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

All right. Thanks, and welcome back. Welcome, especially to General Mills and Jeff Harmening, Chairman and CEO, who joins us at the conference. Thank you very much for being here. We're going to run today's session as a -- just a Q&A between Jeff and myself. And without further ado, we'll get going.

Jeff, I should say, I will issue just a reminder that General Mills is in their quiet period, so we won't be talking about anything that pertains to the current quarter that will be reported at the end of the month. Let's start just a little bit of reflection on the last couple of years of -- that has been tremendously eventful and tumultuous. I guess as you -- and look, we're -- as most of the conference has established, we're exiting one period of turmoil and potentially going into another very different period of turmoil. So I guess from where you sit, just reflecting back on what the company has accomplished over the last couple of years. What do you think -- what do you take out of the most recent period that sets you up and gives you confidence as you go into the future?

Yes. Well, first thanks for having me here, Steve. And it has been quite a couple of years. And you know what, I guess, I would say, if I go back I go back over the last 4 years, we've really shifted toward focusing just on profit to kind of staying in the middle of the boat, balancing growth and profitability. And we've been able to do that over this last period of time in probably 3 major ways, 3 reasons. The first is we've become a lot more competitive in our current categories. And we're really pleased that in the categories in which we participated. We've grown market share and our priority category is about 65% to 70% of those categories in each of the last 4 years. In addition to that, while we have done that, we end this period with a great deal of confidence because while we've competed effectively in our current categories, we've reshaped quite a bit of our portfolio, and that's actually worked quite well. And so whether it's buying Blue Buffalo or the Tyson pet treat business or divesting brands like Yoplait or the proposed divestiture of Helpers and Suddenly Salad, we've really turned over our portfolio, which has added another 100 basis points of growth to our long-term algorithm. And I think the third is that we've continued to develop our culture and capabilities. And so it's one thing to compete effectively in the here and now. But General Mills has tremendous people, and we always have and we still do. And we've developed them, we've developed our culture, but we've also invested in capabilities in data and analytics and strategic revenue management. And so -- as we come out of this current period and enter to whatever comes next, we are confident not only that we can compete well, but we've made the investments necessary to compete for whatever comes ahead. I think one of the things we found out about ourselves during the last couple of years is just our ability to pivot quickly. And I'm not sure we would have said that 4 years ago, but certainly now we can say that. And that's really important because we get asked what's going to come next? And none of us really has a crystal ball if we're completely honest. But we can always adjust to what comes at us. And one of the things we're pleased is that no matter what has come at us, whether it's a pandemic or a war or social unrest, we've navigated those waters well, and it's really our ability to pivot quickly when circumstances change.

Are there things that you've done at the leadership team level, you and your direct reports that have made it easier to pivot quickly, different ways of working as you've evolved and learned from the past. I mean there's obviously data capabilities and information flow within the business that gives you better information. But are there ways of working at the leadership team level that facilitate agility?

Yes. For our -- so first, we have an excellent group of individuals on our leadership team. And there are a blend of people who have been with General Mills for a while. We have 4 different operating segments as well as 7 functional leaders on my team. And as I said, a good blend of people have been with General Mills for decades and have seen lots of things in the food business as well as bringing new people to do things like data and analytics or supply chain. And so -- but as good as those people are, I think our success in the leadership team has not been tied to individuals, but more -- first of all, as a team sport. If you want to be a leader in data and analytics, it can't just be the person who does data and analytics, it has to be tied to business outcomes and business results. If you want to have good innovation, it can't just be marketing people having ideas, it has to be your leader of your R&D organization, being able to develop those products. So it really is a team sport. And I think what's enabled us to pivot quickly in this environment has been that we all believe in the Accelerate strategy. And for us, it's not a document we put up on a wall and we pass by it once a year and say how about we update this. It's something we really live. And that command intent has allowed us to delegate responsibility to lower levels of the organization so that the leadership team doesn't have to make all the decisions. I'll give you an example, and I wouldn't covert for a start, we said one of our command intent, we had to keep our people safe. That was our number one command intend. We need to keep our people safe. And so we develop the COVID policy, we soon realize -- someone realized, I didn't realize that we didn't need -- people didn't need 2 weeks of COVID leave, but they needed was a couple of hours to take someone to the doctor. So we pivoted and said, okay, instead of just having a COVID leave, we're going to make it a couple of hours. And it's things like that repeated over and over again throughout the organization. For example, we said we're going to be a leader in data and technology. I didn't tell Bethany Quam, who runs our Blue Buffalo business to develop an app called Buddies. They took the command intent. We need to be a leader in data and analytics and developed an app for pet parents. And so those are the kinds of things that I think have enabled us to be successful.

