Dazs business, which is virtually all away from home. So we've seen both ends of the spectrum. On the Wanchai Ferry business, demand was very, very high for a couple of months and actually still remains high. And on our Haagen-Dazs business, all of our stores are now open for Haagen-Dazs. Traffic is up to about 70% of what it was pre-COVID. So it continues to improve, but it's still obviously far below what it was before the crisis. And so that gives us a line of sight to how do we think things will happen in other parts of the world. I don't know that will happen exactly like China. But the reopening of the economy there and how consumers spend has certainly been gradual, and we would anticipate the same sort of thing here in the U.S. And we also have a big foodservice business in China beyond shops that services high-speed trains and hotels and things like that. Obviously, that business is not going to be very strong as consumers aren't traveling a lot. So the things that we've learned from China is that even after there's an official reopening, it takes consumers a little while to adjust and to kind of get back into a rhythm. And that would be the first thing I would say. The second is that we learned a lot about how to take care of our employees with temperature checks and masks and how do they run our supply chain successfully in the midst of a pandemic, and we have rolled that learning out to our business in Europe and now the U.S. and then more recently to Brazil.

And in Brazil, just to follow on that. I'm assuming that, that pandemic is just getting, unfortunately, started a little bit later than everybody else. I'm assuming the distribution for Yoki is probably maybe not -- maybe provide us an update rather than me saying what I think it is. But again, you give us an update. You probably know better than I do.

Sure. The -- well, for the situation in Brazil kind of mirrors the U.S., except it's heading down the same tracks. And but maybe a health care system that's not quite even as well prepared as ours. So it's a tough situation in Brazil. Our business in Brazil is almost 100% food at home, and it tends to be items that are more staples. And so in the last couple of months, we have seen good growth in our Brazilian business. Our supply chain remains really resilient because our people feel safe at the plants and when they're in the stores with, again, with all the PPE that we provide to them. Interestingly, around the world, I call it our presenteeism, the number -- the percent of people who are present at our manufacturing plants is well over 95%. And our safety rates are as good as they have ever been in terms of fewer accidents and things like that. And that is also the case in Brazil. Our supply chain is running very effectively even in a market that is challenged.

You said earlier that the best place to be is staying in the middle of the boat. I think that was your expression. But are there any sort of business changes that you would think about doing? And one that I might think of is, I know there was a point in time that you were thinking about divesting certain businesses. And kind of in my mind, I think you're progressing with Betty Crocker and Pillsbury and Hamburger Helper. But given this situation, does that change your philosophical view on possible sales? Or does it get you a better price? Or how do you reconfigure how you're thinking about that? And are there other parts of the business that you would think about -- thinking about doing things differently, for whatever it is, just given the COVID-19?

Yes. Well, the -- our long-term view on portfolio shaping really hasn't changed a lot in that we'll continue to look for acquisition candidates and we'll continue to look for divestiture candidates. And I had talked about roughly 5% of our portfolio. And so that's still our thought. Clearly, the current environment, both in terms of tactics and point of fact is maybe change that time line a little bit. And it maybe cause us to think on a couple of businesses. But in this current environment with so much uncertainty, there is -- it strikes me, it's very difficult to either buy or sell a business in this current environment. And I bet people ask me if businesses are performing better. I would say, well, almost all of our businesses are performing better, especially the ones for at home. So we think there's actually a good chance in the short term to get growth out of some businesses that have been always profitable, always quite profitable, but the challenge has been growth. Now that we have growth, that will make the profitability and the attractiveness of those businesses in the short term much better. So I think it probably changes in the short term what we see in terms of divestitures. But it doesn't necessarily change our long-term perspective that we need to continue to shape our portfolio. It also doesn't change our view on capital allocation. We are very focused on paying down debt, and had a good line of sight to doing that before the pandemic. Clearly, our earnings are higher than what we had anticipated, and our free cash flow conversion remains strong. And so we're really focused on that because once we can get our debt levels back down to about 3x net debt to EBITDA, it opens up a lot of opportunities for shareholders. So it would allow us to get back to dividend increases and potentially share repurchases, acquisitions, other things. So we're going to remain focused in the near term on executing our current business as well as making sure we stay focused on reducing our debt because that will give us a lot of optionality on how we return money to shareholders.

Fair to say that your paydown of debt could accelerate by a 6-month period. I mean there's going to be some speed to which you're able to do that at a faster pace.

Look, if it could, we certainly would. We'll provide more guidance and thought on that when we announce our earnings at the end of the fourth quarter. But certainly, our operating income was a lot better than we -- earnings are a lot better than we had anticipated, given that revised guidance up and our free cash flow conversion is still good. So to the extent we can pay it down, certainly, we will.

So we only have 2 minutes left, so I want to kind of put it all together. Would you see -- there seems to be some structural advantages that will go through your model. And as I put it all together, do you think that General's earnings growth algorithm, it will be easier to achieve your algorithm now and potentially exceed that? How do you think that you will emerge out of this COVID-19? I mean is it really possible or probable that your growth algorithm is more achievable than ever before. And is there actually a bump up of growth that you would think of for the next 2 to 4 years either?

Well, we did see -- I guess I'll start to frame it as we see kind of 3 periods of time. One is this current period, which is social isolation, which is basically restaurants being closed, schools being closed, everybody working from home. And that's where we see the highest growth. That period of time where we're starting to come to the -- and to the beginning of that, and -- but we both see a gradual, we think, reopening, but people won't return to restaurants and everything right away. After that, we'll see, we think, a recessionary period. And we think we'll see more people working from home. While many people are excited about getting back to the office, I think a lot of people found they can actually do their work from home. So we think there'll be more people working from home, which has advantages to us. And I take you back to the last recession where General Mills sales were during the recession were above where they were going into the recession. And to the extent that there's a recessionary period following the social isolation and to the extent that more people are working from home, we think that plays into the strength of General Mills, and particularly our categories around meals. So think about Old El Paso and Progresso and Totino's and Pillsbury and our breakfast occasion where we're way over-indexed with breakfast cereal, that plays into our wheelhouse. And U.S., it plays into our strength in Europe and also in Brazil.

Honestly, I could not appreciate more that you spent the time with us today. Thank you so much. With that, we're going to end it there.

All right. Thank you.

Stay safe.

All right. You as well.

And thank you for that e-mail.

Okay.

Thank you. Take care.

Yes.