And that success probably builds on itself because that becomes part of the culture, right? As people get more comfortable making decisions that maybe before they were looking for someone to give that directive?

It is. And it's a -- I would say it's a confident team, but it's also a humble team. I'd hate to be an arrogant group in this environment. And the combination of confidence that you can take on what comes at you, with the humility as you might not know exactly what comes next, but you know you can participate well in that environment is compelling.

Great. So portfolio reshaping, last 3 to 4 years has been a huge part of the story. As you said, enabling better growth -- normalized growth algorithm going forward. As you think about the next 3 to 4 years, is it going to be equally an important part of the General Mills story? And if so, from here, how do you prioritize sort of the acquisition versus divestment criteria?

So as we look over the last few years, we've reshaped about 20% of our portfolio, which is, say, 20% of our sales are from different places than they were 4 years ago, which is quite a bit. And it's added over 1 point of growth for context. So before the pandemic, we were growing at roughly 1%. And now we think on an ongoing basis, we're going to grow at 2% to 3%, which is not guidance for next fiscal year, it's just what we think we -- whenever the new normal comes, we think we're in a place to go 2% to 3%, and that's important because we want to get to 3% growth. And so when you ask about are we going to -- do we look at doing more M&A? The answer is yes, we will look at doing more portfolio shaping. We're pleased with the results so far. The things we've acquired have worked well. We have executed well against the businesses we've divested so far. And so for us to get to that 3%-plus growth rate, we think it will require more acquisitions and potentially divestitures. But we feel good about what we've done, and we're confident that we can do that. The key is going after assets that are both a good strategic fit, but also ones we can execute at a price that will add value for our shareholders. I mean we need to do both of those things at the same time. And so looking for assets to acquire that are growth accretive and tangential things that we're already doing will be our goal. And then to the extent that we need to shedding assets where somebody else is probably a better owner than we are and they're dilutive to our current growth. As you look at -- as you talked about how do we evaluate our -- the acquisitions and divestitures? We do look at the long term, we look at internal rate of returns and discounted cash flows. What we don't look at really -- I mean, we look at it, but it is not part of a decision criteria is how much dilution is it going to cause in the next fiscal year? We've been around 155 years, and so we're going to play the long game. So we've been really pleased, and we think there's more on the -- we think there's probably going to be more on the horizon.

Great. You've got several growth platform. So I think most -- a lot -- I fall into the trap oftentimes of focusing almost explicitly on Pet. But technically, pet, snack bars, Mexican food, even cereal and ice cream, I guess from your perspective in that new normal, how do each of those platforms contribute to growth and profitability? And how does the company prioritize investment across them and not fall into the trap of overinvesting in sort of the highest growth platform?

So as we think about our global platforms, we have 5 global platforms and probably the fastest growing is going to be Pet, which is why you say maybe people focus on that quite a bit. But if you look at them in aggregate, they will in aggregate grow faster than the norm of the company. And that's important because they are also high-margin businesses or global businesses, they're billion-dollar brands. . The fastest-growing will probably be pet. The slowest growing will probably be cereal, although it's growing to the last 5 years, so we've anticipated that it will keep growing. And then you have things like Haagen-Dazs and bars like Nature Valley and Old El Paso, somewhere in the middle. And in addition to those global brands, we also have some local brands that are really good. Pillsbury is a $1 billion brand, which has been growing rapidly here in the U.S., Totino's Pizza Rolls and Pizza; in China, Wanchai Ferry. And when it comes to where we invest? I mean first of all, they have to earn it. It's called an investment. So we're looking for returns on those investments. And the key is to have good ideas. Now we highly encourage our teams to have good ideas on our big important brands. But we don't just invest because it's a big brand or important brand. We invest behind really good ideas. And that, I think, is the key. And fortunately, I can say across all the brands I just named, we have really good growth ideas and we're executing well against them.

On cereal, so the confidence that you can continue to grow relative to maybe the pushback that it was artificially -- the growth has been artificially inflated categorically from at-home consumption during the pandemic that will normalize lower and for yourselves from share gains, from disruption at other competitors. As you look forward, where does the confidence come from that you can continue to grow despite those potential headwinds?

Yes. So a very fair question. So if I back up a little bit, I mean, we've grown our cereal business for -- this will be the -- just ended the fifth year in a row, which preceded the pandemic. So I don't think pandemic caused our cereal growth, I think, with all respect, we caused our cereal growth. It may have been heightened during a pandemic, but we have grown cereal because we prioritize it, we've got great brands, we're out innovating our competition and we've got really good marketing ideas. That formula of success will carry into the future. And whether that's in our U.S. retail business or our food service business in the U.S., which is also growing share, we're growing share in Canada and of course, our CPW business has also been growing. And so all around the world we are growing our cereal business. And that formula will work over the long term, notwithstanding we had a major competitor this year, we had a big disruption for a couple of quarters. And so in the second -- in our second quarter this year and our third quarter, we have really tough comps where we grew a couple of share points and those are easier. We may not grow share during that period of time. But if you look at over time, we're confident the formula we have, we have 4 of the 5 biggest brands in the U.S. But that combination of having great brands, a really good marketing ideas and really good innovation, we'll win the day even if for a couple of quarters, it doesn't because the comparisons are really, really difficult.

Got it. And on Pet, where -- I guess I can ask you, how much further runway do you see in Pet? And I think part of your answer just a tremendous white space opportunity is not only -- it's growth for the core, but then there's growth around the core and white space. And to the extent that there is opportunity to enter into that white space, how much can be done with the existing brand portfolio versus the need to continue to come out and use that as a source of M&A?

Yes. So I mean Blue Buffalo has been really successful over the last 4 years. We've roughly doubled the household penetration. It's about 20% of U.S. homes now. And so it's been a good success. And what I'm most pleased with our Blue Buffalo acquisition is that we've proven we can grow just beyond growing distribution. I mean a few years ago, when we bought it people thought, okay, when you get distribution you'll grow, but after that, the whole thing will stop and it turns out it hasn't. And that's for a couple of reasons. One is that the humanization trend is really the key trend around the world in pet food. And Blue Buffalo is very well positioned. In addition to that, we've proven we can innovate. We've transformed our cat food business here in the U.S. with the Tastefuls brand. I think last quarter, we grew it at 75%. And the only reason it didn't grow faster is that we kind of ran out of capacity at that point. And so we have proven that we can grow Blue Buffalo. We've added an acquisition like the Tyson business, and we're growing that as well. And so we think there's a lot of room here in the U.S. to continue to grow. It's a big category. It's a $35 billion to $40 billion category, almost half the global market is here in the U.S. So we can grow that organically. Having said that, this humanization trend is a global trend. And so there are other markets in the world where we think that the Blue Buffalo proposition can play well. We have a test market going on in China right now, yes, which is the second biggest pet food market in the world. It's a small test. It won't add meaningfully to the results this year. But we're encouraged by what we're learning in that market. And so whether it's...

It is more cat-centric?

It is more cat-centric in China and getting more cat-centric every day and which makes sense if you think about the number of people living in apartments and how well suited cats are to your apartments versus dogs. But the humanization trend is the same for cats as it is for dogs, even in a market like China. And so there's a lot of white space in the U.S. to grow organically. There's a lot of white space around the globe to grow. A lot of it we can do organically by doing things like launching Tastefuls. But to the extent that we see an opportunity to grow inorganically, we're open to that, too, just like we did with the pet treats acquisition. And as I said, we're pleased that we could grow the core Blue Buffalo while integrating this new business at the same time. So we think there's a lot of runway ahead of us even over the medium and long-term impact for us.

How do you think about -- what's the -- what are the market prerequisites for high-end pet food to be a viable market for entry? Is there household income -- GDP per capita type of threshold that says, okay, those are markets that are ready for entrance because it seems like pet food -- that as a growth opportunity has been there on paper for a while, but it's taken time to evolve.

It's taken -- yes, and that's intentional on our part. We felt as if we had a lot to prove with the Blue Buffalo business in the U.S. and that if we didn't improve that, then nobody is really going to care about what we would do outside the U.S. But if we could prove that we could grow the Blue Buffalo brand in the U.S., which I think we've proven at this point, then we can turn our sights to not only growing here in the U.S. but more broadly. As we look at markets across the world, the humanization trend is the same. The size of the premium market may differ according to the wealth of a country, but the trend towards humanization is very clear in every market that we've looked at. And so the only question then is going to -- is really, okay, how big a business can it be in different markets and how fast can it be and making sure that you're sizing the investment with the opportunity, but we see the opportunity in many, many markets around the world.

Okay. You mentioned a number of local regional brands that are not necessarily small like Pillsbury, how -- what's the -- how does the overall company prioritize investment behind global initiatives versus those local regional initiatives? How does that process work as those different initiatives compete for funding?

Yes. I mean it's really up to the business leaders to prioritize those. And in the case of Pillsbury, it's a $1 billion brand with good margins. And so to the extent you have good ideas, it's pretty easy to prioritize spending against that. We've got great ideas on Pillsbury. And in fact, I think over the last couple of years, we've grown it by $300 million in the top line. And so -- and I think that's one of the things -- one of the reasons we're successful is that when we see ideas, and we see ideas working in the marketplace, whether it's a global brand or a local gym like Wanchai Ferry. We're introducing some new advertising on Wanchai Ferry in China that we're excited about. We have the resources and scale to go after those ideas.

Is a potential recessionary environment at a time to double down on investment, stay ahead of competition and position yourself to emerge stronger? Or is it a time to pull back? What's the philosophy of the company?

For us, it's really a time to -- we don't feel as if we should choose between doing well in the present and preparing it well for the future, for us is an end. And so it's not really a time to pull back, it really is the time to make sure we're executing well in the current environment, which we are, by virtue of the market share gains I talked about earlier, but also investing in capabilities like strategic revenue management or data and analytics capabilities. We've invested over $100 million in our data and technology capabilities over the last couple of years because our goal, which we think is imminently achievable, as we come out of the pandemic stronger than we went in and history has shown that those companies that can not only perform in the current but also build capabilities that set themselves up for the future are the ones that come out of times like this even stronger.

What's the most measurable or tangible way that those investments in, for example, data capabilities have driven results? What's the sort of return? So is it measured in speed to market? Is it measured in sort of consumer insights that produce more greater success rates on new initiatives? Just how do those investments get measured by return?

So the -- when we look at our investments and data and technology, first of all, we look at returns like we would in any other kind of capital investment or marketing investment. And importantly, some of the investments we make are dedicated to growing top line sales faster. So I'll give you an example of the Buddies app we have for Blue Buffalo or the Box Tops for Education app we have or how we're tying our stores together with Haagen-Dazs retail outlets in China. Those are all growth facing. And so there are a certain set of metrics we look at in order to make sure that were -- those are achieving what we want them to achieve from an investment perspective. At the same time, we're also using data and analytics in order to help improve our cost structure. And so in the supply chain, for example, we have used our data and analytics capabilities in our global sourcing function. And we look at how much money can we save and what kind of efficiencies can we drive there just as we would a regular holistic margin management program. So I think the most important for us is that we do measure the investment. We're doing it both to grow the top line and consistent with our strategy to kind of stay in the middle of the boat and make money while we grow our top line. We're also investing in data and analytics capabilities to help us become more efficient as well.

Is -- are investments against ESG initiatives viewed to the same lens? Or is that just more integrated into the day-to-day fabric of who General Mills is?

So the answer is both. I mean the -- we've had a public responsibility committee on our Board of Directors for 50 years, 50. So ESG did not just come to us in the last couple of years, we've been doing this for a long time. And we keep getting better at it, which I think is the encouraging part. For us, importantly, ESG is woven into our strategy. So it's a strategic pillar just like brand building or innovation or driving scale as a strategic pillar. And I think that's important because what that means is that we analyze the returns on that -- on those investments just as we would on brand building and other things, we prioritize them the way we would other things. And so we have a global council that oversees which initiatives we'll go after but also how they go through the organization, and I'm the Chair of that council. And not only am I on that council, but we have a Chief Sustainability Officer, the Head of our North America Retail business, the -- our Chief Strategy and Growth Officer. And so when we make a commitment to, let's say, reduce greenhouse gas emissions, we are very clear about the prioritization of the kinds of things that we look at, but then it also allows us to not only create a glide path but hold the organization accountable for achieving what we said we're going to achieve.

Is there -- so you recently dedicated a full investor session to being a Force for Good. How -- is there a way to crystallize how being a Force for Good enables you to win up and down the value chain with consumers, but also with retailers, with suppliers? Because it's clearly, as you said, it's part of -- you dedicated a lot of intellectual capacity across the company, a lot of financial resources to it. What's the punchline as to how that generates a return for General Mills shareholders?

Yes. I think the best way to articulate that would be to give a couple of examples. So for example, regenerative agriculture, General Mills is probably the leader in regenerative agriculture globally. And we know we needed to do this for the health of our company many decades from now. Having said that, we also need to generate returns in the current. And so brands like Annie's and EPIC Bar and LÄRABAR and Nature Valley, they all leverage regenerative agriculture, many times on the packaging to tell consumers about what we're doing with regenerative agriculture. And so while we have a commitment to generate 1 million acres of regenerative agriculture by 2030, and we're 350,000 acres in after a couple of years. Importantly, we're driving that through some of our biggest, most important brands because the consumers of those brands really care about regenerative agriculture, and our retailers do as well. So when we talk to our retailers about what we're doing, as long as it makes sense for the brands and is consistent with what they're trying to achieve, they want to work with us on programs like that. So that regenerative agriculture, I guess, would be one example of ways in which we drive it through our system. I'll give you one more, which would be recyclable packaging. We have plastic packaging just like everyone else. Now it's only about 11% of our packaging. So it's relatively small. But nature -- you would expect a brand like Nature Valley to have recyclable packaging because it's Nature Valley. And we made all the wrappers recyclable in this last year, and we partnered with retailers in order to do that and share that information with consumers.

So as you -- across the spectrum of capabilities investment, if I lump in some of these sustainability initiatives this capability investments, but also consumer insights and data and digital. To what extent does the company rely on its own resources to make progress against those capabilities versus working with third parties? And has that third-party involvement and engagement gone up over time, gone down over time? What's the build versus buy decision making that you guys go through?

So as we look at our capabilities, I mean, we look at are we going to build or buy or rent on a case-by-case basis. And if I -- I'll give you a couple of examples of how we think about that. So strategic revenue management, we didn't have much of a capability in that 5 years ago. And so we brought a few people in from the outside who are experts in that, but we also combine them with people who have been at General Mills for a long time, we had a strong analytical bench. So we could take the theory and actually apply it to our business. And so we even developed that capability internally, but we did it using some expertise from the outside combined with our own teams. When it comes to developing apps like the Buddies app for Blue Buffalo or Box Tops for Education, that's not a center to what we do. And so we work with third parties in order to help us design what it is we're trying to accomplish, but we combine that with business people from those businesses because they can set the objectives on what it is we're trying to accomplish, what do pet parents really want, and then you can have designers from the outside come in and contract with them to get that up and going. And so we're very pragmatic, but it has evolved over time. And so we're using a combination of external resources where people brought in from the outside, combined with people who know our business and our brands very well, and we find that to be the most productive path. And again, it's a team sport. And we find that having outside expertise combined with knowledge of General Mills is a winning formula a lot of times.

Is there a scenario where you would actually think about acquiring capabilities as part of an M&A strategy. Maybe it's an R&D component, maybe it's something around data and digital. But would you go so far as to actually look for companies to acquire, to enhance your own capabilities?

I mean we haven't done that so far. And I suppose it's possible. What I would say is that there are a lot of companies out there with great capabilities that may or may not be proprietary. And the magic is linking the capability itself to your own business. And so I'm not going to say that we would never do that, we certainly might at some point, but it's probably not the first instinct that we have.

Okay. So strategic revenue management and HMM productivity program, hugely important to the current General Mills, and they've evolved as you were discussing. Are there examples as to what you can do against those initiatives that you couldn't do 3, 4 years ago? How has the company's ability to sustain and evolve and accelerate those programs progressed?

Yes. I think importantly, you link strategic revenue management with holistic margin management because holistic -- I would say that one is actually a subset of the other. The ability to price effectively is actually a subset of holistic margin management. And we look at those capabilities very similarly. In fact, when we built our strategic revenue management capability, we looked at what we did for holistic margin management and applied it. And the important component of that is that our productivity is not episodic. It's something that we do all the time. And the same is true with revenue management now. That was not the case 4 or 5 years ago. And so -- and with holistic margin management, we developed 3-year road maps of things we want to do to generate productivity. We do the same sort of thing with pricing now. Having said that, over the last couple of years, I think we used about 6 years' worth of ideas in about 2 years because the environment has dedicated to that. We could not have done 5 rounds of pricing, which is basically what we have done in the last year, 5 years ago, there's no chance that we could have done that. But because we have an always-on capability because we have a pipeline of ideas, because we've applied data and analytics, it has allowed us to be successful in that in this environment.

So as I mentioned in the opening, you're in your quiet period, so we'll recognize that. But in the current environment, how is the company generally balancing investment needs to support growth strategy versus -- and I know you discussed those sustained, those are still being prioritized, but what's the process by which you balance those strategic investments with the need to deliver bottom line and free cash flow?

So yes, again, without giving guidance on next year, what I would say over the longer term, our -- we've been very clear that in our sales guidance growth is 2% to 3% inflationary period notwithstanding, which can lead to -- which leads to mid-single-digit operating profit growth and mid- to high single-digit EPS growth. And then combine that with the dividend, you get a really good return for shareholders. So that is our model. And within that model, we want to make sure that we're investing in activities that can help us achieve that model and generate the free cash flow that is necessary. And our free cash flow conversion has been really, really good over the last number of years. And the key is to make sure we're investing in some areas while deprioritizing others. So it's not just spend more, spend more, spend more. It's actually invest to generate a return and then sometimes quitting activities that aren't generating the returns that we want in order to do things more like data and analytics that we think are going to be more important to us.

What about capital allocation? To the extent that -- I think the capital allocation priorities of the business are relatively clear cut, but if we go into a more difficult environment, does that force a repriorization at least temporarily?

Yes, I'd say we started the conversation by things we're pleased with and kind of getting back into the middle of the boat on growth and profitability. I would say another area is that -- that we're pleased is we have returned to a more normal capital allocation period after having acquired Blue Buffalo a few years ago. And so our first call on capital is going to be growth for the current business, and we've got some growth businesses, and we've invested in them, and we like the return profile. After that, it's growing dividend roughly in line with our sales growth. And it's something we don't -- it may be clear, but it's something we don't take lightly. We have maintained or grown our dividend for 94 straight years as a public company. And if you look back when we were private, about 120 years. So that's not -- this is a commitment. And then after that, we'll look at M&A. And to the extent we can do M&A, we will do that. And to the extent we don't see that, but we see just small M&A opportunities, we'll also do share repurchases as well. And we really got back to doing that in fiscal '21, and we're doing -- we've applied that capital allocation approach this year, and I suspect we'll apply a similar thinking into the next fiscal year.

Got you. Yes, if the consumer does face more pressure -- well, let me ask you one -- let me ask before we get there. Just in -- as you look out over the horizon and look at the macro landscape that we're all looking at, what's your level of caution and concern just philosophically, as you look at the U.S. economy, the European economy, all of your end markets, what is your -- as your scenario model, has the bear case scenarios get more bearish? And what's your -- what's the kind of the lens through which you're viewing the current environment?

Well, I don't think I'm going to grow out on a limb and say the economic outlook for many developed markets is not highly positive. And so I don't think that's a record-setting statement. We tend to operate well in an environments, though, where the economics get difficult. And the reason for that is that like during the last recession, consumers trade out of away-from-home eating into at home eating. And our categories tend to grow a couple of percentage points faster. Forget about inflation. A couple of percentage points faster in periods where the economy is not doing as well because the cost to eat out of home is about 2.5x what it is to eat at home. And so when people talk about trading down a lot of times they start with, okay, what's private label going to do? That's actually not the best starting point. The starting point is where are people going to eat? And increasingly, they eat at home, and we're actually starting to see that already even over the last month or 2. The percentage of food occasions that are at home have grown by a point or 2, even over the last couple of months when people are itching to get out, but they're concerned about the economic scenarios that face them.

And what is that history in terms of the -- across your portfolio as it stands today, the benefits from essentially trade into the category versus migration up and down and around the category by consumers and maybe in and out of your brands?

Yes, what we -- certainly, what we saw in the last recession and not everybody listening is probably aware of what happened during the last recession, but I'm acutely aware. I was at General Mills at the time. What we saw was that consumption shift at home by a couple of points. So our categories in aggregate grew a couple of points faster. We did see that private label gain share as consumers look for value, but we also saw that we held share. And I think the lesson learned there is that if you have strong brands and you apply good capabilities and good branding with that, you can hold share in an environment that's growing a couple of points faster, your business looks pretty good. And it's the brands in the middle that get squeezed or the companies who aren't investing are the ones that end up on the wrong side of the ledger. And we've applied that thinking to the current environment, we're really pleased with our brand performance and our capability development.

And from a -- I guess, maybe from 2 perspective, price elasticity and market share momentum, how does -- in a recessionary environment and we can debate the magnitude of recessions and the like. Where would you advise investors to expect more volatility in your trends versus more sustained momentum?

Well, I would advise investors that -- I mean, look, our goal is to be competitive wherever we compete, and we've done it for 4 years in a row before a pandemic and during a pandemic. And if you've done both of those things, I wouldn't want to bet against us that we can do it after pandemic ends and during a recession because we've proven that we can. I think that's the most important thing. And I would tell you that it's pretty clear that food consumption at home is not going to decline anytime soon to the extent that we have that recessionary outlook, probably we'll refrain from going category by category. But I will say that even during the last quarter, we've seen elasticities hold up quite well. That doesn't mean there's no elasticity. There's no such thing as no elasticity. But the elasticities have held up well to what they were doing in the 3 and the 6 months prior to that. So even with the amount of pricing that we see in our categories now, which is double digits over the last quarter, we actually haven't seen a meaningful change in elasticities.

As we go forward, do you -- I mean, there's been a lot of concern since Walmart and Target reported about the ability for CPG companies to continue to take price. Do you see that just because there's more burdens building on the consumer and because of burden that have built on the retailers. Do you see that as a fair concern? And as you think about the potential need to achieve more price in the future, does the industry and General Mills alongside it have to rely more on SRM and less on list price? Or is that not -- it's not that simple?

Yes. What -- I guess, to the recent announcements by our retailers are probably like each of them speak to their announcements independently and most become behalf of them. But what I would say is that when it comes to pricing, we're all concerned about where the consumer is going. I mean our main job is to satisfy consumer needs. And our first line of defense against having to raise prices is our productivity. And General Mills has one of the best productivity rates in the industry, if not the best. I mean we've generated $4 billion in productivity over the last decade. Having said that, 4% is a good number, but when your inflation is double digits, you can't really get away from pricing. And so we do see prices going up. I suspect prices will continue to go up as long as inflation continues to rise, and it's really a matter of our input costs going up so significantly. So even with inflation -- or even with our productivity efforts, there's just not enough in this environment to go against that. In terms of how retailers react, I mean, they're seeing the same inflationary pressures we are and nobody really likes the consumer to pay more, especially when you see a tough economy coming ahead of you. But it's a reality of the input cost market that we're in when, as we said in our third quarter earnings call, our inflation in our fourth quarter will be up double digits, I mean it's hard to run a business in that environment without having prices go up.

A couple of minutes left. I want to hit on supply chain, just the supply chain environment. Are you optimistic, is the company optimistic that, that environment gets better as we go forward? Or -- and maybe it's not a universal statement, maybe there are pockets where -- you are in pockets where you're more concerned. But just how you're assessing the supply chain environment, supply environment, both inbound and outbound?

Steve, I'm generally an optimist by nature, but hope is not a strategy. And we are not hoping that our supply chain, the situation gets better externally. And even if it may have marginally improved over the last few months, there is still a record number of disruptions vis-à-vis what we had faced before. And so we're not counting -- we're not -- we're certainly not counting on the supply chain challenges to ease up anytime soon. If they do, that would be great. But we're going to operate as if we're still going to face the disruptions and that it's up to us to be agile enough to pivot when those disruptions occur. And we've been very good at that over the last few years, and I anticipate we'll continue to be good at that. But our -- we are not forecasting and then to supply chain disruptions anytime soon. I'd rather plan for them to continue and not have them continue then to plan not to have them continue and then be forced to deal with them when they come up.

Are you operating a more complicated supply chain environment as you try to mitigate the risk of outages across the supply? So has the -- what you're managing to become more complicated, not actually because it's more volatile, but just the scope of how you've architected your supply chain?

Despite our efforts to simplify what we do, and we have greatly simplified what we do. The external environment has caused the supply chain, especially as ingredient inputs and inputs into our manufacturing plans. That has certainly become more complicated. And we're fighting that complexity with internal simplification. And so not having 80 different kinds of starches or 50 different kinds of vanillas, but kind of ratcheting that down to really what the consumer needs. And so we -- one of the things we have done well is we've reformulated our products sometimes more than 10x over the last year in order to make sure we have ingredients that the product needs, but also fulfill consumer needs. So the worst thing you can do in a complicated environment is fight complexity with complexity. So we've tried to do that with simplifying what we do and yet, there is no question that the external environment is more complicated than it was a year ago.

Yes. when you're facing this kind of complexity, and we're going a couple of minutes left, so when there's this much complexity and this much uncertainty ahead of you, how do you define success? So like when we can reconvene here next year, what's the measure of success that you want to be held to over the next 12 months?

I would say on that question, the first would be -- for the last 4 years, we've met or exceeded our financial guidance. And if you look at the guidance we issued at the end of the third quarter, that would have exceeded what we thought we would do at the beginning of the quarter end. When we're here a year from now, whatever we issue for fiscal '23, I think it will be successful if we meet or beat our financial guidance for the year. That would be the first most important thing because that's a promise to our investors that we're going to do what we say we're going to do. And I'm really proud of being able to do that over the last 4 years through all kinds of external challenges. Beyond that, the -- while we do that, which is kind of the current term, a year from now, we will build on our capabilities, and I'll have more examples to give you and what we've done with data and analytics and more examples of what we've done with pricing and more examples of how we use speed and agility to our advantage. And so the ability to -- and perhaps more portfolio shaping that we have done. And so our ability to not only meet our current commitments, but be able to talk with you coherently with some really tangible examples about other things we have done to move the ball forward on longer-term initiatives that for me is the signal of success.

Great. On that note, we're out of time, so good timing. Thank you. Thank you, Jeff. Thank you, General Mills. Thanks all of you for listening in. Appreciate it, and have a great conference.

Thank you, Steve.

Thank you.